Company Secretarial Practices II (English Version)-munotes

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MANAGEMENT OF THE COMPANY
Unit structure:
1.0 Objectives
1.1 Introduction
1.2 Director of the Company
1.3 Appointment of Directors
1.4 Resignation by Director / Removal of Directors
1.5 Powers / Rights of Company Directors
1.6 Duties of Compan y Directors
1.7 Chairman of the Company / Board of Directors
1.8 The Chief Executive Officer (CEO)
1.9 Company Auditors
1.10 Summary
1.11 Exercises
1.0 OBJECTIVES
After studying the unit the students will be able :
 To explain about appointment of the Company Director
 To explain the powers and rights of the Company Director
 To explain the Chairman of the Board of Directors
 To explain the Role of the Chairman of the Board of Directors
 To explain about CEO ( Chief Executive Officer ) of the company
 To explain about Auditor of the Company
1.1 INTRODUCTION
A director is a person from a group of managers who leads or supervises a
particular area of a company. Companies that use this term often have
many directors spread throughout different b usiness functions or roles
(e.g. director of human resources). ... Some companies also have regional
directors and area directors. The directors are the persons elected by the munotes.in

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2 shareholders to direct, conduct, manage or supervise the affairs of the
company.
The Companies Act does not precisely define the term ‘director’. But it
has been defined under several sections of the Act, in the following
manner:
According to Sec. 2 (13) of the Companies Act, “Director includes any
person occupying the position of dir ector by whatever name called.” This
definition given by the Companies Act does not give the clear meaning of
the word director, but it means that a person who performs the duties of a
director will be deemed to be a director irrespective of the name by wh ich
he is called.
1.2 DIRECTOR OF THE COMPANY
1.2.1 Meaning and Definition
Section 2 (13) of the Indian Companies Act, 1956 defines director as
any person occupying the position of director, by whatever name called.
This legal definition fails to five de tails of functions, etc. of a company
Director.
Section 291 of the Indian Companies Act expressly vests the
management of the business of a company in its directors. They are
responsible for directing, governing or controlling the management of a
company .
According to Sec. 2(30), “A director is the officer of the company.”
Directors act as agents of shareholders and look after the management of
the company. Company is an artificial person created by law. It does not
have physical existence. It is invis ible and acts through human agency.
This human agency of company management is the Board of Directors.
The individual members of the Board are called Directors and collectively
they form the Board. All managerial powers are given collectively to the
Board of Directors and not to Directors individually. They are responsible
for directing, governing and controlling the management of their
company. Directors have to function as a group. Board is the principal
authority in company management. A public compan y needs minimum
three directors. Directors are not outsiders but are elected by shareholders
as their representatives. The Board of Directors is the top administrative
organ of the company. Directors are the brains of the company as the
Company can and d oes act only through its directors. This suggests that
the Directors (collectively) occupy the most influential position in the
company management.
1.2.2 Legal Position of Company Directors
1. Under the Companies Act, the Board of Directors is a must for th e
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3 2. Directors are elected representatives of shareholders and are given
substantial powers of management. Such powers are not to be used
individually by a director but collectively by all directors i.e. by the
Board of Directors.
3. The statutory provision relation to Directors is given in Sections 252 to
323 of the Companies Act.
4. Every private company must have at least two directors and every
public company must have at least three directors.
5. Directors are a n agents , trustees and managing partners of a company.
They are responsible for directing , governing and controlling the
management of their company.
6. Directors have to honour legal provisions as regards their
qualifications, appointment, retirement and use of powe rs.

1.2.3 Qualification of a Director
Any person who is competent to enter into a contract can become a
Director. The Indian Companies Act, 1956 has not laid down any specific
academic, professional or technical or shareholding qualifications for a
director. A person cannot be appointed as a director if he is of unsound
mind or is declared insolvent or is guilty of fraud or moral turpitude.
However, financial prudence requires that the directors must have some
stake in the company. As a result, the Articles usually provide for certain
qualification shares for a director. The law says that persons holding
qualification shares can be elected as directors. The number of shares to be
purchased by a director and their value are laid down in the Articles.
However, the nominal value of such qualification shares should not
exceed Rs. 5000. Similarly, a person has to file his written consent with
the Registrar before accepting directorship. As per Section 270, the
directors must obtain their qualification sh ares, within two months after
their appointment unless they already hold shares of that amount. In the
case of newly floated company, the directors must pay for their munotes.in

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4 qualification shares before the Certificate to Commence Business is
obtained.
In brief, Section 270 provides that :Every director must purchase
qualification shares within two months after his appointment.
Although, the directors have been referred as the trustees, or the managing
partners of the company, but in real sense they are none of th em. Directors
may be considered as the agent, trustees or managing partner for a
particular moment and for the particular purpose. Bowen, L.J. observed,
“Directors are described sometimes as managing partners. But each of
these expressions are used not as exhaustive of their powers and
responsibilities, but as indicating useful points of view from which they
may for the moment and for the particular purpose be considered.”

1.2.4 Disqualification of a Director
The circumstances in which a person cannot be appointed as a director of
a company are enumerated in Section 274. According to this section, a
person cannot be appointed as a director of company, if -
i) He has been found to be of unsound mind by a competent court and
the finding is in force;
ii) He is an undischarged insolvent;
iii) He has applied to be adjudicated as an insolvent and his application is
pending;
iv) He has been convicted of an offence involving moral turpitude and
sentenced to imprisonment for not less than six months and a period of
five years ha s not elapsed since the expiry of his sentence;
v) He has not paid any call in respect of shares of the company held by
him for a period of six months from the last day fixed for the payment;
vi) He has been disqualified by an order of the Court under Sec. 203 of an
offence in relation to promotion, formation or management of the
company or fraud or misfeasance in relation to the company. munotes.in

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The Central Government may by notification in the Official Gazette
remove the disqualifications enumerated in clause (iv) and (v) above. [Sec.
274 (2)]
In addition to the disqualifications mentioned above, there is another
disqualification, namely, the person ‘should not be a minor or older person
under disability’ but should be one competent to contract.
A private company which is not a subsidiary of public company may by
its Articles provide for additional grounds for disqualification.
1.2.5 Liabilities of Company Directors
a) Liabilities to the Company :
1. For Ultra -vires Acts : The Directors are liable where they enter into
contracts ultra -vires the Memorandum or Articles or ultra -vires their
powers.
2. For breach of trust : The Directors are liable for making secret
profits or use company’s fund for their personal use. Such acts
constitute breach of trust.
3. For acting dishonestly : The directors are liable when they act in a
dishonest manner. For example, purchasing property in their own
name first name and then selling the same to the company at a higher
price with a desire to earn profit.
4. For gross negligence : The Directors are held liable for gross
negligence while performing the statutory duties assigned to them. For
example, delegating authority against the provisions in the articles.
5. For willful misconduct : The Directors are liable for willful
misconduct in the form of misa ppropriation of company’s assets.
In all these cases, the Director is not liable for the error of his judgement.
For making him liable, his dishonesty or negligence or willful misconduct
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6 b) Liability to outsiders (Outside Parties):
The Directo rs are liable to outsiders (third parties) under the following
circumstances:
1. For misstatement in the prospectus .
2. For acting fraudulently .
3. For breach of implied warranty of authority
4. For acting in their own name (signing cheque without mentioning the
name of company )
5. For the debts and liabilities of the company at the time of winding up .
c) Criminal Liabilities of Directors:
Directors incur criminal liability for fraud and non -compliance of the
various provisions of the Act. Here, they are punishable with fin e or
imprisonment or both as per the provisions in various Sections of the Act.
Directors are liable to penalty under the following circumstances :
1. For mis -statements in the prospectus.
2. For default in holding AGMs as per provisions in the Companies Act.
3. For holding office as director in more than twenty companies at one
time.
4. For taking loan from company without approval of the Government.
5. For failure to file return as to allotment of shares with the Registrar.
6. For failure to issue share certificates or de benture certificates.
7. For failure to give notice to Registrar as regards consolidation of share
capital
1.2.6 Remuneration of Directors
Directors' remuneration is the process by which directors of a company are
compensated, either through fees, salary o r the use of the company's
property, with approval from the shareholders and board of directors. A
Public Company can pay remuneration to its directors including Managing
Director s and Whole -time Directors, and its managers which shall not
exceed 11% of t he net profit as calculated in a manner laid down in
section 198 of the Companies Act, 2013.Directors are not employed by the
company but are the elected representatives of shareholders. They are not
the regular employees of the company and are not eligibl e for regular
remuneration like other company employees. They act as agents of the
company and participate in the policy -framing and decision -making
process. Directors have no right of remuneration unless there is a specific
provision to that effect in th e Articles or the shareholders resolve for the
same in the general meeting. The Articles usually provide for the payment munotes.in

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7 of remuneration to directors in the form of honorarium. According to
Section 198, total managerial remuneration payable to directors, m anaging
director (s) and whole -time director(s) in respect of any financial year
should not exceed eleven per cent of the net profits of that company for
that financial year. This can be treated as the maximum limit of
managerial remuneration. Section 349 and 350 lay down the manner of
computation of net profits for the purpose of determining the overall
maximum managerial remuneration.
1.3 APPOINTMENT OF DIRECTORS
1.3.1 Appointment of a Director
Every public company by virtue of Sec. 43 A, shall have at least three
directors, private company shall have at least two directors. [Sec. 252] .
Subject to this minimum number of directors, the articles may fix the
minimum and maximum number of directors for its board of directors.
The company in the general mee ting may by ordinary resolution, increase
or reduce the number of its directors within the limit fixed as per A rticles
[Sec.258] . In the case of a public company or a private company which is
a subsidiary of a public company any increase which is beyond th e limit
fixed by Articles must be approved by the Central Government and such
an increase shall become void if disapproved by the Central Government.
However, no approval of Central Government shall be required if the
increase in the number of directors do es not exceed twelve. [Sec. 259]
An individual who is competent to contract and is not disqualified under
Section 274 can be appointed as a director, provided he is willing to act as
a director and who holds or is willing to purchase share qualification as
prescribed in the Articles. The company can increase or decrease the
number of its directors within the limits fixed by its articles. For this,
ordinary resolution in the general meeting must be passed.
1. First Directors : First Directors of a company ar e appointed by the
promoters and their names are mentioned in the Articles. If not so, the
Articles may prescribe the method of appointing them. In the absence
of both, the subscribers to the Memorandum shall be deemed to be the
first directors of the co mpany. Written consent of directors to act in
that capacity must be submitted to the Registrar. The first directors
should have purchased or agreed to purchase qualification shares as
per the articles.
2. Subsequent Directors : Subsequent Directors of the c ompany are
elected by the shareholders in the annual general meetings. Section
225 states that unless the Articles provide for the retirement of all the
directors at every annual general meeting, at least two -thirds of the
total number of directors of a pu blic company and its subsidiary
private company shall retire by rotation and shall be appointed by the
shareholders in their general meetings. These provisions are not
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8 At Subsequent AGMs out of the two -thirds directors li able to retire by
rotation, one -third or the number nearest to one -third, must retire. The
senior most Director shall retire in the first place. Persons who became
directors on the same day, the retirement by rotation will be decided by
mutual consent or by lot. The directors who are to retire by rotation at an
AGM would automatically vacate office on the last day on which the
annual general meeting ought to have been held.
1.3.2 Legal restrictions on the appointment of Directors
A. Legal Restrictions on Fir st Directors :
1. A director has to give a written consent to act as a director. This
consent needs to be filed with the Registrar.
2. A director should have purchased or agreed to purchase qualification
shares as per the Articles of the company.
3. The first dir ectors must sign the prospectus before it is filed and issued
to the public. They would be personally liable for any misleading
statements made therein.
B. Legal Restrictions on Subsequent Directors :
1. Only individual can be appointed as a Director.
2. A person cannot act as a director of more than fifteen companies at the
same time.
3. A separate resolution is required for the appointment of each director.
4. A person who desires to join as a director has to submit a written
consent with the Registrar within 30 days of his appointment.
1.3.3 Appointment of Directors by the Board
In addition to the Directors elected by the shareholder, the Board may
appoint directors under the following circumstances / situations:
1. Casual Vacancies : Casual Vacancies are possible due to the death or
resignation of existing director before the expiry of his term of office.
Such casual vacancy may be filled in by the Board by appointing a
new director.
2. Additional Directors : If the article so permit, the Board of Directors
can appoint additional directors, subject to the maximum number of
directors fixed in the Articles.
3. Alternate Directors : The Articles may empower the Board of
appoint alternate (in place of original director) director, during the
absence of an existing director for more than three months, from the
State in which the meetings of the Board are normally held.
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9 1.3.4 Appointment of Directors by the Central Government
With a view to preventing mismanagement, the Central Government may
appoint such number of directors a s the Company Law Board may specify
as being necessary to effectively safeguard the interests of the company/
shareholders. Such directors will be appointed for a period not exceeding
three years on any one occasion. Such directors appointed by the Centr al
Government shall neither be required to hold any qualification shares nor
they shall be subject to retirement by rotation. Such appointment is
possible only when the order is passed by the Company Law Board on
reference made by members holding at least ten per cent voting rights or
by the Central Government.
1.3.5 Nominated Directors
In addition to directors elected by shareholders appointed by the Board
and by the Central Government, there may be directors nominated by third
parties such as financial institutions (IFCI, IDBI, ICICI, UTI, LIC etc.) on
non-rotational basis. Such “Nominee” directors are usually appointed by
financial institutions (LIC, IDBI or UTI) providing huge financial support
to concerned company. The purpose is to have effective c ontrol on the
companies financed by them.
1.4 RESIGNATION BY DIRECTOR / REMOVAL OF
DIRECTORS
1.4.1 Resignation by Directors
The Indian Companies Act is silent as regards the resignation by directors
as there is no provision in the Act as regards resignat ion of office by a
director. A director can resign provided suitable provision exists in the
Articles for such resignation. If the provision is available, a director can
resign at any time as per the procedure prescribed in the Articles. In the
absence o f any provision in the Articles in this regard, his resignation,
once made, takes effect immediately. There is no need for its acceptance
by the Board or by the company in the general meeting.
1.4.2 Removal of Directors
According to section 149 of the Com panies Act 2013, in case of
resignation or removal of an independent director, a new independent
director is to be appointed within 180 days of such resignation or
removal.As per Company Act Shareholders can remove a Director from
the Company before the ex pire of his tenure, except appointment by
Central Govt. The company directors can be removed by the following
three methods :
a) Removal by Shareholders (Section 284),
b) Removal by the Central Government (Section 288E), and
c) Removal by Company Law Board (Section 402) munotes.in

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10 a) Removal by Shareholders (Section 284) :
Shareholders have a right to remove the elected director if they so desire.
For this, suitable procedure as given in the Companies Act must be
followed. A company may remove a director before the expiry of his
period of office by giving a special notice and passing an ordinary
resolution to this effect in their general meeting.
b) Removal by the Central Government ( Section 288E) :
The Central Government may, by order, remove any director from his
office aga inst whom an adverse judgement has been given by a High
Court, on a reference made by the Government for an alleged fraud,
misfeasance, gross negligence or breach of trust, etc. in carrying out his
legal obligations.
c) Removal by Company Law Board (Section 402) :
The Company Law Board has the power to remove a director on an
application made to it for prevention for oppression (under Section 397) or
mismanagement (under Section 398).
1.5 POWERS / RIGHTS OF COMPANY DIRECTORS
The directors enjoy wide powers a s regards the management of the
company. However, their powers are not unlimited but subject to legal
provisions a nd provisions in the A/A of the company. Powers of directors
are noted in the Articles of the company. These powers are to be used
collectivel y and not individually. Similarly, the directors have to pass
necessary resolutions in their meetings for using such powers.
1.5.1 Statutory Provision s Regarding Powers Of Directors
A. Under Section 292, the following powers can be exercised by the
Board of Directors:
i) The power to make calls;
ii) The power to issue debentures;
iii) The power to borrow moneys otherwise than on debentures;
iv) The power to invest the funds of the company; and
v) The power to make loans.
The powers listed under items (iii), (iv) and (v) can be delegated by the
Board to any committee of directors, the managing director, the manager
or any other principal officer of the company through a resolution passed
at a Board meeting.
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11 B. In addition to the above noted statutory powers, the Companies Act,
under several other sections, provides for some additional powers to be
exercised at the Board meeting only. Such powers are as noted below :
i) The power to fill up casual vacancy among direct ors, to appoint
alternate directors and to appoint additional dir ectors, subject to any
regulations in the Articles.
ii) The power to accord sanction to such contracts in which any directors
or their relatives, etc. are interested.
iii) The power to recommend the rate of dividend on shared to be declared
by the company at the An nual General Meeting, subject to the
approval of the shareholders.
iv) The power to appoint first directors of the company and to fill in any
casual vacancy in the office of the auditor unless such a vacancy is
caused by the resignation of the auditor.
1.6 DUTIES OF COMPANY DIRECTORS
The duties of directors are divided into two categories ie. S statutory duties
and General duties .
A) Statutory duties of Company Directors:
1. It is the duty of the Board of Directors to see that all moneys received
from applicants for shares are deposited in schedule bank until the
“Certificate to Commence Business” is obtained.
2. Under Section 165 of the Act, the Board has a duty to forward a copy
of the Statutory Report at least 21 days before the statutory meeting to
every member of th e company .
3. Under Section 210 (1), the Board has a duty to place before the
members at the annual general meeting, the company’s Profit and Loss
A/c and the Balance Sheet.
4. To call an extra -ordinary general meeting on the requisition of the
specified number of members as per Section 169 (1) of the Act.
5. The Board of Directors has to make a “declaration of solvency” of the
company in the case of members voluntary winding up (Section 488) .
6. At the meeting of the creditors in a creditors’ voluntary winding -up,
the Board of Directors must (a) cause a full statement of the position
of the company’s affairs together with a list of creditors and the
estimated amount of their claims to be laid before the meeting; and (b)
appoint one of their member to preside at the sai d meeting.
7. The Board of Director is suppose to hold its meeting at least once in
every three calendar months. In addition, at least four meetings of the
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12 8. It is the duty of the director to take consent of the Board before
entering into any contract with the company for the purchase or supply
of any goods or services to the company.
9. The directors have to purchase and pay for qualification shares within
the prescribed time +limit as per provisions of the Act.
B) Duties of Direct ors under the General Law :
1. The Directors must always act bonafide for the benefit of the
company. They must protect the interest of the company and must not
make any secret profit.
2. The Directors must discharge their duties with such care and
precaution a s is reasonable in a person of their knowledge.
3. The Directors must attend all meetings of the Board unless it is
impossible otherwise. This means they must not be negligent as
regards their duties in relation to the company.
4. Finally, the Directors are exp ected to make full and complete
disclosure in any contract in which they are directly or indirectly
interested (Section 299).
1.6.1 ROLE OF DIRECTORS
a) Agent: A company is an artificial person and needs people in the
Board of Company to run the business of the company on behalf of and
for the welfare of shareholders of the company. The director acts as an
agent of shareholders and promotes the objects of the company so that the
company can earn profits and increase the intrinsic value of the share and
earnin g of the company.
b) Employee: Any Whole -time director appointed by the Board of
Directors and approved by the shareholders of the company acts as an
employee of the company by managing the day -to-day affairs of the
company. All the directors operate the com pany in the contours of
employment letter issued by the Board of Company.
c) Officer: Director is treated as the main officer of the company and
shall be liable for penal consequences under various statutes, if affairs of
the company are not in compliance wit h the Companies Act, Income Tax
Act, FEMA provisions and other applicable Legal statues defined for
various industries.
d) Trustees: Director is treated as trustee of the company, money and
property of the powers are entrusted to and vested in them only a s trustees.
1.6.2 DIRECTOR’S REPORT :Under Section 415 of the Companies
Act 2006, the directors of a company are required to prepare a directors’
report at the end of each financial year. This legislation is part of a general
move towards greater corporate transparency.
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13 The information provided by the directors’ report helps shareholders
understand:
a) Whether the company’s finances are in good health;
b) Whether the company has the capacity to expand and grow;
c) How well the company is performing within its marke t, and how well
the market is performing in general;
d) How well the company is complying with financial regulations,
accounting standards and social responsibility requirements.
By knowing this information, shareholders can make better informed
decisions and can hold the directors of the company to greater account.
1.6.3 What is included in a directors’ report?
As a minimum, a directors report should always state:
a) The names of each director who served during the reporting year;
b) A summary of the company’s tra ding activities;
c) A summary of future prospects;
d) The principle activities of the company and, if relevant, the principle
activities of its subsidiaries;
e) Recommendations for dividends for the reporting year;
f) Any financial events that occurred after the date on the balance sheet, if
these events could affect the company’s finances;
g) Significant changes to the company’s fixed assets .
1.6.4 DIRECTOR IDENTIFICATION NUMBER
Director Identification Number (DIN) is a unique identification number
given to an existin g or a potential Director of any company which is
incorporated. DIN came into existence after the insertion of the section
266A & 266B of the Companies Act, 1956 (as amended vide Act No 23 of
2006).
Why Director Identification Number (DIN)?
Many a times it is seen that a company is created and it raises money from
investors and public and vanishes with the Director and are not been
traceable. The main purpose of introducing Director Identification
Number (DIN) was to keep a Date base of the Directors of the the
incorporated companies and to keep complete information about the
Directors so that they don’t cheat anyone and in case they do, can be
traceable.
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14 Director Identification Number (DIN) not only helps fixing the identity of
the Director but also re lates his participation in others companies, past and
present. In case any change of address or particular is faced by the DIN
holder, they are suppose to inform the central government about the same.
So this keeps the database ‘live’ always.
As per the re cent amendment in the Companies Act, 1956, DIN has
become mandatory for all the directors. DIN is individual specific and not
company specific, so only one DIN is required per director/person
irrespective of how many companies he is managing. This is a pre -
requisite to incorporate a new company.
1.6.5 Types of Directors
For start -ups and high growth businesses there are three types of directors
available to them – the executive director, the non -executive director, and the
independent director. A good boar d will aim to have a mixture of these three
types as each brings a different element to the table.
A) Executive directors
Executive directors have a dual role as employees of the company and as
directors. As directors they:
 have responsibilities, but must re tain a degree of independence from their
executive role .
 should be appointed as individuals, and not because of any position they
hold within the company .
 must always be alert to the potential for conflicts between their
management interests and their duti es as a director.
An executive director brings an insider’s perspective to the table which can be
very valuable when discussing the operations of a company.
B) Non-executive directors :
These directors bring an outside perspective to the table and often a weal th of
knowledge and experience. A non -executive director may be representing a
major shareholder but an independent director will generally have no other
links with the company other than sitting on the board. Non -executive
directors' principal role is to provide independent judgement. This includes:
 outside experience and objectivity on all issues which come before the
board .
 understanding detailed knowledge of the company's business activities and
on-going performance, so they can make informed decisions .
 recognising the division between the board and management. munotes.in

