BBA IIIrd Semester Corporate Environment full notes

ACHARYA INSTITUTE OF GRADUATE STUDIES
(NAAC Re Accredited ‘A’ Grade & Affiliated to Bangalore University)
Soldevanahalli, Bengaluru-560107
DEPARTMENT OF MANAGEMENT
FACULTY NAME: CHETHAN. S
COURSE : BBA
SEMESTER : III SEMESTER (ODD SEM 2018-19)
SUBJECT : CORPORATE ENVIRONMENT
SUBJECT CODE: BCE3CS
UNIT-1
FORMATION OF COMPANY
Meaning of company:-
An association or an organization which is registered or incorporated under the
companies’ act of 1956 is called a company. It is an artificial person created by
law.
Definition.:-
According to justice lord, lindley. “Associations of many persons who
contribute money of money’s worth to a common stock and invest in some trade
and business and who share profit and loss arising therefore”.
Features or Characteristics of Company
1. Registration :-
The company is created only when registered under the companies act Of 1956.
2. Legal entity:-
A company is an artificial person with a legal entity of its own. It acts through
the board of directors elected by the share holders.

3. Common Seal:-
The company being an artificial legal entity or person, it can’t act on Its own.
So, it acts through natural person’s life or the secretary who is authorized
Hence, The need for a common seal of the company for all the contracts entered
into by the Directors or the secretary. The common seal is like the signature of a
company.
4. Perpetuity:-
The company which is registered never dies with retirement or death of its
members as is the case with partnership. The company will survive for the
longer Period.
5. Limited liability:-
In a company, by shares, the liability of members is limited to the Nominal
value of the shares held by them. In respect of partly paid shares, the liability
Extends up to the balance of the nominal value of shares.
6. Separation of ownership and management:-
In a company, the shareholders are the Owners but the management is interested
to the board of directors who are separate from Form the body of shares holders.
7. Transferability of shares:-
In a public limited company, the shares can be easily transferred from one
person to another.
Kinds of companies
1. Chartered Company:-
It a company is incorporated under a special monarch. It is called a chartered
company. For eg:- East Indian company, the chartered bank of Australia, china
an India were Incorporated by the grant of a special royal charter. These
companies are not there in India at present.

2. Statutory Company:-
A company which is created by a special act of the legislature is called a
statutory company. The state bank of India, industrial finance corporation, life
Insurance, corporation of India etc are the examples of this kind.
3. Registered Company:-
A company brought into existence by registration with the Registrar of the
companies under the companies’ act of 1956 is called registered company.
Types of registered company are:-
(a) Private Company:- A private company has been defined as a company
which:- a) limits the number of members 50 b) restricts the transfer of shares
from one shareholder to another. c) Prohibits an invitation to the public to
subscribe to its shares and debentures.
(b)Public Company:- Public Company is a company which requires at least 7
members to form and there is maximum limit. It can invite the public to
subscribe its shares and debentures and it does not restrict the transfer of its
shares from one shareholder to another.
c) Unlimited company:- The companies in which the liability of the members
is Unlimited is called unlimited company.
d) Companies limited by guarantee:-In these companies, each member gives
a guarantee for the debts of a company up to a certain extent. Eg:- Trade
associations, clubs and societies which formed to promote social and cultural
Activities.
e)Companies limited by shares:- In these companies, liability being limited by
shares, The member is called upon to pay only the unpaid amount on the shares
held by him.
Government company:- A company in which not less than 51% of share
capital is held By the central government and or any state government or
governments is called a Government company. For Eg:- Hindustan Aeronautics
Limited (HAL), Indian Telephone Industries (ITI),Bharath Electronics Limited
(BEL)

Foreign Company:- A foreign company is that company which is incorporated
in a Foreign country, but which has established a place of business in India.
Holding and Subsidiary Company:- A company which has control over
another Company is called holding company in other words, a company which
holds more than 50% of the share capital in other company is called a holding
company company which is controlled by other company is called a subsidiaries
company.
Eg:- Company A has 60% of share capital in Company B Here, Company A is
called a Holding company and Company B is called a subsidiary Company.
DIFFERENCE BETWEEN PRIVATE COMPANY AND PUBLIC COMPANY
Basis Private Company Public Company
1. Formation 1. It can commence its business
immediately after incorporation
1. It can commence its business only
after incorporation as well as
obtained of commencement of
business certificates.
2. End words of the name 2. It uses the word private limited
in its name.
2. It uses the word limited in his
name
3. Membership 3.Minimum 2 members and
maximum 50 members
3. Minimum 7 members and
maximum unlimited
4. Prospectus 4. It is not required to file
prospectus with registrar of the
company.
4. It must file the prospectus with the
registrar of the company.
5. Allotment of shares 5. No legal restriction on
allotment of shares
5. There is certain restriction.
6. MOA / AOA 6. At least 2 members must sign
memorandum of association and
articles of association
6. At least 7 members must sign
MOA & AOA.
7. Public issue of capital 7. It is prohibited from inviting
public to subscribe capital
7. It can invite public to subscribe
capital.
8. Transfer of Shares. 8. No shares are transferable and
cannot be quoted in the stock
exchange.
8. Shares are freely transferable an
they can be quoted on stock
exchange.
9. Directors 9. It must have at least 2 directors 9. It must have at least 3 directors.

10. Minimum capital
requirement.
10. It requires at least Rs. 5 lakhs. 10. It requires at least Rs. 1 lakh.
11. Statutory meeting 11. It doesn’t require to hold
statutory meeting.
11. It must hold statutory meeting
and file a statutory report with
registrar of company within 6 months
from the date of obtainment of
business commencement certificate.
12. Share warrant 12. It cannot issue share warrant 12. It can issue share warrant.
13. Quorum. 13. Minimum 2 members must be
present to conduct meeting.
13. Minimum 5 members must be
present to conduct the meeting.
14. Managerial
remuneration
14. No restrictions on managerial
remunerations.
14. Total managerial remuneration
shouldn’t be more than 11% of net
profit.
FORMATION OF A COMPANY
Company formation is the term for the process of incorporation of a
business. It is also sometimes referred to as company registration.
In the formation of a public limited company mainly four stages are involved:-
• Promotion
• Incorporation
• Capital Subscription
• Commencement of business or trading certificate
In the formation of a private it company only the first two stages say –
 PROMOTION
Promotion is a term used for denoting the preliminary steps taken for the
purpose of registration and floatation of the company. The persons who assume
the task of promotion are called promoters.
The company promotion has involved 4 stages.

a) Discovery of an idea:- The promoters starts with an idea to start some
business either in new field or existing field of business. He makes preliminary
investigation to find out whether the particular business is useful and he roughly
estimates income and expenditure of the proposed business.
b) Detailed Investigation:- The promoter needs to make detailed investigation
of his idea with the assistants of many experts like engineers, chemists, market
analysis’s, finance experts, management consultants etc. on the basis of reports
of these experts the promoters would be in a position to know the capital
requirements, place of location, size of the unit, demand condition in the
market, price of product, cost of production, Written on capital etc. A detailed
investigation will help him to compare the estimated income is enough to meet
the cost of production and other expenses.
c) Assembling:- After detailed investigation, if he is satisfied with practicability
and profitability of the proposal concern, he starts assembling preposition,
assembling means getting the support and consent of other persons to act as a
director or founders, arranging for patents, a suitable site for the company,
machinery and equipment etc.
 INCORPORATION OR REGISTRATION OF A COMPANY
After Promotion, the second stage in the formation of a company is the
registration or incorporation. The promoter of a company should perform the
following functions for getting the company registered under the Companies
Act.
Steps:-
1. Approval of the Proposed Name of the Company
Before the company is registered, it is essential to obtain the approval of the
Registrar to its proposed name. There is a specific application form for this
purpose. The promoter generally selects a few suitable names in order of
preference and applies to the National Company Law Tribunal through the
Registrar of the State in which the company is to be registered in Form No. 1A
along with a fee of Rs.100. On hearing about the available name, the promoter
has to decide the name for the company.

2. Documents to be filed with the Registrar during registration
The promoter should then prepare and file the following documents with the
Registrar of Joint Stock Companies. He should also pay the necessary filing and
registration fees.
1. Memorandum of Association
The Memorandum should be printed and at least seven persons each agreeing to
take at least one share must subscribe their names to Memorandum.
2. The Articles of Association
The Articles must also be signed by at least seven members. If a public
company doesn’t prepare and file Articles, then it is deemed to have adopted
Table A in Schedule I of the Indian Companies Act.
3. List of Directors
A complete list of directors, their addresses and occupations and age. If not
separate list is filed, the subscribers to the Memorandum are deemed to be the
first directors.
4. Consent of the Directors
When Directors of a Company are appointed by the Articles of Association or
named in the prospectus, a written consent to act as directors and also a written
undertaking to take up and pay for the qualification shares if any are mandatory
in Incorporation of a Company.
5. Statutory Declaration
A statutory declaration by any one of the following persons stating that all the
requirements of the Act regarding Registration have been duly complied with:
1. An Advocate of the Supreme Court or High Court.
2. An Attorney or Pleader who is entitled to appear before a High Court.
3. A Chartered Accountant who is engaged in formation of the company and
also practicing in India.
4. Any individual who is named in the Articles of Association as the
Company’s Director, Manager or Secretary.

