Companies Act Section 118

Companies Act, Section 118: Minutes of Proceedings of General Meetings, Board Meetings, and Resolutions Passed by Postal Ballot

Section 118 of the Companies Act establishes the legal requirement for companies to record and maintain minutes of their general meetings, Board meetings, committee meetings, and resolutions passed through postal ballots. The section outlines the format, content, and legal validity of minutes, as well as the responsibilities of company officers in ensuring compliance.

Additionally, the section provides safeguards against the inclusion of inappropriate content in minutes, emphasizes adherence to secretarial standards, and prescribes penalties for non-compliance and criminal liability for tampering with minutes.

1. Obligation to Record Minutes of Meetings and Resolutions

(a) Scope of Applicability

Every company is required to prepare, sign, and maintain minutes of the following proceedings:

1. General meetings: including meetings of any class of shareholders or creditors.

2. Resolutions passed by postal ballot: ensuring due record of votes cast without a physical meeting.

3. Meetings of the Board of Directors: capturing discussions and decisions made by the Board.

4. Meetings of Board Committees: including audit committees, nomination and remuneration committees, and other statutory committees.

(b) Format and Timelines for Recording Minutes

The minutes must be prepared and signed in the manner prescribed by law.

They must be recorded within 30 days from the conclusion of the relevant meeting or passing of a resolution by postal ballot.

The company must maintain these minutes in books specifically designated for this purpose, ensuring that:

Pages are consecutively numbered to prevent tampering.

The minutes reflect a true, fair, and accurate summary of the proceedings.

2. Content and Structure of Minutes

(a) Summary of Proceedings

The minutes should provide a fair and correct summary of all discussions and decisions taken during the meeting.

This ensures transparency, accountability, and legal compliance in the company’s decision-making process.

(b) Details of Appointments

Any appointments made during a meeting must be included in the minutes.

This includes the appointment of:

Directors.

Key managerial personnel (KMP).

Company auditors.

Company secretary in practice.

(c) Specific Requirements for Board and Committee Meetings

For Board meetings and committee meetings, the minutes must additionally include:

1. Names of directors present at the meeting.

2. Details of each resolution passed, including:

Names of directors who dissented from the resolution.

Names of directors who abstained from voting.

Any specific remarks or concerns raised.

3. Exclusion of Certain Matters from Minutes

The Chairman of the meeting has the absolute discretion to exclude certain content from the minutes. The following types of information must not be recorded:

(a) Defamatory Content

Any statements that could reasonably be regarded as defamatory toward any individual or entity.

(b) Irrelevant or Immature Matters

Any matters that are not relevant to the meeting’s agenda or discussions.

(c) Matters Detrimental to the Company’s Interests

Any information that could harm the company’s reputation, business interests, or confidentiality.

The Chairman’s decision regarding inclusion or exclusion of matters in the minutes is final and binding.

4. Legal Status and Evidentiary Value of Minutes

(a) Proof of Legitimacy

Properly maintained minutes serve as legal proof of the proceedings recorded.

If minutes have been recorded in compliance with the 30-day requirement, then:

The meeting shall be deemed to have been properly called and conducted.

The decisions and resolutions passed shall be presumed valid unless proven otherwise.

Any appointments made, including those of directors, auditors, and KMPs, shall be deemed lawful and enforceable.

(b) Public Distribution of Meeting Reports

A company cannot circulate or advertise any document claiming to be a report of the proceedings of a general meeting unless it accurately reflects the contents of the official minutes.

This prevents misrepresentation or selective disclosure of information to shareholders and the public.

5. Compliance with Secretarial Standards

Every company is required to follow Secretarial Standards (SS-1 and SS-2) issued by the Institute of Company Secretaries of India (ICSI).

These standards govern:

Conduct of general and Board meetings.

Preparation and maintenance of minutes.

Disclosure and confidentiality of meeting proceedings.

The Central Government’s approval is required for any modifications to these standards.

6. Penalties for Non-Compliance

Failure to comply with Section 118 results in monetary penalties for the company and responsible officers.

(a) Penalty for Non-Compliance

If a company fails to maintain proper minutes of any meeting:

The company is liable to pay a penalty of ?25,000.

Every officer responsible for the default (including directors and company secretaries) is liable to a penalty of ?5,000.

(b) Criminal Liability for Tampering with Minutes

If a person is found guilty of falsifying or tampering with meeting minutes, they will face:

Imprisonment of up to 2 years.

A minimum fine of ?25,000, which can extend up to ?1,00,000.

These strict penalties ensure the integrity and authenticity of corporate records.

7. Importance of Section 118

The proper maintenance of meeting minutes is crucial for:

Ensuring Legal Compliance: Minutes serve as official evidence of company decisions and prevent legal disputes.

Enhancing Corporate Governance: Transparent documentation of discussions and voting fosters accountability and responsible decision-making.

Protecting Stakeholder Interests: Shareholders, creditors, and regulators can verify the legitimacy of company decisions.

Avoiding Penalties and Criminal Liability: Compliance with Section 118 prevents monetary fines and imprisonment.

Maintaining Corporate Records: Well-maintained minutes ensure that regulatory filings, audits, and financial statements remain accurate and credible.