Unit-3 Meetings

Meeting is not defined under any provisions of Companies Act of 2013, but taking references from
common business and market parlance we can gather that a ‘Company Meeting’ is basically coming
together of at least two persons to either transact any ordinary or special business for lawful
purposes. Meetings can be classified as follows:

1.Annual General Meeting – This is defined u/s 96 of CA’13, wherein every company, whether public
or private, except One Person Company, is required to convene first AGM within 9 months from the
end of first Financial Year to decide the overall progress of the company as well as to plan future
courses of action.

Place: Such meeting is called at Registered Office of the Company or any other such place in the city
where such Reg. Office is situated.

Time Hours: Between 9.00 am – 6:00 pm., and not on any public holiday as so declared by Central or
State Government.

Quorum: In case of Public Company–

5 if members are less than 1000

15 if between 1000-5000
30 if more than 5000 members
In case of Private Company, then only 2 that are present will be the quorum.

Time Gap: Gap between two meetings not more than 15 months, and after conducting first AGM,
the subsequent AGMs need to be conducted within 6 months from the end of Financial Year, and if
there any urgent circumstances or emergency situations arises, when company wasn’t able to
conduct the AGM, then the Tribunal may grant the extension of 3 months, but said extension not
available in first AGM, and therefore first AGM must be conducted within 9 months from end of F.Y.

Power of NCLT: May call or direct to conduct such meeting u/s 97 of CA’13, when an application is
filed by a member if meeting not conducted in due time. Punishment on default: u/s 99 – For
Company and every such defaulting Officer – Rs. 1 Lakh, and if default continues then Rs. 1000 per
day.

2.Extraordinary General Meeting (EGM): Certain matters are so much important that they require an
immediate attention of the members, and that’s where the Board has been granted to call for such
EGM u/s 100 of CA’13.

It can be called through the following ways:

By Board, on suo-moto basis, and the same can be held at any parts of the country.

By requisition of eligible members, wherein the company if having Share Capital, then members
holding at least 1/10th of such Share Capital, and if not having Share Capital, then members holding
at least 10% of the total voting powers in that company can request to call for such meeting.

3. Class Meeting: Such meeting is convened by a particular class of shareholders only and only if they
think that their rights are being altered or if they want to vary their attached rights, as mentioned
u/s 48 of CA’13, and u/s 232 also, if under Mergers and Amalgamation scheme, meetings of
particular shareholders and creditors can be convened if their rights/privileges are being varied
(mixed) to their interests in such company.

4.Statutory Meeting: Statutory meeting is the meeting of shareholders of a company. According to

Sec 165 of the companies act, every public limited by shares or limited by guarantee, having share
capital must hold this meeting. This meeting is held once in the lifetime of a company. A private
company need not hold this meeting.

Objectives of meeting:

1. To comply with the provision of section 165 of the companies act 1956

2. To approve the statutory report

3. To inform the shareholders about the formation of company and made by the company.

4. To inform the shareholders about preliminary expenses made by promoters before

incorporation of company.

5. To inform the shareholders of any contract entered into by the company.

6. Appoint office bearers.

4.Directors Meeting: (Board of Directors Meeting): As per Sec. 173 of CA’13, every company needs
to convene first board meeting within 30 days of its incorporation, and then minimum four meetings
in each calendar year, with time gap of not more than 120 days (at present it is 180 days because of
COVID-19) between two board meetings.

In case of OPC, Dormant Company, Small Company, Sec. 8 Company or any private company (Start-
Up), then required to hold two board meetings in each half of calendar year with time gap of at least
90 days.

In case of Specified IFSC Private & Public Company, then to hold first board meeting within 60 days
of incorporation and then hold one meeting in each half of calendar year. Meeting can be attended
by directors either in person, or through audio-visual mode or through video conferencing, subject
to the nature of meeting being discussed and after complying with necessary formalities as specified
in Sec.173.

Here notice of at least 7 days is necessary to be given to directors at their registered address with
company and also to be provided through e-means, if not possible hand delivery or post-delivery,
and there is one exception wherein a shorter notice can be called off for transacting a very urgent
matter provided one independent director is present at such meeting.

Quorum: 1/4th of total strength or 8 members, whichever is higher should form the quorum.

Matters that can’t be dealt here: E.g., Approving Prospectus/ Boards Report/ Annual Financial
Statements, Scheme of Merger, Amalgamation, Demerger, etc.