6. Notices of the Address of the Registered Office
The notice for the address of the registered office of the company should be
given within 30 days after its incorporation or on the date from which the
company commences its business whichever is earlier.
7. A Letter of Authority for Making Necessary Corrections in Memorandum
and Articles
A letter of authority on a non-judicial stamp paper of the requisite value signed
by all the subscribers in favour of one of them or any other person for making
necessary corrections, on their behalf, in the Memorandum and Articles and
other papers is to be filed with the Registrar of Companies.
8. Letter of Registrar of Companies about the Availability of Name
Notarized original copy of Registrar of Companies stating the availability of the
proposed name is mandatory while registering a company name. It should be
filed with the Registrar of Companies. However, the requirements as given in
points 3 and 4 above shall not apply to private companies.
3. Payment of Necessary Fees
Along with the above-detailed documents, the registration and filing fee as per
the rates prescribed in Schedule X to the Companies Act, 1956 are to be paid.
4. Registration of the Company
The Registrar of Companies will then verify the documents submitted for
registration. If there are any discrepancies found, concerned person was called
to visit the Registrar’s office to rectify the errors in the documents. If the
documents for registrations are found in order, the Registrar will register the
company and a Registration number is allotted.
The Registrar under his hand and Seal of his office will issue a Certificate of
Incorporation. The date given by the Registrar in the certificate will be the date
of incorporation of the company. The company will be considered to be a legal
entity from this date.
The specimen of certificate of incorporation is given below:

 CAPITAL SUBSCRIPTION STAGE
A private company or a public company not having share capital can commence
business immediately on its incorporation. Capital Subscription
Stage and Commencement of Business Stage are relevant only in the case of a
public company having a share capital. Such a company has to pass through
these two additional stages before it can commence its business.
The capital subscription stage deals with the task of obtaining the necessary
capital for the company. For this purpose, immediately after the incorporation, a
meeting of the Board of Directors is conducted to deal with the following
business:
• Appointment or confirmation of appointment of secretary if one has already
been appointed by the promoters at the promotion stage.
• Adoption of preliminary contracts which include the promoters enter into
contracts on behalf of the proposed company such as contract for purchasing of
properties, assets, existing business etc.

• Adoption of a draft of prospectus or the statement in view of prospectus.
• Appointment of bankers solicitors, auditors, legal advisor brokers etc.
• Listing of shares on stock exchange.
• Adoption of undertaking contracts.
• Number of Shares to be issued.
• Collection of share capital etc.
Besides the above mentioned business, the Board also decides as to whether-
1. a public offer for capital subscription is to be made, and
2. Listing of shares at a stock exchange is to be secured.
After the above formalities have been completed, the Directors of the company
file a copy of the prospectus with the Registrar and invite the public to subscribe
into the shares of the company by putting the prospectus in circulation.
Applications for shares are received from the public through the company’s
bankers and if the subscribed capital is equal to the minimum subscription
amount as disclosed in the prospectus, and other requirements of a valid
allotment are fulfilled, the directors of the company pass a formal resolution of
allotment.
Allotment letters are then posted, return of allotment is filed with the Registrar
and share certificates are issued to the allottees in exchange of the allotment
letters.
No allotments can be made or money paid for the subscription of shares will be
refunded if the total subscribed capital is less than the minimum subscription of
if the company does not obtain the minimum subscription within 120 days from
the issue of prospectus.
It may be noted that a public company having a share capital, but not issuing a
prospectus has to file with the Registrar a Statement in lieu of Prospectus at
least 3 days before the directors proceed to pass the resolution of first allotment.

Duties of a Company secretary before incorporation
• To help promoters in making detailed investigation of the proposed business.
• To help the promoters in drawing up the financial plan for the approval of the
business.
• To attend all preliminary meetings of promoters and keep a record of
proceedings of their meetings.
• To get the approval from the registrar for the proposed name of the business.
• To help the promoters in drafting of memorandum of association and articles
of association
• To follow the SEBI (Security Exchange Board of India).
• To collect the certificate registration from the registrar.
• To send a notice of the registered office of the company to the registrar within
the 30 days of the date of registration.
 CERTIFICATE OF INCORPORATION OF THE COMPANY
After the above documents are filed with the Registrar and the prescribed fees
are paid and the Registrar is satisfied that all the requirements of the Act
regarding the registration have been complied with, he will register the
documents and retain them.
The Registrar will then issue a certificate known as Certificate of
Incorporation and enter the name of the company in the Register kept in his
office. This Certificate of Incorporation entitles the company as a legal person.
In other words, the company is born upon the issue of Certificate of
Incorporation.
The specimen of certificate of commencement of business is given below:

Memorandum of Association (MOA)
Memorandum of Association (MOA) is the main, compulsory
document required for the incorporation of the company. It must be
registered with the ROC (Registrar of Companies) at the time of
incorporation. It lays down the objects, scope, powers and area of
operation of the company, all of which the company can’t transgress.
Thus, it lays down it’s the limits of the company.
It must be drafted very carefully as the company can’t go against it
later. Moreover, it can only be amended by a difficult procedure in the
Annual General Meeting with the knowledge of the Central
Government. It can’t be amended retrospectively.
It guides all relations within and outside the company by laying
guidelines and rules for the same and all the subordinate documents
and agreements follow from it. Also known as the ‘charter of the
company’, it must lay down the following six conditions:

Clauses / Contents of MOA:-
 Name Clause
– It is meant to register the official name of the company with the CG
(Central Government) which must be original and must not, in any
way, resemble that of a pre-existing one.
 Situation Clause
– It deals with highlighting the name of the state in which the
company’s registered office is located.
 Object Clause
– The main and auxiliary objects of the company are specified here.
 Liability Clause
– It specifies the liabilities of each member of the company.
 Capital Clause
– It lays down the total capital of the company.
 Subscription or Associate Clause
– It lays down in detail all information about subscribers and their
shares.
Articles of Association (AOA)
An article of Association (AOA) is a secondary document that is
constituted only after the MOA. It lays down the rules and regulations
for the administration and management of the company. The articles
lay down the right, responsibilities, powers, duties, etc of the members
along with information regarding the accounts and audit of the
company.

It is mostly advisable for every company to have its own article but a
company limited by shares can adopt Table A for the same purpose. It
is made to guide the working and governance inside the company.
It follows the MOA and can’t contradict it. It is easier to amend than
MOA which can be done without any restrictions. It can be amended
retrospectively in the Annual General Meeting as per the choice of the
company.
Since both these documents sound similar, people often get confused
between the two. You must not make that mistake. Make sure you get
legal help in order to understand the true dynamics of both and to draft
a copy for your company.
 Company Name
As a legal entity, the company must have a name which can be found in the
articles of association. All jurisdictions will have rules concerning company
names. Usually, a suffix such as "Inc." or "Ltd" must be used to show that the
entity is a company. Also, some words that could confuse the public, such
"government" or "church" cannot be used or must be used only for specific
types of entities. Words that are offensive or heinous are also usually prohibited.
 Purpose of the Company
The reason for the creation of the company must also be stated in the articles of
association. Some jurisdictions accept very broad purposes, for example
"management" while others require greater detail ("the operation of a wholesale
bakery").
 Share Capital
The number and type of shares that comprise a company's capital are listed in
the articles of association. There will always be at least one form of common
shares that makes up a company's capital. In addition, there may be several
types of preferred shares as well. The company may or may not issue the shares,
but if they are found in the articles of association, they can be issued if and
when the need presents itself.

 Organization of the Company
The legal organization of the company, including its address, the number of
directors and officers, the identity of the founders, and original shareholders is
found in this section. Depending on the jurisdiction and type of business,
auditors and legal advisors of the company may also be in this section.
 Shareholder Meetings
The provisions for the first general meeting of shareholders and the rules that
will govern subsequent annual shareholder meetings, such as notices,
resolutions and votes are laid out in detail in this section.
Differences between MOA and AOA
MOA AOA
 It governs external relations of a
company
 It governs internal relations
of a company
 It is a character which sets out the
constitution of a company
 It is the Bye-law of the
company for internal
administration
 It states the objects for which the
company is formed
 It states the rules for carrying
out the business
 If defines limits and powers of
company
 It defines rights and duties of
directors, members etc.
 It is compulsory for incorporation  It is not compulsory for
incorporation. Instead of this
table – A can be prepared
 It is a primary and fundamental
documental document of a
company
 It is secondary and subsidiary
of a company
 It can be altered by a special and
subject to sanction of
 court or central govt as the case
may be
 It can be altered by special
resolution without any
approval from court or
central govt.

Prospectus:
Prospectus means any invitation issue to the public in the form of a document or
a notice, circular, advertisement, etc., to take shares, debentures of company.
The features and characteristics of the prospectus are:
(i) It is a document issued as a prospectus;
(ii) It is an invitation to the member of the public;
(iii) The public is invited to subscribe to the shares or debentures of the
company;
(iv) It includes any notice, circular, advertisement inviting deposits from the
public;
(v) It is a document by which the company procures its share capital needed to
carry on its activities.
Steps necessary before the Issue of Prospectus:-
1. Appointment of Bankers.
2. Appointment of Auditor.
3. Appointment of Company Secretary.
4. Underwriting Contracts.
5. Brokerage Contracts.
6. Listing shares in stock Exchange.
7. Structure of capital combinations.

Forms and Contents of the Prospectus:
Sec. 56 states that every prospectus must
i. State the matters specified in Part I of Schedule II, and
ii. Set out the reports specified in Part II of Schedule II.
iii. Contents in Part III of Schedule II.
Part I of Schedule II—Matters to be Specified:
(a) The contents of the Memorandum:
It expresses the name of the company, objects, nature of business, share capital
and its division, liability of members, names and addresses of the signatories
and the number of shares subscribed by them.
(b) The qualification shares of the Directors:
If the Articles of the company provide that certain minimum number of shares
to be possessed by the directors as qualification, in that case, a person shall not
be qualified to act as a director unless he holds such number of shares.
(c) No. of redeemable preference shares:
Particulars regarding debentures and redeemable preference shares with their
date of redemption must be stated.
(d) Remuneration of the Directors and Promoters:
The prospectus must contain the rate of remuneration for attending meetings
and for other services of the Directors and Promoters.
(e) The names, descriptions and addresses of the Directors and Managing
Directors:

The names, addresses, descriptions, occupations of the Directors, Managing
Directors, Managers and the provisions regarding their appointment must be
stated.
(f) The Minimum Subscription:
The minimum subscription on which the directors may proceed to allotment and
the amount payable on application, allotment etc. on each share should also be
stated in the prospectus.
(g) Time of opening:
The time of the opening of subscription list should also be stated.
(h) Names and Addresses:
The names and addresses of vendors, if any, and the mode of payment of
purchase price and goodwill should also be contained in the prospectus.
(i) Underwriting Commission, Brokerage etc.:
The names of underwriters and the opinion of the directors regarding their
financial position and business integrity should also be stated clearly.
(j) Names of the auditors with their addresses:
The reputation of the auditors is also an important factor necessary for public
patronage.
(k) Particular of Contracts:
The dates of and parties to every material contract, and reasonable time and
place of its inspection are also significant.
(l) Preliminary Expenses:
The estimated amount of preliminary expenses to be incurred should also be
furnished.

