Module I Company Module II Articles of the Association

The Companies Act 2013
The Companies Act 2013 is an Act of the
Parliament of India on Indian company law which
regulates incorporation of a company,
responsibilities of a company, directors,
dissolution of a company.
Objectives of Indian Companies Act, 2013
• To protect the interest of investors. • To put
strict restriction on insider trading. • To provide
merger, amalgamation and takeover. • To
facilitate ease of doing business. • To promote
CSR activities. • To improve corporate law. • To
promote standard and transparency of corporate
governance. • To introduce flexibility and
simplicity in formation of companies. • To create
National company law tribunal and National
Company law appellate tribunal. • To introduce
one person company, small company and
dormant company. • To create National financial
reporting authority.
Salient features of Companies Act, 2013
• One Person Company • Corporate social
responsibility • National company law tribunal
• Class action suits • Cross-border mergers
• Prohibition of insider trading • Strict rules for
auditors • Financial year • Composition of board
• Entrenchment provision in articles • Duties of
directors defined • Maximum number of
members is 200 in private companies • Notice
and participation in board meeting
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.
Nidhis
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
organisations activities or debts.
Various cases of lifting of corporate veil
> Under judicial interpretation
• Protection of revenue • Prevention of fraud •
Determination of enemy character of a company
• Where the company is “sham” • Company
avoiding legal obligations • Company acting as
agent or trusty of the shareholders. • Avoidance
of welfare legislation • Protecting public policy
> Under express statutory provision
• Punishment for incorporation of company by
giving false information • Fraudulent application
for removal of name • Liability for fraudulent
conduct of business.
Difference private company and public company
Private Company Public Company
Minimum number Minimum number
of members is two of members is
seven
Maximum number There is no
of members is two maximum limit
hundred
Transferability of Shares are freely
shares is restricted transferable
Number of There should be at
directors required least three
is two directors
There is Public no Public invitation is
invitation allowed
Private company is Public company
not required to issue prospectus
issue prospectus
No restriction on Legal restriction on
remuneration of remuneration
directors directors
Private company There is no such
enjoys some privileges for public
special privileges company
According to Justice James “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.
Types of companies
> On the basis of incorporation
• Chartered companies :- Chartered companies is
a type of company formed by the crown. It is
regulated by charter incorporating, not by
companies act.
• Statutory company :- A company formed by a
special statute or act passed by the parliament is
known as statutory company.
• Registered company :- The companies formed
and registered under the companies act 2013 is
known as registered company.
> On the basis of liability
• Companies limited by shares :- It means a
company having liability of its members limited
by the memorandum to the amount.
• 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.
• Unlimited company :- An unlimited company is
a type of private company. It has some features
of limited company.
> On the basis of number of members
• Private Company :- A company which is formed
with a minimum number of 2 persons is known
as private company.
• 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.
• One Person Company (OPC) A company which
has only one person as member is called one
person company.
> On the basis of ownership
• Government companies :- A public enterprise
incorporated under the Indian Companies Act,
2013 is called Government Company.
• Non-government companies :- The list of non-
government companies includes those
companies which are registered under the
companies act butnot as government companies
> On the basis of control
•Holding company:-A company ithas control over
other that companies knownas holding company
• Subsidiary company :- A company owned or
controlled by another company is known as
subsidiary company.
> On the basis on nationality
• National company :- A company formed under a
specific company act of nation is known as
national company.
• Foreign company :- A company incorporated
outside India is known as foreign company.
> Other forms of companies
• Small companies :- A small company is a
company in which paid up share capital does not
exceed fifty lakhs rupees.
• Defunct companies :- A defunct company is a
company which have failed to commence its
business of its incorporation.
• Dormant company :- A company which is not
active is known as dormant company.
Promotion
Promotion is the process of organising 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
• Professional promoters
These promoters take the promotion as their
profession. Their interest is promotion of
business, not running of the business.
• Occasional promoters
These promoters takes interest in floating some
companies. They are not engage in promotion
work on a regular basis.
• Entrepreneur promoters
They are both promoters and entrepreneurs.
• Financial promoters
A promoter who provides and offer the financial
services also is known as financial promoters.
