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A company being a separate legal personality ought to be operated at a distance from its members (the shareholders). To facilitate this, they (the members) elect and appoint their representatives directors - who can be entrusted with the responsibility of running the company.

Appointment of directors can be discussed under the following heads: 1. Appointment of First Directors. Generally, the names of the first directors of a new company are named in its articles. However, if the articles are silent on this count then the subscribers of the memorandum are deemed to be the directors subject to the regulations of the articles. 2. Appointment by the Company . The first directors appointed by the articles or otherwise shall act until the first annual general meeting (AGM). As per Section 256, in the first AGM the shareholders shall elect and appoint the directors on a regular basis. In the case of a public company or a private company, which is a subsidiary of a public company, unless the article otherwise provides, at least twothird of the total number of directors shall be liable to retire by rotation. Thus, only one-third of total number of directors shall be non-rotational or permanent directors. As per Section 255, not less than two-third of the directors are eligible to retire by rotation at the AGM. Contd.

3. Re-appointment of retiring directors . When a director retires, s/he can be reappointed. or another person can be appointed as director. Meeting can also resolve that the vacancy may not be filled. However, if the post of a retiring director is not filled at the meeting, and the meeting does not even pass a resolution for not filling the vacancy, the general meeting will be adjourned till next week at the same time and place. If that day happens to be public holiday, the meeting will be held next day. If even on that day, the vacancy is not filled, or a resolution not to fill the vacancy is passed, then the retiring director is deemed to be re-appointed. Contd.

4. Appointment by Board of Directors. The Board of directors is empowered to appoint directors in the following three categories (i) Additional directors (Section 260) (ii) Casual directors (Section 262) (iii) Alternate directors (Section 313) Additional directors . The Board of directors either at the meeting of the Board or by passing a special resolution can appoint additional director(s) on the Board, within the ceiling prescribed, if so authorized by the articles of association. They will although enjoy the same powers and rights as other directors but shall hold office only up to the date of the next annual general meeting. They may, however, be re-elected at the AGM and then continue as directors. Contd.

Casual director . A casual vacancy is one that is caused by death; resignation; disqualification; or failure of an elected director to presume his office, and not by retirement in normal course. In the case of a public co., or a private co., which is a subsidiary of a public co., if the office of any director, appointed by the company in general meeting, is vacated before the expiry of his/her term in the normal course, the resulting casual vacancy may be filled by the Board of directors at a Board meeting. However, this power of Board is in default of and subject to any regulations in the articles of the company. [Section 262(1)] Simplistically put, the appointment of a casual director can be described as a stop-gap arrangement. Alternate directors. At times, a director of a public co. or a private co., which is a subsidiary of a public co., may be out of India or out of the state in which Board meetings are usually held, for more than three months. In such circumstances, a person can be appointed as an Alternate Director by the Board if the articles of company so authorise, or by a resolution passed at a general meeting. According to Section 313, which provides for such an appointment, s/he shall act as director in the absence of the director (called the original director and for whom s/he is alternate) for the above-stated reasons. Contd.

5. Appointment by Third Parties . The memorandum or the articles of a company may empower third parties (debenture holders, banks, financial institutions, government etc.) under certain circumstances to have their representation on the Board of directors. However, the number of directors appointed so by third parties, known as Nominee Directors, should not exceed onethird of total strength of the Board. Nominee directors act in the same capacity and are subject to same regulations as any other director in the company. 6. Appointment by the Central Government . The Companies Act empowers the Central Government to appoint directors. the Central Government is authorized to appoint any number of directors on the Board of the company for up to three years at a time. [Section 408(1)] Contd.


7. Appointment by Proportional Representation. Section 265 states that the articles of a company may provide for the appointment of not less than two-third of the total number of the directors of a public company or of a private company which is a subsidiary of a public company, according to the principle of proportional representation. The proportional representation may be exercised by a single transferable vote or by a system of cumulative voting or otherwise. Such appointments shall be made once in every three years.

