covered all types of companies meeting plus essentials to make the meeting a valid meetings, cases related to the meetings, powers of board & tribunal to call the meetings
2. Contents
1. Meaning of meetings
2. Why to have meetings
3. Kinds of meetings
4. Pre-requisites of valid
meetings
5. Proxies
6. Annual General Meeting
7. Legal provisions to hold AGM
8. Cases related to AGM
9. Statutory meetings
10. Statutory Report
11. Extra ordinary GM
12. Legal provision to EGM
13. Power of tribunal to call EGM
14. Cases related to EGM
15. Class Meetings
16. Board Meetings
17. Pre-requisites of BM
18. Board Committee
19. General powers of Board
20. Restrictions on power of
Board
21. Cases related to BM
22. Meeting of Creditors
23. Meeting of debenture
holder’s
3. Meaning of Meetings
• The word “meetings” in context of company means
a gathering or assembly of directors or shareholders
or of both for taking decisions on the agenda before
them.
• Basically, these people has been convened for the
purpose of achieving a common goal through verbal
interaction, such as sharing information or reaching
agreement.
• Meetings may held face to face or virtually, as
mediated by communication technologies such as a
telephone conference call or a video conferences.
4. Why to have meetings?
• To solve the problems
• To make decisions
• To develop various plans
• To gather or convey information
• To get a response to information
• To obtain approval
• To clarify responsibilities
• To create a sense of teamwork
6. Pre-requisites of a valid meeting
Pre-
requisites
Appropriate
authority
Notice Quorum Agenda Chairman
• The law provides certain provisions, which are supposed to be
followed by the company while holding various types of
company meetings. A meeting must be called conducted
according to the provisions provided in the law & in AOA.
• If these provisions are not followed while convening &
conducting the meeting, then the whole proceedings of the
meeting will be invalid. The following are the pre-requisite of
a valid meeting.
7. 1) Appropriate Authority
• The first essential element of a valid meeting is that it must be
called by an appropriate authority.
• The word “Appropriate Authority ” means Board of directors,
Members & Company law board.
• Under Sec 96 Board has power at common law to call a GM even if this power
is not expressly conferred upon them by the articles
• An individual director has no power to call a GM
• Notice of a GM given by a directory or a director held invalid if it is given
without the sanction of the board
Board
• Members who fulfil the requirement of sec 100 are eligible to requisition an
EGM
• The members may themselves call an EGM u/s 100 on failure of the board to
call the EGM
Members
• An AGM can be called by CLB u/s 97
• An EGM can be called by CLB u/s 98
Company
Law Board
8. 2) Notice (Section 101 & 102)
The term “notice” is derived from the latin word “notitia”
which means which means ‘knowledge’. A meeting cannot be
validly held unless a proper notice of it has been given.
The things in connection with the notice have to be
considered namely:-
•A GM can be called by giving at least 21 days notice in writing
or by electronic mode
•Date of issue of notice & date of meeting have to be in
addition to 21 days
Proper
notice
• A GM may be called even after giving a shorter notice if consent is given in
writing or by electronic mode by not less than 95% of the of the members
entitled to vote at such meeting
• The consent may be taken before or during or even after the meeting [ Re,
Self Help Pvt. Industrial Estate (P) Ltd
Shorter
notice
a) Length of notice [Section 101(1)]
9. 2) Contents of Notice & to whom
[Sec 101]
• (a) Place , day & hour of the meeting
• (b) Business to be transacted thereat (i.e. special or an
ordinary business)
Contents
[Sec101(2)]
• (a) Every member
• (b) Legal representatives of the deceased member
• (c) Official assignees of the insolvent member
• (d) Auditors
Notice to Whom
[Sec101(3)]
• Accidental omission to give notice shall not invalidate the
proceedings at the meeting.
