SYB.Com Semester IV Company Secretarial Practices PDF

31 S.Y.B.Com. SEMESTER - IV (CBCS) COMPANY SECRETARIAL PRACTICE-II SUBJECT CODE : UBCOMFSIV 5.07  © UNIVERSITY OF MUMBAI Prof. Suhas Pednekar Vice-Chancellor, Universit...

31 S.Y.B.Com. SEMESTER - IV (CBCS) COMPANY SECRETARIAL PRACTICE-II SUBJECT CODE : UBCOMFSIV 5.07  © UNIVERSITY OF MUMBAI Prof. Suhas Pednekar Vice-Chancellor, University of Mumbai, Prof. Ravindra D. Kulkarni Prof. Prakash Mahanwar Pro Vice-Chancellor, Director, University of Mumbai, IDOL, University of Mumbai, Programme Co-ordinator : Prof. Rajashri Pandit Asst. Prof. in Economic, Incharge Head Faculty of Commerce, IDOL, University of Mumbai, Mumbai Course Co-ordinator : Mr. Sambhaji Shivaji Shinde & Editor Assistant Professor, IDOL, University of Mumbai, Mumbai Course Writer : Dr. Subhash D’souza ST. Joseph College, Vasai. : Prof. Shubhangi Kedare P. D. Karkhanis college, Ambernath : Dr. Vinod Kamble Bal Bharati’s MJP College of Commerce Kndivali (West), Mumbai. April 2022, Print - I Published by : Director Institute of Distance and Open Learning , University of Mumbai, Vidyanagari, Mumbai - 400 098. DTP Composed & : Mumbai University Press Printed by Vidyanagri, Santacruz (E), Mumbai  CONTENTS Unit No. Title Page No. 1. Management of the Compnay 01 2. Company Meetings 27 3. Dematerialisation and Online Trading 62 4. Reports and Winding up 78   Revised Syllabus of Courses of B.Com.Programme at Semester IV with Effect from the Academic Year 2022-2023 2 Ability Enhancement Courses (AEC) 2A * Skill Enhancement Courses (SEC) Group A 5. Company Secretarial Practice - II Sr. Modules No. of No. Lectures 1 Management of Companies 11 2 Company Meetings 11 3 Dematerialisation and Online Trading 11 4 Reports and Winding Up 12 Total 45 Sr. No. Modules 1 Management of Companies Directors – Appointment, Duties, Role, Directors Report, Director Identification Number (DIN). Types of Directors , Role of CEO, Non- Executive Directors, Independent Director Auditor- Appointment, Duties, Rights & Powers, Audit report. 2 Company Meetings Types of Company meeting, Secretarial Duties – Before, During and after company meeting – Annual General Meeting, Extra-Ordinary General Meeting, Board Meeting. Notices, agenda, Chairman, Quorum& Proxy – Concept and Statutory Provisions Motion, Resolution, Minutes – Concept, Types Voting, Minutes – Concept, Methods. 3 Dematerialisation and Online Trading Dematerialisation – Need and Importance, Secretarial Duties, Procedures, Participants. Online Trading – Concept, Advantages & Disadvantages, Bombay Stock Exchange Online Trading (BOLT), BOSS. Listing of securities – Procedure, Advantages, Secretarial Duties, Scrips – Types. Reports and Winding Up 4 Company Reports – Types, Secretarial Duties with regard to payment of dividend, Interest, Charges & penalties. Winding up of a Company – Procedure,& Statutory Provisions, Secretarial role in winding up. Specimen – Notice & Agenda of Annual General Meeting, Notice & Agenda of Board Meeting prior to Annual General Meeting, Resolution for appointment of Company Secretary, Special Resolution for alteration of Memorandum of Association, Minutes of Board Meeting prior to Annual General Meeting, Minutes of Annual General Meeting.  COMPANY SECRETARIAL PRACTICE REFERENCES Readings: 13. M. C.Bhandari : Guide to Company Law Procedure; Wadhwa& Company, Agra&Nagpur 14. K. V.Shanbhogue : Company Law Practice; BharatLaw House, New Delhi – 34 15. M. L.Sharma : Company Procedures and Register of Companies , Tax Publishers, Delhi 16. A. M.Chakborti, : Company Notices, Meetings and B. P.Bhargava Resolutions, Taxmann, New Delhi 17. A.Ramaiya : Guide to the Companies Act, Wadhwa & Company, Nagpur 18. R.Suryanarayanan : Company Notices, Meetings and Resolutions, Kamal Law House, Kolkatta 19. D. K. Jain : E- Filling of Forms & returns 20. Taxmann : E-Company forms 21. V.K.Gaba : Depository Participants (Law & Practice) 22. ICSI Publications : Meetings 23. B. K.Sengupta : Company Law 24. D. K. Jain : Company Law Procedures References: 3. M. C.Bhandari : Guide to Memorandum, Articles and R.D.Makheeja Incorporation of Companies ; Wadhwa& Company, Agra&Nagpur 4. Taxman : Company Law, Digest Journals: 5. Chartered Secretary : ICSI Publication 6. Student Company Secretary : ICSI Publication 7. Company Law Journal : L.M.Sharma, Post Box No. 2693, New Delhi – 110005. 8. Corporate Law Adviser : Corporate Law Advisers, Post Bag No. 3, VasantVihar, New Delhi  PAPER PATTERN COMPANY SECRETRIAL PRACTICE - PAPER I & II SEMESTER - III & IV Q.1 Multiple Choice Questions (A) Select the most appropriate answer from the option given below 10 (Any Ten out of Twelve) (B) State whether the following statements are True or False 10 (Any Ten out of Twelve) Q.2 Answer Any Two of the following Out of Three questions - Module - I 15 a. b. c. Q.3 Answer Any Two of the following Out of Three questions - Module - II 15 a. b. c. Q.4 Answer Any Two of the following Out of Three questions - Module - III 15 a. b. c. Q.5 Answer Any Two of the following Out of Three questions - Module - IV 15 a. b. c. Q.6 Write notes on Any Four out of Six 20  1 MANAGEMENT OF THE COMPANY Unit structure: 1.0 Objectives 1.1 Introduction 1.2 Director of the Company 1.3 Appointment of Directors 1.4 Resignation by Director / Removal of Directors 1.5 Powers / Rights of Company Directors 1.6 Duties of Company Directors 1.7 Chairman of the Company / Board of Directors 1.8 The Chief Executive Officer (CEO) 1.9 Company Auditors 1.10 Summary 1.11 Exercises 1.0 OBJECTIVES After studying the unit the students will be able:  To explain about appointment of the Company Director  To explain the powers and rights of the Company Director  To explain the Chairman of the Board of Directors  To explain the Role of the Chairman of the Board of Directors  To explain about CEO ( Chief Executive Officer ) of the company  To explain about Auditor of the Company 1.1 INTRODUCTION A director is a person from a group of managers who leads or supervises a particular area of a company. Companies that use this term often have many directors spread throughout different business functions or roles (e.g. director of human resources).... Some companies also have regional directors and area directors. The directors are the persons elected by the 1 Company Secretarial shareholders to direct, conduct, manage or supervise the affairs of the Practices company. The Companies Act does not precisely define the term ‘director’. But it has been defined under several sections of the Act, in the following manner: According to Sec. 2 (13) of the Companies Act, “Director includes any person occupying the position of director by whatever name called.” This definition given by the Companies Act does not give the clear meaning of the word director, but it means that a person who performs the duties of a director will be deemed to be a director irrespective of the name by which he is called. 1.2 DIRECTOR OF THE COMPANY 1.2.1 Meaning and Definition Section 2 (13) of the Indian Companies Act, 1956 defines director as any person occupying the position of director, by whatever name called. This legal definition fails to five details of functions, etc. of a company Director. Section 291 of the Indian Companies Act expressly vests the management of the business of a company in its directors. They are responsible for directing, governing or controlling the management of a company. According to Sec. 2(30), “A director is the officer of the company.” Directors act as agents of shareholders and look after the management of the company. Company is an artificial person created by law. It does not have physical existence. It is invisible and acts through human agency. This human agency of company management is the Board of Directors. The individual members of the Board are called Directors and collectively they form the Board. All managerial powers are given collectively to the Board of Directors and not to Directors individually. They are responsible for directing, governing and controlling the management of their company. Directors have to function as a group. Board is the principal authority in company management. A public company needs minimum three directors. Directors are not outsiders but are elected by shareholders as their representatives. The Board of Directors is the top administrative organ of the company. Directors are the brains of the company as the Company can and does act only through its directors. This suggests that the Directors (collectively) occupy the most influential position in the company management. 1.2.2 Legal Position of Company Directors 1. Under the Companies Act, the Board of Directors is a must for the management and administration of company. 2 2. Directors are elected representatives of shareholders and are given Management of the Company substantial powers of management. Such powers are not to be used individually by a director but collectively by all directors i.e. by the Board of Directors. 3. The statutory provision relation to Directors is given in Sections 252 to 323 of the Companies Act. 4. Every private company must have at least two directors and every public company must have at least three directors. 5. Directors are an agents, trustees and managing partners of a company. They are responsible for directing, governing and controlling the management of their company. 6. Directors have to honour legal provisions as regards their qualifications, appointment, retirement and use of powers. 