Principles for convening and conducting Board Meetings

In any nonprofit/charitable institution its board of directors/trustees is charged with providing ultimate oversight over the activities and affairs of the organisation. Each director/trustee must discharge his/her fiduciary duty in good faith, with due care, diligence and in a manner, he/she believes to be in the best interest of the organisation.

How often the board should meet, what it should discuss and how records of these meetings should be maintained is also important because it is indicative of what a board has accomplished over time as well as to hold directors/trustees accountable for their discussions and decisions. Minutes of the meeting should include major decisions made, follow-up steps and tasks, event information, etc.

Secretarial Standards

Companies registered under the Indian Companies Act follow ‘Secretarial Standards’ issued by the Institute of Company Secretaries of India ('ICSI'). However, charitable trusts and societies have no such standards or guidelines to fall back on. 

The Trusts Act and Societies Registration Act offers little direction in terms of number of meetings and how these should be conducted and records maintained. Often trustees find only vague guidance under their own constitution (trust deed or the by-laws or Rules).

The object of this write-up is two-fold:

a) To give readers a flavor of the latest Secretarial Standards and

b) To help directors/trustees of charitable organizations adopt or adapt some corporate best practices with regard to board meetings.

Latest Amendments to Secretarial Standards

The Institute of Company Secretaries of India ('ICSI') has recently (30^th August, 2017) amended the Secretarial Standers which shall come into effect from 1^st October 2017. 

These Standards prescribes a set of principles for convening and conducting Meetings of the Board of Directors and matters related thereto.

Exemption to Section 8 Companies

These Standards are not applicable to companies registered u/s 8 of the Indian Companies Act 2013.

Highlights:

• An adjourned Board Meeting can be held on a National Holiday.

• Notice of the Meeting shall clearly mention a venue, whether registered office or otherwise, to be the venue of the Meeting and all the recordings of the proceedings of the Meeting, if conducted through electronic mode, shall be deemed to be made at such place. In other words, it has been made mandatory to mention the venue of the meeting in each and every notice of the meeting whether through electronic facility of participation through electronic mode provided or not.

• Directors shall not participate through electronic mode in the discussion on certain restricted items.

• Such restricted items of business include approval of the annual financial statement, Board's report, prospectus and matters relating to amalgamation, merger, demerger, acquisition and takeover.

• Similarly, participation in the discussion through electronic mode shall not be allowed in meetings of the audit committee for consideration of annual financial statement including consolidated financial statement, if any, to be approved by the board.

• The Notice of meeting should inform the directors about the availability of such facility, and provide them necessary information to avail such facility.

• Director may intimate his intention of participation through electronic mode at the beginning of the Calendar Year also.

• Notice in writing of every meeting shall be given to every Director by hand or by speed post or by registered post or by facsimile or by e-mail or by any other electronic means. Where a Director specifies a particular means of delivery of Notice, the Notice shall be given to him by such means. However, in case of a Meeting conducted at a shorter Notice, the company may choose an expedient mode of sending Notice.

• In case the company sends the Notice by speed post or by registered post an additional two days shall be added for the service of Notice.

• Proof of sending Notice and its delivery shall be maintained by the company for such period as decided by the Board, which shall not be less than 3 years from the date of the Meeting.

• Any item not included in the Agenda may be taken up for consideration with the permission of the Chairman and with the consent of a majority of the Directors present in the Meeting.

• The decision taken in respect of any other item shall be final only on its ratification by a majority of the Directors of the Company, unless such item was approved at the Meeting itself by a majority of Directors of the Company.

• Company should hold at least four Meetings of its Board in each Calendar Year with a maximum interval of one hundred and twenty days between any two consecutive Meetings.

• Director shall not be reckoned for quorum in respect of an item in which he is interested. However, in case of a private company, a Director shall be entitled to participate in respect of such item after disclosure of his interest.

• Leave of absence shall be granted to a Director only when a request for such leave has been received by the Company Secretary or by the Chairman.

• Interested Director for the purpose of Quorum: For this purpose, a Director shall be treated as interested in a contract or arrangement entered into or proposed to be entered into by the company. If the item of business is related party transaction, then he shall not be present at the meeting, whether physically or through electronic mode, during discussions and voting of such item.

• If an attendance register is maintained in loose-leaf form, it shall be bound periodically, at least in every three years. The attendance register shall be deemed to have been signed by the Directors participating through electronic mode, if their attendance is recorded in attendance registered and authenticated by the Company Secretary or where there is no Company Secretary, by the Chairman or by any other Director present at the Meeting, if so authorized by Chairman and the fact of such participation is also recorded in the Minutes. Where there is no Company Secretary, the attendance register shall be in the custody of any other person authenticated by the Board of this purpose.

• The attendance register is open for inspection by the Directors. Even after a person cease to be a Director, he shall be entitled to inspect the attendance register of the Meeting held during the period of his Directorship.

• Passing of Resolution by Circulation: Proof of sending and delivery of the draft of the Resolution and the necessary papers shall be maintained by the company for such period as decided by the Board, which shall not be less than three years from the date of the Meeting. An additional two days shall be added for the service of the draft Resolution, in case the same has been sent by the Company by speed post or by registered post or by courier.

• Where the Minutes have been kept in accordance with the Act and all appointments have been recorded, then until the contrary is proved, all appointments of Directors, First Auditors, Key Managerial Personnel, Secretarial Auditors, Internal Auditors and Cost Auditors, shall be deemed to have been duly approved by the Board. All appointments made one level below Key Managerial Personnel shall be noted by the Board.

• Wherever the decision of the Board is based on any unsigned documents including reports or notes or presentations tabled or presented at the Meeting, which were not part of the Notes on Agenda and are referred to in the Minutes, shall be identified by initialing of such documents by the Company Secretary or the Chairman.

• Proof of sending draft Minutes and its delivery shall be maintained by the company for such period as decided by the Board, which shall not be less than three years from the date of the Meeting.

• The Report of the Board of Directors shall include a statement on compliances of applicable Secretarial Standards.

• Board of Directors has to mention a statement in its Directors' Report that 'Company is in compliance with applicable Secretarial Standards'.