A Company Meeting

7/26/2019 A Company Meeting

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A company is an association of several persons. Decisions are made according to theview of the majority. Various matters have to be discussed and decided upon. Thesediscussions take place at the various meetings which take place between membersand between the directors. Needless to say, the importance of meetings cannot beunder emphasised in case of companies. The !ompanies Act, "#$% contains severalprovisions regarding meetings. These provisions have to be understood and followed.

&or a meeting, there must be at least ' persons attending the meeting. (ne membercannot constitute a company meeting even if he holds pro)ies for other members.

Kinds of Company Meetings : *roadly, meetings in a company are of the followingtypes +

. Meetings of Members + These are meetings where the members - shareholders of the company meet anddiscuss various matters. ember/s meetings are of the following types +

A. Statutory Meeting +A public company limited by shares or a guarantee company havingshare capital is re0uired to hold a statutory meeting. 1uch a statutorymeeting is held only once in the lifetime of the company. 1uch ameeting must be held within a period of not less than one month orwithin a period not more than si) months from the date on which it isentitled to commence business i.e. it obtains certi2cate ofcommencement of business. n a statutory meeting, the followingmatters only can be discussed +

a. &loatation of shares - debentures by the company b. odi2cation to contracts mentioned in the prospectus

The purpose of the meeting is to enable members to know all

important matters pertaining to the formation of the company and itsinitial life history. The matters discussed include which shares havebeen taken up, what money has been received, what contracts havebeen entered into, what sums have been spent on preliminarye)penses, etc. The members of the company present at the meetingmay discuss any other matter relating to the formation of the !ompanyor arising out of the statutory report also, even if no prior notice hasbeen given for such other discussions but no resolution can be passedof which notice have not been given in accordance with the provisionsof the Act.

A notice of at least '" days before the meeting must be given tomembers unless consent is accorded to a shorter notice by members,

holding not less than #$3 of voting rights in the company.

A statutory meeting may be adjourned from time to time by themembers present at the meeting.

The *oard of Directors must prepare and send to every member areport called the 41tatutory 5eport4 at least '" days before the day onwhich the meeting is to be held. *ut if all the members entitled toattend and vote at the meeting agree, the report could be forwarded


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later also. The report should be certi2ed as correct by at least twodirectors, one of whom must be the managing director, where there isone, and must also be certi2ed as correct by the auditors of thecompany with respect to the shares allotted by the company, the cashreceived in respect of such shares and the receipts and payments ofthe company. A certi2ed copy of the report must be sent to the

5egistrar for registration immediately after copies have been sent tothe members of the company.

A list of members showing their names, addresses and occupationstogether with the number shares held by each member must be kept inreadiness and produced at the commencement of the meeting andkept open for inspection during the meeting.

f default is made in complying with the above provisions, everydirector or other o6cer of the company who is in default shall bepunishable with 2ne upto 5s. $77. The 5egistrar or a contributory may2le a petition for the winding up of the company if default is made indelivering the statutory report to the 5egistrar or in holding the

statutory meeting on or after "8 days after the last date on which thestatutory meeting ought to have been held.

!ontents of 1tatutory 5eport must provide the following particulars+9a:The total number of shares allotted, distinguishing those fully orpartly paid up, otherwise than in cash, the e)tent to which partly paidshares are paid up, and in both cases the consideration for which theywere allotted.9b: The total amount of cash received by the company inrespect of all shares allotted, distinguishing as aforesaid.9c: An abstractof the receipts and payments upto a date within ; days of the date ofthe report and the balance of cash and bank accounts in hand, and anaccount of preliminary e)penses.9d: Any commission or discount paidor to be paid on the issue or sale of shares or debentures must be

separately shown in the aforesaid abstract.9e: The names, addressesand occupations of directors, auditors, manager and secretary, if any,of the company and the changes which have taken place in the names,addresses and occupations of the above since the date ofincorporation.9f:


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its 2rst annual general meeting within "? months from the date of itsincorporation. n such a case, it need not hold any annual generalmeeting in the year of its incorporation as well as in the following yearonly.

n the case there is any di6culty in holding any annual general

meeting 9e)cept the 2rst annual meeting:, the 5egistrar may, for anyspecial reasons shown, grant an e)tension of time for holding themeeting by a period not e)ceeding @ months provided the applicationfor the purpose is made before the due date of the annual generalmeeting. >owever, generally delay in the completion of the audit of theannual accounts of the company is not treated as 4special reason4 forgranting e)tension of time for holding its annual general meeting.

enerally, in such circumstances, an A is convened and held at theproper time . all matters other than the accounts are discussed. Allother resolutions are passed and the meeting is adjourned to a laterdate for discussing the 2nal accounts of the company. >owever, theadjourned meeting must be held before the last day of holding theA .

A notice of at least '" days before the meeting must be given tomembers unless consent is accorded to a shorter notice by members,holding not less than #$3 of voting rights in the company. The noticemust state that the meeting is an annual general meeting. The time,date and place of the meeting must be mentioned in the notice. Thenotice of the meeting must be accompanied by a copy of the annualaccounts of the company, director/s report on the position of thecompany for the year and auditor/s report on the accounts. !ompanieshaving share capital should also state in the notice that a member isentitled to attend and vote at the meeting and is also entitled toappoint pro)ies in his absence. A pro)y need not be a member of thatcompany. A pro)y form should be enclosed with the notice. The pro)y

forms are re0uired to be submitted to the company at least 8? hoursbefore the meeting.

The A must be held on a working day during business hours at theregistered o6ce of the company or at some other place within the city,town or village in which the registered o6ce of the company issituated. The !entral overnment may, however, e)empt any class ofcompanies from the above provisions. f any day is declared by the!entral government to be a public holiday after the issue of the noticeconvening such meeting, such a day will be traeted as a working day.

A company may, by appropriate provisions in its its articles, 2) thetime for its annual general meeting and may also by a resolutionpassed in one annual general meeting 2) the time for its subse0uentannual general meetings.

!ompanies licensed under 1ection '$ are e)empt from the aboveprovisions provided that the time, date and place of each annualgeneral meeting are decided upon beforehand by the *oard ofDirectors having regard to the directions, if any, given in this regard bythe company in general meeting.


