Virtual Meetings – Company Law Important Questions

Question 1.
Distinguish between: ‘E-voting’ and ‘voting by show of hands. (June 2017) (4 marks)
Answer:

Basis of Distinction‘E-voting’‘Voting by show of hands
Governing SectionSection 108 of the Companies Act, 2013 makes provisions relating to E-voting.Section 107 of the Companies Act, 2013 makes provisions relating to the show of hands.
ApplicabilityThe Central Government may prescribe the class or classes of companies and the manner in which a member may exercise his right to vote by electronic means.At any general meeting, a resolution put to the vote of the meeting shall in the first instance be decided on a show of hands.
Physical Presence RequirementThe physical presence of members at meetings is not necessary in the case of e-voting.The physical presence of members at meetings is necessary in case of voting by show of hands.
MandatoryEvery Listed Company or a company having not less than 1000 members shall provide to its member’s facility to vote on resolutions by electronic means.Voting by Show of hands can be adopted by any Company and it is optional.

Question 2.
The Board of directors of Vedic Ltd. desirous of transacting certain matters through video conferencing seeks your advice on the matters which cannot be dealt with through video conferencing. Advise the Board (June 2015) (4 marks)
Answer:
1. Manner of participation in Board Meetings [Section 173(2) of the Companies Act, 2013]:
The participation of directors in a meeting of the Board may be either in person (personally present) or through video conferencing or other audio-visual means.

2. Rule 4 of the Companies (Meeting of Board and its Powers) Rules, 2014, following matters shall not be dealt with in a meeting through video conferencing or other audiovisual means:

  1. the approval of the annual financial statements;
  2. the approval of the Board’s report;
  3. the approval of the prospectus;
  4. the Audit Committee Meetings for consideration of financial statement including consolidated financial statement, if any, to be approved by the Board under sub-section (1) of section 134 of the Act; and
  5. the approval of the matter relating to amalgamation, merger, demerger, acquisition, and takeover.

Where there is quorum presence in a meeting through the physical presence of directors, any other director may participate in conferencing through video or other audio-visual means.

Thus, the Board of directors of Vedic Ltd. desirous of transacting certain matters through video conferencing must refer to the provisions of rule 4 of the Companies (Meeting of Board and its Powers) Rules, 2014 on matters which cannot be dealt with through video conferencing.

Note: As per Companies (Meetings of Board and its Powers) Second Amendment Rules, 2020, For the period beginning from 19th March 2020 and ending on the 31st December 2020, the meetings on matters discussed above may be held through video conferencing or other audiovisual means.

Question 3.
XYZ Ltd. has 6 directors on its Board of Directors. Out of 6 directors, 5 are foreigners and they reside in America. The company wants to convene its Board Meeting in Mumbai but all the 5 directors of pre-occupied and are not in a position to travel to India. Advise the company regarding the conduct of such a board meeting as per provisions of the Companies Act, 2013 and relevant rules. Will the same rules are provisions applicable in case the company wants to approve annual financial statements in the board meeting? (December 2017) (4 marks)
Answer:
1. Manner of participation in Board Meetings [Section 173(2) of the Companies Act, 2013]:
The participation of directors in a meeting of the Board may be either in person (personally present) or through video conferencing or other audio-visual means.

2. Rule 4 of the Companies (Meeting of Board and Its Powers) Rules, 2014, following matters shall not be dealt with in a meeting through video conferencing or other audiovisual means:

  1. the approval of the annual financial statements;
  2. the approval of the Board’s report;
  3. the approval of the prospectus;
  4. the Audit Committee Meetings for consideration of financial statement including consolidated financial statement, if any, to be approved by the Board under sub-section (1) of section 134 of the Act; and
  5. the approval of the matter relating to amalgamation, merger, demerger, acquisition, and takeover.

Where there is quorum presence in a meeting through the physical presence of directors, any other director may participate in conferencing through video or other audio-visual means.

Thus, XYZ Ltd. can hold the meeting of its directors through video conferencing or other audio-visual means. But, XYZ Ltd cannot pass a motion relating to approval of the annual financial statements in such meeting.

