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Ministry Of Corporate Affairs Allows Video Conferencing In Board And General Meetings

26 May 2011

The Ministry of Corporate Affairs has allowed directors and shareholders in the board and general meetings of Indian companies to participate through Video Conferencing ("VC").Taxand India looks at the background and conditions relating to the participation of Video Conferencing.

Under Companies Act, 1956 ("the Act"), a company is required to have its Annual General Meeting ("AGM") at its registered office or at a place within the city where its registered office is situated, whereas there is no such restriction for conducting a board meeting or extraordinary general meeting ("EGM"). However, in all these meetings, only persons physically present are considered for the purpose of quorum (minimum number of persons required to be present).

Considering that global businesses require key decisions to be taken and that the condition of physical presence created bottlenecks, it was widely represented by industry that VC should be recognised as a valid mode of attending board meetings and general meetings. As a response to this industry demand and as a part of its own "green" initiative, the MCA has allowed participation of directors and shareholders in the meetings of the Indian companies through VC, subject to certain conditions.

Taxand's Take

This move is a welcome step and meets a long pending demand of corporates. It would allow directors and shareholders to eliminate distance being a barrier in effective governance. It should be noted that there is a difference between the manner of determining the quorum between a board meeting and a shareholders' meeting. While the directors present through VC are counted for quorum for board meeting, shareholders present by VC would not be counted for quorum of a general meeting.

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