Section 174 of CA 2013 : Section 174: Quorum For Meetings Of Board

Explanation using Example

Imagine XYZ Pvt. Ltd. has a Board of Directors with 9 members. According to Section 174(1) of the Companies Act, 2013, the quorum for a board meeting would be one-third of its total strength or two directors, whichever is higher. In this case, one-third of 9 is 3, but since 2 is the minimum, the quorum would be 3 directors.

Now, suppose 3 directors have resigned, leaving only 6 directors on the board. Even with these vacancies, the remaining directors can continue to act as per Section 174(2). However, for a board meeting, they now need a minimum quorum of 2 directors because one-third of 6 is 2, and that is higher than the minimum of 2 set by the Act.

If, at some point, 5 out of the 6 remaining directors have a personal interest in a matter being discussed, they are considered "interested directors." As per Section 174(3), only the director who is not interested would be counted for quorum purposes, and since the quorum cannot be less than two, the meeting cannot proceed on this matter due to a lack of quorum.

If a board meeting of XYZ Pvt. Ltd. is called and only one director shows up, the meeting does not have the quorum required to proceed. According to Section 174(4), the meeting will be adjourned to the same day, time, and place in the following week, or to the next working day if that day is a national holiday.