Meeting : Coming together of certain minimum number of people for transacting the business included in the agenda. Meetings of shareholders a) Statutory meeting b) Annual general meeting c) Extraordinary general meeting d) Class meetings Meetings of Directors and committees Meetings of creditors and debenture holders
Time of meeting: First meeting of members of a company after its incorporation Company limited by shares, or limited by guarantee and having a share capital are required to hold a statutory meeting. Meeting must be held within a period of 1-6 months from the date company is entitled to commence business.
Purpose of statutory meeting Acquaint shareholders about the success of company including its financial position and prospects.Legal provisions about statutory meetings1. Notice and Report The board of directors is required to send a notice of statutory meeting along with the statutory report at least 21 days before the meeting.2. Filing of statutory report with Registrar when notice if meeting is dispatched.3. List of members must be kept at meeting for inspection.4. Statutory Report5. Procedure at the meeting
Consequences of default of statutory meeting Punishment with fine up to Rs. 5000 for every Director and officer-in-default.Annual General Meeting – Section 166 Held every calendar year Objective is to inform members about the progress of the company.
1. The first AGM Must be held once in each calendar year. First meeting must be held within 18 months of incorporation of the company. The first AGM must be held not later than 9 months from the date of close of financial year.2. Subsequent annual general meeting Must be held within 6 months of the close of financial year Interval between 2 meetings must not exceed 15 months. Though it may be extended to 18 months by the Registrar.
3. Time and place of the meeting Held at registered office at the company or at some other place in the same city, town or village in which the registered office of the company is located. Must be held during business hours on a day which is not a public holiday.AGM can be held on a public holiday if: Public holiday is declared after issue of notice of meeting. If the meeting is adjourned due to lack of attendance, it has to be held on the same day in the next week at the same time irrespective of it being a public holiday.
4. Proper Authority The board of Directors is the proper authority to convene an AGM.5. Notice A notice of minimum 21 clear days needs to be given in writing.6. Business transacted at the AGM Ordinary Business: According to Section 173, AGM is held to transact : a. Consideration of annual accounts, balance sheets and reports of the board of directors and auditors. b. Declaration of dividends c. Appointment of directors in place of those retiring. d. Appointment and fixation of remuneration of auditors.
Special Business: Any business other than ordinary business conducted at the AGM is deemed to be special business. For any special business to be transacted, the notice of the meeting shall contain a statement of the facts including the nature and extent of interest of every director and manager. For any meeting other than AGM, all business is deemed to be special business.
Central Government holds power to direct the holding of AGM Penalty till Rs. 50,000 & Rs. 2,500 per day after the first day of continuing default
Meetings may be called:• By the board of directors• By the directors on Requisition• By the Requisitionists themselves• By the tribunal
Proper Authority Proper Notice – Notice to Whom? Contents of the notice Business at the AGM – Ordinary/Special Length of Notice Mode of Notice No Notice of adjourned meeting Notice of the right of a member to appoint proxy
Proper Quorum Time for the quorum to be present Cases where a single person shall be the quorum Chairman of the meeting Proxies Voting By show of hands By poll
Who can demand poll? In case of public company having a share capital In the case of private company having a share capital In the case of any other company Time for Taking Poll Manner of Poll Voting on shares held in trust
Resolutions Ordinary Resolution – Passed by majority of share holders entitled to vote in person or proxy Special Resolution – Is necessary in case of important matters affecting the constitution, administration and other affairs of the company Resolution Requiring Special Notice – Type of ordinary resolution where the proposer has to give 14 days special notice before the meeting Resolution by Postal Ballot – To ensure widest participation of share holders in key decisions of the company
The request can be made by Members holding not less than 1/20th of total voting power of all the members entitled to vote Not less than 100 member and holding paid up capital of at least 1 lakh rupeesRequisition to be deposited at the registered office At least 6 weeks before the meeting in case of a requisition requiring notice of resolution At least two weeks before the meeting in case of any other resolution
Minutes Written record of proceedings, business transacted & decisions taken at company meetings.Minutes Book Entries of proceedings to be made here Separate Minutes Book for shareholders meetings & Board of Directors meetings. To be kept open to inspection by members for at least 2 hours daily free of charge.
