CS Company Law Virtual Meetings Question and Answers

Virtual Meetings

Virtual Meeting – Definition

A meeting held totally through either Video conferencing or other audio-visual means is known as a Virtual Meeting. A virtual meeting is when people around the world, regardless of their location, use video, audio, and text to link up online. Virtual meetings allow people to share information and data in real time without being physically located together.

In virtual meetings, there is no physical presence of participants and there is no designated venue for meetings. Participants located at different places participate in the meeting either by teleconference video conference or a combination of them at a predetermined time.

Basic Requirements for Virtual Meeting

• Meeting rooms
• Software, which can be either purchased or can be provided by a vendor for a fee oa n yearly rental basis.
• Hardware equipment like Monitor or LED screen, Webcams.
• High-quality mike system.
• Projectors.
• Document scanners.
• Leased Lines.
• High-speed wireless internet.
• Recording and Storage Equipment for recording the proceeding and Proper storage for future reference as may be required under law.
• Have a trial run before the meeting to ensure all the systems are working properly.
• Ensure that the proper arrangements are made in the Meeting room.

Virtual Board Meetings

Present day Directors’ who are professionals have busy schedules which makes it difficult for them to attend board meetings of the companies in which they are directors, especially for those who are living and working in different cities and countries.

Teleconferencing, videoconferencing, and meeting online benefit boards and directors to enable them to attend the meetings from any location.

Virtual meetings help the directors to participate in meetings wherever they are despite their busy schedule and make valuable contributionthroughby their participation.

Electronic Mode

“Electronic Mode” about Meetings means Meetings through video conferencing or other audio-visual means. “Video conferencing or other audiovisual means” means audio-visual electronic communication facility employed which enables all the persons participating in a Meeting to communicate concurrently with each other without an intermediary and to participate effectively in the Meeting.

Secured Computer System

“Secured Computer System” means computer hardware, software, and procedure that –

• Are reasonably secure from unauthorized access and misuse;
• Provide a reasonable level of reliability and correct operation;
• Are reasonably suited to performing the intended functions; and
• Adhere to generally accepted security procedures.

The attendance registers

The attendance register shall be deemed to have been signed by the Directors participating through Electronic Mode, if their attendance is recorded in the attendance register 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 the Chairman and the fact of such participation is also recorded in the Minutes.

Venue of the meeting

Concerning every meeting conducted through video conferencing or other audio-visual means authorized under these rules, the scheduled venue of the meeting as outlined in the notice convening the meeting shall be deemed to be the place of the said meeting and all recordings of the proceedings at the meeting shall be deemed to be made at such place.

Virtual AGM/EGMs

Section 108 of the Companies Act, 2013 provides for Voting through electronic means. The Central Government may prescribe the class or classes of companies and the manner in which a member may exercise his right to vote by electronic means

General meetings, particularly when large numbers of shareholders are involved, can be very expensive and are not considered to ba cost-effective.

Advantages of Virtual AGM/EGMs

• Increase shareholder participation in meetings,
• Save time on travel and cost because of remote voting.
• Encourages more participation by investors across the world.
• Provides greater accessibility to shareholders who cannot be physically present due to distance.
• Enables institutional investors to attend more than one meeting in a day and protect shareholders’ interests.
• Reduce the cost of holding and conducting shareholder meetings, including the costs of the venue, stationery, transport, and refreshments.
• Save time for the Company’s personnel.

Difficulties in holding Virtual Meetings of Members

• Security of the systems used.
• Streaming with quality without interruption.
• Providing with secure login and shareholder authentication for attendance, with ease of access for shareholders, and remote voting.
• Combined registration, voting, and reporting software.
• Customized instant results screen and detailed audit reporting.
• Data Security of Logins and Passwords.
• Allowing the shareholders, the choice of device.
• the technology used must give all shareholders a reasonable opportunity to participate
• the technology must be secure and must provide reasonable measures for verifying/validating those allowed to attend and vote at the meeting
• The company must provide a digital record of the meeting.

Virtual Meetings  Descriptive Questions

Question 1. The Board of Directors of Vedic Ltd. desirous of transacting certain matters through video conferencing, seeks your advice on the matters which cannot be dealt with through video conferencing. Advise the Board.