Restriction on Appointment of Directors

Position of Directors
Directors as Agents Directors as Managing Partners Directors as Employees Directors as Trustees

Minimum and Maximum Number of Directors

Every public co. must have at least three directors. A private limited co. or a deemed public co. should have a minimum of two directors. [Section 252] As far as maximum number of directors is concerned, it depends on the Articles of the company. As per model articles in Table A, the number of directors and names of first directors should be decided in writing by subscribers to the Memorandum. If the articles do not state the maximum strength of directors, or spells out the names of less than 12 directors, then the number of directors can be increased up to 12 in the general meeting by ordinary resolution. Furthermore, if the strength is to be increased beyond 12, the company should pass an ordinary resolution to this effect and seek the approval of Central Government. [Section 259] Conversely, a company, in its general meeting, by an ordinary resolution, can reduce the strength of its directors, within the limits prescribed in the Articles of the company. However, such number cannot be less than three in case of a public company and two in case of a private company. [Section 258]

Ceiling on Directorships

Section 275 of the Act debars a person from becoming a director in more than 20 companies simultaneously. Section 278 further clarifies the kind of companies that would be considered while maintaining a count of directorships held by a person at a given time. Penalty for non-compliance. Any person who holds office or acts as a director of more than twenty companies in contravention of the foregoing provisions shall be punishable with fine that may extend to Rs 50,000 in respect of each of those companies after the first twenty.

Removal of directors can be discussed under the following three heads: Removal by the company, Removal by the Central Government, and Removal by Tribunal Removal by the Company . Under Section 284, a company (i.e., the shareholders) may, by ordinary resolution requiring special notice, remove a director from the Board before the expiration of his term. However, the director concerned shall be entitled to receive a notice of the resolution of his removal from the company and shall be entitled to be heard on the same. Exceptions . The absolute power apparently given to the general meeting to remove a director under Section 284, does not apply in respect of the following directors: (i) a director appointed by the Central Government in pursuance of Section 408; (ii) nominee directors; (iii) director(s) appointed by means of proportional representation under Section 265. Contd.

2. Removal by the Central Government . Section 388 B empowers Central Government to make a reference to the National Company Law Tribunal (NCLT ) with a request that the latter may inquire into the case and record a decision against any managerial personnel as to whether or not such person is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company. This power can be exercised, where in the opinion of the Central Government, there are circumstances suggesting any of the following: (a) that any person concerned in the conduct and management of the affairs of a company is or has been in connection therewith guilty of fraud, persistent negligence or default in carrying out his obligations and functions under the law, or breach of trust; or (b) that the business of a company is not or has not been conducted and managed by such person in accordance with sound business principles or prudent commercial practices; or (c) that the company is or has been conducted and managed by such person in a manner which is likely to cause, or has caused, serious injury or damage to the interest of the trade industry or business to which such company pertains; or Contd.

(d) that the business of the company is or has been conducted and managed by such person with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to public interest. The person against whom a case is referred to Tribunal shall be joined as a respondent to the application. 3. Removal by Tribunal . Where on an application to the Tribunal under Section 397 or 398 against oppression and mismanagement of a companys affairs, the Tribunal finds that the relief should be granted, it may order the termination, setting aside, or modification, of any agreement between the company and any of its directors.


Powers or rights of directors can be discussed under the following two heads: General powers; and Powers to be exercised at Board meetings. General Powers of Board (Section 291) . The general powers of the directors are described in Section 291 of the Companies Act. According to sub-section (1) of Section 291, the Board of directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorized to exercise and do. However, as per proviso attached to the Section 291, the Board shall not exercise any power which is to be exercised by the company in the general meeting or which shall be inconsistent, if exercised, with the regulations contained in that behalf in the Act, or in the memorandum or articles of the company. Simply put, the directors are not empowered to take action on issues that are stipulated to be the purview of the general meeting of the company, or are counter to regulations contained in the Act, or the memorandum and articles of the company. Directors derive their powers or rights mainly from provisions in the companys articles, as the Act provides little guidance as to which actions are within the directors powers. Contd.


