Module I

Introduction to Companies Act, 2013

Objectives of Indian Companies Act, 2013
1. To protect interest of the investors.
2. To put strict restrictions on insider trading.
3. Provide merger, amalgamation and take over.
4. To facilitate ease of doing business.
5. To promote transparency and high standard of corporate
governance.

6. To promote CSR activities.

7. To improve corporate law standard of our country.
8. To introduce new concepts such as one person company, small
company and dormant company.
Salient Features of Indian Companies Act, 2013
1.One person company (OPC)
This act provides formation of one person company. It may have one director
and one shareholder.

2.Corporate Social Responsibility 9CSR)

This act provides certain class of companies to spend certain amount of
money every year on corporate social responsibility

3.Number of members
The maximum number of members allowed in private company is 200.

4.Financial year
The financial year in relation to company means the period ending on 31st day of
march every year and it has been incorporated on or after 1st day of January
 5.Class Action Suit
This act introduced class action suit with a view of making shareholders and
other stakeholders more informed knowledgeable and conscious of their
right.

6.Composition of Board
Compulsory appointment of a woman director. At least one director should be
a person who has stayed in India for a period less than 182 days in previous
year.

7.Cross border mergers.

8.Prohibition of insider trading.
9.Strict rule for auditors.
10.National company law tribunal introduced.
Company
A company is an association of a person united for common object.

Characteristics of a company
 Voluntary association of a person.
 A company has perpetual succession.
 A company has separate legal entity.
 The liability of a members of a company is limited.
 A company has common seal.
 It is an artificial person created by law.
 It is managed by the board of directors.
 The shares of company are freely transferable.

Kinds of Companies
On the basis of On the On the On the On the On the basis Other types of
incorporation basis of basis of basis of basis of of nationality companies
liabilities number of ownership control
members
Chartered Companies Private Government Holding National Small company
companies limited by Company companies companies companies
shares
Statutory Companies Public Non- Subsidiary Foreign Defunct
companies limited by company government companies companies company
guarantee companies

Registered Unlimited One person Dormant

companies companies company company

A. On the basis of incorporation

1. Chartered companies
Chartered companies are a type of company formed by the crown. It is
regulated by charter incorporating, not by companies act.

2. Statutory company
A company formed by a special statute or act passed by the
parliament is known as statutory company.

3. Registered company
The companies formed and registered under the companies act 2013 is known
as registered company.

B. On the basis of liability

1. Companies limited by shares
It means a company having liability of its members limited by the
memorandum to the amount.

2. Companies limited by guarantee

A company having liability of its members limited by the memorandum to
such amount as the members may respectively undertake by
memorandum to contribute the assets of the company in the event of
winding up.

3. Unlimited company
An unlimited company is a type of private company. It has some
features of limited company.
C. On the basis of number of members
1. Private Company
A company which is formed with a minimum number of 2 persons is known
as private company.
 2. Public company
It is not a private company and has a minimum paid up share capital
of Five lakh rupees or such higher paid-up capital.
Difference between private company and public company
Private Company Public Company
Minimum number of members Minimum number of members
is two. is seven.
Maximum number of There is no maximum limit.
members is two hundred.
Transferability of shares is Shares are freely transferable
restricted.
Number of directors required There should be at least three
is two. directors.
There is no public invitation. Public invitation is allowed.

Private company is not Public company issue

required to issue prospectus.
No restriction on
remuneration of directors.
Private company enjoys
some special privileges.
prospectus.
Legal restriction on
remuneration directors.
There are no such privileges for
public company.

3.One Person Company (OPC)

A company which has only one person as member is called one person
company.

D. On the basis of ownership

1. Government companies: - A public enterprise incorporated under the Indian
Companies Act, 2013 is called government company
2. Non-government companies
The list of non-government companies includes those companies which are
registered under the companies act but not as government companies.

