Company Law

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INCORPORATION OF COMPANY
Q1. DEFINE COMPANY? EXPLAIN THE CHARACTERISTICS OF COMPANY?
Company is a voluntary association of persons formed for the purpose of carrying on some
business. The association is incorporated or registered. It is an artificial person it has a distinct
name and common seal.
Definitions of company:
According to Companies Act, 2013 section 2 (20) defines a company as “a company
incorporated under Companies Act 2013 or under any previous company law”.
According to L.H Haney “a company is an incorporated association, which is an artificial person
created by law, having a separate entity, with perpetual succession and common seal”.
CHARECTERISTICS OR FEATURES OF COMPANY:
1. ARTIFICIAL PERSON: A company is created by law and exists independent of its
members. Like a person a company can own property, open bank account in its name,
enter contracts with outsiders, raise capital, borrow money, sue others etc. therefore a
company is called artificial person.
2. INCORPORATED ASSOCIATION: A company is a voluntary association of many persons.
A company must be registered under company law. For forming a public company
atleast 7 persons and for forming a private company at least 2 persons are required. For
forming one person company only one person is required.
3. SEPARATE LEGAL ENTITY: Being an artificial person a company is a legal entity, different
and separate from its members. It has its own corporate name and works under that
name. it can hold assets on its name, borrow/lend funds, open a bank account on its
name, enter into contracts. It can sue others and others can sue it. The members are not
liable for the liabilities of the company.
4. PERPETUAL SUCCESSION: the company has a permanent existence. The shareholders
may come and go, but the company will go on forever. The continuity of the company is
nost affected by death, lunacy or insolvency of its shareholders. The company can
wound up only by operation of law. The shares of the company may change hands a
number of times, but the continuity of the company is not affected at all.
5. LIABILITY: The liability of the shareholders is limited to the value of shares they have
purchased. In case company incurs huge losses, the shareholders can only be called
upon to pay the unpaid balance of their shares. The liabilities of company are the
liabilities of company, the shareholders will not be personally liable. However, the
shareholders of an unlimited company have unlimited liability. The liability of the
members of a company limited by guarantee is limited to the guaranteed amount.
6. COMMON SEAL: A company being artificial person cannot put its signature. The law
requires every company to have a seal and get its name engraved on it. The seal of the
K.NAVEEN M.COM,MBA,LLB 9059206749

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company is affixed on all important documents and contracts. The directors must
witness the affixation of the seal.
7. TRANSFERABILITY OF SHARES: the shares and debentures of members in a public
limited company shall be movable property and can be transferable in the manner
provided in the Articles of the company. They can easily purchase and sell through stock
exchange.
8. CONTROL: There is separation between ownership and management. The owners of the
company are shareholders but they are widely spread in the country. The shareholders
elect the Board of Directors to manage and control the company. The shareholders do
not interfere in the day to day working of the company. The Board of Directors appoint
top officials for running he business.
9. SHARE CAPITAL: the entire capital of the company is divided in to certain specified
number of equal value and each unit is called a share. This enables the company to
mobilize huge capital from huge investors. The persons who owns or buy these shares
are called “shareholders” or members of the company.
10. SEPARATE PROPERTY: A company is separate legal entity having its own corporate
name. it can hold properties in its own name. no members can claim himself to be the
owner of the company property during its existence. Property of the company is not the
property of the shareholders, it is the property of the company.
Q2. EXPLAIN THE TYPES/KINDS OF COMPANIES?

OR
EXPLAIN THE CLASSIFICATION OF COMPANIES?
name and common seal. Companies can be classified under the following basis:
(A) COMPANIES ACCORDING TO INCORPORATION: The companies may be divided into
three categories according to incorporation:
1. CHARTERED COMPANIES: This type of companies is incorporated under Royal
charter issued by the King or Queen or Head of the State. Under the charter, certain
exclusive rights and privileges are granted to the company for undertaking certain
commercial activities. If the company violates the rules, the head of the state can
close the company. Chartered Companies are famous in England in the nineteenth
century. Ex. EAST INDIA COMPANY, THE CHARTERED BANK OF INDIA ETC.
2. STATUTORY COMPANY: These are the companies formed under special act of
Parliament or State Legislation. The objects, powers, rights and responsibilities of
these companies are clearly defined in the Act. These companies may or may not
use the word “limited”. They are established to provide public utility services to

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people. Ex: RESERVE BANK OF INDIA, INDUSTRIAL DEVELOPMENT BANK OF INDIA,

LIC ETC.
3. REGISTERED COMPANIES: these are the companies formed and registered under
the provisions of Companies Act, 2013 or under earlier Acts. The methods of
formation, management and liquidation are said under the Act. Registered
companies may be public or private companies.
(B) ACCORDING TO LIABILITY: According to liability, the companies may be classified into
three categories.
1. COMPANIES LIMITED BY SHARES: The company limited by shares have a share
capital. The capital is divided into small and equal units known as Share. The
shareholders pay their share money at one time or by installments. The
shareholders are not liable to pay anything more than the value of shares held by
them, whatever be the liabilities of the company.
2. COMPANIES LIMITED BY GUARANTEE: These companies are also formed under the
Companies Act with a stipulation in the memorandum clause that members are
guaranteed to pay a certain amount of money in case of its winding up. The
amount, which members undertake to pay is called the guarantee money.
Sometimes the members are required to buy shares of fixed value and also give a
guarantee for more sum in the event of its liquidation.
3. UNLIMITED COMPANY: The companies registered without limiting the liability of
members to the value of shares are called unlimited companies. The companies are
just like partnership concerns where the liability is unlimited. All the members will
be liable to meet the liabilities of the company to an unlimited extent. These
companies are rarely formed.
(C) ACCORDING TO TRANSFERABILITY OF SHARES:
1. PUBLIC COMPANY: Section 2 (71) of the Companies Act, 2013 defines a public
company is a company which
(a) Is not a private company,
(b) Has a minimum paid up capital of Rupees 5 lakh
(c) Is a private company, subsidiary of public Company.
FEATURES OF PUBLIC COMPANY:
1. It is formed with a minimum of seven members,
2. It can invite general public to subscribe to its shares,
3. There is no restriction on the maximum no of members,
4. It permits easy transfer of shares,
5. Before starting the business, it requires a certificate of commencement from
registrar.
2. PRIVATE COMPANY: As per section 2(68) of companies act 2013, a private company
is a company which has paid up capital of Rupees One lakh and by its articles:
(a) Restricts the right to transfer its shares,

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(b) Limits the number of its members to two hundred,

(c) Prohibits any invitation to the public to subscribe for any shares and debentures,
Prohibits any invitation or acceptance of deposits from public.
3. ONE PERSON COMPANY: section 2(62) of the Companies Act, 2013 states “one -
person company (OPC) means a company which has only one person as
member”.one person company provides the benefits of both sole proprietorship
and company. OPC is run in the same manner as sole trader with limited liability. All
the provisions applicable to private company are applicable to OPC. An Indian
citizen and resident of India can form one -person company. One person cannot
form more than one OPC. It must have one member at any point of time and have
only one director. The memorandum of association shall include the name of the
nominee who shall become member of company in the event of the member’s
death or his incapacity to contract.
(D) ACCORDING TO CONTROL:
1. GOVERNMENT COMPANY: A company owned by central and / or state government
is called a government company. Either whole of the capital or majority of the
shares are owned by the government, it is government company. If central
government or state government or both holds more than 51% of shares in com
pany it is called government company. Management of these companies is under
the control of the government. Government companies are registered both as a
public companies or private companies. Government companies enjoys certain
privileges which are not available to non –government companies.
2. HOLDING COMPANY: Where one company controls the management of another
company, the controlling company is called as “Holding company”. For example, if
company A holds more than 51% of paid up capital of company B, the company A is
called as holding company.
3. SUBSIDIARY COMPANY: A company is called subsidiary company when one of the
following conditions is fulfilled:
(a) If the formation of board of directors is controlled by another company,
(b) The other company controls more than half of the voting rights of this company.
(E) ACCORDING TO NATIONALITY:
1. INDIAN COMPANIES: A company incorporated in India under the Companies Act,
2013 whether operating in India or outside, is called an Indian Company. These
companies may be manufacturing, insurance, banking companies etc.
2. FOREIGN COMPANIES: A foreign company means company incorporated outside
India but has a place of business in India through its branches or agencies

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Q3. DISCUSS THE MERITS AND LIMITATIONS OF JOINT STOCK COMPANY?

OR
EXPLAIN THE ADVANTAGES AND DISADVANTAGES OF JOINT STOCK COMPANY?
name and common seal. The following are the advantages and disadvantages:
ADVANTAGES OF JOINT STOCK COMPANY:
1. LIMITED LIABILITY: The liability of members in joint stock company is limited to the
nominal of the shares they have acquired. If the shares are partly paid , then he can be
required to pay only the unpaid value of the share.
2. TRANSFER OF SHARES: The shares of a public company are freely transferable.a
shareholder can dispose –off his shares at any time when the markets are favourable or
he is in need of money. The shareholders can sell their shares through stock exchanges.
On the other hand in partnership form of organization does not provide free
transferability of shares.
3. PERPETUAL SUCCESSION: The company has a permanent existence. The shareholders
may come and go, but the company will go on forever. The continuity of the company is
nost affected by death, lunacy or insolvency of its shareholders. The compa company is
also any can wound up only by operation of law. The shares of the company may change
hands a number of times, but the continuity of the company is not affected at all.
4. SCOPE OF EXPANSION: a company can arrange large financial resources as compared to
sole-proprietorship and partnership forms of organizations. A company can raise
additional funds through issue of shares and debentures from public. A company is also
in a better position to raise loans from banks and financial institutions.
5. PROFESSIONAL MANAGEMENT: in company form or organization, ownership is
separate from management. It enables the company to appoint expert and qualified
persons for managing various business functions. The availability of large resources
enables the company to attract talented persons by offering them higher salaries and
better career opportunities.
6. ECONOMIES OF LARGE SCALE PRODUCTION: With the availability of large resources,
the company can organize production on a big scale. The increase in scale and size of
the business will result in economies in production, purchase, marketing and
management. These economies enable the company to produce goods at lower cost ,
thus resulting in more profits.
7. DIFFUSED - RISK : In sole trade and in partnership business, the risk is shared by a small
number of persons. Further uncertainties discourage them from taking new ventures for
the fear of risk. In company form of organization, the number of contributories, are

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large so risk is shared by large number of persons. The burden to be shared by different
individuals become insignificant. It enables companies to take up new ventures.
8. DEMOCRATIC SET-UP: The value of shares is generally small. It enables persons with low
incomes to purchase the shares of companies. Shareholders come from all walks of life.
Every individual has an opportunity to become shareholder. Secondly, the Board of
Directors is elected by the members. So members have a say in deciding the polices of
the company. The company form of organization is democratic both from ownership
side and management side.
9. SOCIAL BENEFITS: The company form of organization mobilizes scattering savings of the
community. These savings can be better used for productive purposes. The companies
also enable financial institutions to invest their money by providing them avenues. It
also enables utilization of natural resources for better productive uses. Large-scale
production enjoys a number of economies enabling low cost of production. The society
is supplied with enough quantity of goods.
10. CAPACITY TO SUE : A company acquires a separate legal and independent legal
personality. As a legal person it can sue and can be sued on its own name. A company
may be sued for contempt of court, infringement of copyright and negligence. It may
sue for an injury done to its business reputation by defamation.
DISADVANTAGES OF JOINT STOCK COMPANY:

1. FORMALITIES: Incorporation of the company is coupled with many complex formalities,
requiring considerable time, efforts & money. Even after the incorporation, many legal
formalities are to be complied with by the company & there non- compliance will attract
penal consequences.
2. CORPORATE DISCLOSURE: A company have to ensure maximum disclosure of
information to the members of the company but the members have a limited
accessibility to the management & day to day working of the concern.
3. DIVORCE OF CONTROL FROM OWNERSHIP: Unlike the partnership firm, where partners
have a direct control on its working, the members of the company do not have any
effective control over its working. This is because of the fact that company is controlled
by elected representatives called directors.
4. LOSS OF PRIVACY: Many corporate disclosures are required to be made, & many
documents are required to be kept at Registrar’s office, its office becomes a public office
& the documents so kept are public documents. So any person can inspect any
document by paying prescribed fees. Now this facility is available on internet.
5. DETAILED WINDING UP PROCEDURE: The winding up procedure mentioned in the
Companies Act is very expensive &time consuming as compared to other business
enterprises.

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6. CONTROL BY FEW: The company is controlled by only few persons with business
background which are having very less financial stake in the business but on the
contrary control the huge corporate economic resources.
7. MRE TAX BURDEN IN CERTAIN CASES: The tax implications have a crucial impact in the
decision as to the selection of form of business organization. Company is liable to tax as
a flat rate as compared to the sole proprietors who are taxed under slab system.
Moreover different tax rates are applicable to different companies like Domestic
Companies, Foreign Companies closely related companies etc.
8. POSSIBILTY OF FRAUDS: Since the company is controlled by few , there is a possibility
that they will defraud the other parties, internal &external ,related with the business.
Manipulators so cleverly commit frauds, that its becomes difficult to fix responsibilities.
Q4. EXPLAIN THE DIFFERENCES BETWEEN PRIVATE AND PUBLIC COMPANY?

The following are the differences between private and public companies:
S.NO BASIS PRIVATE COMPANY PUBLIC COMPANY
I Minimum no of Minimum two persons can form Minimum seven persons are
members private company required to form public
company
Maximum number It can have maximum 200 It can have un= limited
members
of members number of members
There is restriction on transfer
Transferability of No restriction on transfer of
of shares
shares shares.
Prospectus Private company cannot issue Public company can issue
prospectus prospectus and invite public
to purchase shares
Minimum directors Must have atleast 2 directors Must have atleat 3 directors
Retirement of Directors are not required to Atleast 2/3 rd of the total no
directors retire by rotation of directors retire by rotation
Quorum for Two members are the quorum Quorum for the meeting is
meeting for the meeting five members
There is restriction on
Managerial Total managerial
managerial remuneration
remuneration remuneration cannot exceed
11%of net profits
Public deposits A private company cannot It is free to accept deposits
accept deposits from public
Paid-up capital Minimum paid-up capital is one Minimum paid up capital is
lakh rupees five lakh rupees.

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Q5. WHAT DO YOU MEAN BY PROMOTION OF COMPANY? EXPLAIN STEPS INVOLVED IN

PROMOTION OF COMPANY?
OR
WHO IS PROMOTER? WHAT ARE THE FUNCTIONS OF PROMOTER?
PROMOTION OF COMPANY: it is the first important stage in formation of company. In
promotion stage necessary steps are taken bringing the idea of a company into practice. It is
the process of planning, arranging various inputs required for running an enterprise. Promotion
involves identification of opportunities, studying the feasibility, assembling the requirements,
financing etc. The person who undertakes all these activities are called promoter.
PROMOTER: A promoter is a person who conceives an idea for setting up a particular business
at a given place and performs various formalities required for starting a company. A promoter
may be an individual, firm, association of persons or a company. Detailed
DEFINITION OF PROMOTER: According to section 2(69) of Companies Act,2013 defines
promoter as a person:
(a) Who has been named in the prospectus as such,
(b) Who has the control over the affairs of the company directly or indirectly,
(c) In accordance with whose advice, directions or instructions the board of directors of the
company act.
CHARACTERISTICS/FEATURES OF PROMOTER:
1. A promoter conceives an idea for setting up of a business.
2. He makes preliminary investigation and ensures about the future prospects of the
business.
3. He brings together various persons who agree to associate with him to form company.
4. He prepares various documents and gets the company incorporated.
5. He raises the required finances and gets the company going.
FUNCTIONS OF A PROMOTER (STEPS INVOLVED IN PROMOTION OF COMPANY)
1. IDENTIFICATION OF BUSINESS OPPORTUNITY: The first stage in promotion of a
company is the identification of a business opportunity. The promoter visualizes that
there are opportunities for a particular type of business and it can be run profitablly. the
idea may be to exploit a new area of natural resources or a venture in the existing of
that field. When the promoter feels that there are opportunities to taking up a
particular venture then the idea is taken further.
2. DETAILED INVESTIGATION: at the second stage various factors relating to the business
are studied from a practical point of view. The demand for the product is estimated and
the likely business share is determined. After determining the prospective demand, the
promoter thinks of arranging finance, labour, raw material, power etc. the cost structure

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of the product is analyzed to find out its profitibility from the venture. An export opinion
is sought upon the viability of the project.
3. APPROVAL OF THE NAME: it is necessary to get the name of the company approved
from the Registrar of Companies. This is done in order to avoid duplication of the name.
generally a company submits six names in order of preference. The Registrar matches
the names with the names of existing companies and then one name is approved.
4. SIGNATORIES TO MEMORANDUM: the promoter decides the names of the signatories
to the memorandum of association. Usually the first signatories of to the memorandum
become the first directors of the company. The written consent of the persons to act as
directors is taken and they are asked to take qualifying shares of the company.
5. APPOINTMENT OF PROFESSIONALS: The next stage is of raising funds and deciding
about various contracts. So the promoters appoint brokers and underwriters to ensure
the sale of company’s shares and debentures. They also appoint solicitors to deal with
legal matters of the company.
6. PREPARING NECESSARY DOCUMENTS: the next step in promotion of company is to
prepare the various legal documents of the company, which are required to be
submitted to the registrar of companies at the time of incorporation of the company.
The documents such as memorandum of association, articles of association, prospectus
etc are to be prepared.
Q6. EXPLAIN THE RIGHTS AND DUTIES OF PROMOTER?
PROMOTER: A promoter is a person who conceives an idea for setting up a particular
business at a given place and performs various formalities required for starting a company. A
promoter may be an individual, firm, association of persons or a company.
RIGHTS OF PROMOTERS: The rights of a promoter of the company are:
1. RIGHT TO RECEIVE PRELIMINARY EXPENSES: The promoters are entitled to receive all
the expenses incurred in setting up and registering the company from the board of
directors. The articles may provide for payment of preliminary expenses to the
promoters. The company may pay the expenses to the promoters even after its
formation but such payments should not be ultra vires the articles of the company.
2. RIGHT TO RECOVER PROPORTIONATE AMOUNT FROM THE CO-PROMOTERS: The
promoters are held jointly and severally liable for the secret profits made by them in
formation of the company. Therefore, if the entire amount of secret profits is paid to
the company by a single promoter, he is entitled to recover the proportionate amount
from his co-promoters.
3. RIGHT TO RECEIVE REMUNERATION: A promoter having made proper disclosure, has a
right to be paid remuneration for his efforts. The payment of remuneration to a
promoter in consideration of his services may be in the form of fully or partly paid-up
shares, debentures or commission or it can even be in the form of a lump sum amount.
Remuneration is paid unless it is said in the articles of association.