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15 The boundary often gets blurred in start -ups and high growth businesses. For
example, a non -executive director may be appointed to fill a gap in knowledge
and expertise, and end up assisting manag ement in that area.
C) Independent directors :
To gain true separation between management and governance it makes sense
to include independent board members. Some owners can feel threatened by
this independence, but in the end their outside thinking can enable the business
to grow and develop valuable long -term strategy.
Characteristics of the best independent directors
 Business experience – A successful business person will have been 'in the
firing line', experiencing and learning from real life experience rat her than
seminars and books. They will most likely have:
 experienced adversity, risk and possibly had to fight for the survival of
their business
 scars and ‘war stories’ to help you avoid making similar mistakes.
 All-round independence – an independent dir ector will be someone who
will not compromise loyalty. They are independent in every way:
 intellectually
 financially
 politically.
D) Silent and absent directors :
A good director is an active one, quiet ones are wasting valuable space, time,
and resources. In many start -ups or high growth businesses formed in
partnership, it is common for one director take the lead in the running of the
business, while the other is the silent partner. Do the business a favour and pull
in people with skills and experience, who have a voice and something to add
value to the business.
The benefits of having one or more independent directors
For start -ups and high growth businesses, there are several benefits from
having one or more independent directors:
a) they bring an objective vi ewpoint to the board ,
b) they are unlikely to have any family or majority ownership ties to the
business
c) they can cast a critical eye over the business without preconception or
prejudice .
d) they are also able to act in the capacity of counsellor, sounding bo ard and
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16 e) they bring a one -off business knowledge and experience in many areas .
f) many start -ups and high growth businesses tend to operate in a vacuum
without looking at outside forces .
g) outside directors introduce a fresh, and usually innov ative, perspective .
h) they may compensate in some of the key areas where management may
be weak .
i) the outside director may act a bit like a consultant .
j) bring input and the ability to assist with objectivity.
1.7 CHAIRMAN OF THE COMPANY / BOARD OF
DIREC TORS
Every meeting of the Board of Directors must be presided over by a
chairman. Regulations regarding appointment of a chairman are given in
the Articles of a company. Normally, the Board elects its chairman for a
particular period. If no chairman is ele cted by the Board, or if at any Board
meeting, he is not present within 5 minutes, the directors present may
choose one of them to be the chairman of the meeting. Chairman acts as
the presiding officer of a Board meeting. As per Regulation 76 of “Table
A”, subject to the articles, chairman is the chief authority in the conduct
and control of Board meeting. He is given a ‘second’ or ‘casting’ vote in
the case of an equality of votes.
In the Companies Act, 2013 there is a provision of compulsory
appointment of woman director. Every company shall have atleast one of
the directors who has stayed in India for 182 days or more in the previous
calendar year. Such provision was absent in the Companies Act, 1956. In
Addition, The Companies Act, 2013 provides that li sted public company
shall have at least one third of the total number of directors as independent
directors. Such provision was absent in the Companies Act, 1956.
1.7.1 Who can be a Board Chairman ?
1) Only a director of the company can be appointed as a Chairman.
2) There is no requirement that only a whole -time director shall be
appointed as the Chairman. Even a part -time director can be elected as
a chairman.
3) A director need not be a shareholders (unless the Articles require
holding of qualification shares b y the directors) and as such a non -
shareholders director can also be appointed as a chairman at a Board
meeting.
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17

1.7.2 Role of the Chairman at the Board Meetings
1) Chairman has to see that Board meeting has been properly convened
and that the required q uorum i s present in the Board meeting.
2) He has to see that the statutory provisions as laid down by the Act are
complied with.
3) He has to preserve order at the meeting and conduct the deliberations
in an orderly manner.
4) He has t o take care and see that proce edings are conducted in a fair
and impartial manner.
5) He has to act in good faith and to be fair and impartial in the conduct
of his duties.
6) He has to adjourn the meeting, if necessary.
7) He has t o ensure that sense of the meeting is properly and accurately
ascertained.
To be an effective leader and mediator , a Chairman must be trusted by the
other members of the Board and also by the officers and management of
the company as well as the shareholders. In order to gain the trust of peer
Board members, as well a s management, it is important that the Chairman
be fair. A good Chairman should also be open minded and should
encourage Board members to voice their views. This is critically important
because the whole concept of having a Board of directors is based on th e
belief that the best decisions are those that are made after a free and open
sharing of views by people with different types of experiences.


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18 1.8 THE CHIEF EXECUTIVE OFFICER (CEO)
1.8.1 Meaning
A chief executive officer (CEO) is the highest -ranking executive in a
company, whose primary responsibilities include making major corporate
decisions, managing the overall operations and resources of a company,
acting as the main point of communication between the board of directors
(the board) and corporate . Company can have other management
personnel i.e. in addition to the company directors. If empowered by the
articles, in addition to company directors, a company may employ Chief
Executive Officer (CEO) for day -to-day administration

1.8.2 Roles and Respo nsibilities of a CEO
The roles and responsibilities of a CEO vary from one company to
another, often depending on the organizational structure and/or size of the
company. In smaller companies, the CEO takes on a more “hands -on
role”, such as making lower -level business decisions . In larger companies
he usually only deals with high -level corporate strategy and major
company decisions. Other tasks are delegated to other managers or
departments.
The typical duties, responsibilities and job description of a CE O include:
1. Communicating on behalf of the company with shareholders,
government entities and public .
2. Leading the development of the company’s short - and long -term
strategy .
3. Creating and implementing the company or organization’s vision and
mission
4. Evaluati ng the work o f executives of the company, including vice
presidents and presidents .
5. Maintaining awareness of the competitive market landscape,
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19 6. Ensuring that the company maintains high social responsibility .
7. Setting strategic goals and making sure they are measurable and
describable .
8. Work ing closely with the CFO (Chief Financial Officer) to prepare
annual budgets, complete risk analysis on potential investments, and
advise the Board of Directors with regard to investment risk a nd
return .
1.9 COMPANY AUDITORS
1.9.1 Meaning
An auditor is a person authorized to review and verify the accuracy of
financial records and ensure that companies comply with tax laws. They
protect businesses from fraud, point out discrepancies in accountin g
methods and, on occasion, work on a consultancy basis, helping
organizations to spot ways to boost operational efficiency. Auditors work
in various capacities within different industries. Company Auditor means
the independent registered public accounting firm responsible for
conducting the audit of the Company's annual financial statements. In the
case of public companies, the main duty of an auditor is to determine
whether financial statements follow generally accepted accounting
principles. To meet this requirement, auditors inspect accounting data,
financial records and operational aspects of a business and take detailed
notes on each step of the process, known as an audit trail. Once complete,
the auditor’s findings are presented in a report that appe ars as a preface in
financial statements. Separate, private reports may also be issued to
company management and regulatory authorities as well.

1.9.2 APPOINTMENT OF AN AUDITOR
The law under which we appoint lays down the procedure of appointment
of au ditors and also the rights, duties and the functions of the auditor. An
auditor shall be independent. Here we will discuss the appointment of an munotes.in

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20 auditor as per the provisions of the Companies Act, 2013. Within thirty
days from the date of the registration of the Company other than the
Government Company, it’s Board of Directors need to appoint an
individual or a firm as the first auditor of the company. The members shall
ratify the appointment of the first auditor in the first annual general
meeting of the company.
The first auditor of the company holds office from the conclusion of the
first annual general meeting until the conclusion of the sixth annual
general meeting and after this until the conclusion of every sixth meeting.
However, the members of the company ratify the appointment of auditors
at every annual general meeting.
However, in a case where the Board of Directors fails to appoint the first
auditors of the company, they shall inform the members of the Company.
Thus, the members shall appoint t he first auditors of the company within
ninety days at an extraordinary general meeting. The auditor so appointed
shall hold the office until the conclusion of the first AGM.
The Board of Directors shall fill any casual vacancy in the office of the
auditor of a company other than a Government Company within thirty
days. This does not include any casual vacancy arising out of the
resignation of an auditor. However, in case of a casual vacancy arising out
of the resignation of an auditor, the Board of Directo rs shall fill the
vacancy within thirty days. But, the company needs to approve this
appointment at a general meeting within three months of the Board’s
recommendation. Such an auditor shall also hold the office till the
conclusion of the next annual gener al meeting.
1.9.3 Rights and powers of a Company Auditor
According to section 227 (1) of the Companies Act, 1956, a company
auditor has the following rights:
1. Right of Access to Books of Accounts: Every auditor of a Company
has a right of access at all tim es to the books of accounts and vouchers
of the company whether kept at the head office of the company or
elsewhere.
2. Right to obtain Information and Explanations: He has a right to
obtain from the Directors and officers of the company any information
and explanation as he thinks necessary for the performance of his
duties as an auditor.
3. Right to Correct any Wrong Statement: The auditor is required to
make a report to the members of the company on the accounts
examined by him and on every Balance Sheet and Profit and Loss
Account and on every other document declared by this Act to be part
of or annexed to the Balance Sheet or Profit and Loss Account which
are laid before the company in General Meeting during his tenure of
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21 4. Right to visit Branches: According to section 228, if a company has a
branch office, the accounts of the office shall be audited by the
company’s auditor appointed under section 224 or by a person
qualified for appointment as auditor of the company under section 226.
5. Right to Sign ature on Audit Report: Under section 229, only the
person appointed as auditor of the company, or where a firm is so
appointed, only a partner in the firm practicing in India, may sign the
auditor’s report, or sign or authenticate any other document of the
company required by law to be signed or authenticated by the auditor.
6. Right to receive Notice relating to General Meeting : Under section
231 an auditor of a company has a right to receive notices and other
communications relating to General Meeting in th e same way as a
member of the company.
7. Right of being indemnified: Under section 633, an auditor (being an
officer of a company), has a right to be indemnified out of the assets of
the company against any liability incurred by him defending himself
agains t any civil and criminal proceedings by the company if it is
proved that the auditor has acted honestly or the judgement delivered
is in his favour.
8. Right to have Legal and Technical Advice: He has a right to seek
the opinion of the experts and, thus, take legal and technical advice.
This is necessary to give his opinion in his report.
1.9.4 AUDIT REPORT
The auditing of the accounts of a company is usually done by an
independent external auditor. An audit report is a letter from the auditor of
a company t hat is the end result of the audit process. It states the auditor’s
opinion on whether the company’s financial statements such as the
balance sheet are in compliance with the generally accepted accounting
principles (GAAP) and if they are free from materia l misstatement.
The audit report is generally accompanied by the company’s annual
report. The audit report is required by banks, financial institutions,
investors, creditors, and regulators. When the auditor issues a clean report,
it means that the company ’s financial statements have been found to be
fully compliant with accounting standards. An unqualified report will tell
you that the financial statement could have some errors.
Audit reports are very important to a company. Investors rely on the audit
report to assess the financial health of the company and they base many
important decisions on the audit report. Regulatory bodies also read the
audit report as it tells them how accurate the financial information
reported is. When an audit report is adverse it can seriously affect the
company’s status and reputation. It is essential to have good accounting
practices so that the audit of accounts goes well.

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22 1.9.5 Types of audit report
An auditor releases an audit report that states the auditor’s opinion on the
financial statements of the company. There are four common types of
auditors reports:
a) Clean audit report :
This is the best type of report that a company can receive from an auditor.
A clean report is one that states that the financial statements of the
company fully comply with GAAP and are free of any material
misstatement. It indicates that the auditors are satisfied with the
company’s financial reporting and that they comply with the governing
principles and laws applicable. Most audits resul t in clean audit reports.
b) Qualified opinion:
There are two situations in which a qualified report would be issued by the
auditor. -1) If there are material misstatements in the financial statements
but they are not pervasive, 2) If there is insufficient evidence to base the
audit opinion on but the possible effects of any material misstatements are
not pervasive.
The problem areas where there has been some calculation mistake will
usually be specified by the auditors in the reports. This enables the
company to fix the errors. When we use Tally software for our accounting,
we stay in compliance with regulations and there is no scope for a
calculation error in computing the reports.
C) Adverse opinion:
An adverse opinion on an audit report is the worst possi ble report that we
can get. An adverse opinion means that the misstatements in the financial
statements are both material and pervasive. An adverse opinion can
damage a company’s reputation and even have legal ramifications unless
the issues are corrected. There are chances that the errors could have crept
in by mistake, but they could also be the result of fraud. If there is an
adverse opinion on account of illegal activities in the company, the
corporate officers may face criminal charges. Investors and r egulators will
also reject the company’s financial statements as a result of the adverse
opinion in the audit report. If there are errors that were corrected, the
company will have to have their financial statements re -audited satisfied
before the statemen ts are accepted.
d) Disclaimer of opinion:
An auditor would issue a disclaimer of opinion if:
a) The auditor was unable to get enough audit evidence to base an opinion
on,
b) They did not get satisfactory answers to their questions,
c) The possible effects of th e undetected misstatements could be material
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23 This may happen if the auditor was denied access to certain financial
information or if the auditor is unable to be impartial. A disclaimer of
opinion means that the financial status of the company could not be
ascertained.
1.9.6 Duties of an Auditor
1. To Enquire:
The duties of an auditor have been extended by the insertion of sub -
section (1A) of section 227 under the Companies (Amendment) Act 1965
which is reproduced below: With prejudice to the pro vision of sub -section
(1), the auditor shall enquire:
a. Whether loans and advances made by a company on the basis of
security have been properly secured and whether the terms on which
they have been made are not prejudicial to the interests of the company
or its members.
b. Whether transactions of the company which are represented merely by
book entries are not prejudicial to the interests of the company.
c. Where the company is not an investment company within the meaning
of section 372 or a banking company, wheth er so much of the assets of
the company, as consists of shares, debentures and other securities
have been sold at a price less than at within they were purchased by
the company.
d. Whether loans and advances made by the company have been shown
as deposits.
e. Whether personal expenses have been charged to revenue account.
f. Whether it is stated in the books and papers of the company that any
shares have been allotted for cash, whether cash has actually been
received in respect of such allotment, and if no cash has actually been
so received, whether the position as stated in account books and the
Balance sheet is correct, regular and not misleading.
2. Under section 227 (2, 3, 4 and 5), the duties of the auditor which relate
to his report are given hereunder:
The Report : The auditor shall report to the shareholders on the accounts
examined by him. The report so submitted shall contain the following:
a. Whether, in his opinion, the Profit and Loss Account referred to in his
report exhibits a true and fair view of the profit or loss.
b. Whether, in his opinion, the Balance Sheet referred to in his report is
properly drawn up so as to exhibit a true and fair view of the state of
affairs of the business according to the best of the information and
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24 c. Whether he has obtained all the information and explanations which to
the best of his knowledge and belief were necessary for the purpose of
his audit.
d. Whether, in his opinion, proper books of accounts as required by law
have bee n kept by the company so far as appears from his examination
of those books, and proper returns adequate for the purpose of his
audit have been received from branches not visited by him.
e. Whether the report on the accounts of any branch office audited under
section 228 by a person other than the company’s auditor has been
forwarded to him as required by (c) of sub -section (3) of that Section
and how he had dealt with the same in preparing the auditor’s report.
f. Whether the company’s Balance Sheet and Profit a nd Loss Account
dealt with by the report are in agreement with the books of accounts
and returns.
1. Where any of the matters referred to above is answered in the negative
or with a qualification, the auditor’s report shall state the reason for the
answe r.
2. Under section 227 (4A), the Central Government may, by general or
special order, direct that, in the case of such class or description of
companies as may by specified in the order, the Auditor’s Report shall
also include a statement on such matters as may be specified therein.
3. The Central Government before making any such order may consult
the Institute of Chartered Accountants of India constituted under the
Chartered Accountants Act, 1949, in regard to the class or description
of companies, if the Government thinks it necessary.
4. In exercise of the powers conferred by sub -section (4A) of section 227
of the Companies Act, 1956, the Central Government has issued the
Manufacturing and other Companies (Auditor’s Report) Order, 1975
which applies to every company which is engaged in one or more of
the following activities:
5. The Company Law Board has now issued a fresh order viz. the
Manufacturing and other companies (Auditor’s Report) order, 1988 which
has superseded the previous order of 1975.
3. Other Statutory Duties : Under section 229, it is the duty of an
auditor to sign the report prepared by him. Only a partner in the firm
practicing in India may sign the Auditor’s Report or authenticate any
other document. Under section 56(1), the Prospectus is sued by an
existing company shall contain a report from the auditor of the
company regarding:
(i) Profits and losses;
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25 (iii) Rates of dividends paid by the company for each of the fiv e it is
auditor’s duty to submit his report.
According to section 165 (4), the auditors of the company shall, in so far
as the statutory report relates to the shares allotted by the company, the
cash received in respect of shares and the receipts and payme nts of the
company, certify it as correct after the same has been certified as correct
by not less than two Directors of the company, one of whom shall be a
Managing Director.
(Every company shall within a period of not less than one month and not
more tha n six months from the date from which the company is entitled to
commence business, hold a General Meeting of the members which shall
be called the statutory Meeting.) 6. When a company goes into its
voluntary winding up and a declaration of solvency is ma de by its
Directors under section 488 (I), such a declaration is to be accompanied by
the report of the auditors of the company under section 488(2). It is the
duty of the auditors to make such a report. Under section 240, it is the
duty of an auditor “to preserve and to produce to an inspector or any
person authorized by him in this behalf with the previous approval of the
Central Government, all books and papers of, or relating to the other body
corporate which are in their custody or poser and otherwise to give to the
Inspector all assistance in connection with the investigation which they are
reasonably able to give “.
1.10 SUMMARY
According to Sec. 2(30), “A director is the officer of the company.”
Directors act as agents of shareholders and look after the management of
the company. Company is an artificial person created by law. It does not
have physical existence. It is invisible and acts through human agency.
This human agency of company management is the Board of Directors.
The individual members of the Board are called Directors and collectively
they form the Board. Every public company by virtue of Sec. 43 A, shall
have at least three directors, private company shall have at least two
directors. [Sec. 252] . Every meeting of the Board of Director s must be
presided over by a chairman. Regulations regarding appointment of a
chairman are given in the Articles of a company. Normally, the Board
elects its chairman for a particular period . Chief executive officer (CEO) is
appointed as the highest -ranki ng executive in a company, whose primary
responsibilities include making major corporate decisions, managing the
overall operations and resources of a company, acting as the main point of
communication between the board of directors (the board) and corpora te.
An auditor is appointed by Board of Directors. He is a person authorized
to review and verify the accuracy of financial records and ensure that
companies comply with tax laws. They protect businesses from fraud,
point out discrepancies in accounting m ethods and, on occasion, work on a
consultancy basis, helping organizations to spot ways to boost operational
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26 1.11 EXERCISE
1. Discuss the powers of Chairman of the Board of Directors.
2. Explain the role played by CEO
3. Explain the proc edure of appointment of an Auditor
4. Discuss the duties of Auditor of the company
5. Write short notes on -
a) Qualification of Director,
b) Remuneration of Director




