Company Meetings Dr Manish dadhich Contents 1 2

Company Meetings Dr. Manish dadhich

Contents 1. 2. 3. 4. Meaning of meetings Why to have meetings Kinds of meetings Pre-requisites of valid meetings 5. Proxies 6. Annual General Meeting 7. Legal provisions to hold AGM 8. Cases related to AGM 9. Statutory meetings 10. Statutory Report 11. Extra ordinary GM 12. Legal provision to EGM 13. 14. 15. 16. 17. 18. 19. 20. Power of tribunal to call EGM Cases related to EGM Class Meetings Board Meetings Pre-requisites of BM Board Committee General powers of Board Restrictions on power of Board 21. Cases related to BM 22. Meeting of Creditors 23. Meeting of debenture holder’s

Meaning of Meetings • The word “meetings” in context of company means a gathering or assembly of directors or shareholders or of both for taking decisions on the agenda before them. • Basically, these people has been convened for the purpose of achieving a common goal through verbal interaction, such as sharing information or reaching agreement. • Sharp vs. Dawes (1971), the meeting is defined as “An assembly of people for a lawful purpose” or “the coming together of at least two persons for any lawful purpose. ”

Why to have meetings? • To solve the problems • To make decisions • To develop various plans • To gather or convey information • To get a response to information • To obtain approval • To clarify responsibilities • To create a sense of teamwork

Characteristics of a Company Meeting: 1. Two or more persons (who are the members of the Company) must be present at the meeting. 2. The assembly of persons must be for discussion and transaction of some lawful business. 3. A previous notice would be given for convening a meeting. 4. The meeting must be held at a particular place, date and time. 5. The meeting must be held as per provisions/rules of Companies Act.

Kinds of meetings MEETINGS Members Directors Board Meeting Statutory Meetings of Sub Committee of Directors Annual General Meeting Creditors Meeting of debenture holders Extraordinary General Meeting of Creditors Class Meeting

Meetings of the Directors 1. Meetings of the Directors Meetings of directors are called Board Meetings. These are the most important as well as the most frequently held meetings of the company. It is only at these meetings that all important matters relating to the company and its policies are discussed and decided upon. 2. Meetings of creditors. 3. Meetings of debenture-holders.

1. Meeting of the Share Holders 1. Statutory Meeting This is the first meeting of the shareholders conducted after the commencement of the business of a public company. Companies Act provides that every public company limited by shares or limited by guarantee and having a share capital should hold a meeting of the shareholders within 6 months but not earlier than one month from the date of commencement of business of the company. 2. Annual General Meeting The Annual General Meeting is one of the important meetings of a company. It is usually held once in a year. AGM should be conducted by both private and public ltd companies whether limited by shares or by guarantee; having or not having a share capital. As the name suggests, the meeting is to be held annually to transact the ordinary business of the company.

3. Extra-ordinary General Meetings (EOGM) Statutory Meeting and Annual General Meetings are called the ordinary meetings of a company. All other general meetings other than these two are called Extraordinary General Meetings. 4. Class Meetings Class meetings are those meetings, which are held by the shareholders of a particular class of shares e. g. preference shareholders or debenture holders.

Pre-requisites of a valid meeting • The law provides certain provisions, which are supposed to be followed by the company while holding various types of company meetings. A meeting must be called conducted according to the provisions provided in the law & in AOA. • If these provisions are not followed while convening & conducting the meeting, then the whole proceedings of the meeting will be invalid. The following are the pre-requisite of a valid meeting. Prerequisites Appropriate authority Notice Quorum Agenda Chairman

1) Appropriate Authority • The first essential element of a valid meeting is that it must be called by an appropriate authority. • The word “Appropriate Authority ” means Board of directors, Members & Company law board. Board • Under Sec 96 Board has power at common law to call a GM even if this power is not expressly conferred upon them by the articles • An individual director has no power to call a GM • Notice of a GM given by a directory or a director held invalid if it is given without the sanction of the board Members • Members who fulfil the requirement of sec 100 are eligible to requisition an EGM • The members may themselves call an EGM u/s 100 on failure of the board to call the EGM Company Law Board • An AGM can be called by CLB u/s 97 • An EGM can be called by CLB u/s 98