(m) Particulars of Directors:
Full particulars of the nature and interest of every director or promoter in the
promotion of or in the property proposed to be acquired by the company within
two years with statement of all sums paid or agreed to be paid to him in cash or
shares for service rendered.
(n) Disclosure:
Full disclosure on these matters should also be made in the prospectus.
(o) Expected rate of dividend and voting rights:
The rights of shareholders relating to voting, meeting and dividends along with
the nature and extent of restrictions to be imposed by Articles on their right to
transfer shares should also be stated in clear and convincing terms.
(p) Capitalisation of Profits and Surplus from revaluation of assets:
Capitalisation of profits/reserves of a company or if any of its subsidiaries have
been capitalized (i.e. issuing bonus shares) — particular of such capitalisation
and also surplus, if any, assets from the revaluation of assets should also be
stated.
(q) Inspection of Balance Sheet and Profit and Loss Account:
The following reports are to be annexed:
Part II of Schedule II— Reports to be set out:
(a) Report by the Auditor:
An audit report of the company relating to:
(i) Its profits .and losses, assets and liabilities,
(ii) The dividend paid by the company during the five financial years preceding
the issue of prospectus should also be furnished.

(b) Report by the Accountant:
The accountant should also state a report relating to profits or losses and assets
and liabilities on a date which must not be more than 120 days before the date
of issue of the prospectus.
Part III of Schedule II
It includes Part I and Part II of Schedule II and also declaration by all the
Members.
Mis-Statements in Prospectus:
Mis-statements and false statements in the prospectus are instruments by which
dishonest company promoters may practice fraud on the public money. In order
to prevent this practice the law imposes certain duties and liabilities on those
persons who are responsible for such issues.
If, however, the prospectus contains any mis-statement of a material fact or if
the prospectus wants in any material fact, three types of liabilities will arise.
They are:
(1) Civil Liability
(2) Criminal Liability
(3) Liability of the Company
Before discussing the above we are to know the liability which may arise for
Untrue Statement. It is the duty of the authors of the prospectus to see that the
prospectus does not contain any untrue statement which may mislead the public.
Sec. 70(4) lays down that, in contravention of Sec. 70(1), the company and
every director of the company, who wilfully authorizes or permits the
contravention, shall be punishable with fine which may extent to Rs. 1,000.

Similarly Sec. 70(5) also states that where the statement in lieu of prospectus
contains any untrue statement, the persons responsible, for the issue thereof,
may be punished by imprisonment which may extend to 2 years or with fine
which may extend to Rs. 5,000, or with both.
Statement In Lieu of Prospectus:
If a public company does not invite the public to subscribe for its shares but
acquires to have money from private sources it may not issue a prospectus. In
the circumstances, the promoters are required to prepare a draft prospectus
which is known as ‘Statement in lieu of Prospectus’ which must contain the
information required to be disclosed by Schedule III of the Act.
Sec. 70(1) states that a company having a share capital which does not issue a
prospectus shall not allot any of its shares or debentures unless at least 3 days
before the allotment of shares or debentures there has been delivered to the
Registrar for registration a statement in lieu of prospectus.
The statement shall be signed by every person who is named therein as a
director or proposed director of the company or by his authorised agent in
writing. It shall be in the form and contain particulars set out in Schedule III of
the Act.
Sec. 70(4) lays down that, in contravention of Sec. 70(1), the company and
every director of the company, who wilfully authorizes or permits the
contravention, shall be punishable with fine which may extent to Rs. 1,000.
Similarly Sec. 70(5) also states that where the statement in lieu of prospectus
contains any untrue statement, the persons responsible, for the issue thereof,
may be punished by imprisonment which may extend to 2 years or with fine
which may extend to Rs. 5,000, or with both.

IMPORTANT QUESTIONS:-
SECTION –A
1. Define company. What are the stages in formation of the company?
2. Define Promoters. State any two functions of promoters.
3. What is capital subscription?
4. What is certificate of commencement of business?
5. Define Prospectus.
6. What do you mean by statement of lieu of prospectus?
7. What do you mean by Resolution?
8. What is Table-A?
SECTION - B
1. Distinguish between MOA & AOA.
2. What are the conditions for alteration of the articles of association?
3. What are the contents of AOA?
4. Briefly explain the alteration of MOA.
SECTION – C
1. Explain the various stages involved in the formation of a company.
2. Define Prospectus and discuss its contents.
3. What is Memorandum of Association? Explain its clauses briefly.
4. Define prospectus and discuss its objects, contents and liabilities for mis-
statement in the prospectus.
5. What do you mean by Promoter? Explain the functions, Rights and Duties of
Promoter.
6. What is Prospectus? Explain the legal rules relating to issue of Prospectus.

UNIT-2
CAPITAL OF COMPANY
Share capital:-
Share capital denotes the amount of capital raised by the issue of shares, by a
company. It is collected through the issue of shares and remains with the
company till its liquidation. Thus the term share capital refers to the amount of
capital raised (or to be raised) by a company through the issue of shares.
Features of Share Capital:
• Owned capital: Share capital is owned capital of the company. It is actually
the money of the shareholders and since the shareholders are the owner of the
company, so share capital is the owned capital.
• Remains with the company: It remains with the company till its liquidation.
• Dependable sources: Share capital is the most dependable source of finance
for the joint stock companies.
• Raises creditworthiness: It raised the credit worthiness of the company.
• Available for: Share capital is easily available for expansion and
diversification of business activities.
• Amendment: The amount of share capital can be raised by amending the
capital clause of the Memorandum of Association.
• No charge: Share capital does not create any charge on the assets of the
company.
• Opportunity to participate: Share capital gives its shareholders an
opportunity to participate in the company's management with normal rights of
shareholders.
• Benefit of bonus shares: It gives it shareholders the benefit of bonus shares.
• Benefit of limited liability: Share capital also gives its shareholders the befit
of limited liability as the liability of its shareholders is limited up to the face
value of each share.
• Meaningful participation: Share capital enables its shareholders to have a
meaningful participation in the expansion of corporate sector.

Types of Share Capital:
• Authorized capital: It is the maximum amount of capital which a company
can collect or raise by selling it's shares to the general public. Authorized capital
is known as nominal capital or registered capital. For example: A company
wants to sell 100 shares of Rs. 10/- each, so the total amount collected by the
company is Rs. 1000/- i.e. 100 shares x 10 each = 1000 The capital with which
a company is registered is known as its authorized capital.
• Issued capital: It is that part of the authorized capital which is actually issued
to the general public. For example: A company has issued 80 shares of Rs. 10/-
each so the issued capital is Rs. 800/-
• Unissued capital: It is that part of the authorized capital which is not being
issued to the general public. That is, company has not issued 20 shares of Rs.
10/- each, so the unissued capital is Rs. 200/-.
• Subscribed capital: It is that part of the issued capital which is actually
subscribed by the general public. That is company has issued 80 shares out of
which 70 shares are being bought by the general public, so the subscribed
capital is Rs. 700/-. That is 70 shares of Rs. 10/- each.
• Unsubscribed capital: It is that part of the issued capital which is not
subscribed by the general public. That is, if the the company has issued 80
shares out of which 70 are bought by the general public and 10 are not being
bought by them, so the unsubscribed capital is 10 x Rs. 10 = Rs. 100. That is 10
shares of Rs. 10 each.
• Called up capital: It is that part of the subscribed capital which is actually
called up by the company. For instance, if a company has asked its shareholders
to pay Rs. 5/- per share so on 70 shares, they have to pay 70 shares x Rs. 5 each
= Rs. 350/-. This is the called up capital.
• Uncalled up capital: It is that part of the subscribed capital which is not being
called up by the company. It may be called up as and when the company need
funds. That is out of Rs. 10/- per share, Rs. 5/- per share is being called up by
the company and Rs. 2 is being uncalled up and Rs. 3 is kept as reserve, that is
yet to be called.
• Reserve capital: Reserve capital is that part of the uncalled capital which is
reserved to be called up only at the time of winding up or liquidation of the
company. It cannot be called during the life time of a company. It is to be used
only for meeting extraordinary situation such as liquidation of the company.
The purpose of reserve capital is to meet the interests of the creditors at the time
of winding up of the company.

• Paid up capital: It is that part of the called up capital which is actually paid
up by the shareholders. For example, out of 70 shares which were subscribed
for 60 shareholders have paid up their call money, that is 60 x Rs. 5 = Rs. 300/-
is called as the paid up capital of the company.
• Unpaid up capital: It is that part of the called up capital which is not being
paid by the shareholders. For example: out of 70 shareholders, 60 shareholders
have paid up their call money and 10 shareholders have not paid their call
money, so 10 x Rs. 5 = Rs. 50/- is called as unpaid up capital. Unpaid up capital
is also known as Calls in Arrears.
Share:-
The share capital of a company is divided into a number of units of a fixed
amount. These units are called as shares.
[Or]
Share means share in share capital of a company
Types of Shares:-
Before the passing of the companies Act, 1956, shares were classified into three
types.
a. Ordinary/Equity shares.
b. Preference shares.
c. Deferred shares: Deferred shares are also called as founder shares
because these shares were normally issued to founders. The shareholders
have a preferential right to get dividend before the preference shares and
equity shares. No Public limited company
But under the Companies Act of 1956 there are only 2 types of shares:-
a. Equity share.
b. Preference share.
A. PREFERENCE SHARES
Preference shares are those which have preferential right to the payment of
dividend during the Life time of the company, and a preferential right to the
return of capital when the company is Winding Up.

