Decoding Secretarial Standards – Quorum

In this post, I will discuss Secretarial Standards related to frequency of Meetings under SS – 1 and SS – 2.

Quorum of Board meeting:

Quorum shall be present throughout the Meeting. Quorum shall be present not only at the time of commencement of the Meeting but also while transacting business. [Paragraph 3.1 of SS – 1]

A Director shall not be reckoned for Quorum in respect of an item in which he is interested and he shall not be present, whether physically or through Electronic Mode, during discussions and voting on such item. [Paragraph 3.2 of SS – 1]

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:

(a) with the Director himself or his relative; or

(b) with any body corporate, if such Director, along with other Directors holds more than two percent of the paid-up share capital of that body corporate, or he is a promoter, or manager or chief executive officer of that body corporate; or

(c) with a firm or other entity, if such Director or his relative is a partner, owner or Member, as the case may be, of that firm or other entity. [Background Paragraph 1 after Paragraph 3.2 of SS – 1]

Directors participating through Electronic Mode in a Meeting shall be counted for the purpose of Quorum, unless they are to be excluded for any items of business under the provisions of the Act or any other law. [Paragraph 3.3 of SS – 1]

Any Director participating through Electronic Mode in respect of restricted items with the express permission of Chairman shall however, neither be entitled to vote nor be counted for the purpose of Quorum in respect of such restricted items. [Background Paragraph 1 after Paragraph 3.3 of SS – 1]

The 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 and in meetings of Audit Committee for the consideration of annual financial statement including consolidated financial statement, if any, to be approved by the Board. [Background Paragraph 2 after Paragraph 3.3 of SS – 1]

The Quorum for a Meeting of the Board shall be one-third of the total strength of the Board, or two Directors, whichever is higher. [Paragraph 3.4.1 of SS – 1]

Any fraction contained in the above one-third shall be rounded off to the next one. Background Paragraph 1 after Paragraph 3.4.1 of SS – 1]

Where the Quorum requirement provided in the Articles is higher than one-third of the total strength, the company shall conform to such higher requirement. [Background Paragraph 2 after Paragraph 3.4.1 of SS – 1]

Total strength for this purpose, shall not include Directors whose places are vacant. [Background Paragraph 3 after Paragraph 3.4.1 of SS – 1]

If the number of Interested Directors exceeds or is equal to two-thirds of the total strength, the remaining Directors present at the Meeting, being not less than two, shall be the Quorum during such item. [Background Paragraph 4 after Paragraph 3.4.1 of SS – 1]

If a Meeting of the Board could not be held for want of Quorum, then, unless otherwise provided in the Articles, the Meeting shall automatically stand adjourned to the same day in the next week, at the same time and place or, if that day is a National Holiday, to the next succeeding day which is not a National Holiday, at the same time and place. [Background Paragraph 5 after Paragraph 3.4.1 of SS – 1]

If there is no Quorum at the adjourned Meeting also, the Meeting shall stand cancelled. [Background Paragraph 1 after Paragraph 3.4.1 of SS – 1]

Where the number of Directors is reduced below the minimum fixed by the Articles, no business shall be transacted unless the number is first made up by the remaining Director(s) or through a general meeting. [Paragraph 3.4.2 of SS – 1]

If the number of Directors is reduced below the Quorum fixed by the Act for a Meeting of the Board, the continuing Directors may act for the purpose of increasing the number of Directors to that fixed for the Quorum or of summoning a general meeting of the company, and for no other purpose. [Background Paragraph 1 after Paragraph 3.4.2 of SS – 1]

Meetings of Committees:

The presence of all the members of any Committee constituted by the Board is necessary to form the Quorum for Meetings of such Committee unless otherwise stipulated in the Act or any other law or the Articles or by the Board. [Paragraph 3.5 of SS – 1]

Regulations framed under any other law may contain provisions for the Quorum of a Committee and such stipulations shall be followed. [Background Paragraph 1 after Paragraph 3.5 of SS – 1]

Quorum for General Meeting:

Quorum shall be present throughout the Meeting. [Paragraph 3.1 of SS – 2]

Quorum shall be present not only at the time of commencement of the Meeting but also while transacting business. [Background Paragraph 1 after Paragraph 3.1 of SS – 2]

Unless the Articles provide for a larger number, the Quorum for a General Meeting shall be:

(a) in case of a public company,—

(i) five Members personally present if the number of Members as on the date of Meeting is not more than one thousand;

(ii) fifteen Members personally present if the number of Members as on the date of Meeting is more than one thousand but up to five thousand;

(iii) thirty Members personally present if the number of Members as on the date of the Meeting exceeds five thousand;

(b) in the case of a private company, two Members personally present. [Background Paragraph 1 after Paragraph 3.1 of SS – 2]

Where the Quorum provided in the Articles is higher than that provided under the Act, the Quorum shall conform to such higher requirement. [Background Paragraph 2 after Paragraph 3.1 of SS – 2]

Members need to be personally present at a Meeting to constitute the Quorum. [Background Paragraph 2 after Paragraph 3.1 of SS – 2]

Proxies shall be excluded for determining the Quorum. [Background Paragraph 3 after Paragraph 3.1 of SS – 2]

A duly authorised representative of a body corporate or the representative of the President of India or the Governor of a State is deemed to be a Member personally present and enjoys all the rights of a Member present in person. [Paragraph 3.2 of SS – 2]

One person can be an authorised representative of more than one body corporate. In such a case, he is treated as more than one Member present in person for the purpose of Quorum. However, to constitute a Meeting, at least two individuals shall be present in person. Thus, in case of a public company having not more than 1000 members with a Quorum requirement of five Members, an authorised representative of five bodies corporate cannot form a Quorum by himself but can do so if at least one more Member is personally present. [Background Paragraph 1 after Paragraph 3.2 of SS – 2]

Members who have voted by Remote e-voting have the right to attend the General Meeting and accordingly their presence shall be, counted for the purpose of Quorum. [Background Paragraph 2 after Paragraph 3.2 of SS – 2]

A Member who is not entitled to vote on any particular item of business being a related party, if present, shall be counted for the purpose of Quorum. [Background Paragraph 3 after Paragraph 3.2 of SS – 2]

This is strange that there is two different direction of thought in standards relating to directors and relating to members. Interested directors are not being counted for quorum while interested member are being counted.

The stipulation regarding the presence of a Quorum does not apply with respect to items of business transacted through postal ballot. [Background Paragraph 4 after Paragraph 3.2 of SS – 2]