Directors(101) S 149 to 172 R/w CO(appointment & Qualification of directors) Rules 2014

ii. Who is Director/BOD (s 2(34),2(10)) vii. Position of Director- a. Director as a agent-Ferguson v

York & North Midland Railway co v Hudson Wilson – Kirlmpudi Sugar Mills v G Venkata Rao
iii. Number of Directors (S, 149)- Minimum and Maximum b. Director as Trustee- York & North Midland Railway v
number of Directors-3/2/1/max 15 Hudson
iv. No of Directorships (S.165) Max 20/public pvt that are c. Directors as Managing Partners
hold/subsidiary of public co 10 whether a director is an Employee of the company? Re
v. Kinds of Directorships : a. MD b. WT Dir emp-c. 1st Dir d. Lee Behrens & co
Nominee dir e.Woman dir S 149(1) share capital >100 cr or viii. Powers of directors: General powers vested in board (s.
turnover > 300 min 1 Residential Dir s.149(3) stayed in India 179)- Powers exercised by means of resolution passed at
>182 days g. Independent Dir S 149(6) 1/3rd h. Dir Elected by meetings of the board (s. 179(3))- Powers exercised only
small Share holders(s 151) 5 Cr 1000 no i. Additional Dir s with consent of company by special resolution (s.180)-
161(1) j. Alternate Dir S 161(2) k. Shadow Director Other powers of dir-161/182
vi. Appoint of Directors S 152 max 5 Y ix. Duties of directors S 166 fine contra 1lakh/5 lak
Provisions :-consent-DIN-DIR 2/12 within 30 D-Rotation- x. Liabilities of Director
1/3rd permanent-2/3 terminate-independent excluding -voted a. Liability to the company. B. Liability to 3rd party –
individually s 162(1) 1 resolution one director not two unless liability under company Act Prospectus S26, With regards to
agreed without any vote caste against it Appointed by Allotment S39, Fraudulent conduct of business(S 339), -
tribunal S 242-j by NCLT Liability for breach of warranty -c. Liability for breach of
Only individual can be appointed as director statutory duties fine 25000 to 25 crore d. Liability for
Disqualifications form appointment of Director (S. 164)- Acts of Co-directors
unsound-insolvent-convict-disqualifying order
Meetings of company(112) S 88 to 122 R/w CO(Management & Administration) 14
ii. Meaning of Meeting iii. Kinds of meeting iv. Member’s of entitled to vote then shorter Notice/On website also.
meeting Persons entitled to receive notice S.101(3)
a. AGM meeting (s 96): for other than 1 member co- min 1 members/LR/assignee/auditor/directors It must be
meeting per Y- legally constituted
First AGM within 9 M from closing of 1st FY- Quorum for meetings( S. 103) if Public <=1000/5- >1000
Subsequent AGMs 6 M from closing of FY, gap not > 15 M <=5000/15- > 5000/30 members –If pvt 2 must be
between 2 AGM-Extension of time period not > 3 M, Day, personally present.
hour and place of AGM 9 to 6 not on national holiday at RO- Chairman of Meetings (S. 104)-By AOA
Consequences of default in holding GM Punishment for default Proxy ( s. 105)-no proxy to S-8 Co-within 48 hours-MGT
( S. 99) <=1 lac 5000 PD 11- not more than 50 members-no right to speak-Cousins
Power of NCLT to call for AGM ( S. 97) NCLT on member v International Brick-Agent
Appli- Business to be transacted at AGM (S.102) vii. Motion(Proposal)-pass with or without alteration
Ordinary Business BL/PL/Report BOD/div/appoint viii. Voting (S. 2(93)) all equity shareholder- Restrictions
BOD/remu of auditor, Special business not ordinary on voting rights (S 106)- no right if sum payable-co has
