The latest technological developments have made their way into the corporate Board Rooms with more and more companies preferring to hold their Board Meetings via teleconference or video conference. The governing Act that regulates the manner in which the Board should be functioning is the Companies Act, 1956. This was drafted way back in 1956 when teleconference was unknown to the society and hence, there are no provisions or prohibitions pertaining to remotely conferencing Board Meetings in this piece of legislation.
Section 287 of the Companies Act, 1956 prescribes quorum i.e. minimum number of directors at Board meeting and section 288(1) prescribes procedure for adjournment for want of quorum. Section 299 requires disclosure of director’s interests at meetings. Section 301 requires placing register of contracts at meeting and signing it by directors. Regulation 71 of Table A requires every director to sign attendance register at the meeting of Board or Committee.
It is quite possible to comply with all the above-mentioned regulations and still hold a Board Meeting via teleconference. The Companies Act makes no specific provision that the Board Meeting must ensure physical presence of directors at a specified place. In fact, law-making authorities never perceived this problem when the law was actually made. Except for signing the register, all other requisites specified in the Companies Act with reference to a Board Meeting can be held if such a meeting is held via teleconference. Videotaping the Board Meeting is possible which in itself vouches for the presence of the quorum, thus serving to achieve the rationale behind the law to sign the register. There are many people in the industry who advocate Board Meetings to be held via teleconference or videoconference.
Definition: "conducting a meeting involving participants at two or more locations through the use of audio-video equipment which allows participants at each location to hear and see each meeting participant at other location, including public input. Interaction between meeting participants shall be possible at all meeting locations."
Department’s take on the issue as per Press Release dated 15.04.2002
1. The Ministry of Corporate Affairs (erstwhile Department of Company Affairs) proposes to make an amendment in the Companies Act, 1956 to enable companies to hold the Board Meetings through electronic devices such as video conferencing and telephone conferencing to take advantage of information technology.
2. The Department has received proposals to allow such meetings and it has held extensive consultation with various shades of opinion.
3. The Department has decided to allow such meetings of the Boards and its Committees.
4. However, DCA has also decided that there are some subjects of special importance that should only be decided or transacted by meetings in person i.e. "physical meetings". It is proposed to notify such subjects from time to time.
5. The Department feels that considering the advantage of "physical meetings”, it should prescribe a certain minimum number of Board meetings must be held in person. This would also be notified from time to time.
6. It proposes to regulate the new provisions through promulgation of Rules, which can be progressively liberalized or modified in accordance with the experience gained from time to time. These decisions have been taken on 'demands' received from various sectors keeping in mind the progressive globalization of the Indian economy.
An analysis of the pros and cons of holding Board Meeting through remote conference highlights the following points amongst others.
Advantages:
1. Frequency of meetings can be increased
2. Time and costs incurred on travel can be reduced
3. Fully interactive with all sites and the same can be recorded for the future requirements
4. Photos and color graphics look great on video and can help convey a difficult concept or simplify complexities
5. Some systems allow application sharing, allowing users at each site to see and edit a document. This kind of sharing encourages collaboration and real-time feedback
Disadvantages:
1. Technical problems such as connectivity, quality of voice and picture, authenticity of proceedings can cause disturbance
2. Costs incurred on taping and saving the meeting is considerably high
Video Conferencing in Other Countries:
Source: NEBRASKA OPEN MEETINGS ACT (1999, Cum. Supp. 2004)
Board Meetings can be held via teleconference or videoconference, provided the following conditions are met
1. Advance public notice is issued
2. Complete arrangements are made to accommodate the public's right to attend, hear and speak at the meeting
3. Arrangements are made for seating, recording the proceedings by audio and visual recording devices, and an reasonable opportunity for inputs from the public
4. At least one copy of all documents being discussed is available to the public at each site of the videoconference
5. At least one member of the public body is present at each site of the videoconference, and
6. No more than one-half of the public body's meetings in a calendar year are held by videoconferencing.
Conclusion
The Government may consider forming a committee of a Group of Experts to frame rules pertaining to remotely conferencing Board Meetings. The E-meeting should be permissible, if specific provision is made in Articles of a company by suitably amending the regulations. Normal resolutions may be passed in such meeting but not where disclosure by director or signing of register is required. An amendment to the existing law would ensure more and more companies to leverage the potential of information technology. This would ensure a whole new dimension to the traditional Board Meetings (that were held in a closed room) by increasing the participation. This would also ensure voluntary participation from the members rather than the mandatory participation and reduce overheads on travel expenses incurred on such meetings.
U Padma Shenoy
Company Secretary
CSS Technergy Limited
Hyderabad