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n case of default in holding an annual general meeting, the followingare the conse0uences +

1. Any member of the company may apply to the !ompany Baw*oard. The !ompany Baw *oard may call, or direct the calling of the meeting, and give such ancillary or conse0uential directions

as it may consider e)pedient in relation to the calling, holdingand conducting of the meeting. The !ompany Baw *oard maydirect that one member present in person or by pro)y shall bedeemed to constitute the meeting. A meeting held in pursuanceof this order will be deemed to be an annual general meeting ofthe company. An application by a member of the company forthis purpose must be made to the concerned 5egional *ench ofthe !ompany Baw *oard by way of petition in &orm No. " inAnne)ure to the !B* 5egulations with a fee of rupees 2ftyaccompanied by 9i: a6davit verifying the petition, 9ii: bank draftfor payment of application fee.

2. &ine which may e)tend to 5s. $,777 on the company and everyo6cer of the company who is in default may be levied and forcontinuing default, a further 2ne of 5s. '$7 per day duringwhich the default continues may be levied.

Business to be Transacted at Annual General Meeting +At every A , the following matters must be discussed and decided.1ince such matters are discussed at every A , they are known asordinary business. All other matters and business to be discussed atthe A are specila business.

The following matters constitute ordinary business at an A +

a. !onsideration of annual accounts, director/s report and theauditor/s report

b. Declaration of dividend

c. Appointment of directors in the place of those retiring

d. Appointment of and the 2)ing of the remuneration of thestatutory auditors.

n case any other business 9 special business : has to be discussed anddecided upon, an e)planatory statement of the special business mustalso accompany the notice calling the meeting. The notice must shouldalso give the nature and e)tent of the interest of the directors ormanager in the special business, as also the e)tent of the shareholding

interest in the company of every such person. n case approval of anydocument has to be done by the members at the meeting, the noticemust also state that the document would be available for inspection atthe 5egistered (6ce of the company during the speci2ed dates andtimings.

C. Extraordinary General Meeting=very general meeting 9i.e. meeting of members of the company: otherthan the statutory meeting and the annual general meeting or any


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adjournment thereof, is an e)traordinary general meeting. 1uchmeeting is usually called by the *oard of Directors for some urgentbusiness which cannot wait to be decided till the ne)t A . =verybusiness transacted at such a meeting is special business. Ane)planatory statement of the special business must also accompanythe notice calling the meeting. The notice must should also give the

nature and e)tent of the interest of the directors or manager in thespecial business, as also the e)tent of the shareholding interest in thecompany of every such person. n case approval of any document hasto be done by the members at the meeting, the notice mus also statethat the document would be available for inspection at the 5egistered(6ce of the company during the speci2ed dates and timings.

The Articles of Association of a !ompany may contain provisions forconvening an e)traordinary general meeting. =g. t may provide that4the board may, whenever it thinks 2t, call an e)traordinary generalmeeting4 or it may provide that 4if at any time there are not within

ndia, directors capable of acting who are su6cient in number to forma 0uorum, any director or any two members of the company may call

an e)traordinary general meeting4.

Extraordinary General Meeting on e!uisition + The members of a company have the right to re0uire the calling of ane)traordinary general meeting by the directors. The board of directorsof a company must call an e)traordinary general meeting if re0uired todo so by the following number of members +

a. members of the company holding at the date of making thedemand for an = not less than one tenth

a. of such of the voting rights in regard to the matter to bediscussed at the meeting C or

b. if the company has no share capital, the members representingnot less than one tenth of the total voting rights at that date inregard to the said matter.

The re0uisition must state the objects of the meetings and must besigned by the re0uisitioning members. The re0uisition must bedeposited at the company s registered o6ce. Ehen the re0uisition isdeposited at the registered o6ce of the company, the directors shouldwithin '" days, move to call a meeting and the meeting should beactually be held within 8$ days from the date of the lodgement of there0uisition. f the directors fail to call and hold the meeting asaforesaid, the re0uisitionists or any of them meeting the re0uirementsat 9a: or 9b: above, as the case may be, may themselves proceed tocall meeting within @ months from the date of the re0uisition, andclaim the necessary e)penses from the company. The company canmake good this sum from the directors in default. At such an = , anybusiness which is not covered by the agenda mentioned in the noticeof the meeting cannot be voted upon.

"o#er of Company $a# Board to %rder Calling of ExtraordinaryGeneral Meeting :


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f for any reason, it is impracticable to call a meeting of a company,other than an annual general meeting, or to hold or conduct themeeting of the company, the !ompany Baw *oard may, either i: on itsown motion, or ii: on the application of any director of the company, orof any member of the company, who would be entitled to vote at themeeting, order a meeting to be called and conducted as the !ompany

Baw *oard thinks 2t, and may also give such other ancillary andconse0uential directions as it thinks 2t e)pedient. A meeting so calledand conducted shall be deemed to be a meeting of the company dulycalled and conducted.

"rocedure for Application under Section &'( :An application by a director or a member of a company for this purposeis re0uired to be made to the 5egional *ench of the !ompany Baw*oard before whom the petition is to be made in &orm No " speci2ed inAnne)ure to the !B* 5egulations with a fee of 5s'77. The petitionmust be accompanied with the following documents

a. =vidence in proof of status of the applicant.

b. A6davit verifying the petition.

c. *ank draft evidencing payment of application fee.

d. emorandum of appearance with copy of the *oard s resolutionor e)ecuted vakalat nama, as the case may be.

). Class Meeting!lass meetings are meetings which are held by holders of a particularclass of shares, e.g., preference shareholders. 1uch meetings arenormally called when it is proposed to vary the rights of that particularclass of shares. At such meetings, these members dicuss the pros andcons of the proposal and vote accordingly. 91ee provisions on variationsof shareholder/s rights:. !lass meetings are held to pass resolutionwhich will bind only the members of the class concerned, and onlymembers of that class can attend and vote.

Fnless the articles of the company or a contract binding on the personsconcerned otherwise provides, all provisions pertaining to calling of ageneral meeting and its conduct apply to class meetings in like manneras they apply with respect to general meetings of the company.