E. On the basis of control

1. Holding company
A company it has control over other that companies known as holding
company.

2. Subsidiary company
A company owned or controlled by another company is known as
subsidiary company.

F. On the basis on nationality

1. National company
A company formed under a specific company act of nation is known as
national company.

2. Foreign company
A company incorporated outside India is known as foreign company.

G. Other forms of companies

1. Small companies
A small company is a company in which paid up share capital does not
exceed fifty lakhs’ rupees.

2. Defunct companies
A defunct company is a company which have failed to commence its business
of its incorporation.

3. Dormant company
A company which is not active is known as dormant company.

Listed companies
A company its securities is listed on any recognized stock exchange is known
as listed companies.

Associate company
An associate company means a company which has a significant influence in
another company, but which is not subsidiary company of that company.
Nidhi’s
Nidhi means a company which has been incorporated with the object of
cultivating the habit of thrift and savings among its members.

Corporate Veil
It is a legal decision to treat the rights and duties of a corporation as a right or
liabilities of its shareholders.

Lifting or piercing of corporate veil

It refers to a circumstance in which court set aside limited liability and hold
company’s investors or directors personally liable for the organization’s
activities or debts

Cases of lifting the corporate veil

A. Under judicial interpretation
1. Protection of revenue
2. Prevention of fraud
3. Determination of enemy character of a company.
4. Where the company is a sham.
5.company avoiding legal obligations.
6. Avoidance of welfare legislation.
7. Protecting public policy.
B. Under statutory provision
1. Punishment for incorporation of company by furnishing false
information.

2. Fraudulent application for removal of name.

3. Liability for fraudulent conduct of business.
 Module II
Promotion of a Company

Promotion
Promotion is the process of organizing and planning the finance of a business
under the corporate firm.

Promoter
A promoter is a firm or person who does the preliminary work related
to the formation of a company.

Types of Promoters
1. Professional promoters
These promoters take the promotion as their profession. Their interest
is promotion of business, not running of the business.

2. Occasional promoters
These promoters take interest in floating some companies. They are not
engaging in promotion work on a regular basis.

3. Entrepreneur promoters
They are both promoters and entrepreneurs.

4. Financial promoters
A promoter who provides and offer the financial services also is known
as financial promoters.

Function of a promoter
1. Discovery of business idea
2. Detailed investigation of the project.
3. Assembling various factors of production.
4. Preparing preliminary documents.
.
5. Entering preliminary documents.
6. Naming the companies.
7. Appointment of bankers, brokers etc.
Duties of a promoter
1. Duty to disclose the secret profit.
2. Duty to disclose all the material facts
3. Duty to disclose private arrangements
4. Duty of promoter against future allottees.
Liabilities of promoter
1. Liability to account in profit.
2. Liability in the misstatement in the property.
3. The promoter is personally liable for all contracts made by him on behalf
of the company.

4. Liability at the time of winding up of the company.

Documents of companies
1. Memorandum of association
2. Articles of association
3. Prospectus

Memorandum of Association
It is a legal document contains fundamental conditions of a company is
allowed to be incorporated.
Contents of memorandum
1. Name clause
2. Situation clause
3. Object clause
4. Liability clause
5. Capital clause
6. Association clause
1. Name clause
The first clause of a memorandum is the name of the proposed company.
Name of the company with the last word ‘limited’ in the case of public
company or the last words ‘private limited’ in the case of a private limited
company.

2. Situation clause
This clause mention name of the state in which the registered office of the
company is to be situated. It is also called registered office clause.

3. Object clause
This is the most important clause in memorandum. This states object of the
company. It means the type of the activities which the company carry on.

4. Liability clause
This clause states that nature of liability that the member incur. The liability
of the company whether limited or unlimited and also states company limited
by shares and company limited by guarantee.

5. Capital clause
This clause states that the capital of the company with which the
company is registered and division of share capital.

6. Association clause
This clause is also known as subscription clause. This clause states that the
purpose of the subscribers to incorporate the company, agreeing to take
the shares in the company based on the number written in the
memorandum
Articles of the Association
Articles of association is a document that defines the purpose of a company
and specifies the regulation for its operations.

