Board Meetings Through Audio-Visual Conferencing

[Submitted By Vibha Sirothiya,
Final Year, National Law Institute University,
Bhopal]

January 13, 2007

Present era of Internet, E-Commerce and Satellite communication has made boundaries irrelevant and made the world a truly global village. Corporations can reduce costs and get connected with people across the globe efficiently through information technology. It is equally important that the companies are facilitated to have Board Meetings through electronic means rather than only by physical presence. The Information Technology Act has recognized the communication in digital / electronic form and holding the Board Meetings through electronic means are permissible under the Act.

Although there is some provisions that are indicative about the place of meeting and even prefer that the directors should be holding meetings in person^[1]. But presently Companies Act 1956 does not talk about Board meetings through Video Conferencing/Tele-Conferencing. Infact provisions regarding time, interval and other procedures are clearly codified but the legislation nowhere answers that with the advent of technology and e-governance what are the different ways of having meetings.

Legislators and policy makers have pondered over the issue and for the contemporary requirement of the global market where regional boundaries should not act as the barriers for functioning of a company, following are the proposals made by policy makers.

1.      Amendments in the Companies Act have been recommended in this regard by the J.J. Irani Committee  ^[2]

As soon as proposals of the J.J.Irani Committee are accepted it will have wide impact on the present scenario of the Company laws specially it would be worth amending Section 289^[3] keeping in view the pace of communication, technological advancement and needs of business community.^[4]

The report has rightly made a point to include in its suggestions the use of technology, electronic media and video conferencing as legally acceptable modes of communication. The excerpts relevant paragraph is quoted below:

"The Committee is of the view that law should facilitate use of technology to carry out statutory processes efficiently. Meetings of the Board of Directors by electronic means (Teleconferencing and video conferencing included) to be allowed and directors who participate through electronic means should be counted for attendance and form part of Quorum.   Minutes should be approved/ accepted by such directors who attended by way of teleconferencing/ videoconferencing (Signature may be accepted by use of digital signature certification.If any director has some reservation about the contents of the Minutes, he may raise the issue in succeeding meeting and the dissent, if any, may be recorded in the minutes of that meeting."

2.      The Department of Company Affairs (DCA)

It proposes to make an amendment in the Companies Act, 1956 to enable companies to hold the Board Meetings through electronic means such as video conferencing and telephone conferencing to take advantage of information technology. The Department recommends to allow such meetings of the Boards. However, DCA has also decided that there are some subjects of special importance, which 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. In keeping with the developments of the information technology, it also proposes to reorganize issue of notices of Board meetings through other means such as e.mail, fax etc. other than normal letters.

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.

3.      FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND INDUSTRY (FICCI)

FICCIin one of its seminars^[6]  highlighted the importance and requirement of the amendment saying that -"It is our considered view that Indian companies should have flexibility in their operations similar to their counterparts in other developed countries to enable them to compete on equal footing. In this perspective, it is utmost necessary that our corporate laws are suitably modified to fit into the new economic scenario."Certain submissions were made in the meeting . Following are the submissions:

• First, meetings of the Board and its Committees may be allowed to be held through the use of Video Conferencing, Telephone Conferencing or any other communication equipment. While doing so amendments has to be made in the Companies Act, 1956 and other Indian statutes about the applicability of minutes of such meetings in the Court of Law as evidence and for other purposes.
   
• Second, to minimise undue litigation, problems which could emerge out of Video Conferencing needs to be addressed. There could be disputes in regard to the genuineness of such meetings through Video / Teleconferencing and the authenticity of the discussion and the decisions taken. Video Conferencing, being highly technical in nature, there might arise some technical problems regarding connectivity, quality of voice and picture, authenticity of proceedings etc. In case, teleconferencing is also allowed along with Video Conferencing, there could be difficulty in identifying the person in case of teleconferencing and saying with certainity that voice is that of a Director. So there are chances of dummy attendance, which will defeat the very purpose of the meeting.
   
• Third, as a country which is in the forefront of using technology, we should provide complete freedom to corporates in India to conduct Board meetings through Video Conferencing and Teleconferencing without any limitations, similar to their counterparts in other developed countries. However, if the general consensus is that certain key areas should be deliberated in a meeting attended by Directors physically, the Government can notify such subjects of overriding importance from time to time.
   
• Fourth, the Department of Company Affairs can be authorised to frame separate Rules for Board meeting through Video Conferencing. On our part, we would be happy to provide any assistance if required. The Government may consider constituting a Group of Experts to frame Rules. The Members of the Group may include; Representatives of Chambers of Commerce, Professionals, etc.

While Concluding it can be inferred that recognition of board meetings through video-conferencing will go hand in hand with the agenda to implement corporate-governance. Also the proposed amendment are likely to go a long way with the liberalization to the Special Economic Zones and attract more FDIs. It will be very beneficial in terms of expediency and efficiency too as:

• Video Conferencing helps Companies manage the business environment and its key challenges economically.
   
• Face to Face meeting without the expense and hassle of long distance travel.
   
• Meeting can be arranged at short notice without any delay decisions making becomes fast.
   
• Today's technology goes way beyond just talking heads, it allows to share any type of information like graphics, documents etc.

[1]

 166. Annual general meeting

(2).. and shall be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situate [Provided that the Central Government may exempt any class of companies from the provisions of this sub-section subject to such conditions as it may impose:
Provided further that-
(b) a private company which is not subsidiary of a public company, may in like manner and also by a resolution agreed to by all the numbers thereof, fix the time as well as the place for its annual general meetings.]

174. Quorum for meeting

(1) Unless the articles of the company provide for a large number, five members personally present in the case of ¹[public company (other than a public company which has become such by virtue of section 43A), and two members personally present in the case of any other company,] shall be the quorum for a meeting of the company.

175. Chairman Of Meeting.

(1)Unless the articles of the company otherwise provide, the members personally present at the meeting shall elect one of themselves to be the chairman thereof on a show of hands.

[2] Report on Company Law, By Dr. Jamshed J. Irani ,Chairman, 31^st May, 2005.

[3] Section 289 of the Companies Act, 1956 speaks about circulation of resolution. It states that :

"No resolution shall be deemed to have been passed by the Board or by a committee thereof by circulation, unless the resolution has been circulated in draft, together with the necessary papers, if any, to all the directors, or to all the members of the committee, then in India (not being less than the quorum fixed for a meeting of the Board or committee, as the case may be), and to all other directors or members at their address in India, and has been approved by such of the directors as are then in India, or by a majority of such of them, as are entitled to vote on the resolution."

[4] The importance of circular resolution fade out as soon as the Indian law recognizes meetings through audio and video conferencing, which would facilitate the discussion amongst the directors/committee members and would be faster than physically moving the papers to all concerned.

[5] PIB Press Release  15^th April, 2002, Ministry of Law Justice and Company Affairs.

[6] Seminar held on 31^st May,2002

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