[Case Study] Consequences of regulatory action in case of errors in board minutes

[2022] 144 taxmann.com 132 (Article)

1. Board minutes

Meeting of minutes is nothing but a record of what transpires during a board meeting of a company, written by the company secretary, after the conclusion of the meeting by capturing the decisions, motions, and key deliberations that are associated with the agenda items on a board meeting. Meeting minutes also note the finer details of a board meeting, such as its date, time, location, attendees, and previous receipt of the agenda and background materials together with recording the attendance of the directors, leave of absence etc. After the conclusion of the board meeting, the minutes are drafted by the company secretary, circulated in draft form to all the directors, reviewed by the directors and thereafter the same is approved and the minutes are generally signed at the subsequent board meeting. While meeting minutes need not read as a transcript of every interaction, they should adequately document all aspects of the board meeting and serve as its legal record since the board meetings are serving as evidence in any legal proceedings

2. The provision on board minutes under the Companies Act 2013

The following are the relevant provisions relating to board minutes.

Section 118 of Companies Act 2013 – Minutes of proceedings of general meeting, meeting of the board of directors and other meetings and resolutions passed by postal ballot.

(1) Every company shall cause minutes of the proceedings of every general meeting of any class of shareholders or creditors, and every resolution passed by postal ballot and every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in such manner as may be prescribed and kept within thirty days of the conclusion of every such meeting concerned, or passing of the resolution by postal ballot in books kept for that purpose with their pages consecutively numbered.

Provided that, in the case of a Specified IFSC public company, the minutes of every meeting of its Board of Directors or of every committee of the Board, are to be prepared and signed in the manner as may be prescribed under sub-section (1) at or before the next Board meeting or committee meeting, as the case may be and kept in the books kept for that purpose.

Provided in case of a Specified IFSC private company, the minutes of every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in the manner as may be prescribed under subsection (1) at or before the next Board or committee meeting, as the case may be and kept in books kept for that purpose.

(2) The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat.

(3) All appointments made at any of the meetings aforesaid shall be included in the minutes of the meeting.

(4) In the case of a meeting of the Board of Directors or of a committee of the Board, the minutes shall also contain —

(a) the names of the directors present at the meeting; and
(b) in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring with the resolution.

(5) There shall not be included in the minutes, any matter which, in the opinion of the Chairman of the meeting,—

(a) is or could reasonably be regarded as defamatory of any person; or
(b) is irrelevant or immaterial to the proceedings; or
(c) is detrimental to the interests of the company.

(6) The Chairman shall exercise absolute discretion in regard to the inclusion or non-inclusion of any matter in the minutes on the grounds specified in sub-section (5).

(7) The minutes kept in accordance with the provisions of this section shall be evidence of the proceedings recorded therein.

(8) Where the minutes have been kept in accordance with sub-section (1) then, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and the resolutions passed by postal ballot to have been duly passed and in particular, all appointments of directors, key managerial personnel, auditors or company secretary in practice, shall be deemed to be valid.

(9) No document purporting to be a report of the proceedings of any general meeting of a company shall be circulated or advertised at the expense of the company, unless it includes the matters required by this section to be contained in the minutes of the proceedings of such meeting.

(10) Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government.

3. Penal provisions for non-compliance/default

The penalty provisions for the company for default:- For any non-compliance or default of the above provisions would attract a penalty as per the provisions of sub-section (11) of section 118 of the Companies Act 2013 which says that, if any default is made in complying with the provisions of this section in respect of any meeting, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.

The penalty provisions for the officers of the company for default:- For any non-compliance or default of the above provisions would attract a penalty as per the provisions of sub-section (12) of section 118 that if a person is found guilty of tampering with the minutes of the proceedings of the meeting, he shall be punishable with imprisonment for a term which may extend to two years and with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees.

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