2) Notice (Section 101 & 102) The term “notice” is derived from the latin word “notitia” which means ‘knowledge’. A meeting cannot be validly held unless a proper notice of it has been given. The things in connection with the notice have to be considered namely: - a) Length of notice [Section 101(1)] Proper notice Shorter notice • A GM can be called by giving at least 21 days notice in writing or by electronic mode • Date of issue of notice & date of meeting have to be in addition to 21 days • A GM may be called even after giving a shorter notice if consent is given in writing or by electronic mode by not less than 95% of the members entitled to vote at such meeting • The consent may be taken before or during or even after the meeting [ Re, Self Help Pvt. Industrial Estate (P) Ltd

2) Contents of Notice & to whom [Sec 101] Contents [Sec 101(2)] • (a) Place , day & hour of the meeting • (b) Business to be transacted thereat (i. e. special or an ordinary business) Notice to Whom [Sec 101(3)] • • Omission to give notice [Sec 101(4)] • Accidental omission to give notice shall not invalidate the proceedings at the meeting. • Deliberate omission to give notice to even single member shall invalidate the meeting. [Smyth v. Darley (1849)] (a) Every member (b) Legal representatives of the deceased member (c) Official assignees of the insolvent member (d) Auditors

Special & Ordinary business [Sec 102(2)] • Special business means all business to be transacted at a meeting except the following, which is called Ordinary Business: (a) The consideration of financial statements & the reports of the Board of Directors & Auditors (b) The declaration of any dividend (c) The appointment of directors in place of those retiring (d) The appointment of, & the fixing of the remuneration of, the auditors (e) Sec 102 provides that where any Special Business is to be transacted at the meeting, there shall be annexed to the notice of the meeting an explanatory statement setting out some material facts.

3) Quorum of General Meeting [Sec 103] • Quorum is the minimum no. of members required to be present at a GM of the company to validly transact any business. • In reckoning, quorum persons are taken into account who are qualified to take part & decide upon questions brought before the meeting • Preference shareholders are not counted in quorum, unless there is some matter affecting their rights. • In case of joint shareholders only 1 one shareholder as per the order in which their name appears in the register of members shall be counted towards quorum

Main provisions of Sec 103(1) Public company 5 members personally present if the number of members as on the date of meeting is not more than one thousand 15 members personally present if the number of members as on the date of meeting is between one thousand to five thousand 30 members personally present if the number of members as on the date of meeting exceeds five thousand Private company 2 members personally present

Consequences of absence of quorum [Sec 103(2)&(3)] Section 103(2): If the quorum is not present within half-an-hour from the time appointed for holding a meeting of the company(a) The meeting shall stand adjourned to the same day in the next week at the same time & place, or to such other date & such other time & place as the board may determine; or (a) The meeting, if called by requisitionists u/s 100 shall stand cancelled • In case of adjournment, notice is required to be given to the members: This sec provides that where there is adjournment or of change of day , time & place of meeting, the company is required to give not less than 3 days notice to the members either individually or by publishing & advertisement in the newspaper which is in circulation at the place where the registered of the company is situated. • Section 103(3) lays down that if at the adjourned meeting also , quorum is present within half an hour from the time appointed for holding the meeting , the members present shall constitute quorum.

• If no quorum is present there is no meeting & the proceedings are invalid so therefore any resolution passed at that will be treated as invalid. Can a single member constitute quorum for a meeting? (1) Where default is made by a company in holding an AGM, the NCLT may give direction that one member of the company present in person or by proxy shall be deemed to constitute the meeting. (Sec. 97) (2) Where for any reason, it is impracticable to hold or conduct EGM, the NCLT may give direction that one member of the company present in person or by proxy shall be deemed to constitute the meeting. (Section 98) (3) Where a person holds all the shares of a class, he alone may constitute a class meeting.

