Business Law 2

Introduction
 A company is an artificial person created by law.
 A company means a group of persons associated (connected or
coupled) together for the attainment of a common end, social
or economic.
 Section 3(1)(i) of the Companies Act, 1956 defines a company
as: “a company formed and registered under this Act or an
existing Company”.
 ‘Existing Company’ means a company formed and registered
under any of the earlier Company Laws.

The Companies Act, 1956 is an act of Parliament that was enacted
in 1956
The Companies Act, 2013 was recently passed
by assent on 29th August 2013.
The Companies Act, 2013 was recently passed by Rajya Sabha on
8th August 2013 and has received Presidential assent on 29th
August 2013.
Companies Act, 1956 Companies Act, 2013

Definitions:
Professor Haney defined ….” A company is an artificial person
created by law”, having separate entity (unit , body) , with a
perpetual (continuous , long-lasting) succession and common
seal.”
Definition given by Judges. According to Justice (C.J) Marshall “A
company is an artificial person created by law, having separate
entity, with a perpetual succession and common seal.”

Characteristics of a Company
Voluntary Incorporated Association
Number of Members/Subscribers
Artificial Personality
Separate Legal Entity
Perpetual Succession
Common Seal
Limited Liability
Share Capital
A Company is not a Citizen
Transferability of Shares

Separation of Ownership and Management
Separate Property
Act within Intra Vires
Democratic Management
Governance by Majority
Statutory Obligations
Separate Name
Raising of Capital on a Large Scale
Shareholders are not the Agents of Company
May Assume Enemy Character
Characteristics of a Company

Voluntary Incorporated Association : For the formation of a company
;registration is compulsory under the Company Act otherwise it will
become illegal association of persons. It is voluntary and statutory
(legal) association; hence it is also called body corporate. It is formed by
consensus (agreement , harmony ).
Number of Members/Subscribers : For incorporation/registration of a
company, minimum seven persons in case of public company and two in
case of private are required. The maximum number of members in case
of private company may be 50 but for a public company, no limit of
members.
Artificial Personality : A company is an artificial, invisible and
intangible person, it exists in the eye of law. It is not natural person
because it has no physical body, no soul and no conscience.

Separate Legal Entity : That a company has distinct legal entity from its
members. It has its own legal existence independent of its members. It has its
own name, can sue and be sued by its members and even by outsiders. A
member can enter into contract with his company in the same manner as
other individuals.
Perpetual Succession : Company is created and wind up by law alone. It‟s
existence is ;not affected by the lunacy, retirement, death or lunacy of its
members. Man may come, man may go but company goes on for ever like
water of river may change but the river like the Ganga is still existing.

Common Seal : Company is an artificial person, hence cannot sign like a
natural person, thus the common seal which is engraved should be affixed on
any documents for authentication and legally binding on the company.
Limited Liability : In case of a company limited by shares, the liability of a
member is limited to the nominal value of the shares held by him. In case of
company limited by guarantee will be liable to pay the amount at the time of
winding up of the company.
Share Capital : Every company have to require share capital according to law
Section 3(1) of Indian Company – a public company is ;required to have a
minimum paid up capital of Rs.5 lakh and a private company must have Rs.
One lakh. But, in case of companies engaged in promotion of commerce (trade ,
business, sale,) art, science, religion, etc. need not require to have minimum
paid up capital.

Transferability of Shares : Section 82 of the companies Act, 1956, provides
that “the shares ;or other interest of any member shall be movable property,
transferable in a manner provided for in the articles of the company.
Separation of Ownership and Management : A company has a right to own
and transfer property since it is a legal entity. A shareholder has no
proprietary right in the property of the company but merely to their shares.
Therefore, the claims of the company's creditors will be against the company's
property and not that of the shareholders
A Company is not a Citizen : A company on incorporation assumes a legal
personality distinct from its members, but it cannot claim to be a citizen of a
country under the constitution of India or the citizenship Act, 1955. Hence, the
company cannot claim the fundamental rights guaranteed under the
constitution.

