The Permissive Framework
Section 173(2) read with Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 permits directors to participate in board meetings through video conferencing or other audio-visual means. The permissive framework is broad, but it is not universal. The rules exclude certain items from VC participation, and the exclusion is mandatory.
The Restricted List
The items that cannot be transacted through video conferencing include: the approval of the financial statements; the approval of the board’s report; the approval of the prospectus; the approval of the annual return; and the matters relating to amalgamation, merger, demerger, acquisition, and corporate restructuring, except where the meeting is conducted in compliance with the prescribed conditions. The restricted list is designed to ensure that directors are physically present for matters that require detailed deliberation and access to underlying documents.
The Item-Specific Character of the Restriction
A board meeting may be held partly through VC and partly in physical mode. The restricted items must be taken up at the physical segment, and the VC participants cannot vote on those items. The minutes should record which directors were present physically and which participated through VC, and the items transacted in each mode. A meeting conducted entirely through VC for a restricted item is procedurally defective even if all directors attend.
Notice and Quorum
The notice of a VC board meeting must inform directors of the mode of participation and the location of the chairperson and the company secretary. The quorum must be present at the commencement of the meeting; if a director disconnects and the quorum falls below the required number, the meeting cannot continue. The chairperson should confirm the quorum at the start and record it in the minutes.
Documentation and Audit Trail
The company should maintain a log of VC participation, including the director’s location, the time of joining and leaving, and the confirmation that the director could hear and be heard. The minutes should record that the participation was through VC and that the director confirmed the ability to participate. Where the VC platform provides a recording, the company should retain it in accordance with its retention policy, subject to applicable privacy and data-protection requirements.
The Risk of “VC by Convenience”
A common failure is to convene a VC meeting for a restricted item because a physical meeting is difficult to schedule. The restriction does not yield to convenience. If the item is restricted, the meeting must be convened in physical mode at least for that item, and the directors must attend physically. A resolution passed in contravention is vulnerable to challenge, and the underlying transaction may be treated as approved without a valid board resolution.
Call to Action: For VC board meeting protocol design or restricted-item compliance review, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.