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27 2
COMPANY MEETINGS
Unit Structure:
2.0 Objectives
2.1 Introduction
2.2 Types of Company Meetings
2.3 Shareholders Meetings
2.4 Annual General Meeting and Secretarial Duties
2.5 Board Meetings
2.6 Secretarial Duties – Before, During and after Company Meetings
2.7 Essentials/ Requisites of Valid General Meeting
2.8 Notice of the Meeting
2.9 Agenda of the Meeting
2.10 Chairman of the Meeting
2.11 Quorum at the Meeting -Concept & Statutory Provisions
2.12. Proxy at the Meeting -Concept & Statutory P rovisions
2.13 Motion
2.14 Resolution
2.15 Minutes –Concept, Types and Methods
2.16 Voting
2.17 Summary
2.18 Exercise
2.0 OBJECTIVES
After studying the unit the students will be able to:
 Explain the types of Company Meetings
 Understand the concepts No tices, agenda, Chairman, Quorum and
Proxy
 Explain the Statutory Provisions related to Notices, agenda, Chairman,
Quorum and Proxy
 Understand the concepts and types of Motion, Resolution, Minutes,
Minutes
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28 2.1 INTRODUCTION
Company forms of business org anisation wherein capital is contributed by
shareholders and management is entrusted in the hands of Board of
directors are popular form of business entities. Here the company
meetings plays very important role in decision making and policy framing.
Moreov er, the company meetings are governed by the specific provisions
laid down Chapter VII “Management and Administration” in the
Companies Act, 2013 and also the rules made there under. Company
secretary should have an eye over the conduct of meetings and
preparations of meetings.
2.2 TYPES OF COMPANY MEETINGS
2.2.1 Meaning and Definition
Meeting is an official gathering of two or more persons for lawful
business . The word “meeting” is not defined anywhere in the Companies
Act. Ordinarily, a company may be def ined as gathering, assembling or
coming together of two or more persons (by previous notice or by mutual
arrangement) for discussion and transaction of some lawful business.
Following are the few definitions of meeting:
In the case of Sharp vs. Dawes (197 1), the meeting is defined as “An
assembly of people for a lawful purpose” or “the coming together of at
least two persons for any lawful purpose.”
According to P.K. Ghosh “Any gathering, assembly or coming together
of two or more persons for the transacti on of some lawful business of
common concern is called meeting.”
According to K. Kishore , “A concurrence or coming together of at least a
quorum of members by previous notice or mutual agreement for
transaction business for a common interest is meeting.”
Thus, company meeting s are very important for discussion and taking
rational decisions in democratic manner. The meeting can be of
shareholders, directors or class meetings of preference shareholders as
well as creditors.
2.2.2 Types of Meeting
Meetings un der the Companies Act, 2013 may be classified as:
1. Shareholders meeting -
a. Annual General Meeting,
b. Extra -Ordinary General Meeting
c. Class Meeting

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29 3. special meeting -
a. Class meeting
b. Creditors meeting

4. Other meet ings:
Meetings of the Debenture holders
Meetings of creditors & contributories
a. Meetings of creditors for purpose other than winding up.
b. Meetings of creditors for winding up.
c. Meetings of contributories in winding up.
2.3 SHAREHOLDERS MEETINGS
Shareholders m eetings are called general meetings. In such meetings,
important matters such as alterations in Memorandum or Articles, election
of directors, approval of annual accounts are discussed and final decision
is taken.
Under the Companies Act, 1956, the first m eeting of shareholders in
public company i.e. statutory meeting was mandatory but now under the
new Companies Act, 2013 that concept is fully done away. Such meeting
was necessary to approve the statutory report in statutory meeting. But
now no need of sta tutory meeting under the new companies Act i.e.
Companies Act, 2013
2.3.1 Annual General Meetings [Section 96]
I) Every company other than a One Person Company (OPC) shall in each
year hold in addition to any other meetings, a general meeting as its
annual ge neral meeting and the company shall specify the meeting as
such in the notices calling Annual General Meeting.
II) The gap between 2 annual general meeting should not exceed 15
months: There should not be more than fifteen months shall elapse
between the date of one annual general meeting of a company and that
of the next first annual general meeting. It shall be held within a
period of nine months from the date of closing of the first financial
year of the company and in any other case, within a period of six
months, from the date of closing of the financial year:
 Extension of time : Provided also that the Registrar may, for any
special reason, extend the time within which any annual general
meeting, other than the first annual general meeting, shall be held, by a
period not exceeding three months.

 Day, Hour and place of AGM : Every annual general meeting shall
be called during business hours, that is, between 9 a.m. and 6 p.m. on
any day that is not a National Holiday and shall be held either at the
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30 town or village in which the registered office of the company is
situated.

 Notice of meeting: A general meeting of a company may be called by
giving not less than clear twenty -one days ‘noti ce either in writing or
through electronic mode in such manner as may be prescribed:

Section 101. Notice of meeting.
1) A general meeting of a company may be called by giving not less than
clear twenty -one days‘ notice either in writing or through electroni c
mode in such manner as may be prescribed:

Provided that a general meeting may be called after giving a shorter
notice if consent is given in writing or by electronic mode by not less
than ninety -five percent of the members entitled to vote at such
meet ing.

2) Every notice of a meeting shall specify the place, date, day and the
hour of the meeting and shall contain a statement of the business to be
transacted at such meeting.

3) The notice of every meeting o f the company shall be given to
(a) every member of the company, legal representative of any
deceased member or the assignee of an insolvent member;
(b) the auditor or auditors of the company; and
(c) every director of the company.

4) Any accidental omission to give notice to, or the non -receipt of such
notice by, any member or other person who is entitled to such notice
for any meeting shall not invalidate the proceedings of the meeting.

Section 97. Power of Tribunal to call annual general meeting.
1) If any default is made in holding the annual general m eeting of a
company under section 96, the Tribunal may, notwithstanding
anything contained in this Act or the articles of the company, on the
application of any member of the company, call, or direct the calling
of, an annual general meeting of the company and give such ancillary
or consequential directions as the Tribunal thinks expedient:

Provided that such directions may include a direction that one member
of the company present in person or by proxy shall be deemed to
constitute a meeting.

2) A general meeting held in pursuance of sub -section ( 1) shall, subject to
any directions of the Tribunal, be deemed to be an annual general
meeting of the company under this Act.

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31 Section 121. Prescribes for the Report on annual general meeting.
1) Every listed publi c company shall prepare in the prescribed manner a
report on each annual general meeting including the confirmation to
the effect that the meeting was convened, held and conducted as per
the provisions of this Act and the rules made there under.
2) The compa ny shall file with the Registrar a copy of the report referred
to in subsection ( 1) within thirty days of the conclusion of the annual
general meeting with such fees as may be prescribed, or with such
additional fees as may be prescribed, within the time a s specified,
under section 403.
3) If the company fails to file the report under sub -section ( 2) before the
expiry of the period specified under section 403 with additional fees,
the company shall be punishable with fine which shall not be less than
one lakh rupees but which may extend to five lakh rupees and every
officer of the company who is in default shall be punishable with fine
which shall not be less than twenty -five thousand rupees but which
may extend to one lakh rupees.
Sections 96 to 98. Punishme nt for not calling AGM in time:
Punishment for default in complying with provisions of
If any default is made in holding a meeting of the company in accordance
with section 96 or section 97 or section 98 or in complying with any
directions of the Tribunal, the company and every officer of the company
who is in default shall be punishable with fine which may extend to one
lakh rupees and in the case of a continuing default, with a further fine
which may extend to five thousand rupees for every day during whi ch
such default continues
2.3.2 Extraordinary General Meetings
Annual general meetings are conducted every year so there is a long -time
gap between two AGMs .So, if any matter of urgent nature arises it can be
urgently dealt with Extra ordinary general mee ting.
All the discussion done at such extra ordinary meeting shall be treated as
special business. Calling such an EGM and conducting such EGM shall be
same as convening and conducting AGM. The notice of such meeting
must be sent 21 days in advance before the date of meeting. Quorum must
be 5 members for Public limited company and 2 members for Private
limited company. The resolution passed at such meeting must be filed with
ROC within 30 days from the date of passing of the resolution.
Section 100. Govern s Calling of extraordinary general meeting.
(Convened by directors - Convened by directors on the requisition of the
shareholders u/s 100)
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32 1) The Board may, whenever it deems fit, call an extraordinary general
meeting of the company.

2) The Board shall , at th e requisition made by,
a) in the case of a company having a share capital, such number of
members who hold, on the date of the receipt of the requisition, not
less than one -tenth of such of the paid -up share capital of the
company as on that date carries the right of voting;

b) in the case of a company not having a share capital, such number of
members who have, on the date of receipt of the requisition, not less
than one -tenth of the total voting power of all the members having
on the said date a right to vot e, call an extraordinary general meeting
of the company within the period specified in sub -section ( 4).
3) The requisition made under sub -section ( 2) shall set out the matters for
the consideration of which the meeting is to be called and shall be
signed by t he requisitionists and sent to the registered office of the
company.
4) If the Board does not, within twenty -one days from the date of receipt
of a valid requisition in regard to any matter, proceed to call a meeting
for the consideration of that matter on a day not later than forty -five
days from the date of receipt of such requisition, the meeting may be
called and held by the requisitionists themselves within a period of
three months from the date of the requisition.
5) A meeting under sub -section ( 4) by the requisitionists shall be called
and held in the same manner in which the meeting is called and held
by the Board.
6) Any reasonable expenses incurred by the requisitionists in calling a
meeting under sub -section ( 4) shall be reimbursed to the requisitionist s
by the company and the sums so paid shall be deducted from any fee
or other remuneration under section 197 payable to such of the
directors who were in default in calling the meeting.
 Secretarial duties and functions relating to EGM:
1. Before EGM:
 Scheduli ng the Board meeting prior to EGM
 Circulating the notice of the meeting
 Sending proxy forms along with notice of the meeting
 Making suitable arrangements for the meeting
2. During EGM:
 Reading the company EGM meeting notice
 Ascertaining quorum
 Providing all necessary information and documents to chairman of
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33  If demanded, arranging for the poll
 Taking notes of the proceedings of the meeting.
3. After EGM:
 Recording resolution passed in the meeting
 Drafting minutes of the meeting.
 Filing minutes with R egistrar within 30 days of the meeting.
2.3.3 Class Meeting of Shareholders covers class meet ings of
preference shareholders
These meetings are convened and conducted when matters relating
to the rights of specific classes i.e. preference shareholders or d ebenture
holders is proposed to alter, change or vary. The proposed change must be
informed and intimated the concerned members properly. For instance, if
it has been decided to cancel arrears of dividend on cumulative preference
shares then it is importan t to call a meeting of such affected shareholders
and to pass a resolution required under the provisions of the Companies
Act.
2.4 ANNUAL GENERAL MEETING AND
SECRETARIAL DUTIES
Every Company, apart from One -person Company (OPC) must have to
hold in additio n to other meetings, by giving a notice about the meeting,
not more than 15 months in between the date of AGM to the next. A
Company may hold its first AGM within the period of 9 months from
closing of its first financial year otherwise in other cases with in the period
of 6 months. [Section 96(1) of the Companies Act, 2013]
2.4.1 Agenda of AGM
The agenda of annual general meeting may involve following:
 Minutes of previous meeting must be presented and approved.
 Financial statements must be presented for its shareholders approval.
 The decisions made by directors over the previous years are ratified by
shareholders.
 Shareholders elect the board of directors for upcoming years.
2.4.2 Quorum of meeting
As provided under section 103 of the companies act the quoru m of the
company will be:
1. In case of public company should be:
 Five personally present in case the total member on date of the
meeting does not exceed 1000,
 15 in case more than thousand but less than five thousand and; munotes.in

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34  30 in case of more than 5000 member s on the date of meeting.
2. While in the case of a private company only 2 members if personally
present will make up the quorum of the meeting.
3. It has been also provided that in case the quorum is not fulfilled within
half an hour the scheduled time of the meeting then the meeting would
be adjourned to the same day of the next week.
4. In case the quorum is not filled within half an hour in the adjourned
meeting then the present members would form the required quorum for
the meeting.
 Provided that in case of an adjourned meeting or of a change of day,
time or place of meeting under clause ( a), the company shall give not
less than three days’ notice to the members either individually or by
publishing an advertisement in the newspapers (one in English and
one in vernacular language) which is in circulation at the place where
the registered office of the company is situated.
5. In the case of the meeting by requisition under section 100, the
meeting stand cancelled in case of lack of quorum as provided under
section 103(2)
 Notice of Meeting
Notice is written invitation sent to shareholders regarding their AGM.
Following are the requirements of notice for general meeting of
shareholders:
1. Every member of the company should receive notice of meeting in
written form.
2. Notices shall be sent other important persons such as auditors,
secretarial auditor, and debenture trustees if it is necessary.
3. Notice should be sent by hand delivery or by post, ordinary or speed
post or by courier, fax or an e -mail etc.
4. Notice shall be dis played on the website of the company.
5. Notice should clearly specify the nature of meeting and business to be
transacted at meeting.
6. Notice and other accompanying documents should be given at least 21
days in advance of the meeting.
7. No other item other than mentioned in the Notice and agenda should
be taken up at the time of meeting.
8. Attendance slip and proxy form should be attached along with notice
with clear instruction of filling and stamping munotes.in

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35 9. Such meeting convened properly issuing notice should not be
postponed or cancelled.
2.4.3 Annual General Meeting – Company Secretary Functions and
Duties
The Company Secretary is responsible for making all the arrangements for
holding the annual general meetings of the company. He is required to
perform the followi ng functions and duties in this connection.
 Before the Meeting:
1. To convene a Board meeting, after giving notice as per Section 173(3),
as soon as the final accounts are ready, invite the Auditors for their
report and transact the following business (in cas e of listed company,
give advance notice to stock exchange):
i. To consider and discuss the report of Audit Committee on the
Annual accounts.
ii. To approve the accounts and authorise signing of accounts.
iii. To secure Auditor’s report on the accounts.
iv. To approve the draft of the Board’s Report in compliance with the
provisions of Section 134 of the Act and to authorise the Chairman
to sign the Report on behalf of the Board.
v. To consider the payment of dividend, if any, in case it is to be
declared in the Annual Genera l Meeting. (Note: In case of listed
company prior intimation has to be sent to stock exchange of the
Board meeting where recommendation of dividend is proposed to
be considered at least 2 working days in advance vide clause 19 of
listing agreement.)
vi. If the Auditors’ report contains any reservations qualification or
adverse remarks, the Board’s Report must contain explanations
there for.
2. To fix time, date and place for the annual general meeting, approve the
draft notice and also authorise the Secretary to i ssue Notice for the
meeting. The Notice must contain Ordinary Business in accordance
with the provisions of Section 102 of the Act, While fixing the time,
date and place for the annual general meeting, care should be taken
that the time should be during 9 am to 6 pm, the date should not be a
National holiday, and the place should be either the registered office of
the company or some other place within the same city, town or village
in which the registered office of the company is situated.
3. To consider the closure of the Register of Members and the Share
Transfer Books of the Company in compliance with the provisions of
Section 91 of the Act and to authorise the Secretary to arrange for its
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36 4. In case of listed company, a notice in a dvance of at least 7 working
days should be sent to the stock exchange(s) about the proposed dates
for such closure and also to comply with the requirement of stock
exchange for book closure.
5. Immediately after the Board meeting, the stock exchanges should be
informed of the dividends and/or cash bonuses recommended by the
Board and to the shareholders in their Report, and financial
information like
6. The total turnover, gross profit/loss, provision for depreciation, tax
provision and net profit/loss, for the year with comparative figures of
the last year and the amounts appropriated from reserves and
accumulated profits of the previous year’s etc. Such intimation has to
be sent within 15 minutes of closure of the Board meeting.
7. To arrange for the publication i n a newspaper of at least 7 days
previous notice of closure of the Register of Members and the Share
Transfer Books as per Section 91 of the Act.
8. In case of listed company, close the registers for the period as
advertised and inform the all the stock excha nges by giving a notice in
advance of at least 7 working days.
9. To arrange for the printing of the balance sheet, profit and loss
account, reports of the directors and of the auditors and the notice for
the meeting.
10. To issue notice to the shareholders, for at least 21 clear days before the
date of annual general meeting and where it is to be sent by post, it
should be posted 48 hours still earlier in terms of section 101. Notice
of the meeting must also be send to the directors (whether member or
not), audit ors and stock exchanges.
11. If the directors decide for the publication of the Chairman’s statement,
make arrangements for the same.
12. In case of listed company, send six copies of the directors’ report,
balance sheet and profit and loss account and three copie s of the
notices to such stock exchange(s) and one copy of each of them to all
other recognised stock exchanges in India.
13. Check proxies with the Register of Members as and when they are
received, from day to day, so that an up -to-date position is available
till the date of the meeting.
14. To arrange for the printing of attendance slips or attendance register
and ballot papers
15. In consultation with the chairman or the Managing Director, prepare a
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37 16. To prepare Dividend List from the Register of Members/beneficial
owners, as on the last date of the closure of the Register of Members
and the Share Transfer Books.
17. To make arrangement for the printing of a combined document
containing “Notice of Dividend” and “Dividend Warrant”.
 During th e Meeting:
1. To arrange for the collection of admission slips or in the alternative to
get the Attendance Register signed by the shareholders, and to make
them comfortable in their seats, and to look to the comfort and
convenience of the directors and the ch airman.
2. To help the Chairman in ascertaining quorum
3. To read out the earlier meeting minutes.
4. To read out the notice of the meeting if advised by the Chairman.
5. To read out the Auditor’s Report, if advised by the Chairman, when
the item relating to adoption of accounts is taken up for consideration.
6. To produce copies of Memorandum and Articles of Association of the
company
7. To help the Chairman in the conduct of the meeting, particularly in the
conduct of poll, counting of votes etc.
8. To supply to the Chairman any information which he may require in
connection with the queries raised by the shareholders relating to
accounts and other connected matters.
9. Give advance information to the members who are to propose and
second the resolutions to be passed at the meeti ng.
10. To take notes of the proceedings for the purpose of preparing minutes
thereof.
11. To keep at the meeting Register of Members, Minutes Book of the
general meeting containing minutes of the previous annual general
meeting(s), copies of the accounts, notice of the meeting and reports of
the directors and of the auditors.
12. To ensure that the Chairman of the Audit Committee is present at
annual general meeting to provide any clarification on matters relating
to audit and to answer shareholder queries;
 After the Meeting:
1. To prepare minutes of the proceedings.
2. To record the minutes of the meeting and get them signed by the
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38 3. To send intimation of appointment/re -appointment of directors. File
Form DIR -12 with the Registrar o f Companies within 30 days of
appointment along with filing fee.
4. To send intimation of appointment/re -appointment of auditors.
5. To file copies of the special and other resolutions, if any, passed at the
meeting, along with Form MGT - 14 with the Registrar of Companies,
within thirty days of the meeting.
6. To file balance sheet, profit and loss account, reports of the directors
and the auditors and the notice of the meeting in Form AOC -4 within
thirty days of the meeting. Ensure that a copy of Secretarial Audi t
Report obtained from a Secretary in whole time practice as required
under Section 204(1) of the Act, if any, is filed with Registrar of
Companies within 30 days from the date of annual general meeting.
In case of listed company, send a copy of the proc eedings of the
annual general meeting to the stock exchange.
7. Where the company has invited public deposits, a copy of the Balance
sheet shall be forwarded to the RBI
2.5 BOARD MEETINGS
2.5.1 Types of Board Meetings
 Meetings of the Board Committees
A membe r of the Committee appointed by the Board or elected by the
Committee as Chairman of the Committee, in accordance with the Act or
any other law or the Articles, shall conduct the Meetings of the
Committee. If no Chairman has been so elected or if the elect ed Chairman
is unable to attend the Meeting, the Committee shall elect one of its
members present to chair and conduct the Meeting of the Committee,
unless otherwise provided in the Articles.
 Meetings of Board of directors/Board Meeting.
Board is collect ive name for all the directors of the company. It is the
decision -making authority which frames policies for the smooth flow of
business of the company. Board of directors are the representatives of the
shareholders of the company and they meet frequently through board
meetings.
1. Under Section 173 of the Act, this provision of the board meeting is
applicable to all types of companies including one -person company.
2. The first board meeting is mandatory to be held within thirty days of
the incorporation of the company and subsequent to that the company
should hold a minimum of four meetings of the board of directors.
3. One of the most important aspects is that not more than 120 days gap
should be there between two such meetings. One Person Company munotes.in

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39 shall convene a t least one board meeting in half calendar year and the
gap between two meetings should not exceed by more than 90 days.
4. The meeting can be done by way of video conferencing or any other
audio -video means. The central government may decide upon
exceptions , modifications or conditions of the companies or class of
companies to be excluded from the applicability of this section and it
can also decide which matters can’t be decided upon by way of video
conferencing.
5. SS - 1 – SECRETARIAL STANDARD ON MEETINGS OF THE
BODs prescribes the rules and regulation of a valid board meeting.
2.5.2 Notice for Board Meeting
Following are the requirements of notice for Board meeting :
1. A minimum notice of not less than seven days has to be provided to
every director of the comp any about the meeting at his registered
address in the company by way of post or by e -mode.
2. The meeting can be called at a shorter notice. In the case of absence of
the independent director, decisions of such meeting should be
circulated to every director and should also be ratified by at least one
independent director.
3. Notice should be sent by hand delivery or by post, ordinary or speed
post or by courier, fax or an e -mail etc.
4. Notice should specify the day, date, time and full address of venue of
meeting . Meeting can be conducted including public holiday and at
any place.
5. The agenda and notes on agenda should be given at least 7 days before
the date of meeting
6. The notice should also specify that a member have right to appoint
proxy who need not to be a me mber in the company.
7. Notices, agenda and notes on agenda can be given at shorter period
than 7 days if majority of members are of Board or committee as the
case may be, agree.
8. Any supplementary item which is not originally included in the agenda
shall be t aken up for discussion in the meeting with the permission of
chairman and with the consent of majority of directors present in the
meeting. But if such an item is significant should be taken up by the
board without prior written notice.
2.5.3 Quorum for bo ard meeting
1. As per section 174, the quorum for the board meeting is 1/3rd of the
total strength of the board of director or two, whichever is highest. munotes.in