4) Agenda of the meeting • The dictionary meaning of the term agenda is the “list of things to be dealt with especially at a meeting”. • It is a part of the notice of the meeting which indicates the list of business issues to be transacted at the meeting. • It is normally called as Agenda Paper

Creating a Agenda

Objectives of Agenda • To bring in to the notice of all the members in advance that, what matters will be discussed at the time • It enables the members to prepare their strategy in advance regarding the issues that will be discussed at the meeting • It helps to remove the confusion among the minds of members if any regarding the purpose of the meeting • To prevent many questions being put to the chairman, which are usually raised by members having insufficient information • To bring discipline among members while in the meeting

5) Chairman of meeting (Sec 104) • If the AOA of a company do not contain any provision for the appointment of chairman, such appointments shall be made by the members present at the meeting by show of hands. • If a poll is demanded on the election of the Chairman, it shall be taken immediately & the chairman elected above shall continue to be chairman of the meeting until the other person get elected by poll.

Appointment of Chairman under Articles 1) Regulation 45 of Table F : It provides that the chairman if any of the Board shall preside as Chairman at every GM of the company. 2) Regulation 46 of Table F : if there is no chairman or he is not present within 15 minutes after the appointed time of the meeting or is unwilling to act as a chairman of the meeting, the directors present shall elect one among themselves to be chairman of the meeting. 3) Regulation 47 of Table F : if at the meeting no director is willing to act as chairman or if no director is present within 15 min after the appointed time of the meeting, the members present should choose one among themselves to be chairman of the meeting.

Appointment of Chairman by NCLT • Where the NCLT u/s 97 & 98 directs the calling of general meeting of a company, it may give directions regarding it’s holding, calling & conducting. It may appoint any person as its Chairman v Casting Vote of Chairman • In the case of an equality of votes on a matter requiring ordinary resolution, the Chairman of GM shall be entitled to a second or casting vote. It may be noted this provision can be used by a company only if the AOA of a company so provides.

Proxies (Section 105) The word “proxy” has two different meanings i. e. (a) Firstly, it means the agent appointed by the member of a company to attend & vote on his behalf at a meeting of members (b) Secondly, it means the document by which such an agent is appointed The relation between the member appointing proxy & the proxy so appointed is that of principal & agent Who can appoint a proxy? 1) Company having a share capital : Every members of the company who is entitled to attend & vote at the meeting can appoint a proxy. 2) Company not having a share capital : `his right is available only if the articles make a specific provision for it. A proxy need not to be a member of the company

Disclosures required in notice of GM [Section 105(2)] • In every notice calling GM there should appear with reasonable prominence a statement that a member, entitled to attend & vote is entitled to appoint a proxy to attend the meeting & vote instead of himself & a proxy need not be a member of the company. • Consequences of Default : In case of default of this sub sec every officer of the company who is in default shall be punishable with fine which may extend to Rs. 5, 000/- Limitation on Proxy • A proxy has no right to speak at meeting • • He is not entitle to vote except on poll He is not counted in quorum He cannot take part in discussion of the meeting He is not capable of inspecting the minutes book of the general meeting

Period for deposit of proxy • A proxy should be get deposited at registered office at least 48 hours before the time fixed for a meeting. • A company may by its articles provide lesser for than 48 hours but not more than 48 hrs for depositing the proxies. • Sunday is included in computation of 48 hours Requirement of instrument of proxy • The instrument appointing a proxy should be in writing & be signed by the appointer or his attorney duly authorised in writing. • In case where the appointer is body corporate, it shall be under its seal or be signed by an officer or an attorney duly authorised by it • In case of joint shareholders, it must be signed by all the shareholders. • A proxy form shall be in FORM NO. MGT. 11

Revocation of proxies • A proxy can be revoked in any of the following ways: (i) By deposit of a new proxy within the time stipulated for deposit of proxies (ii) By the member himself attending & voting before the proxy has voted (iii) By the death or insanity of the appointer by revocation of proxy Inspection of list of Proxies • Every member entitled to vote is entitled to inspect the proxies lodged with it. • Such inspection can be done only during the business hours of the company, • At least 3 days notice in writing of intention to do so has been given to the company.