FEATURES:-
1. Preference over Dividend.
2. Preference over assets.
3. Maturity.
4. No right in Management.
Kinds of Preference Shares
• Cumulative preference shares: The cumulative preference shares are entitled
to fixed Dividends whether there are profits or no profits. If profits are not
sufficient to pay dividends in a particular year, the dividends are accumulated
and paid in the succeeding year as profit become available for distribution.
• Noncumulative preference shares: Unlike the cumulative preference shares,
these shares cannot claim arrears of dividends of any year out of the profits of
subsequent years.
• Participating preference shares: In the case of the participating preference
shares Shareholders receive a fixed rate of dividend in priority to ordinary
shares and, further Right to participate in the balance of profit in an agreed
proportion together with ordinary Shareholders.
• Non-participating preference shares: These shares are entitled to only a
fixed rate of dividend; they have no claim in the surplus profit which belongs to
ordinary shareholders.
• Redeemable preference shares: These are the shares which can be purchased
back by the company. The company reserves its right to call back or purchase
these shares at any time, subject to the provisions of its Articles.
• Irredeemable preference shares: These are the shares that cannot be
purchased back by the company.
• Convertible preference shares: Convertible Preference Shares are corporate
fixed-income securities that the shareholders have the option of converting them
into a certain number of ordinary shares after a predetermined time span or on a
specific date.
• Non-convertible preference shares:- Non-Convertible Preference Shares are
those which do not have the option of their conversion into the equity shares.

Advantages of Equity share:-
To Investors:
1. Priority in repayment of capital.
2. Best-Security.
3. Regular and fixed Income.
4. Less Risk.
5. Safety of Interest.
To Company:
1. No interference in Management.
2. Economic financing.
3. Availability of wide capital Market.
4. No charge on assets.
Disadvantages of Preference share:-
To Investor:
1. Dividend of fixed rate.
2. Uncertain position of redeemable preference shares.
3. Limited voting rights.
To Company:-
1. Fixed economic burden.
2. High cost of capital.
3. Difficult to raise additional capital.
B. EQUITY SHARES
Equity shares or ordinary shares are those shares which are not preference
shares. Dividend on these shares is paid after the fixed rate of dividend has
been paid on preference shares. The rate of dividend on equity shares is not
fixed and depends upon the profits available and the intention of the board. In
case of winding up of the available and the intention of the board. In case of
winding up of the company, equity capital can be paid back only after every
other claim including the claim of preference shareholders has been settled.

Features of Equity Share:-
1. Claim on Income.
2. Right of control and Management.
3. Claim on Asset.
4. Maturity.
Advantages of equity shares:
To Company:
1. Long-term and Permanent Capital.
2. No Fixed Burden.
3. Credit worthiness.
4. Risk Capital.
5. Dividend Policy.
To Investors:
1. More Income.
2. Right to Participate in the Control and Management.
3. Capital profit.
4. An Attraction of Persons having Limited Income.
Disadvantages of equity shares:
To Company:
1. Dilution in control.
2. Trading on equity not possible.
3. Over-capitalization.
4. No flexibility in capital structure.
5. High cost.
6. Speculation.
To investors:
1. Uncertain and Irregular Income.
2. Capital loss During Depression Period.
3. Capital loss.
4. Less attractive to modest investors.

SWEAT EQUITY
“Sweat Equity Shares” means equity shares issued by the company to
employees or directors at a discount or for consideration other than cash for
providing know how or making available rights in the nature of intellectual
property rights or value addition, by whatever name called.
Bonus Shares
Bonus shares are the share allotted to existing equity shareholders without any
consideration being received from them, in cash or in kind.
Share Warrant
A Share Warrant is a document issued by the company under its common seal,
stating that its bearer is entitled to the shares or stock specified therein. Share
warrants are negotiable instruments. They are transferable by mere delivery
without registration of transfer.
RIGHTS ISSUE
When a company which has already issued shares wants to make a further issue
of shares. It is under a legal obligation of first offer the fresh issue to the
existing shareholders unless the company has resolved otherwise by a special
resolution. The right of existing shareholders to buy shares from the company in
this manner is transferable. If the market price of shares is higher than the
amount at which the company has offered new shares, the right to buy shares
from the company will carry a price.
Share Certificate
A share Certificate refers to a document which is issued by a company
evidencing that a person named in such certificate is the owner of the shares of
Company as stated in the share certificate. The Indian Companies Act mandates
companies for issuing share certificates post their incorporation.

Difference between Preference share and Equity share:-
Basis of Difference Preference Share Equity Share
Right of Dividend Preference shares are paid
dividend before the Equity
shares.
Equity shares are paid dividend out
of the balance of profit available
after the dividend paid to
preference shareholders.
Rate of Dividend Rate of dividend is fixed. Rate of dividend is decided by the
Board of Directors, year to year
depending on profits.
Convertibility Preference Shares may be
converted into Equity shares, if
the terms of issue provide so.
Equity shares are not convertible.
Arrears of Dividend Entitled to get arrears of
Dividend
Not entitled to get any arrears on
Dividends
Share Price The nominal value of
preference share is more than
Equity
The nominal value of equity shares
is generally less.
Participation in
Management
Preference shareholders do not
have the right to participate in
the management of the
company.
Equity shareholders have the right
to participate in the management of
the company.
Voting Right Preference shareholders do not
carry the voting right. They
can vote only in special
circumstances.
Equity shareholders have voting
rights in all circumstances.
Redemption of Share
Capital
Preference shares may be
redeemed.
A company may buy-back its equity
shares.
Refund of Capital At the time of winding up of
the company, preference share
capital is paid before the
payment of Equity share
capital.
On winding up, Equity Share capital
is repaid after preference share
capital is paid.
DEBENTURES
The term debenture is defined as “a document under the company’s seal which
provides for the payment of a principal sum and interest thereon at regular
intervals which is usually secured by a fixed or floating charge on the
company’s property or undertaking which acknowledges a loan to the company.

[Or]
Certificate of loan issued by the company which creates indebtedness of the
company.
KIND OF DEBENTURES
• Redeemable and Irredeemable: Lunacy of a member from the point of view
of redemption debentures are classified into redeemable and irredeemable.
Redeemable debentures are those that will be repaid by the company at the end
of a specified period, or on demand, or by installments. Irredeemable debentures
are those that are not repayable during the lifetime of the company.
Irredeemable debentures are also called perpetual debentures.
• Registered and Bearer: From the point of view of records, debentures may
be classified into registered and bearer debentures. Registered debentures are
those in respect of which the names, addresses and particulars of the holdings of
debenture holders are entered in the Register of Debenture holders. The transfer
of registered debenture cannot be affected without the execution of a regular
transfer deed. As against this, the company keeps no such records of bearer

debenture holders. Bearer debentures are negotiable by mere delivery of the
document.
• Convertible and Nonconvertible: In case of convertible debentures, the
holders have the option to convert their debenture holdings into equity shares of
the company at a specified rate after a specified period.
Advantages of Debentures:
• Control of company is not surrendered to debenture holders because they don’t
have any voting rights
• Trading on equity is possible as debenture holders get a lower rate of return
than the earnings of the company
• Interest on debenture is an allowable expenditure under income tax act, hence
incidence of tax on the company is decreased.
• Debentures can be redeemed when company has surplus funds
Disadvantages of Debentures:-
• Cost of raising capital through debentures is high of high stamps duty.
• Common people cannot buy debenture as they are of high denominations.
• They are not meant for companies earning greater than the rate of interest
which they are paying on the debentures
Listing of Securities
Listing of securities means the securities are admission for trading on a
recognized stock exchange. In the case of securities are not
Listed in the stock exchange such company securities are not trading in the
stock exchange. Listing is compulsory for a public issuing company that intend
to offer shares/debentures to the public for subscription. Listed securities are of
two classes, viz., cash List and Forward List. The securities on the cash list are
those involving ready delivery while securities in the forward list enjoy forward
trading privileges.
Objectives of Listing
The major objectives of listing are
1. To provide ready marketability and liquidity of a company’s securities.
2. To provide free negotiability to stocks.
3. To protect shareholders and investors interests.
4. To provide a mechanism for effective control and supervision of trading.