Meetings of Directors Meetings of creditors otherwise than in winding up in accordance with the provisions of Section 391 to 393 Meetings of debenture holder
Who is a director? A person who has control over the direction, governance, policies or superintendence of affairs of a company Number of directors Public company-At least three Private company- Minimum two
Directors as trusteeManage company assets and property and power vested in them Directors as agentsNot liable for contracts made in the name/behalf of company if within scope of authority Directors as managing partnersManage company for themselves as well as benefit for others
Directors as employees Hold office of profit or salaried employmentCan be whole time or part-time employment Directors as officers Treated as officers Liable to certain penalties for failing to comply with provisions of the company act
Appointment by articles Appointment by the company act Appointment by the Board Appointment by third party Appointment by the central government Appointment by proportional representation Appointment by small shareholders Appointment of special director by the tribunal in case of sick industrial companies
A board set up by every public company with paid up capital of five crore and above Consist of at least three directorsOther provisions Composition shall be disclosed in the annual report of the company
By shareholders By the central government By the tribunal
Share qualification Hold at least one share in the company Shares may be held as trustee, or jointly, or gifted Statutory restrictions on the appointment of a director Sign and filed with registrar his consent in writing to act as director Sign the memorandum for his qualification share
The following persons are disqualified from the appointment: A person of unsound mind An undischarged insolvent A person convicted by the court of law A person who failed to pay calls on his share A director of a public company who has not filed annual accounts and returns for three years
A director will be liable to vacate his office in the following circumstances: If he fails to obtain the qualification share within two months Adjudged to be of an unsound mind Adjudged an insolvent Convicted by the court of law Absent for three consecutive board meeting or from all board meeting for three months Fail to disclose his interest in a contract Disqualified by an order of court for fraudulent conduct
No provision in the company act relating to resignation May resign any time by giving a reasonable notice Resignation should be given in writing Resignation cannot be revoked Company file necessary return of change in the board within 30 days
General powers of the board: Entitled to exercise all powers and acts the company is authorized to do Powers of the board are co extensive Limitations Cannot exercise power to be exercised by the shareholders in the general meeting Must exercise power in consonance with the provision of the Act, Memorandum and Articles
Make calls on shareholders To issue debentures To borrow money otherwise than on debentures To invest in the funds To make loans to authorized to buy back the share Recommend the rate of dividends Filling the causal vacancies Making of political contribution
Powers executed only with the consent of the shareholders To sell, lease or dispose the undertaking of the company To remit or repay the debt due to the company by a director To invest the amount of compensation received by the company on compulsory acquisition To borrow money in excess of aggregated paid up capital and free reserves
Restrictions on political contribution Restriction on appointment of sole-selling agents Restriction on contracts in which directors are interested Restriction on loans to director Prohibition of assignment of office Prohibition of appointment to office of profit
Number of board meeting Notice Agenda Quorum Resolution by circulation Procedure of conducting the business at board meeting
Disclosure of interest by directors Effect of non-disclosure Interested director not to participate or vote in the board’s proceedings Register of contracts in which directors are interested Disclosure of directors in contracts appointing managers/managing directors
General duties Duties of good faith Duty of reasonable care Duty to attend board meeting duty not to delegate Duty to disclose interest
Statutory duties : duties imposed by the company act To deposit share application money in the scheduled bank until the receipt of certificate to commence business To call extraordinary general meeting on requisition of the members To lay before the AGM the balance sheet and P&L account To make a declaration of solvency in the case of members voluntary wind up To file return of allotment within 30 days To authenticate and approve financial statements To appoint cost auditor of the company
A. Civil liability • Liability to outsider When the contract in the directors name than the company When contract is outside scope of his authority Making irregular allotments of share Issue of prospectus containing untrue statement When the director found fraudulent • Liability to the company For ultra vires act For negligence For breach of trust For misfeasance For fraudulent conduct of business For breach of statutory duties
B. Criminal liability of the director Issue of prospectus containing untrue statement Failure to application money in a scheduled bank Failure to complete and deliver certificates of shares within 3 months Failure to maintain register of charges Failure to file annual return within 60 days Failure to hold annual general meeting
The following registers relating to directors shall be maintained by a company: Register of contracts and companies in which directors are interested Register of directors , managing directors etc Register of directors’ shareholdings
