Gaurav (student) 21 September 2013

Sec 174(2) of companies act 2013

Hello all Experts and Professionals on CCI, I need a favour from all of You.. Please let me know the meaning of sec 174(2) of Companies Act 2013 i.e. "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." I think It means that once board meeting starts. If director who present at meeting go and do not participate in the meeting even then meeting will continue unless directors presented in meeting is less than quorum. I am confused on this line "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." what does it mean.. I am waiting for your smart reply from smart people

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Anshul 20 September 2016

Hello sir, Lets simply it with the help of an example: Suppose there are 10 directors and in that 9 are interested. Minimum Quorum require by the act is 1/3rd of total strength or 2 whichever is higher as per sec 174(1). And as per sec 174(3) "when no.of interested directors exceeds or is equal to 2/3of total strength,the no.of directors who are not interested directors and present at the meeting being not less than two,shall be the quorum during such time." So in our e.g no.of interested director exceeds 2/3 of 10. Now to have quorum the continuing directors i.e 10 will appoint one more director To make the quorum (1 non interested + 1 newly appointed by the directors) as per sec 174(2)+(3). 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. Have a great day.

Ms.Usha Kapoor (CEO) 01 October 2016

Dear Client,

Quorum here means the minimum number of directors to be present at the board meeting in order to hold the board meeting. The provisions related to the minimum no. of directors i.e. quorum is provided u/s 174 of the companies Act 2013.

This section provides that the quorum of the board meeting should be 1/3rd of total strength or 2 directors whichever is higher. Total strength hereon shall not include directors whose place is vacant. However if the no. of continuing directors is less than the required quorum of the meeting then such continuing directors can hold a meeting only for two purposes :-

To hold a general meeting of the company.
To increase the number of directors to that fixed for the quorum

Any fraction in the number should be taken as 1. In case any director is attending meeting through video conferencing or other audio visual means then no. of these directors shall also be taken into consideration. This provision of minimum no. of director is applicable for both private as well as public company.

In case interested directors are present in the meeting and their no. is equal to or more than 2/3rd of the total strength of the board of directors then in that case the quorum of the meeting should be the number of remaining directors present at the meeting or two directors whichever is higher. Hereon also total strength shall not include directors whose place is vacant.

Now the question arises in our mind is what happens if the required quorum is not present at the meeting. Section 174(4) provides that in case the quorum is not present at the meeting then the board meeting cannot be held and will be adjourned to the same day same time and same place of the next week. In case that day is a public holiday, then to the next succeeding day which is not a public holiday. However the Article of the company can provide otherwise and in that case the AOA of the company will supersede this section.. If you appreciate this answer please click the thank you button on this forum.