What is Quorum?
When we talk about a meeting of the Board of Directors we heard about a word quorum. It is a very important aspect of conducting a meeting of the Board of Directors. So with respect to Board meetings, Quorum means the minimum number of directors competent to transact and vote on any business, i.e. the minimum number of a director who is authorized to act as a board and who does not suffer any disability at a duly convened board meeting. Unless the required quorum is present, no business can be transacted at a board meeting.
What is the required quorum for a Board meeting?
- The quorum required for a board meeting is higher of 1/3rd of total strength or 2 directors.
- Whereat any time the number of the interested director (a director who interested directly or indirectly in the contract or arrangement made in the meeting) exceeds or is equal to 2/3rd of total strength, then the quorum during such time shall be higher of the number of remaining directors (other than an interested director) present at the meeting or 2 directors.
The articles of a company may provide for a higher quorum. However, if the quorum as per the articles is lower than the above-mentioned limit then the limit specified in articles shall be void.
A director who participates in a board meeting by video conferencing or by other audiovisual means shall also be counted for the purpose of quorum.
What is the effect if the quorum is not available?
If a board meeting 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 in next week, at the same place and at the same time or if that day is a national holiday, till the next succeeding day, which is not a national holiday.
So an adjourned meeting is a continuation of the original meeting; it is not a second meeting or separate meeting. Therefore, fresh notice for an adjourned board meeting is not required.
Where a Board meeting could not be held for quorum and is adjourned, and the adjourned board is held subsequently, it shall be deemed that the board meeting was held on the date when the original Board meeting was called and not on the date when the adjourned board meeting was held.
Quorum has to be present at the time of transacting every business. It is not enough that a quorum was present at the commencement of the meeting. Therefore, where a quorum is present at the beginning of the meeting, but some of the directors leave the meeting, so that remaining directors do not constitute a quorum, any subsequent resolutions shall be invalid.
Where a resolution is passed at an adjourned board meeting, the resolution shall be treated to have been passed on the date on which it was passed and not on any earlier date. In short, a resolution passed at an adjourned board meeting does not relate to the original board meeting.
But all these provisions we discussed above do not apply to a One Person Company in which there is only 1 director on the board.