Contents of articles of association

1. The execution of preliminary contracts.
2. Share capital and its division.
3. Payment of underrating commission.
4. Transfer of shares. 5
Forfeiture of shares.
6. Buyback of shares
7. Alteration of capital.
8. General meetings
9. Capitalizations of profits.
10. Calls on shares
11. Transfer of shares.
12. Voting right of shares.
13. Adjournment of meetings.
14. Seal of the company.
15. Winding up of the company.

Difference between memorandum and articles

Memorandum Articles
It is the main document of the It is the subsidiary document of the
company company.

Memorandum governed by Articles governed by

company’s act only. memorandum and companies act.
 Memorandum cannot be altered Articles can be altered very
very easily. easily.

Memorandum contains lesser Articles contain more clause.

clause.

Memorandum defines object and Articles mention ways and means

power of the company. of achieving objects in the
memorandum.

Memorandum regulates the Article regulates the relationship

relationship between company and between company and members.
general public.

Prospectus
Prospectus is a formal document. It is an invitation to offer to subscribe
for shares or debentures in the company.

Red herring Prospectus

It is a prospectus which does not have complete information on the price and
quantum of securities offered.

Abridged prospectus
It means a memorandum containing salient features of a prospectus as may be
specified by the SEBI by making regulations in this behalf.
Shelf prospectus
It is a type of prospectus issued by companies making multiple issues of bonds
for raising fund.

Statement in lieu of prospectus

It is a document filed with registrar of the companies when the company has
not issued prospectus to the public for inviting them to subscribe shares.
Content of the prospectus
1. Name and address of the registered office of the company,
company secretary, auditor, banker, underwriter, etc.

2. Date of opening and closing of issue.

3. Declaration about the issue of allotment letters.
4. Details about underwriting of the issue.
5. Capital structure of the company.
6. Procedure and time schedule for allotment and issue of securities.
Doctrine of ultra vires
It is a fundamental rule of company law. A company has power to do all acts
authorized by companies act memorandum and article. So, any activity done
contrary to or in excess of these will be ultra vires.

Doctrine of indoor management

Doctrine of indoor management means protect the outsiders against the
action done by the company. Any person who enters into a contract with the
company shall ensure that the transaction is authorized by the articles and
memorandum of the company

.
 Module III
SHARES AND SHARE CAPITAL

Share
The capital of a company is divided into small units. Those units are
called share.
Stock
A set of shares put together in a bundle is called stock.
Difference between Shares and Stock

SHARES
It has nominal value
It has distinctive numbers
It is partly or fully paid up
It can be issued directly
It transferred in multiple of one
STOCK
It has no nominal value
It has no such number
It is always fully paid up
It cannot be issued directly
It transferred in fractions