Separate Property : The property of the company is not the property of share
holders. It can acquire and keep it in its own name. No member has either
individually or jointly a right to the assets of a company during its life or on its
winding up. If all the shares be taken by one man, the man cannot insure the
property of a company because he does not have insurable interest.
Act within Intra Vires : A company cannot work beyond the scope of
memorandum of association. Acts made beyond the scope of memorandum
result into ultra vires.
Democratic Management : It is managed by the board of directors, elected by
the members of the company. Day to day decisions is taken by the concerned
Managers. The shareholders cannot take part in the decision process directly.
Governance by Majority : Company is managed by rule of majority decision is
taken by simple or special majority.

Statutory(legal) Obligations : A company is required to comply with various
statutory obligations regarding management. For instance, filling balance
sheets, maintaining proper accounts books, registers and filing annual return
and P & LA/CS duly audited are statutory obligations of a company.
Separate Name : Every company must have specific name which must be
registered. Once company's name is registered. It must be painted or affixed on
the outside of every officer or place of business.
Raising of Capital on a Large Scale : A company can raise the capital on the
large scale by selling its shares to the public at large.
Shareholders are not the Agents of Company : Shareholders have only invested
capital in the company but their entity is different from that for their company.
The company is not bound by its shareholders.

May Assume Enemy Character : Company exists in the eye of law as legal
person hence it cannot become a friend nor an enemy. A company may be
regarded as enemy company if the persons in control of its affairs are residents
in the enemy country or are acting in accordance with directions or instructions
of the enemy.

Types of companies
Registered under company act 1956
Incorporated liability Number
of
members
Control ownership
CHARTED
COMPANY
LIMITED
LIABILIT
Y
PRIVATE HOLDING GOVERN
AMENT
REGISTERE
D COMPANY
UNLIMIT
EDLIABIL
ITY
PUBLIC SUBSIDAR
Y
UN GOVT
STATUTORY
COMPANY

ON THE BASIS OF INCORPORATION
Statutory companies-
These are the companies which are created by a special Act of
the legislature e.g. RBI, SBI, LIC, etc. These are mostly
concerned with public utilities as railways , gas and
electricity companies and enterprises of national level
importance.
Registered companies-
These are the companies which are formed and registered
under the Companies Act,1956 .

Chartered Companies: The ‘Crown’ in the exercise of the royal
prerogative has power to create a corporation by the grant of a
charter to persons assenting to be incorporated. Such companies or
corporations are known as chartered companies

ON THE BASIS OF LIABILITY
1) Companies with limited liability:
LIMITED BY SHARES:
Where the liability of the members of a company is limited
to the amount unpaid on the shares ,it is known as company
limited by shares. If the shares are fully paid, the liability of the
members holding such shares is nil. It may be a public or a
private company.

LIMITED BY GUARANTEE:
Where the liability of the members of a company is limited to a fixed
amount which the members undertake to contribute to the assets
of a company in the event of its being wound up, the company is
called a company limited by guarantee.
These companies are not formed for the purpose of profit but for the
promotion of art, science, charity, sports or for some similar
purposes. They may or may not have a share capital.

Companies with unlimited liability
 Sec 12 specifically provides that any 7 or more persons may form
an incorporated company with or without limited liability. In such
case every member is liable for the debts of the company.
 An unlimited company may or may not have a share capital. If it
has a share capital, it may be a public company or a private
company. It must have its own Articles of Association.

ON THE BASIS OF NUMBER OF MEMBERS
PRIVATE COMPANY-
A company which has a minimum paid-up capital of Rs 1,00,000 or
such higher paid up capital as may be prescribed, and by its articles
a. Restricts the right to transfer its shares, if any
b. Limits the number of its members to 50.
c. Prohibits any invitation to the public to subscribe for any shares in,
or debentures of, the company,
d. Prohibits any invitation or acceptance of deposits from persons
other than its members, directors or their relatives.

PUBLIC COMPANY:
A public company means a company which-
(a) has a minimum paid-up capital of Rs. 5 lakh or such higher
paid-up capital, as may be prescribed;
(b) is a private company which is a subsidiary of a company which
is not a private company;
Every public company, existing on the commencement of the
Companies Act, 2000, with a paid-up capital of less than Rs. 5
lakh, within a period of two years from such commencement,
enhance its paid-up capital to Rs. 5 lakh.

ON THE BASIS OF CONTROL
Holding companies-
A company is known as the holding company of another company
if it has the control over that other company. A company is deemed
to be the holding company of another if, but only if, that other is its
subsidiary.
Subsidiary company-
A company is known as a subsidiary( SECONDARY) of another
company when control is exercised by the holding company over the
former called a subsidiary company.