Other Meetings: Creditors Meeting (Sec. 230) / Debenture Holders Meeting with the Board of
Directors/ Audit Committee Meeting (Sec. 177)/ Nomination and Remuneration Committee Meeting
(Sec. 178) /Any other committee meetings with the respective Board of Directors of the Company, as
and here specified under Companies Act of 2013.
Appointment, Disqualification And Liabilities Of Directors Of A Company: A Legal Perspective

On incorporation, a company becomes a legal artificial person but it cannot act by itself and
consequently it has to depend upon some human agency to act in its name. The members have no
inherent right to participate in the management of the company. A large sized company may have its
members running into lakhs, who are dispersed all over the country and they even lack the expertise
to manage the affairs of the company, which makes it impossible to give the management of the
company in their hands. Therefore, a specialized body of persons called as directors are appointed
by the members to manage the affairs of the company. The directors must act as a body without
improper exclusion of any of the directors. The directors collectively referred to as BOARD. The
board is the managerial body constituted by the members to whom is entrusted the whole
management of the company. Board owes a duty to the members to exercise care, skill and diligence
in discharge of their functions.

Meaning and DEFINITION OF DIRECTOR:

Statutory definition: As per sec 2(13) of Companies act, 1956 “Director” includes any person
occupying the position of a director by whatever name called.

Definition based on function:

A person is considered as a director, if he does whatever a director does normally. Thus, where a
person performs the functions of a director, he will be treated as a director for the purposes of the
act, though he may be called by a different name and is not actually appointed on the board of the
company.

Legal Position of Directors:

It is difficult to define the exact legal position of the director of the company. The Companies Act
makes no effort to define their position. At various times they have been described by judges as
agents, trustees or managing partners.

Directors as agents:

The relationship between the company and the directors is that of principal and agent and the
general principles of agency will govern their relations. Consequently, where the directors enter into
contracts on behalf of the company, it is the company and not the directors who are liable there
under. But the directors will be personally liable only in the following cases:

# Where a director acts in his own name.

# Where a director contract on behalf of the company without using the words ‘Limited’ or ‘Private
limited’ as a part of the name of a company.

# Where a director enters into any agreement or contract in which it is not made clear as to whether
the director is signing in his personal capacity or as an agent of company.

Directors as trustees:

The office of a director is an office of trust. The directors stand in a fiduciary position towards the
company. They are the trustees of: -
Company’s money and property: The property of the company must be applied for the genuine
purposes. If the property is misappropriated it would amount to breach of trust.

The powers entrusted to them: The directors must exercise their powers bonafide and for the
benefit of the company. As a whole, not to promote their own personal or private interests. They
should not put themselves in a position where their duties and personal interests may conflict.
Where a director uses confidential information of the company for his personal purposes,
misappropriates or misuses the assets of the company, he becomes accountable to the company. If
a director misuses his fiduciary position and makes a secret profit, he is liable to pay it to the
company.

Directors as officers of the company:

Amongst other persons, a director is also included in the definition of an ‘officer’ of the company.
Whether or not a director is in the employment of the company, he shall always be treated as an
officer of the company.

Directors as ‘officers in default’ (section-5):

a) A Whole-time director or managing director is always covered in the definition of officer in

default.
b) Where a company has no wholetime director or managing director,or manager-A director
shall be treated as an officer in default if
c) he has been so specified by the board in this behalf.
d) no other director is so specified by the board

Kinds Of Directors:

Under the Companies Act, 1956, the following kinds of directors are recognized:

Ordinary Directors

Ordinary directors are also referred to as simple directors who attends Board meeting of a company
and participate in the matters put before the Board. These directors are neither whole time
directors nor managing directors.

Whole-time/Executive Directors

Whole-time Director or Executive Director includes a director in the whole-time employment of the
company.

Additional Directors

Additional Directors are appointed by the Board between the two annual general meetings subject
to the provisions of the Articles of Association of a company. Additional directors shall hold office
only up to the date of the next annual general meeting of the company. Number of the directors and
additional directors together shall not exceed the maximum strength fixed for the Board by the
Articles.
Alternate Director

An Alternate Director is a person appointed by the Board if so authorised by the Articles or by a

resolution passed by the company in the general meeting to act for a director called "the original
director" during his absence for a period of not less than three months from the State in which
meetings of the Board are ordinarily held. Generally, the alternate directors are appointed for a
person who is Non-resident Indian or for foreign collaborators of a company.

Professional Directors

Any director possessing professional qualifications and do not have any pecuniary interest in the
company are called as "Professional Directors". In big size companies, sometimes the Board appoints
professionals of different fields as directors to utilise their expertise in the management of the
company.

Nominee Directors

The banks and financial institutions which grant financial assistance to a company generally impose a
condition as to appointment of their representative on the Board of the concerned company. These
nominated persons are called as nominee directors.