Powers to be Exercised at Board Meetings (Section 292) . The Board of directors is the principal organ of a company. Section 292(1) of the Companies Act, 1956 empowers it to exercise the following powers on behalf of the company, but it can do so only by means of resolutions passed at meetings of the Board. (a) the power to make calls on shareholders in respect of money unpaid on their shares; (aa) the power to buy-back its shares under Section 77A (b) the power to issue debentures; (c) the power to borrow monies other than on debentures. However, a banking company can borrow only from other banking companies or from the Reserve Bank of India, the State Bank of India or any other banks established by or under any Act [explanation 1 to Section 292(1)]; (d) the power to invest the funds of the company; and (e) the power to make loans.


Since directors exercise control and management over the company and companies are run (in theory at least) for the benefit of the shareholders, the law recognises strict duties to be discharged by the directors in relation to the exercise of their powers. The duties can be categorized into: Statutory duties; and General duties. Statutory Duties The directors need to play an active role in the companys affairs. The Companies Act lays down certain statutory duties, where the failure to perform could attract penalties. Some of the important statutory duties include: 1. Duty to file return of allotments (Section 75). Whenever a company makes any allotment of its shares, the company shall, within thirty days of allotment, file with the Registrar a return of the allotments, stating the number and nominal amount of the shares comprised in the allotment, the names, addresses and occupations of the allottees, and the amount, if any, paid or due and payable on each share. Contd.


2. To disclose interest (Sections 299-300) . Directors are trustees as they control and manage the affairs of the company and hence are expected to perform their duties and functions in the larger interest of the company. A director must therefore disclose the nature and extent of the interest to the Board when a transaction is proposed between a director and the company. Further, disclosure must be made where a director is considered ought to be reasonably aware of the conflicting interest. Non-disclosure of such a conflicting interest would render the contract voidable and the concerned director subjected to fine which may extend up to Rs 50,000. To attend Board meetings [Section 283 (1) (g)]. While a director is not bound to attend all the meetings, if he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board, his office shall automatically become void. Hence the duty to attend Board meetings has been imposed on the directors. Contd.



4. To disclose receipt from transfer of undertaking or property (Section 319) If the directors of a company receive any payment, by way of compensation for loss of office, or as consideration for retirement from office from the transfer of the companys property or undertaking, , it must be disclosed to the members of the company and approved by the company in general meeting. 5. Other statutory duties. Besides the above-mentioned duties, directors of a company are to perform inter alia the following statutory duties. (a) Convene statutory, annual general and extra-ordinary general meetings (b) Authenticate and approve annual financial statements (c) Appoint the first auditor of the company (d) Appoint additional directors of the company (e) Prepare and place at the AGM the balance sheet and profit and loss a/c, and the report of the board of directors. Contd.


General Duties. Other than the statutory duties, the directors are also expected to control and manage the affairs of the company and perform the following general duties: 1. Duty of good faith. Directors must act in good faith in the best interest of the company, which includes interest of present and future members. Directors should not make secret profits from the company or derive a benefit from a third party by reason of (a) being a director; or (b) by doing or not doing anything as a director. All their interests have to be disclosed to the members. 2. Duty of care . The directors should discharge their duties/assigned work with due care. The degree of care, skill and diligence expected from a director implies the general knowledge, skill and experience that may reasonably be expected of a person of his knowledge and status. [Re City Equitable Fire Insurance Co] However, the subjective test requires a director to carry out his duty with the general knowledge, skill and diligence he in fact possess (Dorchester Finance Co vs Stebbing). 3. Duty not to delegate. A Director being an agent is bound by the maxim delegatus non-protest delegare which means a delegatee cannot further delegate. However, in the following cases the directors are allowed to delegate: a) When permitted by the Act or the articles of the company b) Having regard to the existence of business certain functions may be delegated to other officials of the company.

Directors are liable to the company and third parties, and are liable for breach of statutory duties and criminal liability. The liabilities of directors can be studied under the following heads: Liability to the company Liability to third parties Liability for breach of statutory duties Criminal liability Liability to the Company . Being agents of the company, the directors are required to act in good faith, care and due diligence. Thus, directors are liable for Breach of fiduciary duty A Director has to act honestly in the interests of the company or else s/he will be held liable for fiduciary duty. Ultra vires acts The directors will be held personally responsible for acts against the restrictions specified by the Companies Act, Memorandum and Articles of association of the company or agreement and contract with the company being ultra vires. Negligence Where the directors failed to exercise reasonable care, skill and diligence, they will be deemed to have acted negligently and shall be liable for any loss or damage emerging their off. Contd.