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DUTIES OF PROMOTER: The following are the duties of a promoters:

1. DUTY TO DISCLOSE MATERIAL FACTS AT THE TIME OF INCORPORATION: where at any
time after incorporation of a company, it is proved that the company has been got
incorporated by furnishing any false or incorrect information or representation or by
suppressing any material fact, the promoter shall be liable for action.
2. DUTY TO DISCLOSE FACTS IN PROSPECTUS: Section 26 of the Companies Act, 2013 lays
down the matters to be stated and reports to be set out in the prospectus. The
promoter may be held for mis-statements in prospectus.
3. DUTY TO COMPENSATE: Where a person subscribed for securities of a company based
on the false statements made by the promoter in the prospectus and sustained loss or
damage as a consequence thereof, the promoter can be held liable to compensate such
losses.
4. FAILURE TO DISCLOSE ITEMS OF SPECIAL BUSINESS TO BE TRANSACTED: if the
company fails full disclosure or non- disclosure concerning each item of special business
to be transacted at the general meeting will entitle the promoter a fine which may
extend to fifty thousand rupees or five times the amount of benefit derived to the
promoter or any of his relatives, whichever is more.
5. DUTY NOT TO DIVERT FUNDS FOR ANY OTHER PURPOSES: if the tribunal is satisfied on
the basis of information and evidence in its possession with respect to that the
promoter had diverted the funds or other property of the company for any other
purposes other than it is said in memorandum, the tribunal may by order, disqualify the
promoter from being appointed as a director in any company registered under this act
for a maximum period of six years.
6. DUTY TO SUPPORT LIQUIDATOR: It is the duty of the promoter to support the Company
Liquidator at the time of winding up of company. If the promoter fails to support the
liquidator in discharge of his functions and duties, shall be punishable with
imprisonment which may extend to six months or with a fine which may extend to fifty
thousand rupees or with both.
7. DUTY TO COMPENSATE IF LIQUIDATOR REPORT FRAUD IN PROMOTION: if the
company being wound up by the order of tribunal and the liquidator’s report alleges any
fraud in the promotion and formation of the company, the promoter shall be
punishable.
8. DUTY TO COMPENSATE FOR MISAPPLICATION OR RETENTION OF PROPERTY: when a
promoter has misapplied or retained any property of the company or is guilty of breach
of trust, he can be sued by the company for breach of duty, deceit, as the case may be.

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Q7. EXPLAIN THE PROCEDURE FOR REGISTRATION OF A COMPANY?

OR
EXPLAIN THE PROVISIONS OF LAW FOR INCORPORATION OF A COMPANY?
A company comes in to existence when a number of persons comes together with a view to
exploit some business opportunity. These persons are called promoters. Under section 3, any
seven or more persons may incorporate a public company, any two persons minimum and
maximum 200 can incorporate a private company, any one person can incorporate a one -
person company for a lawful purpose by subscribing their names to memorandum of
association and complying with other requirements in respect of registration. Such
incorporated company can be a company (a) limited by shares, (b) limited by guarantee, or (c)
an unlimited company.
STEPS BEFORE PROCEDING WITH THE PROCEDURE OF FILING DOCUMENTS: the promoters
must obtain:
1. DIN (Director Identification Number
2. Digital Signatures
3. Both DIN and Digital Signature will be registered with MCA (Ministry of Corporate
Affairs) portal. After registration and verification of DIN and Digital Signature of the
promoter who is to sigh e-form the following steps will be taken.
AVAILABILITY OF NAME: the next step in getting the company incorporated is of obtaining the
approval of name from Registrar of Companies. A company may adopt any name which is not
prohibited under the Emblems and Names (prevention of improper use) Act, 1950 and which is
not identical with or does not closely resemble the name of a company already registered. The
applicant should give a maximum of six names in order to avoid delay. The application for
approval of name should be sent to Registrar of Companies of the state in which the company is
to be situated. The application is required to be made in the prescribed form (e-form INC-1)
along with prescribed fees and shall be with digital signature of the promoter as per Companies
Act.
APPLICATION FORM: An application shall be filed with ROC in form no INC 2 (for one -person
company) and form no INC 7 (other than one- person company).
DOCUMENTS TO BE FILED WITH THE REGISTRAR: After ascertaining the availability of name,
the promoter should proceed to file with the Registrar of Companies the following documents
along with prescribed fees.
1. Memorandum of association (MOA): the memorandum of association is the charter
document of the company. For the purpose of registration, the promoter has to file with
the registrar of companies, a duly signed and properly stamped printed memorandum
of association.

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2. ARTICLES OF ASSOCIATION (AOA): The other documents to be submitted is the articles

of association which contains the rules and regulations relating to the internal
management of the company. The AOA should be duly signed by all the subscribers to
the memorandum in the prescribed manner.
3. DECLARATION: A declaration in the prescribed form by an advocate, a chartered
accountant, cost accountant or company secretary in practice, who is engaged in the
formation of the company, that all the requirements of this Act and the rules made
under in respect of registration have been complied.
4. AFFIDAVIT: an affidavit from each of the subscriber to the memorandum and from
persons named as the first directors in the articles of association, that he is not
convicted of any offence in connection with the promotion, formation or management
of any company or that he has not been found guilty of any fraud or breach of duty in
any company during preceding five years and that all the documents filed with registrar
for registration of the company contain information that is correct and complete and
true to the best of his knowledge and belief.
5. PARTICULARS OF SUBSCRIBERS: The particulars of name, including surname or family
name, residential address, nationality and such other particulars of every subscriber to
the memorandum along with proof of identity as may be prescribed to be submitted.
6. PARTICULARS OF FIRST DIRECTORS: The particulars of the persons mentioned in the
articles, as the first directors of the company, their names including their surnames, the
director identification number, residential address, nationality and such other
particulars including proof of identity to be submitted.
7. POWER OF ATTORNEY: With a view to fulfill various formalities that are required for
incorporation of a company, the promoters may execute a power of attorney in favor of
an advocate or any other professional like the chartered accountant or a company
secretary.
8. CONSENT OF DIRECTORS: A list of persons who have agreed to become the first
directors of the company along with their consent should be filed.
9. FILING OF AGREEMENT: The agreement if any, which the company proposes to enter
into with any individual for appointment as its managing director or whole time director
or manager.
10. NOTICE OF REGISTERED ADDRESS: Address for communication till the company
acquires its registered office shall be supplied to ROC.
11. STATUTORY DECLARATION OF COMPLIANCE: A declaration is to be filed in form no INC-
8 with the ROC. This is known as statutory declaration of compliance. The promoters
must file a statutory declaration stating that all the requirements of the Companies Act
have been complied.
INCORPORATION CERTIFICATE: when all the required documents are filed with the registrar
along with the requisite fees, a scrutiny is made. When all the documents are found in

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order, the Registrar will enter the name of the company in the Register of Companies and
issues a Certificate of Incorporation.
Q8. WHAT IS MEMORANDUM OF ASSOCIATION? EXPLAIN ITS CLAUSES?
MEANING: The memorandum of association is the constitution of the company and provides
the foundation on which its structure is built. It is the principal document and no company can
be registered without the memorandum of association. It defines the scope of the company’s
activities as well as its relation with outside world.
PURPOSE: the main two purposes of memorandum of association are:
1. It explains the scope of the company. The prospective shareholders know the areas
where company will invest their money and the risk they are taking in investing the
money.
2. The outsiders dealing with the company can understand the limits of the company and
their dealings are with the scope of memorandum or not.
FEATURES OF MEMORANDUM OF ASSOCIATION:
1. Every company must prepare its own memorandum of association.
2. Memorandum of association is the constitution of the company. It prescribes the role
and responsibility of the company.
3. The company can perform only those activities which are prescribed in the
memorandum of association.
4. Memorandum is printed, paragraphed and numbered in sequence.
5. It is signed by seven persons in case of public company, two persons in case of private
company and one person in case of one- person company.
CLAUSES OF MEMORANDUM OF ASSOCIATION: The MOA contains following clauses
1. NAME CLAUSE: A company being a separate legal entity must have a name. a company
may select any name which does not resemble the name of any other company and it
should not contain the words like king, queen, emperor, government bodies and the
names of the world bodies like U.N.O, W.H.O, WORLD BANK etc,. The name should not
be objectionable in the opinion of the government. The word ‘limited’ must be used in
case of public company. The word Private Limited must be used in case of private
company. The word One Person Company (OPC) must be used at the end of the name of
one- person company.
2. REGISTERED OFFICE CLAUSE: Every company should have a registered office, the
address of which should be communicated to the Registrar of Companies. This helps the
Registrar to have correspondence with company. The place of registered office has to be
intimated before getting the Certificate of Incorporation.
3. OBJECT CLAUSE: it is the important clause of memorandum. It defines the objects of the
company. It defines the scope of activities of company. The object clause should be

14
carefully decided because it is very difficult to alter this clause later on. No activity can
be undertaken by the company which is not mentioned in the object clause. The
investors will feel assured that management will invest their money only in those
activities which are mentioned in the memorandum. The objects of the company cannot
be illegal and against public policy.
4. LIABILITY CLAUSE: This clause states that the liability of company is limited to the value
of shares held by members. It means that the members will be liable to pay only unpaid
balance of their shares. In case of company limited by guarantee, this clause states the
amount which every member will undertake to contribute to the assets of the company
in the event of its winding up.
5. CAPITAL CLAUSE: This clause states the total capital of the company. The division of
capital into equity share capital and preference share capital should also be mentioned.
The number of shares in each category and their face value should be mentioned.
6. NAME OF NOMINEE IN CASE OF ONE PERSON COMPANY: In case of one- person
company, memorandum must state the name of the person who, in the event of death
of the subscriber, shall become member of the company. The written consent of the
nominee should be obtained and filed with the Registrar of Companies.
7. ASSOCIATION CLAUSE: This clause provides that those who have agreed to subscribe to
the memorandum must signify the willingness to associate and form a company. This
clause contains the names of signatories to the memorandum of association. The
memorandum of association must be signed by at least seven persons in case of public
company, by at least two persons in case of private limited company. The subscribers
declare that they agree to incorporate the company and agree to take the shares stated
against their names. The signature of subscribers ls attested by at least one witness
each. The full address and occupation of subscribers and the witnesses are also given.
Q9. EXPLAIN THE PROCEDURE FOR ALTERATION OF MEMORANDUM OF ASSOCIATION?
1. ALTERATION OF NAME CLAUSE: The name of the company can be changed by passing a
special resolution and with approval of central government. If a company is registered
with a name which is in the opinion of the central government is identical with or too
closely resemble to the name of existing company, it can be changed by passing an
ordinary resolution but with the approval of central government.
3. ALTERATION OF REGISTERED OFFICE CLAUSE: If the registered office is to be shifted
with in local limits, i.e, from one place to another place in the same city, town or village
that can done by giving a notice of change to registrar. If the registered office is to be
shifted from one city to another or from one town to another with in the same state,
then a special resolution is to be passed by company. A notice of such change shall be
given to the registrar with in 30 days of the change. If the registered office is to be
shifted from one state to another state, special resolution is to be passed and central
government approval to that effect is required.

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4. ALTERATION OF OBJECT CLAUSE: The alteration of object clause is subject to so many

restrictions. A company may change its objects for the following purposes:
a. To carry on business more economically and efficiently
b. To attain its purpose by new or improved means
c. To enlarge or change local area of operations
d. To restrict or abandon any of its objects specified in the memorandum
e. To amalgamate the company with any other company
f. To sell or dispose of the whole or any part of the undertaking of the company.
A special resolution and approval of company law board is necessary for alteration.
5. ALTERATION OF LIABILITY CLAUSE: liability clause cannot be altered so as to make the
liability of members unlimited.
6. ALTERATION OF CAPITAL CLAUSE: Alterations can be made to (i) increase share capital
(ii) to convert fully paid shares into stock (iii) cancellation of shares etc. The above
alterations can be made by giving a notice to that effect shall be given to ROC with in 30
days of such alteration.
Q10. WHAT DO YOU MEAN BY ARTICLES OF ASSOCIATION? EXPLAIN ITS CONTENTS?
The rules and regulations which are framed for the internal management of the company are set out in
a document named Articles of Association. The articles are framed to help the company in achieving its
objectives set out in memorandum of association, it is supplementary document to the memorandum.
It is compulsory for every company to have its own articles of association. And file the same with
ROC. The company may adopt model tables of articles which are given in the Companies Act. The
companies may adopt all the contents of model tables or may prepare some of their own contents and
adopt some of the model tables. Various companies may adopt the following model tables of articles
association:
(i) A public company limited by shares: Table F

(ii) A company limited by guarantee and having share capital: Table G
(iii) A company limited by guarantee and not having share capital: Table H
(iv) An unlimited company having share capital: Table I
(v) An unlimited company not having share capital Table J
The articles must be printed and divided into paragraphs, numbered consecutively. The
articles must be signed by each subscriber to the memorandum in the presence of atleast
one witness who will attest the signature. The articles cannot contain anything contrary to
the Companies Act and also to the memorandum of association
NATURE OF ARTICLES OF ASSOCIATION:
1. Articles of association are subordinate to memorandum of association.
2. The articles are controlled by memorandum.
3. Articles helps in achieving the objectives laid down in the memorandum.
4. Articles are only internal regulations of the company

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CONTENTS OF ARTICLES OF ASSOCIATION:

1. Share capital – shares and their values and their division into equity and preference
shares if any,
2. Rights of each class of shareholders and procedure for variation of their rights.
3. Procedure relating to the allotment of shares, making of calls and forfeiture of shares.
4. Increase, alteration and reduction of share capital.
5. Rules relating to transfer of shares and the procedure to be followed.
6. Lien of the company shares allotted to the members for the amount unpaid in respect
of such shares and its procedure.
7. Appointment, remuneration, powers, duties etc, of the directors and officers of the
company.
8. Constitution and composition of Audit committee, remuneration committee, CSR
committee.
9. Procedure for conversion of shares into stock vice versa.
10. Notice of the meetings, voting rights of the members, proxy, quorum, poll etc.
11. Audit of accounts, transfer of amount to reserves, declaration of dividends etc.
12. Borrowings of the company
13. Issue of share certificates including procedure for issue of duplicate shares.
14. Winding up of the company.
Q11. EXPLAIN THE DIFFERENCES BETWEEN MEMORANDUM OF ASSOCIATION AND
ARTICLES OF ASSOCIATION?
MEMORANDUM OF ASSOCIATION ARTICLES OF ASSOCIATION

SCOPE: Memorandum is the constitution of The articles contain the internal rules and
the company. The company acts in the regulations for day-to-day working of
framework of the memorandum. company. Articles are framed within the
scope of memorandum.
NECESSITY: The memorandum is must for It is the second important document after
getting a company registered. memorandum of association.
PROVISIONS: The memorandum cannot The articles cannot contain anything
contain anything contrary to Companies Act. contrary to memorandum and Companies
Act.
LIMITATION: A company cannot do anything Anything done beyond the scope of articles
beyond scope of memorandum. Any act will not be void and it can be ratified by
done beyond its scope is void. passing a special resolution.
RELATIONSHIP: It regulates the relationship it regulates the relationship between
between the company and outsiders. company and members and among
members themselves.
ALTERATION: Memorandum can be altered Alteration of Articles of association is not
only under special circumstances and difficult. It can be altered by passing special
involves many formalities resolution.

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Q12. DEFINE PROSPECTUS? EXPLAIN THE CONTENTS AND KINDS OF PROSPECTUS?