Disqualifications of a director:

Section 274(1) reads as under:

A person shall not be capable of being appointed director of a company, if the director is

(a) Of unsound mind by a court of competent jurisdiction and the finding is in force;

(b) An un discharged insolvent;

(c) Has applied to be adjudicated as an insolvent and his application is pending;

(d) Has been convicted by a court of any offence involving moral turpitude and sentenced in respect
thereof to imprisonment for not less than six months and a period of five years has not elapsed from
the date of expiry of the sentence;
Key Managerial Personnel:

These are a group of people who are in charge of managing the operations of a Company; they are
responsible for the planning, directing and controlling the functioning of a Company. They are the
first point of contact between the company and its Stakeholders.

According to Section 2(51) of the Companies Act 2013, Key Managerial Personnel in a Company are:
-

1.Chief executive Officer (CEO) OR the Managing Director.

2.Chief Financial Officer (CFO).

3.Manager -Company Secretary (CS)/CA

4.Whole-Time Director.

Companies that are obligated to Appoint KMP (Key Managerial Personnel):-

According to section 203(1) read with Rule 8 of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014 the following companies are mandated to appoint KMP:

1.Every Listed Company Public Companies having paid-up share capital of 10 Crore rupees or more.

2.Public Companies Having paid-up share of 5 Crore rupees or more.

3.Companies having paid-up share capital of 10 Crore rupees or more are mandated to appoint a
Company Secretary.

What are the Roles and Responsibilities of Key Managerial Personnel?

The Management function of implementing important decisions comes under the responsibilities of
Key Managerial Personnel. Here are some of the main Roles and Responsibilities of KMP:

1.As per Section 170 of the Act, the details of Securities held by the Key Managerial Personnel in the
company or its holding, subsidiary, a subsidiary of the company or associated companies should be
disclosed and recorded in the register of the Books.

2.KMP has a right to be heard in the meetings of the Audit Committee while considering the
Auditor’s Report; however, they do not have the right to vote.

3.According to Section 189(2), Key Managerial Personnel should disclose to the company, within 30
days of appointment, relating to their concern or interest in the other associations, which are
required to be included in the register.

Non- Eligibility for Appointment: -

Section 196(3) of companies Act,2013 states that a Company shall not appoint or continue the
employment of a Managing Director, Whole-Time Director or Manager if such person:

1.Hasn’t attained the age of 21 years or has exceeded the age of 69 years (a person can be handed
over the roles at the age of 70 years on the fulfilment of certain conditions).

2.Has been an uncharged insolvent or was adjudged as an insolvent.

3.Has a record of holding payments to his/her creditors.

4.Has been convicted by a court for an offence and imprisoned for a period of more than six months.

5.Has been sentenced to imprisonment or has been fined with more than Rs.1000 for the Conviction
of an offence under certain acts.

6.Wasn’t detained under the Conservation of foreign Exchange and Prevention of Smuggling
Activities Act, 1974(Subject to further conditions).

Types of Committees:
Committees are a sub-set of the board, deriving their authority from the
powers delegated to them by the board. Under Section 177 of Companies Act,
2013, Board of Directors may delegate certain matters to the committees set
up for the purpose. Committees are formed as a means to improve board
effectiveness and efficiency in areas where more focused, specialised and
technically oriented discussions is required.
Auditor and his Role as per the Companies Act:

(1) A person shall be eligible for appointment as an auditor of a company only if he is

a chartered accountant in practice.

(2) Where a firm is appointed as an auditor of a company, only the partners who are Chartered
Accountants in practice shall be authorised by the firm to act and sign on behalf of the firm.

(3) None of the following persons shall be eligible for appointment as an auditor of a company,
namely:—

(a) a body corporate ;

(b) an officer or employee of the company;

(c) a person who is a partner, or who is in the employment, of an officer or employee of the
company;

(d) a person who, or his relative or partner—

(i) is holding any security of the company or its subsidiary , or of its holding or associate
company or a subsidiary of such holding company , of value in terms of such percentage as may
be prescribed;

(ii) is indebted to the company, or its subsidiary, or its holding or associate company or a
subsidiary of such holding company; or

(iii) has given a guarantee or provided any security in connection with the indebtedness of any
third person to the company, or its subsidiary, or its holding or associate company or a
subsidiary of such holding company, for such amount as may be prescribed;

(e) a person or a firm who has business relationship with the company, or its subsidiary, or its
holding or associate company or subsidiary of such holding company or associate company of
such nature as may be prescribed;
(f) a person whose relative is in the employment of the company as a director or key
managerial personnel ;

(g) a person who is in full time employment elsewhere or a person or a partner of a firm holding
appointment as its auditor, if such persons or partner is at the date of such appointment or
reappointment holding appointment as auditor of more than twenty companies other than one
person companies, dormant companies, small companies and private companies having paid-up
share capital less than one hundred crore rupees

(h) a person who has been convicted by a court of an offence involving fraud and a period of ten
years has not elapsed from the date of such conviction;

(i) a person who, directly or indirectly, renders any service referred to in section 144 to the
company or its holding company or its subsidiary company.

