Resolving Companies’ Board Meetings’ Impracticability and Quorum Crisis

In order to ensure steady operations of a limited company, board meetings must successfully take place on a regular basis. The essence of board meetings lies in the fact that board meetings engage the directors – the most important organs of a limited company – and the chairman of the company, to resolve existing concerns and develop policies for the company to pursue. However, a board meeting can only legally take place if it fulfils the quorum specified by the articles of association (Articles) of the concerned company or in the absence of such specification, as mentioned by the governing company law legislation. The quorum requirement for company board meetings stipulates the minimum the number of directors who must be present for a board meeting to validly take place.

The quorum requirement of almost all limited companies in Bangladesh are stated in their articles of association. The laws of Bangladesh are silent in relation to requirement of quorum in each company. This is justified in the sense that it is unlikely that all the companies will have the same number of directors. Nevertheless, while this silence may be tenable, it proves to be problematic in the event a company’s Articles do not specify its quorum. In the UK case of York Tramways Co v Willows1, it was held that if no quorum is established by articles, the board must act by a majority of directors. This practice has also been adopted in Bangladesh. Thus, if the quorum is not prescribed by the Articles, the majority of the directors will constitute a quorum.2 If the Articles provide that the quorum may be fixed by the directors, an outsider may assume that the directors have acted with a proper quorum.3 Exceptionally, the number required for a quorum can be established by usual practice.4

The contention that the law is silent on the issue of quorum requirement can be countered by Section 85(2)(b) of the Companies Act 1994 (CA 1994) which states that “in the case of a private company whose number of members does not exceed six, two members and if such number exceeds six, three members, and in the case of any other company, five members personally present shall be a quorum.” Although this section makes specific reference to members and not directors, it can be argued to be applicable to directors as well. This is because it is mandatory in Bangladesh for an individual to have a minimum qualification share in a company if he is to qualify as a director.5 Additionally, the absence of any expression to the effect that the provision can be utilised in case of board meetings in the absence of quorum requirement within the article does not hinder its application on board meetings. This is because the heading of Section 85 is “provision as to meetings and votes”. It is not limited to any specific types of meetings. Furthermore, it will be seen in the subsequent paragraphs of this exposition that the judiciary of Bangladesh has interpreted meetings to include board meetings, AGMs and EGMs. Therefore, it can be argued that in the absence of any quorum requirement within the Articles of a company, it may be possible to rely on Section 85(2)(b) of CA 1994.

Section 96 of CA 1994 mandates limited companies to hold at least one board meetings every three months and at least four board meetings every year. It is often the case that limited companies struggle to fulfil this requirement. This is because it becomes inconvenient to hold board meetings owing to certain unfortunate events. The occurrence of such unfortunate events may result from actions of directors which could be deliberate or inadvertent. It may be the case that all the directors have resigned and thus there is no functioning board, or the directors may intentionally abstain from being present in order to bar the fulfilment of quorum.  The list of reasons is inexhaustible and depends largely on the particular facts and circumstances of each case. Nevertheless, whatever the reason, the results would essentially be the same: (i) the company will be paralysed and (ii) the company will be in breach of Section 96 of the CA 1994.

However, the above quandary can be avoided by invoking Section 85(3) of the CA 1994 which confers power on the courts to convene meetings where it is impracticable to hold meetings. The court may convene a meeting in its own motion or on the application of any director of the company or of any member of the company who would be entitled to vote at the meeting.6 It must be noted that it matters not to the Court that the application under Section 85(3) of the CA 1994 bears express reference to the term “impracticability” as long as the focal contention therein and materials on record clearly establish to Court’s satisfaction the elements of practicability.7 The CA 1994 did not define what would constitute impracticability; it has been developed by the Courts over time. The starting point to understanding what impracticability means would be to study the observations of Wynn – Parry J in the case of Re El Sombrero8 which was decided in the context of UK Companies Act 1948: “It is conceded that the word “impracticable” is not synonymous with the word “impossible”; and it appears… that the question necessarily raised by the introduction of that word “impracticable” is merely this: examine the circumstances of the particular case and answer the question whether, as a practical matter, the desired meeting of the company can be conducted, there being no doubt, of course, that it can be convened and held.

Through different cases, the judiciary of Bangladesh has developed guidance to determining impracticability. In the case of MD. Anis Ahmed & ors. v The Registrar of Joint Stock Co & Ors (Anis Ahmed)9, Syed Refaat Ahmed J stated that “certain principles do indeed govern the exercise of10 the “Court’s authority under Section 85(3) in particular11. His Lordships then submitted that the principles governing the exercise of the court jurisdiction under Section 85(3) of the CA 1994 were succinctly laid down by F.K.M.A. Munim, C.J. in the case of Ghyasuddin Ahmed v Faruqe (Ghyasuddin)12. The principles that Syed Refaat Ahmed J referred from the Ghyasuddin case are: “(i) regard is always to be had to the Articles of Association of the company; (ii) it is incumbent upon the Court to maintain neutrality and not be seen as getting involved in the internal management of the company; (iii) the court will draw at the outset an essential distinction between “impracticability” and “impossibility” in further calling and holding meetings of the company.13