. Meetings of t*e Board of )irectors

eeting of the *oard of Directors

eeting of a !ommittee of the *oard

. %t*er MeetingsA. Meeting of debenture *oldersA company issuing debentures may provide for the holding of meetings of thedebentureholders. At such meetings, generally nmmatters pertaining to the variationin terms of security or to alteration of their rights are discussed. All mattersconnected with the holding, conduct and proceedings of the meetings of the


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debentureholders are normally speci2ed in the Debenture Trust Deed. The decisionsat the meeting made by the prescribed majority are valid and lawful and bindingupon the minority.

B. Meeting of creditors1ometimes, a company, either as a running concern or in the event of winding up,

has to make certain arrangements with its creditors. eetings of creditors may becalled for this purpose. =g F-s @#@, a company may enter into arrangements withcreditors with the sanction of the !ourt for reconstruction or any arrangement with itscreditors. The court, on application, may order the holding of a creditors s meeting. f the scheme of arrangement is agreed to by majority in number of holding debts tovalue of the three fourth of the total value of the debts, the court may sanction thescheme. A certi2ed copy of the court s order is then 2led with the 5egistrar and it isbinding on all the creditors and the company only after it is 2led with 5egistrar.

1imilarly, in case of winding up of a company, a meeting of creditors and ofcontributories is held to ascertain the total amount due by the company and also toappoint a li0uidator to wind up the aGairs of the company.

e!uisites of a +alid Meetings The following conditions must be satis2ed for ameeting to be called a valid meeting +

". t must be properly convened. The persons calling the meeting must beauthorised to do so.

'. owever, an annual general meeting may be calledand held with a shorter notice, if it is consented to by all the members entitled tovote at the meeting. n respect of any other meeting, it may be called and held with ashorter notice, if at least members holding #$ percent of the total voting power of the!ompany consent to a shorter notice.

Notice of every meeting of company must be sent to all members entitled to attendand vote at the meeting. Notice of the A must be given to the statutory auditor ofthe company.

Accidental omission to give notice to, or the non receipt of notice by, any member orany other person on whom it should be given will not invalidate the proceedings ofthe meeting. The notice may be given to any member either personally or by sendingit by post to him at his registered address, or if there is none in ndia, to any address


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within ndia supplied by him for the purpose. Ehere notice is sent by post, service iseGected by properly addressing, pre paying and posting the notice. A notice may begiven to joint holders by giving it to the jointholder 2rst named in the register ofmembers. A notice of meeting may also be given by advertising the same in anewspaper circulating in the neighbourhood of the registered o6ce of the companyand it shall be deemed to be served on every member who has to registered address

in ndia for the giving of notices to him.

A notice calling a meeting must state the place, day and hour of the meeting andmust contain the agenda of the meeting. f the meeting is a statutory or annualgeneral meeting, notice must describe it as such. Ehere any items of specialbusiness are to be transacted at the meeting, an e)planatory statement setting outall materials facts concerning each item of the special business including the concernor interest, if any, therein of every director and manager, is any, must be anne)ed tothe notice. f it is intended to propose any resolution as a special resolution, suchintention should be speci2ed.

A notice convening an A must be accompanied by the annual accounts of thecompany, the director/s report and the auditor/s report. The copies of these

documents could, however, be sent less than '" days before of the date of themeeting if agreed to by all members entitled to vote at the meeting.

"roxyn case of a company having a share capital and in the case of any other company, if

the articles so authorise, any member of a company entitled to attend and vote at ameeting of the company shall be entitled to appoint another person 9whether amember or not: as his pro)y to attend and vote instead of himself. =very noticecalling a meeting of the company must contain a statement that a member entitledto attend and vote is entitled to appoint one pro)y in the case of a private companyand one or more pro)ies in the case of a public company and that the pro)y need notbe member of the company.

A member may appoint another person to attend and vote at a meeting on his behalf.1uch other person is known as 4owever, anyprovision in the articles which re0uires a period longer than forty eight hours beforethe meeting for depositing with the company any pro)y form appointing a pro)y,shall have the eGect as if a period of 8? hours had been speci2ed in such provision.

A company cannot issue an invitation at its e)pense asking any member to appoint aparticular person as pro)y. f the company does so, every o6cer in default shall beliable to 2ne up to 5s",777. *ut if a pro)y form is sent at the re0uest of a member,the o6cer shall not be liable. =very member entitled to vote at a meeting of thecompany, during the period beginning '8 hours before the date 2)ed for the meetingand ending with the conclusion of the meeting may inspect pro)y forms at any timeduring business hours by giving @ days notice to the company of his intention to doso.


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The pro)y form must be in writing and be signed by the member or his authorisedattorney duly authorised in writing or if the appointer is a company, the pro)y formmust be under its seal or be signed by an o6cer or an attorney duly authorised by it.

The pro)y can be revoked by the member at any time, and is automatically revokedby the death or insolvency of the member. The member may revoke the pro)y by

voting himself before the pro)y has voted, but once the pro)y has e)ercised the vote,the member cannot retract his vote. Ehere two pro)y forms by the same shareholderare lodged in respect of the same votes, the last pro)y form will be treated as thecorrect pro)y form.

A pro)y is not entitled to vote e)cept on a poll. Therefore, a pro)y cannot vote onshow of hands.

-uorumHuorum refers to the minimum number of members who must be present at ameeting in order to constitute a valid meeting. A meeting without the minimum0uorum is invalid and decisions taken at such a meeting are not binding. The articlesof a company may provide for a 0uorum without which a meeting will be construed tobe invalid. Fnless the articles of a company provide for larger 0uorum, $ memberspersonally present 9not by pro)y: in the case of a public company and ' members

personally present 9not by pro)y: in the case of a private company shall be the0uorum for a general meeting of a company.

t has been held by !ourts that unless the articles otherwise provide, a 0uorum needto be present only when the meeting commenced, and it was immaterial that therewas no 0uorum at the time when the vote was taken. &urther, unless the articlesotherwise provide, if within half an hour from the time appointed for holding ameeting of the company, a 0uorum is not present in the person, the meeting +

a. if called upon the re0uisition of members, shall stand dissolvedCb. in any other case, it shall stand adjourned to the same day in the ne)t week,at the same time and place, or to such other day and time as the *oard ofDirectors may determine.

f at the adjourned meeting also, the 0uorum is not present within half an hour fromthe time appointed for holding the meeting, the members present shall a 0uorum.

n case the !ompany Baw *oard calls or directs the calling of a meeting of thecompany, when default is made in holding an annual general meeting, thegovernment may give directions regarding the 0uorum including a direction that evenone member of the company present in person, or by pro)y shall be deemed toconstitute a meeting. 1imilarly the !ompany Baw *oard may, direct a meeting of the

company 9other than an annual general meeting: to be called and held where for anyreason it is impracticable to call a meeting and direct that even one member presentin person or by pro)y shall be deemed to constitute a meeting.