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d) Mala fide acts Being the trustees of the properties and money, directors have to discharge their duties honestly and with due care. If they exercise their powers in a mala fide manner or dishonestly, they will be held liable. Also they are accountable for the secret profits made in the course of the performance of duties on behalf of the company. 2. Liability to Third Parties. This may arise under the provisions of the Companies Act or breach of warranty of authority. a) Liability under provisions of Companies Act Where the directors contravene any of the provisions of the Companies Act which directly or indirectly cause harm or loss to third parties, they may be proceeded against by the third parties. b) Liability for breach of warranty Where the directors transact business in the matters ultra-vires to the company or Memorandum and Articles of Association, they maybe proceeded against for any loss sustained by the third party. Contd.

3. Liability for Breach of Statutory Duties . The Companies Act provides numerous statutory duties under various sections and non-compliance with the same will attract personal consequences. 4. Criminal Liability . As per the provisions of the Companies Act, directors are held liable for criminal liability in many cases such as failure to make compliance regarding annual accounts or for accepting deposits in contravention of the provisions. Criminal liability could result in a simple fine of prescribed amounts to simple imprisonment for specified periods.


A company is an association of several persons for some common object(s). Therefore, various issues have to be discussed and decided according to the view of the majority. These deliberations take place at various meetings which occur between members (shareholders) and between the directors.


Company meetings can broadly be categorized into the following types: I Board Meetings II Meetings of Members (1) General Meetings: (a) Statutory meeting, (b) Annual general meetings, and (c) Extraordinary general meetings. (2) Class Meetings III Other Meetings (1) Meeting of debenture holders (2) Meeting of creditors

Board Meetings
Board meetings refer to meetings of directors. The directors are supposed to act collectively as a single entity, called the board, hence the term board meetings. Rules relating to board meetings can be summarized as under: Periodicity of the Board meetings. Every companyprivate or publicshall hold at least one meeting of the Board in three months and four meetings in a year

Day of holding meeting. Though an original Board meeting should normally be held during business hours and only on a working day, it may be held on a public holiday too. Time of holding Board meetings. Board meetings can be held during business hours or outside business hours. There is no restriction on that matter under the Companies Act. Place for holding a Board Meeting. Board meetings can be held at any place, be it the companys registered office or head office, or any other premises within or outside the city, town, village, or state in which the registered office of the company is situated.

Meetings of Members
These are the meetings where shareholders of a company meet to discuss various matters and take decisions by means of passing resolutions. Members meetings may further be classified as general meetings and class meetings. General Meetings General meetings can further be discussed under the following three heads: Statutory Meeting Annual General Meetings and Extraordinary General Meetings Statutory Meeting This is the first meeting of the shareholders of a public co. and is held once in the life span of the company. A public co. limited by shares, or a company limited by guarantee and having share capital is required to hold a statutory meeting. Such a meeting must be held between one and six months from the date on which the company becomes entitled to commence business i.e., it obtains the certificate of commencement of business. A private limited co. is, however, exempt from holding a statutory meeting. [Section 165] Contd.

. Statutory Meeting
Purpose of Statutory Meeting. The purpose of the meeting is to enable members to know all the important matters pertaining to the formation of the company and its initial life history. The matters discussed include inter alia, which shares have been taken up, what money has been received, what contracts have been entered into, and what sums have been spent on preliminary expenses, etc. The members of the company present at the meeting may discuss any other matter relating to the formation of the company or arising out of the statutory report, even if no prior notice has been given for such discussions. Contd.

. Statutory Meeting
Notice of Statutory Meeting . A clear written notice at least 21 days before the meeting must be given to all the members of the company. The notice must clearly state that the meeting is the statutory meeting of the company. Statutory Report . The Board of directors must prepare and send to every member a report called the Statutory Report along with the notice 21 days before . But if all the members entitled to attend and vote at the meeting agree, the report could be forwarded later also. Contd.