Listing Procedure
The following are the steps to be followed in listing of a company’s securities in
a stock exchange:
1. The promoters should first decide on the stock exchange or exchanges where
they want the shares to be listed.
2. They should contact the authorities to the respective stock exchange/
exchanges where they propose to list.
3. They should discuss with the stock exchange authorities the requirements and
eligibility for listing.
4. The proposed Memorandum of Association, Articles of Association and
Prospectus should be submitted for necessary examination to the stock
exchange authorities
5. The company then finalizes the Memorandum, Articles and Prospectus
6. Securities are issued and allotted.
7. The company enters into a listing agreement by paying the prescribed fees
and submitting the necessary documents and particulars.
8. Shares are then and are available for trading.
Advantages
• Listing of securities provides the marketability and liquidity of the securities
• Listing protects the interest of both shareholders and the investing public
• Listing encourages investment and flow of savings into the capital market
• Listing offers wide publicity to the concerned companies
• Listing provides buying and selling of securities in the stock exchange
• Listing promotes better corporate practices and lead to progressively higher
standards of corporate procedures and practices
• Listing enjoys higher public confidence as the stock exchange compels the
issuer to comply with high standards
Disadvantages
• Listed securities offer wide scope for the speculators to manipulate the values
in such a way as detrimental to the interest of the company
• Sometimes listed securities are subject to wide fluctuations in their value. The
wide fluctuations in their values have the effect of degrading the company’s
reputation and images in the eyes of the public as well as the financial
intermediaries
• Listing discloses vital information such as operating environment to
competitors

SECTION –A
1. Give the meaning of deferred share.
2. What do you mean by share warrant?
3. What is Share Capital?
4. Distinguish between redeemable and Irredeemable preference share.
5. What is authorized share capital?
6. What do you mean by Share?
7. What do you mean by Listing of Securities?
8. What do you mean by debenture?
SECTION - B
1. State the advantages and disadvantages of Preference share.
2. Explain the different kinds of share capital.
3. Briefly explain the various types of Preference shares.
4. Briefly the merits and demerits of Debenture.
5. Explain the merits and demerits of Equity shares.
SECTION – C
1. What is listing? Explain the Procedure, Merits and De-merits of listing.
2. What is debenture? Explain its types.
3. Explain different kinds of share and its merits and demerits.
4. Explain the difference between preference share and equity share.
5. Explain in detail listing of securities.
6. Briefly explain the different kinds of Share capital.

UNIT-3
COMPANY MEETINGS
Meeting:-
Meaning A meeting may be defined as ‘ Any gathering, assembly if two or
more persons in a particular place to discuss some lawful business of common
concern and to take decisions in the form of resolutions on the basis of opinion
expressed by members present at the meeting’.
[Or]
When the members of a company gather at a certain time and place to discuss
business affairs it is called company meeting.
Business Meeting:
When two or more persons gathered as per given notice to discuss some
business matters is known as business meetings.
Company Meeting:
When the members of a company gather at a certain time and place to discuss
business affairs it is called company meeting.
Essentials of Valid Company General Meeting:-
1. Proper Convening Authority.
2. Proper Notice.
Contents of Notice:-
a. Day of the meeting.
b. Place of the meeting.
c. Date of the meeting.
d. Time of the meeting.
e. Agenda.
f. Documents supporting the notice.
3. Quorum.
4. Chairman of the Meeting.
5. Proper conduct of meeting.
a. Voting.
 Voting by Show of Hands.
 Voting by Poll.
b. Proxy.
c. Agenda.
d. Resolutions.
e. Minutes of the meeting.
6. Adjournment of meeting.

Types of Company Meeting:-
A. Shareholders Meeting
1. Class Meeting of Shareholders
It refers to the meeting of a particular of class of shareholders say-
preference share holders, equity shareholders etc.
2. General Meeting
It refers to the meeting of all type of shareholders say-preference share
holders, equity shareholders etc.
i. Statutory Meeting
It is the first general meeting of the shareholders which is held just after
the commencement of the business every public company having share
capital should hold this meeting. It should be done within 6 months of
commencement but not before 1 month.
ii. Annual General Meeting
This is the meeting of the share holders of the company held once in a
year. Every company should hold this meeting to discuss the affairs of the
company, to pass the accounts. It should be held within 18 months from
the date of incorporation, one after every year but the gap between 2
should not be more than 15 months.
Company
Meeting
Creditors and
Debenture
Holder's Meeting
At the time of
winding up of
Company
During the life of
the Company
Directors
Meeting
Committee
Meeting
Board Meeting
Shareholders
Meeting
General Meeting
Annual General
Meeting (AGM)
Extra-ordinary
Meeting (EGM)
Statutory
Meeting
Class Meeting of
shareholders

iii. Extra ordinary Meeting
This meeting is held whenever required to transfer special business
of an urgent nature which can’t be postponed to the annual general
meeting.
B. Directors Meeting
1. Board Meeting
These meeting are often held to frame policies and review the
progress of the company. This meeting is attending by directors of
the company.
2. Committee Meeting
These meetings may be held as and when necessary and
send their reports to board of directors.
C. Creditors and Debenture Holders Meeting
Debenture Holder Meeting:-
A company issuing debentures may provide for the holdings of meetings
of the debentureholders. At such meetings, generally matters pertaining to
the variation in terms of security or to alteration of their rights are
discussed.
Creditors Meeting:-
Sometimes, a company, either as a running concern or in the eventof
winding up, has to make certain arrangements with its creditors. Meetings
of creditors may be called for this purpose.
This meetings can be done either
1. During the life of the Company
2. At the time of winding up of Company
1. STATUTORY (LEGAL) MEETING:
Definition:
Statutory meeting is the first meeting of the members of a public company. It is
held once in the life of a public company. Statutory means legal so this meeting
is totally based on law. Law enforced the company to call this meeting.
Occasion:
This meeting must be held after 1 month, but before 6 months of obtaining the
certificate of commencement of business.

Notice of Meeting:
The directors will send a notice of the meeting to all the members of the
company at least 21 days before the meeting. And also send statutory report to
the shareholders.
Objectives of the Meeting:
Following are the main objectives of the meeting.
 To win Confidence:
This meeting is called to win the confidence of the shareholders and try to
increase their attention towards the company and try to create their
interest in the development of the company.
 To Provide Latest Information:
As it is the first meeting of the company and that is why its prime
objective is to brief about the position of the company in the market and
provide the information about the expected growth of the company and
the industry.
 To Discuss Statutory Report:
Another objective of this meeting is to discuss statutory report of the
company. Statutory report contains following type of information;
a. Details of the shares allotted
b. Total number of shares issued
c. Total receipts and total payments
d. Cash received against shares allotted
e. Names of the directors, CEO, secretary, auditors etc.
 To Discuss Future Plans:
This meeting is held to brief about the future plans of the company for
example; about to increase the share capital, about to make new units of
production, about to purchase some kind of securities, about to issue
debentures against the borrowing etc.
 To Inform About the Property:
Another purpose of this meeting is to inform the shareholders about the
assets of the company and their value in terms of money in the market.
 To Inform Where the Money Used:
It is also included in this meeting to inform the shareholders where the
collected money from shares is used and where the future earnings will be
used etc.

Legal Provisions relating to the statutory Meeting:-
1. Object of holding statutory meeting.
2. Statutory requirement.
3. Notice of the meeting.
4. Statutory report.
5. Scope of the statutory meeting.
6. Procedure at the meeting.
7. Adjournment of the meeting.
8. Penalty for non compliance.
Procedure for holding the statutory meeting.
 The statutory meeting must be held within the period (not less than 1
month & not more than 6 months)
 Preparation of draft: The secretary should prepare a draft of the statutory
report and the notice for convening the meeting & get them approved in
the board meeting.
 Arrangements should be made to get the statutory report certified as
correct by two directors, one of whom is managing director, if there is
one.
 Auditor’s certificate: Arrangements should also be made to get auditors
certificate as to the correctness of the shares allotted and receipts and
payments of cash.
 Notice of the meeting: It should be sent to the share holders along with
the statutory report at least 21 days before the date of the meeting.
 It is also necessary to file a certified copy of the report with the registrar.
 List must be prepared: showing names, address, occupation, & shares
holding of the members.
 Read the notice of the meeting: at the commencement of the meeting, the
chairman will ask the secretary to read the notice of the meeting.
 Announcement by chairman: about the placing of list for inspection by
the members & request the members to take the statutory report already
circulated as read.
 Discussing the resolutions: resolutions if any may also be moved and
discussed. Chairman will also propose that the modifications of contracts
proposed in the report be approved.( meeting will end with the vote of
thanks )

 Preparation of minutes of the meeting: after the meeting the secretary will
prepare the minutes of the meeting & get it signed by the chairman at the
next board meeting.
Secretarial duties relating to statutory meeting
 Preparation of draft of statutory report: the secretary should prepare the
draft of statutory report and the notice of the meeting in consultation with
the director’s.
 Convene the meeting: he should arrange for convening meeting and to get
the statutory report & the notice approved by the board.
 Certificate by auditor: to get report certified by the auditor’s &approved
at least by two directors.
 Printing of notice & report: printed copy should send to every member at
least 21 days before the meeting is scheduled to be held.
 File a certified copy: the secretary should file a certified copy of the
statutory report with the registrar.
 Preparation of agenda of the meeting: A detailed agenda for the meeting
in consultation with the chairman & also a list of members showing the
names, address, occupation, number of shares held each member etc.. For
the purpose of producing it at the meeting.
 Make necessary arrangements: for holding the meeting.
 Ascertain the quorum of the meeting: quorum is nothing but the
minimum number of members at the meeting or committee.
 Produce the list of member’s: to supply necessary information &
explanation to the meeting if required.
 Take down the notes: secretary should take down the notes of the
proceedings during the meeting.
 Preparation of minutes of the meeting: The written record of an official
proceeding. The notes recounting the transactions occurring at a meeting
or official proceeding; a record kept by courts and corporations for future
reference.
 Execute the orders: it is company secretary responsible to implement the
decisions taken by the directors of the company.

2. ANNUAL GENERAL MEETING:
Definition:
Every public company will hold Annual General Meeting of its members every
year. This meeting is to be call and held by the directors of the company.
Occasion:
The first annual general meeting must be held within 18 months from the date
of its incorporation. The next meeting must be held once in every calendar year
within 4 months after closing of its financial year. The interval between the two
meetings must not exceed than 15 months.
Notice of the Meeting:
company at least 21 days before the meeting. It should also be published in
newspaper.
Objectives of the Meeting:
Following are the main objectives of this meeting
 To check Annual Accounts:
The first and the most important objective of this meeting is to check
annual accounts of the company as well as check the growth of the
company among the relevant industry.
 Declaration of Dividend:
The shareholders and directors declare the dividend of the year with the
mutual co-operation. They make decisions for the betterment of the
company and for the betterment of the shareholders etc
 Election of Directors
Elections of the directors also held in this meeting, elected participant
will lead the company up to the next annual general meetings.
 Appointment of Auditor:
In this meeting the directors and shareholder with the mutual co-operation
announced the name of the auditor and fixed the remuneration.
Penalty:
If the company fails to hold this meeting the company and every officer of the
company shall be liable to fine.