Role/Duties of the Auditor

The duties of an auditor have been laid down by the Companies Act, 2013, provided in Section
143. The Act explains the duties in a simplified manner, although the list given is not exhaustive.

Prepare an Audit Report

 An audit report, in simple terms, is an appraisal of a business’s financial position. The auditor
is responsible for preparing an audit report based on the financial statements of the
company. The books of accounts so examined by him should be maintained in accordance
with the relevant laws.

 He must ensure that the financial statements comply with the relevant provisions of the
Companies Act 2013, relevant Accounting Standards etc.

 In addition to this, it is imperative that he ensures that the entity’s financial statements
depict a true and fair view of the company’s financial position.

Form a negative opinion, where necessary

The auditor’s report has a high degree of assurance and reliability because it contains the
auditor’s opinion on the financial statements. Where the auditor feels that the statements do
not depict a true and fair view of the financial position of the business, he is also entitled to form
an adverse opinion on the same.

Additionally, where he finds that he is dissatisfied with the information provided and finds that
he cannot express a proper opinion on the statements, he will issue a disclaimer of opinion. A
disclaimer of opinion basically indicates that due to the lack of information available, the
financial status of the entity cannot be determined. However, it is to be noted that the reasons
for such negative opinion is also to be specified in the report.

Make inquiries

One of the auditor’s important duties is to make inquiries, as and when he finds it necessary. A
few of the inquiries include:-

 Whether loans and advances made on the basis of security are properly secured and the
terms relating to the same are fair
 Whether any personal expenses (expenses not associated with the business) are charged to
the Revenue Account

 Where loans and advances are made, they are shown as deposits.

 Whether the financial statements comply with the relevant accounting standards

Lend assistance in case of a branch audit

Where the auditor is the branch auditor and not the auditor of the company, he will lend
assistance in the completion of the branch audit. He shall prepare a report based on the
accounts of the branch as examined by him and then send it across to the company auditor. The
company auditor will then incorporate this report into the main audit report of the company. In
addition to this, on request, if he wishes to, he may provide excerpts of his working papers to
the company auditor to aid in the audit.

Comply with Auditing Standards

The Auditing Standards are issued by the Central Government in consultation with the National
Financial Reporting Authority. These standards aid the auditor in performing his audit duties
with relevant ease and accuracy. It is the duty of the auditor to comply with the standards while
performing his duties as this increases his efficiency comparatively.

Reporting of fraud

Generally, in the course of performing his duties, the auditor may have certain suspicions with
regard to fraud that’s taking place within the company, certain situations where the financial
statements and the figures contained therein don’t quite add up. When he finds himself to be in
such situations, he will have to report the matter to the Central Government immediately and in
the manner prescribed by the Act.

Adhere to the Code of Ethics and Code of Professional Conduct

The auditor, being a professional, must adhere to the Code of Ethics and the Code of
Professional Conduct. Part of this involves confidentiality and due care in the performance of his
duties. Another important requisite is professional scepticism. In simple words, the auditor must
have a questioning mind, must be alert to possible mishaps, errors and frauds in the financial
statements.

Assistance in an investigation

In the case where the company is under the scope of an investigation, it is the duty of the
auditor to provide assistance to the officers as required for the same. Hence, it can be seen that
the duties of the auditor are pretty diverse, it has an all-round and far-reaching impact. The level
of assurance provided by a set of audited financial statements is comparatively far higher as
compared to regular unaudited financial statements.
Rotation of Auditor is appointing a new auditor when

a. an individual had been appointed as an auditor for more than one term of five
consecutive years
b. an audit firm had been appointed as an auditor for more than two terms of five
consecutive years.

