Section 138 of the Companies Act 1997 provides that, subject to the constitution, the provisions in Schedule 4 govern the proceedings of the board.
Clause 1 — the chairman
(1) The directors may elect one of their number as Chairman.
(2) The Chairman holds office until he dies, resigns, is prohibited from being a director under section 425, 426 or 428, or the directors elect a Chairman in his place.
(3) Where no Chairman is elected, or the Chairman is not present within five minutes of the appointed time, the directors present may choose one of their number to chair the meeting.
Clause 2 — notice of a board meeting
(1) A director, or an employee requested by a director to do so, may convene a meeting of the board.
(2) Not less than two days notice shall be sent to every director who is in the country, including the date, time, and place and the matters to be discussed.
(3) An irregularity in the notice is waived where all directors entitled to receive it attend without protest, or all such directors agree to the waiver.
Clause 2(1) gives every director the power to convene. A director who is being kept out of decisions can therefore call a meeting themselves — a practical remedy that does not require going to Court.
Note that notice is required only to directors who are in the country. A director travelling abroad need not be given notice for the meeting to be validly convened — though the board should still consider whether proceeding is consistent with section 115.
The notice must state the matters to be discussed. A meeting called on a bare agenda cannot properly resolve on a matter no one was told about.
Clauses 3 and 4 — how meetings are held, and quorum
(a) by directors constituting a quorum being assembled together at the appointed place, date and time; or
(b) by means of audio, or audio and visual, communication by which all directors participating and constituting a quorum can simultaneously hear each other throughout the meeting.
(1) A quorum is a majority of the directors.
(2) No business may be transacted where a quorum is not present.
Under section 108, the board means directors numbering not less than the required quorum acting together — or, in a one-director company, that director. Directors below the quorum are not a board and cannot exercise the section 109 management power at all.
That is why section 132 allows a shareholder or creditor to ask the Court to appoint directors where the number falls below the quorum and the constitution offers no way out.
Clause 5 — voting, and the presumption of assent
(1) Every director has one vote.
(2) The Chairman does not have a casting vote.
(3) A resolution is passed where it is agreed to by all directors present without dissent, or where a majority of the votes cast are in favour.
(4) A director present at a meeting is presumed to have agreed to, and to have voted in favour of, a resolution unless he expressly dissents from or votes against it at the meeting.
Silence is assent. A director who says nothing is presumed to have voted in favour — and many liability provisions in the Act turn on exactly that:
- Section 54(2)(d) — a director who voted for the resolution is personally liable for an improper distribution;
- Section 50(2), section 47(2), section 139(4) and section 140(6) — the directors who vote in favour must sign a certificate;
- Sections 348 and 348A — liability turns on what the director did or failed to prevent.
A director who disagrees must expressly dissent or vote against, at the meeting, and should ensure the dissent is recorded in the minutes. Note also that under section 122 an interested director may vote and count in the quorum unless the constitution says otherwise.
Clauses 6, 7 and 8
The board shall ensure that minutes are kept of all proceedings at meetings of the board.
(1) A resolution in writing, signed or assented to by all directors then entitled to receive notice of a board meeting, is as valid and effective as if it had been passed at a meeting duly convened and held.
(2) Such a resolution may consist of several documents in like form.
Unlike the shareholders’ section 103 written resolution, which needs 75 per cent, a board written resolution under clause 7 requires all directors then entitled to receive notice. Note the qualification: those entitled to notice under clause 2(2) are directors in the country.
Clause 8 provides that, except as set out in the Schedule and subject to the constitution, the board may regulate its own procedure.
Minutes form part of the company records required by section 164 to be kept at the registered office, and under section 166 a director has a right of inspection of records.
Varying Schedule 4
Section 138 makes the whole Schedule subject to the constitution. Common variations include:
- a fixed quorum other than a majority, or a quorum requiring a nominee of a particular class;
- a casting vote for the chairman — clause 5(2) denies one by default;
- longer notice than two days, or notice to directors outside the country;
- excluding interested directors from voting or the quorum, displacing section 122;
- weighted voting or reserved matters requiring particular directors’ approval; and
- alternate directors, which the Act does not provide for by default.
Under section 32(2) the constitution has no effect to the extent that it contravenes or is inconsistent with the Act. So it cannot dispense with the directors’ duties, remove the requirement for certificates, or permit the board to exercise a Schedule 3 power by delegation.
Sources
- Companies Act 1997 — ss 32, 47, 50, 54, 103, 108, 109, 111, 115, 122, 132, 138, 139, 140, 164, 166, 348, 348A, 425–428; Schedules 3 and 4
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.