1.2.3 Qualification of a Director Any person who is competent to enter into a contract can become a Director. The Indian Companies Act, 1956 has not laid down any specific academic, professional or technical or shareholding qualifications for a director. A person cannot be appointed as a director if he is of unsound mind or is declared insolvent or is guilty of fraud or moral turpitude. However, financial prudence requires that the directors must have some stake in the company. As a result, the Articles usually provide for certain qualification shares for a director. The law says that persons holding qualification shares can be elected as directors. The number of shares to be purchased by a director and their value are laid down in the Articles. However, the nominal value of such qualification shares should not exceed Rs. 5000. Similarly, a person has to file his written consent with the Registrar before accepting directorship. As per Section 270, the directors must obtain their qualification shares, within two months after their appointment unless they already hold shares of that amount. In the case of newly floated company, the directors must pay for their 3 Company Secretarial qualification shares before the Certificate to Commence Business is Practices obtained. In brief, Section 270 provides that :Every director must purchase qualification shares within two months after his appointment. Although, the directors have been referred as the trustees, or the managing partners of the company, but in real sense they are none of them. Directors may be considered as the agent, trustees or managing partner for a particular moment and for the particular purpose. Bowen, L.J. observed, “Directors are described sometimes as managing partners. But each of these expressions are used not as exhaustive of their powers and responsibilities, but as indicating useful points of view from which they may for the moment and for the particular purpose be considered.” 1.2.4 Disqualification of a Director The circumstances in which a person cannot be appointed as a director of a company are enumerated in Section 274. According to this section, a person cannot be appointed as a director of company, if - i) He has been found to be of unsound mind by a competent court and the finding is in force; ii) He is an undischarged insolvent; iii) He has applied to be adjudicated as an insolvent and his application is pending; iv) He has been convicted of an offence involving moral turpitude and sentenced to imprisonment for not less than six months and a period of five years has not elapsed since the expiry of his sentence; v) He has not paid any call in respect of shares of the company held by him for a period of six months from the last day fixed for the payment; vi) He has been disqualified by an order of the Court under Sec. 203 of an offence in relation to promotion, formation or management of the company or fraud or misfeasance in relation to the company. 4  Management of the Company The Central Government may by notification in the Official Gazette remove the disqualifications enumerated in clause (iv) and (v) above. [Sec. 274 (2)] In addition to the disqualifications mentioned above, there is another disqualification, namely, the person ‘should not be a minor or older person under disability’ but should be one competent to contract. A private company which is not a subsidiary of public company may by its Articles provide for additional grounds for disqualification. 1.2.5 Liabilities of Company Directors a) Liabilities to the Company : 1. For Ultra-vires Acts : The Directors are liable where they enter into contracts ultra-vires the Memorandum or Articles or ultra-vires their powers. 2. For breach of trust : The Directors are liable for making secret profits or use company’s fund for their personal use. Such acts constitute breach of trust. 3. For acting dishonestly : The directors are liable when they act in a dishonest manner. For example, purchasing property in their own name first name and then selling the same to the company at a higher price with a desire to earn profit. 4. For gross negligence : The Directors are held liable for gross negligence while performing the statutory duties assigned to them. For example, delegating authority against the provisions in the articles. 5. For willful misconduct : The Directors are liable for willful misconduct in the form of misappropriation of company’s assets. In all these cases, the Director is not liable for the error of his judgement. For making him liable, his dishonesty or negligence or willful misconduct must be proved. 5 Company Secretarial b) Liability to outsiders (Outside Parties): Practices The Directors are liable to outsiders (third parties) under the following circumstances: 1. For misstatement in the prospectus. 2. For acting fraudulently. 3. For breach of implied warranty of authority 4. For acting in their own name(signing cheque without mentioning the name of company) 5. For the debts and liabilities of the company at the time of winding up. c) Criminal Liabilities of Directors: Directors incur criminal liability for fraud and non-compliance of the various provisions of the Act. Here, they are punishable with fine or imprisonment or both as per the provisions in various Sections of the Act. Directors are liable to penalty under the following circumstances : 1. For mis-statements in the prospectus. 2. For default in holding AGMs as per provisions in the Companies Act. 3. For holding office as director in more than twenty companies at one time. 4. For taking loan from company without approval of the Government. 5. For failure to file return as to allotment of shares with the Registrar. 6. For failure to issue share certificates or debenture certificates. 7. For failure to give notice to Registrar as regards consolidation of share capital 1.2.6 Remuneration of Directors Directors' remuneration is the process by which directors of a company are compensated, either through fees, salary or the use of the company's property, with approval from the shareholders and board of directors. A Public Company can pay remuneration to its directors including Managing Director s and Whole-time Directors, and its managers which shall not exceed 11% of the net profit as calculated in a manner laid down in section 198 of the Companies Act, 2013.Directors are not employed by the company but are the elected representatives of shareholders. They are not the regular employees of the company and are not eligible for regular remuneration like other company employees. They act as agents of the company and participate in the policy-framing and decision-making process. Directors have no right of remuneration unless there is a specific provision to that effect in the Articles or the shareholders resolve for the same in the general meeting. The Articles usually provide for the payment 6 of remuneration to directors in the form of honorarium. According to Management of the Company Section 198, total managerial remuneration payable to directors, managing director (s) and whole-time director(s) in respect of any financial year should not exceed eleven per cent of the net profits of that company for that financial year. This can be treated as the maximum limit of managerial remuneration. Section 349 and 350 lay down the manner of computation of net profits for the purpose of determining the overall maximum managerial remuneration. 1.3 APPOINTMENT OF DIRECTORS 1.3.1 Appointment of a Director Every public company by virtue of Sec. 43 A, shall have at least three directors, private company shall have at least two directors. [Sec. 252]. Subject to this minimum number of directors, the articles may fix the minimum and maximum number of directors for its board of directors. The company in the general meeting may by ordinary resolution, increase or reduce the number of its directors within the limit fixed as per Articles [Sec.258]. In the case of a public company or a private company which is a subsidiary of a public company any increase which is beyond the limit fixed by Articles must be approved by the Central Government and such an increase shall become void if disapproved by the Central Government. However, no approval of Central Government shall be required if the increase in the number of directors does not exceed twelve. [Sec. 259] An individual who is competent to contract and is not disqualified under Section 274 can be appointed as a director, provided he is willing to act as a director and who holds or is willing to purchase share qualification as prescribed in the Articles. The company can increase or decrease the number of its directors within the limits fixed by its articles. For this, ordinary resolution in the general meeting must be passed. 1. First Directors : First Directors of a company are appointed by the promoters and their names are mentioned in the Articles. If not so, the Articles may prescribe the method of appointing them. In the absence of both, the subscribers to the Memorandum shall be deemed to be the first directors of the company. Written consent of directors to act in that capacity must be submitted to the Registrar. The first directors should have purchased or agreed to purchase qualification shares as per the articles. 2. Subsequent Directors : Subsequent Directors of the company are elected by the shareholders in the annual general meetings. Section 225 states that unless the Articles provide for the retirement of all the directors at every annual general meeting, at least two-thirds of the total number of directors of a public company and its subsidiary private company shall retire by rotation and shall be appointed by the shareholders in their general meetings. These provisions are not applicable to private companies. 