CASE STUDIES ( BOARD MEETINGS)
- The article of association of big limited provide that a meeting of board of directors of the company shall be held at 11 A.M on the last day of every quarter ending 31st march, 30th june, 31st December. Relying upon such a clause in the articles, the company didn’t send notice to directors in respect of board meeting held on 30th September. Some of the directors questioned the validity of board meetings on the ground that individual notice has not been sent to the directors. Discuss the validity?
Answer :-
Section 286 deals with the notice regarding Board meeting. And according to this section notice should be given in writing. But notice can be informal. In other words it’s not necessary to give agenda also. A board meeting notice can be given before some hours of the Board meeting as well, if it is bonafide.
In the above case , notice was not send to directors individually. But the article contains that meeting should be held on 11 A.M on the last day of every quarter.
Basic documents :-
Articles and Memorandum are considered as the basic documents of the company. It is presumed that every person/entity who is dealing with the company are fully aware with the basic ( Memorandum and Articles ) documents . Being the directors of the company, they must have full knowledge of the company’s articles. Hence the contention of directors is not valid.
The same decision was held in Portuguese Consolidated Copper mines Ltd. That articles would be considered as notice by itself ;Where articles stated that meeting should be held on 1st Saturday of every month.
- The article of association of the company fixed 3 as the quorum for a meeting of the Board.At a meeting of the Board, all the 5 directors were present. They allotted the shares of the company to 3of the directors. Is it valid ?
Answer :-
Section 287 deals with quorum of Board meeting. As per Section 287 the quorum should be :-
- 1/3 of total strength or 2 whichever is higher
- If there is 2/3 interested directors remaining present should form quorum but such disinterested no of directors should not be less than 2.
- Section 300 describes that interested directors can attend the meeting but will not be counted for the purpose of quorum.
- And it is presumed that the above company is private limited company. As Section 300 doesn’t apply to private companies.
In the above instance shares were allotted to 3 directors of the company. So disinterested directors are (5-3) = 2 in the above case; which fall short of the required no of directors to meet the purpose of quorum.
A board meeting held without quorum is invalid. Hence the allotment of shares is invalid as well. For the purpose of allotment of shares ,Board can appoint 1 additional director to fulfill the quorum . Otherwise the same resolution can be put before the shareholders in AGM/EGM as per the circumstances.
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Regards
Renu
CAclubindia