Remuneration payable to a) Managing director b) Whole-time director c) Manager May take form of a) Monthly payments b) Specified percentage of profit c) Way of sitting fee for each meeting of the board
Ceiling on sitting fees: A company cannot pay a sum exceeding Rs.20000 to a director attending the board meeting Remuneration shall not exceed 5% of annual profit for one such director and 10% percent for all of them Public or private company which is a subsidiary of a public company cannot increase the remuneration of its directors Any director drawing remuneration in excess of the limits prescribed shall hold the excess amount in trust and refund the same to the company
Items included in the net profit Bounties and subsidies Items excluded in net profits Premium on shares, profit on sale of forfeited shares , profit of capital Deductions to be made in net profit Directors remuneration Bonus or commission paid Excess profit tax and business tax Bad debts written off
A director who , by virtue of an agreement with the company or of a resolution passed by the company in a general meeting or by its board of directors is entrusted with substantial powers of management which would otherwise not be exercised by him and includes a director occupying the position of a managing director
By the virtue of: Agreement with the company Resolution of the general meeting of the company Board resolution Memorandum and articles of associationDisqualification for a managing director A person shall not be appointed, if he: Adjudged insolvent Suspended payment to his creditors Convicted by the court
A director who devotes his entire time and attention to the business of the company He cannot accept the office of whole time director in any other company Appointment requires sanction of shareholders by a special resolution A whole time director can be appointment along with managing director
An individual possessing the prescribed qualification and appointed to perform the duties which may be performed under the secretary act Features Only an individual can be appointed not a firm or body Should be a member of the institute of company secretaries of India Performs ministerial or administrative duties and is not entrusted with management of affairs of the company
Board of directors PromotersQualification Member of Institute of Company Secretaries of India Post graduate degree or diploma in management science granted by any university Degree in law granted by any university Post graduate degree in commerce or corporate secretary ship
No person can become a MD in more than two public or private companies which are subsidiaries of public company A person can be the MD for any number of private companies Maximum term of appointment cannot exceed 5 years A change in the provision relating to appointment cannot take place without the approval of the central government Remuneration does not exceed 5% of net profit
A. Statutory duties 1. Under the companies act To apply to central government for its approval to convert public company into private company To file statement-in-lieu of prospectus To file return of allotments To make resolutions and agreements with the registrar 2. Duties under other act 1. Under income tax act 2. Under stamp act 3. Under other act
B. General duties 1. Duties towards directors, managing directors, etc To do all the acts which director directs him To assist the chairman to convene Board and general meeting To advice directors and managing directors in complying with statutory duties 2. Duties towards shareholders and public Allotment and issue of certificate Handle correspondence between the company and shareholders Inspection of various books and registers
Portion of corporate profit which has been set aside and declared by the company as liable to be distributed among shareholders Right to dividend Every trading company should distribute its profit to shareholders Articles can regulate the manner of payment of dividend Rights to claim dividend can arise only after the dividend has been declared Once declared, the dividend becomes a debt and creates an enforceable obligation
Declaration of dividend at general meeting Sources of payment of dividend Meaning of ‘profits’ Charging of ‘depreciation’ and ‘losses’ to profit Transfer of specified percentage of profits to reserves Dividend to be paid in proportion to the paid up capital Redemption of irredeemable Cash payment of dividend
Dividend payment to whom Interim dividends Period of payment of dividend Dividend to reckon as a debt Once a dividend is declared at a general meeting,the company cannot declare a further dividend Transfer of unpaid dividend to unpaid dividend account Transfer of unpaid dividend to investor education & protection fund Payment of unpaid or unclaimed dividend
Dividend declared between two annual General Meeting Declared by the directors Should be declared only when the company has made substantial profit and there are equally good prospects It becomes legally enforceable debt against the company from the day it is declared
As rule, interest cannot be paid out of capitalSec 208 constitute an exception under following condition: Prior government sanction Before sanction payment, government enquires the matter Payment for a period fixed by the government The rate of interest shall not exceed 4%
Unpaid dividend accounts of companies Application moneys received by companies for allotment of any securities and due for refund Mature deposit with companies Mature debentures with companies Grants and donation given to the fund by the cental government Interest or other income received out of investment made from the fund