Annual General Meeting (Section 96) • Section 96(1) of the Companies Act, 2013 provides that every company, other than OPC, shall in each year hold ( in addition to any other meetings ) at least one meeting of its shareholders each year. • It is a statutory requirement to hold an annual general every year, although the company is holding so many other meetings in that year. According to the General Clause Act, 1897 the word “year” means calendar year i. e. a period of 12 months running from 1 st January to 31 st December. • The proper authority to call AGM is the Board of Directors.

Objects of holding an AGM • To review the functioning of the company it is essential that the shareholders must assemble at least once in every year • Consideration of accounts , balance sheet & reports of Board of directors & auditors. • Final dividend are decided and declared in this meeting • For appointments of directors • For appointment & fixed the remuneration of auditors

Legal Provisions to hold AGM If it is 1 st AGM Time period In case of other AGM 1) AGM is to be held within 9 months of closing of financial year of the company [Proviso Sec 96(1) ] 2) If AGM is so held , there is no need to hold AGM in the year of its incorporation 1) AGM is to be held within 6 months from the date of closing of financial year. [Proviso Sec 96(1) ] 2) AGM is to held within 15 months of last AGM. [ Sec 96(1) ] 3) Registrar may for any special reason , can grant extension up to only 3 months. [Proviso Sec 96(1)]

Time , Place & Day of AGM Time of AGM • AGM shall be held during business hours i. e. between 9 a. m. & 6 p. m. [Section 96(2)] Day of AGM • AGM is to held on a day that is not a National Holiday [ Sec 96(2)] • “National Holiday” means & include a day declared as national holiday by Central Govt. Place of AGM • AGM shall be held at the registered office of the company ; or • Some other place within the city, town or village in which the registered office is situated [Section 96(2) ] Exceptions to Above If a day is declared by CG to be holiday after the issue of notice, it shall not be deemed to be a public holiday, in relation to that meeting Where AGM adjourned because of lack of quorum, it is to held on the same day, time & place in the next week, even if that day is a public holiday.

Report on AGM ( Sec. 121) • It mandates every listed public company to prepare in the prescribed manner, Sec 121 • A report on each AGM shall include conformation to the effect that the meeting was convened, held & conducted as per provision of the act. • A copy of this report is to be filed with Registrar, in Form MGT. 15, within 30 days of the conclusion of the AGM. Sec 121 Note: The Central Govt. may exempt any company from the aforesaid provisions subject to such conditions as it may impose

Default in holding AGM If a company default in holding an AGM, the following two consequences will follow: - 1) Section 97 • The National Company Law Tribunal (NCLT) may direct the calling of an AGM provided any member of the company approach to it in this regard. • The NCLT may even direct that one member of the company present in person or by proxy shall be deemed to constitute the meeting. 2) Section 99 • The failure to call this meeting is an offence punishable with fine, which may extend to Rs. 1, 000/- on the company & every officer of the company. • In case of continuing default, there can be a further fine, which may extend to Rs. 5, 000/- for everyday of default.

Important Cases related to AGM Sree Meenakshi Mills Co. Ltd v. Registrar of Joint Stock Co. AIR 1938 Mad 640: It was held that a meeting held in current year as an adjourned meeting of the AGM of the previous year cannot be considered as the AGM for the current year. There should be one meeting per year & as many meetings as there are years. Tapan Kumar Chowdhary v. Registrar of Companies (2003) : It was held that for a failure to hold a meeting it will not considered to be defence that on a/c of a criminal case against the secretary of the Co. some important books were exhibited in the court & as they had not been released in time, no accounts could be prepared, & no meeting could be held. Asia Udyog Pvt. Ltd (1965) : It was held that where the police has seized the account books of a company then the company is exempted from holding the Annual General Meeting.

