Introduction:
In this article the provisions relating to Minutes of meetings of members, Board or committee of Directors and creditors as mentioned u/s 118 of the Companies Act,2014 (The Act 2013 or new Act) are analyzed. This is section is yet to be notified for enforcing the operation of the same. Rules applicable to implementation of Section 118 and 120 have been put on put on MCA website for public comments.
Meaning of Minutes:
Minutes are concise record of proceedings of meetings of members or Board of directors or committees which reflect true and fair summary of proceedings at the meetings.
What are the significant changes brought in by the new Act:
Let us quickly go through those changes so that it will be easier to register in memory the changes.
a) Rules indicate that Distinct minute books shall be maintained for General meetings of members, meetings of meetings of board, meetings of committees and meetings of creditors,. Inclusion of a new class of creditors whose proceedings, if held are to be recorded in a minute book.
b) Resolutions passed by Postal ballot shall be recorded in the minutes of General meetings as if it is deemed to have been passed in the General meeting. Although this practice is followed by many companies, uniformity does not exist.
c) Secretarial Standards (SS) specified by the Institute of company Secretaries of India shall be observed. SS are already prescribed but these are only recommendatory in nature prior to enforcement of Companies Act, 2013. They are to undergo change in line with the Companies Act,2013.
Many other requirements remain the same except for the fact some additional points have been incorporated taking into consideration judgments passed by courts as to evidentiary value of minutes and certain practices followed by companies for e.g., minuting of postal ballot resolution etc.
Requirements specified under the new Act and Rules:
The requirements mentioned below are as per Section 118 and relevant rules framed.
1. Minutes of each meeting shall contain a fair and correct summary of the proceedings.{Section 118(2)}
2. Minutes of the proceedings of every General meeting of any class of shareholders or creditors and every meeting of Board of directors or every meeting of committee of the board should be entered in minute’s book kept separately for each class of meetings within 30 days from the date of the meeting.
3. In the case of resolutions passed by postal ballot, details such as resolution proposed, brief report on postal ballot, summary of the report of scrutinizer and result shall be entered within 30 days of every such meeting concerned in which in the minutes book of members, as if they have been passed in the General meeting.
4. Each page of minutes should be numbered consecutively. Each page of minutes shall be initialed or signed and the last page of the minutes of each proceedings shall be signed and dated-
- In the case of minutes of proceedings of a General meeting by the chairman of the same meeting or in the event of death or inability, by any director authorised by the Board for the purpose.
- In the case of minutes of proceedings of board or committee, by the chairman of the said meeting or succeeding meeting.
- In the case of every resolution passed by postal ballot by the chairman of the board or by any director authorised, in the event there is no chairman or inability of the chairman.
5. While drafting minutes of Board or Committee of directors, the names of directors present at the meeting, names of dissenting directors and appointment of all key managerial persons shall be mentioned clearly. {Section 118 (3) and (4)}
6. The Chairman has been given power to use his absolute discretion to decide whether any portion of the minutes should be omitted from the minutes, when he finds such portion is not in the interests of the company or it is defamatory of any person or not relevant to the proceedings. {Section 118(5)}
7. Unless proved otherwise, Minutes kept in accordance with the provisions of Section 118, are prima facie evidence to the effect that
- meetings are held, proceedings recorded are correct
- resolution passed by postal ballot are correct
- appointment of key managerial persons, auditors or company secretary in practice are valid.
Note: Rules and Act are relied upon for expressing the above requirements. Readers may note that rules framed with regard to minutes are on display for comments and the rules may be subject to changes.
Summary of the procedure for making minutes:
- Format: Use dedicated minutes sheets for printing the content of the minutes.
- Numbering: Consecutively number the pages of the Minutes Book for easy reference and organization.
- Writing Style: Maintain the minutes in the third person and past tense when describing discussions and decisions. However, use the present tense for recording resolutions.