C*airman The chairman is the head of the meeting. enerally, the chairman of the *oard ofDirectors is the !hairman of the meeting. Fnless the articles otherwise provide, themembers present in person at the meeting elect one of themselves to be thechairman thereof on a show of the hands. f there is no !hairman or he is not present


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within "$ minutes after the appointed time of the meeting or is unwilling to act aschairman of the meeting, the directors present may elect one among themselves tobe the chairman of the meeting. f, however no director is willing to act as chairmanor if no director is present within "$ minutes after the appointed time of the meeting,the members present should choose one among themselves to be chairman of themeeting. f, after the election of a chairman on a show of hands, poll is demanded

and taken and a diGerent person is elected as chairman, then that person will be thechairman for the rest of the meeting.

)uties of t*e c*airmanEithout a chairman, a meeting is incomplete. The chairman is the regulator of themeeting. >is duties include the following +

". >e must ensure that the meeting is properly convened and constituted i.e.that proper notice has been given, that the re0uired 0uorum is present, etc.

'. >e must ensure that the provisions of the act and the articles in regard to themeeting and its procedures are observed.

@. >e must ensure that business is taken in the order set out in agenda and nobusiness which is not mentioned in the agenda is taken up unless agreed toby the members.

8. >e must impartially regulate the proceedings of the meeting and maintaindiscipline at the meeting.

$. >e may e)ercise his powers of adjournment of the meeting, should he in goodfaith feel that such a step is necessary. The chairman has the power toadjourn the meeting in case of indiscipline at the meeting. A chairmanhowever does not have the power to stop or adjourn the meeting at his ownwill and pleasure. f he adjourns the meeting prematurely, the memberspresent may decide to continue the meeting and elect another chairman andproceed with the business for which it was convened.

%. >e must e)ercise his power to order a poll correctly and must order it to betaken when demanded properly.

;. >e must e)ercise his casting vote bona2de in the interest of the company.

+oting and )emand for "ollenerally, initially matters are decided at a general meeting by a show of hands. f

the majority of the hands raise their hands in favour of a particular resolution, thenunless a poll is demanded, it is taken as passed. Voting by a show of hands operateson the principle of 4(ne ember (ne Vote4. >owever, since the fundamental votingprinciple in a company is 4(ne 1hare (ne Vote4, if a poll is demanded, voting takes

place by a poll. *efore or on declaration of the result of the voting on any resolutionon a show of hands, the chairman may order suo motu 9of his own motion: that a pollbe taken. >owever, when a demand for poll is made, he must order the poll be taken.

The chairman may order a poll when a resolution proposed by the *oard is lost on theshow of hands or if he is of the opinion that the decision taken on the show of handsis likely to be reversed by poll. Ehen a poll is taken, The decision arrived by poll is2nal and the decision on the show of hands has no eGect.


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A poll is allowed only if the prescribed number of members demand a poll. A pollmust be ordered by the chairman if it is demanded+

a. in the case of a public company having a share capital, by anymember or members present in

a. person or by pro)y and holding shares in the company

i. which confer a power to vote on the resolutionnot being less than one tenth of the total votingpower in respect of the resolution, or

ii. on which an aggregate sum of not less than 2ftythousand rupees has been paid up.

b. in the case of a private company having a share capital, by onemember having the right to vote on the resolution and presentin person or by pro)y if not more than seven such members are

personally present, and by two such members present in personor by pro)y, if more than seven such members are personallypresent.

c. in the case of any other, by any member or members present inperson or by pro)y and having not less than one tenth of thetotal voting power in respect of the resolution.

Motionotion means a proposal to be discussed at a meeting by the members. A resolution

may be passed accepting the motion, with or without modi2cations or a motion maybe entirely rejected. A motion, on being passed as a resolution becomes a decision. Amotion must be in writing and signed by the mover and put to the vote of themeeting by the chairman. (nly those motions which are mentioned in the agenda tothe meeting can be discussed at the meeting. >owever, motions incidental orancillary to the matter under discussion may be moved and passed. enerally, amotion is proposed by one member and seconded by another member.

AmendmentAmendment means any modi2cation to a motion before it is put to vote for adoption.Amendment may be proposed by any member who has not already spoken on themain motion or has not previously moved an amendment thereto. There can be anamendment to an amendment motion also. A motion must be in writing and signedby the mover and put to the vote of the meeting by the chairman. An amendmentmust not raise any 0uestion already decided upon at the same meeting and must berelevant to the main motion which it seeks to amend. The chairman has thediscretion to accept or reject an amendment on various grounds such asinconsistency, redundancy, irrelevance, etc. f the amendment is adopted on a voteby the members, it is incorporated in the body of the main motion. The alteredmotion is then discussed and put to vote and if passed, becomes a resolution.

Kinds of esolutions5esolutions mean decisions taken at a meeting. A motion, with or withoutamendments is put to vote at a meeting. (nce the motion is passed, it becomes a


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resolution. A valid resolution can be passed at a properly convened meeting with there0uired 0uorum. There are broadly three types of resolutions +

&. %rdinary esolution :An ordinary resolution is one which can be passed by a simple majority.

.e. if the votes 9including the casting vote, if any, of the chairman:, at

a general meeting cast by members entitled to vote in its favour aremore than votes cast against it. Voting may be by way of a show ofhands or by a poll provided '" days notice has been given for themeeting.