Note: As per Companies (Meetings of Board and its Powers) Second Amendment Rules, 2020, For the period beginning from 19th March 2020 and ending on the 31st December 2020, the meetings on matters discussed above may be held through video conferencing or other audiovisual means.

Question 4.
Jolly Retails Ltd. issued a notice for the meeting of its Board of directors scheduled for on 5th June 2019 at its corporate office. One of the directors intimated that he would be participating in the meeting through video conferencing. The Secretary contended that the meeting cannot participate through video conferencing and that the concerned director cannot insist that the company should provide video conferencing facilities for attending the board meeting. Is the contention of the Secretary tenable as per the provisions of the Companies Act, 2013? Discuss relevant case laws, if any. (June 2019) (5 marks)
Answer:
1. As per the provisions of Section 173(2) of Companies Act, 2013, the participation of directors in a meeting of the Board may be either in person (personally present) or through video conferencing or other audio visual means. However, where there is quorum in a meeting through the physical presence of directors, any other director may participate through video conferencing or other audio visual means in such meeting on any specified matter.

2. The system of video conferencing or other audio-visual means must be capable of recording and recognizing the participation of the directors and of recording and storing the proceedings of such meetings along with date and time.

3. Rule 4 of the Companies (Meeting of Board and its Powers) Rules, 2014, following matters shall not be dealt with in a meeting through video conferencing or other audiovisual means:

  1. the approval of the annual financial statements;
  2. the approval of the Board’s report;
  3. the approval of the prospectus;
  4. the Audit Committee Meetings for consideration of financial statement including consolidated financial statement, if any, to be approved by the Board under sub-section (1) of section 134 of the Act; and
  5. the approval of the matter relating to amalgamation, merger, demerger, acquisition, and takeover.

Hence, the contention of the secretary that the director cannot participate in a Board meeting through video conferencing is not acceptable.

Note: As per Companies (Meetings of Board and its Powers) Second Amendment Rules, 2020, For the period beginning from 19th March 2020 and ending on the 31st December 2020, the meetings on matters discussed above may be held through video conferencing or other audiovisual means.

Question 5.
Referring to the provision of Companies Act, 2013 advise the directors of a company in the following matters :
(i) The company wishes to obtain approval of the financial statement in a meeting held through video conferencing.
(if) Due to urgency, the company wants to get its prospectus approved in a meeting held through video conferencing. (June 2019) (4 marks)
Answer:
In accordance with Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 following matters shall not be dealt with in a meeting through video conferencing or other audiovisual means:

  • Approval of the annual financial statements.
  • Approval of the Board’s Report.
  • Approval of the Prospectus.
  • Audit Committee Meetings for consideration of financial statement including consolidated financial statement, if any, to be approved by the Board under section 134(1) of the Companies Act, 2013.
  • Approval of the matter relating to amalgamation, merger, demerger, acquisition, and takeover.

In view of the above provisions, the answer to the given case is as follows:

  1. The Company cannot approve financial statements in a meeting held through video conferencing.
  2. The company cannot approve a prospectus in a meeting held through video conferencing even though approval of such prospectus is urgent. The company must hold a physical meeting of the Board of Directors to approve the prospectus of the Company.

Note: As per Companies (Meetings of Board and its Powers) Second Amendment Rules, 2020, For the period beginning from 19th March 2020 and ending on the 31st December 2020, the meetings on matters discussed above may be held through video conferencing or other audiovisual means.

Question 6.
Enumerate the difficulties encountered in holding “Virtual Meetings of Members”. (June 2019) (4 marks)
Answer:
Difficulties in holding Virtual Meetings of Members:

  • Security of the systems used.
  • Streaming with quality without interruption.
  • Providing secure login and shareholder authentication for attendance, with ease of access for shareholders, and remote voting.
  • Combined registration, voting, and reporting software.
  • Customized instant results screen and detailed audit reporting.
  • Data Security of Logins and Passwords.
  • Allowing the shareholders, the choice of device.
  • The technology used must give all shareholders a reasonable opportunity to participate.
  • The technology must be secure and must provide reasonable measures for verifying/validating those allowed to attend and vote at the meeting.
  • The company must provide a digital record of the meeting.

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