- Binding: If using a loose-leaf format, periodically bind the minutes based on the size and volume of the content. This binding should coincide with one or more financial years of the company for better management and archiving.
Minutes to be kept at the registered office:
Section 119 (2) requires that Minutes of proceedings of General meetings shall be kept at the registered office and kept open for inspection by any member without fee during the business hours( not less than 2 hrs). Any copies/extracts of minutes of General meetings sought shall be furnished within 7 days of request on payment of fee as mentioned in the articles or Rs.10/ per copy or part which ever is less. Tribunal may order for immediate inspection and issuance of copies/extracts in any case before it.
Registers in Electronic form:
As per Section 120 of the new Act, read with the new rules displayed, Minutes book is one of those registers/documents which are required to be kept by the company in electronic form at the registered office to facilitate inspection as per provisions of Act.
Rules provide that every listed company or a company having not less than 1000 shareholders, debenture holders, and security holders shall maintain records) specified u/s 120 in electronic form.
Once the minutes of members meeting are either digitally signed/physically signed and converted into electronic format changes can not be made. In the case of minutes of proceedings of General meetings, any member shall be entitled to inspect and ask for copies.
If a request is made by any member for copies of minutes in electronic form in respect of 3 preceding general meetings, he shall be entitled to the same free of cost .
Managing director, Secretary or any director or any officer of the company as the board may decide shall be responsible for maintenance and security of the electronics records to maintained as per Section 120. This will facilitate meeting the requirement of providing copies /extracts on request from members or such other persons who inspect the records and demand for copies/extracts. The rules provide that Board of directors can decide the manner in which these books are to be maintained for ensuring security and retrievability, reproduction in print form.
Whether members are entitled to inspect and seek extracts of Board minutes?
The answer is no. Only directors of the company can inspect the minutes. Statutory auditors while discharging their duties are required to verify the minutes and are entitled to demand extracts and preserve them as their audit papers. Similarly cost auditors, company secretary in practice for the purpose of secretarial audit are required to verify the minutes and entitled to demand for extracts.
Whether confirmation of previous minutes is necessary?
Some Companies follow the practice of writing in the board minutes indicating that “Minutes of previous meeting are read and confirmed and signed” or “ Minutes of previous meeting are confirmed and signed”
This issue, whether minutes of previous meeting are to be confirmed or not, came up for consideration by the Kerala High court in the case of
In the Appeal by KSEB, the Apex court confirmed the judgment of Kerala high court affirming that non confirmation of minutes does not have any effect on the decision taken at earlier meeting. Apex court referred to it earlier judgment in Chetkar Jha Vs Viswanath Prasad Verma and Ors 1971(1) SCR 586. In this case Apex court expressed its view that while alteration of minor clerical errors /mistakes in previous minutes are permissible but not those corrections which constitute substantial change of earlier decision.
Minutes are permanent records:
Minutes of all meetings should be preserved permanently and kept under safe custody.
What are the penalties for violations of Sec 118?
As per new Act, for non compliance of provisions of section 118, the company shall be liable for a penalty of Rs.25,000/- and every officer who is default shall be liable for a penalty of Rs.5,000/-Further if any person is found guilty of tampering with the minutes of the proceedings of meeting, he shall be punishable with an imprisonment for a term which may extend to 2 years and with a fine of not less than Rs.25,000/- but may extend to one lakh rupees.
Conclusion: In this age of electronics, maintenance of minutes and other registers in electronic form is made mandatory in the case of listed companies for facilitating inspection by members. It is imperative that Secretaries should gear up to this new requirement and at the same time keep in view that the increased penalty upto one lakh and imprisonment upto 2years for tampering of minutes under the new Act.
G
DGM(Legal),OCL India Limited
Tags: The Companies Act,2013, Minutes of meetings.
Disclaimer:
This article contains interpretation of the Act and personal views of the author are based on such interpretation. Readers are advised either to cross check the views of the author with the Act or seek the expert’s views if they want to rely on contents of this article.
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