Statutory Meeting (Sec 165 of Companies Act 1956 ) • Every public company limited by shares or limited by guarantee & having share capital must hold a general meeting of its members, to be called statutory meeting. • It is the first meeting of the members of the company after its incorporation.

Objectives of holding this meeting • To give information to the members regarding issues related with the promotion & formation of the company • To make, clear the doubts & confusion, if any in the minds of the members • To discuss the issues regarding success of the flotation of the company • To take consent of the members regarding any modification in the terms of the contracts specified in the prospectus

Companies exempted from holding Statutory meeting • Every company is free to hold its first meeting but certain companies are not required to hold their first meeting subject to Sec 165(1)

Statutory Report • The document containing all the information required by the shareholders before the statutory meeting is known as Statutory Report. • The Statutory Report must comply with the following guidelines of company law : 1) Sent to members • a) At least before 21 days before the day of statutory meeting. • b) If less than 21 days then consent of all the members is required. 2) Certification : It shall be certified as correct by • a) 2 directors (including MD) • b) Auditor of the company ( regarding allotment of shares & receipt & payments of cash. Sec[165(4)]

Contents of the Report Shares Cash received Receipts & Payments a/c • Number of shares allotted • Consideration for shares issued • Cash received by the company in respect of shares allotted • Receipts from shares , debentures & other sources • Payments made • Balance remaining in hand • An a/c or estimate of preliminary expenses of the Co. Directors & Auditors • Names , address & occupation of the directors , manager , secretary & auditors Contracts • Particulars of any contract , which is to be submitted to meeting for its approval Arrears of calls Commission or Brokerage • Arrears due on calls from every director & manager • The particulars of any commission or brokerage paid on shares or debentures to any director or manager.

Consequences of Default 1) Liable for fine [ Sec 165(9)] • Up to Rs. 5, 000 to company & every officer of the company who is in default 2) Winding Up [ Sec 433(b)] • The court may order to wind up the company

Extra-Ordinary General Meeting (Section 98 to 100) INTRODUCTION : • Sometimes, matters requiring immediate consideration by members may crop up whose consideration cannot be deferred till the next AGM. To meet such emergencies, the companies can provide for holding of emergency meetings of the members which are known as Extra-ordinary General Meetings. • Regulation 42 of Table F provides that all general meetings, other than AGM, shall be called as EGM. • All the business which can be transacted at an EGM shall be deemed special.

Who may call EGM • The EGM can be convened by anyone of the following: 1) By the Board of directors ( on its own motion or on demand of the requisitionists ), or 2) By any directors or any two members , or 3) By the Requisitionists themselves , or 4) By National Company Law Tribunal (NCLT) Calling of EGM (Sec 100) • Section 100(1)of the Companies Act , 2013 empowers the board to call an extraordinary general meeting of the company at anytime when it deems fit. • If in case the board fails to call an EGM , it may be called by the requisitionists in manner as prescribed under sub sections of the Section 100

Legal provisions regarding calling of EGM 1) Eligible Members [Sec 100(2)] a) In case of Company having share capital • The requisition shall be made by the shareholders holding not less than 1/10 of such of the paid up share capital of the company & are entitled to vote on that occasion at the said EGM b) In case of company having no share capital • The requisition shall be made by the such no. of members who have at least 10% of the total voting power & are entitle to vote on that occasion at the said EGM

2) Essentials of a valid requisition [Sec 100(3)] The requisition shall specify the matters for the consideration of which EGM is to be called The requisition shall be signed by all the requisitionists. In case of Joint shareholders , it is to be signed by anyone of them shall be deemed to be valid The requisition shall be deposited at the registered office.