. Statutory Meeting
Contents of Statutory Report . According to Section 165 (3) of the Companies Act, the statutory report must furnish the following particulars: The total number of shares allotted, distinguishing those fully or partly paid-up The total amount of cash received by the company in respect of all shares allotted. An abstract of the receipts and payments up to a date within seven days of the date of the report and the balance of cash and bank accounts in hand, and a description of preliminary expenses. Any commission or discount paid or to be paid on the issue or sale of shares or debentures must be separately shown in the aforesaid abstract.

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. Statutory Meeting: Contents of Statutory Report

5. The names, addresses, and occupations of directors, auditors, manager and secretary, if any, of the company and the changes which have taken place in the names, addresses and occupations of the above since the date of incorporation. 6. Particulars of any contracts to be submitted to the meeting for approval and modifications done or proposed. 7. If the company has entered into any underwriting contracts, the extent, if any, to which they have not been carried out and the reasons for the failure. 8. The arrears, if any, due on calls from every director, and from the manager. 10. The auditors have to certify that all information regarding calls and allotment of shares are correct.

Annual General Meeting

An annual general meeting (AGM) must be held by every companypublic

or private, limited by shares or by guarantee, with or without share capital or unlimited companyonce a year. Rules Relating to Annual General Meeting. Following are the rules regarding annual general meetings: i. A company may hold its first AGM within 18 months from the date of its incorporation. However, not more than 15 months must elapse between two AGMs. ii. In case there is any difficulty in holding any AGM (except the first one), the ROC may, for any special reasons shown, grant an extension of time for holding the meeting by a period not exceeding three months provided the application for the purpose is made before the due date of the annual general meeting. Contd...

.Annual General Meeting

iii. A notice of at least 21 days before the meeting must be given to the members The notice must state that the meeting is an annual general meeting. The time, date and place of the meeting must be mentioned in the notice. iv. The notice of the meeting must be include with a copy of the annual accounts of the company, directors report on the position of the company for the year, and auditors report on the accounts.. v. The AGM must be held on a working day during business hours at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated. Contd.

.Annual General Meeting

Business transacted at Annual General Meeting. At every AGM, the following matters must be discussed and decided. Since such matters are discussed at every AGM, they are known as ordinary business. All other matters and business to be discussed at the AGM are special business. The following matters constitute ordinary business at an AGM :Consideration of final accounts, directors report and the auditors report Declaration of dividend Appointment of directors in the place of those retiring Appointment of and the fixing the remuneration of the statutory auditors. In case any other business (special business) has to be discussed and decided upon, an explanatory statement of the special business must also accompany the notice calling the meeting. The notice should also give the nature and extent of the interest of the directors or manager in the special business, as also the extent of the shareholding interest in the company of every such person. Contd.

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Extraordinary General Meeting

Regulation 47 of 'Table A' provides: All general meetings other than annual general meetings shall be called extraordinary general meetings. Thus, every general meeting other than the statutory meeting and the annual general meeting or any adjournment thereof, is an extraordinary general meeting (EGM). Such a meeting is usually called by the Board of directors in emergencies for taking up some urgent business that cannot stay to be decided till the next AGM.

..Extraordinary General Meeting

Who can call an extraordinary general meeting? An Extraordinary general meeting may be called by any four of the following. 1. The Board of directors The Articles of a company may contain provisions for convening an extraordinary general meeting. 2. The Board on requisitions The members of a company have the right to seek calling of an EGM by the directors. The Board of directors must call an extraordinary general meeting if required to do so by the following number of members: On the date of making the demand for an EGM, the strength of members should be at least one-tenths of such of the voting rights in regard to the matter sought to be discussed at the meeting ; or If the company has no share capital, the members representing not less than onetenths of the total voting rights on that date in regard to the said matter. The requisition must state the objects of the meetings and must be signed by the requisitioning members. The requisition must be deposited at the company's registered office and the directors should within 21 days, move to call a meeting and the meeting should actually be held within 45 days from the date of submission of the requisition.