7 Company Secretarial At Subsequent AGMs out of the two-thirds directors liable to retire by Practices rotation, one-third or the number nearest to one-third, must retire. The senior most Director shall retire in the first place. Persons who became directors on the same day, the retirement by rotation will be decided by mutual consent or by lot. The directors who are to retire by rotation at an AGM would automatically vacate office on the last day on which the annual general meeting ought to have been held. 1.3.2 Legal restrictions on the appointment of Directors A. Legal Restrictions on First Directors : 1. A director has to give a written consent to act as a director. This consent needs to be filed with the Registrar. 2. A director should have purchased or agreed to purchase qualification shares as per the Articles of the company. 3. The first directors must sign the prospectus before it is filed and issued to the public. They would be personally liable for any misleading statements made therein. B. Legal Restrictions on Subsequent Directors : 1. Only individual can be appointed as a Director. 2. A person cannot act as a director of more than fifteen companies at the same time. 3. A separate resolution is required for the appointment of each director. 4. A person who desires to join as a director has to submit a written consent with the Registrar within 30 days of his appointment. 1.3.3 Appointment of Directors by the Board In addition to the Directors elected by the shareholder, the Board may appoint directors under the following circumstances / situations: 1. Casual Vacancies : Casual Vacancies are possible due to the death or resignation of existing director before the expiry of his term of office. Such casual vacancy may be filled in by the Board by appointing a new director. 2. Additional Directors : If the article so permit, the Board of Directors can appoint additional directors, subject to the maximum number of directors fixed in the Articles. 3. Alternate Directors : The Articles may empower the Board of appoint alternate (in place of original director) director, during the absence of an existing director for more than three months, from the State in which the meetings of the Board are normally held. 8 1.3.4 Appointment of Directors by the Central Government Management of the Company With a view to preventing mismanagement, the Central Government may appoint such number of directors as the Company Law Board may specify as being necessary to effectively safeguard the interests of the company/ shareholders. Such directors will be appointed for a period not exceeding three years on any one occasion. Such directors appointed by the Central Government shall neither be required to hold any qualification shares nor they shall be subject to retirement by rotation. Such appointment is possible only when the order is passed by the Company Law Board on reference made by members holding at least ten per cent voting rights or by the Central Government. 1.3.5 Nominated Directors In addition to directors elected by shareholders appointed by the Board and by the Central Government, there may be directors nominated by third parties such as financial institutions (IFCI, IDBI, ICICI, UTI, LIC etc.) on non-rotational basis. Such “Nominee” directors are usually appointed by financial institutions (LIC, IDBI or UTI) providing huge financial support to concerned company. The purpose is to have effective control on the companies financed by them. 1.4 RESIGNATION BY DIRECTOR / REMOVAL OF DIRECTORS 1.4.1 Resignation by Directors The Indian Companies Act is silent as regards the resignation by directors as there is no provision in the Act as regards resignation of office by a director. A director can resign provided suitable provision exists in the Articles for such resignation. If the provision is available, a director can resign at any time as per the procedure prescribed in the Articles. In the absence of any provision in the Articles in this regard, his resignation, once made, takes effect immediately. There is no need for its acceptance by the Board or by the company in the general meeting. 1.4.2 Removal of Directors According to section 149 of the Companies Act 2013, in case of resignation or removal of an independent director, a new independent director is to be appointed within 180 days of such resignation or removal.As per Company Act Shareholders can remove a Director from the Company before the expire of his tenure, except appointment by Central Govt. The company directors can be removed by the following three methods : a) Removal by Shareholders (Section 284), b) Removal by the Central Government (Section 288E), and c) Removal by Company Law Board (Section 402) 9 Company Secretarial a) Removal by Shareholders (Section 284) : Practices Shareholders have a right to remove the elected director if they so desire. For this, suitable procedure as given in the Companies Act must be followed. A company may remove a director before the expiry of his period of office by giving a special notice and passing an ordinary resolution to this effect in their general meeting. b) Removal by the Central Government ( Section 288E) : The Central Government may, by order, remove any director from his office against whom an adverse judgement has been given by a High Court, on a reference made by the Government for an alleged fraud, misfeasance, gross negligence or breach of trust, etc. in carrying out his legal obligations. c) Removal by Company Law Board (Section 402) : The Company Law Board has the power to remove a director on an application made to it for prevention for oppression (under Section 397) or mismanagement (under Section 398). 1.5 POWERS / RIGHTS OF COMPANY DIRECTORS The directors enjoy wide powers as regards the management of the company. However, their powers are not unlimited but subject to legal provisions and provisions in the A/A of the company. Powers of directors are noted in the Articles of the company. These powers are to be used collectively and not individually. Similarly, the directors have to pass necessary resolutions in their meetings for using such powers. 1.5.1 Statutory Provisions Regarding Powers Of Directors A. Under Section 292, the following powers can be exercised by the Board of Directors: i) The power to make calls; ii) The power to issue debentures; iii) The power to borrow moneys otherwise than on debentures; iv) The power to invest the funds of the company; and v) The power to make loans. The powers listed under items (iii), (iv) and (v) can be delegated by the Board to any committee of directors, the managing director, the manager or any other principal officer of the company through a resolution passed at a Board meeting. 10 B. In addition to the above noted statutory powers, the Companies Act, Management of the Company under several other sections, provides for some additional powers to be exercised at the Board meeting only. Such powers are as noted below : i) The power to fill up casual vacancy among directors, to appoint alternate directors and to appoint additional directors, subject to any regulations in the Articles. ii) The power to accord sanction to such contracts in which any directors or their relatives, etc. are interested. iii) The power to recommend the rate of dividend on shared to be declared by the company at the Annual General Meeting, subject to the approval of the shareholders. iv) The power to appoint first directors of the company and to fill in any casual vacancy in the office of the auditor unless such a vacancy is caused by the resignation of the auditor. 1.6 DUTIES OF COMPANY DIRECTORS The duties of directors are divided into two categories ie. Sstatutory duties and General duties. A) Statutory duties of Company Directors: 1. It is the duty of the Board of Directors to see that all moneys received from applicants for shares are deposited in schedule bank until the “Certificate to Commence Business” is obtained. 2. Under Section 165 of the Act, the Board has a duty to forward a copy of the Statutory Report at least 21 days before the statutory meeting to every member of the company. 3. Under Section 210 (1), the Board has a duty to place before the members at the annual general meeting, the company’s Profit and Loss A/c and the Balance Sheet. 4. To call an extra-ordinary general meeting on the requisition of the specified number of members as per Section 169 (1) of the Act. 5. The Board of Directors has to make a “declaration of solvency” of the company in the case of members voluntary winding up (Section 488). 6. At the meeting of the creditors in a creditors’ voluntary winding-up, the Board of Directors must (a) cause a full statement of the position of the company’s affairs together with a list of creditors and the estimated amount of their claims to be laid before the meeting; and (b) appoint one of their member to preside at the said meeting. 7. The Board of Director is suppose to hold its meeting at least once in every three calendar months. In addition, at least four meetings of the Board must be held in every year. 11 Company Secretarial 8. It is the duty of the director to take consent of the Board before Practices entering into any contract with the company for the purchase or supply of any goods or services to the company. 9. The directors have to purchase and pay for qualification shares within the prescribed time +limit as per provisions of the Act. B) Duties of Directors under the General Law : 1. The Directors must always act bonafide for the benefit of the company. They must protect the interest of the company and must not make any secret profit. 2. The Directors must discharge their duties with such care and precaution as is reasonable in a person of their knowledge. 3. The Directors must attend all meetings of the Board unless it is impossible otherwise. This means they must not be negligent as regards their duties in relation to the company. 