Foreign directors

"How can we show their Board Meeting and AGM/EGM of the company ?"

Dear Shridhi,

Please refine your question by writing in chaste English, so that we can understand your question properly before answering it.

Regards,

Ankur Sharma

Dear Shirdhi Mam,

 Board meeting can be held anywhere in the world. No provisions in the companies act put any restriction on the venue of the board meeting. Same is the case with EGM refer section 169.

 In case of an AGM there is a stipulation regarding the venue. However AGM is a meeting of the members and the quorum is fulfilled by the number of members present. Even if one director is present I suppose it could be enough to answer the queries raised by the members.

 Also refer to proviso (b) of subsection (2) of section 166 of companies act, It clearly states in case of a company which is not a subsidiary of a public company, may in like manner and also by a resolution agreed to by all the members thereof, fix the times as well at the place for its annual general meeting.

 Regards,

Jeets

Thanks jeets...

But in recent amedment in Company law in 2011, meeting through video confrencing is also valid. I think we can hold all types of meeting through video confrencing. Is it so?

Ankur ji, I jst wanted to ask how directors can hold any meeting in relation to a company if they are scattered in different parts of the world.

Dear Shridhi,

The Ministry of Corporate Affairs (the “MCA”) has, as a part of its ‘Green Initiative in Corporate Governance’, introduced paperless compliances for companies. These provisions have been made pursuant to Sections 2, 4, 5, 13 and 81 of the Information Technology Act, 2000, dealing with legal recognition of electronic records (Section 4), legal recognition of electronic signatures (Section 5) and the manner of reckoning the time and place of dispatch and receipt of electronic records (Section 13). Sections 165-197 of the Companies Act, 1956 (the “Companies Act”) deal with meetings of the shareholders of the Company.

Section 166 of the Companies Act provides that a company is required to have its annual general meeting of shareholders (“AGM”) either at the registered office of the company or at a place within the city, town or the village in which the registered office of the company is situated.

There is no express requirement in the Companies Act stipulating a general meeting of shareholders other than an AGM (i.e. an extraordinary general meeting or “EGM”) must be held. As a result, an EGM can be held in a state other than the state in which the registered office is situate and this position has been accepted by the courts in India (see Ram Prasad Somani v. Bank of Rajasthan Ltd., 2002 (1) WLN 153).

The Companies Act does not express recognize general meetings held by means of tele-conference and video-conference. Historically, at the time when the Companies Act came into force, personal presence of at least two (2) members was the only way envisaged to conduct and participate in a ‘meeting’. Therefore, a member could participate and vote in the general meetings of a Company only by attending the meeting personally. Section 174 of the Companies Act explicitly so provides.

The MCA has, in this regard, vide its circulars dated May 20, 2011 and bearing nos. 27 & 28 /2011, clarified and recognized –

(a) the dispatch and receipt of notices for shareholder and board meetings through electronic mode,

(b) the participation by directors in board meetings through electronic mode, and

(c) the participation by shareholders in general meetings through electronic mode,

subject to the company fulfilling certain requirements and procedures as follows :

The MCA has clarified that ‘electronic mode’ means video conference facility i.e. audio-visual electronic communication facility which enables all persons participating in the meeting to communicate concurrently with each other without an intermediary, and to participate effectively in the meeting.

The chairman of the general meeting and the secretary of the Company are obligated to maintain the integrity of the meeting via videoconferencing and to ensure proper videoconference equipment or facilities, preparing proper minutes of the meeting, ensuring the identity and authority of the participants, and ensuring that the participants’ views are taken on board, with repetitions and reiterations, as may be necessary, notwithstanding any interruption or garbling during such videoconferencing.

The MCA has prescribed certain requirements and procedures to be followed by a company to enable participation by shareholders in general meetings. These are summarized as follows:

(a) Place of meeting:

(1) The place of the meeting (in case of an AGM) continues to be the registered office or a place within the city, town or the village in which the registered office of the company is situated. As stated above, holding of an EGM in a place or state other than the state in which the registered office is situate has been accepted by the courts in India.