After getting the company incorporated, promoters will raise finances. The public is invited to purchase
shares and debentures of the company through the advertisement. Prospectus is the document contains
detailed information about the company and the invitation to the public subscribing to the shares and
debentures. Private companies cannot issue prospectus because they are strictly prohibited from
inviting the public to subscribe to their shares. Only public limited companies can issue prospectus.
FEATURES OF PROSPECTUS: A prospectus has the following essentials:
1. There must be an invitation offering to public.

2. The invitation must be made on behalf of the company or intended company.
3. The invitation must be to subscribe or purchase.
4. The invitation must relate to shares or debentures.
A prospectus must be filed with the ROC before it is issued to the public. The issue of prospectus is
essential when the company wishes to raise capital, invites the public to purchase shares and
debentures.
DEFINITION OF PROSPECTUS:
Section 2(70) of Companies Act defines a prospectus as “any document described or issued as a
prospectus and includes a red herring prospectus referred to sec. 32 or shelf prospectus referred to in sec.
31 or any notice, circular, advertisement or other document inviting deposits from the public or inviting
offers from the public for the subscription or purchase of any shares in or debentures of a body
corporate”.
CONTENTS OF PROSPECTUS: The following matters are to be disclosed in a prospectus:
1. Name and full address of the company.

2. Full particulars about the signatories to the memorandum of association and the number of
shares taken up by them.
3. The number and classes of shares. The interest of shareholders in the property and profits.
4. Name, address and occupations of the members of the Board of Directors or proposed directors.
5. The minimum subscription fixed by promoters after taking into account all financial
requirements of the company.
6. If the company acquires any property from vendors, their full particulars are to be given.
7. The full address of underwriters.
8. The time of opening and closing of subscription list.
9. The nature and interest of every promoter in the promotion of the company.
10. The amount payable on the application, allotment and calls.
11. The particulars of preferential treatment given to any person for subscribing shares or
debentures.
12. Particulars about reserves and surpluses.
13. The amount of preliminary expenses.
14. The name and address of the auditor.
15. Particulars regarding voting rights at the meetings of the company.

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REPORTS IN PROSPECTUS:
1. REPORTS BY AUDITORS: Auditors report with respect to the profit and losses and assets and
liabilities and such other matters as may be prescribed.
2. REPORTS ABOUT THE PROFIT AND LOSSES: reports of profit and losses for the previous five
financial years immediately preceding the financial year of the issue of prospectus. In case five
years have not been completed for the working, then for all those previous year preceding the
issue of prospectus.
3. REPORTS ABOUT BUSINESS OR TRANSACTION: the reports about business or transaction to
which the proceeds of the securities are to be applied directly or indirectly.
KINDS OF PROSPECTUS: The following are the kinds of prospectus:
1. SHELF PROSPECTUS (SECTION 31): Sometimes securities are issued in stages spread over a
period of time particularly in respect of infrastructure projects where iisue size is large as huge
funds have to be collected. In such a case, filing of prospectus each time will be very expensive.
So a provision of “shelf prospectus” has been made under section 31 of Companies Act 2013.
The advantage is that at each stage of offer of securities during validity of shelf prospectus, filing
of prospectus is not required.
The term “shelf prospectus” means a prospectus in respect of which the securities or
class of securities included therein are issued for subscription in one or more issues over a
certain period without the issue of a further prospectus. A company may file a shelf prospectus
with the ROC at the stage of first offer of securities for a period of one year. No further issue of
prospectus is required in respect of second or subsequent offer of securities for a period of one
year.
2. RED-HERRING PROSPECTUS (SECTION 32): with a view to explore the demand for securities and
price at which securities may be offered to the public, a public company may before issue
Prospectus, circulate information memorandum and Red Herring prospectus to the public.
The term “Red Herring Prospectus” means a prospectus which does not give complete
particulars on the
i. Price of the securities offered, and
ii. Quantum of securities offered.
A company proposing to issue a red herring prospectus shall file it with ROC at least
three days prior to the opening of the subscription list and the offer. Upon closing of the
offer of securities, the detailed information to be filed with ROC and SEBI.
Q13. EXPLAIN BRIEFLY ABOUT STATEMENT IN LIEU OF PROSPECTUS?
A public company raises funds from the public and it issues prospectus for this purpose. If the
directors of the company may be hopeful of raising required funds from friends and relatives or through
underwriters. In such a situation, a prospectus need not be issued but a Statement in Lieu of Prospectus
may be filed with ROC at least 3 days before the allotment.
Note: The new Companies Act 2013 has now dispensed with the statement in lieu of prospectus.

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UNIT-II COMPANY MANAGEMENT

Q1. WHO IS A DIRECTOR? WHAT ARE THE TYPES OF DIRECTORS?
A company being artificial person cannot act on its own. It has neither a mind
nor a body of its own. It must act through some human agency, the person, by
whom the business of the company is carried on is termed as DIRECTOR. Directors
act on behalf of the company. Director means a person appointed to perform the
functions and duties of a director of a company in accordance with the provisions
of Companies Act, 2013. He is the person, who guides the policies and supervises
the working of company.
DEFINITION OF DIRECTOR: According to section 2(34) of the companies act
2013, director means a director appointed to the board of the company.
According to sec 149 every public company shall have at least 3 directors and
every private company shall have a minimum of 2 directors. In case of one-
person company, minimum one director must exist. The maximum number of
directors in a company can be 15.
TYPES OF DIRECTORS:
1. ORDINARY DIRECTORS: THESE are the simple directors who attend the board
meetings of a company and participate in the matters put before the board.
These directors are neither whole time directors nor managing directors.
2. MANAGING DIRECTOR: Managing director means a director who by virtue of
the articles of a company or an agreement with a company, or a resolution passed
in general meeting or by its board of directors is entrusted with substantial
powers of management of the affairs of the company.
3. WHOLE TIME EXECUTIVE DIRECTORS: These directors include MANAGING
DIRECTOR OR WHOLE TIME DIRECTOR OR CHIEF EXECUTIVE DIRECTOR who is in
whole time employment of the company.
4. ADDITIONAL DIRECTORS: These are the directors appointed by the board
under section 161 of the companies act 2013 between the two annual general
meeting subject to the provisions of articles of association. Additional directors
shall hold office only up to the date of next annual general meeting of the

20
company. Number of directors and additional directors shall not exceed the
maximum number of directors prescribed by the articles of the company.
5. ALTERNATE DIRECTOR: An alternate director is a director appointed by the
board, if so authorize by articles of company or by a resolution passed in the
shareholders meeting to act for a director called “original director” during his
absence for a period not less than 3 months from India.
6. PROFESSIONAL DIRECTORS: Any director possessing professional qualification
and do not have any pecuniary interest in the company are called professional
directors.
7. NOMINEE DIRECTOR: The directors appointed by third parties of the company
are called Nominee directors. The articles may give right to third parties such as
debenture holders, banks and financial institutions who lend loans to the
company may nominate directors on the board of the company. They are not
liable retire by rotation.
8. INDEPENDENT DIRECTOR: Independent director is a non-executive director of a
company other than managing director or a whole time director who does not
have any pecuniary interest in the company. The company who needs to appoint
independent director are:
(1) in case of every listed public limited company at least 1/3 rd of the total
number of directors must be independent directors.
(2) in case of every other public company having paid up share capital of 10
crores or more or turnover of 100 crores or more or having outstanding aggregate
loans , debentures and deposits of rupees 50 crores or more must appoint at least
2 independent directors.
9. SMALL SHARE HOLDERS DIRECTOR: Every public company having paid up
capital of 5 crore rupees or more and having 1000 or more small shareholders
may have a small shareholder director elected by such small shareholders as
prescribed. It is noted that appointment of small shareholder director is optional
and not mandatory. The following rules are to be followed for appointment:
(1) a company may act suo moto to elect small shareholder director
(2) it may act upon the notice in writing of at least 1/10th of the small shareholders

21
(3) the notice must be given 14 days before the meeting. The notice must contain
a name of a person, whom the small shareholders intend to appoint as small
shareholder director.
(4) the election of small shareholder’s director will be through postal ballot.
(5) the tenure of such director shall be for a maximum period of 3 years and he
shall not retire by rotation. Such director is not eligible for reappointment.
(6) no person shall hold office at the same time in more than 2 companies.
10. RESIDENT DIRECTOR: Section 149(3) of COMPANIES act 2013, provides that
every company shall have at least one director who has stayed in India for a total
period of 182 days in the previous calendar year. Such director is called as
Resident Director.
Q2, EXPLAIN THE QUALIFICATIONS AND DISQUALIFICATIONS OF DIRECTOR?
QUALIFICATION OF DIRECTOR:
1. The director must be a natural person (individual).
2. He must be competent to contract i.e ,he should be major, sound mind and
Not disqualified by any law.
3. Hold minimum qualification shares prescribed by articles.
4. According to section 152(2), no person shall be appointed as a director of
Company unless he has been allotted the Director Identification Number (DIN)
5. There is no age limit prescribed under the act for the appointment or
Retirement of director.
6. He need not possess any academic qualification.
DISQUALIFICATION OF DIRECTOR: U/S 164(1)
a) He has found to be unsound mind by a competent court,
b) He is an un discharged insolvent,
c) He has applied to be adjudicated as an insolvent and his application is pending;

22
d) He has been convicted of an offence and sentenced to imprisonment for not

less than 6 months and a period of 5 years has not completed since the expiry of
his sentence.
e) He has not paid any call in respect of shares of the company held by him for a
period of 6 months from the last day fixed for the payment.
F ) he has been disqualified by an order of the court or tribunal of an offence in
relation to promotion, formation and management of the company of fraud and
misfeasance in relation to the company.
g) He has been convicted of the offence dealing with related party transactions
at any time during the last preceding 5 years.
h) He has not obtained DIN (Director Identification Number)
Q3. EXPLAIN THE LEGAL POSITION OF DIRECTOR IN A COMPANY?

It is very difficult to define the position of director in a company. The
Companies Act, 2013 is also silent on this issue. However, the position of director
is described as follows:
1. DIRECTORS AS AGENTS: The directors act as agents of the company. The
company cannot act on its own, so the directors act on behalf of company as
agents of company. Contracts with third parties are entered into by the directors
not as a principal but as an agent of the company. If the director act within the
scope of his authority, he will not be personally liable. If they exceed the powers
of the act, the members can ratify such acts. The principles of agency, governs the
relationship between director and company.
2. DIRECTORS AS TRUSTEES: Although directors are not trustees yet they have
always considered and treated as:
(a) Trustees of Company’s money and property: As the trustees of company’s
money and property directors are accountable for their proper use and are
required to refund or restore the same if improperly used. The money and
property of the company must be used for the purposes said in MOA. If they
misuse it amounts breach of trust and directors are made personally liable.

23
(b) Trustees of the powers entrusted to them: Directors are the trustees of the
powers conferred upon them and they must exercise those powers bona fide and
for the benefit of the company as a whole. They should use the powers, with
honest, in the interest of the company and the shareholders of the company.
Directors cannot use powers for their own interest.
3. DIRECTORS AS OFFICERS: For certain matters under the Companies Act, 2013
directors are treated as officers of a company. Director as an officer may be held
liable and shall be punishable for any default made by him in compliance with any
of the provisions of the Companies Act.
4. DIRECTORS AS EMPLOYEES: in ordinary course of business, the directors are
not employees of the company. But if any director holds a salaried employment
such as an accountant or manager or secretary in addition to directorship, then
he will be treated as employee. As such he will be entitled to the remuneration
and other benefits admissible to him as an employee in addition to his rights as a
director to sitting fees etc.
5.DIRECTORS AS MANAGING PARTNERS: The directors are also sometimes
described as managing partners because like a partner of a firm, they manage the
affairs of the company and they are also usually important shareholders of the
company. They do all proprietorial functions like allotting shares, making calls,
forfeiting shares etc.
However, all the partners of a firm act on the principle of mutual
agency. But it is not so in the case of directors. A director has no authority to bind
other directors and shareholders. Moreover, directors are subject to retire by
rotation, whereas the partners of the firm are not.
Q4. EXPLAIN THE MODES OF APPOINTMENT OF DIRECTOR OF A COMPANY?
The success of a company depends to a large extent upon the competence
and integrity of its directors. It is, therefore necessary that management of
company should be in proper hands. The appointment of directors is accordingly
strictly regulated by the act. Only an individual can be a director of a company. No
firm or company can be appointed as a director. The directors are appointed not
by selection but by elections. The directors may be appointed in the following
ways:

24
1. APPOINTMENT OF FIRST DIRECTORS: The first directors are usually name in

the articles of association of company. If the Articles are silent regarding the
appointment of directors, the subscribers of MOA, who are, individuals shall be
deemed to be first directors of the company. They shall hold the office until the
directors are appointed at the first annual general meeting.
2. APPOINTMENT OF DIRECTORS AT GENERAL MEETING: Appointment of
subsequent directors is made at every annual general meeting of the company.
Section 152(2) provides that not less than 2/3rd of the total number of directors of
a public company is appointed by the company in general meeting. These
directors must be subject to retire by rotation. In other words not more than
1/3rd of the total number of directors act as non retiring directors.
3. APPOINTMENT OF DIRECTORS BY PROPORTIONAL REPRESENTATION:
Directors of a company generally appointed by simple majority. As a result
majority shareholders controlling 51% or more votes may elect all directors and a
substantial minority shareholders may find no representation on the board.
Section 163 intends to protect interest of the minority shareholders by
giving them an opportunity to place their nominees on the board. The articles of a
company may provide that the appointment of not less than 2/3rd of the total
number of directors of a company shall be according to the principles of
proportional representation.
4. APPOINTMENT BY DIRECTORS (BOARD): The directors are empowered to
appoint (!) Additional director (2) alternate director (3) casual vacancy
1. ADDITIONAL DIRECTOR: The board of directors may appoint additional
directors from time to time if so authorized by its articles. The number of
directors and additional directors must not exceed the maximum limit fixed by
articles. The additional director, hold office only up to the date of the next annual
general meeting. The purpose of such appointment is to enable the board to
appoint competent persons who may find it difficult to come in by election.
2. ALTERNATE DIRECTOR: The board of directors may appoint the alternate
director if authorized by the articles or by resolution passed by company in
general meeting. An alternate director acts in place of original director who is
absent for more than 3 months from the state in which board meetings ate held.

25
He cannot hold office for a longer time than that permissible to the original
director in whose place he has been appointed. He must vacate office on the
return of the original director.
3. CASUAL VACANCY: Where the office of any director appointed by the company
in general meeting is vacated before the expiry of his term, the directors may fill
the vacancy in the board meeting. Any vacancy other than one caused by
retirement by rotation or efflux of time is a casual vacancy. Such a vacancy may
occur by reasons of death, resignation, insolvency, disqualification or failure of an
elected director to accept the office. The director so appointed, hold the office till
the end of the term of the director in whose place he is appointed.
5. APPOINTMENT BY THIRD PARTIES: Section 152 permits 1/3rd of the total
number of directors of a public company to be appointed by the parties other
than shareholders on a non-rotational basis. The articles may give right to
debenture holders, financial institutions, banks who have advanced loans to the
company to nominate directors to the board of the company. The number of
directors so appointed should not exceed 1/3rd of the total strength of the board.
They are not liable to retire by rotation.
6. APPOINTMENT BY CENTRAL GOVERNMENT: The Central Government has the
power to appoint directors on the orders passed by the NCLT to effectively
safeguard the interest of the company or its shareholders or the public interest to
prevent mismanagement or oppression. Such directors shall hold office for a
period not exceeding 3 years on any one occasion. The power can be exercised by
the NCLT either on a reference made by the central government or on an
application:
a) Of not less than one hundred members of the company or
b) Of the members of the company not holding less than 1/10th of the total voting
power therein.
7. APPOINTMENT BY SMALL SHAREHOLDERS: Every public company having paid
up capital of 5 Crores rupees or more, and having 1000 or more small
shareholders may have a small shareholder director elected by such small
shareholders as prescribed. It is noted that appointment of small shareholder

26
director is optional and not mandatory. The following rules are to be followed for
appointment:
(1) A company may act suo moto to elect small shareholder director
(2) It may act upon the notice in writing of at least 1/10th of the small shareholders
(3) The notice must be given 14 days before the meeting. The notice must contain
a name of a person, whom the small shareholders intend to appoint as small
shareholder director.
(4) The election of small shareholders director will be through postal ballot.
(5) The tenure of such director shall be for a maximum period of 3 years and he
shall not retire by rotation. Such director is not eligible for reappointment.
(6) No person shall hold office at the same time in more than 2 companies.
8. APOINTMENT OF SPECIAL DIRECTOR BY THE TRIBUNAL IN CASE OF SICK
INDUSTRIAL COMPANIES: The NCLT can appoint one or more persons who
possess knowledge, expertise in management and control of the affairs of any
other company to be a special director on the board of a sick industrial company.
Q5. EXPLAIN THE MODES OF REMOVAL OF DIRECTORS?
A director may be removed from his office (1) by shareholders (sec.169) (2)
by the tribunal.
(1) REMOVAL BY SHAREHOLDERS: Section 169 empowers the company to
remove a director by ordinary resolution before the expiry of his period of office
except in the following cases:
a) A director appointed by the tribunal,
b) A nominee director appointed by third parties,
c) A director appointed according to the principle of proportional
representation.
SPECIAL NOTICE: Special notice is required for any resolution to remove a director
or to appoint some body in his place. On the receipt of such notice the company
will immediately send a copy to the director concerned and the director shall be
entitled to be heard on the resolution at the meeting.
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DIRECTOR’s RIGHT TO MAKE REPRESENTATION: The director concerned may

make representation in writing and the copy to such representation may be sent
by the company to every member. Where the copy of representation is not sent
to the members in that case the director concerned may read the representation
in the meeting. After representation is made if shareholders are not satisfied with
such representation, they can remove the director.
FILLING OF VACANCY: If shareholders are not satisfied with such representation,
they can remove the director in the general meeting. Some other person may be
appointed as director in the same meeting and the person so appointed will hold
office only for the period for which the removing director holds.
COMPENSATION: A director so removed shall not be deprived of any
compensation or damages payable to him in respect of the termination of his
appointment as director.
2. REMOVAL BY THE TRIBUNAL: On an application to the tribunal for prevention
of oppression and mismanagement, the tribunal may terminate or set aside or
modify any agreement between company and the managing director or any other
director or manager. On such termination, the director cannot serve the company
as director for a period of five years from the date of the order of termination.
The director on removal cannot sue the company for any compensation or
damages for loss of office.
Q6. EXPLAIN THE POWERS, DUTIES AND LIABILITIES OF DIRECTORS?