4. Finally, the Directors are expected to make full and complete disclosure in any contract in which they are directly or indirectly interested (Section 299). 1.6.1 ROLE OF DIRECTORS a) Agent: A company is an artificial person and needs people in the Board of Company to run the business of the company on behalf of and for the welfare of shareholders of the company. The director acts as an agent of shareholders and promotes the objects of the company so that the company can earn profits and increase the intrinsic value of the share and earning of the company. b) Employee: Any Whole-time director appointed by the Board of Directors and approved by the shareholders of the company acts as an employee of the company by managing the day-to-day affairs of the company. All the directors operate the company in the contours of employment letter issued by the Board of Company. c) Officer: Director is treated as the main officer of the company and shall be liable for penal consequences under various statutes, if affairs of the company are not in compliance with the Companies Act, Income Tax Act, FEMA provisions and other applicable Legal statues defined for various industries. d) Trustees: Director is treated as trustee of the company, money and property of the powers are entrusted to and vested in them only as trustees. 1.6.2 DIRECTOR’S REPORT :Under Section 415 of the Companies Act 2006, the directors of a company are required to prepare a directors’ report at the end of each financial year. This legislation is part of a general move towards greater corporate transparency. 12 The information provided by the directors’ report helps shareholders Management of the Company understand: a) Whether the company’s finances are in good health; b) Whether the company has the capacity to expand and grow; c) How well the company is performing within its market, and how well the market is performing in general; d) How well the company is complying with financial regulations, accounting standards and social responsibility requirements. By knowing this information, shareholders can make better informed decisions and can hold the directors of the company to greater account. 1.6.3 What is included in a directors’ report? As a minimum, a directors report should always state: a) The names of each director who served during the reporting year; b) A summary of the company’s trading activities; c) A summary of future prospects; d) The principle activities of the company and, if relevant, the principle activities of its subsidiaries; e) Recommendations for dividends for the reporting year; f) Any financial events that occurred after the date on the balance sheet, if these events could affect the company’s finances; g) Significant changes to the company’s fixed assets. 1.6.4 DIRECTOR IDENTIFICATION NUMBER Director Identification Number (DIN) is a unique identification number given to an existing or a potential Director of any company which is incorporated. DIN came into existence after the insertion of the section 266A & 266B of the Companies Act, 1956 (as amended vide Act No 23 of 2006). Why Director Identification Number (DIN)? Many a times it is seen that a company is created and it raises money from investors and public and vanishes with the Director and are not been traceable. The main purpose of introducing Director Identification Number (DIN) was to keep a Date base of the Directors of the the incorporated companies and to keep complete information about the Directors so that they don’t cheat anyone and in case they do, can be traceable. 13 Company Secretarial Director Identification Number (DIN) not only helps fixing the identity of Practices the Director but also relates his participation in others companies, past and present. In case any change of address or particular is faced by the DIN holder, they are suppose to inform the central government about the same. So this keeps the database ‘live’ always. As per the recent amendment in the Companies Act, 1956, DIN has become mandatory for all the directors. DIN is individual specific and not company specific, so only one DIN is required per director/person irrespective of how many companies he is managing. This is a pre- requisite to incorporate a new company. 1.6.5 Types of Directors For start-ups and high growth businesses there are three types of directors available to them – the executive director, the non-executive director, and the independent director. A good board will aim to have a mixture of these three types as each brings a different element to the table. A) Executive directors Executive directors have a dual role as employees of the company and as directors. As directors they:  have responsibilities, but must retain a degree of independence from their executive role.  should be appointed as individuals, and not because of any position they hold within the company.  must always be alert to the potential for conflicts between their management interests and their duties as a director. An executive director brings an insider’s perspective to the table which can be very valuable when discussing the operations of a company. B) Non-executive directors: These directors bring an outside perspective to the table and often a wealth of knowledge and experience. A non-executive director may be representing a major shareholder but an independent director will generally have no other links with the company other than sitting on the board. Non-executive directors' principal role is to provide independent judgement. This includes:  outside experience and objectivity on all issues which come before the board.  understanding detailed knowledge of the company's business activities and on-going performance, so they can make informed decisions.  recognising the division between the board and management. 14 The boundary often gets blurred in start-ups and high growth businesses. For Management of the Company example, a non-executive director may be appointed to fill a gap in knowledge and expertise, and end up assisting management in that area. C) Independent directors: To gain true separation between management and governance it makes sense to include independent board members. Some owners can feel threatened by this independence, but in the end their outside thinking can enable the business to grow and develop valuable long-term strategy. Characteristics of the best independent directors  Business experience – A successful business person will have been 'in the firing line', experiencing and learning from real life experience rather than seminars and books. They will most likely have:  experienced adversity, risk and possibly had to fight for the survival of their business  scars and ‘war stories’ to help you avoid making similar mistakes.  All-round independence – an independent director will be someone who will not compromise loyalty. They are independent in every way:  intellectually  financially  politically. D) Silent and absent directors: A good director is an active one, quiet ones are wasting valuable space, time, and resources. In many start-ups or high growth businesses formed in partnership, it is common for one director take the lead in the running of the business, while the other is the silent partner. Do the business a favour and pull in people with skills and experience, who have a voice and something to add value to the business. The benefits of having one or more independent directors For start-ups and high growth businesses, there are several benefits from having one or more independent directors: a) they bring an objective viewpoint to the board, b) they are unlikely to have any family or majority ownership ties to the business c) they can cast a critical eye over the business without preconception or prejudice. d) they are also able to act in the capacity of counsellor, sounding board and devil's advocate. 15 Company Secretarial e) they bring a one-off business knowledge and experience in many areas. Practices f) many start-ups and high growth businesses tend to operate in a vacuum without looking at outside forces. g) outside directors introduce a fresh, and usually innovative, perspective. h) they may compensate in some of the key areas where management may be weak. i) the outside director may act a bit like a consultant. j) bring input and the ability to assist with objectivity. 1.7 CHAIRMAN OF THE COMPANY / BOARD OF DIRECTORS Every meeting of the Board of Directors must be presided over by a chairman. Regulations regarding appointment of a chairman are given in the Articles of a company. Normally, the Board elects its chairman for a particular period. If no chairman is elected by the Board, or if at any Board meeting, he is not present within 5 minutes, the directors present may choose one of them to be the chairman of the meeting. Chairman acts as the presiding officer of a Board meeting. As per Regulation 76 of “Table A”, subject to the articles, chairman is the chief authority in the conduct and control of Board meeting. He is given a ‘second’ or ‘casting’ vote in the case of an equality of votes. In the Companies Act, 2013 there is a provision of compulsory appointment of woman director. Every company shall have atleast one of the directors who has stayed in India for 182 days or more in the previous calendar year. Such provision was absent in the Companies Act, 1956. In Addition, The Companies Act, 2013 provides that listed public company shall have at least one third of the total number of directors as independent directors. Such provision was absent in the Companies Act, 1956. 1.7.1 Who can be a Board Chairman ? 1) Only a director of the company can be appointed as a Chairman. 2) There is no requirement that only a whole-time director shall be appointed as the Chairman. Even a part-time director can be elected as a chairman. 