b. EGM ( S.100)Table F Clause 42 AOA of company limited lien right
by shares Kinds of voting: 1. By Show of hands (S.107)unless poll
1. Calling of EGM by board(S. 100(1)) demand- 2.By Electronic means ( S. 108) for class of co- 3.
2. Calling of EGM by board on requisition (S 100(2)) Co with By Demand for poll ( S. 109) 1/10th voting or members
share capital not < then 1/10 of paid up or if no share
th
holding share not < 5 lakh or > 1/10th members paid up
capital 1/10 total Voting power in 21 days of receipt of
th
capital present 4. By Postal Ballot (S. 110)-CG may
requisition not later than 45 D declare 1 KM of business by notification
3. Calling of EGM by requisitions (S. 100(4)) if > 45 D then ix. Resolutions (S 114)-when motion passed with or
called by requisitonists in 3M without modification
4. Calling of EGM by NCLT ( S.98) SUO Motu or in form 1. Ordinary-notice given/simple majority/casting vote- 2.
NCLT-1 application Member must present Special-if notice- not < than 3 times of number of votes
C. Meetings of Class of members. bind them. cast. 75% members must be in favour-MGT-14 with
v. Meetings of debenture holders, creditors-Bind them ROC within 30 D-on default not < 1 lac may extend to 5
vi. Procedure & Requisites of a valid meeting-to be properly Lac
convened & proper notice must. Notice of meeting (s. 101) x. Maintenance of minutes ( S. 118)-separate of each
not < 21 D if not < 95% of members meeting-who present-dissenting director- in book within
30 D
Compromise, Reconstruction, Amalgamation & Mergers(Module 5)S 230 to 240 NDK
Compromise, arrangement & amalgamation S 230 to 240) mutandis-prior approval of RBI
230-Power to compromise or make arrangements with 235-power to acquire shares of shareholders dissenting from
creditors & members-discloure-Notice-proxy in 30 D- scheme or contract approved by majority : within 4 months after
Vote-objections by !<10% of holding or outstanding making offer by transferee co approval by not < 9/10th in
debt !< 25%-Document to CG/SEBI/IT/Stock value of shares anytime within 2 month after expiry period of
exchanges/Official liquidator-Majority ¾ of value of 4 M give notice to dissenting share holders that it desires to
creditors or members-Order binding-no sanction by acquire his shares-unless application made to NCLT trasfree
NCLT unless auditor certi. co wihtin1month from date of notice NCLT order transfer of
231-Power of tribunal to enforce compromise or shares-if no order by NCLT transferee co shall within1 month
arrangements-power to supervise/directions by NCLT-if send notice to transferor co with instrument of transfer to be
unable to pay debt order for winding up deemed to be executed on behalf of shareholders-within 1 month register
made u/s 273 the transferee co as holder of those shares and within 1 M
232- Merger & Amalgamation of co-In amalgamation dissenting share holders receive amount payable by transferee
transferor co sized to exist & transferee co will co. and it should be disbursed within 60 days to share holders.
takeover-may involve more than 1 co-Separation or 236- Purchase of minority shareholding: holder of 90% share
joint application-application u/s 230 includes
amalgamation & merger with reconstruction & part of
assets/liabilities required to be transfer, NCLT may call
meeting –Calculation-draft of terms- report adopted by
directors/Sharehoders/KEM promoters
etc-valuation/expert report- NCTL may order transfer
to transferee co-transferee co shall not hold any share
own name or trust name or subsidiary all such shares
should be extinguished or cancelled-employee transfer-
transferor co to be dissolved & fee set off-auditor
certificate must before order-file copy with ROC in 30
D.-if contravene by co !< 1 lakh >=25 lakh & officer 1
Y or fine !< 1 lakh >=3 lakh. U/s 232(3) After
conclusion of meeting conducted by chairman
appointed by NCLT shall file report. Co who have
proposed shall file 2nd application furnishing details of
scheme.
233- do—Certain companies :Small co-notice-
objections/suggestions 90% by 90% of holder of
shares-if no objections communicate to CG in 30D-if
CG find that it is not In public or creditors interest it
may file before NCLT in 60 D. NCLT may Consider u/s
232-copy of order to ROC–effect of dissolution without
process of winding up-legal process against transferor
co if pending shall continue-apply mutatis mutandis
234- do with foreign company: apply mutatis
Auditor(122) ( S 139 to 148)
ii. Who is an auditor
iii. Appointment of auditor ( S. 139(1)) read with rule 3 of
co(audit & auditors) Rule 2014
a. Appointment of First auditor (S 139(6))-In first AGM
by BOD till 6th AGM ie. 5 Y subject to ratification in
each AGM if not another individual or firm. Other
than govt co, shall be appointed within 30 D of
registration max 90 D who shall be till conclu of 1st
AGM.
b. Appt. in conslt.with Audit Comm.( S. 139(9))- min 3
directors with independent dir.
c. Eligibility & quail. of an auditor ( S 141(1)(2))-Only
CA or firm majority CA incl LLP
d. Disqualifications of an auditor ( s. 141(3))-No body
corporate except LLP-employee-interest in co > 1 lac-
relatives > 1 lac-indebted > 5 lac-Given Gua/security in 2. Duty to inquire into matters of the Co (S.
debt-business relationship
e. Obtaining written consent & certificate from auditor-
indicate eligible-as per term-within limit-no pending
proceedings-satisfies criterias.
f. Intimation of appointment-ACT-1 to ROC within 15 D ICAI/NFRA
of the meeting in which appointed.
g. Term of appointment-1st till conclusion of 6th AGM ie.
