Companies Act Section 174 — Quorum for meetings of Board
CHAPTER XII MEETINGS OF BOARD AND ITS POWERS
Commercial / Corporate
Summary
Sub-section (1) sets the minimum number of directors who must be present for a Board meeting to be valid. This quorum is either one-third of the Board's total strength or two directors, whichever is higher. Directors who join the meeting through video conferencing or other audio-visual means also count towards this quorum.
Sub-section (2) allows the remaining directors to keep working even if there are vacancies on the Board. However, if the number of continuing directors falls below the required quorum, those directors can only act for two purposes: to appoint more directors to reach the quorum, or to call a general meeting of the company. They cannot take any other action.
Sub-section (3) deals with situations where many directors have a personal interest in the matter being discussed. If the number of interested directors is two-thirds or more of the Board's total strength, then the quorum becomes the number of disinterested directors who are present at the meeting, as long as at least two such directors are there. The explanation clarifies that an interested director means a director as defined in sub-section (2) of section 184.
Sub-section (4) states what happens if a Board meeting cannot proceed because there is no quorum. Unless the company's articles say otherwise, the meeting is automatically postponed to the same day, time, and place in the next week. If that day is a national holiday, it moves to the next day that is not a national holiday, at the same time and place. The explanation adds that any fraction of a number is rounded up to one, and that total strength does not include vacant director positions.
Official Text
(1) The quorum for a meeting of the Board of Directors of a company hall be one-third of its total strength or two directors, whichever is higher, and the participation of the directors by video conferencing or by other audio visual means shall also be counted for the purposes of quorum under this sub-section.
(2) The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company and for no other purpose.
(3) Where at any time the number of interested directors exceeds or is equal to two-thirds of the total strength of the Board of Directors, the number of directors who are not interested directors and present at the meeting, being not less than two, shall be the quorum during such time.
Explanation.—For the purposes of this sub-section, “interested director” means a director within the meaning of sub-section (2) of section 184.
(4) Where a meeting of the Board could not be held for want of quorum, then, unless the articles of the company otherwise provide, the meeting shall automatically stand adjourned to the same day at the same time and place in the next week or if that day is a national holiday, till the next succeeding day, which is not a national holiday, at the same time and place.
Explanation.—For the purposes of this section,—
(i) any fraction of a number shall be rounded off as one;
(ii) “total strength” shall not include directors whose places are vacant.