S.No. Basis of Distinction Private company Public company
1 Minimum Capital It requires at least 1 lac
or more as paid up
capital.
Min. paid up capital
of Rs.5 lacs or more
as prescribed.
2 Membership In case of private company,
minimum at least two and
maximum 50 members are
required.
Min.7 and no limit of
maximum of persons.
3 Transfer of Shares Transfer of shares is
restricted by its articles and
its shares cannot be
transferred.
The shares of public
company are freely
transferable from one
person to another and
they can be quoted on
the stock exchanges. A
public company must
file a prospectus with
the registrar before
allotting shares.

4 Prospectus It is not needed to file a
prospectus or statement
in lieu of the prospectus.
public limited company must
file a prospectus with the
registrar before allotting
shares.
5 Statement in Lieu
of Prospectus
It need not be issued
before allotment of
shares.
In case of public company, if it
issues shares to its existing
members or directors or to
their relatives or friends it must
file a statement in lieu of
prospectus to the registrar
earlier to allotment of shares.
6 No. of Directors At least two directors are
required in case of private
company.
3 Directors are required in case
of Public Company.
7 Commencement
of Business
A private company can
commence its business
after obtaining certificate
of incorporation
Contrary to it, a public
company can start its own
business merely after obtaining
certificates of commencement
of business

Types and Forms of Business :A business entity is an organization
that uses economic resources or inputs to provide goods or services to
customers in exchange for money or other goods and services.
Business organizations come in different types and different forms of
ownership.
3 Types of Business
There are three major types of businesses:
1. Service Business
2. Merchandising Business
3. Manufacturing Business

1. Service Business
A service type of business provides intangible products (products with no
physical form). Service type firms offer professional skills, expertise,
advice, and other similar products.
Examples of service businesses are: salons, repair shops, schools, banks,
accounting firms, and law firms.
2. Merchandising Business
This type of business buys products at wholesale price and sells the same at retail
price. They are known as "buy and sell" businesses. They make profit by selling the
products at prices higher than their purchase costs.
A merchandising business sells a product without changing its form.
Examples are: grocery stores, convenience stores, distributors, and other resellers.

3. Manufacturing Business
Unlike a merchandising business, a manufacturing business buys products
with the intention of using them as materials in making a new product. Thus,
there is a transformation of the products purchased.
A manufacturing business combines raw materials, labor, and factory
overhead in its production process. The manufactured goods will then be
sold to customers.
Hybrid Business Hybrid businesses are companies that may be classified in more
than one type of business.
A restaurant, for example, combines ingredients in making a fine meal
(manufacturing), sells a cold bottle of wine (merchandising), and fills customer
orders (service).
Nonetheless, these companies may be classified according to their major business
interest. In that case, restaurants are more of the service type – they provide dining

Forms of Business Organization
These are the basic forms of business ownership:
1. Sole Proprietorship
2. Partnership
3. Corporation
4. Limited Liability Company
5. Cooperative
1. Sole Proprietorship
A sole proprietorship is a business owned by only one person. It is easy to set-up and
is the least costly among all forms of ownership.
The owner faces unlimited liability; meaning, the creditors of the business may go
after the personal assets of the owner if the business cannot pay them.
The sole proprietorship form is usually adopted by small business entities.

2. Partnership
A partnership is a business owned by two or more persons who contribute
resources into the entity. The partners divide the profits of the business
among themselves.
In general partnerships, all partners have unlimited liability. In limited
partnerships, creditors cannot go after the personal assets of the limited
partners.
3. Corporation
A corporation is a business organization that has a separate legal personality from its
owners. Ownership in a stock corporation is represented by shares of stock.
The owners (stockholders) enjoy limited liability but have limited involvement in
the company's operations. The board of directors, an elected group from the
stockholders, controls the activities of the corporation.

In addition to those basic forms of business ownership, these are some other types of
organizations that are common today:
Limited Liability Company
Limited liability companies (LLCs) in the USA, are hybrid forms of business that
have characteristics of both a corporation and a partnership. An LLC is not
incorporated; hence, it is not considered a corporation.
Nonetheless, the owners enjoy limited liability like in a corporation. An LLC may
elect to be taxed as a sole proprietorship, a partnership, or a corporation.
Cooperative
A cooperative is a business organization owned by a group of individuals and is
operated for their mutual benefit. The persons making up the group are called
members. Cooperatives may be incorporated or unincorporated.
Some examples of cooperatives are: water and electricity (utility) cooperatives,
cooperative banking, credit unions, and housing cooperatives.