3) EGM called by Board [Sec 100(4)] On a receipt of a valid requisition, the Board shall within 21 days proceed to call EGM to be held not later than 45 days from the date of deposit of requisition. 4) EGM called by Requisitionists If the board fails to call an EGM, it may be called by the requisitionists themselves as follows : Time period for holding • It must be held within 3 months from the deposits of requisition. EGM [Sec 100(4)] Manner of calling EGM [Sec 100(5)] Reimbursement of expenses [Sec 100(6)] • The requisitionists shall call the EGM in the same manner in which a meeting is called by the Board of Directors • All reasonable expenses incurred by the requisitionists to call EGM shall be repaid back to them • The sum so repaid shall be deducted from the remuneration of the defaulting directors

Power of Tribunal to call EGM (Sec 98) • Section 98(1) of the Companies Act, 2013 provides that when for any it is impracticable to call, hold & conduct the meeting of the Co. according to the provision of the law or of the article of the company, the NCLT may order a meeting of the company to be held or conducted in such a manner as it thinks deem fit. Here the word “impracticable” means impracticable from a reasonable point of view. Holding a meeting is supposed to be impracticable in the following circumstances 1. 2. 3. 4. When there is dispute between the various the shareholders that, who are the lawful directors of the company to call the meetings. Where the Registered office or any other place fixed for the meeting has been locked. Where the company does not have it’s duly appointed Board of Directors. Where there is chance of quarrel & violence at the meeting.

It may also give such ancillary direction as it thinks fit. The directions given under this section may also include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting. The Company Law Board/ Tribunal can issue such orders either

Default in holding EGM (Section 99) • The failure to call this meeting is an offence punishable with fine, which may extend to Rs. 1, 000/- on the company & every officer of the company. • In case of continuing default , there can be a further fine, which may extend to Rs. 5, 000/for everyday of default.

Important Cases of EGM • A. D. Chaudhary v. Mysore Paper Mills Ltd. : It was held that the BOD is right in refusing to call & hold an EGM on the requisition of members where there is an order of injunction, restraining the company from holding any meeting is in force. • LIC of India v. Escorts Ltd. (1986) It was held that as every shareholder has a right to requisition an EGM , so he cannot be restrained from requisitioning an EGM & he is not bound to disclose the reasons for the removal where the meeting get held for the purpose of removing bunch of directors • Metal box India Ltd , re (2001) : It was held it’s not necessary to held the meeting at the registered office so resolution passed at such meeting would be equally valid as it held at registered office.

Class Meetings • Besides the GMs, the articles of a company may provide that certain matters affecting the interest of the holders of a particular class of shares shall be subject to the consideration & decision of a meeting of those holders only, such meetings are called “Class Meetings” • In other words Class Meetings are those meetings that are held by the shareholders of a particular class of shares e. g. Preference shares • The class meeting are usually required to be held when it is proposed to alter, vary or affect the rights of a particular class of shares. So for effecting such changes, it becomes necessary to call separate class meeting of the holders of those shares & seek their approval. • For example : As per Section 48 of 2013 act, where a company desires to cancel the arrears of dividends on cumulative preference shares, it is necessary to call a meeting of such shareholders & pass a special resolution.

Board Meeting [Section 173 to 176] The affairs of a company are managed by the Board of Directors. So it is necessary that the directors should often meet to discuss various matters regarding the management & administration of the affairs of the company in the best interest of the shareholders & the public. Essentials of a Valid Meeting 1. 2. 3. 4. 5. Frequency of Board Meeting Notice of Board meeting Quorum of a Board Meeting Chairman of a Board Meeting Agenda of a Board Meeting

Notice of a Board Meeting [Sec 173(3)] Length & mode of notice • The act requires that not less than 7 days notice in writing shall be given to every director at the registered address as available with the company. • The notice can be given by hand delivery or by post or by electronic means Shorter notice • At least one independent director shall be present at the meeting. • If he is not present then decision of the meeting shall be circulated to all directors & shall be final only after ratification of decision by at least one Independent Director Consequences of Default • Every officer of the company, whose duty is to give notice & who fails to do so, shall be punishable with fine which may extend to Rs. 25000/-

