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Corporate Governance during Covid-19 Outbreak

March 25, 2020

While the global lock down continues, companies are still finding ways to continue and operating. The situation also requires taking key corporate decisions.  

 

Board Meetings

Companies Act 2006 (the “Companies Act”) envisages that board decisions can be made by way of physical meeting or written resolution. The written resolution should be signed by all the eligible directors.

 

The Companies Act provides additional flexibility to the private limited companies. Unless specifically restricted in the memorandum of association or articles of association, board of directors of private limited companies can conduct meetings through electronic means and will include telephone conference, other web based salutations like zoom, skype, webex can be used. Such meeting is deemed to be held at the place where the chairperson is based. and the resolution so passed has to be certified by the chairperson. The normal rule of quorum will also be applicable to such meetings.

 

The Companies Act does not provide flexibility of electronic meetings to pubic limited companies and not for profit companies. Written resolution will be the only flexible option during this period of travel restriction and lock-downs.

 

General Meetings

The Companies Act allows shareholders of a private company to adopt a written resolution instead of convening a general meeting. As the decision is made by way written resolution, quorum requirement is not relevant and decision is considered as made where the shareholders representing at least 75% of the total shares eligible has executed the resolution. The resolutions can be drafted in separate document and can be signed separately by the shareholders.

 

In addition, the shareholders of a private company can also convene general meetings through electronic means and the same rule as board meetings will apply for such electronic meetings.

 

The Companies Act does not provide flexibility of virtual meetings or decisions by way of written resolutions to public limited companies and not for profit companies.

 

**DISCLAIMER: This document is prepared for general understanding and should not be taken for any legal purpose without consulting legal professionals. ** The copyright of the document is vested with PLA.**

 

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