Memorandum of Association
•It is the document which contains the rules regarding constitution and
activities or objects of the company.
•It is a fundamental charter(license ,bond , agreement) of the company.
•The company is governed by it.
•The company is allowed to work within the framework of it. By it outside
world knows the state of affairs.
•It defines the extent and powers of the company.
•If the acts of the company are beyond the limits of the MoA, such acts would
be void and ultra vires.
•Directors are personally liable to make good the Company’s loss if
company’s money is spent on an unauthorized object.

Contents of MoA [Sec.13]
Name of company with ‘Limited’ suffixed in case of public company and
‘Private Limited’ suffixed for a private company.
Registered office of the company.
Objects of the company.
Liability of the members.
Details of share capital of the company.
Subscription or Association clause.

DISTINCTION BETWEEN ARTICLES OF ASSOCIATION AND MEMORANDUM OF
ASSOCIATION
S.No Memorandum ofAssociation Articles of Association
1
It is character of company
indicating nature of business &
capital. It also defines the
company’s relationship with
outside world
They are the regulation for the
internal management of the
company and are subsidiary to
the memorandum
2
It defines the scope of the
activities of the company, or
the area beyond which the
actions of the company cannot
go.
2. They are the rules for
carrying out the objects of the
company as set out in the
Memorandum.
3
It, being the charter of the
company, is the supreme the
document.
They are subordinate to
Memorandum. If there is a
conflict between the Articles
and the Memorandum, the act

4
Any act of the company which is
ultra vires the Memorandum
which is wholly void and cannot
ratified even by the whole body of
shareholders
Any act of the
company which is ultra
vires the articles can
be confirmed by the
shareholders if it is
intra vires the
memorandum.
5
Every company must have its own
Memorandum
A company limited by
Shares need not have
Articles of its own. In
such A case, Table A
Applies.
6
There are strict restrictions on its
alteration. Some of the conditions
of incorporation contained in it
cannot be altered except with the
sanction of the Central
Government.
They can be altered by
a special resolution, to
any extent, provided
they do not conflict
with the Memorandum
and the Companies
Act.

MEMORANDUM OF ASSOCIATION
The formation of a public company involves preparation and filing of
several essential documents. Two of basic documents are :
1. Memorandum of Association
2. Articles of Association
The preparation of Memorandum of Association is the first step in the
formation of a company.
It is the main document of the company which defines its
objects and lays down the fundamental conditions upon which alone the
company is allowed to be formed.
It is the charter(agreement) of the company.

Its purpose is to enable shareholders, creditors and those who deal with
the company to know what exactly is its permitted range of activities.
It enables these parties to know the purpose, for which their money is
going to be used by the company and the nature and extent of risk they
are undertaking in making investment.
Form of Memorandum (Sec. 14)
Companies Act has given four forms of Memorandum of Association in
Schedule
I. These are as follows :
Table B Memorandum of a company limited by shares
Table C Memorandum of a company limited by guarantee and not
having a share capital.
Table D Memorandum of company limited by guarantee and having
share capital.

Table E Memorandum of an unlimited company. Every company is
required to adopt one of these forms or any other form as near there to
as circumstances admit.
Printing and signing of Memorandum (Sec. 15).
The memorandum of Association of a company shall be (a) printed, (b)
divided into paragraphs numbered consecutively, and (c) signed by
prescribed number of subscribers (7 or more in the case of public
company, two or more in the case of private company respectively).
Each subscriber must sign for his/her name, address, description and
occupation in the presence of at least one witness who shall attest the
signature and shall likewise add his address, description and
occupation, if any.

Contents of Memorandum
1. Name clause
2. Registered Office Clause
3. Object Clause
Main Objects
Other objects
4. Capital Clause
5. Liability Clause
6. Association or Subscription Clause

Name clause
Promoters of the company have to make an application to the registrar of
Companies for the availability of name. The company can adopt any name if
i) There is no other company registered under the same or under an identical
name;
ii) The name should not be considered undesirable and prohibited by the
Central Government (Sec. 20). A name which misrepresents the public is
prohibited by the Government under the Emblems & Names (Prevention of
Improper use) Act, 1950 for example, Indian National Flag, name
pictorial representation of
Mahatma Gandhi and the Prime Minister of India, name and emblems of the
U.N.O., and W.H.O., the official seal and Emblems of the Central
Government and State Governments.