Provisions of companies act to hold annual general meeting.
 Meeting must be held within the period: the first annual general
meeting must be held within 18 months from the date of the incorporation
of the company. If it is so held, it is not necessary for a company to hold
any annual meeting in the year of its incorporation or in the following
year.
 Subsequent annual meeting: The subsequent annual meetings should be
held each year and not more than 15 months must elapse between the date
of one annual meeting and the next.
 Notice of the meeting: The notice for the meeting must clearly specify
that the meeting is the annual general meeting. It should also state the
date, time and place of the meeting and it must be sent to every member
at least 21 days before the date of the meeting.
 Meeting should be held within the business hours: the meeting should
be held within the business hours, at the registered office of the company
or at some place within the city, town or village in which the registered
office is situated.
 Notice must be accompanied: the notice of the meeting must be
accompanied by a copy of the audited balance sheet and profit and loss
account for the previous year also the annual report of directors.
 Extension of time or period: if the company cannot hold the annual
meeting ( not the first annual general meeting) for any special reason, the
registrar may extend the time for holding the meeting up to 3 months.
[Or]
Legal Provisions relating to Annual General Meeting:-
1. Statutory requirement.
2. Notice of the meeting.
3. Time and place of the meeting.
4. Authority to Convene the annual general meeting.
5. Adjournment of the meeting.
6. Default in holding annual general meeting.
7. Penalty for default.

Procedure relating to annual general meeting
The procedure to be followed for holding the annual general meeting of a
public company may be studied under 3 headings:
 Before the meeting
 During the meeting
 After the meeting.
Before the meeting: The steps which are needed to be taken at this stage
are as follows:
Step1: preparation of financial statements: at the end of the financial year
,the balance sheet and the profit and loss account are prepared , approved by the
board. Audited report also must be recorded.
Step2: preparation of draft of annual report: the secretary must prepares the
draft of annual reports of directors and in consultation with the chairman.
Step3: convene board meeting: the next step is to convene board meeting just
before the annual general meeting to consider matters such as disposal of
profits, to determine the rate of profits, to approve auditor’s report and the
annual report of directors to fix the date, time, place and agenda of the meeting.
Step4: printing the notice: the secretary then makes arrangement for the
printing of the notice, annual accounts and balance sheet, reports of auditors and
directors, proxy form etc…
Step5: notice along with relevant documents: the notice of the annual
meeting along with the relevant documents is sent by post to the members and
others entitled to receive the notice.
Step6: publish a public notice: arrangements are also to be made to publish
notice of the meeting in newspapers.
Step7: copies of notice sent to stock exchange: copies of the notice and
directors report are sent to the stock exchange for their information
Step8: display of notice: copies of notice and annual reports of the company
are displayed in the notice at the registered office of the company.

Step9: preparation of detailed agenda: secretary then prepares a detailed
agenda of the meeting, the chairman’s speech and annual returns in consultation
with the chairman.
Step10: secretary completes the preliminary arrangements: the secretary
completes the preliminary arrangements for dividend distribution, making the
register of member’s up to date, preparation of dividend list.
Step11: arrangements for the meeting: scrutiny of proxy forms received up to
2 days before the meeting is made and a list of proxies for use during the
meeting is prepared and also arrangements for the meeting
Example: seating arrangements, recording the attendance of members etc…
During the meeting: during the meeting steps to be taken are as follows:
Step1: Collection of admission cards: before the commencement of the
meeting the secretary has to collect the admission card from the members at the
gate and also record their attendance in the register meant for the purpose.
Step2: Proceedings bi chairman: the chairman takes the chair to conduct the
proceedings of the meeting.
Step3: Directions by the chairman: Chairman directs the secretary to ascertain
whether a quorum is present or not.
Step4: Readjustment by the secretary: Then the secretary readjusts the notice
of the meeting and presents the register of director’s shareholdings for
inspection of members.
Step5: Reads out the auditor’s report: In the absence of auditor the secretary
will reads out the auditor’s report.
Step6: Discussion about the business: the business of the meeting is to b then
taken up for discussion in the same order as stated in the agenda.
Step7: Declaration of dividend: the chairman then moves that the dividend
recommended by the director, be declared.
Step8: Vote of thanks: the meeting ends with a vote of thanks to the chairman.

After the meeting: The steps to be taken after the annual general meeting
are as follows:
Step1: Preparation of minutes of the meeting: after the meeting the
secretary prepares the minutes of the meeting, and gets them signed by the
chairman at the next board meeting.
Step2:Carry out the directions and instructions: the secretary has to carry
out the directions and instructions of the annual general meeting.
Example: he may have to inform the director appointed or reappointed at the
meeting, make the changes in the register of directors, sending dividend
warrants,etc..
Step3:Filing the annual reports: the secretary files the annual accounts and
balance sheet, annual returns etc… with the registrar within the prescribed
time.
3. EXTRA ORDINARY GENERAL MEETING:
Definition:
All general meetings other than annual general meeting and statutory
meeting are known as Extra-Ordinary General Meetings. This meeting is
held on the special occasions or you can say in the emergency situations
when directors think that it necessary. For example; at the plan of merger,
terminating any auditor etc
Occasion:
This meeting is held on the special occasion and in the emergency situation.
Notice of the Meeting:
company at least 21 days before the meeting.
Objectives:
Following are the main objectives of the Extra Ordinary General Meeting.
 Special Business:
In case of special business this meeting is held for example; a case of 10
billion rupees of export is at the door. In this case it can be called.

 In Some Innovative Cases:
In some innovative cases this meeting can be called for example; an idea
of launching a new product or launching a new setup etc…
Secretarial work relating to an extraordinary general meeting.
 If it’s called by the board: if the meeting is convened on the board’s
initiative the secretary in consultation with the chairman convenes the
board meeting to fix the date, time, place etc… of the meeting.
 By the board on requisition of members: If the members requisition for
calling an extraordinary general meeting is received, the secretary after
making a scrutiny of the requisition to ascertain whether it is in order, has
to convene a board meeting in consultation with the chairman for fixing
the date and time of the extraordinary general meeting.
 Preparation of draft of resolution: the secretary also prepares the draft
resolution after getting approved (arrange for printing).
 Issue of notice: Secretary issues notice to members along with the
explanatory statement & will also advertise the notice in newspapers.
 Seating arrangements: He arranges for the seating of members & for
recording their attendance.
 Checking the admission cards: He has to arrange for checking the
admission cards at the entrance.
 Ascertainment of quorum:At the meeting he has to ascertain whether
the required quorum is present, if the quorum is present he has to read the
notice of meeting if required to do so.
 Supply of necessary information: He should assist the chairman in
conducting the meeting including supply of necessary information and
documents if required by the meeting.

 Taking down the notes: During the meeting he has to take down notes
of the proceedings of the meeting.
 Preparation of minutes of the meeting: After the meeting is over he has
to draft the minutes of the meeting & get them approved by the chairman
at the next board meeting.
 Carry out the instructions & decisions: Further he should carry out the
instructions and decisions of the meeting.
 File a certified copy: He should also file a certified copy of the special
resolution, if he fails to do so a fine of Rs 20/day will be imposed on the
company till the default continues.
 Alteration of copies: If changes have been made in the articles or
memorandum, the altered copies of these documents must be filed with
the register within 3 months.
Provisions for holding the extraordinary general meeting:
 If it’s called by the board: if the meeting is called by the directors,
secretary send notice of the meeting to the members along with an
explanatory statement at least 21 days before the meeting and published
in the news papers.
 By the board on requisition of members: If the meeting is to be held on
the requisition of shareholders, the secretary first ascertain whether the
requirements of the act relating to number of requisitions etc…have been
complied with and then in consultation with the chairman will convene a
meeting of the directors to decide the date, time and place of the meeting
 Notice of members: Then the secretary will send notice to the members
along with the explanatory statement before 21 days.
 Ascertainment by the chairman: At the meeting, first the chairman
ascertains whether the meeting is duly convened and properly constituted.
 Proceedings by the chairman: After reading of the notice of meeting the
chairman will proceed with the business as per agenda.

 Explanation by the chairman: Before moving any resolution on the
matter the chairman explains the need and advisability of passing the
resolution.
 File a copy of resolution: After the meeting the secretary must file a
copy of resolution to register within 30 days of its passing.
Board meeting
General Powers of the board:
 Determination of management policy and trading policy
 Appointment, promotion and dismissal of staff
 Issue of shares and debentures
 Allotment of shares, calls on shares, forfeiture and reissue of shares
 Transfer and transmission of shares
 Convening meetings of share holders
 Disposal of profits and determination of nature of dividend and also
declaration of interim dividend
 Entering into contracts with third parties on behalf of the company
 Investment of companies funds
 Exercising borrowing powers on behalf of the company
 Filing of statutory returns and statements etc…
Secretarial work relating to board meeting.
Before the meeting
During the meeting
After the meeting
Before the meeting:
 He must ensure that the provisions contained in the act and articles
regarding the conduct of a meeting are complied with.
 Fixation of time & place: If the proceeding meeting has not fixed
the date, time & place of the board meeting.
 Preparation of agenda: He has prepared the agenda for the meeting
in consultation with the chairman & send notice of the meeting
along with the agenda to every director.
 Issue of invitation: He must issue the invitation letters to solicitors
and auditors who are required to attend the meeting.