3) A director need not be a shareholders (unless the Articles require holding of qualification shares by the directors) and as such a non- shareholders director can also be appointed as a chairman at a Board meeting. 16  Management of the Company 1.7.2 Role of the Chairman at the Board Meetings 1) Chairman has to see that Board meeting has been properly convened and that the required quorum is present in the Board meeting. 2) He has to see that the statutory provisions as laid down by the Act are complied with. 3) He has to preserve order at the meeting and conduct the deliberations in an orderly manner. 4) He has to take care and see that proceedings are conducted in a fair and impartial manner. 5) He has to act in good faith and to be fair and impartial in the conduct of his duties. 6) He has to adjourn the meeting, if necessary. 7) He has to ensure that sense of the meeting is properly and accurately ascertained. To be an effective leader and mediator, a Chairman must be trusted by the other members of the Board and also by the officers and management of the company as well as the shareholders. In order to gain the trust of peer Board members, as well as management, it is important that the Chairman be fair.A good Chairman should also be open minded and should encourage Board members to voice their views. This is critically important because the whole concept of having a Board of directors is based on the belief that the best decisions are those that are made after a free and open sharing of views by people with different types of experiences. 17 Company Secretarial 1.8 THE CHIEF EXECUTIVE OFFICER (CEO) Practices 1.8.1 Meaning A chief executive officer (CEO) is the highest-ranking executive in a company, whose primary responsibilities include making major corporate decisions, managing the overall operations and resources of a company, acting as the main point of communication between the board of directors (the board) and corporate. Company can have other management personnel i.e. in addition to the company directors. If empowered by the articles, in addition to company directors, a company may employ Chief Executive Officer (CEO) for day-to-day administration 1.8.2 Roles and Responsibilities of a CEO The roles and responsibilities of a CEO vary from one company to another, often depending on the organizational structure and/or size of the company. In smaller companies, the CEO takes on a more “hands-on role”, such as making lower-level business decisions. In larger companies he usually only deals with high-level corporate strategy and major company decisions. Other tasks are delegated to other managers or departments. The typical duties, responsibilities and job description of a CEO include: 1. Communicating on behalf of the company with shareholders, government entities and public. 2. Leading the development of the company’s short- and long-term strategy. 3. Creating and implementing the company or organization’s vision and mission 4. Evaluating the work of executives of the company, including vice presidents and presidents. 5. Maintaining awareness of the competitive market landscape, expansion opportunities etc. 18 6. Ensuring that the company maintains high social responsibility. Management of the Company 7. Setting strategic goals and making sure they are measurable and describable. 8. Working closely with the CFO (Chief Financial Officer) to prepare annual budgets, complete risk analysis on potential investments, and advise the Board of Directors with regard to investment risk and return. 1.9 COMPANY AUDITORS 1.9.1Meaning An auditor is a person authorized to review and verify the accuracy of financial records and ensure that companies comply with tax laws. They protect businesses from fraud, point out discrepancies in accounting methods and, on occasion, work on a consultancy basis, helping organizations to spot ways to boost operational efficiency. Auditors work in various capacities within different industries. Company Auditor means the independent registered public accounting firm responsible for conducting the audit of the Company's annual financial statements. In the case of public companies, the main duty of an auditor is to determine whether financial statements follow generally accepted accounting principles. To meet this requirement, auditors inspect accounting data, financial records and operational aspects of a business and take detailed notes on each step of the process, known as an audit trail. Once complete, the auditor’s findings are presented in a report that appears as a preface in financial statements. Separate, private reports may also be issued to company management and regulatory authorities as well. 1.9.2 APPOINTMENT OF AN AUDITOR The law under which we appoint lays down the procedure of appointment of auditors and also the rights, duties and the functions of the auditor. An auditor shall be independent. Here we will discuss the appointment of an 19 Company Secretarial auditor as per the provisions of the Companies Act, 2013. Within thirty Practices days from the date of the registration of the Company other than the Government Company, it’s Board of Directors need to appoint an individual or a firm as the first auditor of the company. The members shall ratify the appointment of the first auditor in the first annual general meeting of the company. The first auditor of the company holds office from the conclusion of the first annual general meeting until the conclusion of the sixth annual general meeting and after this until the conclusion of every sixth meeting. However, the members of the company ratify the appointment of auditors at every annual general meeting. However, in a case where the Board of Directors fails to appoint the first auditors of the company, they shall inform the members of the Company. Thus, the members shall appoint the first auditors of the company within ninety days at an extraordinary general meeting. The auditor so appointed shall hold the office until the conclusion of the first AGM. The Board of Directors shall fill any casual vacancy in the office of the auditor of a company other than a Government Company within thirty days. This does not include any casual vacancy arising out of the resignation of an auditor. However, in case of a casual vacancy arising out of the resignation of an auditor, the Board of Directors shall fill the vacancy within thirty days. But, the company needs to approve this appointment at a general meeting within three months of the Board’s recommendation. Such an auditor shall also hold the office till the conclusion of the next annual general meeting. 1.9.3 Rights and powers of a Company Auditor According to section 227 (1) of the Companies Act, 1956, a company auditor has the following rights: 1. Right of Access to Books of Accounts: Every auditor of a Company has a right of access at all times to the books of accounts and vouchers of the company whether kept at the head office of the company or elsewhere. 2. Right to obtain Information and Explanations: He has a right to obtain from the Directors and officers of the company any information and explanation as he thinks necessary for the performance of his duties as an auditor. 3. Right to Correct any Wrong Statement: The auditor is required to make a report to the members of the company on the accounts examined by him and on every Balance Sheet and Profit and Loss Account and on every other document declared by this Act to be part of or annexed to the Balance Sheet or Profit and Loss Account which are laid before the company in General Meeting during his tenure of office. 20 4. Right to visit Branches: According to section 228, if a company has a Management of the Company branch office, the accounts of the office shall be audited by the company’s auditor appointed under section 224 or by a person qualified for appointment as auditor of the company under section 226. 5. Right to Signature on Audit Report: Under section 229, only the person appointed as auditor of the company, or where a firm is so appointed, only a partner in the firm practicing in India, may sign the auditor’s report, or sign or authenticate any other document of the company required by law to be signed or authenticated by the auditor. 6. Right to receive Notice relating to General Meeting : Under section 231 an auditor of a company has a right to receive notices and other communications relating to General Meeting in the same way as a member of the company. 7. Right of being indemnified: Under section 633, an auditor (being an officer of a company), has a right to be indemnified out of the assets of the company against any liability incurred by him defending himself against any civil and criminal proceedings by the company if it is proved that the auditor has acted honestly or the judgement delivered is in his favour. 8. Right to have Legal and Technical Advice: He has a right to seek the opinion of the experts and, thus, take legal and technical advice. This is necessary to give his opinion in his report. 