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40 2. The participation of the directors by video conferencing or by other
audio -visual means shall be counted for the purpose of quorum under
this sub -section.
2.5.4 Agenda of board meeting
As per Companies Act, it is not mandatory to send agenda along with
notice of board meeting but it is sent for their convenience to facilitate
speedy decision making. Approval of earlier meeting minutes, issue of
shares, debentures, review of financial position of the company, allotment,
transfer and transmission of shares, profit distribution, determining rate of
dividend and fixing future period policies are routine matters in cluded in
the agenda of board meeting.
Following are the provisions of the Act for agenda:
1. Agenda and notes on agenda should be given to directors at least seven
days before the date of meeting.
2. Agenda and notes on agenda should be sent by hand delivery o r by
post, ordinary or speed post or by courier, fax or an e -mail etc.
3. If a director mentions specific means for the delivery of agenda and
notes on agenda, then it should be sent to him by such means.
4. Agenda and notes on agenda shall be sent to original d irector at the
address registered with company.
5. Notes on items of business which are in the nature of unpublished
price sensitive information may be given at a shorter period of time
than stated above, with the consent of majority of directors, which
shoul d include at least one independent director, if any.
6. Supplementary notes on any agenda items may be circulated at or prior
to the meeting but shall be taken up with the permission of chairman
and with the consent of majority of directors.
2.5.5 Duties of c ompany se cretary regarding board meeting
The company secretary has to play very significant role in the conduct of
board meeting. He has to perform following duties and functions before,
during and after the meeting.
 Before the meeting
1. Fixing the date, tim e and place of meeting in consultation with
chairman.
2. Issuing notices and agenda to all the directors as per the directions of
chairman or as directed by the authority convening Board meeting.
3. Keeping required papers and documents ready such as periodical
financial statements, bank pass book, trading returns and transfer munotes.in

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41 statements, minutes of board meetings etc. This will facilitate the
smooth conduct of meeting.
4. Arrangement of the board room for meeting by fulfilling the
requirements of stationery and oth er equipments.
 During the meeting
1. Ascertaining quorum and obtaining the signature of directors who are
present in the “Directors Attendance Book”.
2. Reading the notice of meeting and minutes of previous meeting and to
obtain the signatures of the chairman on the minutes after they are
confirmed by the directors.
3. Providing information and taking the notes of the proceedings of the
meeting. These notes will help to write minutes in accurate manner.
 After the meeting
1. Preparing the minutes of the meeting and ente ring same in Minutes
Book within 30 days of the meeting.
2. Implementation of decisions taken in the board meeting and to carry
out the instructions issued by the board. The secretary of the company
should perform statutory duties specifically imposed on him.
3. Every company shall keep Minutes of all Board and Committee
Meetings in a Minutes Book. Minutes kept in accordance with the
provisions of the Act evidence the proceedings recorded therein.
Minutes help in understanding the deliberations and decisions take n at
the Meeting.
2.6 SECRETARIAL DUTIES – BEFORE, DURING AND
AFTER COMPANY MEETINGS
Company secretary occupies a pivotal position in company administration.
He is closely connected with conducting company meetings. He needs to
perform various functions b efore, during and after the company meetings.
He is responsible for conducting all businesses relating to meetings
lawfully. He ensures that all the meetings are properly convened and
accurately recorded. The company secretary studies all the provisions of
Indian Companies Act, 2013 in relation to Company meetings. Before
organizing any meeting, he makes preliminary arrangements. A high level
of planning and precision is required for flawless company administration
and management. He follows all the prov isions governing the company
meetings. His importance in the company is known to all the members and
others. His duties relating to company meetings are divided into the
following three categories.

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42 1. Secretarial Duties Before Meetings
The company secreta ry prepares the notice and agenda of meeting to be
circulated among the members. The venue, day, date time is mentioned in
notice. Agenda specifies the list of items of businesses to be transacted at
the meeting. He also gets the entire documents ready in advance which are
essential for the smooth conduct of the meeting. For instance, Annual
Report is very important to be presented in AGM. Various documents are
necessary for discussion and decision making at the board meeting. Hence,
secretary gets done all the preliminary requirements of the meetings before
hand.
2. Secretarial Duties During Meetings
It is the duty of the company secretary to keep an eye on quorum when the
meeting commences. He helps chairman to ascertain the quorum for the
smooth conduct of meeting. He has to read the minutes of earlier meeting
before the commencement of the meeting. During the meeting, he remains
present, takes notes of the proceedings of the meetings, and makes
arrangements for voting. He reads the reports as per the instru ction of the
chairman. During the course of meeting, he needs to provide pertinent
information if any issue is raised by the members. He looks after that all
the items of the agenda are properly taken for the discussion.
3. Secretarial Duties After Meetings
The main task after the meeting is writing minutes. Company secretary
drafts the minutes of the meetings and place it before the chairman for
consideration and approval. He plays the role of executive officer for the
decisions taken at the meeting. He ha s to communicate the newly
appointed persons i.e. company auditors for next financial year by sending
the letters of appointments. He also ensures whether the dividend is paid
to all the members before the due date. Company secretary is required to
submit the copies of resolutions to ROC as per legal requirements. He is
also assisted by his subordinates for post - meeting drafts and other related
work.
Thus, company meetings are inevitable in the company form of business.
Secretary extends required support a nd co -operation to the chairman and
directors for conducting meetings in orderly manner.
2.7 ESSENTIALS /REQUISITES OF VALID GENERAL
MEETING
Every company meeting to be valid meeting must comply with certain
requirements. These requirements are the essen tial requisites for valid
general meeting which are elaborated as follows:
a. A meeting must be properly convened: It means the meeting must
be called by competent authority as per the provisions of the Articles
of the Company. The company's board of directo rs has the right to
convene a general meeting. A single director has no power to convene munotes.in

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43 a meeting. The secretary of the company has no authority to call a
general meeting unless the Board resolves and authorizes him to do so.

b. A meeting must be duly const ituted properly: A company meeting
must be properly scheduled. Minimum number of members required to
constitute a valid meeting and to transact business therein is called
‘quorum’. No meeting can be valid without quorum. Any resolution
passed at a meeting without quorum shall be invalid. Usually, Quorum
is fixed by the Articles of Association.

c. A meeting must have proper person in Chair: Every meeting of the
company must be presided over by a chairman who regulates and
supervises the proper conduct the busi ness at a meeting. He decides all
incidental questions arising in the course of the proceedings of the
meeting. Chairman acts bonafide and in the best interest of the
company as a whole. Articles usually provide the mode of
appointment of the chairman of a meeting. If the articles do not
provide otherwise, the members personally present at the meeting shall
elect one of them to be the chairman thereof on a show of hands [Sec.
175 (2)]. Chairman of the board usually act as the chairman of the
meetings of mem bers and directors.

d. A meeting must be properly conducted and accurately recorded:
A company meeting is conducted for lawful purpose and legal
provisions are followed for the conduct of the meeting. The quorum is
ascertained before the beginning of the meeting. Voting must be done
impartially at the meeting. Irregular voting is invalid. The decisions
held at the meeting must be recorded properly in the form of minutes
and resolutions.

e. Following are the five significant formalities essential for
conveni ng and constituting company meetings:
 Notice
 Agenda
 Quorum
 Chairman
 Proxy
2.8 NOTICE OF THE MEETING
As per Section 101 of Companies Act, 2013, the general meeting of a
company can be convened by giving a notice of not less than 21 days,
either in writing or through electronic mode. A notice of meeting is served
upon members of the company, legal representatives of a deceased
member, auditors and directors of the company. Notice contains the
information about day, date, time and venue of the meeting. It a lso
includes the agenda i.e. business to be transacted in the meeting. Such
business is general business i.e., appointment of auditor, approval of
director report, and declaration of rate of dividend. Special business
includes, alteration in M/A, and A/A. Secretary by drafting notice of munotes.in

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44 meeting completes first formality regarding meeting. Notice is a kind of
invitation given to concerned members. The company secretary should
take all precautions so that there is no omission is serving notice to
concerned me mbers who are entitled to receive the same.
As far as board meeting is concerned, a reasonable notice must be issued.
The idea behind issuing notice well in advance is to enable members to
make arrangement for attending meeting conveniently. Notice of boa rd
meeting shall be in issued in writing to all the board of directors. The
person who is authorized to send notice must send the meeting notice.
2.9 AGENDA OF THE MEETING
The word agenda has been derived from the Latin word which means to
“drive on” or “to set in motion” what is known in English as an agenda is
list of individual items which must be acted upon or processed. It is an
ordered sequence of items to be discussed in formal meeting. In short,
Agenda of meeting means points to be discussed in a meeting. An
agenda lists the items of business to be taken up during a meeting or
session. It is usually sent along with notice of the meeting. It should be
brief and indicative of programs to be discussed and done at the meeting.
Agenda serves as the fou ndation of the company meeting business. It
gives a clear idea to concerned members about nature of business of
company meetings. Secretary while drafting notice and agenda takes
precaution that the points of agenda are arranged in logical order. The
agend a ensures and smooth conduct of meeting. Depending upon the
nature and type of meeting, agenda varies. The business of meeting is
conducted as per the items listed in agenda. Agenda facilitate the
member’s preparation for the meeting. No important matter is skipped or
omitted due to agenda.
The objective of an agenda is to:
1. Familiarise participants with the topics to be discussed and issues to be
raised,
2. To show what prior knowledge would be expected from the
participants,
3. To indicate what outcome the pa rticipants may expect from meeting.
2.10 CHAIRMAN OF THE MEETING
2.10.1 Meaning
The chairman enjoys special status in the meeting. If no chairman is
present within 15 minutes of the meeting or unwilling to act as a chairman
of the meeting, the directors present shall elect one amongst themselves to
be a chairman of the meeting.
The person who has been elected to preside over the meeting and conduct
the proceedings of the meeting in smooth manner is called chairman. He is munotes.in

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45 in charge of meeting and his prese nce is of utmost importance for the
orderly functioning of meeting.
Normally Articles of Association provides for the appointment of
Chairman and his rights and duties. In the absence of such provisions the
members present in the meeting elect one of them to be the chairman.
2.10.2 Se ction 104. Chairman of meetings
1. Unless the articles of the company otherwise provide, the members
personally present at the meeting shall elect one of themselves to be
the Chairman thereof on a show of hands.
2. If a poll is dem anded on the election of the Chairman, it shall be taken
forthwith in accordance with the provisions of this Act and the
Chairman elected on a show of hands under sub -section ( 1) shall
continue to be the Chairman of the meeting until some other person is
elected as Chairman as a result of the poll, and such other person shall
be the Chairman for the rest of the meeting.
2.10.3 D uties and functions of chairman
1. The chairman has to see that the meeting is properly convened over
which he is presiding. Chairpers on should outline the purpose of the
meeting and remind members why they are there.
2. He must ensure that the meeting is properly convened and constituted
i.e. that proper notice has been given, that the required quorum is
present, etc.
3. He must ensure that the provisions of the act and the articles in regard
to the meeting and its procedures are observed.
4. He must ensure that business is taken in the order set out in agenda and
no business which is not mentioned in the agenda is taken up unless
agreed to by the members.
5. He must impartially regulate the proceedings of the meeting and
maintain discipline at the meeting.
6. He may exercise his powers of adjournment of the meeting, should be
in good faith feel that such a step is necessary. The chairman has the
powe r to adjourn the meeting in case of indiscipline at the meeting. A
chairman however does not have the power to stop or adjourn the
meeting at his own will and pleasure. If he adjourns the meeting
prematurely, the members present may decide to continue the meeting
and elect another chairman and proceed with the business for which it
was convened.
7. He must exercise his power to order a poll correctly and must order it
to be taken when demanded properly.
8. He must exercise his casting vote bonafide in the interes t of the
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46 9. The chairman has power to give ruling on the interpretation of the
rules and all the members are abided by his ruling.
10. He also has to see that all the resolutions passed in the meeting must
be properly entered in Minutes book.
11. To decide t he priority of speakers is also one of the important duties of
chairman of the meeting.
2.10. 4 Rights and powers of chairman
1. He must ensure that the meeting is properly convened and constituted.
2. He has power to decide the priority of members and he has to see that
all the members get the equal and fair opportunity to speak in the
meeting.
3. He has power to stop the meeting if he feels that the enough discussion
has been done on the respective motion. Thus he has power to stop
irrelevant discussion in the meet ing.
4. He has right to adjourn the meeting when the quorum is not available.
5. To maintain the order and decorum in the meeting and to perform this
duty he may exclude certain matters, remarks from the meeting that is
defamatory or irrelevant. (Section 193)
6. He has right to stop any of the speaker who is exceeding over the time
allotted to him.
7. He has right to exercise his casting vote in case of tie.
2.11 QUORUM OF THE MEETING
Quorum is an essential pre -requisite for a valid meeting. The business of
the meetin g is not conducted if quorum is not available. The word quorum
is derived from the Latin language which means ‘the minimum number of
persons who must be present at the meeting’ as required under the law.
Under the companies Act,2013 the quorum for a Gener al Meeting, a
Board Meeting and an Extraordinary General Meeting is enumerated with
its provisions:
Section 103 of the Act states the quorum required for a General Meeting.
Under this Section, unless the Articles of Association of the company
provide for a larger quorum, the minimum quorum must be:
For public companies
 5 members to be present if as on the date of the meeting being held,
the number of members in the company does not exceed one thousand.

 15 members to be present if as on the date of the me eting there are
more than one thousand members but less than five thousand
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47  30 members to be present if as on the date of the meeting there are
more than five thousand members.
For private companies:
In case of private company regardless of number of members, two
members must be present for the quorum to be met for a meeting.
Legal provisions regarding quorum
1. Members present in proxies’ are not counted for ascertaining quorum.
2. Preference shareholders and equity shareholders without voting rights
are also excluded while counting quorum.
3. If within half an hour from the time scheduled for holding the meeting,
the quorum is not present, the meeting shall be adjourned to the same
day in the next week at the same time and place or to such other day,
time and place as the Board of directors may determine and notify.
4. If in the adjourned meeting also, quorum is not present within half an
hour from the time scheduled for holding the meeting, members
present shall be the quorum.
5. Quorum must be present thro ughout the meeting.
2.12 PROXY – CONCEPT & STATUTORY PROVISIONS
2.12.1 Meaning
The term “proxy” has been used to denote both the instrument and the
person appointed through the instrument. The term is not defined in the
Act.
Secretarial Standard -2 defines the term as “Proxy means an instrument
in writing signed by a Member, authorising another person, whether a
Member or not, to attend and vote on his behalf at a Meeting and also
where the context so requires, the person so appointed by a Member”.
Black’s Law Dictionary [9th Edition, Page 1346] defines the term
“proxy” as “One who is authorized to act as a substitute for another; in
corporate law, a person who is authorized to vote another’s stock shares”.
2.12.2 Right of member to appoint a proxy
1. Sub-section (1) of section 105 enables a member, who is entitled to
attend and vote to appoint another person as a proxy to attend and vote
at the meeting on his behalf.
2. However, a proxy so appointed cannot speak at a meeting though he
may vote on poll.
3. A membe r may appoint one or more proxies to vote in respect of the
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48 the alternative, so that if the first named proxy fails to vote, the second
one may do so, and so on.
4. Second proviso to sub -section (1) provides that the said sub -section
does not apply to a company not having share capital unless the
articles otherwise provide. In other words articles of a company not
having share capital may entitle a member to appoint a proxy to attend,
speak and vote on behalf of himself. Alternatively, the articles of such
company may restrict the right of the member to appoint proxy.
5. Limitation on right of member of section 8 company Rule 19 (1)
provides that a proxy shall be a member of the company in case of
companies registered under section 8 of the Act.
6. Deposit of proxy instrument Sub -section (4) of section 105 read with
SS-2 clause 6.6.1 provides that the proxies shall be deposited with the
company either in person or through post. The proxies are to b e
deposited not later than 48 hours before the commencement of the
meeting in relation to which they are deposited.
7. A proxy shall be accepted on a holiday if the last date by which it
could be accepted is a holiday.
8. Any provision in the articles of a compa ny which specifies or requires
a longer period for deposit of proxy than 48 hours before a meeting of
the company shall have effect as if a period of forty -eight hours had
been specified in or required for such deposit. Hence, the provisions of
the Act wil l override the provisions of the articles.
9. A member of a company not having a share capital shall not be
entitled to appoint proxy unless articles provide so. Central
Government may also specify companies whose members shall not be
entitle to appoint a pro xy.
10. A person appointed as proxy shall not act as proxy for more than fifty
members or for more than prescribed number of shares.
Form No. MGT -11
Proxy form
[Pursuant to section 105(6) of the Companies Act, 2013 and rule 19(3)
of the Companies (Management a nd Administration) Rules, 2014 ]
CIN: U74140MH2006PTC162836
Name of the company: LoyltyRewardz Management Private Limited
Registered office: A -703, TheQube M.V Road, Marol, Andheri -Kurla
Road, Andheri (E), Mumbai -400059
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49 Name of the member (s):
Registered a ddress:
E-mail Id:
Folio No/ Client Id:
DP ID:

I/We, being the member (s) of …………. shares of the above named
company, hereby appoint
1. Name: ……………………
Address:
E-mail Id:
Signature……………., or failing him
2. Name: ……………………
Address:
E-mail Id:
Signature………… ., or failing him
3. Name: ……………………
Address:
E-mail Id:
Signature…………….
as my/our proxy to attend and vote (on a poll) for me/us and on my/our
behalf at the …………. Annual general meeting/ Extraordinary general
meeting of the company, to be held on the …… da y of……. At……….
a.m. / p.m. at………………(place) and at any adjournment thereof in
respect of
such resolutions as are indicated below:
Resolution No.
1Adoption of Balance sheet, statement of Profit and Loss, Auditors
Report and Directors Report for the year ende d 31st March, 2015.
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50 2To ratify the appointment of M/s. S R B C & Co. LLP (FRN:
324982E),
Chartered Accountants (Firm Registration No. 101720W) as Statutory
Auditors of the Company

3To appoint Mr. Ajay Kaushal as the director of the company
4 To appoint M r. Mr. Srinivasu Nagesvar Mallapragada as the director
of the company.

Signed this…… day of……… 20….

Signature of shareholder

Signature of Proxy holder(s)
Note: This form of proxy in order to be effective should be duly
completed and deposited at the Re gistered Office of the
Company, not less than 48 hours before the commencement of
the Meeting.

2.13 MOTION
2.13.1 Meaning
Motion is proposal, any subject or topic put forward for discussion,
approval in the meeting. Any member at a meeting who introduces or
moves a subject for discussion it is called a motion. With the permission
of the chairman a motion is moved by an individual. He ‘secures the
floor’, addresses the chairman and makes a short speech in support of the
motion. It is a proposed resolution. Any person puts forward such a
proposal is called ‘mover’ and the one who supports such a motion is
called ‘seconder’. After sufficient discussion, the motion is put to vote. If
majority votes are in favour of the motion, it turns into resolution.
2.13.2 Rules Regarding Motion
1. Every motion should be in writing and signed by the proposer or
mover.
2. It should be clear, precise and unambiguous. Affix
Revenue
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51 3. A motion should be within the scope of properly convened notice of
meeting.
4. The language of motion is normally is ‘affirmative’.
5. Every member present in the meeting can speak only once on the
motion but the proposer can have liberty to speak twice on his
proposed motion.
6. The motion can be proposed or by seconded only by present members.
7. Once proposed, motion cannot be withdrawn without proper
permission in the meeting.
8. A motion can be amended during the discussion in the meeting.
2.13.3 Types of motion
1. Original motion: Original motion is a motion which comes up for the
discussion for the first time a fresh. It is a speci fic item listed in the
agenda. It is proposed by mover and supported by seconder. It initiates
the discussion in the meeting.

