Board meetings: Companies have to provide video conferencing facility on directors’ request

Corporates cannot stay away from providing video conferencing facilities for Board meetings if a director requests for such a facility.

It is mandatory for companies to provide video conferencing if a director so desires, said the National Company Law Appellate Tribunal (NCLAT) in a recent ruling.

Simply put, the NCLAT has held that it is not the company’s sole prerogative to decide whether video conferencing facility should be provided or not.

As per NCLAT’s reading of the Companies Act 2013 along with the framed rules, companies cannot deny the director’s right of participation in Board meeting via video conferencing.

The concerned provision (Section 173 (2)) in company law should be taken as a compulsory requirement and not an optional one, the NCLAT has said.

In giving this ruling, the NCLAT has also made it clear that the ICSI’s Secretarial Standards on Board Meetings — although mandatory for Company Secretaries — cannot override this position of the Companies Act 2013 and its rules.

This would mean that the NCLAT is not in agreement with the contention that the secretarial standards guidelines are that such video conference participation can be done only “if the company provides such facility”.

This latest NCLAT ruling has also in a way strengthened the viewpoints made in certain quarters that ICSI’s Secretarial Standards should only be “desirable best practices” and not thrust as mandatory norms for corporates.

Corporate sector observers hope that legal interventions such as this (NCLAT’s latest) does not end up threatening the efficacy of secretarial standards. NCLAT has also not bought the arguments that in situation where a director resorts to making use of video conferencing facility, it would not be possible for the Chairperson to ensure that the director is alone when participating from wherever the video call is made.

It was being contended that Chairperson would have no means to know as to who else is sitting in the room or place concerned. However, NCLAT has not agreed to this viewpoint.

Commenting on the NCLAT’s ruling, G Ramaswany, former CA Institute President, said: ” the ruling is welcome and clarificatory in nature. It has set right the apprehensions in minds of directors as well as companies”.

Apprehension of the companies that the discussion or decisions of the board will be shared with outsiders by the directors in a video conference is misplaced, Ramaswamy told BusinessLine .

Anyway it is the responsibility of a director participating in a video conference to be cautious in keeping the data and details confidential, he said.

This is because the laws like Information Technology Act and Companies Act already provide for civil and criminal liabilities on directors for sharing of data and details to outsiders without the knowledge of the company, Ramaswamy said.

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