MANDATORY REQUIREMENTS

For the purpose of the rotation of auditors

a. in case of an auditor (whether an individual or audit firm), the period for which the individual
or the firm has held office as auditor prior to the commencement of the Companies Act, 2013
shall be taken into account for calculating the period of five consecutive years or ten
consecutive years.
b. the incoming auditor or audit firm shall not be eligible if such auditor or audit firm is
associated with the outgoing auditor or audit firm under the same network of audit firms.
The term “same network” includes the firms operating or functioning, hitherto or in future,
under the same brand name, trade name or common control.
c. a break in the term for a continuous period of five years shall be considered as fulfilling the
requirement of rotation.
d. if a partner, who is in charge of an audit firm and also certifies the financial statements of the
company, retires from the said firm and joins another firm of chartered accountants, such
other firm shall also be ineligible to be appointed for a period of five years.

FOLLOWING PROCEDURE IS TO BE FOLLOWED

1. Obtain written consent and Certificate from the Proposed Auditor [Section 139(1) & Rule
4(1) of the Companies (Audit and Auditors) Rules, 2014]
Company shall receive before such appointment is made, the written consent of the auditor
to such appointment and a certificate from him or it that the appointment, if made, shall be
in accordance with the conditions. The Auditor shall submit a certificate
a. that the individual or the firm, as the case may be, is eligible for appointment and
is not disqualified for appointment under the Act, the Chartered Accountants Act,
1949 and the rules or regulations made thereunder
b. that the proposed appointment is as per the term provided under the Act
c. that the proposed appointment is within the limits laid down by or under the
authority of the Act
d. that the list of proceedings against the auditor or audit firm or any partner of the
audit firm pending with respect to professional matters of conduct, as disclosed
in the certificate, is true and correct.
2. Obtain recommendations for appointment from the Audit Committee [Section 139 (11),
177]
Where a Company is required to constitute an Audit Committee under section 177, shall
receive a recommendation from the committee for the appointment and remuneration of
the Auditor. In other cases, the Board shall itself consider the matter of rotation of auditors
and make its recommendation for appointment of the next auditor by the members in annual
general meeting.
3. Convene a Meeting of Board of Directors [As per Section 173 & Secretarial Standard-1 (SS-
1)]
a. Issue Notice of Board Meeting to all the Directors of Company at their addresses
registered with the Company, at least 7 days before the date of Board Meeting. A
shorter notice can be issued in case of urgent business.
b. Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
c. Hold a meeting of Board of Directors and pass Board Resolution
 to consider and recommend the appointment of Auditor for a period
of 5 years.
 to fix the day, date, time and venue of the Annual General Meeting
(AGM)
 to approve the draft notice convening the AGM along with
explanatory statement annexed to the notice as per requirement of
the Section 102 of the Companies Act, 2013
 to authorize the Director or Company Secretary to sign and issue
notice of AGM.
 Prepare and Circulate Draft Minutes within 15 days from the
conclusion of the Board Meeting, by Hand/Speed Post/Registered
Post/Courier/E-mail to all the Directors for their comments.
4. Convene Annual General Meeting [As per Section 96 and Secretarial Standard-2 (SS-2)]
a. Notice of General Meeting shall be given at least clear 21 days before the actual
date of Annual General Meeting in writing, by hand or by ordinary post or by
speed post or by registered post or by courier or by facsimile or by e-mail or by
any other electronic means or a Shorter Notice can be issued with the consent of
at least majority in number and ninety five percent of such part of the paid up
share capital of the company giving a right to vote at such a meeting in
accordance with Section 101.
b. Notice will be sent to all the Directors, Members, Auditors, Secretarial Auditor,
Debenture Trustees and to others who are entitled to receive the notice of the
General Meeting.
c. Notice shall specify the day, date, time and full address of the venue of the
Meeting and contain a statement on the business to be transacted at the
Meeting.
d. Hold the Annual General Meeting on the fixed date and pass the Ordinary
Resolution for appointment of the Auditor for a period of 5 years and shall fix the
remuneration to be paid to the Auditor.
e. Listed Companies shall disclose the proceedings of General Meeting to the Stock
Exchange within 24 hours from the conclusion of General Meeting and same shall
be posted on the website of the company within 2 working days.
f. Listed Companies shall submit to the stock exchange the details of the voting
results within two working days from the conclusion of the meeting and post the
same on the website of the Company.
g. Prepare the minutes of General Meeting, get them signed and compile
accordingly.
5. Filing Notice of Appointment with ROC
The Company shall inform the Auditor so appointed about the appointment and file a notice
of such appointment with the Registrar within 15 days of the general meeting. [Section
139(1) and Rule 4(2) of the Companies (Audit and Auditors) Rules, 2014] along with the
following attachments:
a. Certified true copy of the Ordinary Resolution passed in the AGM
b. Intimation/Offer Letter given by the Company to the Auditor
c. Consent Letter given by the Auditor to the Company
d. Certificate given by the Auditor to the Company.