1.9.4 AUDIT REPORT The auditing of the accounts of a company is usually done by an independent external auditor. An audit report is a letter from the auditor of a company that is the end result of the audit process. It states the auditor’s opinion on whether the company’s financial statements such as the balance sheet are in compliance with the generally accepted accounting principles (GAAP) and if they are free from material misstatement. The audit report is generally accompanied by the company’s annual report. The audit report is required by banks, financial institutions, investors, creditors, and regulators. When the auditor issues a clean report, it means that the company’s financial statements have been found to be fully compliant with accounting standards. An unqualified report will tell you that the financial statement could have some errors. Audit reports are very important to a company. Investors rely on the audit report to assess the financial health of the company and they base many important decisions on the audit report. Regulatory bodies also read the audit report as it tells them how accurate the financial information reported is. When an audit report is adverse it can seriously affect the company’s status and reputation. It is essential to have good accounting practices so that the audit of accounts goes well. 21 Company Secretarial 1.9.5 Types of audit report Practices An auditor releases an audit report that states the auditor’s opinion on the financial statements of the company. There are four common types of auditors reports: a) Clean audit report : This is the best type of report that a company can receive from an auditor. A clean report is one that states that the financial statements of the company fully comply with GAAP and are free of any material misstatement. It indicates that the auditors are satisfied with the company’s financial reporting and that they comply with the governing principles and laws applicable. Most audits result in clean audit reports. b) Qualified opinion: There are two situations in which a qualified report would be issued by the auditor. -1) If there are material misstatements in the financial statements but they are not pervasive, 2) If there is insufficient evidence to base the audit opinion on but the possible effects of any material misstatements are not pervasive. The problem areas where there has been some calculation mistake will usually be specified by the auditors in the reports. This enables the company to fix the errors. When we use Tally software for our accounting, we stay in compliance with regulations and there is no scope for a calculation error in computing the reports. C) Adverse opinion: An adverse opinion on an audit report is the worst possible report that we can get. An adverse opinion means that the misstatements in the financial statements are both material and pervasive. An adverse opinion can damage a company’s reputation and even have legal ramifications unless the issues are corrected. There are chances that the errors could have crept in by mistake, but they could also be the result of fraud. If there is an adverse opinion on account of illegal activities in the company, the corporate officers may face criminal charges. Investors and regulators will also reject the company’s financial statements as a result of the adverse opinion in the audit report. If there are errors that were corrected, the company will have to have their financial statements re-audited satisfied before the statements are accepted. d) Disclaimer of opinion: An auditor would issue a disclaimer of opinion if: a) The auditor was unable to get enough audit evidence to base an opinion on, b) They did not get satisfactory answers to their questions, c) The possible effects of the undetected misstatements could be material and pervasive 22 This may happen if the auditor was denied access to certain financial Management of the Company information or if the auditor is unable to be impartial. A disclaimer of opinion means that the financial status of the company could not be ascertained. 1.9.6 Duties of an Auditor 1. To Enquire: The duties of an auditor have been extended by the insertion of sub- section (1A) of section 227 under the Companies (Amendment) Act 1965 which is reproduced below: With prejudice to the provision of sub-section (1), the auditor shall enquire: a. Whether loans and advances made by a company on the basis of security have been properly secured and whether the terms on which they have been made are not prejudicial to the interests of the company or its members. b. Whether transactions of the company which are represented merely by book entries are not prejudicial to the interests of the company. c. Where the company is not an investment company within the meaning of section 372 or a banking company, whether so much of the assets of the company, as consists of shares, debentures and other securities have been sold at a price less than at within they were purchased by the company. d. Whether loans and advances made by the company have been shown as deposits. e. Whether personal expenses have been charged to revenue account. f. Whether it is stated in the books and papers of the company that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in account books and the Balance sheet is correct, regular and not misleading. 2. Under section 227 (2, 3, 4 and 5), the duties of the auditor which relate to his report are given hereunder: The Report: The auditor shall report to the shareholders on the accounts examined by him. The report so submitted shall contain the following: a. Whether, in his opinion, the Profit and Loss Account referred to in his report exhibits a true and fair view of the profit or loss. b. Whether, in his opinion, the Balance Sheet referred to in his report is properly drawn up so as to exhibit a true and fair view of the state of affairs of the business according to the best of the information and explanations given to him as shown by the books of accounts. 23 Company Secretarial c. Whether he has obtained all the information and explanations which to Practices the best of his knowledge and belief were necessary for the purpose of his audit. d. Whether, in his opinion, proper books of accounts as required by law have been kept by the company so far as appears from his examination of those books, and proper returns adequate for the purpose of his audit have been received from branches not visited by him. e. Whether the report on the accounts of any branch office audited under section 228 by a person other than the company’s auditor has been forwarded to him as required by (c) of sub-section (3) of that Section and how he had dealt with the same in preparing the auditor’s report. f. Whether the company’s Balance Sheet and Profit and Loss Account dealt with by the report are in agreement with the books of accounts and returns. 1. Where any of the matters referred to above is answered in the negative or with a qualification, the auditor’s report shall state the reason for the answer. 2. Under section 227 (4A), the Central Government may, by general or special order, direct that, in the case of such class or description of companies as may by specified in the order, the Auditor’s Report shall also include a statement on such matters as may be specified therein. 3. The Central Government before making any such order may consult the Institute of Chartered Accountants of India constituted under the Chartered Accountants Act, 1949, in regard to the class or description of companies, if the Government thinks it necessary. 4. In exercise of the powers conferred by sub-section (4A) of section 227 of the Companies Act, 1956, the Central Government has issued the Manufacturing and other Companies (Auditor’s Report) Order, 1975 which applies to every company which is engaged in one or more of the following activities: 5. The Company Law Board has now issued a fresh order viz. the Manufacturing and other companies (Auditor’s Report) order, 1988 which has superseded the previous order of 1975. 3. Other Statutory Duties: Under section 229, it is the duty of an auditor to sign the report prepared by him. Only a partner in the firm practicing in India may sign the Auditor’s Report or authenticate any other document. Under section 56(1), the Prospectus issued by an existing company shall contain a report from the auditor of the company regarding: (i) Profits and losses; (ii) Assets and liabilities of the company and its subsidiaries; and 24 (iii) Rates of dividends paid by the company for each of the five it is Management of the Company auditor’s duty to submit his report. According to section 165 (4), the auditors of the company shall, in so far as the statutory report relates to the shares allotted by the company, the cash received in respect of shares and the receipts and payments of the company, certify it as correct after the same has been certified as correct by not less than two Directors of the company, one of whom shall be a Managing Director. (Every company shall within a period of not less than one month and not more than six months from the date from which the company is entitled to commence business, hold a General Meeting of the members which shall be called the statutory Meeting.) 6. When a company goes into its voluntary winding up and a declaration of solvency is made by its Directors under section 488 (I), such a declaration is to be accompanied by the report of the auditors of the company under section 488(2). It is the duty of the auditors to make such a report. Under section 240, it is the duty of an auditor “to preserve and to produce to an inspector or any person authorized by him in this behalf with the previous approval of the Central Government, all books and papers of, or relating to the other body corporate which are in their custody or poser and otherwise to give to the Inspector all assistance in connection with the investigation which they are reasonably able to give “. 