Where the name of the company closely resembles the name of the
company already registered, the Court may direct the change of the
name of the company.
iii) Once the name has been approved and the company has been
registered, then
The name of the company with registered office shall be affixed on
outside of the business premises;
The name and address of the registered office shall be mentioned in all
letterheads, business letters, notices and Common Seal of the
Company, etc. (Sec.147).

Registered Office Clause
Memorandum of Association must state the name of the State in which
the registered office of the company is to be situated.
It will fix up the domicile of the company. Further, every
company must have a registered office either from the day it begins to
carry on business or within 30 days of its incorporation, whichever is
earlier, to which all communications and notices may be addressed.
Registered Office of a company is the place of its residence for the
purpose of delivering or addressing any communication, service of any
notice or process of court of law and for determining question of
jurisdiction of courts in any action against the company. It is also the
place for keeping statutory books of the company.

Object Clause
This is the most important clause in the memorandum because it not
only shows the object or objects for which the company is formed but
also determines the extent of the powers which the company can
exercise in order to achieve the object or objects. Stating the objects of
the company in the Memorandum of Association is not a mere legal
technicality but it is a necessity of great practical importance.
Capital Clause
In case of a company having a share capital unless the company is an
unlimited company, Memorandum shall also state the amount of share
capital with which the company is to be registered and division there of
into shares of a fixed amount [Sec. 13(4)].

Liability Clause
In the case of company limited by shares or by guarantee,
Memorandum of Association must have a clause to the effect that the
liability of the members is limited.
It implies that a shareholder cannot be called upon to pay any
time amount more then the unpaid portion on the shares held by him.
He will no more be liable if once he has paid the full nominal value of
the share.
Association or Subscription Clause
In this clause, the subscribers declare that they desire to be formed
into a (16) company

company and agree to take shares stated against their names. No
subscriber will take less than one share.
The memorandum has to be subscribed to by at least seven
persons in the case of a public company and by at least two persons in
the case of a private company.
The signature of each subscriber must be attested by at least
one witness who cannot be any of the subscribers. Each subscriber
and his witness shall add his address, description and occupation, if
any.

ARTICLES OF ASSOCIATION
Every company is required to file Articles of Association along with
the Memorandum of Association with the Registrar at the time of its
registration. Companies Act defines
Articles of Association are the rules, regulations and bye-laws for
governing the internal affairs of the company. They may be described
as the internal regulation of the company governing its management
and embodying the powers of the directors and officers of the
company as well as the powers of the shareholders.
They lay down the mode and the manner in which the business
of the company is to be conducted.

In framing Articles of Association care must be taken to see that
regulations framed do not go beyond the powers of the company it
self as contemplated by the Memorandum of Association nor should
they be such as would violate any of the requirements of the
companies Act, itself.
All clauses in the Articles ultra vires the Memorandum or the Act
shall be null and void.
Article of Association are to be printed, divided into paragraphs,
serially numbered and signed by each subscriber to Memorandum with
the address, description and occupation. Each subscriber shall sign in
the presence of at least one witness who shall attest the signatures and
also mention his own address and occupation.

Contents of Articles of Association
Articles generally contain provision relating to the following matters;
(1)The exclusion, whole or in part of Table A;
(2) share capital different classes of shares of shareholders and
variations of these rights
(3)execution or adoption of preliminary agreements, if any;
(4)allotment of shares;
(5)lien on shares (vi) calls on shares;
(6)forfeiture of shares;
(7) issue of share certificates;
(8)issue of share warrants;
(9) transfer of shares;
(10) transmission of shares;

• alteration of share capital;
• borrowing power of the company;
• rules regarding meetings;
• voting rights of members;
• notice to members;
• dividends and reserves;
• accounts and audit;
• arbitration provision, if any;
• directors, their appointment and remuneration;
• the appointment and reappointment of the managing director,
manager and secretary
• fixing limits of the number of directors
• Payment of interest out of capital; common seal; and winding up.

