Effective boardroom governance is essential for any company in India to ensure transparency, efficiency, and accountability to stakeholders. Boardroom governance practices should be structured based on legal frameworks and regulatory guidelines. In the current scenario where the government is working on building strict legal and compliance rules, meeting effective boardroom governance is not an option but a necessity to save the company from fines penalties, and reputation damage and drive the organization’s vision forward by fostering collaboration and informed decision-making.
The role of the Company Secretary is pivotal in ensuring boardroom governance practices are implemented and complied with. From scheduling boardroom meetings, and agendas, ensuring participants of all relevant directors and chairman, and drafting minutes, every aspect of boardroom meetings requires meticulous planning and execution.
This blog explores the essentials of board meeting governance in India, emphasizing the key elements, challenges, and practices that organizations must follow to align with compliance requirements and corporate governance standards.
Legal and Regulatory Framework
- India’s Boardroom governance is governed by the Companies Act 2013.
- Further, for the first time in the history of Company Law in India, the Companies Act, 2013 has given statutory recognition to the Secretarial Standards issued by the Institute of Company Secretaries of India stating Every company shall observe secretarial standards for general and Board meetings specified by the Institute of Company Secretaries of India
Effective boardroom governance practice and guidelines
It is rightly said that the way we run board meetings describes much about how we run a successful company. Therefore, before structuring a practice knowing rules and regulations is vital. Let’s bifurcate the boardroom governance in three phases and understand the government regulations a company and company secretary have to follow to comply with the law in terms of the board meeting:
1.Conducting Board Meetings
A quorum of Meeting – The number of Board members attending the meeting
- The number of board members attending the meeting shall be one-third of the total strength of the board or two directors whichever is higher. Any fraction is rounded off to one.
- If there are interested directors in the meeting for a particular meeting then the remaining directors not less than two shall be a quorum of meeting for that particular matter.
- The quorum shall be available from the start to the end of the meeting. Directors participating through VC are considered part of a quorum.
- If there is no quorum the meeting has to be automatically adjourned to the same day in the next week at the same time and place. If that day is a national holiday then the next succeeding day not being national holiday at the same time and place.
- If there is no quorum the adjourned meeting has to be cancelled.
- For listed companies, Board meetings must include participation from independent directors to maintain compliance with SEBI’s Listing Obligations and Disclosure Requirements (LODR) regulations.
Attendance Register
- The company has to maintain an attendance register for board meetings under the custody of a CS or an authorized director in case there is no CS in the company.
- The CS and directors attending the meeting have to sign that register.
- The director can be granted leave of absence if it is well informed to the CS or the chairman.
Chairman’s Responsibilities
The chairman of the company shall be the chairman of meetings and is responsible for
- Conducting meetings as per the agenda
- Resolving disputes during meetings.
- Ensure fair participation of all directors.
- If the Chairman has an interest in any agenda item, they shall, with the members’ consent, delegate the proceedings for that item to a Disinterested Director and resume the Chair once the item is concluded.
Board of Directors’ responsibilities
- Directors must disclose any interest in matters under discussion.
- They are required to abstain from voting on resolutions where they have a conflict of interest
- No proxy shall be appointed by the director i.e. the director has to attend the meeting personally.
- The director can appoint an observer with the consent of the board who can observe the meeting on his behalf but does not have the right to speak or vote.
Voting and Resolutions
- All the directors not party to the interest have to vote.
- Resolutions are passed by a majority vote. In case of a tie, the chairperson may have a casting vote if authorized by the articles of association.
- Majority criteria based on resolution
- Ordinary resolution – Simple majority required
- Special resolution- 3/4th Majority required
2. Post-Meeting Compliance
Minutes Preparation
- The CS of the company is responsible for drafting minutes of meetings
- The shall be minutes of every meeting of the board.
- The minutes should include:
- Names of attendees and absentees
- Type of meeting,
- Date, time, place of meeting
- Key points of discussion
- Resolutions passed and voting details
- Declarations of interest, if any.
- Minute shall be maintained in physical form or electronic form with a timestamp.
- Draft of minutes shall be circulated within 15 days of a board meeting.
- Directors should provide comments within seven days, and the minutes should be finalized and entered into the minutes book within 30 days of the meeting.
- A signed minutes shall be circulated within 15 days of signing.
Filing resolution with ROC
- Certain board resolutions, such as the appointment of a director or approval of financial statements, must be filed with the Registrar of Companies (RoC) using appropriate e-forms by CS.
Implementation of resolution
- Resolutions passed during the meeting must be communicated to relevant stakeholders for execution.
- The CS must ensure that actions are taken as per the decisions recorded in the minutes.
3.Effective boardroom governance Practice
For effective boardroom governance practice the company secretary must have structured pre-meeting plans such as meeting calendars, provide notice on time, ensure comprehensive agendas, communicate notices, agendas, and relevant documents in writing to directors, etc.
During the meeting, CS should ensure the quorum required is present in the meeting, interested directors to agenda do not participate in the meeting, all directors required are present personally and there is no proxy, signing minutes, and attendance registers are not forged. CS should manage conflict of interest, ensure active participation and voting by all board members, accurate recording of meetings, etc.
For Post-meeting compliance, CS should ensure minutes are drafted accurately without missing any details, minutes are timely circulated and updated in minutes books, certain resolutions are filed with ROC and all resolutions are implemented in the company without delay.
Further, there should also be technology integration to ensure streamlined meeting management, including agenda distribution, secure virtual participation, voting, automated minutes recording, and all such requirements and compliance a CS or authorized person has to fulfill to ensure compliance with rules and regulations.
Conclusion
Effective boardroom governance is the backbone of a company’s compliance and operational success. By adhering to the legal and regulatory frameworks outlined in the Companies Act, of 2013, and implementing secretarial standards, organizations can ensure transparent, efficient, and accountable decision-making processes.
A meticulous approach to pre-meeting, during-meeting, and post-meeting compliance not only safeguards the company against penalties and reputational risks but also fosters trust among stakeholders. With the integration of structured practices and technology-driven solutions, boardroom governance can be streamlined, empowering companies to align with their strategic goals while maintaining the highest standards of corporate governance.
While this blog provides an understanding of boardroom governance regulations and a brief on practices that can be followed we shall discuss more on how technology will help in hassle-free compliance with this boardroom governance without any errors or anomalies in our next blog.
Summary: For social media dissemination
Boardroom governance is the backbone of corporate compliance and decision-making. By aligning with the Companies Act, of 2013, and adhering to secretarial standards, companies can streamline board meeting processes, mitigate risks, and foster accountability. From pre-meeting planning to post-meeting execution, every step matters in ensuring seamless operations and informed decision-making.
For a detailed guide on effective board meeting governance practices, visit our latest blog.
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