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There have been vast developments in recent years regarding the modern concepts of corporate law. The main focus of growth was in the idea of giving notice to the directors for the meeting conducted for business transactions. This case talks about the question that whether it is necessary to give prior notice with all particulars attached to it for the meeting to be conducted to the directors of the Company or not?
- There was a newly formed company incorporated under the Company Law. A, B and C were the directors of theCompany. A and B formed a quorum to issue shares which have been not allotted to anybody in the Company without giving notice to C.
- Both the directors held a meeting on 14th February at which they appointed D as a new director. They also appointed bankers, solicitors and also permitted to use the company offices.
- On the 22nd of February, C heard about the meeting that has been held on the 14th of February by the two other directors. After that, C obtained the memorandum signed by the five out of seven directors from carrying out the resolution on 14th February and also filed a writ against A and B.
- On the very same day, before the writ had been served to the other directors, C received notice from B regarding the board meeting that will be held on 24th of February. But the notice has not stated anything about the business that needs to be transacted. C also received that letter stating that the business done on the 14th will be brought up against.
- On 24thFebruary, C didn’t attend the meeting and A and B appointed D and E as the new directors and they were allotted some shares in their name which qualifies them as the new directors of the Company and also affirmed the resolution passed on 14thof Feburary.
- After that, C amended the writ and added E also in the writ and asked to declare the resolution passed on 24th to be null and void. C also filed an injunction against the two of his directors from acting and restrain D and E from acting as a director.
Whether it is important to mention all the particulars and details in the notice for a meeting or not?
The Court held the notice doesn’t need to convene matters of the meeting that is to be transacted. It was also held even if the agenda of the meeting is convened via the notice, it is not necessary to conduct the meeting according to the agenda.
The judge also compared the difference between the meeting held by the shareholders and the meeting held by the directors. It was also stated that the meeting of the directors can be convened any time without any notice for day to day business transactions and the directors must attend the meeting for maintaining company affairs.His Lordship, however, added that:
“… these ideal or best practices or equitable considerations do not derogate from or denude the salutary principle that a notice of board of directors or agenda which states precious little about the matters that are to be discussed is not ipso facto invalid or null and void …”
According to my opinion, the decision is bad in the eyes of law. Although shareholders have allotted a share in the Company, so the prior notice is required for them but to say that directors don’t need any prior notice and they must attend the day to day meeting is wrong. Because of this decision, many directors have misused the decision of the case and used as a defence for illegally appointing others.
The Company must give prior notice to all the directors before conducting any meeting so that the directors can get enough time to equip themselves with the necessary details for the meeting and mark their presence in the meeting. If the Company didn’t provide any notice it will be detrimental for the Company’s business and proper management.
Also, if we provide sufficient time to the directors, they can free their schedule for the meeting if the transaction is that important for them. And if maximum numbers of the director will be present the result will be much clearer and more effective than the decision taken by few for their interest.
Example- There were four directors A, B, C and D. They all were the shareholders in the Company. A and B wanted to invest and appoint a few more directors but C and D were against it. So, A and B decided to conduct a meeting without C and D so they sent the notice regarding the meeting but didn’t share the purpose of the meeting and after that appointed few more directors in the absence of the other directors. The company, because of this decision suffered a considerable loss.
This can be stopped if both the directors C and D attended the meeting and they all discuss the pros and cons of this decision and then made a firm decision.
The Court in the case of P. Rama Aiyar vs T.R. Sivagnanam Pillai And Ors–
In this case, the court has freed itself from the clutches of the English Law and held- That it is mandatory to provide prior notice with all particulars attached related to the meeting that will be conducted.
Also, it was held that thatthe matter related to appointment of the trustees is of great importance and requires sufficient notice for the same.
Also read Director’s fiduciary duty of good faith
 (1928) 54 MLJ 140