Types of share capital

1. Registered Capital
The capital with which a company is registered is called registered capital.
It is also known as nominal or authorized capital.
2. Issued Capital
It is a part of authorized capital which is issued to the public for
subscription.
3. Subscribed Capital
It is a part of issued capital which is subscribed by the public.
4. Called up Capital
It is a part of subscribed capital which the directors have called from the
shareholders.
5. Paid up capital
It is a part of called up capital which is actually paid up by the
shareholders.
6. Reserve capital
It is the amount of the capital which is not called by the company except
in the event of winding up.
Kinds of share capital
1. Equity Share capital
2. Preference Share capital
Equity Share Capital
Shares which are not preference shares are called equity shares. These
are ordinary shares.
Merits of equity shares
1. It is a permanent capital. There is no liability for payments.
2. It improves creditworthiness of the company.
3. There is no capital obligation for payment of dividend.
4. Company can strengthen financial base by issuing equity shares.
5. Equity shareholders enjoy ownership.
6. Reward from equity shares is high.
Preference shares
Preference shares are those shares which carries preferential right with
respect to payment of dividend and repayment of capital.
Merits of preference shares
1. It ensures creditworthiness of the company.
2. Shareholders earn a stable dividend rate.
3. No voting right. So existing shareholders will not loss controlling power of
the company.
4. Preference dividend is a fixed obligation.
5. Issue of preference shares enjoy financial flexibility.
6. No legal obligation for dividend payment.
7. Improved borrowing capacity.
Demerits of preference shares
1. Preference dividend should be paid in arrears. It will affect the financial
flexibility of the company.
2. Preference shares lack of liquidity in market.
3. The rate of dividend to equity shares is more than preference.
4. Skipping dividend disregard market image.
5. Costly source of finance.
Types of preference share capital
1. Cumulative preference share.
2. Non-cumulative preference shares.
3. Participating preference shares.
4. Non-participating preference shares.
5. Convertible preference shares.
6. Non-convertible preference shares.
7. Redeemable preference shares.
8. Irredeemable preference shares.
Difference between equity shares and preference shares
Equity Shares Preference Shares
It is an ownership security. It is a hybrid security.
Dividend rate is not fixed. Dividend rate is fixed.
Nominal value is lower. Nominal value is higher.
Expenses on issue are lower. Expenses on issue are higher.
Dividend is paid last. Dividend is before paying equity
dividend.
Raising of capital/ Issue of shares
1. Private placement
2. Right issue
3. Public offer
Private placement
Private placement is the issue of securities of a company direct to one
investor or small group of investors.
2. Right issue
It is an issue of shares to the existing shareholders in proportion to their
existing shareholding.
3. Public issue
Public issue means selling of shares or securities to public by issue of
prospectus.
Types of public issue
a) Initial public offer (IPO)
This is a method of raising securities in which a company sells shares or stocks
to general public for first time.
b) Offer for sales
In this method shares are offered to public through the
intermediaries.
Procedure for issuing new shares
1. Approval and filing of prospectus.
2. Issue of prospectus.
3. Receiving of application.
4. Scrutiny of application.
5. Sorting of application.
6. Closure of application list.
7. Record of application.
Employees’ Stock Option Plan (ESOP)
It is a scheme under which the company gives option to the whole-time
directors, officers or employees to purchase or subscribe equity shares at a
future data at a predetermined price.
Different types of ESOPs
1. Employees Stock Option Scheme (ESOS)
Under this scheme, the company grands an option to the employees to
acquire shares at a future date with predetermined price.
2. Employees Stock Purchase Plan (ESPP)
Employees are given the right to acquire shares of the company
immediately, not a future date.
Book Building
It is an international practice which refers to collecting orders from
investment bankers as large investors based on an inductive price range.
Issue price of shares
1. Issue of shares at par
When shares are issued equal to their face value is called issue of shares
at par.
2. Issue of shares at premium
When shares are issued at a price higher than face value is called issue of
shares at premium.
3. Issue of shares at discount
When shares are issued at a price lower than face value is called issue of
shares at discount.

Underwriting
Underwriting is an act of guarantee by an organization for the sale of certain
minimum number of shares and debentures issued by a public limited
company.
Underwriting commission
It is a compensation that an underwriter receives for placing a new issue
with investors.
Listing of Securities
It means enrolment of name of the company in the official list
maintained in the stock exchange.
Objectives of Listing
1. To ensure supervision and control of trading.
2. To mobilizes savings for economic development.
3. To protect interest of investors.
4. To create ready marketability and liquidity.
Advantages of listing
1. High liquidity
2. Facilitate buying and selling
3. Tax advantages
4. Fair price
5. Helps to raise finance
6. Protects investors
7. Good collateral securities
8. Get regular information
Limitations of listing
1. Speculation
2. No regular price quoting
3. Large amount of listing fees
4. Information to competitors
Sweat equity shares
Sweat equity shares are those shares issued by the company to its directors
and employees at a discount or for consideration other than cash for
providing know how or making available rights in the nature of intellectual
property rights or value additions.