• Deliberate omission to give notice to even single member
shall invalidate the meeting. [Smyth v. Darley (1849)]
Omission to give
notice [Sec
101(4)]
10. Special & Ordinary business
[Sec102(2)]
• Special business means all business to be transacted at a
meeting except the following, which is called Ordinary
Business:-
(a) The consideration of financial statements & the reports of
the Board of Directors & Auditors
(b) The declaration of any dividend
(c) The appointment of directors in place of those retiring
(d) The appointment of, & the fixing of the remuneration of,
the auditors
(e) Sec 102 provides that where any Special Business is to be
transacted at the meeting, there shall be annexed to the
notice of the meeting an explanatory statement setting
out some material facts.
11. 3) Quorum of General Meeting
[Sec 103]
• Quorum is the minimum no. of
members required to be present at a
GM of the company to validly transact
any business.
• In reckoning, quorum persons are taken
into account who are qualified to take
part & decide upon questions brought
before the meeting
• Preference shareholders are not
counted in quorum, unless there is some
matter affecting their rights.
• In case of joint shareholders only 1 one
shareholder as per the order in which
their name appears in the register of
members shall be counted towards
quorum
12. Main provisions of Sec103(1)
5 members personally present if the
number of members as on the date of
meeting is not more than one thousand
15 members personally present if the
number of members as on the date of
meeting is between one thousand to five
thousand
30 members personally present if the
number of members as on the date of
meeting exceeds five thousand
Public
company
2 members personally
present
Private
company
13. Consequences of absence of quorum
[Sec 103(2)&(3)]
• Section 103(2): If the quorum is not present within half-an-hour from
the time appointed for holding a meeting of the company-
(a) The meeting shall stand adjourned to the same day in the next week at
the same time & place, or to such other date & such other time & place as the
board may determine; or
(a) The meeting, if called by requisitionists u/s 100 shall stand cancelled
In case of adjournment, notice is required to be given to the members: This sec
provides that where there is adjournment or of change of day , time & place of
meeting, the company is required to give not less than 3 days notice to the
members either individually or by publishing & advertisement in the newspaper
which is in circulation at the place where the registered of the company is
situated .
• Section 103(3) lays down that if at the adjourned meeting also , quorum is
present within half an hour from the time appointed for holding the meeting
, the members present shall constitute quorum.
14. Can a single member constitute quorum for a
meeting?
• If no quorum is present there is no meeting & the proceedings
are invalid so therefore any resolution passed at that will be
treated as invalid.
(1) Where default is made by a company in holding an AGM, the
NCLT may give direction that one member of the company
present in person or by proxy shall be deemed to constitute
the meeting. (Sec.97)
(2) Where for any reason, it is impracticable to hold or conduct
EGM, the NCLT may give direction that one member of the
company present in person or by proxy shall be deemed to
constitute the meeting. (Section 98)
(3) Where a person holds all the shares of a class, he alone may
constitute a class meeting.
15. 4) Agenda of the meeting
• The dictionary meaning of the
term agenda is the “list of
things to be dealt with
especially at a meeting”.
• It is a part of the notice of the
meeting which indicates the
list of business issues to be
transacted at the meeting.
• It is normally called as Agenda
Paper
17. Objectives of Agenda
•To bring in to the notice of all the members in advance
that, what matters will be discussed at the time
•It enables the members to prepare their strategy in
advance regarding the issues that will be discussed at the
meeting
•It helps to remove the confusion among the minds of
members if any regarding the purpose of the meeting
•To prevent many questions being put to the chairman,
which are usually raised by members having insufficient
information
•To bring discipline among members while in the meeting
18. 5) Chairman of meeting (Sec 104)
• If the AOA of a company do not
contain any provision for the
appointment of chairman, such
appointments shall be made by
the members present at the
meeting by show of hands .
• If a poll is demanded on the
election of the Chairman, it shall
be taken immediately & the
chairman elected above shall
continue to be chairman of the
meeting until the other person
get elected by poll.
19. Appointment of Chairman under
Articles
1) Regulation 45 of Table F : It provides that the chairman if
any of the Board shall preside as Chairman at every GM of
the company.
2) Regulation 46 of Table F : if there is no chairman or he is not
present within 15 minutes after the appointed time of the
meeting or is unwilling to act as a chairman of the meeting,
the directors present shall elect one among themselves to
be chairman of the meeting.