2. Formal motion: Such kind of motion may not be subject matter of
original motion, so no previous notice for such motion is require d.
Such motions may be proposed to postpone, end or prevent the
discussion on a specific topic presented in the meeting. Amendments
cannot be made to such formal motions. Following are the types of
formal motions:
a) Closure: Such types of motions are moved i n the meeting to stop
discussion when sufficient time has been already given for the
discussion. For moving such motion, seconding is required. This is to
save valuable time and being wasted on account of irrelevant
discussion and to conclude on the topic.
b) Point of Order: It is a motion meant for expressing objection or
complaint by a member against the speech made by another member.
A member cannot raise a ‘point of order’ because he dis agrees with the
speaker or chairman ordinarily. But he can raise it on any one of the
following justified reasons:
i. Incorrect proce dure of meeting is followed For example, the
chairman allows an item not mentioned in the agenda, to be raised
by a member.
ii. Irrelevant things are said by any member unnecessarily and thereby
wasting time.
iii. If a member uses some unparliamentarily language, i.e. words which
are not allowed to be used inside Parliament
iv. If any rule regarding meetings as given in the bye -laws of the
association is transgressed or violated.
v. When a speaker makes some re marks against any member which are
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52 vi. When a member draws the attention of the chairman that quorum
has fallen due to early leaving of some member or members.
Such a formal motion does not require seconding. The chairman may
approve or disapprove t he point of order and accordingly give his ruling.
He either says ‘Yes, it is out of order’ or ‘No, it is in order’.
Sometimes unnecessarily ‘points of order’ are raised by a member or a
group of members to interrupt the debate and to kill the time so that the
proposal under discussion is not put to vote as he or they fears or fear that
the resolution, which is sure to be passed will go against his or their
interest.
Sometimes a chairman, being biased, consistently disapproves justified
points of order. In that case members in a large majority may raise a ‘No
confidence’ move against the chairman.
3. Substantive motion: Substantive motion known as main motion
which calls for an action or expression of an opinion. One can try to
change the wording of this kind of motion. It is a motion changed due
to an amendment. Thus original motion is changed due to
amendments, is called as substantive motion. It is a modified version
for further discussion in the meeting.
4. Previous question: The purpose of this motion to stop ongoing
discussion and set aside original motion. This is a type of closure
motion which wants to stop discussion and stop taking of votes on a
proposal under discussion. This is a technique by which an undesirable
or controversial proposal is shelved. Any member may move a motion
for the previous question stating that “this question be not now put”.
5. Proceed to next business: The main purpose of this motion is to
stop/prevent further discussion and voting on the original motion.
When members feel that suffi cient information is not before them on
some proposal under discussion they wait to stop taking of votes on
that issue. Any member may propose to ‘proceed to the next business
and another member seconds it. This closure proposal is put to vote. If
passed, no vote is taken on that proposal. If lost, then vote is taken on
that proposal for decision.
6. Adjournment: Adjournment motion is for adjourning debate/
controversy on any motion in the meeting. Any member can move
such motion if he is of opinion that some more information is required
to have proper discussion on specific matter. If such motion is
accepted, the debate is postponed to an agreed date and if the motion is
rejected or lost the debate begins once again.
7. Refer back: This is motion moved on Board of directors meeting. Any
member can move this ‘the matter be referred back’. Another member
shall second it. Now this proposal is put to vote. If passed, then the
matter is referred back. If lost, then discussion is resumed and vote is
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53 meeting, and if directors feel that few need to be studied again then
such director can move such refer back motion.
2.14 RESOLUTION
2.14.1 Meaning
Every resolution is a motion in the past in its earlie r stage. Once the
motion proposed in the meeting is accepted by the majority of members it
becomes the final decision, it is known as resolution. The resolutions must
be clearly and correctly worded.
2.14.2 Types of Resolution
1. Ordinary resolution (section 114)
 An ordinary resolution is a resolution passed by the shareholders of
a company by a simple or bare majority (for example more than 50%
of the vote) either at a convened meeting of shareholders or by
circulating a resolution for signature.
 An ordinary resolution is the most common method by which a
corporate entity conducts its business or the board of directors seeks
shareholder approval of its actions. It means the vote cast in favour of
resolution is more than votes against the resolution. Normally show of
hands or poll methods of voting are used/followed in case of ordinary
resolution.
 These resolutions may not be filed with ROC but they are entered in
Minutes book properly.
 Following are the cases in which ordinary resolution is suffice:
i. Declaring the rate of dividend
ii. Approval of director’s report, auditor’s report
iii. Election of directors
iv. Voluntary winding up of the company
2. Special resolution:
 A special resolution a approved by substantial majority of vote cast i.e.
75% or more. It require absolute majority.
 the votes cast in favour of the resolution, whether on a show of hands,
or electronically or on a poll, as t he case may be, by members who,
being entitled so to do, vote in person or by proxy or by postal ballot,
are required to be not less than three times the number of the votes, if
any, cast against the resolution by members so entitled and voting.
 There shou ld be clear cut intention to treat it as a special resolution
expressed in notice of general meeting. There should be 21 days’
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54  The concerned members must be provided with the text of resolution
21 days in advance before passing such resolution.
 As per section 117, the copy of special resolution must be registered
with ROC within a period of 30 days from the day of its passing.
 In following case the special resolutions are passed:
i. Any alterations in M/A or A/A
ii. Voluntary winding up of the company
iii. Reduction of share capital of the company
iv. Creation of secret reserves
2.15 MINUTES CONCEPT, TYPES AND METHODS
2.15.1Meaning: The term ‘minutes’ means a brief and accurate written
record of business concluded at a com pany meeting. Minutes of meeting
are an official record of the proceedings of a meeting. Minutes help in
understanding the deliberations and decisions taken at the Meeting. There
is no restricted format or language for recording Minutes of meeting.
Minutes are precise and drafted in summary form. Minutes are different
from notes taken during the meeting. Minutes are written after the meeting
whereas notes are taken down during the meeting. Minutes cannot be
challenged if duly approved. The main objective of writing minutes of
meeting is to preserve the written record of business transacted at the
meeting. It helps to record and preserve the record of decisions taken and
resolution passed. Properly written and duly approved minutes serve as a
legal document. Writing minutes is mandatory. Minutes may be preserved
in physical of electronic form.
According to section 118 of the Companies Act, 2013, every company is
required to write and maintain minutes of all meetings within 30 days of
the conclusion of the meet ing.
2.15.2. Minutes of Board Meeting and Provisions as per Act
1. Minutes shall be recorded in books maintained for that purpose.
2. A Distinct Minutes Book shall be maintained for Meetings of the
Board and each of its Committees.
3. Minutes may be maintained in electronic form in such manner as
prescribed under the Act and as may be decided by the Board. Minutes
in electronic form shall be maintained with Timestamp.
4. A company may maintain its Minutes in physical or in electronic form
with Timestamp. Every Company shall however follow a uniform and
consistent form of maintaining the Minutes. Any deviation in such
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55 5. The pages of the Minutes Books shall be consecutively numbered.
This shall be followed irrespective of a break in the book arising out of
periodical binding in case the Minutes are maintained in physical
form. This shall be equally applicable for maintenance of Minutes
Book in electronic form with Timestamp. In the event any page or part
thereof in the M inutes Book is left blank, it shall be scored out and
initialled by the Chairman who signs the Minutes.
6. Minutes shall not be pasted or attached to the Minutes Book, or
tampered with in any manner.
7. Minutes of the Board Meetings, if maintained in loose -leaf form, shall
be bound periodically depending on the size and volume and
coinciding with one or more financial years of the company. There
shall be a proper locking device to ensure security and proper control
to prevent removal or manipulation of the loose leaves.
8. Minutes of the Board Meeting shall be kept at the Registered Office of
the company or at such other place as may be approved by the Board.
2.15.3 Contents of Minutes

1. General Contents
a) Minutes shall state, at the beginning the serial number and type of
the Meeting, name of the company, day, date, venue and time of
commencement and conclusion of the Meeting.

b) Minutes shall record the names of the Directors present physically or
through Electronic Mode, the Company Secretary who is in
attendance at the Meeting and Invitees, if any, including Invitees for
specific items.

c) Minutes shall contain a record of all appointments made at the
Meeting.
2. Specific Contents
Minutes shall inter -alia contain:
a) Record of election, if any, of the Chairman of the Meeting
b) Record of presence of Quorum.
c) The names of Directors who sought and were granted leave of
absence.
d) The mode of attendance of every Director whether physically or
through Electronic Mode.
e) In case of a Director participating through Electronic Mode, his
particulars, the location from where and the Agenda items in which
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56 f) The name of Company Secretary who is in attendance and Invitees,
if any, for specific items and mode of their attendance if through
Electronic Mode.
g) Noting of the Minutes of th e preceding Meeting.
h) Noting the Minutes of the Meetings of the Committees
i) The text of the Resolution(s) passed by circulation since the last
Meeting, including dissent or abstention, if any.
j) The fact that an Interested Director was not present during the
discussion and did not vote.
k) The views of the Directors particularly the Independent Director, if
specifically insisted upon by such Directors, provided these, in the
opinion of the Chairman, are not defamatory of any person, not
irrelevant or immaterial to the proceedings or not detrimental to the
interests of the company.
l) If any Director has participated only for a part of the Meeting, the
Agenda items in which he did not participate.
m) The fact of the dissent and the name of the Director who dissented
from the Resolution or abstained from voting thereon.
n) Ratification by Independent Director or majority of Directors, as the
case may be, in case of Meetings held at a shorter Notice and the
transacting of any item other than those included in the Agenda.
o) The ti me of commencement and conclusion of the Meetings.
2.15.4 Methods of writing minutes
1. Minutes by Resolution: In the first type of minute writing only
decisions taken or approved are noted. This is called as summary
method of writing minutes. Only formal and final decisions and
resolutions are recorded. Such minutes are brief but easy to
understand. Normally such minutes begin with the word “Resolved
that...” after which the exact text of the resolution comes.
2. Minutes by Narration: In this type minutes are wr itten in descriptive
form. The procedure wise details are mentioned along with final
decisions and resolutions. This method gives full information about
the business of the meeting to the reader as it provides full statement
of facts, discussions during t he meeting, suggestions and methods of
voting used also the votes for and against and how final decision
arrived at. This kind of minute writing is popular and preferred.
A company secretary can select any of the above method of minute
writing or the comb ination of these two methods will be good depending
upon nature and proceeding of meeting.
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57 2.15.5 Recording of Minutes
1. Minutes shall contain a fair and correct summary of the proceedings of
the Meeting. The Company Secretary shall record the proceedings o f
the Meetings.
2. Where there is no Company Secretary, any other person duly
authorised by the Board or by the Chairman in this behalf shall record
the proceedings.
3. The Chairman shall ensure that the proceedings of the Meeting are
correctly recorded.
4. The C hairman has absolute discretion to exclude from the Minutes,
matters which in his opinion are or could reasonably be regarded as
defamatory of any person, irrelevant or immaterial to the proceedings
or which are detrimental to the interests of the company.
5. Minutes shall be written in clear, concise and plain language.
6. Minutes shall be written in third person and past tense. Resolutions
shall however be written in present tense.
7. Minutes need not be an exact transcript of the proceedings at the
Meeting. In ca se any Director requires his views or opinion on a
particular item to be recorded verbatim in the Minutes, the decision of
the Chairman whether or not to do so shall be final.
8. Any document, report or notes placed before the Board and referred to
in the Min utes shall be identified by initialling of such document,
report or notes by the Company Secretary or the Chairman.
2.15.6 Finalisation of Minutes
Within fifteen days from the date of the conclusion of the Meeting of the
Board or the Committee, the draft M inutes thereof shall be circulated by
hand or by speed post or by registered post or by courier or by e -mail or
by any other recognised electronic means to all the members of the Board
or the Committee for their comments.
2.15.7 Entry in the Minutes Book
1. Minutes shall be entered in the Minutes Book within thirty days from
the date of conclusion of the Meeting.
2. In case a Meeting is adjourned, the Minutes in respect of the original
Meeting as well as the adjourned Meeting shall be entered in the
Minutes Book within thirty days from the date of the respective
Meetings.
3. The date of entry of the Minutes in the Minutes Book shall be recorded
by the Company Secretary. Where there is no Company Secretary, it
shall be entered by any other person duly authorised by t he Board or
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58 4. Minutes, once entered in the Minutes Book, shall not be altered. Any
alteration in the Minutes as entered shall be made only by way of
express approval of the Board at its subsequent Meeting in which such
Minutes are sought to be altered.
2.15. 8 Signing and Dating of Minutes
1. Minutes of the Meeting of the Board shall be signed and dated by the
Chairman of the Meeting or by the Chairman of the next Meeting.
2. The Chairman shall initial each page of the Minutes, sign the last page
and append to such signature the date on which and the place where he
has signed the Minutes
2.15.9 Inspection and Extracts of Minutes
1. The Minutes of Meetings of the Board and any Committee thereof can
be inspected by the Directors.
2. Extracts of the Minutes s hall be given only after the Minutes have
been duly entered in the Minutes Book. However, certified copies of
any Resolution passed at a Meeting may be issued even earlier, if the
text of that Resolution had been placed at the Meeting.
2.15.10 Preservati on of Minutes and other Records
1. Minutes of all Meetings shall be preserved permanently in physical or
in electronic form with Timestamp.
2. Office copies of Notices, Agenda, Notes on Agenda and other related
papers shall be preserved in good order in physical o r in electronic
form for as long as they remain current or for eight financial years,
whichever is later and may be destroyed thereafter with the approval
of the Board.
3. Office copies of Notices, Agenda, Notes on Agenda and other related
papers of the trans feror company, as handed over to the transferee
company, shall be preserved in good order in physical or electronic
form for as long as they remain current or for eight financial years,
whichever is later and may be destroyed thereafter with the approval
of the Board and permission of the Central Government, where
applicable.
4. Minutes Books shall be kept in the custody of the Company Secretary.
Where there is no Company Secretary, Minutes shall be kept in the
custody of any Director duly authorised for the p urpose by the Board.
2.16 VOTING
2.16.1 Meaning
Voting is a method of expressing opinion in meeting. It’s a very common
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59 restricted to certain people such as shareholders, directors etc . Voting is
necessary in general meetings as well as in board meeting to arrive at
certain decisions. Voting is the expression of opinion in favour or against
any proposal. The word “vote” is derived from the Latin word “Votum”
which means vow, wish.
2.16.2 Methods of voting
The articles of association gives the details of methods of voting for
general meeting in accordance with Companies Act, 2013.
1. By show of hands
This is a simple and popular method of voting in company meeting. The
chairman asks the me mbers present to express their opinion by raising
their hands unless the poll is demanded . Here the rule followed is “one
man, one vote”. The votes for and against counted and Majority wins. This
result is final if no poll is demanded. If there is tie, ch airman can exercise
his casting vote power if provided in the Articles.
2. By Poll
This is another alternative method of voting to show of hands. When
members present are not satisfied with the voting under show of hands can
demand poll. Every member is pro vided with voting paper to indicate his
/her vote “for” or “against” the proposal. This method is superior to show
of hands and treated as final. Here, the member can vote as per his share
qualification. The rule followed is “one share, one vote”. It is a capitalistic
method of voting. This method ensures more secrecy in voting.
3. By Voice/ Acclamation
This is one of the simple and common methods of voting by clapping
hands or applause. Under this method, the chairman asks members present
in the meeting wheth er they are in favour or against the resolution by
saying ‘yes’ or ‘no’. If the volume of voice in favour of resolution is more,
the resolution is accepted and vice versa. When meeting is likely to be
unanimous such type of voting method is applied. Thoug h it is not
reliable and scientific method. If any member demands poll immediately
the results of voice/ acclamation becomes invalid.
4. By division
In this method of voting, the chairman asks the members to divide
themselves into two groups as per for and a gainst the resolution. One
group in one corner of the room and another group at the other corner of
the room. The votes are counted with the help of secretary. If the decisions
of show of hands are challenged then the division method of voting is
adopted.

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60 5. By Ballot
Ballot method is also a secret method of voting normally used in political
elections. In company meeting, it is a very positive step since year 2000.
Ballot means voting through post or through electronic means. It provides
ample of convenience to the shareholders who are unable to attend annual
general meeting can vote through ballot. Every member is provided with
ballot paper to record their vote after which it is deposited in ballot box.
6. Electronic voting
As per Section 108, Electronic voting means voting through electronic
means. Central Government may prescribe the class or classes of
companies and manner in which a member may exercise his right to vote
by the electronic means. This is the most advanced method of voting in
general meetings o f the company. Voting through electronic means
enables the voter to record their vote using computer or mobile.
2.17 SUMMARY
Company meetings are very important for discussion and taking rational
decisions in democratic manner. The meeting can be of shareh olders,
directors or class meetings of preference shareholders as well as creditors.
Company secretary occupies a pivotal position in company administration.
He is closely connected with conducting company meetings. He needs to
perform various functions be fore, during and after the company meetings.
Every company meeting to be valid meeting must comply with certain
requirements. Company secretary needs to implement all the provisions of
the Act for conducting AGMs, EGMs, Class meetings and Board
Meetings. Secretary also ensures that every company meeting must
comply with certain requirements; such as notice, agenda, quorum,
chairman and minutes.
Proxy is an instrument in writing signed by a Member, authorising
another person, whether a Member or not, to at tend and vote on his behalf
at a Meeting and also where the context so requires, the person so
appointed by a Member. Motion is proposal, any subject or topic put
forward for discussion, approval in the meeting. Any member at a meeting
who introduces or mo ves a subject for discussion it is called a motion.
Every resolution is a motion in the past in its earlier stage. Once the
motion proposed in the meeting is accepted by the majority of members it
becomes the final decision, it is known as resolution. Minu tes of meeting
are an official record of the proceedings of a meeting. Minutes help in
understanding the deliberations and decisions taken at the Meeting. Voting
is a method of expressing opinion in meeting. It’s a very common method
of reaching a decision . The right to vote in company meeting is restricted
to certain people such as shareholders, creditors and directors. There are
various methods of voting such as show of hands, voice/acclamation,
ballot, poll, division and electronic voting. Thus, company secretary takes
all the precautions and conduct the company meetings according to
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61 2.18 EXERCISE
1) Explain the duties of company secretary before, during and after the
Annual General meeting?
2) Explain the duties of compa ny secretary before, during and after the
board meeting?
3) What are the different kinds of company meeting?
4) Write short notes on
a. Types of motion
b. Proxy
c. Quorum
d. Chairman
e. Annual general meeting
f. Notice of board meeting
g. Agenda
5) Discuss the kinds of resolution.
6) What are the duties and powers of the chairman?
7) Explain the concept minutes and explain its statutory provisions.
8) State the quorum of board meeting and general meeting.



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62 3
DEMATERIALISATION AND ONLINE
TRADING
Unit structure:
3.0 Objectives
3.1 Introduction to Dematerialization
3.2 Importance of Dematerialization
3.3 Process / Procedure of Dematerialization
3.4 Participants in Dematerialization
3.5 Secretarial Duties in r egard to Dematerialisation
3.6 Online Trading - Concepts
3.7 Bombay Stock Exchange Online Trading (BOLT)
3.8 Listing of Securities
3.9 Scripts
3.10 Summary
3.11 Exercise
3.0 OBJECTIVES
After studying the unit the students will be able to:
 Understand t he meaning and importance of Dematerialization
 Know the Secretarial duties, Procedures, Participants in the
Dematerialization process
 Elaborate the concept online trading and advantages and disadvantages
of online trading.
 Explain the role of Bombay stock exchange in online trading.
 Explain the Procedure, Advantages, Secretarial duties of Listing of
Securities.