Quorum [Section 174] Required quorum • As per Sec 174(1), it shall be 1/3 rd of its total strength or two directors whichever is higher • As per Sec 174(3), where at any time the no. of interested directors exceeds or is equal to 2/3 rd of the total strength of BOD, the number of directors who are not interested directors & present at the meeting, being not less than two, shall be the quorum during such time. Effect of no quorum • Due to lack of quorum the meeting shall automatically stand adjourned to the same day at the same time & place in the next week • If that day is a national holiday till the next succeeding day, which is not a holiday, at the same time & place • Proper quorum is required at adjourned meeting but issue of fresh notice is not required. Board may act notwithstanding vacancies • When there is vacancy in Board then continuing directors may act there • But if their no. Is reduced below the quorum fixed by the act then the continuing directors may act only for increasing the no. of directors or summoning a GM As per Sec 184 “ Interested Director” means any director whose presence cannot be counted for the purpose of forming a quorum at a meeting of the board at the time of discussion or vote on any matter

Number of Board Meeting [Sec 173(1)] Minimum number of BMs • The 1 st BM of a company shall be held within 30 days of the date of incorporation • There shall be minimum of 4 board meeting every year at interval of maximum of 120 days. Exemption by CG • To any class of companies • By notification in the Official Gazette Relaxations [ Sec 173(5)] • To one person company , small company & dormant company • One board meeting in each half of a calendar year at minimum gap of 90 days in two board meeting

BM through Video Conferencing [Sec 173(2)] Manner of participation in BM • Either in person or through video conferencing or other audio visual means. • It must capable of recording & recognising the participation of directors & of recording & storing the proceedings of such meetings along with date & time. Video conferencing prohibited w. r. t. certain matters (Rule 4) • In case of approval of Annual financial, Board’s report , prospectus , amalgamation, merger, demerger, acquisition & takeover. • Meetings of Audit Committee for consideration of financial statement.

Resolution by Circulation [Section 175] Conditions for passing a resolution by circulation 1) The resolution has been circulated in draft with all other necessary papers 2) Send them to all the directors at their registered address by hand or post or courier. Conditions for passing a resolution not by circulation 1) 1/3 rd of total no. of directors require that the resolution be decided at BM Other Points 1) Resolution passed by circulation shall be noted at a subsequent meeting of the Board 2) Shall be recorded or noted in minutes of such meeting

Board Committees (Sec 177 & 178) • Board committees are usually formed as a means of improving board effectives & efficiency in areas where more focused, specialised & technical discussions are required. • Committees enable better management of full board’s time & allow in-depth scrutiny & focused attention. Types of Board Committees

1) Audit Committee (Sec 177) • The Audit committee meetings are usually held once in three months • It help in providing more transparency & better Corporate Governance in financial matters. Main provisions pertaining to AC i)

ii) Composition of Audit Committee (s/s 2) Composition Minimum 3 director Majority of independent Director Majority of member including Chairperson shall be person with ability to read & understand financial statement iii) Functions of Audit Committee (s/s 4) • • • Recommendation for appointment & remuneration of auditors. Review & monitor auditor’s performance Examination of financial statement & auditor’s report Scrutiny of inter-corporate loans & investments Valuation of undertaking or assets wherever it is necessary Evaluation of internal financial controls & risk management system

iv) Powers of the audit committee (s/s 5) • Call for the comments of the auditors about internal control systems, the scope of audit & observation of the auditors • Review of financial statement before submission to the board • It may discuss any related issues with the auditors & the management of the company. • Investigate into any of the aforementioned matters & any other matter referred to it by the board. • Obtain professional advice from external sources • Full access to records of the company • Oversee the Vigil Mechanism v) Rights of auditors & KMP (s/s 7) The auditors of a company & the key managerial personnel shall : (a) Have right to be heard (b) Not have right to vote

2) Nomination & Remuneration [Sec 178(1) to (4)] • The Nomination & Remuneration Committee helps the BOD in the preparations relating to : 1) The election of members of BOD 2) The remuneration of senior management & to management’s & personnel’s remuneration & incentive schemes. Main provisions pertaining to NRC i)

ii) Composition of NRC (s/s 1) Composition 3 or more non executive directors Independent directors not less than one half The chairperson of the Co. not to be chairperson of NRC iii) Functions of NRC (s/s 3) Identify persons to be appointed as directors in senior management Identify persons to be removed from directorship in senior management Carry out evaluation of performance of every director Formulate the criteria for determining qualifications, positive attributes & independence of directors • Recommend to the Board a policy regarding remuneration of directors, KMP & other employees • •