(2)However, with a view to provide for larger participation and to curb the costs borne by the shareholders in attending general meetings, listed public companies may provide videoconferencing connectivity during such meetings in at least five (5) places in India, preferably covering top five (5) states or union territories having the maximum number of members residing therein or at least one thousand (1000) members, whichever is more.

(b) Notice:

The notice of the meeting must inform the shareholders of the availability of conferencing facilities for participation and provide necessary information to enable the shareholders to access such facilities.

(c) Quorum:

(1) The circular clarifies that shareholders may now participate in a general meeting through electronic mode.

(2) Unlike in the case of board meetings, Section 174 of the Companies Act requires the personal presence of at least five (5) members in case of a public company and at least two members in case of a private company, to constitute the quorum for the general meeting.

(3) Therefore, the circular clarifies that in a general meeting where the shareholders are allowed to participate through electronic mode, the chairman of the meeting as well as the quorum required for the meeting have to be physically present at the place of the meeting. This is in line with the Companies Act requirement for such personal presence for quorum.

(d) Voting and recording of decision:

(1) The circular provides for electronic voting by shareholders in general meetings.

(2) In order to provide for a secure electronic platform for capturing accurate electronic voting processes, the MCA, in its circular dated May 2, 2011 and bearing no. 21/2011, has approved National Securities Depository Limited (“NSDL”) and Central Depository Services (India) Limited (“CDSL”) as the agencies for providing and supervising electronic platform for electronic voting, subject to NSDL and CDSL receiving a certificate from Standardization Testing and Quality Certification (STQC) Directorate, Department of Information Technology, Ministry of Communications and IT, Government of India.

(3) It may be noted here that Section 192A of the Companies Act recognizes passing of resolutions in a listed public company by postal ballot. An explanation to Section 192A clarifies that postal ballot includes voting by electronic mode. The Companies (Passing of the Resolution by Postal Ballot) Rules, 2001 (“Postal Ballot Rules”) prescribes list of matters than can be voted upon by postal ballot and the procedures to conduct business via postal ballot. However, these Postal Ballot Rules do not shed any light on the procedures to be followed for electronic voting by postal ballot, other than recognizing such electronic voting.

The MCA has further clarified, vide its circular dated June 6, 2011 and bearing no. 35/2011, that video conferencing facilities for shareholders’ meetings, are mandatory for listed companies (excluding the shareholders’ meetings to be held during the financial year 2011-2012). The MCA has placed no restrictions on the nature of the videoconferencing equipments or facilities that can be used during the meetings for participation purposes.

Regards,

Veeral Gandhi

Dear Shridhi,

Please find attached MCA Circular dated May 20, 2011:

Regards,

Veeral Gandhi

Thank you so so so much Veeral Gandhi ji...It is very useful.

In my case, there is one Wholly owned subsidiary (WOS) (of Egyptian company) in India. Two foreign directors. All the shares held by Parent company except one share that is held by one director of WOS on behalf of the parent company (sec187C)

While holding an EGM, can it be done by only one director present personally (he is also the shareholder) and other director thru Video Confrencing. Is it mandatory to show the two shareholders present in person? Can one shareholder join thru video confrencing from Egypt? 

Hi shridhi

As per section 174 of companies act there has to be 2 members personaly present in the general meetings of a  pvt.company, and as specifies by Veeral ji

The MCA circular clarifies that in a general meeting where the shareholders are allowed to participate through electronic mode, the chairman of the meeting as well as the quorum required for the meeting have to be physically present at the place of the meeting. This is in line with the Companies Act requirement for such personal presence for quorum.

Hope its clear.

Regards

Anshu

The above mentioned circulars state that the minimum quorum should be present presonally.

It means in case of private company, in any general meeting, at least two shareholders must b present in person.

But how is it possible to do so if there are only two shareholders (as i hv mentioned in my above post), one being a foreign holding company?

Secondly, i want to ask , is video confrenceing facility is available within in India only? or it is for all the shareholders/directors worldwide ?