Tag Archives: The Companies (Meeting of Boards and its powers) Rules 2014

Second Amendment to Companies MBP Rules

On 14th August 2014, Ministry of Corporate Affairs came out with its second amendment to the Companies (Meeting of Board and its Powers) Rules 2014. These Rules come into effect from the date of publication of these amendment Rules in official Gazette which is 14th August 2014.

  1. Rule 3 relating to board meeting through audio vidsual Means discussed earlier here, has been amended to give effect that “scheduled venue of the meeting, which shall be deemed to be a place of the meeting may be a place anywhere and need not be a place in India.
  2. Rule 4(iv) have been amended to the effect that a meeting of Audit Committee through
    Audio Visual means shall not deal with “consideration of financial statement including consolidated financial statement, if any, to be approved by the Board under sub-section (1) of section 134 of the Act. Before amendment, a meeting of Audit Committee through
    Audio Visual means may have not deal with “consideration of accounts” only.

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According to Section 187 of the Companies Act 2013 discussed earlier here, all investments made or held by a company in any property, security or other asset shall be made and held by it in its own name.

The company may hold any shares in its subsidiary company in the name of any nominee or nominees of the company, if it is necessary to do so, to ensure that the number of members of the subsidiary company is not reduced below the statutory limit. [Proviso to Section 187(1)]

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According to Section 185 of the Companies Act 2013, save as otherwise provided in this Act, no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person. We have discussed this Section earlier here.

Rule 10 of the Companies (Meetings of Board and its Powers) Rules 2014 exempt wholly owned subsidiary from the requirements of Section 185 when such loan is utilised for principal business activity of the subsidiary company.

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Section 188 of the Companies Act 2013 lay down provisions regarding related party transactions. This Section discusses type of related party contracts and arrangements, disclosure in board report, rendered related party contract voidable for non – ratification, recovery of any loss and provision for fines. We have discussed these provisions earlier here.

Rule 15 of the Companies (Meeting of Boards and its powers) Rules 2014 add conditions on which a company may enter into a contract with related party:

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One simple solution for cost effective and efficient method to pass a resolution is by passing it by circulation. Section 175 of the Companies Act 2014 the resolution shall be circulated in draft together with all necessary papers to all directors (or members of committee) in same manner as notice. The resolution shall be passed when approved by majority of directors (or members) who is entitled to vote. When one third or more directors require that it must be decided in a meeting, it shall be decided in meeting. Every resolution passed by circulation must be noted in next board meeting and made part of minutes of that meeting. Rule 5 of these Rules adds, a resolution in draft form may be circulated to the directors together with the necessary papers for seeking their approval, by electronic means which may include E-mail or fax.

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We have discussed Committees under the Companies Act 2013 earlier here.

Following committees has statutory mandate:

  1. Social Responsibility Committee
  2. Audit Committee
  3. Nomination and Remuneration Committee, and
  4. Stakeholders Relationship Committee.

The requirement related to Social Responsibility committees is given in Section 135 and the Companies (Corporate Social Responsibility Policy) Rules 2014. Section 178(5) requires every company with more than one thousand shareholders to have stakeholders’ relationship committee. Rule 6 of the Companies (Meeting of Boards and its powers) Rules 2014 set threshold limits.  The Board of directors of every listed company and the following classes of companies shall constitute an Audit Committee and a Nomination and Remuneration Committee of the Board-

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According to Section 173(2) of the Companies Act 2013, directors may participate through:

  1. In person,
  2. Through Video Conferencing,
  3. Other Audio – visual means, as may be prescribe.

Such means must be capable of recording of proceedings and recognising the participation of directors.

The Companies (Meetings of Boards and its Powers) Rules 2014 elaborate provisions related to meeting through audio visual means.

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Section 191 of the Companies Act 2013 discusses payment of compensation for Director for loss of office.  In an earlier post here, we have discussed this section in detail.

According to sub – section (1) of section 191, no director of a company shall, in connection with—

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