The directors represent the directing mind or will of the company and control
the affairs of company. All the powers of management of the affairs of the
company are vested in the board of directors. The directors enjoy all such powers
as are given to them by the act, memorandum or articles. Section 179 and 180
deal with the following powers:
I. General Powers (powers which can be exercised in accordance with the
articles)
II. Powers U/S 179(3)

28
III. Powers under Rule 8

IV, Other Matters.
I. GENERAL POWERS: The general powers of the board of directors have been laid
down in section 179 of the companies act. It empowers the board to exercise all
such powers and do all such acts and things as the company is authorized to do. In
other words the directors can do what the company is authorized to do. However,
the following two limitations are there on their powers:
a) The board shall not exercise those powers which under companies act 2013 or
the memorandum of association or otherwise, are required to be exercised by the
company in general meeting.
b) In exercising all such powers and doing of any such act, the board will be
subject to the provisionals of this act or any other act, or memorandum or the
articles.
II. POWERS UNDER SECTION 179(3): The directors can exercise the following
powers through passing a resolution in board meetings:
a) To make calls on shareholders in respect of money unpaid on their shares.
b) To authorize buy-back of shares
c) To issue securities including debentures whether in India or outside India.
d) To borrow monies.
e) To invest the funds of the company.
f) To grant loans or give guarantee or provide security in respect of loans.
g) To approve financial statements and the Board report.
h) To diversify business of the company.
i) To approve amalgamation reconstruction or merger.
j) To take over a company or acquire controlling or substantial stake in other
company.
k) Any other matter which may be prescribed.

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III. POWERS UNDER RULE 8:

a) To make political contribution.
b) To appoint or remove Key Managerial Personnel (KMP)
c) To take not of appointment or removal of one level below KMP.
d) To appoint internal auditor and secretarial auditors.
e) To take note of disclosure of director’s interest and shareholding.
f) To buy, sell investments held by the company.
g) To accept or renew public deposits.
h) To approve quarterly, half yearly or annual financial statements.
IV. OTHER MATTERS:
a) issuance of shares.
b) allotment of shares and debentures.
c) Appointment of directors and managing director / whole time director.
d) Consideration of annual accounts.
e) Approval of interim dividends and recommendation of final dividends.
f) Merger and amalgamation of companies.
g) Appointment of auditor in case of casual vacancy.
h) Appointment of whole time secretary for issuance of compliance certificate.
DUTIES OF DIRECTORS: The directors hold key position in management of the
company. Law imposes certain duties upon them, in the interest of the public
good and for the protection of those who invested money in the company. The
duties of director vary from company to company. The following may be
important duties of director:.
1. FIDUCIARY DUTIES: The directors occupy a fiduciary position and must
therefore exercise these powers in good faith and for the benefit of the company
as a whole. Directors should not enter into contracts, in which there is a

30
possibility that the director’s personal interest could conflict with those of the
company.
2. DUTY OF CARE AND SKILL: A director must perform his duties with reasonable
care and skill i.e with the amount of care which an ordinary man will be expected
to take care if the business of the company is his own. A director will be liable for
his negligence in carrying out his duties, however a director cannot be held liable
for mere error of judgement if he acts honestly and with reasonable care.
3. DUTY TO ATTEND BOARD MEETINGS: A director shold attend board meeting
when ever he is able to do so, but he is not bound to attend all board meetings..
continuous non-attendance may render a director liable for the acts of his co-
directors. The law provides that the office of director becomes vacant, if he is
absent himself from 3 consecutive meetings of the board or from all the meetings
of the board for a continuous period of three months whichever is longer without
obtaining leave of absence from the board.
4. DUTY NOT TO DELEGATE: As a rule, directors must perform their duties
personally and should not delegate their office. The directors are bound by the
maxim “Delegated duties cannot be further delegated”. This rule is subject to
certain exceptions. The directors may delegate their duties if the act or articles
specifically authorize them to do so.
5. DUTY TO DISCLOSE INTEREST: As a director is an agent of the company, he
must see that his interest and duty does not conflict. The act says that the
company can avoid a contract in which the director has an interest unless prior
sanction of the board has been taken. A director, who is interested in any
transaction of the company is bound to disclose his interest to the board. The
disclosure shall be made at the first meeting of the board held after he has
become so interested
6. STATUTORY DUTIES: The directors are required to perform the following
statutory duties:
i) Duty not to allot shares until minimum subscription is raised.
ii) Duty to sign the annual returns and the certificates attached thereto.
iii) Duty to call annual general meeting every year with in proper time.

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iv) Duty to call extraordinary meeting on a valid requisition.

v) Duty to prepare profit and loss account and balance sheet and lay before the
company with directors report as to the state of affairs of the company’
vi) Duty to take qualification shares and disclose shareholding.
LIABILITIES OF DIRECTORS: The liabilities of director can be classified into
1) Civil liabilities 2) Criminal Liabilities
!) Civil Liabilities: The directors may render themselves liable to a) the company
b) to the third parties.
a) Liability towards Company: Directors are agents and trustees of the company
as such they owe certain duties to the company. Breach of these duties or
negligence in performing them may make them liable to the company and
shareholders. They become liable for:
i) Negligence: A director must exercise due care and diligence in performance of
his duties. If the director acts negligently or carelessnessly in performing the
duties towards company, the director can be held liable.
ii) Misfeasance: Misfeasance is defined as any breach of duty in the conduct of
the company’s affairs, which causes loss to the company. It is something more
than negligence. If the director does any fraud he can be held liable by the
company.
iii) Breach of trust: As the directors are trustees of the company, it is their duty
to apply company funds, assets and powers in the interest of the company as a
whole. If the directors, misapplies them, they can be held liable for breach of
trust.
iv) Ultra vires Acts: Where the directors do any acts which are in excess of their
powers or which are the acts against MOA , then director can be held liable by the
company to make good the loss.
b) Liability to Third Parties: Directors may be liable to third parties in the
following cases:
1. Directors contract with third parties in their personal capacity.

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2. They contract as the agents of undisclosed principal (company).

3. They enter into a contract on behalf of prospective company.
4. Misstatements in prospectus.
5. Irregular allotment of shares and debentures.
6. Failure to repay application money if shares are not allotted to applicants.
2. Criminal Liability: Companies Act, 2013 imposes certain duties upon the
directors, they may be held liable to penalties by way of fine or imprisonment if
they fail to perform them. In following cases director face criminal liabilities:
1. Filing of prospectus containing untrue statements,
2. Inviting deposits from public in contravention of rules,
3. Failure to repay excess application money,
4. Undischarged insolvent acting as director.
5. Default in distributing dividends,
6. Failure to assist registrar in inspection of books of accounts etc,
7. Failure to lay balance sheet etc. at annual general meeting,
8. Acting as director after removal by court.
9. Improper issue of shares and debentures.
10. False declaration of company’s solvency.
SHORT ANSWER QUESTIONS:
1. Director
2. Managing Director
3. Alternate Director
4. Additional Director
5. Qualification and disqualification of director.
6. Removal of director

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CORPORATE SOCIAL RESPONSIBILITY

1. DEFINE CORPORATE SOCIAL RESPONSIBILITY? EXPLAIN THE LIST OF CSR
ACTIVITIES?
The term Corporative Social Responsibility refers to the responsibility of a
company towards the society. It is the company’s initiative for social welfare.
India is the first country in the world to make CSR mandatory.
APPLICABILITY: CSR is compulsory for all companies – government, public and
private, provided they meet any one of the following conditions:
1, the net worth of the company is 500 Crores or more or
2. The annual turnover of the company is 1000 crores or more or
3. The annual net profit of the company is 5 crores or more.
MEANING OF CORPORATE SOCIAL RESPONSIBILITY: The term CSR means and
include but not limited to:
a. projects and programs relating to activities specified in schedule VII to the Act
b. Projects and Programs relating to the activities undertaken by the board of
directors of a company on recommendations of CSR Committee as per declared
CSR policy of the company subject to the condition that such policy will cover
subjects said in schedule VII of the Act.
CONSTITUTION OF CSR COMMITTEE: The CSR committee can be constituted in
the following manner:
(i) A listed public company covered U/S 135(1), shall have at least 3 independent
directors in the CSR committee.
(ii) An unlisted public company or a private company covered under section
135(1), which is not required to appoint independent directors shall have at least
3 directors as CSR committee,
(iii) A private company having only two directors on its board shall constitute its
CSR committee with two such directors.

34
(iv) If a foreign company is covered U/S 135(1), the CSR committee shall comprise
of at least 2 persons of which one person shall be specified under section
380(1)(d)of the Act and the other person shall be nominated by the foreign
company.
FUNCTIONS OF CSR COMMITTEE: Section 135(3) provides that CSR committee
shall:
(a) Formulate and recommend to the board, a CSR policy, which will indicate the
activities to be undertaken by the company as specified in schedule VII
(b) Recommend the amount of expenditure to be incurred on the activities
referred in the CSR policy.
(c) Monitor CSR policy from time to time.
LIST OF CSR ACTIVITIES:
a. Eradicating hunger, poverty, malnutrition, promoting health care including
preventive health care and sanitation and make available safe drinking water.
b. Promoting education including special education and employment enhancing
vocation skills especially among children and women, elderly and differently abled
and livelihood enhancing projects.
c. Promoting gender equality, empowering women, setting up homes and hostels
for women and orphans. measures for reducing inequalities faced by socially and
economically back ward groups.
d. Ensuring environmental substitutability, ecological balance, protection of flora
and fauna, animal welfare, agro forestry, conservation of natural resources and
maintaining quality of soil, air water etc.
e. Protection of national heritage, art and culture including restoration of
buildings and sites of national importance, development of traditional art and
handicrafts.
f. Measures for benefit of armed forces veterans, war widows and their
dependants.
g, Training to promote rural sports, nationally recognized sports, paraolympic
sports and Olympic sports.
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h. Contribution to Prime Minister’s National Relief fund or any other fund set up
by the Central Government for socio-economic development of Sc, ST, Bc,
minorities and women.
i. Contribution or funds provided to technology incubators located within
academic institutions which are approved by the Central Government.
j. Rural Development Projects.
Q2. EXPLAIN THE ROLE AND RESPONSIBILITY OF BOARD IN CONTEXT TO CSR?
ROLE OF BOARD OF DIRECTORS: Section 135(4) Provides that the Board of
directors shall:
(a) After taking into account, the recommendations made by the CSR committee,
approve the CSR Policy for the company and disclose the contents of such Policy
in the Director’s Report and also place it on the company’s website in the form
specified under Companies (CSR) Rules, 2014 and
(b) Ensure that the activities as are included in CSR Policy are undertaken by the
company.
(c) Ensure 2% of net profits spending on CSR activities.
(d) Report CSR activities in Board’s report and
(e) Disclose non compliance (if any) with the CSR provisions.
RESPONSIBILITY OF BOARD OF DIRECTORS:
a. To ensure that at leaat 2% of average net profits of last 3 preceding years is
spent on CSR activities every year. Net Profit means profit before tax and shall not
include profits earned from branches outside india.
b. To approve the CSR policy after considering the recommendations of CSR
committee.
c. To disclose CSR policy and initiatives in Board’s Report and Company’s website.
d. To ensure that activities reflected in CSR policy are actually undertaken by
company.

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e. If the company does not spend 2 % of net profits for CSR activities as required ,
then the Board to report the reasons in the Board report.
Q3. WHAT IS CORPORATE GOVERNENCE? EXPLAIN ITS PRINCIPLES AND

OBJECTIVES?
Corporate Governance is the process set up for the companies based on
certain systems and principles by which a company is governed. The guidelines
provided ensure that the company is directed and controlled in a way so as to
achieve the goals and objectives to add value to the company and also benefit the
company and stakeholders in the long term. Corporate Governance plays an
important role in enhancing economic efficiency of the firm.
NATURE OF CORPORATE GOVERNANCE:
1. It defines the responsibilities and duties imposed on each director.
2, it organizes, clarifies and constant decision making process.
3. its purpose is to implement responsible value oriented management and to
have effective control over the organization.
4. it deals with the style, structure, processes and roles of directors, members,
auditors and other personnel associated with the organization.
5. it operates as a part of large economy and relies its operations on legal
regulatory and institutional environment.
OBJECTIVES OF CORPORATE GOVERNANCE:
1. Builds investor’s confidence: It builds the confidence of investors of the
company through its effective functioning and higher profits.
2. Ensures transparency in operations: It ensures that all the operations involved
in managing the company must be performed in fair and transparent manner, so
that the value of the company and stakeholders increases and have faith on
company.

37
3. Provides balanced Board: To have a balanced Board it appoints adequate

number of executive and non-executive directors in the company to achieve the
interest of the company and stakeholders.
4. Policies and Procedures of the Board are reviewed: It reviews the Policies and
Procedures of the board so that the interest of the company and stakeholders can
be achieved.
5. Board’s decisions are informed: It ensures that board’s decisions are informed
to the shareholders regularly.
6. Long term objectives of the Board: It frames the policies of the board in such a
manner that long term objectives of the company and stakeholders are fulfilled.
SHORT ANSWER QUESYIONS:
1. CSR
2. CSR report
3. CSR activities
UNIT III COMPANY SECRETARY

Q1. WHO IS A SECRETARY? EXPLAIN THE KINDS OF SECRETARIES?

38
Every association of persons, from the smaller sport club to right up to the government itself, has at
least one person known as secretary. The profession of a secretary is one of the oldest profession in the
world.
Secretary means “ one entrusted with secrets”. The word “secretary” is derived from the latin
word “secretarius” which means a confidential writer or notary. In olden days the term secretary is used
to an officer who conducted the correspondence of king. In modern times the duties and functions of a
secretary have become so wide and varied that a modern secretary performs functions such as
conducting correspondence, keeping of records and accounts, writing of minutes, reports, acting as
public relation officer etc.
TYPES OF SECRETARIES: Secretaries may be classified into different categories which are as under:
1. PRIVATE SECRETARY: Private secretary is a person employed by another for his personal work
and correspondence. He is the right hand man of the employer. Persons holding top positions in
the business houses, public bodies and government, the professional people like doctors,
lawyers, engineers etc. whose work requires close attention and specialization cannot afford to
spare time for routine activities. For such routine activities they employ secretaries. The duties
of private secretary may be a) taking dictation b) filing and indexing files c) attending callers d)
handling mails e) keeping financial and personal records f) making appointments g) collecting
information.
2. SECRETARY OF AN ASSOCIATION OR CLUB: An association or club is formed to serve some
coomon cause of its members, such as promoting art, science, music, sports, literature etc.
these associations or clubs require the service of a whole time secretary. They usually appoint a
paid secretary to conduct the day to day activities of the association and act as the agent and
adviser of the managing committee.
3. SECRETARY OF A GOVERNMENT DEPARTMENT: Secretary of a government department is the
executive head who manages a particular department of the government. Usually an I.A.S
officer is appointed as the secretary of a particular department such as Secretary , Ministry of
Home Affairs; Secretary, Ministry of Foreign Affairs; The secretary of a government department
acts under the direct control of the minister in charge of that department. He is not only the
executive or administrative head of the department but also the chief advisor to the minister.
4. SECRETARY OF A CO-OPERATIVE SOCEITY: A co-operative society is a body corporate with
common seal and own properties on its name. it can enter into contracts to do all such things
necessary to achieve the objects for which it is formed. A secretary may be appointed as a paid
secretary or elected from among the members of the managing committee. The main function
of the secretary of a co-operative society is to manage the affairs of the society under the
control and directions of the managing committee. He is required to maintain proper records
and registers in accordance with the rules framed by the government and submit periodical
statements and returns to the Registrar of co-operative societies.
5. SECRETARY OF A LOCAL BODY: Local self - governing bodies such as municipal committees,
improvement trusts, zilla parishads etc usually appoint a whole time secretary to look after the
day to day affairs. The secretarial duties include office management, assisting in the conduct of
meetings, recording proceedings at the meeting, ensuring that the legal requirements are duly
complied and doing other functions.