Function of a promoter
• Discovery of business idea • Detailed
investigation of the project. • Assembling various
factors of production. • Preparing preliminary
documents. • Entering preliminary documents.
• Naming the companies. • Appointment of
bankers, brokers etc
Duties of a promoter
• Duty to disclose the secret profit. • Duty to
disclose all the material facts • Duty to disclose
private arrangements • Duty of promoter against
future allotters.
Liabilities of promoter
• Liability to account in profit. • Liability in the
misstatement in the property.
Remuneration of promotor
• The company pay remuneration for services
rendered. • The promotor maybe given
commission on shares sold. • The promotor may
make profit on his transactions with company.
• The promotor may sell his property to fully paid
shares. • The promotor may give an option to buy
further shares.
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. It contains the relationship
between company and its outsiders.
Contents of memorandum
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 association is a document that
defines the purpose of a company and specifies
the regulation for its operations. It is a document
containing rules and regulation framed by the
company for its internal Management.
Contents of articles of association
• The execution of preliminary contracts. • Share
capital and its division. • Payment of underrating
commission. • Transfer of shares. • Forfeiture of
shares. • Buyback of shares • Alteration of
capital. • General meetings • Capitalization of
profits. • Calls on shares • Transfer of shares.
• Voting right of shares. • Adjournment of
meetings. • Seal of the company. • Books of
accounts and audit •Proxy and their appointment
• Dividend and reserves • Board of directors
•Proceedings of the board • Winding up of the
company.
Prospectus
Prospectus is a formal document. It is an
invitation to offer to subscribe for shares or
debentures in the company.
Shelf prospectus
It is a prospectus issued by companies making
multiple issues of bonds for raising funds.
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.
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
• Name and address of the registered office of
the company, company secretary, auditor,
banker, underwriter, etc. • Date of opening and
closing of issue. •Declaration about the issue of
allotment letters. • Details about underwriting of
the issue. • Capital structure of the company.
• Procedure and time schedule for allotment and
issue of securities.
Doctrine of ultravires
It is a fundamental rule of company law. It states
that the objects of a company, as specified in its
memorandum of association, can be departed
from only to the extent permitted by the Act.
Doctrine of indoor management
Doctrine of constructive notice
The doctrine of constructive notice protects the
company from outside person. Where all the
persons dealing with a company are deemed to
have knowledge of the companies articles of
association and memorandum of association.
Doctrine of indoor management
Doctrine of indoor management means protects
the outsiders against the actions 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.
Difference between memorandum and articles
Memorandum Articles
It is the main It is the subsidiary
document of the document of the
company company
It is the charter of It is the regulation
the company for internal
management
It governed by Articles governed
company’s act by memorandum
only and companies act
It cannot be It can be altered
altered very easily very easily
It contains lesser It contain more
clause clause
It defines object It mention ways and
and power of the means of achieving
company objects in the
memorandum
It regulates the It regulates the
relationship relationship
between company between company
and general public and members

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 Module III Raising of capital/ Issue of shares Share Certificate Module IV
Share 1. Private placement 2. Right issue3. Public offer Is a document issuedby the company evidencing Director
The capital of a company is divided into small Private placement that a person named in such certificate is the A director means a director appointed to the
units. Those units are called share. Private placement is the issue of securities of a owner of the shares of the company. board of a company. It means the person who
Stock company direct to one investor or small group of Contents of a share certificate appointed for the management of the company.
A set of shares put together in a bundle is called investors. • Name and address of registered office. • Serial Qualification of director
stock. Right issue number of share certificate • Date of issue of In Companies act, 2013 does not laid down any
Difference between shares and stock Its an issue of shares tothe existing share certificate. • Name and address of holder. particular qualification for a director, not even
Shares Stock shareholders in proportion to their existing • Number and class of shares. • Signature. qualification of shares. Directors must held
It has nominal It has no nominal shareholding. Share warrant qualification shares. Nominal value of
value value Public issue It is a document issued under the common seal qualification shares of a director is fixed by the
It has distinctive It has no such Public issue means selling of shares or of the company stating that the bearer is entitled articles of the company.