. Special esolution :A special resolution is one in regard to which is passed by a ;$ 3majority only i.e. the number of votes cast in favour of the resolution isat least three times the number of votes cast against it, either by ashow of hands or on a poll in person or by pro)y. The intention topropose a resolution as a special resolution must be speci2callymentioned in the notice of the general meeting. 1pecial resolutions areneeded to decide on important matters of the company. =)amples

where special resolutions are re0uired are +

a. To alter the domicile clause of the memorandum from one 1tateto another or to alter the objects clause of the memorandum.

b. To alter - change the name of the company with the approval ofthe central government

c. To alter the articles of association

d. To change the name of the company by omitting 4Bimited4 or4


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a. To appoint at an annual general meeting appointing an auditora person other than a retiring auditor.

b. To resolve at an annual general meeting that a retiring auditorshall not be reappointed.

c. To remove a director before the e)piry of his period of o6ce.

d. To appoint another director in place of removed director.

e. Ehere the articles of a company provide for the giving of aspecial notice for a resolution, in respect of any speci2ed matteror matters.

owever, there are provisions in the !ompanies Act which enable membersto introduce motions at a meeting and give prior notice of their intention to do so toall other members of the company. f members having one twentieth of the totalvoting rights of all members having the right to vote on a resolution or if "77members having the right to vote and holding paid up capital of 5s",77,777 or more,re0uire the company to do so, the company must +

". ive to the members entitled to receive notice of the ne)t annual generalmeeting, notice of any resolution which may be properly moved and isintended to be moved at that meetingC and

'. !irculate to members entitled to have notice of any general meeting sent to

them, any statement of not more than ",777 words with respect to the matterreferred to in any proposed resolution, or any business to be dealt with at thatmeeting.

The e)penses for this purpose must be borne by the re0uisitionists and must betendered to the company. The re0uisition, signed by all the re0uisitionists, must bedeposited at the registered o6ce of the company at least % weeks before themeeting in the case of resolution and not less than ' weeks before the meeting incase of any other re0uisition together with a reasonable sum to meet the e)penses.>owever, where a copy of the re0uisition re0uiring notice of resolution has beendeposited at the registered o6ce of the company and an annual general meeting iscalled for a date si) weeks or less after the re0uisition is deposited, the copy thoughnot deposited within the prescribed time is deemed to have been properly deposited.

The company is re0uired to serve the notice of resolution and-or the statement to themembers as far as possible in the manner and so far as practicable at the same timeas the notice of the meeting C otherwise as soon as practicable thereafter.

>owever, a company need not circulate a statement if the !ourt, on the applicationeither of the company or any other aggrieved person, is satis2ed that the rights soconferred are being abused to secure needless publicity or for defamatory purposes.


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1econdly a banking company need not circulate such statement, if in the opinion ofits *oard of directors, the circulation will injure the interest of the company.

egistration of esolutions and AgreementsA copy of each of the following resolutions along with the e)plantory statement incase of a special business and agreements must, within @7 days after the passing or

making thereof, be printed or typewritten and duly certi2ed under the signature of ano6cer of the company and 2led with the 5egistrar of !ompanies who shall record thesame +

". All special resolutions'. All resolutions which have been unanimously agreed to by all the members

but which, if not so agreed, would not have been eGective unless passed asspecial resolutions

@. All resolutions of the board of directors of a company or agreement e)ecutedby a company, relating to the appointment, re appointment or renewal of theappointment, or variation of the terms of appointment, of a managing director

8. All resolutions or agreements which have been agreed to by all members ofany class of members but which, if not so agreed, would not have beeneGective unless passed by a particular majority or in a particular manner andall resolutions or agreements which eGectively bind all members of any classof shareholders though not agreed to by all of those members

$. All resolutions passed by a company conferring power upon its directors to sellor dispose of the whole or any part of the company s undertakingC or toborrow money beyond the limit of the paid up share capital and free reservesof the companyC or to contribute to charities beyond 5s$7777 or $ per cent ofthe average net pro2ts

%. All resolutions approving the appointment of sole selling agents of thecompany

;. All copies of the terms and conditions of appointment of a sole selling agent orsole buying or purchasing agent

?. 5esolutions for voluntary winding up of a company

Ad1ournmentAdjournment means suspending the proceedings of a meeting for the time being sothat the meeting may be continued at a later date and time 2)ed in that meetingitself at the time of such adjournment or to decided later on. (nly the business not2nished at the original meeting can be transacted at the adjourned meeting.

The majority of members at a meeting may move an adjournment motion at ameeting. f the chairman adjourns the meeting, ignoring the views of the majority,the remaining members can continue the meeting. The chairman cannot adjourn themeeting at his own discretion without there being a good cause for such anadjournment. Ehere the chairman, acting bona 2de within his powers, adjourns themeeting as per the view of the majority, the minority members cannot to continuewith such meeting and, if they do the proceedings there will be null and void.


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An adjourned meeting is merely the continuation of the original meeting andtherefore, a fresh notice is not necessary, if the time, date and place for holding theadjourned meeting are decided and declared at the time of adjourning it. f a meetingis adjourned without stipulation as to when it will be continued, fresh notice of theadjourned meeting must be given.

"ostponement


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discretion of the !hairman with regard to the inclusion or e)clusion of any matter isabsolute and unfettered.

Ehere minutes of the proceedings of any meeting have been kept properly, they are,unless the contrary is proved, presumed to be correct, and are valid evidence thatthe meeting was duly called and held, and all proceedings thereat have actually

taken place, and in particular, all appointments of directors or li0uidators made at themeeting shall be deemed to be valid.

The minute books of the proceedings of general meetings must be kept theregistered o6ce of the company. Any member has a right to inspect, free of costduring business hours at the registered o6ce of the company, the minutes bookscontaining the proceedings of the general meetings of the company. &urther, anymember shall be entitled to be furnished, within ; days after he has made a re0uestto the company, with a copy of any minutes on payment of 5upee (ne for everyhundred words or fraction thereof. f any inspection is refused or copy not furnishedwithin the time speci2ed, every o6cer in default shall be punishable with 2ne up to5s. $77 for each oGence. The !ompany Baw *oard may also by order compel animmediate inspection or furnishing of a copy forthwith. *ut the minutes books of the

board meetings are not open for inspection of members

Minimum number of directors=very public company 9 other than a deemed public company : must have at leastthree directors. =very other company must have at least two directors.

The directors of a company collectively are referred to as the 4*oard of directors4 or4*oard4. (nly individuals can be appointed as directors. No body corporate,association or 2rm can be appointed director of a !ompany.

n case the 2rst directors are not appointed by the promoters of a company,subscribers of the memorandum who are individuals, shall be deemed to be thedirectors of the company, until the directors are duly appointed.