39
6. COMPANY SECRETARY: every listed company and every public company having a paid up share
capital of 10 crore rupees or more shall have a company secretary. He must posses C.S degree
from ICSI. Company secretary performs the duties which may be performed by a secretary
under Companies Act, and includes any other ministerial or administrative duties.
Q2. DEFINE THE TERM “COMPANY SECRETARY“ ? STATE HOW AND WHO MAY BE APPOINTED AS
SECRETARY OF A COMPANY?
According to the section 2 (24) of the Companies Act, 2013 Company Secretary or Secretary is defined as
“Company Secretary or Secretary as defined in section 2 (1) (c) of the Company Secretaries Act, 1980
who is appointed by the company to perform the functions of a company secretary under the Act”.
According to section 2(1) (c) of Company Secretaries Act, 1980 company secretary is defined as “a
person who is member of the Institute of Company Secretaries of India (ICSI).
Therefore, company secretary means a person who is the member of Institute of Company
Secretaries of India (ICSI) and who is appointed by a company to perform the functions of a company
secretary. The functions of company secretary has been detailed in section 205 of the Act.
APPOINTMENT OF COMPANY SECRETARY: Section 2(24) , 203, 204 of the Companies Act, 2013 state
the provisions regarding appointment of the company secretary which are as follows:
 Only an individual who is a member of Institute of Company Secretaries of India (ICSI) can be
appointed as a company secretary.
 The following companies need to appoint whole time company secretary (mandatory)
a) All listed companies
b) Every public company having paid up capital of 10 crore or more
c) Every private company having paid up capital of 10 crore or more
 As per section 203(2), whole time company secretary must be appointed like other Key
Managerial Persons (KMP) through passing resolution of the Board which contains terms and
conditions of appointment as well as remuneration.
 As per section 203(3), a whole time company secretary cannot hold office in more than one
company except in its subsidiary company at the same time.
 As per section 203(4), if the office of a whole time company secretary is vacated, such vacancy
shall be filled by the board ina board meeting with in six months from the date of vacancy.
 A penalty will be imposed on the companies which contravenes the provisions of section 203(1),
(2), (3), (4), such a company is punishable with a fine of rupees one ;Lakh which may extend up
to rupees 5 Lakh. Addition to this, every director and other key managerial persons (KMP) are
also punishable with a fine of rupees 50 thousand. However, if the contravention still continues
after charging the fine, then rupees 1000 will be charged on daily basis from the starting date of
contravention of the provision.
STEPS FOLLOWED FOR THE APPOINTMENT OF A COMPANY SECRETARY:
1. ADVERTISE THE POST AND SELECTION: company advertise the post, collect applications, hold
interview, short list the individuals for the position, and finalise the terms of appointment.
2. CALL BOARD MEETING: As per section 203 (2) pass a Board Resolution for appointment of the
company secretary . At the board meeting, place , the proposal of appointment of Company

40
secretary with the details of the person finalized and pass a resolution appointing the company
secretary and approving the terms and conditions of his appointment .
3. RECEIVE CONSENT OF COMPANY SECRETARY: Receive Consent from Company Secretary to act
as Company Secretary.
4. FILLING OF FORM WITH ROC:
a) MGT -14 : As per provision of section 179 (3) Rule 8 (2); Company require to file -14 along
within 30 days of passing of Board Resolution with attachment of consent letter and Board
Resolution and fee.
b) MR-1: A company required to file MR-1 form at the time of appointment of KMP within 60
days of passing of Board resolution with attachments of Board resolution and consent letter
of company secretary.
c) DIR-12: As per section 170(2), it is needed to file form DIR-12 for appointmentof director or
KMP within 30 days from the date of appointment with attachments of consent letter,
appointment letter, self attested copy of PAN card, membership details (ICSI records),
residential details, e-mail id of the person for communication purpose are required to be
filled in the form.
5. INTIMATION TO STOCK EXCHANGE: if the company is a listed company, then intimation to all
the stock exchanges where the company’s securities are listed.
6. MAKE ENTRIES IN THE REGISTER OF DIRECTORS AND KMP: the company should make entries
about appointment of company secretary in the Register of Directors and Key Managerial
Persons (KMP) under section 170 of the Act.
NOTE: Now no need to file a return of appointment in form MR-1 with ROC for CEO, Company
Secretary and CFO.
Q3. EXPLAIN THE QUALIFICATIONS OF COMPANY SECRETARY?
The whole time company secretary as a KMP shall be a member of the Institute of Company
Secretaries of India (ICSI). A listed company or public company having paid up share capital of
rupees 10 crore or more, shall appoint any individual who possesses the qualification of CS and have
membership of ICSI, constituted under the Company Secretaries Act, 1980 as a whole time secretary
to perform the duties of a Key Managerial Person (KMP) and secretary under Companies Act, 2013.
OTHER QUALIFICATIONS:
1. SOUND EDUCATION: the secretary should possess high standard of academic qualification.
Since a company secretary has to perform multifarious duties, it is desirable that he should be
very well qualified.
2. PROFICIENCY IN LANGUAGE: Proficiency in language is a must qualification of a secretary. The
writing of statements precisely, drafting of reports, the writing of minutes, the preparation of
agenda and the framing of resolutions require a some what specialized knowledge of the English
language. Hence it is necessary that the secretary should command that knowledge.
3. KNOWLEDGE OF OFFICE ORGANISATION AND BUSINESS METHODS: It is essential that the
secretary should possess sound practical knowledge of the different system of filing, indexing,
duplicating. He should have practical knowledge of practical office routine and methods. He
should be familiar with the modern trend of office mechanization and automation.

41
4. KNOWLEDGE OF ACCOUNTANCY AND TAXATION : As an executive officer, the company

secretary must have a basic knowledge of book-keeping and accountancy as well as law and
practice of income-tax, sales-tax etc.,
5. KNOWLEDGE OF MERCANTILE LAW: It is necessary that the secretary should be thoroughly
conversant with acts like Contract Act , and the laws of the country relating to Sale of Goods,
Insurance , Patents , and Copyrights, Trade Marks , Workmen’s Compensation, etc. Above all he
should possess an intimate knowledge of the Companies Act together with all leading cases.
6. KNOWLEDGE OF ECONOMICS, BANKING , FINANCE : A company secretary should especially
have knowledge of the methods of modern banking and so far as it relates to the financing of
the company. More particularly, he should know the law and practice of banking, working of the
money and capital markets, methods of financing trade and industry and foreign exchange.
7. IMPRESSIVE PERSONALITY: A good and impressive personality is the aggregate of several
qualities of head and heart, e.g., sincerity, orderliness, common sense, tact, discretion,
punctuality, enthusiasm, alertness, dependability, sense of responsibility, cheerful, disposition
and like. The secretary can get on well with everybody and secure willing co-operation from his
subordinates and colleagues if he possess an impressive personality.
Q4. EXPLAIN THE DUTIES OF COMPANY SECRETARY?
Duties of company secretary are classified into two types:
DUTIES OF COMPANY
SECRETARY
GENERAL DUTIES SPECIAL DUTIES
I] GENERAL DUTIES
General duties of a company secretary includes the following activities,
1. To follow the company’s rules and regulations.

2. To conduct all kinds of company meetings, meetings of Board of Directors , general meetings
and such other meetings required from time to time.

42
3. To maintain minutes of meetings.

4. To issue all necessary notices to members of the company.
5. To conduct correspondence with shareholders in accordance to further issue of shares and calls.
6. To make transfers and forfeitures.
7. To act as a in charge of company’s books like register of members, share ledgers, transfer books
, etc.,
8. To file all necessary returns with registrar of companies.
9. To certify documents like certificate of incorporation, memorandum and articles of association.
10. To ensure that board decisions are properly communicated.
II] STATUTORY DUTIES:
According to Rule 10 of the Companies (Appointment and Remuneration of Managerial

Personnel) Rules,2014 states that the company secretary is responsible to perform the statutory duties,
1. To provide guidance to the directors of company collectively or individually.

2. To obtain approvals from government, board, board meetings and other authorities.
3. To attend board meetings, committee and general meetings and maintain minutes of meetings.
4. To convey minutes of meetings.
5. To provide assistance to the boards in the conduct of company affairs.
6. To guide board in ensuring good corporate governance.
7. To handle new duties assigned by board from time to time.
8. To make statutory declaration for receiving certificate of commencement of business.
9. To sign the documents and proceedings which require authentication.
10. To deliver registration of allotment to the registrar.
11. To give notice to registrar for increase for increase of company’s share capital.
12. To deliver certificate of allotment of shares within two months after transfer.
Q5. EXPLAIN THE RITHTS AND LIABILITIES OF COMPANY SECRETARY?
RIGHTS AND POWERS OF A COMPANY SECRETARY: A company secretary enjoys certain rights. Some of
them are provided by the Companies Act while some other rights are arise out of agreement between
him and his employer
1. Company secretary has the right to supervise and control the secretarial department of a
company.
2. He has the right to sign documents as a principal officer of the company within the meaning of
the Companies Act.
3. Secretary has a right to issue share certificate of the company.
4. The secretary is empowered to perform all acts which is required to perform under Companies
Act, FERA Act, income tax act etc.
5. Sometimes the Board of Directors may delegate some powers to the secretary. Accordingly he
can enter into contracts on behalf of directors and do all such acts which the board of directors
specifically directs him to perform.
6. Sometimes, the general meeting also authorizes him to perform certain acts.
7. He has a right to be indemnified by the company for any loss suffered by him while discharging
his official duties.

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LIABILITIES OF A COMPANY SECRETARY: They are divided as under:

LIABILITIES OF
COMPANY
SECRETARY
STATUTORY CONTRACTUAL
LIABILITIES LIABILITIES
A) STATUTORY LIABILITIES: If a Company Secretary fails to perform his statutory duties, he become
liable to punishment or penalty prescribed under the Act.
Company secretary may be held liable for:
1. Default in filing a return of allotment- fine up to Rupees 1000 for every day which may to 1
lac if default continues.
2. Default in keeping ready for delivery share certificates, debenture certificates etc., with 3
months after allotment and with in efault 2 months of the application for registration of a
transfer- fine up to Rupees 5000 which may extend to 5 lac for every day during which
default continues.
3. Default in filing particulars of charge on properties acquired – fine up to rupees 5000.
4. Default in filing annual returns – fine up to rupees 50,000 and if default continues 5 lac.
5. Default in holding annual general meeting – fine up to 1 lac plus fine up to 5000 for every
day after the first during which such default continues.
6. Default in the circulation of the members resolutions – fine up to 25000
7. Default in registering certain resolutions and agreements requiring registration – fine up to
1 lac which may extend to 5 lac.
8. Failure to record the minutes of the board and general meetings – fine up to 5000
9. Refusal in allowing inspection of minutes of general meeting or failure to furnish a copy of
such minutes on request by any member with in 7 days os such request – fine up to 5000
10. Default in laying down P & L account and balance sheet at AGM – fine up to 50000 or
imprisonment up to 1 year or both.
11. Failure to give due notice of board meeting – fine up to 25000.
12. Failure to maintain the following statutory books:
a) Register of members – fine up to 50000.
b) Index of register of members – fine up to 3 lacs.
c) Register and index of debenture holders – fine up to 50,000
d) Register of directors – fine per day of default 5000.
e) Register of director’s shareholdings – fine up to 50000.
B) CONTRACTUAL LIABILITIES:
1. He must carry out the orders given to him by the directors.
2. He must carry out the obligations of his service agreement with the company.
3. He should not disclose any confidential information of the company.

44
4. He should not do anything beyond his authority. If he acts beyond his authority, he will be
held personally liable for any damage or loss suffered by the company or any third party as a
result of his action.
5. He is expected to perform his duties with reasonable care and skill.
6. He is liable for damages caused to the company by his willful misconduct and neglect of
duties.
7. He is liable for any fraud on the part of any of his assistants if it is proved that he is a pay to
such fraud.
Q6. WRITE BREIFLY ABOUT THE COMPANY SECRETARY IN PRACTICE?
Company secretary in practice:
The section 2 (25) of Companies Act, 2013 defines “Secretary in Practice as to mean a
secretary who is deemed to be in practice within the meaning of section 2(2) of the Company
Secretaries Act, 1980”.
The section 2(2) of Company Secretaries Act, 1980 states that “a member of the institute
shall be deemed to be in practice” when , individually or in partnership with one or more
members of the institute in practice or in partnership with members of such recognized
profession as may be prescribed in consideration of remuneration received or to be received,
engaged him self involves:
(i) Practicing profession of a company secretary in relation to any company.

(ii) Offering to perform or performing services in relation to the company’s promotion,
incorporation, amalgamation, reconstruction or winding up.
(iii) Offering or performing services such as:
(a) Authorized company representative,
(b) Agent of share transfer,
(c) Issue house
(d) Broker of shares and stocks
(e) Secretarial auditor or consultant.
Q7. EXPLAIN BREIFLY SECRETARIAL AUDIT?
SECRETARIAL AUDIT: The Companies Act, 2013 introduces the concept of “Secretarial Audit” for the first
time under section 204. It is the process of checking compliance with the provisions of various laws,
rules, regulations, procedures and other legislation of corporate or economic nature applicable to the
company. It helps to ensure that the company has successfully complied with the legal and procedural
requirement of all related laws. Secretarial Audit provide a comfort zone to the regulators, stakeholders,
and management and can feel that the company is following disciplined approach which helps to
improve and evaluate the effectiveness of a company’s risk management and goverance.
Companies applicable for Secretarial Audit: According to section 204 of Companies Act, 2013 the
following companies are required to obtain Secretarial Audit Report:
1. A listed company
2. A public company which has a paid up capital of rupees 50 crore or more

45
3. A public company which has a turnover of rupees 250 crore or more

4. A private company which is a subsidiary of a public company
OBJECTIVES OF SECRETARIAL AUDIT:
The objectives of Secretarial Audit are mentioned below as follows:
1. To verify and report on compliances of applicable laws and Secretarial Standards;

2. To point out non-compliances and inadequate compliances;
3. To protect the interests of various stakeholders i.e., the customers, employees, society etc;
4. To avoid any unwarranted legal actions/ penalties by law enforcing agencies and other persons
as well.

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UNIT-IV COMPANY MEETINGS AND RESOLUTIONS

Q1. WHAT IS MEETING? EXPLAIN THE REQUISITIES/ ESSENTIALS/ LEGAL RULES
OF A VALID MEETING?
Meetings are must for organizations and associations. A meeting may be as “
gathering or assembly of certain number of members to transact business as per
agenda for which prior notice has served”. Generally, the purpose of meeting is
to consider issues of common interest of its members. The company meetings
must be convened and held in compliance with the provisions of Companies Act,
2013.
REQUISITIES OR ESSENTIALS OR LEGAL RULES OF A VALID MEETING:
1. PROPER AUTHORITY: The Board is the proper authority to convene a meeting,
be it a annual general meeting or extra ordinary general meeting or board
meeting. The Board should pass a resolution to call for a meeting of company at a
specified date, time and place.
2. NOTICE: The notice of the meeting should be issued by the Board. A proper
notice of general meeting of the company can be given by post or electronic
mode. Notice must be in writing. It must specify date, time and place of meeting.i
it must be sent to every member of company who is entitled to receive it. It must
contain a statement of business to be transacted at the meeting. In case of
general meeting of company notice should be sent at least 21 days before
conducting the meeting. A meeting can also be called by a shorter notice if not
less than 95% of the members entitled to vote at such meeting give their consent
in writing or electronic mode.
3. AGENDA: The business to be transacted at the business is called the Agenda. It
means the “things to be done” at the meeting. It outlines the business which the
meetings to transact item by item. The secretary prepares the agenda in
consultation of the chairman of the company. The agenda should be sent to the
members along with the notice.
4. QUORUM: The term quorum may be defined as the minimum number of
members that must be present to constitute a valid meeting. If the quorum is not

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present, the meeting shall be invalid and the proceedings of such meeting are also
invalid. Quorum for the meetings as per Companies Act, 2013 are as follows:
Public company: in case of public company quorum is as follows:
(a) In case of public company having less than 1000 members on the date of
meeting the quorum is 5 members personally present.
(b) in case of public company having more than 1000 and less than 5000 members
then the quorum is 15 members personally present.
(c) in case of public company having more than 5000 members on the date of the
meeting the quorum shall be 30 members personally present.
Private company: in case of private company the quorum shall be 2 members
personally present at the meeting.
5. PROXY: When a member is unable to attend a meeting personally, he may
depute another person to attend the meeting on his behalf. The person so
appointed by the member is called proxy. The legal rules relating to proxy are as
follows:
1. A proxy cannot be appointed to represent more than 50 members.
2. The document appointing the proxy must be in writing and signed by the
appointer or by his duly authorized agent.
3. The instrument appointing the proxy for a meeting is also called as proxy.
4. The proxy appointed before the meeting is also valid for adjourned meeting.
5. The proxy is entitled to vote only at the meeting. The proxy has no right to
speak at the meeting. However he can demand poll.
6. A member of company may appoint more than one proxy for each class of
shares held by him.
7. Death of the member appointing the proxy may revoke the proxy.
8. When the member appointing the proxy personally present and vote at
meeting may revoke the proxy.

