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The Companies Act, 2013 (hereinafter referred to as the Act) requires that a company established under the Act has to hold General meetings as well as Board meetings periodically. To ensure that the companies follow this regulation and that such meetings are held properly, it requires a quorum to be met for it to be deemed as a valid meeting.
A ‘Quorum’ in simple words means the minimum number of members that have to be present in a meeting. Under the Act, the quorum for a General Meeting, a Board Meeting and an Extraordinary General Meeting is enumerated within its provisions.
Section 103 of the Act states the quorum required for a General Meeting. Under this Section, unless the Articles of Association of the company provide for a larger quorum, the minimum quorum must be:
In the case of a private company regardless of the number of members, two members must be present for the quorum to be met for a meeting.
Sub-clause (2) and (3) of Section 103 of the Act provides for when the quorum has not been met. If the quorum is not present within half an hour of the time set for the meeting to begin, then the following options will be applicable:
A board meeting is a meeting that is held between the directors of a company. Such meetings are held usually to take important decisions about the company. To make sure that such decisions are not taken arbitrarily, the Act requires a quorum for the meeting and the decisions taken in the meeting to be valid. Section 174 of the Act provides the quorum for a board meeting.
The quorum for a board meeting must be 1/3rd of the total number of directors or 2 directors whichever is the higher number. Therefore in case, there are only three directors in a company, then at least two must be present even though 1/3rd would entail that only one director needs to be present. If the directors are not physically present but take part in the meeting via any audio/visual means, they too shall be considered part of the quorum.
In the case where the quorum for a board meeting is not present, the directors may only take two courses of action:
Where the number of interested directors ,i.e. directors who have invested in the company, exceeds or is equal to 2/3rd of the board of directors, the number of not interested directors present at the meeting has to be at least 2 for the quorum.
In the case where the board meeting could not take place due to the lack of the quorum, the board meeting shall be adjourned. This is subject to the Articles of Association of the company. Therefore as long as the articles of the company states otherwise the meeting will be adjourned.
The meeting will be adjourned to the same time and place as the original meeting on the same day the following week. In the case where the adjourned date is a national holiday, then the board meeting will be held at the same place and time on the following day.
It is important to note the following points when calculating the quorum:
A valid meeting may be constituted by the presence of one person in the following cases:
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