 He has to keep ready the periodical financial and trading returns
and statements, documents including cheques, contracts, transfer
instrument etc…
 He should keep ready the bank pass book, minute book of board
meeting, company seal etc…
 He should arrange for the seating arrangement for holding the
meeting.
During the meeting:
 He should obtain the signature of the director present in directors’
attendance book.
 He has to ascertain whether the quorum is present or not as per the
article.
 If the quorum is present he has to read the notice.
 He has to get the minutes of the previous meeting approved &
signed by the chairman.
 He should assist the chairman in conducting the meeting
 He has to take down the notes of the proceedings of the meeting.
After the meeting:
 Preparation of the minutes of the meeting
 Carry out the resolutions and instructions.
RESOLUTIONS
Resolutions
Ordinary
Resolution
Special
Resolution

Meaning: company decisions are made by passing resolutions. Resolutions are
passed both by the company’s members and by its directors. In either case,
resolutions may be passed at meetings or by written resolutions.
General Body Resolutions are of two kinds; namely,
1. Ordinary Resolution
2. Special Resolution
Ordinary Resolution
Meaning: A resolution which is passed by simple majority of votes cast by
members personally or by proxy (where proxy is permitted) is called ordinary
resolution. A simple majority means that the votes cast in favour of the
resolution must exceed the votes cast against the resolution.
According to the act an ordinary resolution is necessary to
transact the following business:
Ordinary business:
 To approve accounts
 To declare dividends
 To appoint directors in place of those retiring
 To appoint auditors and fix their remuneration
Special business:
 To approve the statutory report
 To issue shares at a discount
 To issue bonus shares as per the articles
 To alter share capital by way of increasing sub division,
consolidation etc…
 Any other business as per the articles.
An ordinary resolution means which satisfies the following criteria:
 It is a resolution passed at a general meeting of members;
 Notice of the meeting as per the Act must have been duly given;
 The votes cast (whether on show of hands or on poll) in favour of the
(resolution (including the casting Chairman) exceed the votes, if any, cast
against the resolution;
 The votes may be cast in person or by proxy.

Special Resolution
Meaning: A special resolution is one which required to be passed by a ¾
majority. A copy of the special resolution must be filed with the registrar within
30 days of the passing of the evolution. A special can be passed at any
extraordinary general meeting or general meeting of share holders.
A resolution is a special resolution where it satisfies the follows criteria:
 The intention to propose the resolution as a special resolution has been
duly specified in the notice calling general meeting or other intimation
given to members;
 The notice required under the Companies Act (i.e., at least 21 clear-days'
notice) has been duly given of the general meeting;
 The votes cast in favour of the resolution (whether by show of hands or
on poll), by members present in person or by proxy are not less than 3
times the number of votes, if any, cast against the resolution. Abstentions,
if any, are not to be taken into account.
Some of the matters for which special resolution is required to be passed
are:
 To alter objects clause of memorandum:
 To change the registered office of the company from one State to another:
 To reduce share capital of the company
 To alter Articles of Association.
 To change the name of the company.
 To fix remuneration of the directors
Resolution Requiring Special Notice [Section 190]
The expression means a resolution of which special notice is required to be
given. „Special Notice‟ mean that notice of the intention to move the resolution
should be given to the company at least 14 days before the meeting and the
company in turn must inform all the members at least seven days before the
meeting either through individual notices of, it that is not practicable, through
advertisement in a newspaper having an v. appropriate circulation or in any
other manner permitted by the Articles.

Special notice is required to move, besides the resolutions mentioned in the
Articles, the following resolutions:
 A resolution appointing an auditor other than the retiring [Section 225].
 A resolution providing expressly that the retiring auditor shall not be
reappointed [Section 225].
 A resolution purporting to remove a director before the expiry of his
period of office [Section 284]; and
 A resolution to appoint another director in place of the removed director
[Section 284].
IMPORTANT TERMINOLOGIES:-
MOTION
Before meeting of a company all the matters are placed in the form of proposals
which are called as ‘Motion’.
AMENDMENT
Amendment means any modification to a motion before it is put to vote for adoption.
MINUTES
Minutes refer to a record of business transacted and decisions arrived at a meeting.
RESOLUTIONS
Resolution is defined as ‘formal decisions of a meeting on any motion before it’.
ADJOURNMENT
Adjournment means suspending the proceedings of a meeting for the time being so the
meeting may be continued at a later date.
DISSOLUTION
Dissolution of a meeting means termination of a meeting. The meeting no longer exists once
Once it has been dissolved
POSTPONEMENT
Postponement of meeting means deferring the holding of the meeting itself at a later date
BALLOT
According to this method, normally a piece of paper called ‘Ballot’ is provided to each
member of meeting to vote. The candidate names are printed or written in alphabetical order
on the ballot card. The person who votes has to put a cross mark against the name he is going
to elect. Finally the votes are counted and the Chairman announces the result

ACCLAMATION
If the members of the meeting express their approval or disapproval of a motion through
applause, clapping or cheering, it is called ‘Voting by Acclamation’.
AGENDA
There should be an agenda for the meeting and the items discussed at the meeting should be
according to the items on agenda.
QUORUM
A quorum is the minimum number of members required to attend a meeting and transact
business validly.
CLASS MEETING
Class meetings are meetings which are held by holders of a particular class of shares,
e.g., preference shareholders
VOTING
Voting is a means of determining the sense or opinion of a meeting. i.e., whether the
meeting approves or disapproves of the proposals placed before it.
PROXY
Any member entitled to attend and vote at a general meeting may appoint another
SECTION –A
1. Name the different kinds of company meetings.
2. Give any two reasons for adjournment of meeting.
3. What is Class Meeting?
4. What is Statutory Meeting?
5. What is Agenda of Meeting?
6. Give the meaning of ordinary resolution.
7. What do you mean by Proxy?
8. What do you mean by Resolution?

SECTION - B
1. What is Resolution ? What are its Essentials ?
2. Explain the provisions of Board Meeting under Companies Act 1956.
3. Explain the legal provisions of Statutory meeting.
4. Explain how company’s meeting is duly convened and constituted?
5. Explain the Powers of a chairman.
SECTION – C
1. What is statutory meeting? State the legal provisions applicable to it and
contents of statutory report.
2. What is Extraordinary General Meeting ? Explain duties of Company
Secretary relating to Extraordinary General Meeting.
3. What is Annual general meeting? Explain the legal provisions relating to
annual general meeting.
4. State the Procedure for conducting an Annual General Meeting.
5. What is Resolution? Explain the kinds of resolution.
6. Explain the Procedure relating to Annual General Meeting.

UNIT –IV
COMPANY SECRETARY
MEANING OF SECRETARY:-
The word secretary is derived from a latin word “ Secretaries’ which means
Confidential officer.
A person employed to handle correspondence, to keep files and do clerical
work. For another person or an organization is called a secretary.
In other words, an officer who keeps records takes minutes of meeting and
answers correspondence is called a secretary.
DEFINITION:
The Companies Act 1956, as amended by the Amendment Act of 1988, defines
a secretary as "any individual possessing the prescribed qualifications appointed
to perform the duties which may be performed by a Secretary under the Act and
any other ministerial and administrative duties".
TYPES OF SECRETARY
1) Private Secretary: He is usually appointed by an important person such as
minister in government. Member of parliament manager, business magnate or
professional men like doctor, lawyers etc. His main work is to attend the
personal correspondence and other personal work of the employer.
2) Secretary of a club or an association: A full time secretary appointed by
business association, cultural association, professional association and sports
club to conduct day to day activities of the association or club is called a
secretary of a club or an association.
3) Secretary of Co-operative Society: Generally the full time secretaries are
appointed in co-operative society. In some cases, one of the members of
managing committee may be elected to act as secretary.
4) Secretary of a government company: Each department of the government
is under the control of a secretary. For Eg:- Secretary finance dept, secretary
education dept etc. He is also executive head and advisor to the minister who is
concerned with a particular department.

5) Secretary of local body: Usually, municipal corporations and panchayats
appoint a paid secretary who will function as a office executive.
6) Secretary of trade union: He is to hold the meetings of the union, to record
their proceedings to maintain accounts and statutory books and to conduct
correspondence on behalf of the union.
7) Company Secretary: The secretary of a company guides the management
the day to day work of company law, mercantile law and of accounts, taxation,
holding meetings, drafting of reports, resolutions etc. and he undertakes the
administrative task of the company.
Under the companies with Act 1956, “Companies with a paid up capital of Rs. 5
Crore or more must appoint a full time secretary.
POSITION OF COMPANY SECRETARY:
The actual position of a company secretary is not merely that of a servant or an
agent, but something more than that. In actual practice, a company secretary
occupies a position of importance in the administrative set-up of the company.
In the company set up, both the board of directors and the: secretary play .a
complementary role to each other. The board of directors is responsible for the
overall management of the company's business. It plans, decides and formulates
the policies of the company. But the responsibility of the actual execution of the
policies lies with the company secretary .It is the secretary who carries out the
orders of the board of directors. That is why, it has been rightly remarked that
while the directors are the brain of the company, the secretary is its eyes, ears
and hands of the company.
The company secretary acts in different capacities and discharges many duties
and responsibilities. They are:
1. He acts as the agent of the board of directors and carries out the
instructions of the board of directors.
2. He acts as the registrar of the company and attends to the secretarial
functions, such as the filing of various returns and statements with the
registrar of companies, registration of transfers and transmission of shares
and the work of correspondence.

3. He serves as the business executive of the company and carries out the
routine office work and also the managerial duties entrusted to him by the
board.
4. He acts as an adviser and advises the directors and the chairman on
important matters affecting the business of the company.
5. He acts as a liaison officer between the board of directors on the one
side and the staff, shareholders and the general public on the other side.
6. He acts as a confidential officer and ensures that the confidential
matters of the company are not leaked out.
7. He is also required to act as a public relations officer of the company and
improve the image of the company in the minds of the public.
Proterm Company Secretary:-
The promoters of a company generally 1st appoint the secretary who assists
them in the formation of a company by attending to all preliminary work, such
as preparation of various documents and statements required for registering the
company. Arranging meetings etc. he is also called as ‘Proterm secretary’ or
‘1st secretary’ or ‘secretary for time being’ and his name may be included in the
articles of association of the company.
The board of directors has power to appoint a regular secretary by passing a
resolution in its meeting. The first secretary appointed by the promoters. May or
may not be appointed by the board. If the board of directors decides to appoint
another person as a secretary after incorporation of the company the first
secretary can’t issue the company.
However in such a case he should be given a prior notice otherwise, he can sue
the company for damages. Hence to secure his position, the first secretary who
has been acting as proterm secretary must immediately after incorporation get
his appointment confirmed by a resolution at the first board meeting.