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6. RESOLUTIONS: Important or relevant matters are discussed at the meeting to

arrive at a decision. The decisions so taken in the meeting are called Resolutions.
A resolution is a legal form or formal decision taken at a meeting. The resolutions
are mainly of two kinds. They are (1) ordinary resolutions (2) special resolutions.
7. MINUTES: All the proceedings of every meeting must be recorded, such record
containing the information pertaining to the resolutions passed by the company is
called minutes’s book. This book is maintained separately for meetings of the
members and meetings of the board. Each page of the minute’s book must bear
the signature of the chairman.
8. CHAIRMAN: Every meeting shall have a chairman. He is the chief authority in
the conduct and control of the meeting. He is responsible for efficient and smooth
conduct of the meeting. A meeting is not valid, if it is conducted without
chairman. Generally, the articles of association of a company provides that, the
chairman of the Board shall preside as the chairman of the general meeting of
company.
Q2. WHAT IS AN ANNUAL GENERAL MEETING? EXPLAIN THE PROVISIONS

REGARDING HOLDING AN AGM?
Every company other than one person company shall hold an annual general
meeting as per the provisions of section 96 of companies Act 2013. Annual
general meeting as the name suggests it is the annual meeting of the company
irrespective of private or public company , having a share capital or not, limited or
unlimited as per section 96 of the Act.
OBJECTIVES OF AGM:
1. Presentation of Annual Accounts: The profit and loss accounts and balance
sheet of the company shall be presented by the board of directors for the
approval of the shareholders.
shareholders of the company, if sufficient profits are available.
3. Appoint of Auditors: Auditors of the company for the next financial year are
also appointed and their remuneration is also fixed in AGM.

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4. Appointment of Directors: In case of every Public limited Company, every year

2/3rd of the number of directors shall retire by rotation and new directors in their
place shall be appointed in the AGM of shareholders.
Section 96 to 99 deals with the legal provisions relating to AGM:

1. FIRST AGM: Sec 96 of Companies Act 2013, makes it mandatory to hold the
first annual general meeting with in the first 9 months from the date of the
closing of the first financial year of a company. No extension can be given with
respect of holding first AGM.
2. SUBSEQUENT AGMs: The subsequent AGMs should be held within 6 months
from the date of close of the financial year. The Registrar in special cases, extend
the prescribed time period for holding AGM by a period not exceeding 3 months.
3. NOTICE: The notice of the proposed AGM must be sent to all the shareholders
of the company. A period of 21 days notice must be given either in writing or
through electronic mode before the date of the proposed meeting. A shorter
notice can also be given if 95% of the members who are entitled to vote in the
meeting give their consent.
4. NOTICE TO WHOM: the notice must be sent to all the shareholders. Legal
representative of the deceased shareholder, official receiver of an insolvent
member, auditor of the company, every director of the company, practicing
company secretary who has give compliance certificate etc.
5. DATE, TIME AND PLACE OF THE MEETING: Every AGM shall be called during
the business hours. Business hours means between 9 am to 6 pm. AGM shall be
conducted on a day which is not a public holiday. AGM must be held at the
registered office of the company or any other place within the city or town in
which the head office is situated in.
6. PROPER AUTHORITY: The Board of Directors is the proper authority to to
convene an AGM. A manager or managing director or secretary calls a meeting
without such authority, the AGM is not valid.
7. QUORUM: Quorum means the minimum number of members required to
conduct a meeting. The quorum of the meeting in case of public company shall be
5 members personally present if the number of members as on the date of

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meeting is not more than 1000. 15 members personally present if the number of
members as on the date of meeting is more than 1000 and less than 5000. 30
members personally present if the number of members as on the date of meeting
is more than 5000. In case of private company 2 members personally present can
be quorum.
8. BUSINESS TO BE TRANSACTED AT THE MEETING: the business to be transacted
at the meeting comprises of :
ORDINARY BUSINESS: in case of AGM the following business is deemed to be
ordinary business:
1. Presentation of Annual Accounts: The profit and loss accounts and balance
sheet of the company shall be presented by the board of directors for the
approval of the shareholders.
shareholders of the company, if sufficient profits are available.
3. Appoint of Auditors: Auditors of the company for the next financial year are
also appointed and their remuneration is also fixed in AGM.
4. Appointment of Directors: In case of every Public limited Company, every year
2/3rd of the number of directors shall retire by rotation and new directors in their
place shall be appointed in the AGM of shareholders.
SPECIAL BUSINESS: All the matters other than the ordinary business are termed
as special business. Explanatory statement must be annexed to the notice for
transacting special business in the meeting.
9. CONSEQUENCES OF FAILURE TO CONDUCT THE MEETING: If the company fails
to hold the meeting as per section 96 with in prescribed time, the tribunal under
section 97 of the Act empowered to call or direct the company to hold an AGM. If
the company defaults the sections 96 and 97, then the company and every officer
of the company will be punishable with a fine which may extend to rs 100000 and
in case of continuing default with a further fine which may extend to rs 5000 per
day during the continuance of such default.

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3. WHAT DO YOU MEAN BY EXTRAORDINARY GENERAL MEETING (EGM)? WHO

CAN CONVENE EGM?
Any general meeting of shareholders conducted in between two AGMs is
called EGM. In other words all general meetings other than AGM is called EGM.
An extraordinary general meeting may be held for the purpose of dealing with
any extraordinary business or special business which cannot be postponed till
next AGM. EGM is generally conducted to transact any urgent or special business
which may arise between two AGMs.
NEED FOR EGM: EGM can be conducted to transact any special business such as
changes in MOA, changes in AOA, reduction or reorganization of share capital,
issue of debentures, removal of directors, removal of directors etc.
BUSINESS TO BE TRANSACTED: All the business transacted in EGM is special
business . in case of every special business transacted at EGM an explanatory
statement to be sent to shareholders with notice. The provisions of AGM relating
to date, time and place of meeting shall not be applicable to EGM.
WHO CAN CONVENE EGM: EGM can be convened by any one of the following:
A) BY THE BOARD OF DIRECTORS
I) on its own ii) on the requisition of shareholders
B) BY THE REQUISITIONISTS THEMSELVES
C) BY THE NATIONAL COMPANY LAW TRIBUNAL (NCLT)
A) i)BY THE BOARD OF DIRECTORS ON ITS OWN: The board may, whenever it
thinks fit, call an extraordinary general meeting. The board by passing a resolution
can convene EGM. A secretary or a managing director cannot convene EGM
without board authority.
II) BY THE BOARD ON REQUISITION OF MEMBERS: The board is bound to call an
extraordinary meeting of the company on the requisition of members if the
following conditions are satisfied:
1. The requisition is signed by the requisite number of members under section
100. The requisite number of members who shall sign the requisition is:

52
i) in the case of a company having a share capital , holders of at least 10% of the
paid up share capital of the company and
ii) in the case of a company not having a share capital, members having at least
10% , the total voting powers.
2. The requisition shall state the matters for the consideration of which meeting is
to be called
3. The requisition shall be deposited at the registered office of the company
On receipt of valid requisition the board shall within 21 days from the date of
the deposit of a valid requisition proceed to call EGM by giving 21 days notice.
The meeting shall be held within 45 days from the date of the deposit of the
requisition.
B. BY REQUISITIONISTS THEMSELVES: If the board does not proceed to call EGM
within 21days from the deposit of requisition, the requisitionists themselves can
call a meeting by sending a notice on a day not later day than 45 days from the
date of deposit of requisition. The EGM requisitioned by members must be held
within 3 months from the date of deposit of requisition. No other business can be
transacted except for which it is especially convened. The company is bound to
repay all the expenses incurred by the requisitionists in calling such meeting.
c. BY THE NATIONAL COMPANY LAW TRIBUNAL(NCLT) : if for any reasons it is
impracticable to call or hold or conduct an EGM, the tribunal may order an EGM
to be called , held and conducted in such manner as it thinks fit. The tribunal may
give directions in respect of place, date and the manner in which the meeting be
held and conducted. The tribunal may call and conduct the EGM on the
application of a member or on the application of a director or suo motu (on its
own).
Q4. EXPLAIN THE PROVISIONS OF LAW RELATING TO BOARD MEETING?

The board of directors of a company should hold board meetings as
frequently as necessary. The board of directors meet together, to take decisions
to run affairs of the company. The board meetings should be, generally, held at
the registered office of the company or at any convenient place. The date of next

53
board meeting is decided at the end of every board meeting. The quorum to hold
board meeting is 1/3rd of the total number of directors or two directors whichever
is more.
PROVISIONS FOR HOLDING BOARD MEETINGS:
1. FREQUENCY: At least one board meeting must be held within every 3 calender
months. At least four such board meetings are to be held in a calendar year. The
time gap between two board meetings should not be more than 120 days.
2. FIRST BOARD MEETING: The first board meeting of company after
incorporation must be held within 30 days of incorporation. However Central
Government may exempt companies such as dormant companies, one person
companies and small companies from holding first board meeting within 30 days.
3. BOARD MEETING THROUGH VIDEO CONFERENCE: As per the Companies Act,
2013 the board of directors can take part in board meeting through video
conference. The following is the procedure for board meeting through video
conference:
a) Arrangements: The chairman of the meeting and the company secretary shall
make necessary arrangements for board meeting through video conference. They
should ensure to avoid failure the failure of video or audio connection. They
should ensure the safeguard of integrity of meeting by ensuring sufficient security
and identification procedures. Secretary should record the proceedings and sage
guard the tapes of recording till the audit for the year is completed.
b) Notice: The notice of the meeting shall be sent to all the directors. The notice
of the meeting shall inform the directors regarding the option available to them
to participate through video conference. The notice must contain date, time and
place of meeting.
c) Communication of intention by director to participate by video conference:
The directors, who desires to participate through video conference or other audio
visual means, shall intimate the chairman in beginning of the calendar year. In the
absence of any such intimation. It shall be assumed that the director attend the
meeting in person.

54
d) Roll call: At the commencement of the meeting a roll call shall be taken by the
chairman from every director participating the meeting through video
conference. The directors participating meeting through video conference state:
i) his name.
ii) the location from where he is participating,
iii) That he has received the agenda and all other relavent material for meeting,
iv) That no one other than the concerned director is attending, having access to
the proceedings of the meeting at the location.
d) Statutory Registers: it is the duty of the chairman to place the registers, books
of accounts and reports etc, which are needed to be placed before the meeting
for consideration of the board.
e) Decision: At the end of discussion on each agenda item, the chairman of the
meeting shall announce the summary of the decision taken on such item.
f) Minutes: At the end of every board meeting, the company secretary has to
record the minutes in minutes book. It is to be signed by chairman on every page
of minutes book.
Q5: WHAT IS RESOLUTION? EXPLAIN THE KINDS OF RESOLUTIONS?

The term resolution may be defined as the proposal which is voted at the
meeting and accepted by the majority members. In othe words it is the formal
decision taken in the meeting. The affairs of the company are conducted through
paasing resolutions in the meeting.
KINDS OF RESOLUTIONS: There are 3 kinds of resolutions recognised by company
law. They are
1) ORDINARY RESOLUTION: An ordinary resolution is one which is passed at a
general meeting by a simple majority of members entitled to vote. Simple
majority means that the votes cast in favour of a proposal is more than the votes
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cast against the proposal. All the resolutions which are not special or which do
not require special notice or ordinary resolutions. Ordinary resolutions do not
require filing with the Registrar of Companies. The usual notice of 21 days is
however, required for passing an ordinary resolution.
The following decisions are taken through passing ordinary resolutions:
1. Adoption of profit and loss account, balancesheet , director’s report, auditor’s
report etc.
2. Election of directors.
3. Declaration dividends.
4. Appointment of auditors and fixing their remuneration.
5. Removal of a director before expiry of his tenure.
6. Sale of whole or part of company’s undertaking or business.
2) SPECIAL RESOLUTION: A resolution shall be a special resolution when:

i) The intention to propose the resolution as a special resolution has been duly
specified in the notice.
Ii) A 21 days clear notice has been duly given’
iii) The votes cast in favour of the resolution by the members entitled to vote are
not less than 3 times more than the votes cast against the proposal.
An explanatory statement setting out all material facts concerning the subject
matter of the special resolution shall be annexed to the notice of the meeting. A
copy of every special resolution together with the copy of the explanatory
statement shall be filed with the registrar of companies within 30 days of passing
such resolutions.
The following decisions are taken through passing special resolution:
1. to alter the provision of the memorandum for changing the place of registered
office from one state to another or objects of the company.
2. to change the name of the company.

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3. to alter the articles of association of the company.

4. to create reserve capital.
5. to reduce the share capital of the company.
6. to authorize payment of interest out of capital.
3. RESOLUTION REQUIRING SPECIAL NOTICE: A resolution requiring special notice
is not actually an independent class of resolution. Such a resolution may be an
ordinary or special resolution. This resolution requires a special notice to be
circulated before conducting the meeting.
The following decisions are taken through passing resolution requiring special
notice:
1. For the appointment of auditor other than retiring auditor.
2. for the express resolution that the retiring auditor shall not be reappointed.
3. for removal of a director before expiry of the term.
4. for appointing another person as director in place of the director removed.
4. Passing of resolution by Postal ballot: It is generally noted that members of a
listed company are widely dispersed and there is very poor attendance at the
general meetings. The meetings are normally attended by the promoters, their
friends and relatives who collect proxies and by and large resolutions are passed.
Moreover the general meetings are conducted on working hours, so shareholders
find it difficult to attend the meeting. By postal ballot system shareholders can
take part in decision making of the company. Section 110 also empowers the
central government to declare that certain business can only be conducted by
postal ballot.
The following decisions are generally taken through passing resolution by postal
ballot:
1. Alteration of the objects clause of the memorandum of association
2. Alteration of Articles of association.

57
3. Change in place of registered office outside the local limits of any city, town or
village
4. Election of director under section 151 (small shareholder’s director)
5. Buy back of shares by a company under sec 68(1).
Q6. WHO IS THE CHAIRMAN OF A MEETING? EXPLAIN HIS POWERS AND

DUTIES?
CHAIRMAN: Every meeting shall have a chairman. He is the chief authority in
the conduct and control of the meeting. He is responsible for efficient and smooth
conduct of the meeting. A meeting is not valid, if it is conducted without
chairman. Generally the Articles of association of a company provides, that the
chairman of the Board shall preside as the chairman of the general meeting of
company.
If the board has appointed the chairman and if he is not present within 15
minutes of the appointed time of the meeting or is unwilling to chair, then the
directors among themselves may elect one to be chairman. If no director present
at meeting is willing to chair, then the members among themselves may choose
to be the chairman.
The following are the powers and duties of the chairman:
1. The chairman has the power to preside over all meetings. He should ensure
that notice is given to all concerned and the quorum of members are present and
that his appointment is regular and in order.
2. All the requirements of the statutory rules, standing orders and regulations are
duly observed.
3. He has to determine the agenda of the meeting.
4. The items of the business are taken out in an order as set out in the agenda.

58
5. Bring the discussion on any question and be impartial by giving all members a
fair chance to discuss on any proposed resolution and to see all views are taken
into consideration.
6. His decision with regard to the validity of proxies is final.
7. The validity of vote shall be decided by him and his decision will be final. The
courts shall not interfere with such a decision unless fraud is proved.
8. He should take care to see the minority is in no way oppressed.
9. He has the power to adjourn or postpone the meeting, if necessary.
10. He has the power to expel any member, if the member seriously interferes
with the smooth conduct of the meeting.
11. He should be in a position to ensure that the proposals are brought forward
for consideration by the directors in their meeting.
12. He should see that the views of the directors are heard and not stifled by the
conduct of others in the meeting.
13. He has the power to order the poll.
14. He must be ready to intervene as and when necessary.
15. He should ensure that the Board meetings achieve the purpose for which they
are intended.
16. He should review the composition, effectiveness and performance of the
Board.
Q7. WHAT DO YOU MEAN BY VOTING? WHAT ARE ITS KINDS?

