Drafting of Minutes for Board Meetings
The term ‘minutes’ though not defined in the Companies Act, 1956, is considered as a written record of proceedings of a meeting of any Company duly kept in pursuance of the law. Minutes contain interalia a description of the type of meeting to which they relate, its date, time and venue, mention about persons attended the meeting concerned, confirmation of minutes of previous meeting as a result of practice, decisions taken, process at the meeting, discussions held, voting on resolutions, etc. Minutes record what was done at the meeting i.e. decisions taken at the meeting. The minutes contain record of the business transacted at the meeting as a whole and should exclude any reference to conduct or events which are not themselves items of transacted business. The minutes of the board meetings are the official record of the board meeting proceedings; adoption of proposed policies, resolutions passed at the meeting and other formal board actions. The board meeting agendas are the outline of the topics to be discussed at each meeting.
As the name of the article “The ABC of Board Minutes and its Drafting” suggests, it does not merely include the meaning of “Minutes” or the legal compliances or provisions attached to minutes or board meetings under the Companies Act. The basic crux of this article is the mixture of all the provisions whether the Companies Act or Articles of Association or Secretarial Standards issued by the “Institute of Company Secretaries of India” or any other statutory enactment which should be taken care of while preparing/drafting the minutes.
Minutes are the statutory record under the Companies Act, 1956. The non maintenance or deficiency of any statutory provision can call for prosecutions, fines and penalties. Sections 193, 194, 195, 196 and 197 of the Companies Act are exclusively incorporated for the purpose of minutes. The Article of Association of the company generally contains the provisions for the minutes. Also, The Institute of Company Secretaries of India had framed Secretarial Standard-5 namely “Secretarial Standard on Minutes” effective from 20th September 2007. SS-5 specifies the standards that should be followed while drafting minutes for a good corporate practice. Therefore, utmost care should
be taken while drafting minutes. There is no standardized level of content and format for board minutes. Writing and summarizing what happens at board meetings is more an art than a science. As such, it requires discretion and good
judgment. Good minutes enhance a board’s ability to supervise the organization primarily by helping the board manage its information and hold management accountable. Good minutes describe and, where possible, incorporate by reference and attachment all information that the board has considered, and organize that information for future use. The Company Secretary or the authorized official of the company is generally responsible for recording the proceedings of the meeting. The draft board minutes are required to be circulated to every director for their comments thereon. Therefore, it is necessary that utmost care should be taken while drafting minutes. All the legal provisions of the Companies Act, 1956, Articles of Association and the Secretarial Standards should be taken into account while drafting the minutes.
In this context some of the important points are discussed below:
1. The Minutes should begin with the heading “MINUTES” preferably in capital, bold and aligned in center.
2. Full name of the company should be mentioned
3. The name of the meeting viz., the board meeting or committee or any other like should be specifically mentioned.
4. The date of the meeting should preferably be in words viz. …….. day of ……. , 200.. Here it is important to mention that the original meeting can be held on a public holiday, but the adjourned board meeting (adjourned for lack of quorum) cannot be held on a public holiday [section 288(1)].
5. The time of the meeting may be in 12 hrs. or 24 hrs format. Board meetings can be held during business hours or outside business hours. There is no restriction on that matter under the Act.
6. The place of the meeting should be mentioned. The Board meetings can be held at any place whether it be a company’s registered office or head office or any other premises and whether or not it is within the same city, town, village or state in which the registered office of the company is situated. Board meeting can also be held at places other than these places including abroad.
7. Minutes should record the names of the Directors and the Company Secretary present at the meeting. As per SS-5 the names of the directors should be listed in alphabetical order or in order of seniority, but in either case starting with the name of the chairman and the vice chairman if any. The quorum of the meeting should be in compliance with section 287. It should be ensured that the quorum is required throughout the meeting. Further, as per SS-1 in addition to the names of the directors present at the meeting, the names of persons in attendance and the names of invitees, if any, should also be recorded.
8. The body of the minutes is normally divided into 5 parts
a) Chairman / chairperson
b) Leave of absence
c) Minutes of last board meeting
d) Agenda / item
e) Vote of thanks / any other business
Chairman is in case of a male heading the Board and Chairperson is in case of a female heading the Board. As per regulation 76 (1) of Table A of Schedule 1 to the Companies Act, 1956 “the Board may elect a chairman of its meeting and determine the period for which he is to hold office”. In such a case where the chairman is already appointed by the board it may be written as “Mr./Ms.. ….. took the chair to proceed the meeting”. As per regulation 76 (2) of Table A of Schedule 1 to the Companies Act, 1956 “If no such chairman is elected or if at any meeting the chairman is not present within five minutes after the time appointed for holding the meeting, the directors may choose one of their number to be chairman of the meeting. In such a case where the chairman is elected by the board at the meeting itself it may be written as “Mr./Ms. …. was elected as the chairman/chairperson of the meeting”.