Answer:

Matters are not to be dealt with in a meeting through video conferencing or other audio-visual means.

Question 2. Referring to the provision of the Companies Act, 2013 advise the directors of a company in the following matters:

1. The company wishes to obtain approval of the financial statement in a meeting held through video conferencing.
2. Due to urgency, the company wants to get its prospectus approved in a meeting held through video conferencing.

Answer:

Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 provides that the following matters, shall not be dealt with in any meeting held through video conferencing or other audio-visual means:

• the approval of the annual financial statements;
• the approval of the Board’s report;
• the approval of the prospectus;
• the Audit Committee Meetings for consideration of financial statements including consolidated financial statements, if any, to be approved by the Board under sub-Section (1) of Section 134 of the Act; and
• the approval of the matter relating to amalgamation, merger, demerger, acquisition, and takeover.

Accordingly, the company cannot obtain approval of the financial statements from directors in a meeting held through video conferencing (2) The company cannot get its prospectus approved in a meeting held through video conferencing.

Question 3. Enumerate the difficulties encountered in holding virtual meetings of Members:

Answer:

The following are the main difficulties encountered in holding virtual meetings of members:

• Security of the systems used.
• Streaming with quality without interruption.
• Providing secure login and shareholder authentication for attendance with ease of access for shareholders and remote voting.
• Combined registration, voting, and reporting software.
• Customized instant results screen and detailed audit reporting.
• Data security of logins and Passwords.
• Allowing the shareholders, the choice of device.
• the technology used must give all shareholders a reasonable opportunity to participate
• the technology must be secure and must provide reasonable measures for verifying/validating those allowed to attend and vote at the meeting
• The company must provide a digital record of the meeting.

Question 4. What do you understand by the term ‘secured computer

Can all matters required to be approved by a meeting of the Board of Directors be approved by video conferencing?

Answer:

According to Secretarial Standard-1, a Secured Computer System in the context of virtual Board Meetings means computer hardware, software, and procedures that

• are reasonably secure from unauthorized access and misuse;
• provide a reasonable level of reliability and correct operation;
• are reasonably suited to perform the intended functions; and
• adhere to generally accepted security procedures

Section 173(2) of the Companies Act, 2013 read with Rule 4 of Companies (Meetings of Board and its Powers) Rules, 2014, prescribes that the following matters shall not be dealt with in any meeting held through video conferencing or other audio-visual means:

• The approval of the Annual Financial Statements;
• The approval of the Board’s report;
• The approval of the Prospectus;
• The Audit Committee Meetings for consideration of financial statements including consolidated financial statements if any, to be approved by the board under Section 134(1) of the Companies Act, 2013;
• The approval of the matter relating to amalgamation, merger, demerger acquisition, and takeover.

Although, where there is a quorum present in a Board meeting through the physical presence of directors, any other director may participate through the Opportunity to participate. video conferencing or other audiovisual means.

Accordingly, as per the above-mentioned provisions, all matters required to be approved by a meeting of the Board of Directors cannot be approved by video conferencing.

Virtual Meetings  Practical Questions

Question 1. Jolly Retails Ltd. issued a notice for the meeting of its Board of directors scheduled for 5th June 2019 at its corporate office. One of the directors intimated that he would be participating in the meeting through video conferencing.

The Secretary contended that the meeting cannot be participated through video conferencing and that the concerned director cannot insist that the company should provide video conferencing facilities for attending the board meeting. Is the contention of the Secretary tenable as per the provisions of the Companies Act, 2013? Discuss with relevant case laws if any.

Answer:

Section 173(2) of the Companies Act, 2013 states the participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio-visual means as may be prescribed, which are capable of recording and recognizing the participation of the directors and recording and storing the proceedings of such meetings along with date and time.

The second proviso of section Sub Section 2 of Section 173 states that where there is quorum in a meeting through the physical presence of directors, any other director may participate through video conferencing or other audio-visual means in such meeting on any matter specified under the first proviso. (Inserted by the Companies (Amendment) Act, 2017, w.e.f 7-5-2018).