3) Regulation 47 of Table F : if at the meeting no director is
willing to act as chairman or if no director is present within
15 min after the appointed time of the meeting, the
members present should choose one among themselves to
be chairman of the meeting .
20. Appointment of Chairman by NCLT
• Where the NCLT u/s 97 & 98 directs the calling of general
meeting of a company, it may give directions regarding it’s
holding, calling & conducting. It may appoint any person as its
Chairman v
Casting Vote of Chairman
• In the case of an equality of votes on a matter requiring
ordinary resolution, the Chairman of GM shall be entitled to a
second or casting vote. It may be noted this provision can be
used by a company only if the AOA of a company so provides.
21. Proxies (Section 105)
The word “proxy” has two different meanings i.e.
(a) Firstly, it means the agent appointed by the member of a company
to attend & vote on his behalf at a meeting of members
(b) Secondly, it means the document by which such an agent is
appointed
The relation between the member appointing proxy & the proxy so
appointed is that of principal & agent
Who can appoint a proxy?
1) Company having a share capital : Every members of the company
who is entitled to attend & vote at the meeting can appoint a
proxy.
2) Company not having a share capital : `his right is available only if
the articles make a specific provision for it.
A proxy need not to be a member of the company
22. Disclosures required in notice of GM
[Section 105(2)]
• In every notice calling GM there should appear with reasonable
prominence a statement that a member, entitled to attend & vote is
entitled to appoint a proxy to attend the meeting & vote instead of
himself & a proxy need not be a member of the company.
• Consequences of Default : In case of default of this sub
sec every officer of the company who is in default shall be punishable
with fine which may extend to Rs.5,000/-
Limitation on Proxy
• A proxy has no right to speak at meeting
• He is not entitle to vote except on poll
• He is not counted in quorum
• He cannot take part in discussion of the meeting
• He is not capable of inspecting the minutes book of the general
meeting
23. Period for deposit of proxy
• A proxy should be get deposited at registered office at least
48 hours before the time fixed for a meeting.
• A company may by its articles provide lesser for than 48 hours
but not more than 48 hrs for depositing the proxies.
• Sunday is included in computation of 48 hours
Requirement of instrument of proxy
• The instrument appointing a proxy should be in writing & be signed
by the appointer or his attorney duly authorised in writing.
• In case where the appointer is body corporate, it shall be under its
seal or be signed by an officer or an attorney duly authorised by it
• In case of joint shareholders, it must be signed by all the
shareholders.
• A proxy form shall be in FORM NO. MGT. 11
24. Revocation of proxies
• A proxy can be revoked in any of the following ways:
(i) By deposit of a new proxy within the time stipulated for deposit
of proxies
(ii) By the member himself attending & voting before the proxy has
voted
(iii) By the death or insanity of the appointer by revocation of proxy
Inspection of list of Proxies
• Every member entitled to vote is entitled to inspect the proxies
lodged with it.
• Such inspection can be done only during the business hours of the
company,
• At least 3 days notice in writing of intention to do so has been given
to the company.
25.
26. Annual General Meeting
(Section 96)
• Section 96(1) of the Companies Act,2013 provides that
every company, other than OPC, shall in each year hold ( in
addition to any other meetings ) at least one meeting of its
shareholders each year.
• It is a statutory requirement to hold an annual general every
year, although the company is holding so many other meetings
in that year .
According to the General Clause Act,1897 the word
“year” means calendar year i.e. a period of 12 months running
from 1st January to 31st December.
• The proper authority to call AGM is the Board of Directors.
27. Objects of holding an AGM
• To review the functioning of the company it is essential that the
shareholders must assemble at least once in every year
• Consideration of accounts , balance sheet &
reports of Board of directors & auditors.