Appointment of directors and proportion of t*ose #*o are to be retire byrotationFnless that articles provide for the retirement of all directors at every annual generalmeeting, at least two thirds of the total number of directors of a public company, orof a private company which is subsidiary of a public company, must +

9a: retire by rotation

9b: be appointed by the company in general meeting, e)cept where otherwiseprovided by the !ompanies Act.

The remaining directors in the case of any such company, and the directors generallyin the case of a private company which is not a subsidiary of a public company, mustalso be appointed by the company in general meeting, unless otherwise provided inany regulations in the articles of the company.

Ascertainment of directors retiring by rotation and 2lling of 3acanciesAt every annual general meeting of a public company, or a private company which isa subsidiary of a public company, one third of the directors liable to retirement by


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rotation or if their number is not three or a multiple of three, then, the numbernearest to one third, shall retire from o6ce.

The directors to retire by rotation at every annual general meeting shall be those whohave been longest in o6ce since their last appointment, but as between persons whobecame directors on the same day, those who will have to retire is to be determined

by lot, unless otherwise agreed to among themselves.

At the annual general meeting at which a director retires as aforesaid the companymay 2ll up the vacancy by appointing the retiring director or some other personthereto. n other words, a retiring director is eligible for re appointment at the samemeeting.

f the place of the retiring director is not so 2lled up and the meeting has note)pressly resolved not to 2ll the vacancy, the meeting shall stand adjourned till thesame day in the ne)t week, at the same time and place, or if that day is a publicholiday, till the ne)t succeeding day which is not a public holiday, at the same timeand place.

f at the adjourned meeting also, the place of the retiring director is not 2lled up andthat meeting also has not e)pressly resolved not to 2ll the vacancy the retiringdirector shall be deemed to have been re appointed at the adjourned meeting, unless

i. a resolution for the re appointment of such director has been put to themeeting and lost

ii. the retiring director, has by a notice in writing addressed to the company orits *oard of directors, e)pressed his unwillingness to be so re appointed

iii. he is not 0uali2ed or is dis0uali2ed for appointment

iv. a resolution, whether special or ordinary, is re0uired for his appointment or reappointment in virtue of any provisions of this Act.

ig*t of persons ot*er t*an retiring directors to stand for directors*ipA person who is not a retiring director shall, subject to the provisions of this Act, beeligible for appointment to the o6ce of director at any general meeting, if he or somemember intending to propose him has, given notice in writing to the company at itsregistered o6ce of at least "8 days before the meeting, signifying his candidature forthe o6ce of director or the intention of such member to propose him as a candidatefor that o6ce along with a deposit of rupees 2ve hundred 9 refundable on successfulelection :.

The company must inform its members of such candidature by giving at least ; days

prior notice. 1uch notice may not be re0uired if the company advertises suchcandidature at least ; days before the meeting in at least ' newspapers circulating inthe place where the registered o6ce of the company is situated, one of which mustbe in =nglish and the other in the regional language.

This provision shall not apply to a private company, unless it is a subsidiary of apublic company.


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ig*t of company to increase or reduce t*e number of directorsA company, at a general meeting may, by ordinary resolution, increase or reduce thenumber of its directors within the limits 2)ed in that behalf by its articles.

4ncrease in number of directors to re!uire Go3ernment sanctionn the case of a public company, or a private company which is a subsidiary of a

public company, any increase in the number of its directors, beyond the ma)imumnumber of directors permitted by the Articles of the !ompany as 2rst registered, shallnot have any eGect unless approved by the !entral overnment and shall becomevoid if, and in so far as, it is disapproved by that overnment.

>owever, where such permissible ma)imum is "' or less, no approval of the !entralovernment is re0uired provided the increase does not increase the number of

directors beyond "'.

Additional directors The *oard of directors may appoint additional directors if such power is conferred onit by the articles of the company. 1uch additional directors shall hold o6ce only up tothe date of the ne)t annual general meeting of the company.

owever, appointment of more than one director through the sameresolution will be valid if it has been passed unanimously. A resolution moved incontravention of the aforesaid provision shall be void, whether or not objection wastaken at the time to its being so moved+


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Consent of candidate for directors*ip to be 2lled #it* egistrarA person shall not act as director of a company unless he has, by himself or by hisagent authorised in writing, signed and 2led with the 5egistrar, a consent in writingto act as such director within @7 days of his appointment. This provision shall notapply to a private company unless it is a subsidiary of a public company.

%ption to company to adopt proportional representation for t*eappointment of directorsf the articles of a company provide for the appointment of not less than two thirds of

the total number of the directors of a public company or of a private company whichis a subsidiary of a public company, according to the principle of proportional,

representation, whether by the single transferable vote or by a system of cumulativevoting or otherwise. 1uch appointments may be made once in every three years andinterim casual vacancies being 2lled by the *oard of Directors as !asual Vacancies.

This may enable minority shareholders to have a proportional representation on the*oard of Directors of the company.

estrictions on appointment or ad3ertisement of directorA person shall not be capable of being appointed director of a company by thearticles, unless before the registration of the articles, the publication of theprospectus, or the 2ling of the statement in lieu of prospectus, as the case may be ,he has, by himself or by his agent authorised in writing

9a: signed and 2led with the 5egistrar a consent in writing to act as such directorC and

9b: either C

i. signed the memorandum for shares not being less in number or valuethan that of his 0uali2cation shares, if any, or

ii. taken his 0uali2cation shares, if any, from the company and paid oragreed to pay for themC or

iii. signed and 2led with the 5egistrar and undertaking in writing to takefrom the company his 0uali2cation shares, if any, and pay for themC or

iv. made and 2led with the 5egistrar an a6davit to the eGect that shares,not being less in number or value than that of his 0uali2cation shares,if any, are registered in his name.

-uali2cation s*ares are the minimum number of shares a person must own, asprovided in the articles of the company, in order to 0ualify to become a director ofthe company. Huali2cation shares must be ac0uired by a director within ' months of

his appointment. The articles cannot re0uire a director to ac0uire 0uali2cation shareswithin a shorter period. The face value of the 0uali2cation shares cannot e)ceed 2vethousand rupees, or if the face value of one share is more than 2ve thousand rupees,then the 0uali2cation share will be one 0uali2cation share.