..Extraordinary General Meeting

3. By the Requisitionists. If the directors fail to call and hold the meeting as aforesaid, the requisitionists or any of them fulfilling the requirements stated above, as the case may be, may themselves proceed to call the EGM within 3 months from the date of the requisition, and claim the necessary expenses from the company. The company can make good this sum from the directors-in-default. 4. By the National Company Law Tribunal. If for any reason, it is impracticable to call a meeting of a company, other than an annual general meeting, or to hold or conduct the meeting of the company, the NCLT may, either i) on its own motion, or ii) on the application of any director of the company, or of any member of the company, who would be entitled to vote at the meeting, order a meeting to be called and conducted as the Tribunal deems fit, and may also give such other ancillary and consequential directions as it thinks fit expedient. A meeting so called and conducted shall be deemed to be a meeting of the company duly called and conducted.

Class Meetings
Class meetings are meetings which are held by the holders of a particular class of shares (i.e., where the share capital of a company is divided into different classes of shares), e.g., preference shareholders. Such meetings are normally called when it is proposed to alter, vary or affect the rights of that particular class of shareholders. At such meetings, these members discuss the pros and cons of the proposal and vote accordingly Class meetings are held to pass resolutions, which will bind only the members of the shareholders class concerned, and therefore only members of that class can attend and vote. Unless the articles of the company or a contract binding on the persons concerned otherwise provides, all provisions pertaining to calling of a general meeting and its conduct do apply to class meetings in the same way as they apply with respect to general meetings of the members. However, all resolutions in a class meeting are required to be passed as special resolutions.

Other Meetings
Meeting of Debenture Holders. A company issuing debentures through its articles may provide for the holding of meetings of the debenture holders. At such meetings, generally matters pertaining to the variation in terms of security provided by the company against the debentures or to alteration of their rights are discussed. All matters connected with the holding, conduct and proceedings of the meetings of the debenture holders are normally specified in the Debenture Trust Deed. The decisions at the meeting made by the prescribed majority are valid and lawful and binding upon the minority. Meetings of Creditors. Sometimes, a company, as a running concern, has to make certain arrangements with its creditors. Hence, meetings of creditors may be called for this purpose. Similarly, in case of winding up of a company, a meeting of creditors and contributories is held to ascertain the total amount due by the company and also to appoint a liquidator to wind up the affairs of the company.


The following conditions must be satisfied for a meeting to be called a valid meeting: It must be duly convened. The persons calling the meeting must be authorized to do so. The proper authority in this regard is the Board of directors, members, or the National Company Law Tribunal. Proper and adequate notice must have been given to all those entitled to attend. The meeting must be legally constituted. There must be a proper authority in the chair. The rules of quorum must be maintained and the relevant provisions of the Act and the articles of association must be duly complied with. The business at the meeting must be validly transacted. The meeting must be conducted in accordance with the regulations governing the meetings.




A member may appoint another person to attend and vote at a meeting on his behalf. Such other person is known as Proxy. The term is also applied to the instrument by which the appointment to act on his behalf is made by the member. In case of a company having a share capital and in the case of any other company, if the articles so authorise, any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself. [Section 176] The member appointing a proxy must deposit with the company a proxy form at the time of the meeting or prior to it giving details of the proxy appointed. However, any provision in the articles which requires a period longer than forty-eight hours before the meeting for depositing with the company any proxy form appointing a proxy, shall have the effect as if a period of 48 hours had been specified in such provision. A proxy is not entitled to vote except on a poll. Therefore, a proxy cannot vote on show of hands. The proxy is automatically revoked by the death or insolvency of the member.

The term 'quorum' means the specified minimum number of qualified persons whose presence is necessary for transacting legally binding business at a meeting. A meeting without the quorum is invalid and decisions taken at such a meeting are not binding. the quorum for the Board meeting shall be one-third of its total strength, or two directors whichever is higher, while the quorum for any General meeting shall be five members personally present in case of public company, and two members personally present in the case of private company unless the articles of a company provide otherwise. [Section 174] It has been held by the courts that unless the articles otherwise provide, a quorum needs to be present only when the meeting commenced, and it was immaterial that there was no quorum at the time when the vote was taken. Further, unless the articles provide otherwise, if within half an hour from the time appointed for holding a meeting of the company, a quorum is not present in the person, the meeting :if called upon the requisition of members, shall stand dissolved; in any other case, it shall stand adjourned to the same day in the next week, at the same time and place, or to such other day and time as the Board may determine. If at the adjourned meeting also, the quorum is not present within half-an-hour from the time appointed for holding the meeting, the members present shall constitute a quorum.