• Final dividend are decided and declared in this
meeting
• For appointments of directors
• For appointment & fixed the remuneration of
auditors
28. Legal Provisions to hold
AGM
Time
period
1) AGM is to be held within 9
months of closing of financial year
of the company [Proviso Sec96(1) ]
In case
of other
AGM
If it is
1st AGM 2) If AGM is so held , there is no
need to hold AGM in the year of its
incorporation
1) AGM is to be held within 6 months
from the date of closing of financial
year.[Proviso Sec 96(1) ]
2) AGM is to held within 15 months of
last AGM. [ Sec96(1) ]
3) Registrar may for any special reason ,
can grant extension up to only 3
months.[Proviso Sec 96(1)]
29. Time , Place & Day of AGM
• AGM shall be held during business hours i.e. between
9 a.m. & 6 p.m. [Section 96(2)]Time of AGM
•AGM is to held on a day that is not a National Holiday [ Sec 96(2)]
•“National Holiday” means & include a day declared as national
holiday by Central Govt.
Day of AGM
• AGM shall be held at the registered office of the company ; or
• Some other place within the city, town or village in which the registered
office is situated [Section 96(2) ]
Place of AGM
Exceptions to Above
If a day is declared by CG to be
holiday after the issue of notice,
it shall not be deemed to be a
public holiday, in relation to that
meeting
Where AGM adjourned
because of lack of quorum,
it is to held on the same day,
time & place in the next
week, even if that day is a
public holiday.
30. Report on AGM ( Sec.121)
•It mandates every listed
public company to
prepare in the
prescribed manner,
Sec 121
•A report on each AGM shall
include conformation to the
effect that the meeting was
convened, held & conducted as
per provision of the act.
Sec 121
•A copy of this report is to be
filed with Registrar, in Form
MGT.15, within 30 days
of the conclusion of the
AGM.
Sec 121
Note: The Central Govt. may exempt any company from the aforesaid
provisions subject to such conditions as it may impose
31. Default in holding AGM
If a company default in holding an AGM, the following two consequences
will follow:-
1) Section 97
• The National Company Law Tribunal (NCLT) may direct the calling of an
AGM provided any member of the company approach to it in this regard.
• The NCLT may even direct that one member of the company present in person
or by proxy shall be deemed to constitute the meeting.
2) Section 99
• The failure to call this meeting is an offence punishable with fine, which may
extend to Rs. 1,00,000/- on the company & every officer of the company.
• In case of continuing default, there can be a further fine, which may extend
to Rs. 5,000/- for everyday of default.
32. Important Cases related to AGM
Sree Meenakshi Mills Co. Ltd v. Registrar of Joint Stock Co. AIR 1938 Mad
640:
It was held that a meeting held in current year as an adjourned meeting of the AGM of
the previous year cannot be considered as the AGM for the current year. There should
be one meeting per year & as many meetings as there are years.
Tapan Kumar Chowdhary v. Registrar of Companies (2003) :
It was held that that for a failure to hold a meeting it will not considered to be defence
that on a/c of a criminal case against the secretary of the Co. some important books
were exhibited in the court & as they had not been released in time, no accounts could
be prepared, & no meeting could be held.
Asia Udyog Pvt.Ltd (1965) :
It was held that where the police has seized the account books of a company then the
company is exempted from holding the Annual General Meeting.
33. Statutory Meeting
(Sec 165 of Companies Act 1956 )
• Every public company limited by shares or limited by guarantee
& having share capital must hold a general meeting of its
members, to be called statutory meeting.
• It is the first meeting of the members of the company after its
incorporation.
34. Objectives of holding this meeting
• To give information to the members regarding issues related
with the promotion & formation of the company
• To make, clear the doubts & confusion, if any in the minds of
the members
• To discuss the issues regarding success of the flotation of
the company
• To take consent of the members regarding any modification
in the terms of the contracts specified in the prospectus
35. Companies exempted from holding
Statutory meeting
• Every company is free to hold its first meeting but certain
companies are not required to hold their first meeting subject
to Sec 165(1)
36. Statutory Report
• The document containing all the information required by the
shareholders before the statutory meeting is known as
Statutory Report .
• The Statutory Report must comply with the following
guidelines of company law :
1) Sent to members
• a) At least before 21 days before the day of statutory meeting.
• b) If less than 21 days then consent of all the members is required.