A company is a legal entity and does not have any physical existence. It
can act only through natural persons to run its affairs. The person,
acting on its behalf, is called Director.
A Director is any person, occupying the position of Director, by
whatever name called. They are professional men, hired by the
company to direct its affairs. But, they are not the servants of the
company.

A Director's duties also include the following:
• To convene Statutory, Annual General Meeting (AGM) and also
Extraordinary General Meetings;
• To prepare and place at the AGM, along with the balance sheet and,
profit and loss account, a report on the company's affairs, including
the report of the Board of Directors;
• To authenticate and approve annual financial statement;
• To appoint first auditor of the company;
• To appoint cost auditor of the company;
• To make a declaration of solvency in the case of a Members'
voluntary winding up;

What are the Liabilities of the Directors of a company towards the
company?
The liability of a Director to the company may arise from:
Breach of fiduciary duty: Where a Director acts dishonestly to the
interest of the company, he will be held liable for breach of fiduciary
duty. Most of the powers of Directors are powers in trust and,
therefore, should be exercised in the interest of the company and, not
in the interest of the Directors or, any section of members.

Ultra vires acts: Directors are supposed to act within the parameters of
the provisions of the Companies Act, Memorandum and Articles of
Association, since these lay down the limits to the activities of the
company and, consequently, to the powers of the Board of Directors.
Further, the powers of the Directors may be limited in terms of specific
restrictions, contained in the Articles of Association. The Directors
shall be held, personally, liable for acts beyond the aforesaid limits,
being ultra vires the company or the Directors

Negligence: As long as the Directors act within their powers with
reasonable skill and care, as expected of them as prudent (careful)
businessmen, they discharge their duties to the company.
But, where they fail to exercise reasonable care, skill and
diligence, they shall be deemed to have acted, negligently, in discharge
of their duties and, consequently, shall be liable for any loss or
damage, resulting there from.
However, error of judgment will not be deemed as negligence.
The Directors cannot be absolved of their liability for negligence by
any provisions in the Articles of Association.

Mala fide acts: Directors are the trustees for the money and property
of the company, handled by them, as well as for exercise of the powers,
vested in them. If they dishonestly or in a mala fide manner, exercise
their powers and perform their duties, they will be liable for breach of
trust and, may be required to make good the loss or damage, suffered
by the company by reason of such mala fide acts. They are also
accountable to the company for any secret profits they might have
made in course of their performance of duties on behalf of the
company. Directors can also be held liable for their acts of
'misfeasance', i.e., misconduct or willful misuse of powers. However,
misconduct, which is not willful, shall not amount to 'misfeasance'.

INTRODUCTION to MEETING
The company is an artificial person created by law having a separate
entity distinct from its members. Being an artificial person, it cannot
take decisions on its own. It has to take decisions on matters relating to
its well being by way of resolutions passed at properly constituted and
convened meetings of its shareholders or directors.
The decisions about a company's management are taken by the
directors in their meetings and they are to be ratified in the general
meetings of the company by the shareholders.

MEETING
Any gathering, assembly or coming together of two or more persons for
the transaction of some lawful business of common concern is called
meeting.”
CHARACTERISTICS OF MEETING
Two or more persons required
For some lawful business
Notice for intimation
Specified date, place and time
Company’s meetings governed by provisions of company’s act

COMPANY MEETINGS
Shareholders meetings
Statutory Meeting
Annual General Meeting
Extra Ordinary General Meeting

STATUTORY MEETING
 First meeting of members of PUBLIC limited company
 Held only once in the life of company
 Meeting must be held after 3 months and before 6 months from
the date of entitlement to commence business
 Business of meeting is to consider “statutory report”
 Statutory report should be sent to each member at least 21 days
before the statutory meeting
 Statutory report contains brief account of the state of company’s
affairs since its corporation and business plan

CONTENTS OF STATUTORY REPORT
•Conveyed by the directors to each member at least 21 days before
meeting
•INCLUDES
•List of members
•Shares allotted and the amount received from them
•Particulars of the directors, managers and secretary
•Particulars of contracts that have to be approved
•The detail of company’s affairs along with fees and brokerage paid
•Report shall be certified by chief executive and two directors
•Report should be accompanied by an auditor’s certificate in respect
of cash received against shares and receipts and payment of company
•5 copies of report must be filed to the registrar