5 years – not more than 1 term of 5 consecutive years & 6. Auditor not to render certain services ( S.144)-internal audit-
if firm 2 term of 5 Y-Re-appointment after cool off
period 5 Y.
h. Appt of Retiring auditor ( S. 139(9)) if not disq can be
reappointed-not unwillingness-no special resolution
i. Fill up of casual vacancies (S.139-(5)) -by BOD or AC
within 30 D has to be approved in GM within 3 M till
conclusion of next AGM
j. Remuneration of auditor (S. 142)
k. Removal of auditor (S. 140(1))-approval of CG-appl
in ADT-2 in 30 D hold AGM in 60 D
Majority Rule & Minority Rights(131)
ii. Rights of shareholders: Individual- S 136-101-102-71-
85-87-119-189-170-90-100-105-107-copy/inspect/attend/ v. Exceptions to the majority rule
voting/register)-Minority Rights
-relief/EOM/investigate
Majority Rights-policy/BS-PL approval/control
management/appoint dir/md
iii. The Majority Rule/Principle of non-interference-once
capital shall notify co of their intention to buy remaining
shares at a price determine based on valuation by valuer –
majority should deposit amt in account for 1 year and
disbursed to minority within 60 days. Transferor co will act as
Agent for receiving and paying to minority. If no physical
delivery, then share cancel
237-Power of CG to provide for amalgamation of co in public
interest: if CG satisfied, CG may notify-legal proceeding will
continue by or against transferee co-every member will have
nearly same interet/rights against transferee co as he had. – if
less rights entitle to compensation to that extent-if objections
to compensation, may in 30 days appeal to NCLT and
compensation will be made by NCLT. Copy of order to house
of parliament.
238-Registration of offer of scheme involving transfer of shares:
for transfer to transferee u/s 235, every circular containing
offer and recommendations to members of transferor co by its
directos to accept such offer shall be accompanied by such
information with statement by or behalf of transferee co
disclosing steps to be presented before ROC
239-Presetvation of books & papers of amalgamated companies:
no disposal without prior permission of CG. It will appoint
for examination
240- Lia of officers for offences committed prior to
merger/amalgamation -transferee co will be liable for all
offences before
l. Resig by auditor (S. 140(2)(3))-Stat in ACT-3 with reasons
fine min 50000 mx 5 lac if contra
m. Power of NCLT to direct co to change auditor SUO MOTU
or apply by CG or by concerned person S140(5)
- SEBI v Kailash Agrawal
n. Auditor of Government co-By CAG
iv. Powers and duties ( S. 143)
a. powers/rights of auditor
1. Right to access books of account, vouc ( S. 143(1))-all books
incl subsidiary/associat
2. Right to obtain information & explanations.
3. Power to sign the audit report(S. 145)
4. Right to receive notice & attend general meetings (S 146)
B Duties of auditor
1. Duty to check accuracy of accounts
143(1)))Security/trans/sale/loanAdv/exp/cash
3. Duty to Prepare audit report ( s.
143(2),145)-prepare/Sign/audit STD
4. Duty to comply with accounting STD (S 143(9)(10))As per
5. Duty to report fraud (S. 143(12)(15))- in 60 D to CG-ADT 4-
MCA
actuarial service-invest advisory-implement financial info sys-
banking/financial/management services
v. Penalties for contravention (S. 147) contravention of S
139/143/144/145 !< 25000 to 5 lac if knowingly!<1lac max 25
lac imprisonment may extend to 1 Y.
vi. Position of auditor-Fiduciary-Deputy Sec v S N Dasgupta-
Re.City Equitable Fire ins-Re. Kingston cotton Mills Re. London
& General Bank
ICIC v Parasrampura Synthetic
a. Ultra vires and illegal acts – Bharat Insurance ltd v Kanhya lal
b. Fraud on minority – Menier v Hooper’s Telegraph Works
c. Acts requiring Special Majority
d. Wrongdoers in Control-Glass v Atkin
e. Individual membership rights – Nagappa Chettiar v Madras
approve effect all if majority no court intervene -Foss v Race Club
Harbottle f. Oppression & mismanagement.