2) Certification : It shall be certified as correct by
• a) 2 directors (including MD)
• b) Auditor of the company ( regarding allotment of shares & receipt &
payments of cash . Sec[165(4)]
37. Contents of the Report
•Number of shares allotted
•Consideration for shares issuedShares
•Cash received by the company in respect of shares allottedCash received
•Receipts from shares , debentures & other sources
•Payments madeReceipts &
•Balance remaining in hand
•An a/c or estimate of preliminary expenses of the Co.Payments a/c
•Names , address & occupation of the directors , manager , secretary &
auditorsDirectors & Auditors
•Particulars of any contract , which is to be submitted to meeting for its
approvalContracts
•Arrears due on calls from every director & managerArrears of calls
•The particulars of any commission or brokerage paid on shares or
debentures to any director or manager.Commission or Brokerage
38. Consequences of Default
• Up to Rs.5,000 to company & every officer of the
company who is in default
1) Liable for fine [ Sec 165(9)]
• The court may order to wind up the company
2) Winding Up [ Sec 433(b)]
39. Extra-Ordinary General Meeting
(Section 98 to 100)
INTRODUCTION :
• Sometimes, matters requiring immediate consideration by
members may crop up whose consideration cannot be deferred
till the next AGM . To meet such emergencies, the companies can
provide for holding of emergency meetings of the members
which are known as Extra-ordinary General Meetings.
• Regulation 42 of Table F provides that all general meetings, other
than AGM, shall be called as EGM .
• All the business which can be transacted at an EGM shall be
deemed special.
40. Who may call EGM
• The EGM can be convened by anyone of the following:-
1) By the Board of directors ( on its own motion or on demand of the
requisitionists ), or
2) By any directors or any two members , or
3) By the Requisitionists themselves , or
4) By National Company Law Tribunal (NCLT)
Calling of EGM (Sec 100)
• Section 100(1)of the Companies Act , 2013 empowers the board to
call an extraordinary general meeting of the company at anytime
when it deems fit .
• If in case the board fails to call an EGM , it may be called by the
requisitionists in manner as prescribed under sub sections of the
Section 100
41. Legal provisions regarding calling
of EGM
1) Eligible Members [Sec100(2)]
a) In case of Company having share capital
• The requisition shall be made by the shareholders holding not less
than 1/10 of such of the paid up share capital of the company & are
entitled to vote on that occasion at the said EGM
b) In case of company having no share capital
• The requisition shall be made by the such no. of members who have
at least 10% of the total voting power & are entitle to vote on that
occasion at the said EGM
42. 2) Essentials of a valid requisition [Sec100(3)]
The requisition shall specify the matters for the
consideration of which EGM is to be called
The requisition shall be deposited at the
registered office .
The requisition shall be signed by all the
requisitionists. In case of Joint shareholders , it is
to be signed by anyone of them shall be deemed
to be valid
43. 3) EGM called by Board [Sec 100(4)]
On a receipt of a valid requisition, the Board shall within 21
days proceed to call EGM to be held not later than 45 days
from the date of deposit of requisition .
4) EGM called by Requisitionists
If the board fails to call an EGM, it may be called by the
requisitionists themselves as follows :
Time period for holding
EGM [Sec 100(4)]
Manner of calling EGM
[Sec100(5)]
Reimbursement of
expenses [Sec100(6)]
•It must be held within 3 months
from the deposits of requisition .
•The requisitionists shall call the
EGM in the same manner in which
a meeting is called by the Board of
Directors
•All reasonable expenses incurred by the
requisitionists to call EGM shall be repaid
back to them
•The sum so repaid shall be deducted from
the remuneration of the defaulting directors
44. Power of Tribunal to call EGM
(Sec 98)
• Section 98(1) of the Companies Act,2013 provides that when for any it is impracticable
to call, hold & conduct the meeting of the Co. according to the provision of the law or
of the article of the company, the NCLT may order a meeting of the company to be held
or conducted in such a manner as it thinks deem fit.
Here the word “impracticable” means impracticable from a reasonable
point of view.
Holding a meeting is supposed to be impracticable in the following circumstances
1. When there is dispute between the various the shareholders that, who are the lawful
directors of the company to call the meetings.