3.1 INTRODUCTION TO DEMATERIALIZATION
3.1.1 Meaning of Dematerialization
With the introduction of depository system in 1996 with the passing of
Depository Act to bring more transparency and to avoid delays in share
transfer procedure, dematerialization came in to existence. This enables to
hold share in electronic form which prevents inherent weaknesses of
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63 Demat / demateria lization is the process of converting physical shares into
electronic format. An investor who wants to dematerialize his shares needs
to open a demat account with Depository Participant . Investor surrenders
his physical shares and gets them converted into electronic shares in his
demat account.
According to the Depositories Act, 1996, an investor has the option to
hold securities either in physical or elect ronic form.
3.1.2 Re-materialisation of shares:
The process of converting electronic holdings of securities (shares, stocks,
mutual fund units, bonds, debentures, etc.) into physical form (certificates)
is known as re -materialisation.
A depository is resp onsible for holding the securities of a shareholder in
electronic form. These securities could be in the form of bonds,
government securities, and mutual fund units, which are held by a
registered Depository Participant (DP).
3.2 IMPORTANCE OF DEMATERIALI ZATION
3.2.1 Importance
1. Paperwork Handling related to shares in the physical format often led
to errors and unforeseen mishaps in the past. So , it is safe to have
securities in electronic form. It simply eliminates the risk of theft or
loss or any act of forgery.
2. Tracking records and share documents with respect to transfer and
upkeep transactions was difficult
3. The authorities in charge of updating these documents could not keep
up with the increasing volume of share papers, which, if left
unchecked, coul d cripple the financial base of the Indian share market
and associated businesses.
4. Introduction of scripless/paperless trading system was required.
5. Possibility of Best use of computer technology in Indian stock
exchanges.
6. Offering convenience of time savin g and energy saving to investors.
7. Providing technically sound market for encouragement to foreign
investors.
8. Introduction of economical, transparent, safe and quick method of
dealing in electronic form of securities.
3.2.2 Advantages/ merits/ benefits/ of dematerialization
a. To investors/demat account holders
1. Easy transfer of shares as the cost of transfer is less due to
exemption of stamp duty
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64 3. Risk of fraud, loss of share certificate has been eliminated due to
electronic versions.
4. Changing of portfolio of investments have become easy and
simple.
5. Dematerialized shared reduced paperwork.
6. Transfer and transmission of shares have become more safer and
quicker
7. High liquidity due to faster settleme nt of transactions.
8. Bankers offers easy loans on demat shares.
9. Demat shares have becoming popular with fast pace among the
younger generation as they are techno savvy.Thus, saves lot of
time.
10. In one demat account, all kinds of securities can be kept by the
investors.
b. To issuer company
1. As depository maintains proper record of demat account holders,
this all recorded information is provided to Issuer Company which
in turn facilitate distribution of dividend, interest and bonus shares
easily.
2. Easy and quick t ransfer of shares
3. Reduced administrative cost.
4. Immediate settlement of transactions
5. Various kinds of paper work such as allotment, transfer and bonus
shares reduced to a greater extent.
c. To banks
1. Huge turnover due to maximum payments are made through bank s.
2. Increased business as more and more every investor needs to open
a bank account for transacting business in shares.
3. Profitability of banks increases.
3.3 PROCESS/PROCEDURE OF DEMATERIALIZATION
Following is the process of Dematerialisation
1. The client (r egistered owner) shall submit a request to the DP in
the Dematerialisation Request Form for dematerialisation, along with
the certificates of securities to be dematerialised. Before s ubmission,
the client has to deface the certificates by writing "SURRENDERED
FOR DEMATERIALISATION".
2. The DP will verify that the form is duly filled in and the number of
certificates, number of securities and the security type (equity,
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65 is in order, the DP will issue an acknowledgement slip duly signed and
stamped, to the client.
3. In case the securities are not in or der they are returned to the client and
acknowledgment is obtained. The DP will reject the request and return
the DRF and certificates in case:
I. A single DRF is used to dematerialise securities of more than one
company.
II. The certificates are mutilated, or th ey are defaced in such a way
that the material information is not readable. It may advise the
client to send the certificates to the Issuer/ R&T agent and get new
securities issued in lieu thereof.
III. Part of the certificates pertaining to a single DRF is par tly paid -up;
the DP will reject the request and return the DRF along with the
certificates. The DP may advise the client to send separate requests
for the fully paid -up and partly paid -up securities.
IV. Part of the certificates pertaining to a single DRF is l ocked -in, the
DP will reject the request and return the DRF along with the
certificates to the client. The DP may advise the client to send a
separate request for the locked -in certificates. Also, certificates
locked -in for different reasons should not be submitted together
with a single DRF
4. In case the securities are in order, the details of the request as
mentioned in the form are entered in the DPM (software provided by
NSDL to the DP) and a Dematerialisation Request Number (DRN )
will be generated by the system.
I. The DRN so generated is entered in the space provided for the
purpose in the dematerialisation request form.
II. A person other than the person who entered the data is expected to
verify details recorded for the DRN. The request is then released
by th e DP which is forwarded electronically to DM (DM -
Depository Module, NSDL's software system) by DPM.
III. The DM forwards the request to the Issuer/ R&T agent
electronically.
IV. The DP will fill the relevant portion viz., the authorisation portion
of the demat re quest form.
V. The DP will punch the certificates on the company name so that it
does not destroy any material information on the certificate.
VI. The DP will then despatch the certificates along with the request
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66 VII. The Issuer/ R&T agent confirms acceptance of the request for
dematerialisation in his system DPM (SHR) and the same will be
forwarded to the DM, if the request is found in order.
VIII. The DM will electronically authorise the creation of appropriate
credit balances in the client's account.
IX. The DPM will credit the client's account automatically.
X. The DP must inform the client of the changes in the client's
account following the confirmation of the request.
The issuer/ R&T may reject dematerialisation request in some cases.
The issuer or its R&T Agent will send an objection memo to the DP, with
or without DRF and security cert ificates depending upon the reason for
rejection. The DP/Investor has to remove reasons for objection within 15
days of receiving the objection memo. If the DP fails to remove the
objections within 15 days, the issuer or its R&T Agent may reject the
reques t and return DRF and accompanying certificates to the DP. The DP,
if the client so requires, may generate a new dematerialisation request and
send the securities again to the issuer or it’s R&T Agent. No fresh request
can be generated for the same securiti es until the issuer or its R&T Agent
has rejected the earlier request and informed NSDL and the DP about it.
3.4 PAR TICIPANTS IN DEMATERIALIZATION
Following are the main participants
1. Depository: Depository is an institution which facilitates the smooth
transfer of ownership of securities from physical form to electronic
form. Depository acts as a central system where in all the securities are
held in electronic form. It keeps record of all the transactions i.e.
purchase and sale of securities in online for m. Currently, there are two
depositories registered with SEBI and are licensed to operate in India:
NSDL (National Securities Depository Ltd.) and CDSL (Central
Depository Services India Ltd.). NSDL is the very first depository
established in 1996 to look after the dematerialization process.
Whereas CDSL was established after NSDL in the year 1999.
2. Depository participants (DPs): A DP is an agent of the depository
providing depository services to traders and investors. Depository
participant is an agent or representative of depository. It acts as a
connecting link between investor and depository. An investor cannot
have direct access to depository but he can trade his securities through
his depository participant. Normally every DP has an Identity number
for identification. Every investor needs to open a demat account with
DP. As per SEBI guidelines, banks, financial institutions and stock
brokers are allowed to operate as depository participants. (DP).
3. Issuer Company: It is a company which brings new issue o f
securities. Such a company need to register itself with depository.
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67 4. Beneficial owner /Investor: The one who opens demat account is an
investor and ultimate beneficiary. He is the one whos e name is
recorded with depository and through his demat account he get bonus
shares and dividend.
3.5 SECRETARIAL DUTIES IN REGARD TO
DEMATERIALISATION
The secretary of Issuer Company has to perform the following duties in
respect of issuing securities in electronic form.
1) The Secretary has to ensure that the draft prospectus has been filled
with the SEBI through an eligible Merchant Banker, at least 21 days
prior to the filling of prospectus with the Registrar of Companies.
SEBI suggests changes in the dra ft prospectus. The issuer company (it
is a company which makes an issue of securities) carries out such
changes in it before filing prospectus with the Registrar of Companies.
2) The Secretary has to ensure whether the company's scrip (rule) come
under compul sory dematerialized trading or not.
3) If the dematerialized trading is compulsory, the secretary has to see
that the company enters into an agreement with the depository.
4) The Secretary has to see that the company made an application for
listing of securities on the stock exchanges.
5) The Secretary has to ensure that the company gives an option to the
subscriber or the shareholder or the investor to receive security
certificate in dematerialized form with a depository.
6) The Secretary has to intimate details of al lotment to the depository
immediately.
3.6 ONLINE TRADING – CONCEPT
3.6.1 Meaning
We live in the electronic era where almost everything is done online and
financial markets are not far behind as online trading has replaced offline
trading. Online trading has ensured that you can buy or sell, order from
anywhere in the world. It refers to act of an investor or trader buying and
selling stock, futures, options, bonds or any other financial security
through the facility of internet.

Online trading system e nables to register with online trading portal. This
service is available on internet for dealing in shares and other securities.
BSE introduced BOLT online trading system whereas NSE has NEAT
online trading system. Online trading is gaining popularity due to its
multiple benefits. Transactions can be seen online it is less time
consuming and minimized the errors and frauds. The speed of transactions
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68 3.6.2 Advantages of Online Trading

Following are the advantages and disadvantages of online trading –
1. Convenience and Flexibility: The biggest advantage of online trading
is the convenience factor because if offers the convenience of dealing
through mobile as nowadays all brokers are giving online trading
application. Besides it gives a lot of flexibility as you can put orders
from anywhere whether you are.

2. Inexpensive/economical: One of the clearest advantages of online
trading is the reduction in transaction costs and high fees associated
with traditional brick -and-mortar brokerage firms.

3. Access to online tools: Many of today’s online trading companies
offer customers an impressive suite of tools providing valuable
information and helping optimize trades.
4. Opportunity to monitor investments in real time: Many online
trading sites offer stock quotes and trade information that make it easy
for people to see how their investments are doing in real time.
5. Other Advantages :
 Easier and convenient way to own shares with Immediate transfer
 Equity and debt both the ki nd of instruments can be easily held in
demat account.
 reduced expenditure on printing and distribution and less transaction
cost
 Depository participant acting as an intermediary between depository
and investor rendering various facilities thus there is no need for an
investor not to contact company immediately.
 safe and secured than physical shares as no possibility of fraud and
forgery
 Even one share can be sold/ dealt with and results in automatic
credit demat account.
3.6.3 Disadvantages of Online Tradi ng
1. Risk of excessive trading: The investor may enjoy the flow of the
online transaction and for time being he may forget that he is using
his real money.
2. No personal relationships with brokers: Professional share broker
and online investor /trader don’t sh are mentor mentee relationship and
can take a decision on his own for online trading .
3. Error and Connectivity Problems: At times there is poor internet
connectivity which may hinder the online share trading experience.
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69 connection is too slow or is interrupted, he/she may suffer loss out on
a profitable or lucrative deal.
4. Users who are not familiar with the basics of brokerage software can
make mistakes which can prove to be a costly affair.
5. Experts often stress the importance of research, particularly for new
traders. You need to learn as much as you can about the companies in
which you invest.
6. kind of addiction: Online traders can experience a certain high when
trading that is similar to what p eople experience when gambling,
according to a recent study on excessive trading published in the
journal Addictive Behaviours.
3.7 BOMBAY STOCK EXCHANGE ONLINE
TRADING (BOLT)
3.7.1 Introduction
BSE was established in 1875, as "The Native Share & Stock Br okers'
Association" one of the most updated, fastest and progressive stock
exchanges in the world. BSE is the first stock exchange in the country
which obtained permanent recognition (in 1956) from the Government of
India under the Securities Contracts (Re gulation) Act 1956. BSE's pivotal
and pre -eminent role in the development of the Indian capital market is
widely recognized. It migrated from the open outcry system to an online
screen -based order driven trading system in 1995 which is totally advanced
and sophisticated. BSE also has a wide range of services to empower
investors and facilitate smooth transactions.
Today, BSE is the world's number 1 exchange in terms of the number of
listed companies and the world's 5th in transaction numbers. BSE provides
an efficient and transparent market for trading in equity, debt instruments
and derivatives. It has a nation -wide reach with a presence in more than
359 cities and towns of India. BSE has always been at par with the
international standards. The systems and processes are designed to
safeguard market integrity and enhance transparency in operations. BSE is
the first exchange in India and the second in the world to obtain an ISO
9001:2000 certification. It is also the first exchange in the country and
second in the world to receive Information Security Management System
Standard BS 7799 -2-2002 certification for its BSE On -line Trading
System (BOLT).BOLT is currently operating in 25,000 Trader
Workstations located across over 359 cities in India.
BOLT facilitates online screen -based transactions in securities. it
established in 1995 its online trading. BSE has largest number of listed
companies in the world almost 4937 companies with 7700 instruments
traded. The in February, 2001 BSE introduced the world’s first c entralized
exchange -based internet trading system i.e. BSEWEBX.com. This
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70 3.7.2 Advantages of BOLT
 The system shows scrip, market related information required by
investors on continuous basis.
 It has c apacity to perform 2 million transactions per day.
 System works from Monday to Friday 9.30 am to 3.30 am
 Facility of trading anywhere, anytime at any time.
 BSE internet trading system:www.bsewebx.com
3.7.3 BOSS
BSE is one of the few stock exchanges in the world, which has obtained
the ISO certification for its surveillance function . Surveillance: BSE's
On-Line Surveillance System (BOSS) monitors on a real -time basis the
price movements, volume positions and members' positions and real -time
measurement of d efault risk, market reconstruction and generation of cross
market alerts.
The main objective of the surveillance function is to promote market
integrity in two ways, By monitoring price and volume movements
(volatility) as well as by detecting potential ma rket abuses (fictitious/
artificial transactions, circular trading, false or misleading impressions,
insider trading, etc) at an ascent stage, with a view to minimizing the
ability of the market participants to influence the price of any Security in
the ab sence of any meaningful information by taking timely actions to
manage default risk.
 The surveillance activities at BSE are allocated to three Cells:
1. Price monitoring : is mainly related to the price movement/ abnormal
fluctuation in prices or volumes of an y Security
2. Investigations: conducting snap investigations / examinations /
detailed investigations in Securities where manipulation /aberration is
suspected.
3. Position Monitoring : relates mainly to abnormal positions of
Members in order to manage the defaul t risk BSE has launched a beta
version of its online member (broker) surveillance system e -Boss.
Brokers would be able to monitor fraudulent trade practices such as
circular trading, pump and dump, wash sales, front running, order
book spoofing and the lik e. Usual alerts on orders trades, scrip -wise
gainers and losers and the like would also be available.
3.8 LISTING OF SECURITIES
3.8.1 Meaning
Listing of securities is one of the important functions of stock exchange
which allows the company to include its securities in the official trade list
of the exchange. Listing means the admitting the securities of a company
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71 Companies Act. It becomes necessary when a public limited company
desires to issue shares or debentures to the public. When securities are
listed in a stock exchange , the company has to comply with
the requirements of the exchange . Listing facilitates the official buying
and selling of listed securities. Listed company should follow the rules and
regulations of the concerned stock exchange.
Section 21 of the securities contract regulation act, 1956, provides that the
central government can make it mandatory for public limited company to
get its shares /secu rities listed on the recognised stock exchange. This
shows that government has power to make listing compulsory in case of
specific company’s securities though it’s not compulsory.
Renowned companies’ securities such as L & T, Godrej, Tata Group,
Reliance etc. have been listed on various Indian stock exchanges such as
NSE and BSE.
3.8.2 Objectives of Listing
The major objectives of listing are:
1) To provide ready marketability and liquidity of a company’s shares
and securities.
2) To raise the Goodwill of the co mpany which has been listed.
3) To provide free negotiability to stocks.
4) To protect interest of shareholders and investors.
5) To provide an effective control and supervision mechanism for of
trading in securities.
6) To offer convenience to the investors regarding buying and selling of
securities.
3.8.3 Listing requirements
A company which desires to list its shares in a stock exchange has to
comply with the following requirements:
1) Permission for listing should have been provided for in
the Memorandum of Association and Articles of Association .
2) The company should have issued for public subscription at least the
minimum prescribed percentage of its share capital (49 percent).
3) The prospectus should contain necessary information with regard to
the opening of subscription list, receipt of share application etc.
4) Allotment of shares should be done in a fair and reasonable manner. In
case of over subscription, the basis of allotment should be decided by
the company in c onsultation with the recognized stock exchange
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72 5) The company must enter into a listing agreement with the stock
exchange. The listing agreement contains the terms and conditions of
listing. It also contains the dis closures that have to be made by the
company on a continuous basis.
3.8.4 Minimum Public Offer
A company which desires to list its securities in a stock exchange should
offer at least sixty percent of its issued capital for public subscription. Out
of this sixty percent, a maximum of eleven percent in the aggregate may
be reserved for the Central government, State government, their
investment agencies and public financial institutions.
The public offer should be made through a prospectus and through
newspaper advertisements. The promoters might choose to take up the
remaining forty percent for them, or allot a part of it to their associates.
3.8.5 Fair allotment
Allotment of shares should be made in a fair and transparent manner. In
case of over subscription, allotment should be made in an equitable
manner in consultation with the stock exchange where the shares are
proposed to be listed.
In case, the company propo ses to list its shares in more than one exchange,
the basis of allotment should be decided in consultation with the stock
exchange which is located in the place in which the company’s registered
office is located.
3.8.6 Listing Procedure
The following are the steps to be followed in listing of a company’s
securities in a stock exchange:
1. The promoters should first decide on the stock exchange or exchanges
where they want the shares to be listed.
2. They should contact the authorities to the respective stock exchange/
exchanges where they propose to list.
3. They should discuss with the stock exchange authorities the
requirements and eligibility for listing.
4. The proposed Mem orandum of Association, Articles of Association
and Prospectus should be submitted for necessary examination to the
stock exchange authorities
5. The company then will finalize the Memorandum, Articles and
Prospectus
6. Securities are issued and allotted.
7. The co mpany enters into a listing agreement by paying the prescribed
fees and submitting the necessary documents and particulars.
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73 3.8.7 Advantages
A. Advantages to listed company
1) Listed securities are preferred by the inv estors as they have better
liquidity.
2) Listing provides wide publicity to the companies since their name
is mentioned in stock market reports, analysis in newspapers,
magazines, TV news channels. This increases the market for the
securities
3) Listing provides a company better visibility and improves its
image and reputation.
4) It makes future financing easier and cheaper in case of expansion
or diversification of the business.
5) Growth and stability in the market through broadening and
diversification of its share holding.
6) Listing attracts interest of institutional investors of the country as
well as foreign institutional investors.
7) Listing enables a company to know its market value and this
information is useful in case of mergers and acquisitions, to arrive
at the purchase consideration, exchange ratios etc.
8) By complying with the listing requirements, the operations of the
company become more transparent and investor friendly. It further
enhances the reputation of the company.
B. Advantages to investors
1) It provides li quidity to investments. Security holders can convert
their securities into cash by selling them as and when they require.
2) Shares are traded in an open auction market where buyers and
sellers meet. It enables an investor to get the best possible price for
his securities.
3) Ease of entering into either buy or sell transactions.
4) Transactions are conducted in an open and transparent manner
subject to a well -defined code of conduct. Therefore, investors are
assured of fair dealings.
5) Listing safeguards investors in terests. It is because listed
companies have to provide clear and timely information to the
stock exchanges regarding dividends, bonus shares, new issues of
capital, plans for mergers, acquisitions, expansion or
diversification of business. This enables in vestors to take informed
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74 6) Listed securities enable investors to apply for loans by providing
them as collateral security.
7) Investors are able to know the price changes through the price
quotations provided by the stock exchanges in case of listed
securities.
8) Listing of shares in stock exchanges provides investors facilities
for transfer, registration of rights, fair and equitable allotment.
9) Shareholders are provided due notice with regard to book closure
dates, and they can take investment decision s accordingly.
C. Advantages to the stock exchanges/Economy
1) The Information about company is readily available.
2) Stock exchanges are found activated as larger number of securities
of various companies is listed.
3) Safe and secured dealings as stock exchanges are governed by
SEBI.
4) Enhances the capital formation pace in the country.
5) Attracts foreign individual and financial institutional investors due
to listing.
3.8.8 Disadvantages of listing
Though listing has many merits but it has other side also which throws
light on its demerits. It doesn’t provide any security to the investors
regarding the company whether it is financially sound. It is a lengthy
process and it requires the company to supply all the relevant information
to the stock exchanges from time to tim e. Listing is not that fruitful for
checking the malpractices and artificial price hike of securities.
The following are the limitations of listing:
1. Price Rise : Listing might enable speculators to drive up or drive
down prices at their will. The violent fl uctuations in share prices
affect genuine investors.
2. In case of excessive speculation, share prices might not reflect its
fundamentals. The stock markets may fail to be the true economic
barometer of an economy’s performance.
3. In case of bear markets share prices might be hammered down, and
the standing of a company might be lowered in the eyes of the
investors, shareholders, bankers, creditors, employees etc.
4. Listing of securities may induce the management and the top level
employees to indulge in ‘insider trading’ by getting access to
important information. Such actions adversely affect the common
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75 5. The management might enter into an agreement with brokers to
artificially increase prices before a fresh issue and benefit from that.
Common pub lic might be induced to buy shares in such companies,
ultimately the prices would crash and the common investors would
be left with worthless stock of securities.
6. Listing requires disclosing important sensitive information to stock
exchanges such as plans for expansion, diversification, selling of
certain businesses, acquisition of certain brands or companies etc.
Such information might be used by the competitors to gain
advantage.
7. Outsiders might acquire substantial shares in the company and
threaten to ta ke over the company or they might demand hefty
compensation to sell their shares.
8. Stock exchanges in India still suffer from shortcomings. Listed
securities might be utilized by scamsters to indulge in scams.
3.8.9 Secretarial duties
1. The company secretary should prepare and submit all the required
documents to the stock exchange authorities. Such as MA/AA,
prospectus, Statement in lieu of prospectus, balance sheet, Director’s
report, agreement with underwriters etc. also specimen copies of share
and debent ure certificates, particulars of capital structure, details of
dividends and cash bonuses during the last 10 years along with brief
history of company activities since its incorporation.
2. The company secretary must ensure that the company is adhering to
the rules for listing of securities. stock exchanges give special attention
to such new application for listing. For example:
a. whether the articles contains following provisions;
i. A common form of transfer shall be used
ii. Fully paid shares will be free fro m lien
iii. Calls paid in advance may carry interest, but shall not confer a right for
dividend
iv. Unclaimed dividend shall not be forfeited before the claim becomes the
time barred.
v. Option to call on shares shall be given only after sanction by genera l
meeting.
b. Whether at least 49% of each class of securities issued was offered to
the public for subscription through newspapers for not less than 3 days.
c. Whether the company is of fair size, has a broad -based capital structure
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76 3. After the stock exchange authorities go through the application and if
they are satisfied, they may call upon the company secretary to execute
listing agreement which shall contain the obligations and restrictions.
This agree ment will have 39 clauses with sub -clauses. Various issues
such as share certificates, letters of allotment, transfer of shares,
information to be given to the stock exchange regarding closure of
registers of members for the purpose of dividends, issue of bonus
shares, right shares, holding of meetings, submission of copies of
director’s reports, annual accounts, notices, resolutions etc are covered
by this listing agreement.
3.9 SCRIPTS
The word scrip has various meanings in different context. Sometimes i t is
regarded as chit. Scrip is also a temporary document which represents
fractional share resulted from a split or spin off. Scrip is basically
documents which acknowledge debt. Scrip may indicate currency issued
by Private Corporation. In a broader sens e, the term scrip refers to any
type of substitution currency that replaces legal tender .
Companies that faces cash crunches, often pay scrip dividends. When a
company offers its sharehold ers a scrip dividend, it offers them the choice
to receive dividends in the form of more shares or in cash.
The most widely used and most modern kind of scrip is used in the retail
industry in the form of gift cards or gift certificates. Sometimes it is
considered improper to give cash as a gift; it can be acceptable to give
someone a gift card as a present. Gift cards facilitate the user to control
how and where the card is spent as they can only be used in particular
locations.
Scrip evolved in the 1980s which contained a popular method of
fundraising. This fundraising option is specifically popular among bands,
athletic groups, schools, and other nonprofit organizations.
Retailers provide nonprofit groups with gift cards and certificates at a
discounted rate.
Here, is the meaning of scrip in relation to stocks and shares. In simple
terms, scrip means a share certificate in a company. Scrip means shares
which are issued by company from time to time i.e. equity shares and
preference shares.
Equity shares are of two types:
1. Equity shares are of two types
a) with normal voting rights,
b) With differential rights as to dividend and voting
2. Preference shares are of 4 types
a) Cumulative and non -cumul ative
b) Participating and non -participating
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77 3.10 SUMMARY

Damaterialization is a process through which shares in physical form are
converted into electronic form. The new shares allotted to the investors
are credited to their demat accounts. Dematerialization takes 10 -12 days
for whole procedure. As we have our bank account, we have share account
in the form of demat. NSDL and CDSL are our main depositories after
the enactment of Depository Act, 1996 acting as custodian of securities.
Dematerialization participants are as follows:
 Depository
 Depository participant
 Issuer Company
 Investor

Online transaction increases the speed of buying and selling of securities
with the aid of internet. Thi s procedure is different from traditional
procedure. It is fully transparent with no errors.