iv. Application of Foss v Harbottle in Indian Context--
Rajahmundry Electric v Nageshwar v Parasrampura
Synthetic
Prevention of Oppression & Mismanagement(138)
ii. Meaning of oppression -Shanti Prasad v Kalinga Tubes- undue gains-Certified copy of order shall be file with ROC in
Denial of to shareholders of right to vote/dividend 30 days of order-Contravention fine !< 10 lac extn to 25 lac
Mohan lal Cbandumall v Punjab co-Suppressing notice and officer jail 6 M with fine 25000 extn to 1 lac
Farhat Sheikh v Esemen Metalo Chemical-Attempt to f. Consequences of termination or alteration of f. f. certain
force new/risky objects on minority Hindustan Coop Ins agreement ( S.243) not give rise to claims against any director
case-Not calling AGM Hindustan Soc case-not or person for compensation of damages. If MD terminated by
oppressive like careless conduct/inefficient/no divi to NCLT shall not hold office for 5 years
loss/non filing of records v. Class of action (S. 245) – A class action suits representing
iii. Meaning of mismanagement Instances of mism- common interest
Misconduct/deviation/bank account unofficial/sale of a. Who may file,-Members not < 100 or 10% of total or any
assets without auth/AOA violation member jointly or singly hold !< 10% of the issued share
iv. Relief –application to NCLT in NCLT 1 form capital-Provided paid all calls and incase of no share capital, !
a. form of application b. Who may apply -as per S < 1/5 th of total members-depositors !< 100 or 10% of total
241only who has right to apply u/s 244.U/s 244, if co members whichever is less.
with share capital 1/10th total member or 100 members & no .b. Who may be sued through class action suits? –co or directors
share than 1/5th of total members. If application file in for fraud/auditors-firm/experts or advisors or consultant
Form NCLT-9 it can waive c. Reliefs that may be claimed-restrain co beyond AOA/co from
c. who can’t apply: holder of letterOf Allotment of breach/declare resolution void for altering MOA&AOA/Prov
partly paid up share/share warrant & share certificate contrary to co act/claim damage, compensation.
not entered in register and transferee who has not d. Order of NCLT u/s 245(7):Binding if fail, min 5 lac extn 25
lodged share for trans in co. lac officer jail extn to 3 Y with fine min 25000 extn 1 lac
d. Relief against (S 241).-prejudice to public int/to if application found to be wrong may reject and order
him/other members/interest of co-Material change not application and pay compensation !> 1 lac u/s 245(8)
in interest of creditor No provision relating to action suit u/s 245 shallbe applicable
e. Powers of tribunal ( s. 242) -conduct of to banking co u/s 245(9)
affairs/purchase of share/alter agreement/setting aside
transfer/delivery of goods/removal of
director/manager/recovery of
Winding up(145)
ii. Winding up – meaning S.(94A) under this act or u/s 275 for winding up of co under co Act. b. Appointment of
IBC liquidator: NCLT or Co incase of voluntary
iii. Modes of winding up- Only by tribunal after IBC no c. Who may appoint as co liquidator: Official liquidator by CG
voluntarily from this act U/s 359 or a person registered as Insolvency professional incase
iv. Winding up by the tribunal-by filing petition u/s 272 of IBC.
jurisdiction with HC having original juri @ place of d. Terms & conditions of the appointment of liquidator S 275(5)-
RO of CO terms/fee specified by NCLT
a. Who apply for winding up S. 272-Co-contributory- e. Duty of liquidator on appointment S. 277(5&6),
creditor-registrar with approval of CG-person autho S.288-1. Recover & realize assets 2. To investigate affairs of co
by CG by SG/CG u/s 271(b). u/s 2(26) Contributory from day 1 3. Declaration of conflict of interest within 7 D 4. Form
means every person liable to contribute to assets of co committee within 3 weeks & file reports u/s 277(6) 5. Periodical
during winding up. Deposit holder can file. reports u/s 288 6. Other impartiality-act with skill-maintain
b. Circumstances in which company may be wound up confidentiality
by tribunal S, 271(1)-1. Inability to pay debts > 1 lakh f. Powers of a liquidator S. 290-institute or defend suit-carry
in 21 D on demand or decree or order of court or NCLT business-sell immovable property-raise required money-
returned unsatisfied or fail to prove – 2.Passing special appoint advocate-compromise-draw or accept BOE-appoint
resolution-3. Acting against interest of sovereignty agent
4.Fail to revival of sick co 5.Fraudulent affairs 6.Fail vi . Effect of winding up order S.278-Order shall operate in
in annual returns for 5 Y-7. Just equitable ground favour of creditors & contributors
c. Commencement of winding S. 357-deem to be vii. Stay of suits & legal proceedings S. 279-No suit co after
commence on presentation of petition. order except leave NCLT
d. Procedure upon presentation of petition S. 272-may viii. General powers of the tribunal in case of winding up by
dismiss or interim order/appoint provisional tribunal (S 283,285,289,296 to 298, 300, 301) (Check in Module
liquidator/order with/without cost. No winding up for 8)
assets mortgage excess debt amt or no assets or other ix. Dissolution of the company: where affairs of co completely
reason. Order within90 days from presentation wound up and assets completely liquidated the liquidator shall
v. Liquidator: a. Meaning. S 2(23) means a person make application to NDLT for dissolution. If satisfied, pass
appointed by NCLT order. Order shall be file with ROC within 14 days of receipt of
copy of order or time fixed by NCLT. Creditors may be
dispensed by NCLT if 90% in value agreed.