Forfeiture of shares
It means cancellation of shares due to non-payment of allotment money
within a specified period.
Share Certificate
It is a document issued by the company evidencing that a person named in such
certificate is the owner of the shares of the company
. Contents of a share certificate
1. Name and address of registered office.
2. Serial number of share certificate
3. Date of issue of share certificate.
4. Name and address of holder.
5. Number and class of shares.
6. Signature.
Share warrant
It is a document issued under the common seal of the company stating that
the bearer is entitled to the specified number of shares
. Transmission of shares
It is the passing of title or property in shares from one person to another
by the operations of law such as death, insolvency etc.…
Difference between Transfer and Transmission of shares
Transfer of shares Transmission of shares
It is voluntary. It is involuntary.
Transfer of shares take place at It is taken only at the time of
any time. death, insolvency, insanity.
Valid consideration exists. There is no consideration.
Bonus shares
Bonus shares are those shares which are issued by a company free of cost to
the existing shareholders of a company.
Dematerialization
It is a process of converting physical shares into digital or electronic form.
Advantages of Demit system
1. Immediate transfer of shares.
2. No stamp duty on transfer of securities.
3. Elimination of bad deliveries.
4. Elimination of loss or theft of shares.
5. It enables share transfer without involve much paperwork.
6. Faster and smoother settlement.
Disadvantages of Demit system
1. Dishonest stockbrokers.
2. Trading in stock maybe uncontrollable in case of dematerialization.
Depository Participant (DP)
It is described as an agent or the registered stock broker of a depository.
 Module IV
Management of Companies
Director
A director means a director appointed to the board of a company. It means
the person who appointed for the management of the company.
Qualification of director
In Companies act, 2013 does not laid down any particular qualification for a
director, not even qualification of shares. Directors must hold qualification
shares. Nominal value of qualification shares of a director is fixed by the
articles of the company.
Disqualification of Directors
1. If he is unsound mind.
2. If he is undischarged insolvent.
3. He has been convicted by a court of any offence.
4. If he has not paid any call-in respect of shares of the company.
5. If he has not allotted the direct identification number.
6. If he has not filled the annual accounts for continuous three
financial year.
7. If he has not filed annual returns for continuous three financial year.
Role of directors
1. Directors as agents
A director is an agent of the company for the conduct of the business of the
company. Directors of a company have fiduciary relationship with the
company as well as shareholders when act as an agent.
2. Directors as trustees
Directors as trustee of the company's money and properties. They
safeguard them for and on behalf of the company.
3. Directors as employees
Where any director, besides being a director is also in the service or
employment of the company such as secretary, managing or otherwise he
will be treated as an employee.
4. Directors as managing partners
Directors are elected representatives of the shareholders and they are in a
position as managing directors.

Powers of directors
1. To call on shareholders in respect of money unpaid on shares.
2. To authorize buy back of shares.
3. To borrow monies.
4. To grant loans.
5. To issue securities.
6. To diversify the business of the company.
7. To approve amalgamation and merger.
8. To invest fund of the company.
Duties and Responsibilities of
directors’ Statutory duties
1. To verify truthiness of prospectus.
2. To determine amount of minimum subscription.
3. To keep register of members.
4. To convene annual general meeting.
5. To convene extra ordinary general meeting.
6. To send to the registrar the copies of resolution.
7. To keep register of mortgages and charges.
8. To submit statement of affairs at the time of winding up.

General duties
1. To exercise independent judgment.
2. To exercise reasonable care, skill and diligence.
3. To avoid conflicts of interest.
4. Not to accept benefits from third party.
5. To promote the success of the company for the benefits of its
members as a whole.
Rights of directors
1. Right to access company’s document and financial records.
2. Right to get remuneration.
3. Right to delegate duties.
4. Right to receive notice of board meeting.
5. Right to participate in board meeting.
6. Right to vote at board meeting.
7. Right to hold any number of directorships.
8. Right to claim reimbursement of business expenses.
Liabilities of directors
Liabilities of the directors can be classified into three types:
1. Liability to outsiders.
2. Liability to company
3. Criminal liability.
Appointment of directors
1. Appointment of first directors
a. By articles of the articles of the company.
b. By the subscribers to the memorandum of association.
2. Appointment of subsequent directors
a. By the company in general meeting.
b. By the board of directors.
c. By third party.
d. By tribunal.
e. By the principle of proportional representation.
Removal of directors
1. Removal by the share.
2. Removal by the tribunal.
3. Removal by central government.