BSE provide multiple services to the investors which in turn facilitate the
smooth flow of dealings in securities. BSE introduced BOLT which
facilitates online s creen based business in securities.

Listing of securities
It is a process of including the company’s names in the official list of
stock exchange due to which said securities become eligible for trading on
the stock exchange.
3.11 EXERCISE
1. Explain the adv antages of dematerialization.
2. State the Advantages and disadvantages of listing of securities.
3. What is online trading? Explain its advantages in detail
4. Write short notes:
a. BOLT b. BOSS
c. Scripts d. Depository participant
5. Discuss the secretarial duties r egarding listing of securities in brief.
6. What are the features of Demat securities?
7. Explain the need and importance of dematerialization.


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78 4
REPORTS AND WINDING UP
Unit structure:
4.0 Objectives
4.1 Introduction
4.2 Types of Company Reports
4.3 Dividends
4.4 Secretarial Duties with regard to Payment of Dividend
4.5 Charges
4.6 Punishment
4.7 Winding up of a Company
4.8 Specimen
4.9 Summary
4.10 Exercise
4.0 OBJECTIVES
After studying the unit the students will be able to:
 Understand Company Reports - Types, Secretarial duties with regard to
payment of dividend, Interest, Charges and Penalties.
 Know Winding up of company - Procedure& Statuto ry provisions,
Secretarial role in winding up.
 Understand the following Specimen:
1. Notice and agenda of Annual General Meeting
2. Notice and agenda of Board meeting prior to Annual General
Meeting, Resolution for appointment of company secretary
3. Special resolution for alteration of Memorandum of Association
4. Minutes of Board meeting prior to Annual General Meeting
5. Minutes of Annual General Meeting
4.1 INTRODUCTION
During the management of company, various kinds of reports are being
made. These report s do play the role of effective communication between
the shareholders and directors of the company. For directors it is
mandatory to prepare Annual report i.e. Board’s report which provide
details of annual accounts to the shareholders. Likewise, section 143(2)
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79 his examination of accounts and financial statements. Thus, various
reports are very important as they provide valuable information.
Report on Annual General Meeting (Section 121) provides, every listed
public company needs to prepare and file with the Registrar of Companies,
a report on each annual general meeting which confirms that the meeting
was convened, held and conducted as per the provisions of the Companies
Act 2013 and the rules made there under.
There are two kinds of reports i.e. statutory and non -statutory reports.
Statutory reports are mandatory under the companies Act, 2013. E.g.
Auditor’s report, Board’s report etc.
Non-statutory reports are not mandatory under the law but such reports
offer convenience in the management and facilitate smooth flow of
working of the company. Examples of non -statutory reports are –
Committee reports of directors, reports of directors on special proposals to
shareholders and secret arial reports for investigation and reporting.
4.2 TYPES OF COMPANY REPORTS
Following are the different types of company reports:
1. Board Report
2. Auditor’s Report
3. Management Analysis and Discussion Report
4. Corporate Governance Report
5. Report on Corporate socia l responsibility
6. Report on Annual General Meeting
1. Board Report: (Director’s Report/Annual Report)
Board report provides the useful information about the progress of the
company to its shareholders as well as others. It also includes
information about the s ignificant changes in the management, major
policies and changes in the capital structure of the company. Director’s
report includes director’s responsibility statement.
Ingredients s of the board report
i) Disclosures under various Rules made under the comp anies Act:
ii) Disclosures under Section 134
iii) Disclosure pursuant to listing agreement]
iv) Other Disclosures under Companies Act, 2013.
Normally following matters are h ighlighted in the Annual report
i) Chairman’s speech.
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80 iii) Auditor’ s report under section 227 .
iv) Balance sheet, Profit and loss account, schedules forming part of
balance sheet and profit and los s account, cash flow statement.
v) Accounts of the subsidiary under the section 212 duly signed by
directors and secretary of the company on behalf of board of directors
and corporate governance.
2. Auditor’s Report:
Auditor’s report is statutory report of the company which states whether
the accounts of the company are made in accordance with provisions of
the Act and it must reflect t rue and fair view of the state of affairs of the
company.
Section 143 ( 3) The auditor ‘s report shall also state —
(a) Whether he has sought and obtained all the information and
explanations which to the best of his knowledge and belief were
necessary for th e purpose of his audit and if not, the details thereof
and the effect of such information on the financial statements;
(b) whether, in his opinion, proper books of account as required by law
have been kept by the company so far as appears from his
examination of those books and proper returns adequate for the
purposes of his audit have been received from branches not visited by
him;
(c) whether the report on the accounts of any branch office of the
company audited under sub -section ( 4) by a person other than the
company’s auditor has been sent to him under the proviso to that sub -
section and the manner in which he has dealt with it in preparing his
report;
(d) whether the company’s balance sheet and profit and loss account
dealt with in the report are in agreement wit h the books of account
and returns;
(e) whether, in his opinion, the financial statements comply with the
accounting standards;
(f) the observations or comments of the auditors on financial transactions
or matters which have any adverse effect on the functioning of the
company;
(g) whether any director is disqualified from being appointed as a
director under sub -section ( 2) of section 164;
(h) any qualification, reservation or adverse remark relating to the
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81 (i) whether the company has adequate internal financial controls system
in place and the operating effectiveness of such controls; such other
matters as may be prescribed
Thus, different kinds of reports are made in the company as per needs and
legal provisi ons under the statutes but Board’s report and Auditor’s reports
are the two main important reports used in the company.
4.3 DIVIDENDS
4.3.1 Meaning of Dividend
The term ‘dividend’ has been defined under Section 2(35) of the
Companies Act, 2013. The term “D ividend” includes any interim
dividend. It is an inclusive and not an exhaustive definition. According to
the generally accepted definition, “Dividend” means the profit of a
Company, which is distributed among the Shareholders in proportion to
the amount p aid-up on the shares held by them.
4.3.2 Declaration and Payment of Dividend under the Companies Act,
2013
Following are the certain provisions laid down for declaration of dividend
under the Companies Act, 2013:
 Section 51 permits Companies to pay dividen ds proportionately, i.e. in
proportion to the amount paid -up on each share when all shares are not
uniformly paid up, i.e. pro rata. Pro rata means in proportion or
proportionately, as per certain rate. The Board of Directors of a
company may decide to pay dividends on pro rata basis if all the
equity shares of the company are not equally paid - up.
 But the permission given by this section depends upon the Company’s
Articles of Association (AOA) expressly authorizing the Company in
this matter.
 Final Dividen d is generally declared at an AGM at a rate not more
than what is recommended by the Directors in accordance with the
AOA of a Company.
 In accordance with Section 134(3) (k), Board of Directors must state in
the Directors’ Report the amount of dividend, if any, which it
recommends to be paid.
 The dividend recommended by the Board of Directors in the Board’s
Report must be ‘declared’ at the AGM of the Company. This
constitutes an item of Ordinary Business to be transacted at every
AGM.
 No dividend shall be d eclared or paid by a Company for any financial
year except out of the profits of the company for that year arrived at
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82 the Act or out of profits of the Company for any previous financial
year/years arrived at after providing for depreciation in accordance
with the provisions of above sub section and remaining undistributed
or out of both [Section 123(1)].
 A Company may before the declaration of any dividend in any
financial year, transfer such percentage of its profits for that financial
year as it may consider appropriate to the reserves of the Company.
 If owing to inadequacy or absence of profits in any year, a Company
proposes to declare dividend out of the accumulated profits earned by
it in any previous financial years and transferred to reserves, such
declaration of dividend shall not be made except in accordance with
the Companies (Declaration and Payment of Dividend) Rules, 2014.
 Depreciation, as required under Section 123(1) of the Companies Act
has to be provided in accordance with the provisions of Schedule II to
the Act.
 The amount of dividend (final as well as interim) shall be deposited in
a separate bank account within 5 days from the date of declaration.
[Section 123(4)]
 Divid end has to be paid within 30 days from the date of declaration.
 If dividend has not been paid or claimed within the 30 days from the
date of its declaration, the Company is required to transfer the total
amount of dividend which remains unpaid or unclaimed , to a special
account to be opened by the Company in a scheduled bank to be called
“Unpaid Dividend Account”. Such transfer shall be made within 7
days from the date of expiry of the said period of 30 days.
 Any money transferred to the unpaid dividend acc ount of a Company
in pursuance of section 124 which remains unpaid or unclaimed for a
period of seven years from the date of such transfer shall be transferred
by the Company to the Investor Education and Protection Fund and the
company shall file a statem ent in “Form DIV -5” to the Authority
constituted under the Act to administer the fund and such authority
shall issue a receipt to the company as evidence of such transfer.
[Section 124(5)]
 Where a dividend has not been paid by the Company within 30 days
from the date of declaration, every Director shall, if he is knowingly a
party to the default, be punishable with imprisonment for a term which
may extend to 2 years and shall also be liable to a fine of rupees 1000
for every day during which default continu es and the Company shall
be liable to pay simple interest @ 1 4% per annum during the period
for which such default continues. [Section 127]
 If the Company delays the transfer of the unpaid/unclaimed dividend
amount to the unpaid dividend account, it shall pay interest @ 12%
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83 shall ensure to the benefit of the members of the company in
proportion to the amount remaining unpaid to them. [Section 124(3)]
 Any dividend payable in cash may be paid by cheque or warrant
through post directed to the registered address of the shareholder who
is entitled to the payment of the dividend or to his order or in any
electronic mode sent to his banker. [Section 123(5)].
4.4 SECRETARIAL DUTIES WIT H REGARD TO
PAYMENT OF DIVIDEND
1. Issue notice for holding Board meeting: As per section 173 notices
must be issued stating the date, time and venue of the meeting.
2. Notification to the stock exchanges at least 2 days in advance of the
meeting, in case of listed compa nies where the securities are listed.
3. Holding board meeting for approving the annual accounts and
recommending the amount of final dividend and sources available to
pay the dividend.
4. Fixing the day, date and time, venue holding next AGM of the
company for declaring the dividend recommended by the Board.
5. Approving notice for AGM and Authorising the Company secretary of
any other competent person if no Company secretary is appointed to
issue the notice of AGM on behalf of Board.
6. Determining the date of closur e of register of members and the share
transfer register of the companies to fulfil the requirements of section
91 of the companies Act, 2013.
7. Ensuring the necessary amount of profit to be transferred to company’s
reserves.
8. Publishing notice of book closur e in a newspaper (in case of listed
company) circulating in the district in which the company’s registered
office is situated at least 7 days before the date of commencement of
book closure.
9. Closing the register of members and share transfer register of th e
company.
10. Director’s report will reflect the amount of dividend recommended by
Board of directors.
11. Holding board meeting or committee meeting for approving
registration of transfer or transmission the shares prior to the
commencement of book closure.
12. Hold ing AGM and passing ordinary resolution for declaring the
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84 13. Preparing the statement of dividend in case of all shareholders.
14. Ensuring that the dividend tax is paid to the tax authorities within
stipulat ed date.
15. Opening separate bank account for making dividend payment.
16. Making arrangements with the banks for payment of dividend warrants
at par.
17. Dispatching dividend warrants within 30 days of the declaration of the
dividend.
18. Arranging the transfer of unpai d or unclaimed dividend to a special
account “Unpaid Dividend Account” within 7 days after expiry of the
period of 30 days of declaration of final dividend.
19. Transferring unpaid dividend amount to investor education and
protection fund (IEPF) after the expi ry of 7 years from the date of
transfer to unpaid dividend account.
4.5 CHARGES
4.5.1 Definition of Charge
Under section 2(16) of Companies Act, 2013 “ A Charge as an interest or
lien created on the assets or property of a Company or any of its
undertakin g as security and includes a mortgage”. Companies require
substantial amount of capital which is in the form of share capital as well
as borrowed capital. Such capital is acquired in the form of loans and
advances from banks and financial institutions. Ban ks and financial
institutions create charge i.e. right on the assets of the borrowing company
that is nothing but charge.
Companies Act, 1956: Section 125 specifies only 9 types of charges to be
registered. Companies Act, 2013: Section 77 states that Compa nies are
required to register ALL TYPES OF CHARGES , with ROC within 30
days of its creation.
It does not matter if the charge created is –
i) within or outside India;
ii) on its property or assets or any of its undertakings;
iii) whether tangible or otherwise; and
iv) situated in or outside India.
Following are the two main kinds of Charges
1. Fixed charge : remains fixed and it is identified with a specific and
clear asset at the time of the creation of such charge. The company is
not supposed to transfer this kind of a char ge unless the charge holder
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85 2. Floating charge: This charge is not fixed charge. The nature of these
kinds of charges keeps changing from time to time. The floating
charge can convert into a fixed charge if there is a crystal lisation of the
company or the undertaking cease to be a going concern. Floating or
the circulating nature of properties of a company, like sundry debtors
or stock in trade, can be deemed as floating charges.
Sr.
No. E-Form Purpose
1. CHG -1 Creating or Mo difying charge (for other than
Debentures)
2. CHG -2 Certificate of Registration of charge.
3. CHG -3 Certificate of Modification of charge.
4. CHG -4 Intimation of the satisfaction to the Registrar.
5. CHG -5 Memorandum of satisfaction of charge.
6. CHG -6 Notice of appointment or cessation or receiver
or manager.
7. CHG -7 Register of charges.
4. CHG -4 Application for condonation of delay shall be
filed the Central Government.
9. CHG -9 Creating or modifying the charge in (for
debentures including change in rectification)
10. CHG -10 Application for delay to the registrar.