The chairperson is there to preside over a meeting. Generally, the chairperson of the Board of directors also happens to be the chairperson of the meeting. Unless the articles otherwise provide, the members present in person at the meeting elect one of themselves to be the chairperson thereof on a show of the hands. If there is no chairperson, or s/he is not present within 15 minutes after the appointed time of the meeting or is unwilling to act as chairperson of the meeting, the directors present may elect one among themselves to chair the meeting. If, however no director is willing to act as the chairperson or if no director is present within 15 minutes after the appointed time of the meeting, the members present should choose one among themselves to chair the meeting. If, after the election of a chairperson on a show of hands, poll is demanded and taken and a different person is elected as chairperson, then that person will head the meeting from that point.

Duties of the Chairman

Without a chairperson, a meeting is incomplete. The chairperson is the regulator of the meeting. The duties of the chair include the following: The chairperson must ensure that the meeting is properly convened and constituted i.e., the proper notice has been given, and that the required quorum is present, etc. S/He must ensure that the relevant provisions of the Act and the Articles of Association are observed. S/He must ensure that business is taken in the order set out in the agenda, and no business which is not mentioned in the agenda is taken up unless agreed to by the members. S/He must impartially regulate the proceedings of the meeting and maintain discipline at the meeting. The chairperson has the power to adjourn the meeting in case of indiscipline at the meeting. S/He must exercise his/her powers of adjournment of the meeting, should s/he in good faith feel that such a step is necessary. S/He must exercise his/her power to order a poll correctly and must order it to be taken when demanded properly. S/He must exercise his/her casting vote bona fide in the interest of the company.

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The word 'vote' means an expression of a wish or opinion in a democratic and formal way for or against a proposal. Generally preliminary matters are decided at a general meeting by a show of hands. If the majority of the persons raise their hands in favour of a particular resolution, then unless a poll is demanded, it is taken as passed. Voting by a show of hands operates on the principle of one member- one vote. However, since the fundamental voting principle in a company is one share - one vote, if a poll is demanded, voting takes place by accordingly. Before or on declaration of the result of the voting on any resolution on a show of hands, the chairperson may order sue motu (of his own motion) that a poll be taken. However, when a demand for poll is made, s/he must order the poll. Also, the chairperson may order a poll when a resolution proposed by the Board is lost on the show of hands or if s/he is of the opinion that the decision taken on the show of hands is likely to be reversed by poll. When a poll is taken, the decision arrived at by the poll is final and supersedes the decision on the show of hands. A poll is allowed only if the prescribed number of members demands it. A poll must be ordered by the chairperson if it is demanded in any of the following cases. a) in the case of a public company having a share capital, by any member or members present in person or by proxy and holding shares in the company Contd.


b) which confer a power to vote on the resolution not being less than one-tenths of the total voting power in respect of the resolution, or on which an aggregate sum of not less than Rs 50,000 has been paid up. in the case of a private company having a share capital, by one member having the right to vote on the resolution and present in person or by proxy if not more than seven such members are personally present, and by two such members present in person or by proxy, if more than seven such members are personally present. in the case of any other company, by any member or members present in person or by proxy, and having not less than one-tenths of the total voting power in respect of the resolution.


AGENDA . The term 'agenda' literally means things to be done. In the context of company meetings, it is a statement of the businesses to be transacted at a meeting. It also sets out the order in which the business is to be dealt with. The agenda helps in systematic and smooth transaction of businesses at a meeting without omission of any item of importance. MOTION. Motion means a proposal to be discussed at a meeting by the members. A resolution may be passed accepting the motion, with or without modifications or a motion may be entirely rejected. A motion, on being passed as a resolution becomes a decision. A motion must be in writing and signed by the mover and put to the vote of the meeting by the chairperson. Only those motions which are mentioned in the agenda to the meeting can be taken up and discussed at the meeting. Generally, a motion is proposed by one member and seconded by another member. Amendment to motion. An amendment refers to any modification to a motion before it is put to vote for adoption. An amendment may be proposed by any member who has not already spoken on the main motion, or has not previously moved an amendment thereto. There can be an amendment to an amendment motion also. A motion must be in writing and signed by the mover, and put to the vote of the meeting by the chairperson. The chairperson has the discretion to accept or reject an amendment on various grounds such as inconsistency, redundancy, irrelevance, etc.

