Proxies during Board Meetings

The Companies Act, 2013 refers to proxies in 2 ways. The first meaning of proxy refers to an individual who has been appointed by a member to attend a board meeting on their behalf and vote in this meeting as a representative.  The second meaning of proxy is referring to a document or instrument by which such an individual has been appointed as a proxy. This paper will talk about proxies during a board meeting, that is, people who are acting as a representative for a board member.

The board of directors have the most authority in every company, they make all necessary decisions concerning the company. Section 149(1) of the Companies Act, 2013, specifies the number of directors in a company who are to form the board of directors.[i] The board of directors is to have a combination of non-executive and executive directors, and the board should have at least one woman director.[ii] The power of the board of directors includes exercising all powers that the company has been authorized for and taking action for all matters in which the company has authority.[iii] They can invest and borrow funds; approve mergers and amalgamations; gives guarantees, provide securities, and loans; diversify the business of the company, and; issue securities as debentures. But they can only make these decisions following the Companies Act, 2013, memorandum of association and articles of association of the company, and any regulations passed by the company in general meetings. The board of directors also have to in some cases, take the approval of the board of directors before making decisions.

Under the Companies Act, 2013, every company has to hold 4 board meetings every year, and the first board meeting has to be held within 30 days from the date of incorporation.[iv] There should not be more than 120 days of gap between board meetings.[v] Every board meeting has to be preceded with at least a seven-day notice which is sent to every director in writing to their address registered with the company and has to be delivered by hand delivery, post, or by electronic means if necessary.[vi] Directors are allowed to participate in board meetings through audio-visual means.[vii] It is the responsibility of the convening directors to ensure that every facility is allowed directors to attend the meeting through video-conference mode or any other audio-visual means.[viii] While providing the notice, it is not necessary to give the agenda, however, it is a preferred practice and is generally followed when there is the right agenda; in a case, the court held that the agenda was not provided in the notice because of the wrong intentions, and held the meeting to be void.[ix]

Certain matters cannot be dealt with within the meeting through video-conferencing or any other audio-visual means. These include approval of any financial statements, approval of the Board of director’s report, the approval of matters related to mergers and amalgamations, approval of a prospectus, and the audit committee meetings for consideration of financial statements including consolidated financial statements to be approved by the board.[x] However, they can appoint a proxy to take their place in the meeting.

Proxy voting was not recognized under common law, it was only given statutory recognition in the Companies Act, of 1913 in its 1936 amendment under section 79. Later, it was also recognized in section 176 of the Companies Act, of 1956. Under the current Companies Act, of 2013, proxy voting is recognized under section 105. Proxies can be appointed by board members to represent them in any company meeting; however, this is only an option for members having share capital unless the Article of Association provides for it.[xi] the government retains the right to give a list of classes or classes of companies whose members under no circumstances can appoint a proxy to represent them during a board meeting.

A proxy can represent not more than 50 members whose shareholding in the company, as an aggregate, which carries voting rights is not exceeding 10%. If a singular member alone has 10% or more shareholding with voting rights, a proxy for a such member cannot represent any other members for the meeting. If a proxy has been appointed for more than 50 members, then before the inspection period starts, the proxy is responsible for choosing and confirming the 50 members they want to represent. If the same is not done they will be appointed for the first 50 members who submitted the proxy instrument.[xii] Interestingly, if a member is a body corporate, governor of the state of India, or the President of India, and has an authorized representative, this authorized representative is allowed to appoint a proxy for the member.[xiii] The notice of the meeting needs to contain a statement stating that members who are entitled to attend the meeting and vote may appoint a proxy, and the proxy need not be a member of the company.[xiv] This applies only to companies which have share capital or otherwise companies whose Article of Association allows proxy voting.