Director Identification Number (DIN)

It is an eight-digit unique identification number that has lifetime validity.
Through DIN details of directors are maintained in a database.
Whole time Director
He is a director in the whole-time employment of the company.
Managing Director
He is the key managerial personnel of the company. He is the head of the
company and decision making.
Chief Executive Officer
An officer of a company who has been designed as such by it.
Chief Financial Officer
According to Section 219, A person appointed as chief financial offer of a
company
Corporate Governance
Corporate governance refers to the set of systems, principles and
processes by which a company is governed.
Need and Importance of corporate governance
1. Change in ownership structure.
2. Growing number of scams.
3. Separation of ownership from management.
4. Social responsibility.
5. Globalization.
6. SEBI rules made corporate governance compulsory.
7. Take over and mergers.
Principles of corporate governance
1. Fairness
2. Responsibility.
3. Transparency.
4. Accountability.
Corporate Social responsibility (CSR)
CSR is the contribution of a company to the communities’ development by
the implementation of social and environmental projects and the
developmental programs of a country.
Securities and Exchange Board of India Act 1992
SEBI was set up in 1988 to regulate the functions of security market. SEBI
promotes orderly and healthy development in stock market.
Functions of SEBI
1. To protect the interest of investors.
2. To regulating the business of stock exchanges.
3. Promoting and regulating self-regulatory organizations.
4. Prohibiting unfair trade practices in stock markets.
5. Promoting investors education and training.
6. Prohibiting insider trading.
7. Levying fees and other charges.
8. Registering and regulating working of stock brokers, sub brokers,
Marchant bankers etc.
9. Registering and Regulating working of depositories, participants etc.
10. Registering and regulating the working of venture capital fund, mutual
funds etc.
Powers of SEBI
1. Call for periodical returns from stock exchanges.
2. To compel listing of shares to public companies.
3. To grant recognition to stock exchanges.
4. To grant registration to intermediaries.
5. Withdrawal of recognition of stock exchanges.
6. Prohibit contract in certain cases.
7. To give direction to stock exchanges.
8. To suspend business of recognized stock exchanges.
Securities Appellate Tribunal (SAT)
It is a statutory board established under the provisions of Section 15K of
the SEBI Act,1992 to hear and dispose of appeals against orders passed by
the SEBI.
Powers of SAT
1. Enforce and summons attendance of any person.
2. Require the discovery and production of documents.
3. Receive evidence on affidavits.
4.Issue commissions for the examination of the documents or
witnesses.
5.Dismiss an application for default or deciding it ex-parted.
Composition of SAT
 Presiding Officer: Appointed by the central government in
consultation with Chief justice of India or nominee.
 The two members shall be appointed by central government.
 Module V
Company Meetings and Winding Up
Company meetings
Company meeting means coming together of at least a quorum of members
in order to transact either ordinary or special business of the company.

Characteristics of company meeting

1. Two or more persons must present.
2. Notice is essential.
3. Held at a particular place, date and time.
4. Must be held as per companies Act
Kinds of company meetings
1. Meeting of directors
2. Meeting of shareholders
3. Meeting of creditors
4. Meeting of debenture holders.

1. Meeting of directors
The directors must hold their meetings as frequently as possible. These
meetings of the directors are known as board meetings.

Important matters relating to directors meeting

1. Frequency of board meeting
 First meeting should be held within thirty days from the date of
incorporation.
 Minimum four meeting of BOD should be held every year.
 One person company, small and dormant company at least one meeting
of the BOD has been half of the calendar year.
 2. Notice of the meeting
A minimum seven days’ notice should be sent to every director at his
address by post or mail.

3. Agenda
The term agenda means things to be done. It is aa statement of the business
to be transacted at a meeting.

4. Quorum
The quorum for a meeting of BODs of a company shall be 1/3rd of its total
strength or two directors whichever is higher.

5. Chairperson
Every meeting of the board must have chairperson to preside over it.

6. Resolution
Decisions are taken by directors by passing resolutions.

7. Voting
Each director has one board for each resolution put to vote at the meeting. In
case of an equality of votes, the chairperson shall have a second or casting
vote.