VOTING: The term vote means expression of will or opinion in an authorized
form for or against any proposal. The business in the meeting is conducted in the
form of passing the resolutions in the meeting. The resolutions so passed in the
meetings, is decided by the voting in the meeting. The members has the right to
discuss about the proposal and vote in favour or against it. It is to be noted that
equity shareholders has right to vote on every resolution, whereas the preference
shareholders can only vote on such resolutions which directly affect their rights.
59
KINDS OF VOTING: The following are the different kinds of voting:

1. By Acclamation: When persons present in meeting indicate their approval or
disapproval of the proposal by clapping, cheering or applause, it is known as
voting by acclamation. This method is adopted where there is almost unanimous
approval or disapproval. Motion of thanks of the chair is adopted by this method.
2. By Voice Vote: In this method the chairman puts the proposal before the
meeting and the persons who are in favour of the proposal say ‘yes’ and those
who are against the proposal say ‘no’ . the chairman hears the both the voices of
‘yes’ and ‘no’ and gives his decision after ascertaining the numbers of ‘yes’ and
‘no’,
3. By division: Under this method the chairman requests the members present in
the meeting to dive themselves into two blocks – one in favour of proposal and
another against it. The chairman with the help of secretary counts the numbers of
persons in favour and against the proposal and gives his decision based on
majority principle.
4. By show of hands: Under this method the chairman asks all those in favour of
the resolution to raise the hands and when that number is noted, asks all those
against to do likewise. The chairman then declares the result of the voting .
5. By Ballot: Under this method, every person present records his vote on a ballot
paper and deposits it in the ballot box provided for that purpose. The counting of
ballots cast for or against the proposal reveals the result. This method ensures
secrecy in casting votes.
6. By Poll: In company meetings, voting by poll is according to the number of
shares held by a member. The voting by show of hands may not always reflect the
opinion of members upon a value basis. Also there may be a number of proxies
who can vote only by poll and not by show of hands.
7. E-Voting: E-Voting means voting through electronic means. Every, listed
company or a company having not less than 1000 members shall provide to its
members facility to vote at the general meeting through electronic means. The
company may pass any resolution by electronic voting system.
Q8. WHAT IS CLASS MEETING?

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Class meeting are held to deal with certain matters affecting the interests of
the holders of a particular class of shares. In other words class meetings are those
meetings which are held by share holders of a particular class of shares. Eg.
Preference shares. The class meetings are usually required to be held when it is
proposed to alter, vary or affect the rights of a particular class of shares. For
effecting such changes it is necessary to call separate meeting of the holders and
seek their approval. Class meeting are held to pass resolutions which are binding
only on the members of the class of the shares concerned and the members of
that class alone may attend and vote at that meeting. Class meetings are held to
ascertain the consent of the class of members for alteration of their rights.
Eg: when a company desires to cancel the arrears of dividends on cumulative
preference shares, it is necessary to call a meeting of only preference share
holders.
1. Extra ordinary Meeting 11.Agenda
2. Class meeting 12. Resolution
3. Board meeting
4. Special Resolution
5. Kinds of meeting
6. Kinds of voting
7. Proxy
8. Roll call
9. E-voting
10. Minutes

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UNIT-V WINDING UP
Q1. WHAT DO YOU MEAN BY WINDING UP? EXPLAIN KINDS OF WINDING UP?
Winding up or liquidation of a company represents the last stage in its life. It
is a legal process by which a company is dissolved. The assets of the company are
disposed of, the debts are paid off out of the realized assets and the surplus if any
are then distributed among the members in proportion to their holding in the
company.
Winding up is the process by which the life of the company is ended and its
property is administered for the benefit of its members and creditors. An
administrator called ‘Liquidator’ is appointed and he takes control of the
company, collects its assets, pay its debts and finally distributes any surplus
among members. Winding up process also called as liquidation.
MODES (KINDS) OF WINDING UP: There are two modes of winding uo. They are
1. Compulsory winding up 2. Voluntary winding up.
1. COMPULSORY WINDING UP: A company may wound up at an order of tribunal.
up’. The court may make an order for winding up on an application by any of the
persons entitled u/s 272. Under this winding up the Liquidator is appointed by the
Tribunal.
Grounds for Compulsory Winding uo of Company:
1. Special resolution.
2. Inability to pay debts.
3. Just and equitable.
4. Default in filing P/L account and Balance sheet and annual returns.
5. Acted against Sovereignty and Integrity of India.
6. Sick industrial company u/s 424.
2. VOLUNARTY WINDING UP: A voluntary winding up of a company is entirely
different from a compulsory winding up, voluntary winding up is winding up by

62
the members or creditors of a company without interference by the tribunal. The

most important advantage of voluntary winding up is that it does not have so
many legal formalities to be complied. This form of winding up is the most
common and the most popular. A company may wound up
(a) on the expiry of the period of the duration of the company prescribed in the
Articles of Association or on the happening of an event leading to winding up by
an ordinary resolution passed at general meeting of the company.
(b) By a special resolution passed at the general meeting
KINDS OF VOLUNTARY WINDING UP: It is of two kinds. They are
1.Members Voluntary Winding up 2. Creditors Voluntary winding up.
Q2. WHAT IS COMPULSORY WINDING UP? ON WHAT GROUNDS TRIBUNAL CAN

ORDER FOR COMPULSORY WINDING UP?
COMPULSORY WINDING UP: A company may wound up at an order of
tribunal. up’. The court may make an order for winding up on an application by
any of the persons entitled u/s 272. Under this winding up the Liquidator is
appointed by the Tribunal.
Grounds for Compulsory Winding uo of Company:
1. Special resolution.
2. Inability to pay debts.
3. Just and equitable.
4. Default in filing P/L account and Balance sheet and annual returns.
5. Acted against Sovereignty and Integrity of India.
6. Sick industrial company u/s 424.
1. SPECIAL RESOLUTION OF THE COMPANY: If a company by a special resolution
resolves that it may be wound up by the tribunal, the tribunal may pass a winding
up order. The power of the Tribunal in such a case is discretionary and should be

63
exercised only in bona fide cases. The Tribunal may refuse to order winding up
where it is opposed to public or company’s interest.
2. INABILITY TO PAY DEBTS: The Tribunal may order for the winding up of a
company if it is unable to pay its debts. The Tribunal may order for winding up of
company, if the company has ceased to be commercially solvent i.e., it is unable
to meet its current liabilities although the assets when realized may exceed its
liabilities. If the company is not in a position to pay its existing liabilities, a petition
can be filed for winding up order
3. JUST AND EQUITY: Another ground on which a Tribunal can order the winding
up order of a company is when the Tribunal is of the opinion that it is just and
equitable that the company should be wound up. The Tribunal has a wide powers
to order winding up whenever the Tribunal considers it just and equitable to do.
In the following cases the tribunal has winded up the company on the ground of
just and equity.
(a) Loss of Substratum: It is just and equitable to wind up a company where the
company’s main object or substratum is gone. The substratum is deemed to be
gone when :- (i) the subject matter of the company is gone, or (ii) the object for
which it was incorporated has substantially failed, or (iii) it is impossible to carry
on the business of the company except for a loss , or (iv) the existing and the
possible assets are insufficient to meet the existing liabilities of company.
(b) Deadlock in Management: Where there is deadlock in management of the
company, it is a proper case for winding up under the just and equitable ground.
(c ) Oppression of minority: When Majority shareholders have adopted an
aggressive or oppressive policy towards the minority, it is sufficient ground for
winding up of the company.
(d) Fraudulent purpose: if the affairs of the company have been conducted in a
fraudulent manner or the company was formed for fraudulent and unlawful
purposes or the persons concerned in the formation or management of its affairs
have been guilty of fraud or misconduct, then it is just and equitable to wind up
the company.
4. DEFAULT IN FILING PROFIT AND LOSS ACCOUNT, BALANCE SHEET AND
ANNUAL RETURNS: The Tribunal may order for compulsory winding up, if the

64
company has made a default in filing with the Registrar its profit and loss account,
balance sheet or annual returns for five consecutive financial years.
5. ACTS AGAINST SOVEREIGNTY OR INTEGRITY OF INDIA: If the company has
acted against the interest of the sovereignty or integrity of India, the security of
the state, friendly relation with foreign states, public order, decency or morality.
6. SICK COMPANY: The tribunal may order for winding up of company if it is a sick
industrial company and it is not likely to become viable in future and it is just and
equitable to do so.
Q3. WHO CAN FILE A PETITION FOR WINDING UP OF COMPANY BY TRIBUNAL?

The Tribunal does not choose to wind up a company of its own motion. It has
to be petitioned. Section 272 of the Companies Act, 2013 enumerates the
following persons who can file a petition to the tribunal for the winding up of a
company.
The following persons can file a petition to tribunal for winding up:
1. COMPANY’S PETITION: A company itself cannot file a petition for winding up.
But it can do so only when the company has passed a special resolution to that
effect. The directors have no right to file a petition for winding up unless they
have been authorized by the members by passing a special resolution at the
general meeting of the company.
2. CREDITOR’S PETITION: A creditor can also apply for winding up a company. The
term ‘creditor’ is not limited to one to whom a debt is due at the date of the
petition. Every person who has a claim against the company whether actual or
contingent is a creditor. The word creditor includes a secured creditor, debenture
holder, an assignee of a debt, an executor or a deceased creditor, judgement
creditor, receiver etc.
3. CONTRIBUTORY’S PETITION: the term ‘contributory’ means every person liable
to contribute to the assets of a company in the event of its being wound up. It

65
includes the holder of any shares which are fully paid up. A contributory shall be
entitled to present a petition for winding only
(a) When the number of members is reduced below 7 in case of a public company
and below 2 in the case of a private company.
(b) When he holds shares which were originally allotted to him or has held the
shares for six out of eighteen months prior to the commencement of winding up
or the shares have been devolved on him through the death of a former holder.
4. JOINT PETITION: it means the creditors and contributories can jointly present a
petition for winding up of a company.
5. REGISTRAR’S PETITION: Registrar can file a petition in the Tribunal on the
following grounds:
(a) If the company does not commence its business within a year of its
incorporation or suspends its business for a whole year.
(b) When the number of members is reduced below 7 in case of a public company
and below 2 in the case of a private company.
(c) if the company is unable to pay its debts.
(d) if there is default in filing with Registrar its P/L account, Balance Sheet and
annual return for five consecutive years.
6. PETITION BY A PERSON AUTHORISED BY CENTRAL GOVERNMENT: The Central
Government on the consideration of inspector’s report is empowered to
authorized any person to move an application for winding before the Tribunal.
The Central Government may authorize any person including the Registrar to act
on its behalf for the purpose.
7. CENTRAL GOVERNMENT’S OR STATE GOVERNMENT’S PETITION: If the
company has acted against the interests of the sovereignty and integrity of India
the security of the state, friendly relation with foreign states, public order,
decency or morality, then the Central Government or State Government can file a
petition for winding up of the company.

66
4. WHO IS OFFICIAL LIQUIDATOR? EXPLAIN HIS DUTIES AND POWERS?

For the purpose of winding up of a company by Tribunal, there shall be an
Official Liquidator who:
(a) may be appointed from panel of professional firms of chartered accountants,
advocates, company secretaries, cost and management accountants, or firms
having a combinations of these professions, which the central government shall
constitute for the Tribunal or
(b) may be body corporate consisting of such professionals as may be approved
by the central government or
(c) such professionals must have atleast 10 years of experience in company
matters.
The terms and conditions for the appointment of the liquidator and the
remuneration payable to him shall be specified by the Tribunal.
DUTIES OF LIQUIDATOR:
1. Submission of report by the liquidator to Tribunal: Where the tribunal has
made a winding up order and appointed the liquidator, such liquidator shall
within 60 days from the order, submit ti the tribunal, a report containing the
following particulars namely
a) the nature and details of the assets of the company with its valuation.
b) Amount of capital issued, subscribed and paid up.
c) The value of existing and contingent liabilities of the company.
d) list of contributories and dues.
e) Details trade mark and intellectual properties in any.
f) details of legal cases filed by and against the company.
g) the debts due to company from others
h) the viability of the company.

67
2.To take over company’s assets: On winding up order being made, the liquidator
must take into custody all the properties and actionable claims to which the
company is entitled.
3. To comply with the directions: The liquidator is bound to follow the directions
given by creditors, contributories and committee of inspections.
4. To summon meeting of creditors and contributories: It is the duty of liquidator
to call meeting of creditors and contributories to find their wishes. However he
must summon such meeting at such time as the creditors and contributories
having not less than 1/10th value of creditors and contributories may by resolution
direct to hold such meeting.
5. To keep proper books: It is the duty of the liquidator to maintain the proper
books of accounts and minutes of the meetings and such other matters as may be
prescribed. Any creditor or contributory may, with the permission of tribunal may
inspect any such books.
6. To submit accounts: The liquidator shall at least twice in any year present to
the tribunal an audited account of receipts and payments. Once the accounts are
audited one copy must be filed with tribunal and another copy must be filed with
registrar.
7. To appoint committee of inspection: when the tribunal directs the liquidator
to appoint committee of inspection, the liquidator shall convene a meeting of
creditors and contributories and decide the members of committee of inspection.
8. Making payments into the Public Accounts of India: The liquidator shall pay all
the money received by him as liquidator of the company into the Public Accounts
of India in the Reserve Bank Of India.
POWERS OF LIQUIDATOR:
1. To carry on the business of the company as Fr as may be necessary for the
beneficial winding up of the company.
2. to do all such acts and execute, in the name and on behalf of the company, all
deeds, receipts and others for winding up

68
3. to sell immovable and movable properties and actionable claims of the

company.
4, To sell whole of the undertaking of the company as a going concern.
5. To raise on the security of the assets of the company any money required.
6. To institute or defend any suit, prosecution or other legal proceeding, civil or
criminal, in the name or on behalf of the company.
7. to settle claims of creditors, employees or other claimants and distribute the
sale proceeds in accordance with priorities in the Act.
8. to inspect the records and returns of the company or the files of the Registrar
or any other Authority.
9. to draw, endorse and accept any negotiable instruments on behalf of the
company.
10. to obtain any professional assistance from any person or appoint any
professional in discharge of his duties.
11. to take all such actions, or sign any papers etc., as may be necessary for
winding up of the company.
Q5. EXPLAIN THE PROVISIONS OF LAW RELATING TO THE VOLUNTARY
WINDING UP?
VOLUNARTY WINDING UP: A voluntary winding up of a company is entirely
different from a compulsory winding up, voluntary winding up is winding up by
the members or creditors of a company without interference by the tribunal. The
most important advantage of voluntary winding up is that it does not have so
many legal formalities to be complied. This form of winding up is the most
common and the most popular. A company may wound up
(a) on the expiry of the period of the duration of the company prescribed in the
Articles of Association or on the happening of an event leading to winding up by
an ordinary resolution passed at general meeting of the company.
(b) By a special resolution passed at the general meeting
KINDS OF VOLUNTARY WINDING UP: It is of two kinds. They are

69
1.Members Voluntary Winding up 2. Creditors Voluntary winding up.

1. MEMBER’S VOLUNTARY WINDING UP: A members voluntary winding up takes
place only when the company is solvent. It is initiated by members and is entirely
managed by members. The liquidator is appointed by the members. No meeting
of creditors is held and no committee of inspection is appointed. To obtain the
benefit of this form of winding up a declaration of solvency must be filed.
Declaration of solvency shall be made by the directors within 5 weeks
immediately preceding the date of the passing of the resolution for winding up.
Declaration of solvency is a affidavit made by the board that the company has no
debts or that it will be able to pay all its debts in full within a period of not
exceeding 3 years from commencement of winding up. The declaration shall be
filed with registrar before passing the resolution for winding up. It shall also
accompanied by a copy of audited profit and loss account and balance sheet of
the company. Where such a declaration is duly made , the winding up is called
member’s voluntary winding up. Where the same is not made, it is called
creditor’s voluntary winding up.
PROVISIONS APPLICABLE FOR MEMBER’S VOLUNTARY WINDING UP:
1. APPOINTMENT OF LIQUIDATOR: The company, in general meeting can appoint
one or more liquidators for winding up the affairs of a company and for
distributing the assets. The company shall also fix the remuneration for
liquidators. The liquidator may be appointed at the same meeting at which the
resolution is for voluntary winding up is passed.
2. BOARD’S POWER TO CEASE: Once the liquidator is appointed all the powers of
the board and other managerial personnel shall come to an end.
3. POWER TO FILL VACANCY IN THE OFFICE OF THE LIQUIDATOR: when a vacancy
for whatever the reason occurs in the office of the liquidator, the company in
general meeting fill the vancancy. The general meeting may be called by any
contributory or by any continuing liquidator.
4. NOTICE OF APPOINTMENT OF LIQUIDATOR TO REGISTRAR: The company shall
give a notice to registrar of the appointment of a liquidator. The company shall
giva a notice of every vacancy occurring in the office of the liquidator and the

70
names of the liquidators appointed to fill every such vacancy. The notice shall be
given within 10 days from the date of the appointment to the registrar.
5. GENERAL MEETING AT THE END OF EVERY YEAR: the liquidator shall report
quarterly on the progress of the winding up of the company in such a form and in
such a manner as may be prescribed to the members and creditors by calling a
meeting of them If the liquidator fails to comply this rule, he shall be punishable
with a fine of 10 lakhs.
6. FINAL MEETING AND DISSOLUTION: when the affairs of the company is fully
wound up the liquidator shall perform the following duties:
1. he shall make up an account of the winding up showing how the same has been
conducted and how the properties has been disposed of.
2. he shall call a meeting of the company for laying before it the said accounts.
This meeting is the final meeting of the company. The advertisement specifying
the date, time, place and objects thereof shall be given not less than one month
before the meeting. The advertisement shall be given in local newspaper where
the registered office is situated.
3. within one week after the meeting the liquidator shall send a copy of the
accounts to the registrar and the official liquidator and also a return on holding
the meeting and the date thereof.
The registrar on receiving the accounts shall register it. The official liquidator
on receiving the accounts is required to make a scrutiny of the books and papers
of the company. The official liquidator shall send the report of the scrutiny to the
tribunal. If the report says that the affairs of the company have been conducted
bona fide, the company shall be deemed to be dissolved. If the report says that
the affairs of the company have been conducted in a manner against the interest
of the company, members, creditors etc., the tribunal shall direct the official
liquidator to make a further investigation on the affairs of the company winding
up..
2. CREDITOR’S VOLUNTARY WINDING UP: where a company proposes to wind up
voluntarily and the directors are not in a position to make the declaration of
solvency , the winding up is called a creditor’s winding up. The provisions of the
creditor’s voluntary winding up are similar to those applicable to the member’s

71
voluntary winding up except that here liquidator is appointed, his remuneration is

fixed by creditors.
PROVISIONS APPLICABLE TO CREDITOR’S VOLUNTARY WINDING UP:
1. MEETING OF CREDITORS: when the declaration of solvency is not made by the
directors, the company shall call a meeting of the creditors of the company, to be
called on the day or next following day on which the resolution for voluntary
winding up is to be proposed. Notice of meeting of creditors shall be posted to
creditors simultaneously with the notice of the meeting of the company. The
board of directors shall lay before the meeting of the creditors a full statement of
the position of the company’s affairs together with a list of its creditors and the
estimated amount of their claims.
2. NOTICE TO REGISTRAR: The company shall give a notice of resolution passed at

the meeting of creditors to the registrar within 10 days of its passing. If the
company fails to send the notice of resolution to registrar, within prescribed time,
the company, every officer of the company and the liquidator shall be punishable
with a fine which may extend to 50,000 to 2 Lakhs for every day during which the
default continues.
3. APPOINTMENT OF LIQUIDATOR: The creditors and the company shall appoint
a person to be the liquidator. If different persons are nominated, the person
nominated by the creditors shall be the liquidator. Where no person is nominated
by the creditors, the person nominated by the company shall be the liqidator.
4. COMMITTEE OF INSPECTION: The creditors at their meeting may appoint a
committee of inspection consisting of not more than 5 persons. Where the
committee of inspection is appointed, the company may also appoint at the
meeting such number of members not exceeding 5 to act as the members of the
committee. If the creditors resolves that the person appointed by the company
should not be the member of committee of inspection, then the tribunal may
appoint another person .
5. LIQUIDITOR’S REMUNERATION: The liquidator’s remuneration is fixed by the
committee of inspection or the creditors if committee of inspection is not
appointed.

