Board meetings by video-conferencing – whether available only if company allows, or whether director can insist on it?

The NCLAT has held recently (in Achintya Kumar Barua vs. Ranjit Barthkur ([2018] 91 taxmann.com 123 (NCL-AT)) that if any director desires to attend board meetings by video conferencing, the company is bound to allow attendance in this manner. In other words, it is not up to the company or at the discretion of the Chairman/Company Secretary whether or not to allow attendance by video conferencing. The right and option is with any director who so desires. NCLAT has held that the words of Section 173(2) of the Companies Act, 2013 are clear on this. There are, of course, some specified resolutions which cannot be considered in a meeting held by video-conference. However, a proviso inserted to Section 173(2) by the Companies (Amendment) Act, 2017, though not yet brought into effect, says that even in respect of these matters, if the required quorum is physically present, other directors can attend and participate by video-conferencing.

Section 173(2) applies to all companies, private or public, listed or unlisted, small or big. The advantages of participation by video-conferencing are obvious – e.g., saving of costs and time of reaching the venue of board meeting, particularly when the director is located in another city or even another country. However, there are concerns too which particularly for small companies have special relevance. The costs and efforts can be high, and even more than that are the elaborate requirements of compliance. Video-conferencing may also result in raising the level of formality of discussions and bring down free discussions, particularly since the proceedings would be available for review later as in case of default, frauds, etc. This of course can also be helpful too to directors to clearly bring out their individual roles. As the NCLAT emphasized, this generally can also reduce the disputes relating to board meetings.

All in all, though, the law makers may consider whether small/private companies could be given the discretion to decide whether video-conferencing should be offered.

I have written a more detailed article on this in Firstpost here.
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CA Jayant Thakur

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