ANNUAL GENERAL MEETING (AGM)
Must be held every year
Must be held by every type of company, public or private, limited by
shares or by guarantee, with or without share capital or unlimited
company, once a year
The first AGM is to be held within eighteen months of incorporation
Every subsequent(coming) AGM is to be held within four months of
the closing of the company’s annual financial year or 15 months from
the last meeting whichever is earlier
Notice of the date of the meeting is to be send twenty one days before
such date to the shareholders whereas in case of a listed company the
notice is also required to be published in the newspaper

The gap between two AGMs should not be more than fifteen months
In case of default in complying with any of these requirements all officers to such
default shall be held liable
AGENDA OF AGM
In this meeting the following matters are usually considered:
Annual accounts of the company
Declaration of dividend
Retirement and appointment of auditors
retirement and appointment of Directors

Extra Ordinary General Meeting (EGM)
All general meetings of a company , other than AGM and the statutory
meeting are called Extra Ordinary General Meeting. Such meetings are
called to deal with some urgent special business that can not be
postponed till the AGM
These meetings are called by following ways:
Calling of EGM by Directors
Calling of EGM by Directors on request of members
Calling of Extra Ordinary General Meeting by Directors:
The directors may at any time call the Extra Ordinary General Meeting
of the company to consider any matter which requires the approval of
the company and can’t be postponed till general meeting

Calling of Extra Ordinary General Meeting on the Requisition of
Members:
The directors shall, on the requisition of members representing the
one tenth of the voting power on the date of deposit of requisition,
forthwith to proceed to call an extra ordinary general meeting
Requirements of Calling Extra Ordinary General Meeting on the
Requisition of Members
The requisition shall state the objects of the meeting.
It will be signed by the requisitionists.
The requisition will be deposited at the registered office of the
company
If the directors do not proceed within the twenty-one days from the
date of the requisition being so deposited to call a meeting, the
requisitionists may themselves call the meeting

The meeting so called shall be held within three months from the date
of depositing such requisition.
The meeting will be called in the same manner as the meetings are
called by directors
Expenses of the meeting shall be borne by the company
QUORUM FOR THE MEETING
It means the minimum number of members that must be present
at the meeting.

Quorum is the minimum number of members required to attend a
meeting and transact business validly. In other words, it is the minimum
number of members who must be present at a meeting for the purpose of
transacting business validly
Provisions relating to quorum:
In case of single member company
The single member present in person or proxy
In case of Listed company
Ten members, personally present, representing 25% voting powers either
on their own account or as proxies in meeting
In case of any other company
Two members, personally present, representing 25% voting powers either
on their own account or as proxies in meeting

PROXIES (substitute ,alternate)
Proxy is the person appointed to vote and speak on behalf of a
member in General meeting of a company
A member can’t appoint more than one proxy
A proxy must be a member unless article declare a non-member as
a proxy
Proxy can speak and vote at meeting
Proxy can demand a poll
Proxy can abstain ( with draw) from voting

Resolutions
Decisions of a company are made by resolutions passed by the
prescribed majority of the members present at the meetings or
also called the collective decision of the members in a general
meeting
Resolutions are of 3 kinds
1. Ordinary Resolution
2. Special Resolution
3. Resolutions requiring special notice

A resolution, which requires simple majority of the members entitled
to vote and voting in person, or where proxies are allowed, by proxy,
is called an ordinary resolution.
Some of the Ordinary resolutions:
Issue of shares at discount
Alteration of share capital
Adoption of statutory report
Passing of annual accounts and B/S, along with reports of board of
directors and auditors.
Appointment of auditors and their remuneration

A special resolution is one passed at a general meeting of a
company when:
Not less than twenty one days notice has been given
The notice specifies the intension to propose the resolution as
special resolution
By a majority of the three fourth of such members entitled to
vote as are present as proxy
Some special resolutions:
Alteration of object clause of memorandum
Change of name of a company with consent of central govt.
Alteration of the articles of a company.
Variation of shareholders rights.
Payment of interest out of capital.

Provision in this act or in the articles, special notice is required
Notice of the intension to move the resolution shall be given to the
company not less than 14 days before the meeting
The company must give to its members- notice
Advertisement in a newspaper

POLITICAL CONTRIBUTIONS
A company cannot contribute and donate any amount to the
following:
Any political party
Any political leader
A person contesting an election
In case of contravention (breach) a fine not exceeding of rupees
500000 may attract for every defaulting officer of the company

Business Law 2

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Business Law 2