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Introduction:

 

In my previous article (The Companies Act, 2013- Provisions relating to Minutes of Meetings: Part-I), a detailed analysis was made of the provisions of Section 118 of the Companies Act,2013(The Act,2013 or Act )and rules applicable to maintenance of minutes in electronic form. The topic of minutes will be incomplete, if its importance is not highlighted and also basic principles to be observed for enhancing the value of minutes.

 

Significance of minutes:

 

Minutes are a 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. Minutes are one of the most important records which have to be maintained as per provisions of the Act and preserved through out the life time of the company. It also serves as evidence in case of any disputes with regard to any particular decisions recorded in the minutes.

 

Let us now find out as to what is the mandate of the Act, 2013 with regard to Minutes.

 

Requirements u/s 118:

Section 118 of the Act, 2013 requires every company to make minutes of General meetings of members, meetings of Board of directors, its committees and creditors within 30 days of the meeting. In the case of minutes of General meeting, it is to be ensured that the same are signed within 30 days by the Chairman of the same meeting or by any director duly authorised by the board for the purpose in event of death or inability of the Chairman. In the case of board minutes, they can be signed either by the Chairman of the same meeting or by the Chairman of the succeeding meeting. Each page of minutes should be numbered consecutively and shall be initialed or signed and the last page of the minutes shall be signed and dated. 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. Secretarial standards framed by the ICSI should be observed. Rules mandate that distinct books should be maintained for each class of minutes i.e shareholders, Board or its committees and creditors.

 

Reference of Minutes in the Act:

The importance of minutes will be obvious from its mention in various sections which are discussed below:

 

We find reference of minutes in Section 2(12) of The 2013 which defines” books and paper”.  

 

Section 2 (12) which defines  “book and paper” and “book or paper” include books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form;

 

Section 118 deals with the manner of maintenance of minutes of proceedings of General meetings, board meetings and resolutions passed through postal ballots and penalties for contraventions briefly discussed above)

 

Section 128 mandates that every company shall prepare and keep at its registered office books of account and other relevant books and papers and financial statements for every financial year. Readers may note that Books and paper include minutes also in view of definition u/s 2(12).

 

Section 206(5) gives power to Central government to direct inspection of books of account and papers of the company. During inspections, minutes guides the inspector to verify the compliance of various sections as in some cases resolutions are pre requisite for actions. Registrar of companies also call for information by a notice under section 206(1) certain documents which invariably will have inclusion of minutes or extracts of minutes.

 

Section 239 speaks about preservation of books and papers of amalgamated companies which obviously includes minutes. The minutes of amalgamated company can be used as an evidence, if any allegation of misappropriation or fraud committed is inquired into. Similarly Section 283, 299 also refer to custody of papers of a winding up company and power of Tribunal to summon books and papers respectively.

 

Having noted the importance of the minutes and its requirements to be complied with, we may shift the focus to basics of good drafting of minutes and good practices to be adopted.

 

Basics to be observed while drafting of minutes:

It would be a better practice, if draft minutes are prepared immediately after the meeting. As the mind will be fresh with the details coupled with brief notings in the meeting, This practice will help in recording details with accuracy. It will be a good idea to sketch the draft minutes based on the agenda and details such as attendance quorum, names of dissenting persons, deferment, and other details can be supplemented during the meeting or immediately after the meeting. It is desirable to circulate Draft minutes within 7 days after conclusion of the meeting to the chairman and other directors for their suggestions/corrections and finalise the minutes thereafter. Endeavour must be made to get the minutes signed within 30 days by the chairman of the same meeting. In view of the Judgment of Supreme Court in the case of Kerala State Electricity Board Vs Hindustan construction co. Ltd & others, confirmation of minutes in the subsequent meeting is not required.

 

Minutes reflecting decisions, once written but not signed should not be altered or amended except minor corrections involving grammatical errors or spelling mistakes with authentication under the initial/signature of the chairman. For making any alterations in the minutes which substantially change or impact the decision, the proper course would  be to pass a fresh resolution at a duly convened subsequent meeting.

 

The following other points may be kept in mind while drafting minutes:-

 

-Different styles of drafting are adopted for writing minutes. What ever be the style, Minutes should be drafted in such a way that they are clear and unambiguous. At the same time it must be ensured that are concise (not too ling or not too short) and accurate.

 

- It is not the flowery language which is important but a plain and simple language is desirable.

 

- Minutes should be written in past tense and in third person.

 

- Minutes should always indicate the name of the company/body corporate, date, time and place of the meeting and mention the names of the directors or invitees present and chairman of the meeting. In the case of General meetings, the number is huge; it may give reference of the book where the attendance is recorded.

 

- Presence of quorum is a prerequisite for transacting business in any meeting. Therefore a specific mention should invariably be made in the minutes that requisite quorum was present. In the case of minutes of General meeting, if the number of shareholders or proxies is huge in number, then it is better to mention simply the number of persons present in person or by proxy.The reference of book maintained for attendance should be indicated and preserved along with minute books.

 

- In the case of General meetings, the presence of auditors/company secretary in practice should be recorded, if they are present.

 

- Mentioning of leave of absence to those directors who could not be present. Director will automatically vacate his office for default committed as per Section 167(1(b) of new Act.

 

- Brief background about the resolution should be incorporated. This practice will some times remove ambiguities created by badly drafted resolutions.  If a healthy discussion leads to decision, substance of the discussion should be recorded besides recording the names of dissenting persons.

 

- If any director is interested in a particular item of agenda, his name and his abstaining from participating in discussion or voting should be recorded in the minutes.

 

- The most common mistake which many companies commit is that Minutes are not consecutively numbered when minutes are maintained in loose leaf form. Some times blank pages are left in between. The blank pages should be crossed to avoid any presumption for   interpolation. Similarly some times each page is not initialed or signed but last page is signed but sometimes not and dated. Secretarial department fails to pay attention to these minor yet important requirements.

 

- Some times drafts of agreements or documents statutory notices are placed for facilitating discussion or debate; the same should be mentioned in the minutes and also the fact that they are initialed by the chairman for the purpose of identification. This will help in detecting unintentional errors or changes made in approved drafts.

 

- If minutes are written within 30 days, this will also help in giving certified copies of certain minutes even before signing of the minutes. Giving extracts before signing of the minutes should be avoided.

 

- Minutes should not be pasted. Even circulatory resolutions passed should be recorded and made part of the minutes of the Board meeting held subsequently Section 175(2) of the new Act.

Conclusion:

One can infer from the provisions of the Act and suggested good practices that utmost care should be taken while drafting minutes. It must also be ensured that minutes should always be kept in  safe custody of a responsible person authorised by the Board and access to it must be limited only to authorised persons in view of its importance.

 

G S Rao,

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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Category Corporate Law, Other Articles by - G S Rao 



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