72
6. POWER OF BOARD TO CEASE: the board usually ceases to function on

appointment of the liquidator. The board may act in so far as the committee of
inspection (if any) or the creditors at general meeting sanctions.
7. VACANCY IN OFFICE OF LIQIDATOR: The creditors in general meeting may fill
up any vacancy caused in the office of the liquidator.
8. MEETING AT THE END OF EACH YEAR: The liquidator shall report quarterly on
the progress of the winding up of the company in such a form and in such a
manner as may be prescribed to the members and creditors byl calling a meeting
of them. If the liquidator fails to comply this rule, he shall be punishable with a
fine of 10 lakhs.
9. FINAL MEETING AND DISSOLUTION: when the affairs of the company is fully
wound up the liquidator shall perform the following duties:
1. he shall make up an account of the winding up showing how the same has been
conducted and how the properties has been disposed of.
2. he shall call a meeting of the company and the creditors for laying before it the
said accounts. This meeting is the final meeting of the company. The
advertisement specifying the date, time, place and objects thereof shall be given
not less than one month before the meeting. The advertisement shall be given in
local newspaper where the registered office is situated.
3. within one week after the meeting the liquidator shall send a copy of the
accounts to the registrar and the official liquidator and also a return on holding
the meeting and the date thereof.
The registrar on receiving the accounts shall register it. The official liquidator
on receiving the accounts is required to make a scrutiny of the books and papers
of the company. The official liquidator shall send the report of the scrutiny to the
tribunal. If the report says that the affairs of the company have been conducted
bona fide, the company shall be deemed to be dissolved. If the report says that
the affairs of the company have been conducted in a manner against the interest
of the company, members, creditors etc., the tribunal shall direct the official
liquidator to make a further investigation on the affairs of the company winding
up..

73
Q6. EXPLAIN DIFFERENCES BETWEEN MEMBER’S AND CREDITOR’S VOLUNTARY

WINDING UP?
1. Declaration of solvency is must in member’s voluntary winding up whereas it is
not necessary in creditor’s winding up.
2. it is not necessary to call and conduct creditors meeting in member’s voluntary
winding up, whereas in creditor’s voluntary winding up creditors meeting is must.
3. Liquidator is appointed by members in member’s voluntary winding up,
whereas in creditor’s voluntary winding up liquidator is appointed by both.
4. There is no committee of inspection in member’s voluntary winding up,
whereas in creditor’s voluntary winding up committee of inspection can be there.
5, In case of member’s voluntary winding up it is the members who control the
winding up whereas in creditor’s winding up creditors has the control.
6. if company is solvent member’s voluntary winding up can take place, if not
creditor’s voluntary winding takes place.
Q7. WHAT ARE THE CONSEQUENCES (EFFECTS) OF WINDING UP ORDER?
The consequences of winding up order commence from the date of
commencement of winding up order. The following are consequences:
1, INTIMATION TO OFFICIAL LIQUIDATOR AND REGISTRAR: When court makes
an order to winding up of company, the court shall intimate thereof to the official
liquidator and registrar. The object of intimation to official liquidator is that he
may take up the administration of winding up.
2. COPY OF WINDING UP ORDER TO BE FILED WITH REGISTRAR: it is the duty of
the petitioner to file with registrar a certified copy of the order with in 30 days
from the date of obtaining copy of that order from tribunal.
3. AUTOMATIC DISCHARGE OF SERVICES OF OFFICERS AND EMPLOYEES: Once
the winding up order is made it shall be deemed to be notice of discharge of
services of officers and employeesof the company except when the business is to
be continued.
4. SUITS STAYED ON WINDING UP ORDER: As and when the winding up order is
passed all the suits or legal proceedings against the company deemed to be
74
stayed. The main object of this provision is to safeguard the assets of the
company.
5. POWER OF THE TRIBUNAL: The tribunal which has taken up winding up of the
company shall have jurisdiction to entertain:
(a) any suit or legal proceeding made by or against the company.
(b) any claim made by or against the company.
6. EFFECT OF WINDING UP ORDER: An order of winding up order shall operate in
favour of all the creditors and contributories as if it had been on the joint petition
of creditors and contributories,
7. OFFICIAL LIQUIDATOR TO BE LIQUIDATOR: On the winding up order is being
made in respect of a company, official liquidator by virtue of his office become
the liquidator of the company.

1. Compulsory winding up
2. Just and equity
3. Liquidator
4. Differences between member’s and creditor’s voluntary winding up
5. Consequences of winding up order
6. Contributories

75
COMPANY LAW UNIT WISE IMPORTANT QUESTIONS

UNIT I
1. DEFINE COMPANY? EXPLAIN ITS CHARACTERISTICS?
2. GIVE THE ADVANTAGES AND DISADVANTAGES OF INCORPORATION OF
COMPANY?
3. EXPLAIN THE KINDS OF COMPANY?
4. STATE THE DIFFERENCES BETWEEN PUBLIC AND PRIVATE COMPANY?
5. DEFINE PRIVATE COMPANY? EXPLAIN THE SPECIAL PRIVILEGES ENJOYED BY IT?
6. EXPLAIN THE PROCEDURE FOR FORMATION OF COMPANY UNDER COMPANIES
ACT 2013?
7. WHO IS A PROMOTER? STATE HIS RIGHTS AND DUTIES?
8. STATE THE PROCEDURE FOR ONLINE REGISTRATION OF A COMPANY?
9. WHAT IS MOA? WHAT ARE ITS CLAUSES? HOW THEY CAN BE ALTERED?
10. EXPLAIN THE DOCTRINE OF ULTRA VIRES? EXPLAIN ITS EFFECTS/
CONSEQUENCES?
11. WHAT IS AOA? WHAT ARE ITS CONTENTS?
12. EXPLAIN THE DOCTRINE OF INDOOR MANAGEMENT? EXPLAIN ITS
EXCEPTIONS?
13. WHAT IS PROSPECTUS? EXPLAIN ITS CLAUSES AND KINDS?
UNIT II
1. WHO IS DIRECTOR? EXPLAIN THE TYPES OF DIRECTORS?
2. EXPLAIN THE QUALIFICATION AND DISQUALIFICATION OF A DIRECTOR?
3. EXPLAIN THE LEGAL POSITION OF DIRECTOR OF A COMPANY?
4. EXPLAIN THE MODES OF APPOINTMENT OF DIRECTOR?
5. EXPLAIN MODES OF REMOVAL OF DIRECTOR?

76
6. EXPLAIN THE POWERS AND DUTIES OF DIRECTOR?

7. EXPLAIN THE LIABILITIES OF DIRECTOR?
8. DEFINE CSR? EXPLAIN THE LIST OF CSR ACTIVITIES?
9. EXPLAIN THE ROLE AND RESPONSIBILITY OF BOARD OF DIRECTOR’S IN THE
CONTEXT OF CSR?
10. WHAT IS CORPORATE GOVERANCE? EXPLAIN ITS PRINCIPLES AND
OBJECTIVES?
UNIT III
1. WHO IS SECRETARY? EXPLAIN THE TYPES OF SECRETARIES?
2. WHO IS A COMPANY SECRETARY? EXPLAIN THE QUALIFICATIONS OF COMPANY
SECRETARY?
3. EXPLAIN THE POWERS AND DUTIES OF A COMPANY SECRETARY?
4. EXPLAIN THE LIABILITIES OF A COMPANY SECRETARY?
5. WHAT IS SECRETARIAL AUDIT? EXPLAIN ITS APPLICABILITY, OBJECTIVES AND
SCOPE?
UNIT IV
1. WHAT IS COMPANY MEETING? EXPLAIN ITS REQUISITIES/ ESSENTIALS?
2. WHAT IS COMPANY MEETINGS? EXPLAIN KINDS OF MEETINGS?
3. WHAT IS AGM? EXPLAIN THE PROVISIONS OF LAW RELATING TO CONDUCT OF
AGM?
4. WHAT IS EXTRA ORDINARY MEETING? WHO CAN CONVENE EGM?
5. EXPLAIN THE PROVISIONS OF LAW RELATING BOARD OF DIRECTORS MEETING?
6. WHO IS A CHAIRMAN? WHAT ARE HIS POWERS AND DUTIES?
7. WHAT IS A RESOLUTION? EXPLAIN KINDS OF RESOLUTIONS?

77
8. WHAT IS COMMITTEE MEETING? EXPLAIN ITS KINDS?
UNIT V
1. WHAT IS WINDING UP OF COMPANY? EXPLAIN MODES OF WINDING UP?
2. WHAT IS COMPULSORY WINDING UP? ON WHAT GROUNDS, A TRIBUNAL CAN
COMPULSORYLY WIND UP?
3. DEFINE THE PROCEDURE FOR VOLUNTARY WINDING UP OF COMPANY?
4. WHO ARE THE PERSONS CAN FILE A PETITION FOR WINDING UP OF COMPANY?
5. WHO IS A LIQUIDATOR? WHAT ARE HIS POWERS AND DUTIES?
6. EXPLAIN THE CONSEQUENCES OF WINDING UP OF COMPANY?
7. EXPLAIN THE DIFFERENCES BETWEEN MEMBER’S AND CREDITOR’S VOLUNTARY
WINDING UP?
SHORT ANSWER QUESTIONS UNIT WISE:
UNIT I
1. DEFINE COMPANY 2. STATUTORY COMPANY 3. CHARTER COMPANY
4. PRIVATE COMPANY 5. PUBLIC COMPANY 6. PROMOTER 7. MOA
8.AOA 9. PROSPECTUS 10. ONE PERSON COMPANY
UNIT II
1. DIRECTOR 2. MANAGING DIRECTOR 3. ALTERNATE DIRECTOR
4. ADDITIONAL DIRECTOR 5. QUALIFICATION OF DIRECTOR
6. DISQUALIFICATION OF DIRECTOR 7. NOMINEE DIRECTOR 8 DIN
9. CSR 10 LIST OF CSR ACTIVITIES 11 CSR REPORT 12. CORPORATE GOVERENACE
UNIT III
1. SECRETARY 2. COMPANY SECRETARY 3. QUALIFICATION OF CS
4. SECRETARIAL AUDIT 5. RIGHTS OF CS 6 DUTIES OF CS.

78
UNIT IV
1. AGM 2. EGM 3. CLASS MEETING 4. BOARD MEETING 5 RESOLUTION
6. SPECIAL RESOLUTION 7. PROXY 8 AGENDA 9 MINUTES 10. CHAIRMAN
11. COMMITTEE MEETING 12. MOTION 13. KINDS OF VOTING
UNIT V
1. COMPULSORY WINDING UP 2. VOLUNTARY WINDING UP 3. CONTRIBUTORY
4. LIQUIDATOR 5.JUST AND EQUITY 6. COMMITTEE OF INSPECTION

79

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1

K.NAVEEN M.COM,MBA,LLB 9059206749

Q2. EXPLAIN THE TYPES/KINDS OF COMPANIES?

K.NAVEEN M.COM,MBA,LLB 9059206749

people. Ex: RESERVE BANK OF INDIA, INDUSTRIAL DEVELOPMENT BANK OF INDIA,

K.NAVEEN M.COM,MBA,LLB 9059206749

(b) Limits the number of its members to two hundred,

K.NAVEEN M.COM,MBA,LLB 9059206749

Q3. DISCUSS THE MERITS AND LIMITATIONS OF JOINT STOCK COMPANY?

K.NAVEEN M.COM,MBA,LLB 9059206749

DISADVANTAGES OF JOINT STOCK COMPANY:

K.NAVEEN M.COM,MBA,LLB 9059206749

Q4. EXPLAIN THE DIFFERENCES BETWEEN PRIVATE AND PUBLIC COMPANY?

S.NO BASIS PRIVATE COMPANY PUBLIC COMPANY

K.NAVEEN M.COM,MBA,LLB 9059206749

Q5. WHAT DO YOU MEAN BY PROMOTION OF COMPANY? EXPLAIN STEPS INVOLVED IN

K.NAVEEN M.COM,MBA,LLB 9059206749

K.NAVEEN M.COM,MBA,LLB 9059206749

DUTIES OF PROMOTER: The following are the duties of a promoters:

K.NAVEEN M.COM,MBA,LLB 9059206749

Q7. EXPLAIN THE PROCEDURE FOR REGISTRATION OF A COMPANY?

K.NAVEEN M.COM,MBA,LLB 9059206749

2. ARTICLES OF ASSOCIATION (AOA): The other documents to be submitted is the articles

K.NAVEEN M.COM,MBA,LLB 9059206749

K.NAVEEN M.COM,MBA,LLB 9059206749

K.NAVEEN M.COM,MBA,LLB 9059206749

4. ALTERATION OF OBJECT CLAUSE: The alteration of object clause is subject to so many

(i) A public company limited by shares: Table F

K.NAVEEN M.COM,MBA,LLB 9059206749

CONTENTS OF ARTICLES OF ASSOCIATION:

MEMORANDUM OF ASSOCIATION ARTICLES OF ASSOCIATION

K.NAVEEN M.COM,MBA,LLB 9059206749

Q12. DEFINE PROSPECTUS? EXPLAIN THE CONTENTS AND KINDS OF PROSPECTUS?

FEATURES OF PROSPECTUS: A prospectus has the following essentials:

1. There must be an invitation offering to public.

CONTENTS OF PROSPECTUS: The following matters are to be disclosed in a prospectus:

1. Name and full address of the company.

K.NAVEEN M.COM,MBA,LLB 9059206749

KINDS OF PROSPECTUS: The following are the kinds of prospectus:

Q13. EXPLAIN BRIEFLY ABOUT STATEMENT IN LIEU OF PROSPECTUS?

K.NAVEEN M.COM,MBA,LLB 9059206749

UNIT-II COMPANY MANAGEMENT

K.NAVEEN M.COM,MBA,LLB 9059206749

K.NAVEEN M.COM,MBA,LLB 9059206749

K.NAVEEN M.COM,MBA,LLB 9059206749

d) He has been convicted of an offence and sentenced to imprisonment for not

Q3. EXPLAIN THE LEGAL POSITION OF DIRECTOR IN A COMPANY?

K.NAVEEN M.COM,MBA,LLB 9059206749

K.NAVEEN M.COM,MBA,LLB 9059206749

1. APPOINTMENT OF FIRST DIRECTORS: The first directors are usually name in

K.NAVEEN M.COM,MBA,LLB 9059206749

K.NAVEEN M.COM,MBA,LLB 9059206749

DIRECTOR’s RIGHT TO MAKE REPRESENTATION: The director concerned may

Q6. EXPLAIN THE POWERS, DUTIES AND LIABILITIES OF DIRECTORS?

K.NAVEEN M.COM,MBA,LLB 9059206749

III. Powers under Rule 8

K.NAVEEN M.COM,MBA,LLB 9059206749

III. POWERS UNDER RULE 8:

K.NAVEEN M.COM,MBA,LLB 9059206749

K.NAVEEN M.COM,MBA,LLB 9059206749

iv) Duty to call extraordinary meeting on a valid requisition.

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