The Hindu Business Line : Board meetings

Political parties advise their spokespersons to be careful before the TV cameras. Now directors would choose their words more carefully in video conferencing meetings.

S. Murlidharan

The Companies Bill, 2008 that is slated to replace the Companies Act, 1956 that has become a patchwork of amendments breaks several new grounds one of which is to enable companies to conduct their board meetings through video conferencing (VC). From the contours of the proposals available, it seems the Ministry of Company Affairs (MCA) would not accede completely to the corporate sector’s demand and instead would insist on a few physical meetings as well.

One doesn’t know whether a physical meeting would be insisted upon if the matter involved is grave, such as making a rights or bonus issue, preferential allotment of shares, etc.

Feasible or not?

Considering the fact that board meetings tend to be freewheeling, especially with the indulgence of the chairperson, one is not sure whether it would be feasible to maintain such a clear-cut binary distinction between physical and virtual meetings.

To be sure, video-conferencing is a quick and cheap way of getting together. But in the context of company affairs would it also be an effective way?

This doubt arises because, as it is, the Companies Act, 1956 requires a written notice of board meetings to be given to all the directors for the time being in India and to at the usual address in India, for other directors. Company secretaries are often at their wits’ end buttonholing directors in India, especially the jet set or the globe trotting variety.

Matters come to a head when directors are at loggerheads and head for the Company Law Board (CLB). Written notice as a prelude to VC would be a positive impediment to the latter. Assuming this requirement is given up for the sake of speed, would it not accentuate tensions amongst directors not seeing eye to eye with the one left out complaining of steamroller tactics by the promoter group.

The positives

One positive fallout of VC meeting would be its telltale character. Company law history in India is replete with stories of manipulated minutes book. Political parties advise their spokespersons to be careful before the TV cameras. Now directors would choose their words more carefully in VC meetings. A VC meeting perhaps would render superfluous the rigmarole of writing minutes fastidiously.

Administration of the law in letter and spirit would also become more practicable in a VC scenario. An interested director having conflict of interest on a matter before the board meeting, for example, is a persona non grata for the nonce. One does not know what happens actually in the rarefied board rooms — whether they are politely asked to leave the board room or brusquely told to step out or they themselves decently slip out.

While the chairperson could be embarrassed in showing the doors to an interested director in a physical meeting, especially if s/he happens to be a celebrity or otherwise powerful, in VC meeting he can simply cut him off from the rest.

And this he would do for sure because otherwise he could be hauled over coals for allowing an interested director to participate in a board meeting on a matter in which s/he was interested

Physical meetings have their pluses. First, if any bulky record or document is to be passed around the table, it can be done with ease but not so in a VC meeting. Second, a physical meeting can go on uninterrupted but the success of a VC meeting would entirely depend on the efficacy of the communication network.

Third, on the spot informal consultations amongst like-minded directors is possible in a physical meeting but not in a VC meeting.

Thus the proposed new dispensation promises to be a mix bag. Let us wait for it to unfold fully both in law and in practice.

(The author is a Delhi-based chartered accountant. blfeedback@thehindu.co.in)

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