numbers number securities to public by issue ofprospectus. to the specified number of shares. Disqualification of Directors
It is partly or fully It is always fully Types of public issue Transmission of shares • If he is unsound mind. • If he is undischarged
paid up paid up a) Initial public offer (IPO) It is the passing of title or property in shares insolvent. • He has been convicted by a court of
This is a method of raising securities in which a from one person to another by the operations of any offence. • If he has not paid any call in
It can be issued It cannot be issued
company sells shares or stocks to general public law such as death, insolvency etc… respect of shares of the company. • If he has not
directly directly
for first time. Difference between Transfer and Transmission allotted the direct identification number. • If he
It transferred in It transferred in
b) Offer for sales of shares has not filled the annual accounts for continuous
multiple of one fractions
In this method shares are offered to public Transfer of shares Transmission of three financial year. • If he has not filed annual
All the shares of a Stock maybe of
through the intermediaries. shares returns for continuous three financial year.
class are of equal different
Procedure for issuing new shares It is voluntary It is involuntary. Role of directors
denominations denominations
• Approval and filing of prospectus. • Issue of Transfer of shares It is take only at the 1. Directors as agents
Types of share capital
prospectus. • Receiving of application. • Scrutiny take place at any time of death, A director is an agent of the company for the
• Registered Capital :- The capital with which a
of application. • Sorting of application. • Closure time insolvency, insanity conduct of the business of the company.
company is registered is called registered capital
of application list. • Record of application. Valid There is no Directors of a company have fiduciary
Its also known as nominal / authorised capital.
Irregular allotment consideration exist consideration. relationship with the company as well as
• Issued Capital :- It is a part of authorised capital
If allotment of shares is made against the shareholders when act as an agent.
which is issued to the public for subscription. It is initiated by It is initiated by
provision of the Act, then the allotment is termed 2. Directors as trustees
• Subscribed Capital :- It is a part of issued transferor and legal heir or
as irregular. Directors as trustee of the company's money and
capital which is subscribed by the public. transferee receiver
Employees’ Stock Option Plan (ESOP) properties. They safeguard them for and on
• Called up Capital :- It is a part of subscribed Stamp duty is No need to pay
It is a scheme under which the company gives behalf of the company.
capital which the directors have called from the payable on the stamp duty
option to the whole time directors, officers or 3. Directors as employees
shareholders. market value of
employees to purchase or subscribe equity Where any director, besides being a director is
• Paid up capital :- It is a part of called up capital shares
shares at a future data at a predetermined price. also in the service or employment of the
which is actually paid up by the shareholders. Execution of valid No execution of
Different types of ESOPs company such as secretary, managing or
• Reserve capital :- Its the amount of the capital transfer deed valid transfer deed
1. Employees Stock Option Scheme (ESOS) otherwise he will be treated as an employee.
which is not called bythe company except in the Bonus shares
Under this scheme, the company grand an option 4. Directors as managing partners
event of winding up Bonus shares are those shares which are issued
to the employees to acquire shares at a future Directors are elected representatives of the
Kinds of share capital by a company free of cost to the existing
date with predetermined price. shareholders and they are in a position as
1. Equity Share capital 2.Preference Share capital shareholders of a company.
2. Employees Stock Purchase Plan (ESPP) managing directors.
Equity Share Capital Bonus issue :- An offer of free additional shares
Employees are given the right to acquire shares Powers of directors
Shares which are not preference shares are to existing shareholders are called bonus issue.
of the company immediately, not a future date. • To call on shareholders in respect of money
called equity shares. These are ordinary shares. Advantages of issuing bonus shares
Book Building unpaid on shares. • To authorize buy back of
Merits of equity shares > To the shareholders
It is an international practice which refers to shares • To borrow monies • To grant loans • To
• It is a permanent capital. There is no liability for • Shareholders gets additional shares for free.
collecting orders from investment bankers as issue securities. • To diversify the business of
payments. • It improve creditworthiness of the • Not required to pay income tax on bonusshares
large investors based on an inductive price range the company. • To approve amalgamation and
company. • There is no capital obligation for • Shareholders will get increased dividend in
Issue price of shares merger. • To invest fund of the company.
payment of dividend. • Company can strengthen future • When market price of shares increase
1. Issue of shares at par :- When shares are Duties and Responsibilities of directors
financial base by issuing equity shares. • Equity shareholders earn profit.