2. Where the Registered office or any other place fixed for the meeting has been locked.
3. Where the company does not have it’s duly appointed Board of Directors.
4. Where there is chance of quarrel & violence at the meeting.
45. It may also give such ancillary direction as it thinks fit. The
directions given under this section may also include a direction
that one member of the company present in person or by proxy
shall be deemed to constitute a meeting .
The Company Law Board/ Tribunal can issue such orders either
46. Default in holding EGM
(Section 99)
• The failure to call this meeting is an offence
punishable with fine, which may extend to
Rs.1,00,000/- on the company & every officer
of the company.
• In case of continuing default , there can be a
further fine, which may extend to Rs. 5,000/-
for everyday of default.
47. Important Cases of EGM
• A.D. Chaudhary v. Mysore Paper Mills Ltd.:
It was held that the BOD is right in refusing to call & hold an EGM on the
requisition of members where there is an order of injunction, restraining the
company from holding any meeting is in force.
• LIC of India v. Escorts Ltd . (1986)
It was held that as every shareholder has a right to requisition an EGM , so he
cannot be restrained from requisitioning an EGM & he is not bound to disclose
the reasons for the removal where the meeting get held for the purpose of
removing bunch of directors
• Metal box India Ltd , re (2001) : It was held it’s not necessary to held
the meeting at the registered office so resolution passed at such meeting would be
equally valid as it held at registered office.
48. Class Meetings
• Besides the GMs, the articles of a company may provide that certain matters
affecting the interest of the holders of a particular class of shares shall be
subject to the consideration & decision of a meeting of those holders only,
such meetings are called “Class Meetings”
• In other words Class Meetings are those meetings that are held by the
shareholders of a particular class of shares e.g. Preference shares
• The class meeting are usually required to be held when it is proposed to
alter, vary or affect the rights of a particular class of shares. So for effecting
such changes, it becomes necessary to call separate class meeting of the
holders of those shares & seek their approval.
• For example : As per Section 48 of 2013 act, where a company desires to
cancel the arrears of dividends on cumulative preference shares, it is
necessary to call a meeting of such shareholders & pass a special resolution.
49.
50. Board Meeting [Section 173 to 176]
The affairs of a company are managed by the Board of Directors.
So it is necessary that the directors should often meet to discuss
various matters regarding the management & administration of
the affairs of the company in the best interest of the
shareholders & the public.
Essentials of a Valid Meeting
1. Frequency of Board Meeting
2. Notice of Board meeting
3. Quorum of a Board Meeting
4. Chairman of a Board Meeting
5. Agenda of a Board Meeting
51. Notice of a Board Meeting [Sec173(3)]
Length & mode of notice
• The act requires that not less than 7 days notice in writing shall be given to
every director at the registered address as available with the company.
• The notice can be given by hand delivery or by post or by electronic means
Shorter notice
• At least one independent director shall be present at the meeting.
• If he is not present then decision of the meeting shall be circulated to all
directors & shall be final only after ratification of decision by at least one
Independent Director
Consequences of Default
• Every officer of the company, whose duty is to give notice & who fails to
do so, shall be punishable with fine which may extend to Rs. 25000/-
52. Quorum [Section 174]
•As per Sec 174(1), it shall be 1/3rd of its total strength or two directors whichever is higher
•As per Sec174(3), where at any time the no. of interested directors exceeds or is equal to 2/3rd
of the total strength of BOD, the number of directors who are not interested directors &
present at the meeting, being not less than two, shall be the quorum during such time.
Required quorum
•Due to lack of quorum the meeting shall automatically stand adjourned to the same day at the
same time & place in the next week
•If that day is a national holiday till the next succeeding day, which is not a holiday, at the same
time & place
•Proper quorum is required at adjourned meeting but issue of fresh notice is not required .
