The Ministry of Corporate Affairs (MCA) on 18th March 2020, has issued a notification to allow companies to hold board meetings through video conferencing till June 30 in an attempt to reduce physical contact and limit the spread of the Covid-19 outbreak.
Relaxation in Matters which require the physical presence of members in Board Meetings
- Rule 4 of the Companies (Meeting of the Board and its Powers) Rules, 2014 which is now relaxed, requires a quorum of board members to be physically present if the agenda of the meeting included approval of the annual financial statements, board of director’s report and prospectus.
- Furthermore, approval of matters like Mergers, Demerger, Amalgamation, acquisition, and takeover also require a physical present quorum.
- Listed companies are required to submit audited financial statements within sixty days from the close of the year i.e. March 31. However, MCA has now provided relaxation up to 30th June which will allow enabling directors, especially which are based overseas to avoid travel in the wake of the Covid-19 pandemic.
- Also, the relaxation will ensure that important decisions related to Mergers and Amalgamations are not held up.
However, MCA also stated the below
MCA stated that companies must follow Rule 3 which means that the company will have to take steps to avoid any kind of failure in video or audio-visual connection.
The chairperson or the company secretary, if any will have to safeguard the integrity of the meeting via proper security and identification procedures. Proceedings at the board meeting have to be recorded and minutes have to be provided.
Importance of Meetings in this quarter
As per Live mint, the meetings in this quarter are also important as they would ratify interim dividends announced by at least two dozen companies. These dividends were announced to avoid higher dividend distribution tax (DDT) levy to promoters post the new provisions in the budget this year.
To ensure safeguards, the companies would have to ensure adequate documentation of meetings held through video conferencing.
Even in the absence of the relaxation, many companies had been deferring or canceling extraordinary general meetings (EGMs), and board meetings to reduce contact and community spread.
Notification by MCA in regard to Board Meetings under the Companies Act, 2013
Considering the need to take precautionary steps to overcome the outbreak of the coronavirus (Covid-19), the Government has in-principle decided to relax the requirement of holding Board meetings with physical presence of directors under section 173 (2) r/w rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 for approval of the annual financial statements, Board’s report, etc. Such meetings may till 30th June 2020 be held through video conferencing or other audiovisual means by duly ensuring compliance of rule 3 of the said rules.
The necessary changes in the rules in this regard are expected to be notified soon.
Important to Note: The coronavirus cases in India crossed 200 on 20th March 2020 after 13 new cases were reported from various parts of the country. India’s tally of Covid-19 cases includes fresh cases from Maharashtra, Gujarat, Punjab, West Bengal, Uttar Pradesh, and Andhra Pradesh.