PROCEDURE TO APPOINTING COMPANY SECRETARY:
A resolution has to be passed the board of
directors meeting regarding the appointment
of a secretary on certain conditions & terms.
The particulars of appointment must be filled
in duplicate with the registrar within 30 days
of the appointment
Notify the seretary funtion in any other
ompany he should inform the other company
within 20 days of his appointment.
Any director interested in the appointment of
seretary director has to give his consent
If any director or the relative of the director,
he is appointed as a secretary of the company.
A special resolution has to be passed at the
general body meeting for such appointment..

DUTIES AND FUNCTIONS OF COMPANY SECRETARY
The duties of .a secretary vary from company to company, depending upon the
nature on the business, size of the company and the powers enjoyed by and
responsibilities entrusted with the secretary.
The duties of a company secretary may be classified under the following
broad heads:
1. Statutory duties
2. General Duties
a. Duties in relation to directors
b. Duties in relation to shareholders
c. Duties towards organization and office
d. Duties in relation to the public
1. STATUTORY DUTIES
These duties are described by the companies act as any other legislation such
as income tax act (1961) sales tax act stamp act (1899), contract act (1872).
MRT pact (1969) etc. The most important part of his statutory duties relates to
the various provisions of the Companies Act are:
1. Maintenance of books and registers of the company
2. Filing of the necessary returns with the Registrar of Companies
3. Supervising the issue, allotment, transfer and forfeiture of share and
debentures.
4. Attending to meetings and recording their proceedings.
5. Safe Custody and proper use of the common seal of the company.
2. GENERAL DUTIES
 Duties in Relation to Directors:
 The Secretary has to look after the correspondence with the director.
 convene board meetings under the direction, of the managing director
 preparation of minutes.
 Execute the orders and instruction of the board.
 He has to advise the directors during the deliberations at the meeting regarding
the provisions of various Acts. He acts as a guide to the board of directors.

The secretary is the confidential clerk of the board. While the directors lay
down the broad policies of the company at board meetings, the secretary
interprets these policies. He communicates board decisions to the staff and
shareholders and because of thus, he is called the mouthpiece of the board of
directors.
 Duties in Relation to Shareholders.
 Application and allotment of shares.
 Calls of shares.
 Forfeiture of shares.
 Transfer and transmission of shares.
 Distribution of dividend
 Notice and circulars to .members
 Meetings of shareholders
 Inquiries and complaints from shareholders.
 Duties towards Organization and Office.
 To supervise the various activities of the office.
 To co-ordinate the activities of various departments.
 To select organise and guide the personnel.
 To maintain good relationship with the members.
 Duties in Relation to the Public.
 The secretary being in possession of all-important information about the
various aspects of the company has to function as a medium of
communication between the directors and the general public.
 At the same time, he should take care to see that no confidential information is
divulged to the public.
 He should function as liaison officer between the shareholders and the
directors, the company and the outsiders and should discharge his duties in the
best interest of the company.

 Duties Before Incorporation:
 To attend preliminary meetings of the promotions and prepare the
minutes of meeting.
 To guide the promoters regarding the provisions of the companies act
relating to incorporation of a company.
 To assist the promoters in preparation of various documents such as
memorandum of association, articles of association etc.
 Duties After Incorporation:
 To arrange for 1st board meeting and get the necessary resolution passed.
 To take necessary steps to get the business commencement certificate by
filing necessary documents with the registrar of the companies.
 To arrange for statutory meeting after obtaining business commencement
certificate.
 To look after the work-in-connection with application, allotment, calls on
shares, transfer and forfeiture of shares etc.
QUALIFICATIONS OF THE SECRETARY
(I) Membership of the Institute of Company secretary of India (ICST).
(II) Pass in the intermediate examination conducted by the Institute of Company
Secretary in India (ICSI).
(III) Post-Graduate degree in commerce or corporate secretaryship awarded by any
university in India.
(IV) Degree in Law awarded by any university.
(V) Membership of the Institute of Cost and. Works Accountants of India.
(VI) Membership of the Institute of Chartered Accountants of India.
(VII) Post-graduate in Company Law and Secretarial Practice granted by the
University of Udaipur.
(VIII) Membership of the Association of Secretaries and Manager, Calcutta.
(IX) Diploma in Corporate Laws and Management granted by the India Law
Institute, New Delhi.
(X) Post-graduate degree or diploma in Management Sciences granted by any
University.
(XI) Post-graduate degree or diploma granted by Indian Institutes of Management,
Bangalore, Calcutta, Lucknow, Ahmadabad or Calicut.

The qualifications possessed by a person holding the office as the secretary of
a company immediately before 30the October 1980 shall be deemed to be the
qualification, which he shall he required to possess in order to be eligible to
continue in that company.
QUALITIES OF THE COMPANY SECRETARY:
In addition to the statutory qualifications, a company secretary should possess
certain other qualities if he is to discharge his multifarious duties efficiently.
The qualities are:
 Sound General Education:A sound general education helps the secretary in
grasping the subject without taking much of his time and effort.
 Command over Languages:As a large part of the secretary's work consists
of correspondence and preparation of report and précis, it is necessary that
he should have a command over language. Further, he should also be
conversant with certain specialized business terms and expressions suited to
his work. If his company has foreign connections, it is better for him to have
aknowledge of one or two foreign languages.
 Knowledge of Office Administration:For the efficient organization of the
office, the secretary should know the best system of filing and indexing and
should have a knowledge of labour saving devices, recruitment of office
staff, methods of remuneration, delegation of work etc.,
 Knowledge of Accounting and Taxation:As company secretary is an
executive office of the company, he must also have a basic knowledge of the
principles of accounting and taxation, consisting of income tax and sales tax.
 Knowledge of Company Law:A thorough knowledge of the various
provisions of the Companies, Act is essential for the secretary .Companies
have to function within the legal framework of the companies Act, hence a
thorough knowledge of .the various provisions of Companies Act is essential
for a secretary.
 Knowledge of various acts Relating to Staff: For the efficient handling of
staff, the secretary should have thorough knowledge of various acts of
legislation which are applicable to the staff, viz., the Factories Act, the
Industrial Disputes Act, the Workmen's Compensation Act, the Employees'
Provident Fund Act, the Payment of Wages Act, Income Tax Act, etc.

 Knowledge of Mercantile Law:Apart from the knowledge of the law
relating to staff, a working knowledge of the laws relating to contracts,
negotiable instruments, sale of goods, insurance etc, may be of immense help
to the secretary in discharging his duties.
 Knowledge of the Industry:He should have a thorough knowledge of the
business of his company and knowledge of the industry in which his
company is engaged. This would help him to give proper guidance to the
chairmen and the board on various intricacies of business.
 General Knowledge:General Knowledge helps the secretary in guiding the
chairman and board of directors, and in performing his duties confidently.
Hence, apart from knowledge of the industry, the secretary should have
general knowledge likes current happenings, economic conditions, political
and social condition, market conditions, etc.
Rights and Powers of Secretary:
The companies act doesn’t confer any special powers to secretary. He cannot
do anything express or implied authority of the board. However as an employee
an officer of the company, he derives certain powers by implication. They are:-
1) He has the right to control and manage the departments under his control.
2) He has the rights to authenticate the important document.
3) He has the right to claim his salary as a preferential creditor at the time of
winding up of the company.
4) He act as a Authorized Person.
5) He is having right to Supervise the activities of the Company.
6) He has the right to allot the shares to the applicants with the permission of the
directors, but it should be mentioned in the articles of association.
Restrictions on powers or limitations on secretarial duites:
Through the post of secretary is important in the companies administrative
structure, the secretary has no powers to do any of the foll without express
authority:-
1) To converse a meeting.
2) To allot shares.

3) To transfer shares.
4) To remove a name from the registrar of the members.
5) To make representation and enter into contract on behalf of the company.
6) To borrow money on behalf of the company .
LIABILITIES OF THE SECRETARY
The liabilities of the company secretary may be divided into two categories:
a) Statutory liabilities
b) Contractual liabilities
a) Statutory Liabilities
As the principal executive officer of the company, the secretary has
certain statutory obligations under the .Companies Act, Income tax Act
and the Stamp Act, Sales .tax Act etc. If the secretary fails to carry out the
statutory obligations or duties imposed on him by the various acts, certain
liabilities are imposed on him by the Companies Act and other acts. Such
liabilities are called the Statutory liabilities. In short, statutory liabilities
refer to all those liabilities imposed on the secretary by the Companies
Act and other acts for his failure to discharge his statutory duties.
The various statutory liabilities imposed on the company secretary are:
1. If he fails to hold a statutory meeting.
2. If he does not circulate the statutory report.
3. If he fails to hold the Annual General Meeting.
4. If he fails to submit to the Registrar of Companies copies of annual
accounts and other statements.
5. If he fails to give notice of Board Meeting.
6. If he fails to record the minutes of Board and General Meeting.
7. If he does not maintain minute books at the registered office.
8. If he refuses to allow inspection of minutes by the members.
9. If he refuses to furnish copies of Minutes to members.
10.If he fails in making ready share certificates and debenture certificates
within the stipulated period.

BBA IIIrd Semester Corporate Environment full notes

BBA IIIrd Semester Corporate Environment full notes

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