2. Meeting of shareholders
Shareholders meeting can be any of the following:
1. Annual general meeting
2. Extra ordinary meeting
3. Class meeting

1. Annual general meeting

Annual general meeting is regarded as the most important of all company
meetings. The purpose of the meeting is to give full information to members
of the progress by the company during the year.
Secretary’s duties in connection with annual general meeting
Before the meeting
1. Ensure the final accounts are ready.
2. Final accounts will be submitted to the board meeting for
approval.

3. Secretary must issue notice to the shareholders, directors, auditors

and stock exchange at least twenty-one days before the date of the
meeting.

4. Make necessary arrangement for poll, preparation of voting papers

etc.

At the meeting
1. To get the attendance register signed by the shareholders.

2. To help the chairman in ascertaining the quorum.

3. To read the auditor’s report.
4. To help the chairman in the conduct of meeting.
5. To take notes for preparing meeting.
After the meeting
1. To prepare minutes.
2. To get minutes of meeting approved by the chairman.
3. To send intimation of the appointment to the directors and
auditors.

4. Extra ordinary meeting

All general meetings of a company other than annual general meeting
are called extra ordinary general meeting which is held between two
annual general meeting.
2. Class meeting
Meeting of different classes of shareholders is known as class
meeting.

3. Meeting of Creditors
A company call the meeting of creditors, when the company proposes
to make a scheme for arrangement with its creditors.

4. Meeting of debenture holders

The company may call the meeting of its debenture holders to get their
approval for making any change in their terms and conditions.

Essentials of a valid meeting (Requisites)

1. Proper authority to convene the meeting.
The proper authority to convene a general meeting to the company is the
board of directors. If the directors fail to call the meeting, the tribunal is the
proper authority.

2. Notice of meeting
The second requirement of a valid meeting is that a proper notice of meeting
should be given to the members. In addition to the members, notice should
be given to auditors, directors etc.

3. Quorum
Quorum means minimum number of members who must be present in the
meeting for validity of the meeting.

4. Chairman of the meeting

The chairman is a person who presides the meeting. A chairman is
necessary to conduct a meeting.

Duties of Chairman
a. To set the agenda.
b. To lead the meeting.
c. to maintain order at the meeting.
d. To ensure the conventions of the meeting are been followed.
e. To ensure members present at meeting.
f. To exercise his casting votes for interest of the company.
5. Minutes of meeting
Minutes is a clear and accurate record of the proceedings and the
decisions at a meeting.
Objectives of use of minutes
a. It provides a clear and accurate record of business transactions at a
meeting.

b. It is a permanent record of the meeting.

c. It accepted in a court of law for evidence.
d. To provide a link between one meeting and previous meeting.
6. Voting
Each director has one vote for each resolution put to vote at the
meeting. Voting may be of show of hands or voting by poll.

7. Proxy
A proxy is an authorized agent of member for the purpose of voting.

8. Resolution
A resolution represents the collective decision of the meeting.

Types of resolution
a. Ordinary resolution
It is one which require a single majority, that is the votes in favor should
exceed the votes against the resolution.

b. Special resolution
It is a resolution which is passed by at least three fourth majority of votes of
members on show of hands or electronically.
Difference between ordinary resolution and special resolution
Ordinary Resolution Special Resolution
It is required for ordinary It is required for special matters.
matters.
It is passed by simple majority of It is passed by at least 3/4th
votes. majority of members.

It is not required to mention in It is required to mention in the

the notice of the meeting. notice of the meeting.

Copy of ordinary resolution need Copy of special resolution must be

not be filled with registrar. filled with registrar.

Chairman can use his casting Chairman cannot do so.

vote.

Company secretary
Company secretary is a principal officer responsible for the secretarial and
management of the company as per companies Act.

Duties of company secretary

1. Promotion, formation and incorporation of companies.
2. Arranging board meeting.
3. Arranging general meeting.
4. Preparation of minutes.
5. Maintaining the statutory register.
6. Keeping safe custody of company seal.
7. Communicating with the company shareholders.
8. Ensuring good corporate governance.
Rights of company secretary
1. He has the right to supervise, direct and control all the office activities
of the subordinate office.