issued equal to their face value is called issue of > Statutory duties
shareholders enjoy ownership. • Reward from > To the company
shares at par. • To verify truthiness of prospectus. • To
equity shares is high. • It does not affect working capital of the
2. Issue of shares at premium :- When shares are determine amount of minimum subscription.
Preference shares company. • The cost of issue of bonus shares
issued at a price higher than face value is called • To keep register of members. • To convene
Preference shares are those shares which are less. • It increases goodwill of the company.
issue of shares at premium. annual general meeting. • To convene extra
carries preferential right with respect to payment • No tax payment related to bonus issue.
3. Issue of shares at discount :- When shares are ordinary general meeting. • To send to the
of dividend and repayment of capital. Disadvantages for issue of bonus shares
issued at a price lower than face value is called registrar the copies of resolution. • To keep
Merits of preference shares > To the shareholders
issue of shares at discount. register of mortgages and charges. • To submit
• It ensure creditworthiness of the company. • It encourages speculations. • Market value of
Underwriting statement of affairs at the time of winding up.
• Shareholders earn a stable dividend rate. •No shares sometimes fall. • Sometimes dividend per
Underwriting is an act of guarantee by an > General duties
voting right. So existing shareholders will not shares reduced. • EPS will fall.
organisation for the sale of certain minimum • To exercise independent judgment. • To
loss controlling power of the company. > To the company
amount of shares and debentures issued by a exercise reasonable care, skill and diligence. • To
• Preference dividend is a fixed obligation. • It encourages undesirable speculations.
public limited company. avoid conflicts of interest •Not to accept benefits
• Issue of preference shares enjoy financial • Company’s reputation may suffer. • It reduces
Underwriting commission from third party. • To promote the success of the
flexibility.• No legal obligation for dividend accumulated profits earned in past years.
It is a compensation that an underwriter receives company for the benefits of its members as a
payment. • Improved borrowing capacity. Conditions of bonus issue
for placing a new issue with investors. whole
Demerits of preference shares • It should be authorized by articles. • Approval of
Listing of Securities Rights of directors
• Preference dividend should be paid in arrears. It board of directors. • Company should have
It means enrolment of name of the company in • Right to access company’s document and
will affect the financial flexibility of the company. sufficient profit and reserves. • It must follow
the official list maintained in the stock exchange. financial records. • Right to get remuneration.
• Preference shares lack of liquidity in market. SEBI guidelines. • Once issue should not be
Objectives of Listing • Right to delegate duties. • Right to receive
• The rate of dividend to equity shares is more withdrawn. • Issued only to existing members.
• To ensure supervision and control of trading. notice of board meeting. • Right to participate in
than preference. • Skipping dividend disregard Sources of bonus issue
• To mobilise savings for economic board meeting. • Right to vote at board meeting.
market image. • Costly source of finance. Revenue reserves/ Capital reserves/
development. • To protect interest of investors. •Right to hold any number of directorships •Right
Types of preference share capital profits Profits
• To create ready marketability and liquidity. to claim reimbursement of business expenses.
1. Cumulative preference share. 2. Non- General reserve Profit prior to
Advantages of listing Liabilities of directors
cumulative preference shares. 3. Participating incorporation
• High liquidity • Facilitate buying and selling Liabilities of the directors can be classified into
preference shares. 4. Non-participating Dividend equalization Capital redemption
• Tax advantages • Fair price • Helps to raise three types: 1. Liability to outsiders 2. Liability to
preference shares. 5. Convertible preference reserve reserve
finance • Protects investors • Good collateral company 3. Criminal liability
shares. 6. Non-convertible preference shares. Credit balance in the Security premium
securities •Get regular information sinking fund account reserves Appointment of directors
7. Redeemable preference shares
Limitations of listing Credit balance in the Profit on sale of 1. Appointment of first directors
8. Irredeemable preference shares.
• Speculation • No regular price quoting • Large statement ofprofit/loss fixed assets •By articles of the articles of the company•By the
Difference equity shares and preference share
amount of listing fees • Information to Dematerialisation :- It is a process of converting subscribers to the memorandum of association
Equity Shares Preference Shares competitors. physical shares into digital or electronic form. 2. Appointment of subsequent directors
Its an ownership Its a hybrid security Sweat equity shares Remeterialization :- It is the process by which a client • By the company in general meeting. • By the
security Sweat equity shares are those shares issued by can get his electronic holdings converted into physical board of directors. • By third party.• By tribunal.