It can be discerned from above that Section 85(3) of the CA 1994 can be relied upon to hold meetings which have failed to take place owing to impracticability. However, it is not clear from the Section 85(3) of the CA 1994 as to whether it will apply to all or some specific types of meetings of a company. This has been clarified by the case of Mostofa Jamal Mohiuddin v Magura Paper Mills and others (Mostofa Jamal)14 where Md. Rezaul Hasan J stated that: “The wording of sub-section (3) does not refer to Annual General Meeting or to Board meeting. It refers to ‘a meeting’ of the company, which has become impracticable to be conducted in the manner as laid down in Articles of Association (in this case as laid down in Article 109) or this Act. The expression ‘a meeting’ is wide enough to enough to cover an AGM, and EGM or a Board meeting, as the case be…15

This observation of Md. Rezaul Hasan J was affirmed by the Appellate Division of the Supreme Court of Bangladesh in the case of Md. Rafiqul Islam Vs. Mostofa Jamal (Rafiqul Islam)16 where the Appellate Division held that: “This very section 85 is very much clear that the provisions provided in this section are with respect to all meetings, namely, annual general meeting, board meeting and other meeting…17

It is thus clear that if a board meeting is failing to take place as a result of events which qualifies as impracticability, the board meeting can be summoned through the intervention of the court by virtue of Section 85(3) of the CA 1994.

Directors must be cautious with their attempts to disrupt company board meetings. If a director voluntarily remains absent from board meetings in order to impede the fulfilment of the quorum requirement, then that particular director risks having his or her office of director vacated under Section 108(1)(f) of the CA 1994. This provision states that “The office of a director shall be vacant, if– … he absents himself from three consecutive meeting of the directors or from all meetings of the directors for a continuous period of three months, whichever is the longer, without leave of absence from the Board of Directors…”. This contention has been affirmed by Md. Rezaul Hasan J in Mostofa Jamal where he opined that the deliberate absence of a director to attend meeting could cause his office of directorship to be vacated. His exact words were: “Hence, if BCIC nominee directors absent themselves from the Board meeting, after receiving the notices of the same, then the provisions of clause-(f) of Section 108 of the Act shall be applicable and the office of the nominee directors of BCIC shall remain liable to be vacated…18

His Lordship further submitted that the deliberate absence could also lead to waiver of right to attend a meeting: “…The provisions for the attendance of at least one Director from each group has been, in my considered view (based on authority), kept in the interest of each group of shareholders and such right can always be waived by any group, viz BCIC in this case. This conduct on the part of the BCIC amounts to waiver of their right to attend the Board Meeting, in spite of receiving the notice for the same and this should not bar holding the board meeting, nor such conduct or unfair practice can be allowed in the rest of the company, to avoid a deadlock situation, and this is a fit case were sub-section (3) of section 85 should be applied to overcome the deadlock situation19 … If BCIC decides to waive their right to attend the Board meeting which they can always waive the advice, that will not, however, prevent formation of the quorum and the Board can transact business as per the agenda noted in the notice.20

Although the observations of Md. Rezaul Hasan J was directed towards a particular company who was a party to the case, it does not eradicate the possibility of the application of his dicta in other cases. In any case, his opinions act as a useful guidance to every operating limited companies in Bangladesh.

In conclusion, it can be submitted that the laws of Bangladesh clearly recognise the essence of board meetings. In addition to making board meetings mandatory for companies, the judiciary has been vested with the power to convene board meetings when impracticability impede board meetings from taking place. The possibilities that a director’s voluntary absenteeism from board meeting could amount to vacancy of his or her office, or waiver of his or her right of attendance to a board meeting is extremely alarming for directors and they must, therefore, be wary before acting to disrupt the formation of quorum of board meetings.

1 [1882] 8 Q.B.D. 685

2 M. Ismail, Hand Book on Company Meetings & Resolutions for Directors & Secretaries, ABC Consulting Corporation Ltd.

3 ibid

4 Tavistock Ironworks Co Ltd, Re (Lyster’s Case) [1867] L.R.4 Eq.233.

5 CA 1994, ss 92(1)(b)(i) and 97

6 CA 1994, s 85(3)

7 MD. Anis Ahmed & ors. Vs. The Registrar Joint Stock Co & ors. [2015] HCD [2016] 1 LNJ 136 [16] [Syed Refaat Ahmed J]

8 [1958] Ch. 900, Chancery Division, L.S. Sealy, Cases and Materials in Company Law (Cambridge University Press 1971)

9 MD. Anis Ahmed & ors. Vs. The Registrar Joint Stock Co & ors. [2015] HCD [2016] 1 LNJ 136

10 Anis Ahmed [18]

11 ibid

12 [1986] AD [1986] DLR 296

13 Anis Ahmed [18]

14 [2013] HCD [2014] LNJ 248

15 Mostofa Jamal [17]

16 [2014] AD [2017] 2 ALR (AD) 2017 300

17 Rafiqul Islam [10]

18 Mostofa Jamal [15]

19 Mostofa Jamal [14]

20 Mostofa Jamal [21]

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Mohammad Taqi Yasir

Mohammad Taqi Yasir is a LLB graduate of the University of London International Programmes. He is one of the 15 students around the world who was awarded first class in 2017 by the University of London. After completing his LLB in 2017, he commenced his legal career at a leading law firm in Dhaka and is currently practicing in civil law, more specifically in the areas of company law. He is also an entrepreneur holding board position at a digital marketing and event management company, Planet X Incorporated. His interests extend to the field of philanthropy as well and he current performs the role of an advisor for a charity called Born To Smile and holds the position of Vice President of a social enterprise named, Footsteps Foundation.

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