2. He has the right to attend board meeting.

3. He has the right to claim his salary and other allowances.
4. He has the right to issue proper guidelines to concerned officers.
5. During winding up he can claim his legal dues.

Winding Up
Meaning
It is a process of realization of assets, payment of liabilities and distribution of
surplus among the members of the company. It is also known as liquidation of
company.

Modes of winding up
a. Winding up by tribunal
b. Voluntary winding up
a. Winding up by tribunal
The company may require to wound up by the tribunal under the following
situations:

1. In the case of company does not pay debts amounts exceeding one
lakh rupees.

2. In the case of fails to submit annual returns and financial

statements of the last five financial years.

3. The formation of company is for any unlawful purpose.

4. In case of company is formed in a fraudulent manner.
5. In case of sick companies, if no revival and rehabilitation is done.
b. Voluntary winding up
It means winding up of the company by the members without
interference by the tribunal.

Conditions for voluntary winding up

1. Declaration of solvency
A voluntary winding up takes place only when the company is solvent.
Declaration must be made by the directors of the board.

2. Shareholder’s resolution
Shareholders must meet and pass ordinary resolution or a special
resolution for the winding up of the company.

3. Meeting of creditors
The company should call a meeting of creditors and the majority should
agrees for winding up.

Provisions applicable to voluntary winding up

1. Commencement of voluntary winding up
2. Stopping the business.
3. Appointment of company liquidator.
4. Powers to remove and fill vacancy of company liquidator.
5. Notice of appointment of liquidator.
6. Censor of board’s power.
7. Powers and duties of company’s liquidator in voluntary winding up.
8. Appointment of companies.
9. Liquidator to submit report on progress of winding up.
10. Report of liquidator to tribunal for examination of persons.
11. Final meeting and dissolution of company.
Consequences of winding up
1. Consequences as to shareholders
The shareholders are liable to pay the face value of shares. A member of a
company is liable to pay full number of shares held by him.

2. Consequences as to creditors
It is the duty of the liquidator to pay off all liabilities of the company.

3. Consequences as to servants and officers

A winding up order by a court operates as a notice of discharge to the
employees and officers of the company except when the business of the
company is continued.

4. Consequences as to cost
Assets of the company are insufficient to satisfy the liabilities, the court
may make an order for payment of cost of assets.

5. Consequences as to documents
Any document in the name of the company must contain a
statement that the company is wound up.

Liquidator
A liquidator is an officer who is specially appointed to wind up the affairs of
a company.

Powers and duties of company liquidator

1. To verify the claims of all the creditors and consolidate them.
2. To take into his custody all the assets, properties etc.
3. To evaluate the assets and properties of the corporate debtor.
4. To invite and settle claim of creditors, employees or any other
claimant.
5. To sell the whole of the undertaking of the company as a going
concern.

6. To raise any money required for the security of the asset of the
company.
 Dissolution of a company
Dissolution of a company means existence of a company comes to an end.

Difference between winding up and dissolution

Winding up Dissolution
Order of tribunal is not essential. Order of tribunal is essential.

The legal entity of the company The legal entity status comes to
continues. end.

Liquidators carry out the process of NCLT passes the order of

winding up. dissolution.

Winding up is one of the Dissolution is the end process.

methods of dissolution of a
company.

Method of dissolution of a company

1. Dissolution by the order of tribunal.
2. Dissolution by liquidation.
3. If the name of the company is removed from the register of
companies.

National Company Law Tribunal (NCLT)

The central government has to establish a tribunal to be known as National
Company Law Tribunal. It consists of president and such number of judicial
and technical members as may be deemed necessary.

National Company Law Appellate Tribunal (NCLAT)

The central government has to establish an appellate tribunal known as National
Company law Appellate Tribunal. It has to consists of a chairman, judicial and technical
members not exceeding eleven. It has to hear appeals against the orders of the tribunal