=very director, not being a technical director of a director appointed, by the !entralor a 1tate overnment, shall within two months after his appointment 2le with thecompany a declaration specifying the 0uali2cation shares held by him. f, after thee)piry of the said period of two months, any person acts as a director of the company


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when he does not hold the 0uali2cation shares, he shall be punishable with the 2newhich may e)tend to 2fty rupees for every day between such e)piry and the last dayon which he acted as a director.

The above provisions do not apply to

a. a company not having a share capitalC b. a private companyC

c. a company which was a private company before becoming a public companyCor

d. a prospectus issued by or on behalf of a company after the e)piry of one yearfrom the date on which the company was entitled to commence business.

Managing )irectorsanaging Director means a person who, by virtue of an agreement with the company

or of a resolution passed by the company in a general meeting or by its *oard ofdirectors or by virtue of its memorandum or articles of association, is entrusted withsubstantial powers of management which could not otherwise be e)ercisable by himand includes a director occupying the position of a managing director, by whatevername called. The power merely to do administrative acts of a routine nature, when soauthorised by the *oard such as the power to a6) the common seal of the companyon any document or to draw and endorse any che0ue on the account of the companyin any bank or to draw and endorse any negotiable instrument or to sign any sharecerti2cate or to direct registration of share transfers will not be deemed to beincluded within substantial powers of management. The managing director muste)ercise his powers subject to the superintendence, control and direction of the*oard.

Certain persons not to be appointed managing directorsNo company can, appoint or employ, or continue the appointment or employment of,any person as its managing or whole time director who

a. is an undischarged insolvent, or has at any time been adjudged an insolvent b. suspends, or has at any time suspended, payment to his creditors or makes,

or has at any time made, a composition with them

c. is, or has at any time been, convicted by a !ourt in ndia of an oGenceinvolving moral turpitude.

=very public company or a private company which is a subsidiary of a publiccompany, having a paid up share capital of 5s. $ crores or more must have amanaging director or wholetime director or manager.

Appointment of managing director or wholetime director or manager of a publiccompany or a private company which is a subsidiary of a public company re0uires theapproval of the !entral overnment unless the appointment is in accordance with theconditions speci2ed in 1chedule I of the !ompanies Act, "#$% and a returm in &orm'$ ! is 2led within @7 days of appointment.


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Application for approval must be made to the !entral overnment if &orm '$ A within#7 days of appointment. The !entral overnment shall grant its approval if it issatis2ed that +

a. the managing director or wholetime director or manager is in its opinion, a 2tand proper person

b. such appointment is not against public interest

c. the terms and conditions of the appointment are fair and reasonable.

The !entral overnment may grant approval for a period less that the period forwhich approval is sought.

n case the approval of the !entral overnment is refused, the appointed person shallvacate his o6ce on the date of communication of the decision of the !entral

overnment to the company and if he omits to do so, he shall be liable to a 2ne of5s. $77- for each day of default.

The !entral overnment, on information received by it or suo moto, is of the opinionthat such appointment made without approval of the !entral overnmentcontravenes the conditions given in 1chedule I , it may refer the matter to the!ompany Baw *oard for decision.

(n receipt of the order of the !ompany Baw *oard against the company,+

a. The company shall be liable to 2ne of upto 5s. $777- b. =very o6cer of the company in default shall be liable to a 2ne of 5s. "7777-

c. The appointment shall be deemed to have come to an end and the appointedperson shall in addition to being liable to pay a 2ne of 5s. "7777- , refund tothe company the entire amount of remuneration received by him from suchappointment.

,umber of companies of #*ic* one person may be appointed managingdirectorNo public company or private company which is a subsidiary of a public companycan, appoint or employ any person as managing director, of he is either themanaging director or the manager of any other company, e)cept as provided below.

A public company or a private company which is the subsidiary of a public companymay appoint or employ a person as its managing director, if he is the managingdirector or manager of one, and of not more than one, other company provided thatsuch appointment or employment is made or approved by a unanimous resolutionpassed at a meeting of the *oard and of which meeting, and of the resolution to bemoved thereat, speci2c notice has been given to all the directors then in ndia.

n addition to the above provision, the !entral overnment may, by order, permit anyperson to be appointed as a managing direct of more than two companies if the!entral overnment is satis2ed that it is necessary that the companies should, fortheir proper working, function as a single unit and have a common managing director.


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Managing director not to be appointed for more t*an 23e years at a timeNo company can, appoint or employ any individual as its managing director for aterm e)ceeding 2ve years at a time.

>owever, a person may be re appointed, re employed, or his term of o6ce e)tendedby further periods not e)ceeding 2ve years on each occasion. 1uch re appointment,

re employment or e)tension cannot be sanctioned earlier than two years from thedate on which it is to come into force.

This provision does not apply to a private company unless it is a subsidiary of a publiccompany.

)is!uali2cations of directorsA person shall not be capable of being appointed director of a company, if,

a. he has been found to be of unsound mind by a !ourt of competent jurisdictionand the 2nding is in force

b. he is an undischarged insolvent

c. he has applied to be adjudicated as an insolvent and his application is pending

d. he has been convicted by a !ourt of any oGence involving moral turpitude andsentenced in respect thereof to imprisonment for not less than si) months,and a period of 2ve years has not elapsed from the date of e)piry of thesentence

e. he has not paid any call in respect of shares of the company held by him,whether alone or jointly with others, and si) months have elapsed from thelast day 2)ed for the payment of the call

f. an order dis0ualifying him for appointment as director has been passed by acourt and is in force unless the leave of the court has been obtained for hisappointment in pursuance of that section.

The !entral overnment may, by noti2cation in the (6cial aJette, remove +

i. the dis0uali2cation incurred by any person in virtue of clause 9d: eithergenerally or in relation to any company or companies speci2ed in thenoti2cationC or

ii. the dis0uali2cation incurred by any person in virtue of clause 9e:

A private company which is not a subsidiary of a public company may, by its articles,

provide that a person shall be dis0uali2ed for appointment as a director on anygrounds in addition to those speci2ed above.