LEAVE OF ABSENCE
Leave of absence is granted only to that director from whom intimation had been received by the company for not attending the meeting. In such a case it may be written as “The leave of absence was granted to Mr. /Ms. ……”. As per Section 283 (1)(g), “The office of a director shall become vacant if he absents from three consecutive meetings of the Board of directors, or from all meetings of the board held during a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board”. Here it is important to note that the intimation for leave of absence is mandatory keeping in view the harsh provisions stated above.
MINUTES OF LAST BOARD MEETING
It is not mandatory to place the minutes of the last board meeting at the present board meeting. Also there is no law requiring confirmation of minutes of the previous meeting of the board of directors. The confirmation of minutes reflects an accurate record of the decisions made at the previous meeting. It is done to take note of what all was discussed at the last board meeting and whether the duties and responsibilities assigned to the authorized persons had been performed or not. In other words, it is to review the operations and activities those were placed at the last board meeting. In this case it is better to mention
“The minutes of the last board meeting were placed before the board. The members of the board took note of the same”. As per section 193(1A), “Each page of every such book shall be initialed or signed and the last page of the record of proceedings of each meeting in such books shall be dated and signed-(a) in case of minutes of proceedings of a meeting of the board or of a committee thereof, by the chairman of the said meeting or the chairman of the next succeeding meeting. (b) in the case of minutes of proceedings of a general meeting, by the chairman of the same meeting within the aforesaid period of thirty days or in the event of the death or inability of that chairman within that period, by a director duly authorised by the Board for the purpose." In such a case where the chairman of the succeeding board meeting signs the minutes of the last board meeting it may be written as “The minutes of the last board meeting as placed before the table was signed by the chairman of the meeting.”
ITEM / AGENDA OF THE MEETING
a. All the items discussed at the meeting should be entered in minutes book serially numbered.
b. Each agenda item discussed and passed whatever should begin with a suitable heading. The heading should be short enough to cover the subject of the item.
c. Where any motion is passed and the resolution needs to be entered in the Minutes book, it should begin with an impressive preamble. Preamble should include a brief and summarized background of the proposal and the rationale for taking the decisions. It may begin with “the chairman proposed…………..” or “the members of the board proposed for ……….” or anything depending on the nature of agenda. Where some report or like document is placed before the board for its approval or discussion it may be written as “ ..… was placed before the board etc”.
d. Where the resolution had been passed, the preamble must also specify the same. It may be written as “ the matter was discussed and following resolution was passed”.
e. Unanimous resolution where passed should be mentioned that it is unanimously passed. Section 316, 372A and 386 of the Companies Act are mandatory and are required to be passed unanimously.
f. All the resolutions passed by way of circulation under section 289 should be noted at the next board meeting and it shall form part of the minutes of such board meeting.
g. As per SS-5, the minutes should be written in third person and in past tense.
h. The minutes of meetings of any committee should be noted at the board meeting.
i. Names of directors dissenting or not concurring with any resolution passed must be stated.
j. Reference about interested directors abstaining from voting is necessary.
k. It is important to note that the audited annual accounts are approved (not adopted) by the directors in their meeting and adopted (not approved) at annual general meeting.
l. Form 24AA required under Section 299 regarding general disclosure of interest should be placed before the board annually.
m. Notice for disqualification of director as required under section 274(1)(g) should be placed before the board annually.
n. There is no special business or ordinary business in regard to board meetings. Similarly there is no ordinary resolution or special resolution.
o. The resolutions should start with words “Resolved that” preferably in capital and bold. They should contain the reference of the sections of the Companies Act, 1956, Memorandum of Association, Articles of Association or any other statutory enactment where applicable and where prior approval of the authority is sought, the name of the authority viz., the Central Government, Company Law Board, Reserve Bank of India etc. Where any statutory form is to be filed, specific authority to sign the form must be mentioned in the resolution.
p. The common seal of the company shall be affixed as per the regulation 84(2) of Table A of Schedule 1 of the Companies Act.
q. Fixation of the date, time and place for the next Board Meeting is not the agenda for the meeting. However, if the articles of the company provides it is better to mention the same through a duly passed resolution. It may be written as “RESOLVED THAT the next meeting of the board of directors shall be held on ……date …. . at …time….. a.m. at ……venue…..”
VOTE OF THANKS / ANY OTHER BUSINESS
Vote of thanks is the formal end to the minutes. It may be written as “There being no other business to transact, the meeting ended with vote of thanks to the chair”. If any business is discussed without prior agenda it can be incorporated in the heading “Any other business”. Thereafter vote of thanks may be mentioned. It is important to keep in mind that the items contained under Section 316 and Section 386 of the Companies Act, 1956 requires a specific notice and cannot be discussed under any other business.
DATE AND SIGNATURES
The minutes are to be signed in accordance with the provisions of Section 193 of the Companies Act. The chairman or the authorized director should initial each page of the minutes and sign the last page and append to such signature the date on which he has signed the minutes.