Effect of no quorum
•When there is vacancy in Board then continuing directors may act there
•But if their no. Is reduced below the quorum fixed by the act then the continuing directors
may act only for increasing the no. of directors or summoning a GM
Board may act notwithstanding vacancies
As per Sec 184 “ Interested Director” means any director whose presence cannot be
counted for the purpose of forming a quorum at a meeting of the board at the time of
discussion or vote on any matter
53. Number of Board Meeting
[Sec 173(1)]
• The 1st BM of a company shall be held within 30 days of the date of
incorporation
• There shall be minimum of 4 board meeting every year at interval of
maximum of 120 days.
Minimum number of BMs
• To any class of companies
• By notification in the Official Gazette
Exemption by CG
• To one person company , small company & dormant company
• One board meeting in each half of a calendar year at minimum gap of 90
days in two board meeting
Relaxations [ Sec 173(5)]
54. BM through Video Conferencing
[Sec 173(2)]
• Either in person or through video
conferencing or other audio visual means.
• It must capable of recording & recognising
the participation of directors & of recording
& storing the proceedings of such meetings
along with date & time.
Manner of participation in BM
•In case of approval of Annual financial, Board’s
report , prospectus , amalgamation, merger,
demerger, acquisition & takeover.
•Meetings of Audit Committee for consideration of
financial statement.
Video conferencing prohibited
w.r.t. certain matters (Rule 4)
55. Resolution by Circulation
[Section 175]
Other Points
1) Resolution passed by circulation shall be
noted at a subsequent meeting of the Board
2) Shall be recorded or noted in minutes of
such meeting
Conditions for passing a resolution not by circulation
1) 1/3rd of total no. of directors require that
the resolution be decided at BM
Conditions for passing a resolution by circulation
1) The resolution has been circulated in draft
with all other necessary papers
2) Send them to all the directors at their
registered address by hand or post or courier.
56. Board Committees (Sec 177 & 178)
• Board committees are usually formed as a means of
improving board effectives & efficiency in areas where more
focused, specialised & technical discussions are required.
• Committees enable better management of full board’s time &
allow in-depth scrutiny & focused attention.
Types of Board Committees
57. 1) Audit Committee (Sec 177)
• The Audit committee meetings are
usually held once in three months
• It help in providing more
transparency & better Corporate
Governance in financial matters.
Main provisions pertaining to AC
i)
58. ii) Composition of Audit Committee (s/s 2)
• Recommendation for appointment & remuneration of auditors.
• Review & monitor auditor’s performance
• Examination of financial statement & auditor’s report
• Scrutiny of inter-corporate loans & investments
• Valuation of undertaking or assets wherever it is necessary
• Evaluation of internal financial controls & risk management system
Composition
Minimum 3
director
Majority of
independent Director
Majority of member including Chairperson shall be person with
ability to read & understand financial statement
iii) Functions of Audit Committee (s/s 4)
59. iv) Powers of the audit committee (s/s 5)
• Call for the comments of the auditors about internal control systems, the
scope of audit & observation of the auditors
• Review of financial statement before submission to the board
• It may discuss any related issues with the auditors & the management of
the company.
• Investigate into any of the aforementioned matters & any other matter
referred to it by the board.
• Obtain professional advice from external sources
• Full access to records of the company
• Oversee the Vigil Mechanism
v) Rights of auditors & KMP (s/s 7)
The auditors of a company & the key managerial personnel shall :
(a) Have right to be heard
(b) Not have right to vote
60. 2) Nomination & Remuneration
[Sec 178(1) to (4)]
• The Nomination & Remuneration Committee helps the BOD in
the preparations relating to :
1) The election of members of BOD
2) The remuneration of senior management & to management’s
& personnel’s remuneration & incentive schemes.
Main provisions pertaining to NRC
i)
61. ii) Composition of NRC (s/s 1)
Composition
3 or more non -
executive
directors
Independent
directors not less
than one half
The chairperson of
the Co. not to be
chairperson of NRC
iii) Functions of NRC (s/s 3)
• Identify persons to be appointed as directors in senior management
• Identify persons to be removed from directorship in senior management
• Carry out evaluation of performance of every director
• Formulate the criteria for determining qualifications, positive attributes &
independence of directors
• Recommend to the Board a policy regarding remuneration of directors,
KMP & other employees
62. 3) Stakeholders Relationship Committee
[Sec 178(5)to(8)]
• Companies having no. of shareholders, debentures-holders &
any other security holders more than 1,000 required to have
stakeholder relationship committee .