1.10 SUMMARY According to Sec. 2(30), “A director is the officer of the company.” Directors act as agents of shareholders and look after the management of the company. Company is an artificial person created by law. It does not have physical existence. It is invisible and acts through human agency. This human agency of company management is the Board of Directors. The individual members of the Board are called Directors and collectively they form the Board. Every public company by virtue of Sec. 43 A, shall have at least three directors, private company shall have at least two directors. [Sec. 252]. Every meeting of the Board of Directors must be presided over by a chairman. Regulations regarding appointment of a chairman are given in the Articles of a company. Normally, the Board elects its chairman for a particular period. Chief executive officer (CEO) is appointed as the highest-ranking executive in a company, whose primary responsibilities include making major corporate decisions, managing the overall operations and resources of a company, acting as the main point of communication between the board of directors (the board) and corporate. An auditor is appointed by Board of Directors. He is a person authorized to review and verify the accuracy of financial records and ensure that companies comply with tax laws. They protect businesses from fraud, point out discrepancies in accounting methods and, on occasion, work on a consultancy basis, helping organizations to spot ways to boost operational efficiency. 25 Company Secretarial 1.11 EXERCISE Practices 1. Discuss the powers of Chairman of the Board of Directors. 2. Explain the role played by CEO 3. Explain the procedure of appointment of an Auditor 4. Discuss the duties of Auditor of the company 5. Write short notes on - a) Qualification of Director, b) Remuneration of Director   26  2 COMPANY MEETINGS Unit Structure: 2.0 Objectives 2.1 Introduction 2.2 Types of Company Meetings 2.3 Shareholders Meetings 2.4 Annual General Meeting and Secretarial Duties 2.5 Board Meetings 2.6 Secretarial Duties – Before, During and after Company Meetings 2.7 Essentials/ Requisites of Valid General Meeting 2.8 Notice of the Meeting 2.9 Agenda of the Meeting 2.10 Chairman of the Meeting 2.11 Quorum at the Meeting-Concept & Statutory Provisions 2.12. Proxy at the Meeting-Concept & Statutory Provisions 2.13 Motion 2.14 Resolution 2.15 Minutes –Concept, Types and Methods 2.16 Voting 2.17 Summary 2.18 Exercise 2.0 OBJECTIVES After studying the unit the students will be able to:  Explain the types of Company Meetings  Understand the concepts Notices, agenda, Chairman, Quorum and Proxy  Explain the Statutory Provisions related to Notices, agenda, Chairman, Quorum and Proxy  Understand the concepts and types of Motion, Resolution, Minutes, Minutes 27 Company Secretarial 2.1 INTRODUCTION Practices Company forms of business organisation wherein capital is contributed by shareholders and management is entrusted in the hands of Board of directors are popular form of business entities. Here the company meetings plays very important role in decision making and policy framing. Moreover, the company meetings are governed by the specific provisions laid down Chapter VII “Management and Administration” in the Companies Act, 2013 and also the rules made there under. Company secretary should have an eye over the conduct of meetings and preparations of meetings. 2.2 TYPES OF COMPANY MEETINGS 2.2.1 Meaning and Definition Meeting is an official gathering of two or more persons for lawful business. The word “meeting” is not defined anywhere in the Companies Act. Ordinarily, a company may be defined as gathering, assembling or coming together of two or more persons (by previous notice or by mutual arrangement) for discussion and transaction of some lawful business. Following are the few definitions of meeting: In the case of 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.” According to P.K. Ghosh “Any gathering, assembly or coming together of two or more persons for the transaction of some lawful business of common concern is called meeting.” According to K. Kishore, “A concurrence or coming together of at least a quorum of members by previous notice or mutual agreement for transaction business for a common interest is meeting.” Thus, company meeting s are very important for discussion and taking rational decisions in democratic manner. The meeting can be of shareholders, directors or class meetings of preference shareholders as well as creditors. 2.2.2 Types of Meeting Meetings under the Companies Act, 2013 may be classified as: 1. Shareholders meeting- a. Annual General Meeting, b. Extra-Ordinary General Meeting c. Class Meeting 2. Directors Meeting- a. Board Meeting b. Committee Meeting 28  3. special meeting- Company Meetings a. Class meeting b. Creditors meeting 4. Other meetings: Meetings of the Debenture holders Meetings of creditors & contributories a. Meetings of creditors for purpose other than winding up. b. Meetings of creditors for winding up. c. Meetings of contributories in winding up. 2.3 SHAREHOLDERS MEETINGS Shareholders meetings are called general meetings. In such meetings, important matters such as alterations in Memorandum or Articles, election of directors, approval of annual accounts are discussed and final decision is taken. Under the Companies Act, 1956, the first meeting of shareholders in public company i.e. statutory meeting was mandatory but now under the new Companies Act, 2013 that concept is fully done away. Such meeting was necessary to approve the statutory report in statutory meeting. But now no need of statutory meeting under the new companies Act i.e. Companies Act, 2013 2.3.1 Annual General Meetings [Section 96] I) Every company other than a One Person Company (OPC) shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and the company shall specify the meeting as such in the notices calling Annual General Meeting. II) The gap between 2 annual general meeting should not exceed 15 months: There should not be more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next first annual general meeting. It shall be held within a period of nine months from the date of closing of the first financial year of the company and in any other case, within a period of six months, from the date of closing of the financial year:  Extension of time: Provided also that the Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall be held, by a period not exceeding three months.  Day, Hour and place of AGM: Every annual general meeting shall be called during business hours, that is, between 9 a.m. and 6 p.m. on any day that is not a National Holiday and shall be held either at the registered office of the company or at some other place within the city, 29 Company Secretarial town or village in which the registered office of the company is Practices situated.  Notice of meeting: A general meeting of a company may be called by giving not less than clear twenty-one days ‘notice either in writing or through electronic mode in such manner as may be prescribed: Section 101. Notice of meeting. 1) A general meeting of a company may be called by giving not less than clear twenty-one days‘ notice either in writing or through electronic mode in such manner as may be prescribed: Provided that a general meeting may be called after giving a shorter notice if consent is given in writing or by electronic mode by not less than ninety-five percent of the members entitled to vote at such meeting. 2) Every notice of a meeting shall specify the place, date, day and the hour of the meeting and shall contain a statement of the business to be transacted at such meeting. 3) The notice of every meeting of the company shall be given to (a) every member of the company, legal representative of any deceased member or the assignee of an insolvent member; (b) the auditor or auditors of the company; and (c) every director of the company. 4) Any accidental omission to give notice to, or the non-receipt of such notice by, any member or other person who is entitled to such notice for any meeting shall not invalidate the proceedings of the meeting. Section 97. Power of Tribunal to call annual general meeting. 1) If any default is made in holding the annual general meeting of a company under section 96, the Tribunal may, notwithstanding anything contained in this Act or the articles of the company, on the application of any member of the company, call, or direct the calling of, an annual general meeting of the company and give such ancillary or consequential directions as the Tribunal thinks expedient: Provided that such directions may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting. 2) A general meeting held in pursuance of sub-section (1) shall, subject to any directions of the Tribunal, be deemed to be an annual general meeting of the company under this Act. 30 Section 121. Prescribes for the Report on annual general meeting. Company Meetings 1) Every listed public company shall prepare in the prescribed manner a report on each annual general meeting including the confirmation to the effect that the meeting was convened, held and conducted as per the provisions of this Act and the rules made there under. 2) The company shall file with the Registrar a copy of the report referred to in subsection (1) within thirty days of the conclusion of the annual general meeting with such fees as may be prescribed, or with such additional fees as may be prescribed, within the time as specified, under section 403. 