Rule 4 of the Companies (Meeting of Board and its Powers) Rules 2014, which states the matter is not to be dealt with in a meeting through video conferencing or other audio-visual means has been amended by the Companies (Amendment) Act, 2017, by the inclusion of the proviso that where there is a quorum in a meeting through the physical presence of directors, any other director may participate through video conferencing or other audio visual means (inserted w.e.f. 7-5-2018). One of the matters specified in this rule is the approval of the prospectus.

In this case of Achintya Kumar Barua vs. Ranjit Barthkur ([2018] 91 taxman. com 123 (NCL-AT)] The NCLAT has held that, even if one of the directors so desires, a company is bound to provide facilities to directors to participate in board meetings by video conferencing.

With the above amendment and the Tribunal decision, Jolly Retail Ltd. is bound to provide the necessary video conferencing facilities to the director. Space to write important points for revision

Question 2. JKJ Ltd. has 10 directors on its Board. A Board meeting was convened on 19-10-2019 in which two of the directors participated in person and one director through video conferencing. Two directors were interested in the agenda and hence, did not participate in the meeting. The auditor claimed that the quorum was not present for the meeting to be valid. Do you agree with the auditor? Justify your answer about provisions of the Companies Act, 2013.

Answer:

Under Section 174 of the Companies Act, 2013 the quorum for Board Meeting Requirements is as under:

• The quorum for a Board Meeting is 1/ 3rd of its Total strength or two directors, whichever is higher
• A Director participating through video conferencing/audio-visual modes will also be counted for quorum
• Any fraction of a member will be rounded off as one
• “Total strength” shall not include directors whose places are vacant
• In the JKJ Board meeting held on 19.10.19, the quorum is: Total Strength 10×1/3 is 3.33 So, it is rounded off to 4 Directors. Therefore, the Directors required for Quorum is 4 Directors.
• Since two directors attended in person and one director through video conferencing there was an absence of quorum. The claim of the Auditor is true.

Virtual Meetings  Short Notes

Question 1. Write short notes on Virtual Board Meetings.

Answer:

• Present-day Directors who are professionals have busy schedules which makes it difficult for them to attend board meetings of the companies in which they are directors, especially for those who are living and working in different cities and countries.
• Teleconferencing, videoconferencing, and meeting online benefit boards and directors to enable them to attend the meetings from any location. Virtual meetings help the directors to participate in meetings wherever they are despite their busy schedule and make valuable contributionthroughby their participation.
• Virtual attendance can also make board participation more attractive and appealing, especially for independent directors as they are not expected to attend every meeting in person and it is not practically possible as they sit on many boards of the company which are located in different cities and countries and due to statutory requirements most the board meetings of the companies especially listed entities are held around the same time making it more difficult for the Independent professional directors to be physically present and participate in the meetings.
• By holding virtual meetings, Boards with members around the country and globe will benefit from wider participation and it would be very convenient for the directors to attend through virtual media from their respective locations also it helps with reduced travel and reimbursement of costs

Virtual Meetings  Descriptive Questions

Question 2. What do you understand by the concept of Virtual Annual General Meeting? Discusses benefits of such h meeting.

Answer:

Section 108 of the Companies Act, 2013 provides for Voting through electronic means. The Central Government may prescribe the class or classes of companies and how a member may exercise his right to vote by electronic means General meetings, particularly when large numbers of shareholders are involved, can be very expensive and are not considered to be cost-effective.

Advantages of Virtual AGM/EGMs

• Increase shareholder participation in meetings,
• Save time on travel and cost because of remote voting.
• Encourages more participation by investors across the world.
• Provides greater accessibility to shareholders who cannot be physically present due to distance.
• Enables institutional investors to attend more than one meeting in a day and protect shareholders’ interests.
• Reduce the cost of holding and conducting shareholdemeetingsng, including the costs of the venue, stationery, transport, and refreshments. Saves time for the Company’s personnel.

Question 3. ABC Ltd. Wants to hold meetings in electronic mode. As a company secretary detail the procedure to the Board.