Dividend rate is not Dividend rate is the company to its directors and employees at a certificates. • By the principle of proportional representation.
fixed fixed discount or for consideration other than cash for Advantages of Demat system
Removal of directors
• Immediate transfer of shares •No stamp duty on
Nominal value is Nominal value is providing know how or making available rights in 1. Removal by the share 2. Removal by the
transfer of securities • Elimination of bad deliveries •
lower higher the nature of intellectual property rights or value tribunal 3. Removal by central government.
Elimination of loss or theft of shares • It enable share
Expenses on issue Expenses on issue additions. transfer without involve much paperwork • Faster and Director Identification Number (DIN)
are lower are higher Forfeiture of shares smoother settlement. It is an eight-digit unique identification number
It can be buyback It cannot be It means cancellation of shares due to non- Disadvantages of Demat system that has lifetime validity. Through DIN details of
buyback payment of allotment money within a specified •Dishonest stockbrokers • Trading in stock maybe directors are maintained in a database.
Dividend is paid Dividend is before period. uncontrollable in case of dematerialisation. Whole time Director
Depository Participant (DP) :- It is described as an He is a director in the whole time employment of
last paying equity
agent or the registered stock broker of a depository. the company.
dividend

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Managing Director
He isthe keymanagerial personel of the company
He isthe head of the company & decision making
Independent director
An independent director is a non-executive
director who does not have any kind of
relationship with the company that may affect
the independence of judgement.
Nominee director
A nominee director is a director in a company
who has been appointed by financial institutions,
bankers or investors to form part of the board of
directors.
Chief Executive Officer
An officer of a company who has been designed
as such by it. 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
• Change in ownership structure. • Growing
number of scams. • Separation of ownership
from management. • Social responsibility.
• Globalisation. • SEBI rules made corporate
governance compulsory • Take over and mergers
Principles of corporate governance
• Fairness • Responsibility. • Transparency.
• Accountability.
Corporate Social responsibility (CSR)
CSR is the contribution of a company to the
community’s 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.
Reason to form SEBI
• Manipulation of security prices • Price rigging
• Insider trading • Delay • Lack of fair dealings
• Protection of investors • Lack of control over
brokers
Functions of SEBI
• To protect the interest of investors.• To
regulating the business of stock exchanges.
•.Promoting and regulating self-regulatory
organizations. •.Prohibiting unfair trade practices
in stock markets. • Promoting investors
education and training. • Prohibiting insider
trading. • Levying fees and other charges.
• Registering and regulating working of stock
brokers, sub brokers, Marchant bankers etc.
• Registering and Regulating working of
depositories, participants etc. • Registering and
regulating the working of venture capital fund,
mutual funds etc.
Powers of SEBI
•Call for periodical returns from stock exchanges
•To compel listing of shares to public companies
• To grant recognition to stock exchanges •To
grant registration to intermediaries • Withdrawal
of recognition of stock exchanges. • Prohibit
contract in certain cases. • To give direction to
stock exchanges. • 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
• Enforce and summons attendance of any
person. • Require the discovery and production
of documents. • Receive evidence on affidavits
• Issue commissions for the examination of the
documents or witnesses •Dismiss an application
for default or deciding it ex-parte.
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.
ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ
Module V
Company meetings
Company meeting means coming together of at
least a quorum of members in order to transact
either ordinary /special business of the company
Characteristics of company meeting
• Two or more persons must present. • Notice is
essential. • Held at a particular place, date and
time. • Must be held as per companies Act
Kinds of company meetings
• Meeting of directors • Meeting of shareholders
• Meeting of creditors • Meeting of debenture
holders.
1. Meeting of directors
The directors must hold their meetings as
frequently as possible. This meetings of the
directors are known as board meetings.
Important matters relating to directors meeting
• 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 atleast one meeting
of the BOD has been half of the calendar year.