Voluntary winding up(153)
ii. Voluntary liquidation process under IBC board in 7 days Resolution file in MGT-14 with ROC
iii. Who may initiate (S 59 of IBC) only corporate who vii. appointment of liquidator: by Insolvency professionals of
has not committed default means non payment of company who met criteria
whole or in part debt or installment when due & viii. Commencement of liquidation process: wef passing
payable resolution after approval from creditors. Not later than 5 days
iv. Declaration by directors-by majority of directors liquidator shall makes public announce for calling upon
through affidavit & full inquiry into affairs of co & operational/financial Creditors, workmen,
opined that will not be able to pay debt & not employees to submit claim within 30 D from commencement.
liquidated to defraud any person. x. Completion of liquidation: within 1 year windup from
v. Resolution by member of co- in GM within 4 week commencement date-meeting of contributors within 15 days
by special resolution or 2/3rd of creditors in value of from year end in which appointed & at the end of year present
debt within 7 days of resolution. status report on progress-final report to contributors, ROC and
vi. Notifying the registrar & Board about resolution to Board
liquidate: with ROC & IBC xi. Dissolution of the company: Application to NCLT for
dissolution of co
National Company Law Tribunal(158) NCLT & NCLAT Rules 2016
ii. Back ground of NCLT-challenged before Madras Bar S. 242-Conduct of affairs-Purchase of share -Alter agreement-
asso v UOI-quasi judicial-Eradi committee to exercise Setting aside transfer-Delivery of goods-Removal of
power of BIFR,CLB & HC. Notified on 01/06/2016. director/manager
iii. Constitution of NCLT S 408-President by select -Recovery of undue gains-A certified copy of order shall be file
committee in consultation with CJI-for judicial with ROC within 30 days of order-Contravention fine !< 10 lac
member->HC judge served as District judge min 5 y/ extn to 25 lac and officer jail 6 M with fine 25000 extend to 1 lac
lawyer 10 Y-Technical members who holds c. Powers in respect of winding up by the tribunal: S 272- May
secretaries or Assistant Secretary-President & dismiss or interim order
member appointed by CG- select committee includes -Appoint provisional liquidator-Order with/ Without cost. No
CJI, senior judge of SC or CJ of HC, member MCA, winding up for assets mortgaged excess debt amt or other
Ministry of law & justice –President for 5 Y reason.
eligiblereappointment d. Power to punish for contempt S. 425
iv. Jurisdiction of NCLT –Territorial- Principal batch vi Order of tribunal S 420: After parties heard. May be amend in
@ Delhi and 10 other 2 Y for rectification of mistake apparent from record if brought
- Subject matter-jurisdiction/power/function under co to notice by parties.
Act & functions of AA under IBC vii. Appeal from orders of tribunal S.421-Any person. No appeal
v. Powers of tribunal: a. General powers for purpose with the consent of parties. May be filed within 45 D Delay may
of discharging functions- Civil court & also u/s 283 be condone.
Deliver property -S. 285 Settle list of contributors -S. viii. Expeditious, disposal by the tribunal S.422-
289 Stay winding up-S. 295 Set off claims-S. 296 Disposal of application or petition within 3 M.
Make calls-S. 297 Adjust rights of contributors-S. 298 ix. Transfer of certain proceedings: wef 07/12/2016 MCA issued
Order cost-S. 300 Order public exam of promoters Rules for transfer of pending legal proceedings from HC to
-directors-S. 301 arrest absconding person. NCLT including related to arbitration, compromise,
b. Powers in respect of prevention oppression & arrangements & reconstruction pending before HC in
respective territorial jurisdiction.
/