Main Provisions pertaining to SRC
Composition
(s/s 5)
Chairperson (non-
executive director )
Other members
as decided by the
Board
i)
63. ii) Functions of SRC (s/s 6)
• Consider & resolve the grievances of security holders
• Non–consideration of any grievance in good faith
iii) Duty to attend GMs
• Chairperson of Stakeholder Relationship Committee ,or
• In his absence, any other member of SRC authorised by
Chairperson of SRC .
iv) Consequences of default
64. General Power of the Board [Sec 179]
1. Power of the Board (s/s 1) : the BOD of a company shall be
entitled to exercise all such powers, & to do all such acts & things
as the company is authorised to do.
2. Power exercisable only at a BM (s/s 3):
a) To make calls on shareholders in respect of money unpaid on their
shares
b) To authorise buy-back of securities u/s 68
c) To issue securities, including debentures whether in or outside
India
d) To borrow money
e) To invest the funds of the company
f) To grant loans or give guarantee or provide security in respect of
loans
g) To approve financial statements & the Board report
65. Delegation of Power
• The board may by a resolution passed at a meeting delegate
to any committee of directors, the MD, the manager or to any
officer, the powers that are
a) To borrow monies
b) To invest the funds of the company
c) To grant loans or give guarantee in respect of loans.
Restriction on powers of board (Sec 180)
• To sell, lease or otherwise dispose of the whole or substantially the whole
of the undertaking of the company.
• Investment of compensation received by the company as a result of any
merger or amalgamation.(Exception : consent of members by way ofSR is
not required if such compensation is invested in trust securities specified
u/s 20 of the Trusts Act)
• To borrow money, where the money to be borrowed together with the
money already borrowed by the company will exceed aggregate of its paid
–up share capital & free reserves.
66. Cases related to Board Meeting
• Parmeshwari Prasad Gupta v. UOI (1973)
It was observed that notice to all directors of a meeting of the
BOD is essential for the validity of any resolution passed at the
meeting.
• Re Homer Gold Mines Ltd (1986)
It was held that 3 hours before notice to all the directors who
had other business to attend was held to be insufficient, even
their places of business & the place of meeting was in same city.
67.
68. Meetings of Creditors (Section 230)
• The creditors meeting is convened where a compromise or arrangement is
proposed between a company & its creditors.
• The meeting of creditors may be convened for the following purposes:-
a) To enter into an arrangement or a compromise between a company & creditors
or any class of them, or for them, or for an arrangement or a compromise b/w a
company & its members or any class of them.
b) To seek approval of creditors for amalgamation or reconstruction of a company
c) To seek consent of the creditors for winding up of a company.
The tribunal may on the application of the co. or of any creditor or member of the
company, in case of a company being wound up even on the liquidator’s
application may call meeting by order, to be held & conducted in such manner as
the tribunal directs.
Where the Co. is being wound up, any creditor or class of creditors or liquidators
may apply to the tribunal for ordering a meeting of the creditors or class of
creditors.
69. Meetings of Debentures Holder
• The company may call the debentures holder’s meeting for
the following purposes:
a) Any variation in conditions of their security
b) Any alteration in their rights
c) Effecting change in rate of interest on the existing
debentures
d) For issuing of new debentures
Case : J.K Pvt. Ltd v. New Kaiser Spinning & weaving Co. Ltd (1987)
It was held by the SC that a scheme sanctioned by the court does not operate
as a new agreement b/w the parties . It becomes binding on the company, the
creditors & the shareholder & has statutory force. It cannot be altered expect
with the sanction of the court even if the shareholders & creditors
acquiesce(to accept reluctantly) in such alteration
70. Bibliography
• Company Law (Taxman)
• Company Law (Avtar Singh)
• Law, Ethics & Communication (CA. Munish
Bhandari )
• Company Law (Sangeet Kedia)
• www.unilawonline.com/bareacts