4.5.2 Process for registration of charge
1. Company has to register charge with Registrar within 30 days of
creation of charge in Form CHG -1.
2. If not registered within 30 days then with in 300 days of such creation
with additional fees.
3. If company fails to register with in period of 300 days, then it has to
seek extension from Central Government (Regional Director) in Form
CHG -4
4. File the approval received with Registrar in Form INC -24.
5. If registrar is satisfied, he shall issue a certificate of registration in
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86 6. If company fails to register, without prejudice to its liability to offence,
the person in whose favour charge is created may apply to registrar to
register.
7. Any change / modification in terms of the charge is also to be filed in
Form CHG 1, on whose registration ROC shall issues Form CHG 3
4.6 PUNISHMENT
4.6.1 Meaning
If company or any officer of company contravenes any provision
regarding registration, satisfaction of charge or any other provision
regarding charge under Companies Act, 2013 and rules there to then
company or officer who is in default shall be punishable, and punishment
shall be On Company - Fine which shall not be less than Rs. 1 Lac rupees
but which ma y extend to Rs. 10 Lacs On Officer in Default -Imprisonment
which may extend to 6 months; or Fine which shall not be less than Rs.
25,000 but which may extend to Rs 1 lac; or Both
Penalties: Section 447, 44 4, 449, 450, 451, 452 and 453 Section 447.
Punish ment for fraud: Without prejudice to any liability including
repayment of any debt under this Act or any other law for the time being
in force, any person who is found to be guilty of fraud, shall be punishable
with imprisonment for a term which shall not be less than six months but
which may extend to ten years and shall also be liable to fine which shall
not be less than the amount involved in the fraud, but which may extend to
three times the amount involved in the fraud:
Provided that where the fraud in question involves public interest, the term
of imprisonment shall not be less than three years.
Explanation . —For the purposes of this section
i) fraud in relation to affairs of a company or anybody corporate,
includes any act, omission, concealment of an y fact or abuse of
position committed by any person or any other person with the
connivance in any manner, with intent to deceive, to gain undue
advantage from, or to injure the interests of, the company or its
shareholders or its creditors or any other pe rson, whether or not
there is any wrongful gain or wrongful loss;
ii) wrongful gain means the gain by unlawful means of property to
which the person gaining is not legally entitled;
iii) wrongful loss means the loss by unlawful means of property to
which the pe rson losing is legally entitled.
The Companies act, 2013 received assent of President of India on 29th
August, 2013 which introduced new provisions resulting in stringent
penalties for non -compliance of rules under the new Act. Offence and
penalty go hand in hand. So whenever any offence is committed by
company following sections of Companies Act, 2013 provides for the
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87 Section 44 4. Punishment for false statement. Save as otherwise
provided in this Act, if in any return, re port, certificate, financial
statement, prospectus, statement or other document required by, or for, the
purposes of any of the provisions of this Act or the rules made there under,
any person makes a statement,
(a) which is false in any material particula rs, knowing it to be false; or
(b) which omits any material fact, knowing it to be material, he shall be
liable under section 447.
Section 449. Punishment for false evidence. Save as otherwise provided
in this Act, if any person inte ntionally gives false evidenc -
(a) upon any examination on oath or solemn affirmation, authorised under
this Act; or
(b) in any affidavit, deposition or solemn affirmation, in or about the
winding up of any company under this Act, or otherwise in or about
any matter arising un der this Act, he shall be punishable with
imprisonment for a term which shall not be less than three years but
which may extend to seven years and with fine which may extend to
ten lakh rupees
Section 450. Punishment where no specific penalty or punishment is
provided. — If a company or any officer of a company or any other person
contravenes any of the provisions of this Act or the rules made there
under, or any condition, limitation or restriction subject to which any
approval, sanction, consent, confirmat ion, recognition, direction or
exemption in relation to any matter has been accorded, given or granted,
and for which no penalty or punishment is provided elsewhere in this Act,
the company and every officer of the company who is in default or such
other p erson shall be punishable with fine which may extend to ten
thousand rupees, and where the contravention is continuing one, with a
further fine which may extend to one thousand rupees for every day after
the first during which the contravention continues.
Section 451. Punishment in case of repeated default. — If a company or
an officer of a company commits an offence punishable either with fine or
with imprisonment and where the same offence is committed for the
second or subsequent occasions within a period of three years, then, that
company and every officer thereof who is in default shall be punishable
with twice the amount of fine for such offence in addition to any
imprisonment provided for that offence
Section 452. Punishment for wrongful withholding of property.
(1) If any officer or employee of a company
(a) wrongfully obtains possession of any property, including cash of the
company; or (b) having any such property including cash in his
possession, wrongfully withholds it or knowingly applies it for the
purposes other than those expressed or directed in the articles and
authorised by this Act, he shall, on the complaint of the company or of any
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88 shall not be less than one lakh r upees but which may extend to five lakh
rupees.
(2) The Court trying an offence under sub -section ( 1) may also order such
officer or employee to deliver up or refund, within a time to be fixed by it,
any such property or cash wrongfully obtained or wrongfu lly withheld or
knowingly misapplied, the benefits that have been derived from such
property or cash or in default, to undergo imprisonment for a term which
may extend to two years
Section 453. Punishment for improper use of Limited or Private
Limited. I f any person or persons trade or carry on business under any
name or title, of which the word Limited or the words Private Limited or
any contraction or imitation thereof is or are the last word or words, that
person or each of those persons shall, unless du ly incorporated with
limited liability, or unless duly incorporated as a private company with
limited liability, as the case may be, punishable with fine which shall not
be less than five hundred rupees but may extend to two thousand rupees
for every day f or which that name or title has been used.
4.7 WINDING UP OF A COMPANY
4.7.1 Meaning
As company takes birth with its incorporation, winding up of a company is
the last stage of company in which its existence for past several years is
dissolved, its life c omes to an end and all its assets are used to pay off the
creditors, shareholders and other liabilities.
As per section 270 of the Companies Act 2013, the procedure for winding
up of a c ompany can be initiated either
a) By the tribunal or,
b) Voluntary.
Winding up of a company may be required due to a number of reasons
including closure of business, loss, bankruptcy, passing away of
promoters, etc., The procedure for winding up of a company can be
initiated voluntarily by the shareholders or cred itors or by a Tribunal.
a) Winding up of a Company by Tribunal
As per Companies Act 2013, a company can be wound up by a Tribunal,
if:
 The company is unable to pay its debts.
 The company has by special resolution resolved that the company be
wound up by the T ribunal.
 The company has acted against the interest of the sovereignty and
integrity of India, the security of the State, friendly relations with
foreign states, public order, decency or morality.
 The Tribunal has ordered the winding up of the company unde r
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89 b) Voluntary Winding up of a Company
 The winding up of a company can also be done voluntarily by the
members of the Company, if:
 If the company passes a special resolution for winding up of the
Company.
 The company in general meeting passes a r esolution requiring the
company to be wound up voluntarily as a result of the expiry of the
period of its duration, if any, fixed by its articles of association or on
the occurrence of any event in respect of which the articles of
association provide that the company should be dissolved
4.7.2 Steps for Voluntary Winding up of a Company
The following are the steps for initiating a voluntary winding up of a
Company:
 Step 1: Convene a Board Meeting with two Directors or by a majority
of Directors. Pass a resol ution with a declaration by the Directors that
they have made an enquiry into the affairs of the Company and that,
having done so, they have formed the opinion that the company has no
debts or that it will be able to pay its debts in full from the proceeds of
the assets sold in voluntary winding up of the company. Also, fix a
date, place, and time agenda for a General Meeting of the Company
after five weeks of this Board Meeting.
 Step 2: Issue notices in writing calling for the General Meeting of the
Compan y proposing the resolutions, with suitable explanatory
statement.
 Step 3: In the General Meeting, pass the ordinary resolution for
winding up of the company by ordinary majority or special resolution
by 3/4 majority. The winding up of the company shall com mence from
the date of passing of this resolution.
 Step 4: On the same day or the next day of passing of resolution of
winding up of the Company, conduct a meeting of the Creditors. If two
thirds in value of creditors of the company are of the opinion that it is
in the interest of all parties to wind up the company, then the company
can be wound up voluntarily. If the company cannot meet all its
liabilities on winding up, then the Company must be wound up by a
Tribunal.
 Step 5: Within 10 days of passing of resolution for winding up of
company, file a notice with the Registrar for appointment of liquidator.
 Step 6: Within 14 days of passing of resolution for winding up of
company, give a notice of the resolution in the Official Gazette and
also advertise in a newspaper with circulation in the district where the
registered office is present.
 Step 7: Within 30 days of General Meeting for winding up of
company, file certified copies of the ordinary or special resolution
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90  Step 4: Wind up affairs of the company and prepare the liquidators
account of the winding up of the company and get the same audited.
 Step 9: Call for final General Meeting of the Company.
 Step 10: Pass a special resolution for disposal o f the books and papers
of the company when the affairs of the company are completely
wound up and it is about to be dissolved.
 Step 11: Within two weeks of final General Meeting of the Company,
file a copy of the accounts and file an application to the Tri bunal for
passing an order for dissolution of the company.
 Step 12: If the Tribunal is satisfied, the Tribunal shall pass an order
dissolving the company within 60 days of receiving the application.
 Step 13: The company liquidator would then file a copy of the order
with the Registrar.
 Step 14: The Registrar, on receiving the copy of the order passed by
the Tribunal then publishes a notice in the Official Gazette that the
company is dissolved.
4.7.3 Winding up by Tribunal
 National Company Law Tribunal can b e initiated by an application by
way of petition for winding up order.
 It should be chosen when other means of healing an ailing company
are of absolutely no avail.
 Remedies are provided by the statute on matters concerning the
management and running of th e company.
 It is primarily the NCLT which has jurisdiction to wind up companies
under the Companies Act, 2013.
 There must be strong reasons to order winding up as it is a last resort
to be adopted.
 Grounds on which a Company may be wound up by the Tribunal
Under Section 271, a company may be wound up by the tribunal if -
 Company is unable to pay the debts;
 If the company has, by special resolution, resolved that the company
be wound up by the Tribunal;
 If the company has acted against the interests of sovere ignty and
integrity of India, the security of the State, friendly relations with
foreign States, public order;
 If the Tribunal has ordered the winding up of the company under
Chapter XIX;
 If on an application made by the Registrar or any other person
autho rized by the Central Government by notification under this Act,
the tribunal is of opinion that affairs of the company have been
conducted in a fraudulent manner or the company was formed for
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91 misfeasance or misconduct in connection therewith and that it is
proper that company be wound up;
 If the company has made default in filing with the Registrar its
financial statements or annual returns for immediately preceding five
consecutive financ ial years;
 If the tribunal is of the opinion that it is just and equitable that the
company should be wound up.
4.7.4 Who may file petition for winding up
A petition for winding up may be presented by any of the following
persons under Section 272 of The C ompanies Act, 2013 -
 The company; or
 Any creditor or creditors, including any contingent or prospective
creditor or creditors; or
 Any contributory; or
 All or any of the above three specified parties; or
 The Registrar; or
 Any person authorised by Central Gov ernment in this behalf;
 By the Central Government or State Government in case of Company
acting against the interest of sovereignty and integrity of India.
4.8 SPECIMEN
A. Notice and agenda of Annual General Meeting:
ABC COMPANY LIMITED
(Address of the Regist ered Office)
NOTICE IS HEREBY GIVEN THAT THE Thirty -ninth Annual General
Meeting of ________ will be held at the ________ on 20 at _______ p.m.
to transact the following business:
1. To receive and adopt the Directors’ report and audited Balance Sheet
and Pro fit and Loss Account for the year ended _________ 20
_______.
2. To declare a dividend.
3. To appoint a Director in place of Mr. _______, who retires by rotation
and is eligible for re -appointment.
4. To appoint a Director in place of Mr. _______, who retires by r otation
and is eligible for re -appointment.
5. To appoint auditors and to fix their remuneration.
6. To appoint Branch Auditors and to fix their remuneration.
By Order of the Board of Directors
For PQR COMPANY LIMITED
Mumbai
Dated: Sd/-

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92 Notes :
1. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITIED
TO APPONT A PROXY TO ATTEND AND VOTE INSTEAD OF
HIMSELD AND A PROXY NEED NOT BE A MEMBER.
2. The Register of Members and Transfer Books of the company will be
closed form ______ to ________ both days inclusive.
3. The dividend when sanctioned will be made payable on or after
______ to those shareholders whose names will appear as members in
the books of the company on ______.
B. Notice & Agenda of First Board Meeting

ABC COMPANY LIMITED
(Address of the Registered Office)
Ref. No. ______________________ Date:

Mr./ Mrs. _______________________
(Name and Address of Director)

Sub: Notice of the First Board Meeting
Dear Sir ,
I am directed to inform you that the First Meeting of the Board of
Directors of the Company will be held at the Registered Office of the
Company on _________ at _________a.m. / p.m.
Please make it convenient to attend the meeting. A copy of the
Agenda is enclosed herewith for your informatio n and reference.

Your s Faithfully,

Sd/-
Encl: As above (_____)
Secretary
AGENDA
1. To elect the Chairman of the meeting.
2. To elect the Chairman of the Company.
3. To record the Cer tificate of Incorporation of the Company.
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93 a) Managing Director
b) Secretary
c) Bankers
d) Auditors
e) Underwriters to the issue
f) Registrar and Brokers to the issue.
5. To pass a resolution authorizing some of the directors to operate the
bank accounts and to dec ide the method of operating bank accounts.
6. To consider and approve the draft prospectus.
7. To decide on sending an application to the Stock Exchange for listing
of equity shares of the company.
8. To approve and adopt the Common Seal of the company.
9. To adopt pr eliminary agreements, if any, with the vendors.
10. To consider any other business with the permission of the Chair.
11. To fix the date of the next Board meeting.

C. Notice and Agenda of Board Meeting prior to Annual General
Meeting

SUNLIGHT INDUSTRIES LIMITED
Opera House, Mahatma Phule Road,
Bandra Kurla Complex, Mumbai -40021
Ref. No. fCM/ DC/ 146 Date:
Mr. R.D. Patel
21, Gurukripa, Kansai section,
Ambernath(E) 421501
Dear Sir,
I am directed to inform you that the meeting of the Board of Directors,
prior to the annual general meeting, will be held at the registered office of
the company on Tuesday, the 17th October, 2017, at 4.00 p.m. to consider
the following agenda.
You are requested to make it convenient to attend the meeting and oblige.
Yours faithfully,
Sd/ -
(__________)
Secretary


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94 AGENDA
1. To confirm the minutes of the last Board meeting held on 17th August,
2017.
2. To consider the leave of absence of Mr. S.K. Kan (Director)
3. To consider and approve Directo r Report and Annual Accounts of the
Company for the year 2016 -2017.
4. To authorize the Chairman to sign the Directors’ Report on behalf of
the Board of Directors.
5. To recommend the rate of dividend.
6. To decide date and others details of annual general meeting and to
authorize the secretary to make suitable arrangements for the meeting
and also to send notice of the meeting to all members along with the
Directors’ Report, Auditor Report and the Annual Accounts.
7. To decide the period during which the Register of M embers and the
Share Transfer Register will remain closed and also to authorize the
secretary to issue notice regarding the closure of the Register of
Members and the Share Transfer Register.
8. To consider any other item with the permission of the Chair.
9. To decide the date of the next meeting of the Board of Directors.
D. Resolution for appointment of company secretary
“RESOLVED THAT Mr. / Ms. ___________, Associate/Fellow Member
of the Institute of Company Secretaries of India having ACS / FCS No.
__________ be and is hereby appointed as Company Secretary of the
Company w.e.f. ___________ pursuant to the provisions of Section 203 of
the Companies Act, 2013 read with Companies (Appointment and
Remuneration) Rules, 2014 and any amendment made thereto.
“RESOLVED FU RTHER THAT (Name of the person(s) authorized) be
and are hereby severally authorized to file e -form DIR 12 / MR -1 with
Registrar of Companies and do all the acts, deeds and things which are
necessary to give effect to this resolution.”
E. Special Resolution f or alteration of Memorandum of Association
Change of name of the Company
“Resolved That the name of the company be changed from “The Eureka
Forbes Software Limited” to “The Exotic Apparels Limited” and that
the secretary be and is hereby authorized to com municate with the Central
Government for obtaining their suitable consent to such alteration.”
F. Minutes of Board meeting prior to Annual General Meeting
MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS
OF [NAME OF THE COMPANY] HELD ON [DATE] AT [TIME]
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95 DIRECTORS PRESENT
[Name of the directors’ present]
IN ATTENDANCE
[Name of the Company Secretary]
Chairman of the Meeting
[Name of the Chairman], with the consent of the Board, took the Chair
and presided over the meeting. He w elcomed all the Directors to the
meeting of the Board of Directors. Thereafter, he ascertained the quorum,
and declared that the meeting was duly convened and properly constituted
and agenda of the meeting was taken up.
Leave of Absence
[Name of the direct or] expressed his unwillingness to attend the Board
Meeting, hence leave of absence was granted to him.
1. To take Note of the Minutes of the Last Board Meeting
The minutes of the last meeting of Board of Directors duly initialed by
the Chairman were placed b efore the Board and board took note of the
same.
2. Approval of the Draft Annual Accounts of the Company for the
Year Ended 31st March ___________.

The Chairman informed the Board that Annual Accounts of the Company
for the year ended 31st March __________ h ad been finalized and the
same is placed before the Board for their approval. After having approval
of the Board of Directors, these accounts were sent to the Auditors of the
Company i.e. [Name of the Statutory Auditors], Chartered Accounts for
their repor t. After discussion the following resolution was passed.

“RESOLVED THAT pursuant to the provisions of section 215 (3) of the
Companies Act, 1956 Profit & Loss Account for the year ended 31st
March, _______ and the Balance Sheet as at 31st March _______ to gether
with Schedules and Notes on Accounts as placed before the Board and
initialed by the Chairman for the purpose of identification be and is hereby
approved and adopted”.

“RESOLVED FURTHER THAT the same be signed by any two
directors of the company on behalf of the board of Directors of the
Company.”

“RESOLVED FURTHER THAT the same be sent to Auditors for their
report thereon.”

3. Approval of the Audited Annual Accounts for the Year ended 31st
March _________. munotes.in

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96 The Chairman placed before the board, the A udited profit & Loss account
for the year ended 31st March ________ and the balance sheet as at 31st
March ________ After discussions, the following resolution was passed:
“RESOLVED that the Audited Profit & Loss account for the period
ended 31st March 199 4 and the Balance Sheet as at 31st March ________
as placed before the Board initialed by the Chairman for the purpose of
identification be and is hereby approved and the same is recommended to
the members for adoption in the forthcoming ensuring Annual Ge neral
Meeting.”
“Resolved further that [Name of the person(s) authorized] be and are
hereby authorized jointly / severally to take such steps as may be
necessary in relation to the above and file such documents with the
Registrar of Companies, [concerned s tate].”
4. Approval of the Auditors Report on the Annual Accounts for the
year ended 31st March _______.

The Chairman placed before the board, the Auditors Report on the Profit
& Loss account for the year ended 31st March 199 4 and the balance sheet
as at 31st March _________ After discussions, the following resolution
was passed:
“RESOLVED that the Auditors Report on the Profit & Loss account for
the year ended 31st March ________ and the balance sheet as at 31st
March ________ as placed before the Board and initialed by the Chairman
for the purpose of identification be and is hereby approved and the same is
recommended to the members for adoption in the forthcoming ensuring
Annual General Meeting.”
“Resolved further that [Name of the person(s) authorized] b e and is
hereby authorized to take such steps as may be necessary in relation to the
above and file such documents with the Registrar of Companies,
[concerned state].”
5. Approval of the Draft Directors Report for the Year ENDING 31st
March __________.
The C hairman Placed before the Board, the draft Directors Report of the
Company for the Financial Year ending 31st March _________. The Board
considered the same and passed the following resolution:
“Resolved that the Directors’ Report of the Company for the Fi nancial
year ending 31st March 199 4 be and is hereby approved and [Name of the
person(s) authorized] Chairman be and is hereby authorized in terms of
section 217(4) of the Companies Act, 1956 to sign the same on behalf of
Board of Directors of the Company. ”
“Resolved further that [Name of the person(s) authorized] be and is
hereby authorized to take such steps as may be necessary in relation to the
above and file such documents with the Register of Companies,
[concerned state].
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97 6. Approval for the re -appointm ent of Statutory Auditors
The Chairman apprised the Board that in terms of Section 224 of The
Companies Act, 1956 the Statutory Auditors are to be appointed, subject
to the approval of the members in the forthcoming Annual General
Meeting for auditing the Annual Accounts of the Company for Financial
Year ________. He further informed that a certificate under Section 224
(1B) of the Companies Act, 1956, has been received from the existing
auditors [Name of the Auditors], Chartered Accountants. The Board aft er
taking note of such certificate and the brief discussion passed the
following resolution: -
“RESOLVED THAT pursuant to the provisions of Section 224(1) of the
Companies Act, 1956 and subject to the approval of the members at the
Annual General Meeting o f the Company [Name of the Auditors],
Chartered Accountants, be and are hereby appointed as the Auditors of the
Company to hold office, from the conclusion of ensuring Annual General
Meeting to the conclusion of the next Annual General Meeting of the
Compa ny at a remuneration as may be decided by the Board with the
mutual consent of the auditors.”
7. Regularization of Mr. Avdhesh Mittal as Director of the Company
Director on the Board of the Company, will expire at the ensuing
Annual General Meeting. The Boa rd recommended the appointment of
[Name of the director] as director of the company to the shareholders
of company by passing the following resolution:

“RESOLVED THAT subject to the approval of shareholders of the
company [Name of the director] who has b een inducted as additional
director of the company by the Board of directors in their meeting held on
[date of meeting of appointment] be and is hereby appointed as director of
the company not liable to retire by rotation.”

8. Approval of the Draft Notice fo r Calling of the First Annual
General Meeting of the Company
The Chairman apprised the Board that the First Annual General Meeting
of the Members of the Company is to be held, and placed before the Board
for its approval, the draft text of the notice calli ng the same along with
explanatory statement thereon. After considering the same and after few
deliberations the Board passed the following resolution:
“Resolved that pursuant to the provisions of Section 166 read with
Section 210 of the Companies Act, 19 56, the First Annual General
Meeting of the Company be held on [Day], the [Date] at [Time] at [Place]
the Registered office of the Company to transact the business as given in
the draft notice issued for the same as per Section 171 and Section 173 of
the C ompanies Act, 1956.”
“Resolved further that [Name of the person(s) authorized] be and is
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98 Company and to do, all other necessary acts for the conduction of the First
Annual General Meetin g of the Company.”
9. Vote of Thanks
There being no other business to transact, the meeting concluded with vote
of thanks to the chair
Dated: CHAIRMAN
G. Minutes of Annual General Meeting
Minutes of the Annual General Meeting of _________ Limited Held on
Tuesd ay. 7th August 2017 at 01.00 P.M. at _________________________
(Address) Members Present.
1. Mr. A Chairperson
2. Mr. B Member
3. Mr. C (Representation of __________ Limited)
4. Mr. D (Representation of __________ Limited)
5. Mr. E (Representation of __________ Limited)
Mr. A, Chairperson took the chair and declared that the required quorum
was present to convene the meeting. The Chairperson read the speech
highlighting the operation & Prospects of the company. After the
Chairperson speech, Mr. Z, Company Secretary read t he Auditor’s Report.
The Accounts & Director’s Report having already been circulated was
taken as read. The following resolutions were passed:
1. To receive, consider and adopt the balance sheet as at March 31st, 2017
and profit and loss account for the year ended on that date and the
report of directors and auditors thereon. Mr. C proposed and Mr. D
seconded and the following resolution was passed as an ordinary
resolution: “Resolved that Audited Annual Accounts as on 31st March,
2017 together with Auditor’s Report thereon having been already
circulated to the shareholders and produced at the meeting be and the
same are hereby approved and adopted.” On being put to vote by show
of hands, the resolution was carried unanimously.

2. Re-Appointment of Auditors
Mr. E proposed and Mr. D seconded and the following resolution was
passed as an ordinary resolution: “RESOLVED THAT the retiring
Auditors M / s. ______________ & Associates, Chartered Accounts,
_______________ (Auditor’s address) be and are hereby reappointed
as Auditors of the company to hold office till the conclusion of next
Annual General Meeting at a remuneration as the Board of Directors
may determine.” On being put to vote by show of hands, the resolution
was carried unanimously.
3. Appointment of Director
Mr. E proposed and Mr. D seconded and the following resolution was
passed as an ordinary resolution: “RESOLVED THAT Mr. Ram, who munotes.in

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99 was appointed as an Additional Director with effect from April 17,
2002 on the Board of the Company in terms of Section 260 o f the
Companies Act, 1956 and Article 67 of Article of Association of the
Company and who holds office up to the date of this Annual General
Meeting, and in respect of whom a notice has been received from a
Member in writing , under Section 257 of the Comp anies Act, 1956,
proposing his candidature for the office of a Director, be and is hereby
appointed as a director of the Company.” On being put to vote by
show of hands the resolution was carried unanimously.

4. Vote of Thanks
There being no other busines s, the meeting was terminated with a vote
of thanks to the chair proposed by Mr. Rajkumar Gupta and seconded
by Mr. J. Kumar.
4.9 SUMMARY
Company reports are very important as it serves as a medium of
communication between the directors and shareholders. C ompany reports
must be drafted according to the provisions of Companies’ Act 2013. The
secretary plays a crucial role in reports drafting.
Dividend:
Section 123 of Companies Act, 2013 has special provisions relating to
dividend payment.
Charges:
Section 2(16) of the companies Act, 2013 has defined the term charge.
Section 77 of Companies Act, 2013 states that Companies are required to
register ALL TYPES OF CHARGES , with ROC within 30 days of its
creation. Charges are of two types; Fixed and floating char ge.
Section 447, section 44 4, section 449, section 450, section 451, section
452, section 453are the stringent penalty provisions in the Companies Act,
2013.
Winding up is the death of the company. At this stage, realizing debts and
paying off the debts i s an important thing as the administration of the
company is transferred in the hands of liquidator. Thus after dissolution
of company, it ceases to exist.
4.10 EXERCISE
1. What is the procedure for voluntary winding up of the company?
2. Explain the secretari al duties regarding declaration and payment of
dividend?
3. Write short notes on the following:
a. Charges b. Penalties
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100 4. Explain the procedure of winding up company by tribunal.
5. Give the Specimen of the followings:
a. Notice a nd agenda of Annual General Meeting
b. Notice and agenda of Board meeting prior to Annual General
Meeting, Resolution for appointment of company secretary
c. Special resolution for alteration of Memorandum of Association
d. Minutes of Board meeting prior to Annual General Meeting
e. Minutes of Annual General Meeting



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