3) Stakeholders Relationship Committee [Sec 178(5)to(8)] • Companies having no. of shareholders, debentures-holders & any other security holders more than 1, 000 required to have stakeholder relationship committee. Main Provisions pertaining to SRC i) Composition (s/s 5) Chairperson (nonexecutive director ) Other members as decided by the Board

ii) Functions of SRC (s/s 6) • Consider & resolve the grievances of security holders • Non–consideration of any grievance in good faith iii) Duty to attend GMs • Chairperson of Stakeholder Relationship Committee , or • In his absence, any other member of SRC authorised by Chairperson of SRC. iv) Consequences of default

General Power of the Board [Sec 179] 1. Power of the Board (s/s 1) : the BOD of a company shall be entitled to exercise all such powers, & to do all such acts & things as the company is authorised to do. 2. a) b) c) d) e) f) g) Power exercisable only at a BM (s/s 3): To make calls on shareholders in respect of money unpaid on their shares To authorise buy-back of securities u/s 68 To issue securities, including debentures whether in or outside India To borrow money To invest the funds of the company To grant loans or give guarantee or provide security in respect of loans To approve financial statements & the Board report

Delegation of Power • The board may by a resolution passed at a meeting delegate to any committee of directors, the MD, the manager or to any officer, the powers that are a) To borrow monies b) To invest the funds of the company c) To grant loans or give guarantee in respect of loans. Restriction on powers of board (Sec 180) • To sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company. • Investment of compensation received by the company as a result of any merger or amalgamation. (Exception : consent of members by way of. SR is not required if such compensation is invested in trust securities specified u/s 20 of the Trusts Act) • To borrow money, where the money to be borrowed together with the money already borrowed by the company will exceed aggregate of its paid –up share capital & free reserves.

Cases related to Board Meeting • Parmeshwari Prasad Gupta v. UOI (1973) It was observed that notice to all directors of a meeting of the BOD is essential for the validity of any resolution passed at the meeting. • Re Homer Gold Mines Ltd (1986) It was held that 3 hours before notice to all the directors who had other business to attend was held to be insufficient, even their places of business & the place of meeting was in same city.

Meetings of Creditors (Section 230) The creditors meeting is convened where a compromise or arrangement is proposed between a company & its creditors. • The meeting of creditors may be convened for the following purposes: a) To enter into an arrangement or a compromise between a company & creditors or any class of them, or for an arrangement or a compromise b/w a company & its members or any class of them. b) To seek approval of creditors for amalgamation or reconstruction of a company c) To seek consent of the creditors for winding up of a company. The tribunal may on the application of the co. or of any creditor or member of the company, in case of a company being wound up even on the liquidator’s application may call meeting by order, to be held & conducted in such manner as the tribunal directs. Where the Co. is being wound up, any creditor or class of creditors or liquidators may apply to the tribunal for ordering a meeting of the creditors or class of creditors. •

Meetings of Debentures Holder • The company may call the debentures holder’s meeting for the following purposes: a) Any variation in conditions of their security b) Any alteration in their rights c) Effecting change in rate of interest on the existing debentures d) For issuing of new debentures Case : J. K Pvt. Ltd v. New Kaiser Spinning & weaving Co. Ltd (1987) It was held by the SC that a scheme sanctioned by the court does not operate as a new agreement b/w the parties. It becomes binding on the company, the creditors & the shareholder & has statutory force. It cannot be altered expect with the sanction of the court even if the shareholders & creditors acquiesce(to accept reluctantly) in such alteration

Bibliography • Company Law (Taxman) • Company Law (Avtar Singh) • Law, Ethics & Communication (CA. Munish Bhandari ) • Company Law (Sangeet Kedia) • www. unilawonline. com/bareacts