Introduction
SMEs or early-stage companies who have just started might find it difficult to organise a formal board meeting perfectly. Here are some imperatives that SME founders can take note of.
A board meeting is a business meeting of the top directors or executives, essentially the board of directors of a company, to discuss issues, policies, and strategies that require the urgent attention of the company.
Section 173(1) of the Companies Act mandates that "Every company shall hold the first meeting of the Board of Directors within thirty days from the date of company incorporation and after that hold board meetings in such a manner that not more than 120 shall intervene between two consecutive meetings and should be a minimum number of four meetings every year."
Why are Board Meetings Important?
A board of any MNC, startup, or SME is inevitably responsible for keeping the strategies and performance of the company in check and holding executive actions accountable on behalf of stakeholders. Therefore, boards must conduct their meetings to maximise the use of the members' time and intellectual resources.
The constitution of a board in SMEs is not very rigid. Then there are early-stage startups that have only one person on their board. Generally, the founder, the CEO, and a significant investor (or a Venture Capitalist) are included on the board. The board elects a Chairman from among its members.
The Board of Directors may also exercise the following powers in addition to those listed under section 179(b)(3) of the Act, but only by resolutions adopted at Board meetings:
To appoint or discharge key managerial persons (KMP)
To mark any appointments or discharges of Key Management Personnel at a level below
To secure or sell investments held by the firm (other than trade investments)
To take note of the disclosure of the director's interest and shareholding
To evaluate or modify the terms and circumstances of public deposit
To approve quarterly, half-yearly, and annual financial statements or financial results as may be necessary
How to Summon a Meeting?
As per the Institute of Company Secretaries of India (ICSI), a board meeting can be summoned by any director on the company's board. The meeting is convened by the Company Secretary or a person authorised by the board for the same.
A notice of the board meeting is digitally mailed to every director. The notice of the meeting should be communicated to all directors, At least seven days before the scheduled date of the board meeting. This ensures that the investors of SMEs can notify their availability ahead of time.
The notice of a board meeting, drafted by the Company Secretary (is generally the CEO in SMEs and large enterprises), should specify the date, day, time, venue, and serial number of the meeting. It should also include options, if available to board members to participate through video conferencing and details regarding the same. Proper arrangements should be made if a director intends to be virtually present for the meeting.
The agenda of the board meeting and the topics up for discussion should also be enclosed with the notice.
Quorum of a Board Meeting
A board meeting requires a quorum of either two directors or one-third of the board's total membership, whichever is higher. For board meetings, startups or SMEs should maintain a record of the attendees. The information to be included in the attendance register should be:
The board meeting's serial number
The day, date, time, and location of the meeting
The names and signatures of the present directors
The name of the company secretary
The Company Secretary or the Chairman of the board present in the meeting must note each director who attends the meeting via VC and the specifics of their participation in the minutes.
A director may only take a leave of absence after communicating the request to the Company Secretary, the Chairman, or any other person designated by the board.
Meeting agendas
Each item of business to be discussed at the meeting will have a unique serial number. All issues and proposals that need to be approved at the meeting must be accompanied by a note outlining the proposal's specifics and relevant information to help the directors understand the proposal's meaning, scope, and implications.
Topics not on the agenda can be discussed with the Chairman's approval and the support of a majority of the attendees at the meeting. Each contract or agreement must have a register presented in a board meeting and signed by each director.
Concluding the Board Meeting
The board Chairman or the Company Secretary should read the resolutions adopted before adjourning the meeting. It is customary to make the time and location of the following meeting known. The secretary should circulate the minutes for members to peruse after the meeting.
Pointers to note
1. Having a clear agenda: A specified meeting agenda will ensure minimum wastage of time on trivial matters and more time to debate on issues of concern.
2. Board packs and documents: Essential papers are generally sent with the meeting notice to give the members ample time to review them and be prepared.
3. Keeping tools and facilities in check: Ensure proper arrangements like laptops, network connectivity, access control to encrypted folders, and stationery for an obstruction-free meeting.
4. Recording important pointers of the meeting: Conclusion or resolutions of the meetings must be well drafted and shared with all the board members - present or absent in the board meeting.
Board Meeting Etiquettes
A few etiquette guidelines for directors should be followed to ensure the smooth operation of the board meeting. These consist of:
Richard Branson said, “Any successful entrepreneur knows that time is more valuable than money itself.” The board meeting must run on schedule to be successful.
Electronic devices should be used only to refer to the meeting materials.
None of the attendees should be interrupted by their counterparts while presenting their views. All the present board members should be all ears while someone else is speaking.
In cases of a clash of opinions, board members should be respectful to each other.
All board meeting attendees should thoroughly read the board papers to prepare. It is advisable to create pertinent inquiries or solutions to issues to be addressed.
Recognise that all board members, even those who voted against a resolution, are accountable for it.
All the attendees of a board meeting should thoroughly read the board papers to prepare. It is advisable to create pertinent inquiries or solutions to issues to be addressed.
It should be recognised that all board members, even those who voted against a resolution, are accountable for it.
Board meetings are crucial for decision-making and establishing formal channels of horizontal communication for the top-tier management. Any startup looking forward to expanding their company’s scale and stature should look forward to implementing the essentials of a board meeting in the right way. If you are a startup or an SME looking to manage your funding or compliance issues, Table by Salt is a one-stop solution for all your worries.
