The minutes are highly essential for maintaining corporate records for private companies. They consist of a written account of the company’s meetings, decisions, and resolutions passed by its directors and members, actions taken by corporate agents, and decisions made regarding the company’s affairs by its directors, shareholders, and officers. Proper transparency and accountability within an organization can be assured by maintaining minutes.
There are many benefits of operating your business as a private limited company. But everything comes at a cost. The privacy and autonomy of the companies come with scrutiny, strict due diligence, and corporate governance. That includes mandatory reports of what happens during board meetings or shareholder meetings. The method through which the Ministry of Corporate Affairs keeps track of these meetings is through the Maintenance of Minutes for Private Companies. The present article will discuss the need for minutes, legal requisites, best practices and the importance of maintaining minutes for private companies.
Introduction
A private company is an artificial person which is run and managed by directors and shareholders. The affairs managed for fulfillment of the mission, vision and objects of the directors or promoters. It is important to maintain the summarized records of proceedings of the meetings of the company. In future, this will act as legal evidence in the court of law. The Keeping of minutes of every meeting of directors and shareholders is compulsory according to the Companies Act, 2013.
This most preferably should be in writing and some of the basic features include; name of the present shareholders and directors, points that were to be discussed and the decision that has been made including the reason as to why the decision has been made and other details which may include in the meeting.
Meaning of Minutes of Meetings
The basic meaning of the “minutes” is recording of the proceedings which was taken place in the meeting. It should contain fair and correct summery. It is not required to be exact transcript of the proceedings conducted in the meeting. The meeting’s minute book is a formal record of proceedings conducted by the company.
A bound book of which has numbered pages must be used to maintaining the minutes of the meetings of the company. The minute’s book should be kept at the office, or any other place as decided by the Board.
Section 118 of the Companies Act 2013 outlines the relevant procedures provisions and minutes recording of board meetings or committee meetings of the company. It also covers the resolution passed by postal ballot supported by secretarial standards on meetings. The inspection of minutes is allowed by any Auditor, Director, or Secretary of the Company.
Standards of Minutes of Meetings
The applicable Secretarial Standards have been issued by ICSI which provided the provisions regarding the importance and manner of the preparation and maintenance of minutes as per the Companies Act, 2013. This is for the purpose of good corporate governance and for legal compliance as to minutes.
According to ICSI, the minutes need to be summarized, intelligible and contain all the information. The minutes must include this information-
- Name of directors, shareholders and committee members who were present in the meeting.
- The date and time as well as the place of the meeting.
- Details of the members who were absent and reasons for absence.
- The items of the agenda discussed in the meeting and decision taken on those items.
- The rationale for such decisions is made.
- Any complaints or disagreements from the attendees in a particular meeting.
- The follow-up action is to be requested.
- The date and time when the next meeting will be held.
These Secretarial Standards has the application to all companies under the Companies Act, 2013. All meetings including board meetings or general meetings, or committee meetings has the implications of this standards for minutes recording.
Significance of Minutes of Meetings
The minutes of meetings are very important to private companies in several different ways, some of which include-
- Minutes as a record of decisions- Minutes play an important role in recording of decisions, discussion and action taken that took place in the course of meetings. They offer the reference of decisions to the participants in the meetings guaranteeing the accountability of the proceedings.
- Legal observance- Owing to legal requirements it is necessary that the meetings should be documented in detail and accuracy. As a result, it demonstrates that the company is monitoring the corporate governance regulations and fulfill its responsibilities.
- Information to shareholders- Minutes can be communicated to shareholders for purposes of informing them about the activities, progress and decisions taken within the company. This promotes the creation of trust both between the company and the shareholders and helps to get rid of misunderstandings as well.
- Monitor for liability purposes– This is in case of any dissatisfaction or cases which are brought forward, a set of minutes are useful as they present the proceedings of the meeting. Which may assist protection to the company and its directors through providing a clear account of those considerations made within the decision making process.
- Source of reference- In the company, the minutes act as a source of reference. They give explanations and analysis of past choices, conversations, and processes of an organization’s development. It can be useful for a future prospecting, for monitoring and for learning lessons from the past.
The ICSI has emphasized the significance of maintaining accurate and a detailed record of the meetings. Besides, it is helpful in keeping a record of the decision making process of the company. It also acts as a reference tool for the information that the stakeholders need to have whether shareholders, internal or external auditors, and regulatory bodies.
Effects of Non-Maintenance of Meetings
The provisions of the Companies Act 2013 make it really clear that in case of failure, the same would be considered a violation of section 118. The officers who make that default and the company itself shall be liable for the punishment as per the provisions of the Act.
A penalty of Rs 25,000 may be imposed on the company, and Rs 5,000 may be imposed on any corporate official who defaults. If a person is found guilty of altering meeting proceedings’ minutes, he may be punished with imprisonment for two years and a fine of Rs 25,000 to 1 lakh.
According to Section 206 (5) of the Companies Act, 2013, the inspection of the books of accounts in a financial year can be done by the central government. During such inspection if it is found that there is default related to minutes of meetings by the company, it shall be actionable.
Conclusion
Maintaining minutes for private companies is a critical exercise in the governance of private companies. Apart from being a legal requirement, it is a very useful tool for accountability, guarding the interest of the company and other stakeholders in interest and keeping a historical record of decision-making.
The minutes act as the report of the meetings proceeding and show transparency in making decisions. Maintaining minute helps private companies to go through the regulatory landscape as they are in the understanding that they will have a solid basis upon which corporate records depend.
Private companies can take greater advantage of better governance, trust, and legal protection when they realize the worth of minutes and make a corresponding investment towards their maintenance. Companies must thus keep proper and accurate accounts of all the minutes of all meetings held.
Bibliography
The Companies Act of 2013 (Act No. 18 of 2013)
The Companies (Management and Administration) Rules, 2014
https://www.mca.gov.in/