Answer:

Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014 provides for the requirements and procedures, in addition to the procedures required for Board meetings in person, for convening and conducting Board meetings through video conferencing or other audio-visual means:

• Every Company shall make necessary arrangements to avoid failure of video or oaudio-visualal connection.
• The Chairperson of the meeting and the company secretary, if any, shall take due and reasonable care, the same has been discussed above.
• The notices of the meeting shall be sent to all the directorbyth the provisions of sub-section (3) of section 173 of the Act.
  • The notice of the meeting shall inform the directors regarding the option available to them to participate through video conferencing mode or other audio-visual means and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio-visual means.
  • A director intending to participate through video conferencing mode or audio-visual means shall communicate his intention to the Chairman or the company secretary of the company.
  • If the director intends to participate through video conferencing or other audio-visual means, he shall give prior intimation to that effect sufficiently in advance so that the company can make suitable arrangements on this behalf.
  • In the absence of any such intimation from the director, it shall be assumed that the director will attend the meeting in person.
• At the commencement of the meeting, a roll call shall be taken by the Chairperson when every director participating through video conferencing or otheaudio-visualal means shall state, for the record, the following namely:
  • name;
  • the location from where he is participating;
  • that he can completely and see, hear, and communicate with the other participants;
  • that he has received the agenda and all the relevant material for the meeting; and
  • that no one other than the concerned director is attending or having access to the proceedings of the meeting at the location mentioned in (b) above.
• After the roll call, the Chairperson or the Secretary shall inform the Board about the names of persons other than the directors who are present for the said meeting at the request or with the permission of the Chairman and confirm that the required quorum is complete.
  • Explanation: It is clarified that a director participating in a meeting through video conferencing or other audio-visual means shall be counted for quorum, unless he is to be excluded for any items of business under any provisions of the Act or the Rules.
  • The roll call shall also be madafterof the meeting ant the re-commencement of the meeting after every break to confirm 12. (a) The draft minutes of the meeting shall be circulated among all the presence of a quorum throughout the meeting.
• Concerning every meeting conducted through video conferencing or other audio-visual means authorized under these rules, the scheduled venue of the meeting as outlined in the notice convening the meeting shall be deemed to be the place of the said meeting and all recordings of the proceedings at the meeting shall be deemed to be made at such place.
• The statutory registers which are required to be placed in the Board meeting as per the provisions of the Act shall be placed at the scheduled venue of the meeting and where such registers are required to be signed by the directors, the same shall be deemed to have been signed by the directors participating through electronic mode if they have given their consent to this effect and it is so recorded in the minutes of the meeting.
• Every participant shall identify himself for the record before speaking on any item of business on the agenda.
  • If a statement of a director in the meeting through video conferencing or otheaudio-visualal means is interrupted or garbled, the Chairperson or company secretary shall request for a repeat or reiteration by the director.
• If a motion is objected to and there is a need to put it to vote, the Chairperson shall call the roll and note the vote of each director who shall identify himself while casting his vote.
• From the commencement of the meeting until the conclusion of such meeting, no person other than the Chairperson, directors, Secretary, and any other person whose presence is required by the Board shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing without the permission of the Board.
• At the end othe f discussion on each agenda item, the Chairperson of the meeting shall announce the summary of the decision taken on such item along with names of the directors, if anywho , dissented from the decision taken bthe y majority
  • The minutes shall disclose the particulars of the directors who attended the meeting through video conferencing or otheaudio-visualal means.
• The draft minutes of thmeetingng shall be circulated among all the directors within fifteen days of the meeting either in writing or in electronic mode as may be decided by the Board.
  • Every director who attended the meeting, whether personally or through video conferencing or other audio-visual means, shall confirm or give his comments, about the accuracy of recording of the proceedings of that particular meeting in the draft minutes, within seven days or some reasonable time as decided by the Board, after receipt of the draft minutes failing which his approval shall be presumed.

Question 4. Describe the requirements for VirtuaMeetingsng.

Answer:

• Meeting rooms
• Software, which can be either purchased or can be provided bthe y vendor
• for a fee oa n yearly rental basis.
• Hardware equipment like Monitor or LED screen, WebcamsHigh-qualityty mike system.
• Projectors.
• Document scanners.
• Leased LinesHigh-speeded wireless internet.
• Recording and Storage Equipment for recording the proceeding and Proper storage for future reference as may be required under law. Hava e trial run before the meeting to ensure all the systems are working properly.
• Ensure that the proper arrangements are made in the Meeting room.