3) If the company fails to file the report under sub-section (2) before the expiry of the period specified under section 403 with additional fees, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees. Sections 96 to 98. Punishment for not calling AGM in time: Punishment for default in complying with provisions of If any default is made in holding a meeting of the company in accordance with section 96 or section 97 or section 98 or in complying with any directions of the Tribunal, the company and every officer of the company who is in default shall be punishable with fine which may extend to one lakh rupees and in the case of a continuing default, with a further fine which may extend to five thousand rupees for every day during which such default continues 2.3.2 Extraordinary General Meetings Annual general meetings are conducted every year so there is a long-time gap between two AGMs.So, if any matter of urgent nature arises it can be urgently dealt with Extra ordinary general meeting. All the discussion done at such extra ordinary meeting shall be treated as special business. Calling such an EGM and conducting such EGM shall be same as convening and conducting AGM. The notice of such meeting must be sent 21 days in advance before the date of meeting. Quorum must be 5 members for Public limited company and 2 members for Private limited company. The resolution passed at such meeting must be filed with ROC within 30 days from the date of passing of the resolution. Section 100. Governs Calling of extraordinary general meeting. (Convened by directors - Convened by directors on the requisition of the shareholders u/s 100) 31 Company Secretarial 1) The Board may, whenever it deems fit, call an extraordinary general Practices meeting of the company. 2) The Board shall, at the requisition made by, a) in the case of a company having a share capital, such number of members who hold, on the date of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date carries the right of voting; b) in the case of a company not having a share capital, such number of members who have, on the date of receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said date a right to vote, call an extraordinary general meeting of the company within the period specified in sub-section (4). 3) The requisition made under sub-section (2) shall set out the matters for the consideration of which the meeting is to be called and shall be signed by the requisitionists and sent to the registered office of the company. 4) If the Board does not, within twenty-one days from the date of receipt of a valid requisition in regard to any matter, proceed to call a meeting for the consideration of that matter on a day not later than forty-five days from the date of receipt of such requisition, the meeting may be called and held by the requisitionists themselves within a period of three months from the date of the requisition. 5) A meeting under sub-section (4) by the requisitionists shall be called and held in the same manner in which the meeting is called and held by the Board. 6) Any reasonable expenses incurred by the requisitionists in calling a meeting under sub-section (4) shall be reimbursed to the requisitionists by the company and the sums so paid shall be deducted from any fee or other remuneration under section 197 payable to such of the directors who were in default in calling the meeting.  Secretarial duties and functions relating to EGM: 1. Before EGM:  Scheduling the Board meeting prior to EGM  Circulating the notice of the meeting  Sending proxy forms along with notice of the meeting  Making suitable arrangements for the meeting 2. During EGM:  Reading the company EGM meeting notice  Ascertaining quorum  Providing all necessary information and documents to chairman of the meeting. 32   If demanded, arranging for the poll Company Meetings  Taking notes of the proceedings of the meeting. 3. After EGM:  Recording resolution passed in the meeting  Drafting minutes of the meeting.  Filing minutes with Registrar within 30 days of the meeting. 2.3.3 Class Meeting of Shareholders covers class meetings of preference shareholders These meetings are convened and conducted when matters relating to the rights of specific classes i.e. preference shareholders or debenture holders is proposed to alter, change or vary. The proposed change must be informed and intimated the concerned members properly. For instance, if it has been decided to cancel arrears of dividend on cumulative preference shares then it is important to call a meeting of such affected shareholders and to pass a resolution required under the provisions of the Companies Act. 2.4 ANNUAL GENERAL MEETING AND SECRETARIAL DUTIES Every Company, apart from One-person Company (OPC) must have to hold in addition to other meetings, by giving a notice about the meeting, not more than 15 months in between the date of AGM to the next. A Company may hold its first AGM within the period of 9 months from closing of its first financial year otherwise in other cases within the period of 6 months. [Section 96(1) of the Companies Act, 2013] 2.4.1 Agenda of AGM The agenda of annual general meeting may involve following:  Minutes of previous meeting must be presented and approved.  Financial statements must be presented for its shareholders approval.  The decisions made by directors over the previous years are ratified by shareholders.  Shareholders elect the board of directors for upcoming years. 2.4.2 Quorum of meeting As provided under section 103 of the companies act the quorum of the company will be: 1. In case of public company should be:  Five personally present in case the total member on date of the meeting does not exceed 1000,  15 in case more than thousand but less than five thousand and; 33 Company Secretarial  30 in case of more than 5000 members on the date of meeting. Practices 2. While in the case of a private company only 2 members if personally present will make up the quorum of the meeting. 3. It has been also provided that in case the quorum is not fulfilled within half an hour the scheduled time of the meeting then the meeting would be adjourned to the same day of the next week. 4. In case the quorum is not filled within half an hour in the adjourned meeting then the present members would form the required quorum for the meeting.  Provided that in case of an adjourned meeting or of a change of day, time or place of meeting under clause (a), the company shall give not less than three days’ notice to the members either individually or by publishing an advertisement in the newspapers (one in English and one in vernacular language) which is in circulation at the place where the registered office of the company is situated. 5. In the case of the meeting by requisition under section 100, the meeting stand cancelled in case of lack of quorum as provided under section 103(2)  Notice of Meeting Notice is written invitation sent to shareholders regarding their AGM. Following are the requirements of notice for general meeting of shareholders: 1. Every member of the company should receive notice of meeting in written form. 2. Notices shall be sent other important persons such as auditors, secretarial auditor, and debenture trustees if it is necessary. 3. Notice should be sent by hand delivery or by post, ordinary or speed post or by courier, fax or an e-mail etc. 4. Notice shall be displayed on the website of the company. 5. Notice should clearly specify the nature of meeting and business to be transacted at meeting. 6. Notice and other accompanying documents should be given at least 21 days in advance of the meeting. 7. No other item other than mentioned in the Notice and agenda should be taken up at the time of meeting. 8. Attendance slip and proxy form should be attached along with notice with clear instruction of filling and stamping 34 9. Such meeting convened properly issuing notice should not be Company Meetings postponed or cancelled. 2.4.3 Annual General Meeting – Company Secretary Functions and Duties The Company Secretary is responsible for making all the arrangements for holding the annual general meetings of the company. He is required to perform the following functions and duties in this connection.  Before the Meeting: 1. To convene a Board meeting, after giving notice as per Section 173(3), as soon as the final accounts are ready, invite the Auditors for their report and transact the following business (in case of listed company, give advance notice to stock exchange): i. To consider and discuss the report of Audit Committee on the Annual accounts. ii. To approve the accounts and authorise signing of accounts. iii. To secure Auditor’s report on the accounts. iv. To approve the draft of the Board’s Report in compliance with the provisions of Section 134 of the Act and to authorise the Chairman to sign the Report on behalf of the Board. v. To consider the payment of dividend, if any, in case it is to be declared in the Annual General Meeting. (Note: In case of listed company prior intimation has to be sent to stock exchange of the Board meeting where recommendation of dividend is proposed to be considered at least 2 working days in advance vide clause 19 of listing agreement.) vi. If the Auditors’ report contains any reservations qualification or adverse remarks, the Board’s Report must contain explanations there for. 2. To fix time, date and place for the annual general meeting, approve the draft notice and also authorise the Secretary to issue Notice for the meeting. The Notice must contain Ordinary Business in accordance with the provisions of Section 102 of the Act, While fixing the time, date and place for the annual general meeting, care should be taken that the time should be during 9 am to 6 pm, the date should not be a National holiday, and the place should be either the registered office of the company or some other place within the same city, town or village in which the registered office of the company is situated. 3. To consider the closure of the Register of Members and the Share Transfer Books of the Company in compliance with the provisions of Section 91 of the Act and to authorise the Secretary to arrange for its publication in a newspaper. 35 Company Secretarial 4. In case of listed company, a notice in advance of at least 7 working Practices days should be sent to the stock exchange(s) about the proposed dates for such closure and also to comply with the requirement of stock exchange for book closure. 5. Immediately after the Board meeting, the stock exchanges should b