The appointment of a proxy has to be in Form No. MGT.11,[xv] and the instrument needs to be in writing and has to be signed by the appointer or his authorized attorney.[xvi] If in case the member appointing the proxy is a body corporate, then the instrument has to be under the body corporate’s seal, signed by a duly authorized attorney or the officer-in-charge. The instrument of proxy needs to be duly stamped,[xvii] if such stamp is missing or has been inadequately stamped, then the instrument is invalid. Moreover, an instrument which is missing any key information, such as the date or proxy’s name, is invalid. It was held in Virender Goel’s[xviii] case that where the same member has submitted instruments of proxy naming different people, the proxy named the last will be considered to be the proxy for the member. If there is a case where there are rival claims for proxy, the chairman of the meeting has to first contact the member for clarification, if the same fails, then the instrument which has the later date the same will be considered the proxy.[xix]

The proxy form needs to be dropped at the company either through a post or in person.[xx] This has to be done at least 48 hours before the commencement of the meeting unless the articles of association provide a longer time period,[xxi] that is the instrument needs to be dropped earlier than 48 hours. If the last day of submission of such form is a holiday, then the proxy’s form will be accepted on the holiday. If a member wants to request an investigation of the proxy, this request needs to be given in writing and at least 3 days before the meeting.[xxii]

The relationship of proxy and member can be treated as one of agent and principal. So, a member can revoke the proxy as a principal would. The article of association of the company may make certain restrictions on this, including making the proxy irrevocable; if the articles of association are silent then the right of revocation prevails.[xxiii] The proxy can be removed when a notice of revocation is received by the company and has been signed by the member or members in case it is a joint appointment.[xxiv] Moreover, the right of a member to attend and vote in a meeting is paramount compared to proxy’s rights. When a member attends the meeting while having appointed a proxy, the appointment is automatically revoked if the member votes before the proxy.[xxv]

Even though audio-visual mechanisms have made it easier for board members to participate in board meetings, in certain circumstances the same is not enough. It is due to these restrictions, that the role of proxy continues to be of importance to board meetings. The proxy has a certain number of powers to fulfil their duty as the representative of the member, including voting in a poll on behalf of the member. Allowing flexibility for the member. The rights of proxies have been limited, to ensure, that they do not overstep their responsibilities. The proxy is not counted towards the quorum of the meeting, generally, they do not have any rights to speak at the meeting which might be granted for some matters, and they cannot participate in the vote by show of hands. Overall, despite restrictions, the role of proxies is very important to companies.

[i] Companies Act, 2013, Section 149(1).

[ii] Ibid.

[iii] Companies Act, 2013, Section 179.

[iv] Companies Act, 2013, Section 173.

[v] Ibid.

[vi] Companies Act, 2013, Section 101.

[vii] Achintya Kumar Barua alias Manju Baruah v. Ranjit Barthkur, Company Appeal (AT) No. 17 of 2018, decided on February 8, 2018.

[viii] Rupak Gupta v. U.P. Hotels Ltd., CA No. 8/C-11/2016, CP. No. 37 (ND) of 2015.

[ix] T.M. Paul (Dr.) v. City Hospital (P.) Ltd., (1999) 97 Com Cases 216.

[x] Navneet Singh Bagga, ‘Board Meetings under Companies Act 2013,’ (TaxGuru, August 2020) <> Accessed 12th October, 2022.

[xi] Companies Act, 2013, Section 105(1).

[xii] Secretarial Standard on General Meetings, 6.1.

[xiii] Companies Act, 2013, Section 105.

[xiv] Companies Act, 2013, Section 105(2).

[xv] Companies (Management and Administration) Rules, 2014, Rule 19(3).

[xvi] Companies Act, 2013, Section 105(6).

[xvii] Secretarial Standard on General Meetings, 6.3.

[xviii] Virender Kumar Goel v. Raghu Raj & Anr., ILR 1986 Delhi 579.

[xix] B. Ramchandra Adityan v. Tamilnad Mercantile Bank Shareholder’s Welfare Association, Decided on 26 November 2009, Application No. 2954 of 2008 in C.S. No. 481 of 2002.

[xx] Secretarial Standard on General Meetings, 6.6.1.

[xxi] Companies Act, 2013, Section 105(4).

[xxii] Companies Act, 2013, Section 105(8).

[xxiii] Indian Contract Act, 1872, Section 203.

[xxiv] Secretarial Standard on General Meetings, 6.7.

[xxv] Knight v. Bulkeley, (1895) 5 Jur. (n.s.) 817.

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