• Notice of the meeting :-A minimum seven days’
notice should be send to every directors at his
address by post or mail.
• Agenda :- The term agenda means things to be
done. It is a statement of the business to be
transacted at a meeting.
• 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.
• Chairperson :- Every meeting of the board must
have chairperson to preside over it.
• Resolution :- Decisions are taken by directors
by passing resolutions.
• 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 canbe any of the
following:
★ 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
• Ensure the final accounts are ready • Final
accounts will be submitted to the board meeting
for approval • Secretary must issue notice to the
shareholders, directors, auditors and stock
exchange at least twenty one days before the
date of the meeting. • Make necessary
arrangement for poll, preparation of voting
papers etc.
> At the meeting
• To get the attendance register signed by the
shareholders. • To help the chairman in
ascertaining the quorum. • To read the auditor’s
report • To help the chairman in the conduct of
meeting. • To take notes for preparing meeting.
> After the meeting
• To prepare minutes. • To get minutes of
meeting approved by the chairman. • To send
intimation of the appointment to the directors
and auditors.
★ 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 meetings.
★ 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.
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.
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
• To set the agenda. • To lead the meeting. • To
maintain order at the meeting. • To ensure the
conventions of the meeting are been followed.
• To ensure members present at meeting. • 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
• It provide a clear and accurate record of
business transactions at a meeting. • It is a
permanent record of the meeting. • It accepted in
a court of law for evidence. • 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 authorised 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 favour 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 Special Resolution
Resolution
It is required for It is required for
ordinary matters special matters
It is passed by It is passed by at
simple majority of least 3/4th majority
votes of members
It is not required It is required to
to mention in the mention in the
notice of the notice of the
meeting meeting
Copy of ordinary Copy of special
resolution need resolution must be
not be filled with filled with registrar
registrar
Chairman can use Chairman cannot do
his casting vote so
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
• Promotion, formation and incorporation of
companies •Arranging board meeting • Arranging
general meeting • Preparation of minutes
• Maintaining the statutory register • Keeping
safe custody of company seal • Communicating
with the company shareholders • Ensuring good
corporate governance.
Rights of company secretary
• He has the right to supervise, direct and control
all the office activities of the subordinate office.
• He has the right to attend board meeting • He
has the right to claim his salary and other
allowances • He has the right to issue proper
guidelines to concerned officers • During winding
up he can claim his legal dues.
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 consist of a
chairman, judicial and technical members not
exceeding eleven. It has to hear appeals against
the orders of the tribunal.
Winding up of a company
It is a process of realisation of assets, payment
of liabilities and distribution of surplus among
the members of the company. It is also known
as liquidation of company.
Modes/ Methods of winding up
• Winding up by tribunal • Voluntary winding up
• Winding up by tribunal
The company may require to wound up by the
tribunal under the following situations:
• In the case of company does not pay debts
amounts exceeding one lakh rupees • In the case
of fails to submit annual returns and financial
statements of the last five financial years • The
formation of company is for any unlawful
purpose • In case of company is formed in a
fraudulent manner. • In case of sick companies,
if no revival and rehabilitation is done.
• 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 mustbe madeby 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
• Commencement of voluntary winding up
• Stopping the business. • Appointment of
company liquidator. • Powers to remove and fill
vacancy of company liquidator. • Notice of
appointment of liquidator. • Cessor of board’s
power. • Powers and duties of company’s
liquidator in voluntary winding up. • Appointment
of companies. • Liquidator to submit report on
progress of winding up. • Report of liquidator to
tribunal for examination of persons. • 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 amount of shares held by him.
2. Consequences as to creditors :-It is the duty of
the liquidator to payoff all liabilities ofthe 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 asto documents:-Anydocument
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
•To verify the claims of all the creditors and
consolidate them •To take into his custody all
the assets,properties etc •To evaluate the assets
and properties of the corporate debtor •To invite
and settle claim of creditors,employees or any
other claimant •To sell the whole of the
undertaking of the company as a going concern.
• 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 Order of tribunal is
not essential essential
The legal entity of The legal entity
the company status comes to
continues end
Liquidators carry NCLT passes the
out the process of order of
winding up dissolution
Winding up is one Dissolution is the
of the methods of end process
dissolution of a
company