A motion, with or without amendments is put to vote at a meeting. A 'motion' when passed by requisite majority of votes by the shareholders becomes a company resolution. Thus, a resolution may be defined as the formal decision of a meeting on any proposal placed before it. Kinds of Resolutions. Broadly speaking there are three types of resolutions under the Companies Act, 1956: ordinary, special, and those requiring special notice. Ordinary resolution [Section 189(1)] . An ordinary resolution is one which can be passed by a simple majority. That is if the votes (including the casting vote, if any, of the chairperson), at a general meeting cast by members entitled to vote in its favour are more than the votes cast against it. Voting may be by way of a show of hands or by a poll provided 21 days notice has been given for the meeting. An ordinary resolution is required to transact such businesses as: declaring dividend, appointment of auditors, electing directors, or to pass the annual accounts. Contd.

Special Resolution [Section 189(2)]. A special resolution is one which is passed by at least three-fourths clear majority i.e., the number of votes cast in favour of the resolution is at least three times the number of votes cast against it, either by a show of hands or by a poll in person or by proxy. The intention to propose a resolution as a special resolution must be specifically mentioned in the notice of the general meeting. Special resolutions are needed to decide on important matters of the company. Examples where special resolutions are required are: To alter the domicile clause of the memorandum from one state to another, or to alter the objects clause of the memorandum. To alter/change the name of the company with the approval of the Central Government. To alter the articles of association. To change the name of the company by omitting Limited or Private Limited. The Central Government may allow a company with charitable objects to do so by a special resolution under section 25 of the Companies Act, 1956. Contd.

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Resolution Requiring Special Notice[Section 190] . Resolution requiring special notice is a species of ordinary resolution. There are certain matters specified in the Act which may be discussed at a general meeting for which a prior intention to move the resolution has to be given to the members. Such a prior intention in the form of special notice enables the members to be prepared on the matter to be discussed and gives them time to indicate their views on the resolution. The following matters, in order to be taken up for discussion, require special notice before the meeting: To appoint an auditor other than a retiring auditor at an annual general meeting. To resolve at an annual general meeting that a retiring auditor shall not be reappointed. To remove a director before the expiry of his period of office. To appoint another director in place of removed director. Where the articles of a company provide for serving a special notice for a resolution, in respect of any specified matter or matters. A resolution requiring special notice may be passed either as an ordinary resolution (with simple majority) or as a special resolution (with threefourths majority).

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Every company must keep minutes containing details of all proceedings at the meetings. The minutes are a gist of the discussions at the meeting and the final decisions taken there at. It normally includes only the resolutions actually passed. The pages of the minute books must be consecutively numbered and the minutes must be recorded therein within 30 days of the meeting. They have to be written directly on the numbered pages. Pasting or attaching of papers is not allowed. Each page of minute books must be initialed or signed and the last page of the record of proceedings of each meeting in such books must be dated and signed by the following: chairperson of that meeting or that of the succeeding meeting, in case of the meeting of the Board of directors or committee thereof, and chairperson of the same meeting in the case of a general meeting, within the aforesaid 30 days. In the event of the death or inability of that chairperson within the period, by a director duly authorized by the Board of directors for the purpose. Contd.

The Tribunal (NCLT), however, may not object if the minutes are maintained in loose leaf form provided all other procedural requirements are complied with, and all possible safeguards against manipulation or interpolation of the minutes are ensured. The loose leaves must be bound at reasonable intervals. The chairman may exclude from the minutes any matters which are defamatory, irrelevant or immaterial or which are detrimental to the interests of the company. The discretion of the Chairman with regard to the inclusion or exclusion of any matter is absolute and unfettered. Every member will have a right to inspect, free of cost during business hours at the registered office of the company, the minute books. Further, any member shall be entitled to be furnished, within seven days after s/he has made a request to the company, with a copy of any minutes on payment of Rupee One for every hundred words or fraction thereof.