,o person to be a director of more t*an t#enty companiesNo person shall, hold o6ce at the same time as director in more than twentycompanies.

Ehere a person already holding the o6ce of director in twenty companies isappointed, as a director of any other company, the appointment +


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a. shall not take eGect unless such person has, within 2fteen days thereof,eGectively vacated his o6ce as director in any of the companies in which hewas already a directorC and

b. shall become void immediately on the e)piry of the 2fteen days if he has not,before such e)piry eGectively vacated his o6ce as director in any of the othercompanies aforesaid.

Ehere a person already holding the o6ce of director in nineteen companies or less isappointed, as a director of other companies, making the total number of hisdirectorships more than twenty, he shall choose the directorships which he wishes tocontinue to hold or to accept so however that the total number of the directorships,old and new, held by him shall not e)ceed twenty.

None of the new appointments of director shall take eGect until such choice, is madeCand all the new appointments shall become void if the choice is not made within2fteen days of the day on which the last of them was made.

n calculating the number of companies of which a person may be a director, thefollowing companies shall be e)cluded +

a. a private company which is neither a subsidiary nor a holding company of apublic company

b. an unlimited company

c. an association not carrying on business for pro2t or which prohibits thepayment of dividend

d. a company in which such person is only an alternate director, that is to say, adirector who is only 0uali2ed to act as such during the absence or incapacityof some other director.

Any person who holds o6ce, or acts, as a director of more than twenty companies incontravention of the foregoing provisions shall be punishable with 2ne which maye)tend to 2ve thousand rupees in respect of each of those companies after the 2rsttwenty.

+acation of o6ce by directors The o6ce of a director shall become vacant if +

a. he fails to obtain within the time speci2ed 9 ' months : or at any timethereafter ceases to hold, the share 0uali2cation, if any, re0uired of him bythe articles of the company

b.he is found to be of unsound mind by a !ourt of competent jurisdiction

c. he applies to be adjudicated an insolvent

d. he is adjudged an insolvent

e. he is convicted by a !ourt of any oGence involving moral turpitude and issentenced in respect thereof to imprisonment for not less than si) months


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f. he fails to pay any call in respect of shares of the company held by him,whether alone or jointly with others, with in si) months from the last date2)ed for the payment of the call unless the !entral overnment has, bynoti2cation in the (6cial aJette removed such dis0uali2cation.

g. he absents himself from three consecutive meetings of the *oard of directors,or from all meetings of the *oard, for a continuous period of three months,whichever is longer, without obtaining leave of absence from the *oard

h. he, whether by himself or by any person for his bene2t or on his account orany 2rm in which he is a partner or any private company of which he is adirector, accepts a loan, or any guarantee or security for a loan, from thecompany in contravention of section '#$ 9 without due authoriJation of the!entral overnment :

i. he acts in contravention of section '## 9 failure to disclose interest in anytransaction with the company :

j. he becomes dis0uali2ed by an order of !ourt under section '7@

k. he is removed by the members by resolution at a general meeting

l. having been appointed a director by virtue of his holding any o6ce or otheremployment in the company, he ceases to hold such o6ce or otheremployment in the company.

The dis0uali2cation referred to in clauses 9d:. 9e: and 9j: shall not take eGect,

a. for thirty days from the date of the adjudication sentence or order

b. where any appeal or petition is preferred within the thirty days aforesaidagainst the adjudication, sentence or conviction resulting in the sentence, ororder until the e)piry of seven days from the date on which such appeal orpetition is disposed of

c. where within the seven days aforesaid, any further appeal or petition ispreferred in respect of the adjudication, sentence, conviction, or order, andthe appeal or petition, if allowed, would result in the removal of thedis0uali2cation, until such further appeal or petition is disposed of.

f a person functions as a director, knowing that his o6ce has vacated on account ofthe above provisions, shall be liable to a 2ne upto 5s. $77- per day of default.

A private company which is not a subsidiary of a public company may, by its articles,provide, that the o6ce of director shall be vacated on any grounds in addition tothose speci2ed in above

emo3al of directorsA company may, by ordinary resolution, remove a director 9not being a directorappointed by the !entral overnment in pursuance of section 87?: before the e)piryof his period of o6ce. This provision shall not apply where the company has availeditself of the option given to it of proportional representation on the *oard of Directors


25/26

to appoint not less than two thirds of the total number of directors according to theprinciple of proportional representation.

1pecial notice shall be re0uired of any resolution to remove a director, or to appointsomebody instead of a director so removed at the meeting at which he is removed.

(n receipt of notice of a resolution to remove a director under this section, thecompany shall forthwith send a copy thereof to the director concerned, and thedirector 9whether or not he is a member of the company: shall be entitled to be heardon the resolution at the meeting.

Ehere notice is given of a resolution to remove a director and the director concernedmakes representations in writing to the company 9not e)ceeding a reasonable length:and re0uests their noti2cation to members of the company, the company shall,unless the representations are received by it too late for it to do so +

a. in any notice of the resolution given to members of the company state thefact of the representations having been madeC and

b. send a copy of the representations to every member of the company to whomnotice of the meeting is sent

f a copy of the representations is not sent as aforesaid because they were receivedtoo late or because of the company s default, the director may 9without prejudice tohis right to be heard orally: re0uire that the representations shall be read out at themeeting.

>owever, copies of the representations need not be sent out and the representationsneed not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the !ompany Baw *oard is satis2edthat the rights conferred by this provision are being abused to secure needlesspublicity for defamatory matter and the !ompany Baw *oard may order the

company s costs on the application to be paid in whole or in part by the director.

A vacancy created by the removal of a director if he had been appointed by thecompany in general meeting or by the board in on a casual vacancy, be 2lled by theappointment of another director in his stead by the meeting at which he is removed,provided special notice of the intended appointment has been given.

A director so appointed shall hold o6ce until the date up to which his predecessorwould have held o6ce if he had not been removed as aforesaid.

f the vacancy is not 2lled, it may be 2lled as a causal vacancy in accordance with theprovisions.

The above provisions of removal of a director shall not aGect +

a. any compensation or damages payable to him in respect of the termination ofhis appointment as director or of any appointment terminating with that asdirector

b. any other power to remove a director which may e)ist apart from thisprovision.


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Documents

A Company Meeting