Circulation of Members' Resolutions, and Minutes

Note the two limbs. Clause (a) circulates the resolution; clause (b) circulates the members' statement of reasons. A resolution without an explanation would usually be useless.

And note "which may properly be moved". The company need not circulate a resolution that could not lawfully be moved at that meeting.

Section 111(2): the two conditions. The company is not bound unless:

• (a) a copy of the requisition signed by the requisitionists, or two or more copies which between them contain all their signatures, is deposited at the registered office:
• (i) for a requisition requiring notice of a resolution, not less than six weeks before the meeting; and
• (ii) for any other requisition, not less than two weeks before the meeting; and
• (b) there is deposited or tendered with the requisition a sum reasonably sufficient to meet the company's expenses in giving effect to it.

Six weeks for a resolution, two weeks for a statement. The difference is sensible: circulating a new resolution changes the agenda and needs more notice than circulating an argument about business already on it.

And the members pay. Clause (b) puts the cost on the requisitionists, which is why section 111 is not used frivolously.

The proviso saves the member from a late meeting. If, after a copy of a requisition requiring notice of a resolution has been deposited, an annual general meeting is called for a date within six weeks after the deposit, the copy, although not deposited within the six weeks, shall be deemed to have been properly deposited. Otherwise a Board could defeat every requisition by fixing the meeting inside the six weeks.

Section 111(3): the defamation stop. The company is not bound to circulate a statement under clause (b) if, on the application either of the company or of any other person who claims to be aggrieved, the Central Government by order declares that the rights conferred by this section are being abused to secure needless publicity for defamatory matter.

Section 111(4): costs. Such an order may also direct that the cost incurred by the company by virtue of this section shall be paid to the company by the requisitionists, notwithstanding that they are not parties to the application.

Section 111(5): the penalty. On default, the company and every officer in default are liable to a penalty of twenty-five thousand rupees.

Representation of the President, Governors and corporations: sections 112 and 113

Section 112. The President of India or the Governor of a State, if a member of a company, may appoint such person as he thinks fit to act as his representative at any meeting of the company or of any class of members. That person is deemed to be a member and may exercise the same rights and powers, including the right to vote by proxy and postal ballot, as the President or Governor could.

Section 113. A body corporate, whether a company within this Act or not, may by resolution of its Board or other governing body authorise a person to act as its representative:

• (a) at any meeting of a company of which it is a member, or of any class of members; and
• (b) where it is a creditor, including a debenture holder, at any meeting of creditors held under the Act or the rules or under any debenture or trust deed.

Such a person may exercise the same rights and powers, including voting by proxy and by postal ballot, as the body corporate could if it were an individual member, creditor or debenture holder.

Distinguish a representative from a proxy, because it is asked. A representative under section 112 or 113 is deemed to be the member: he may speak, may vote on a show of hands, and counts towards the quorum. A proxy under section 105 may do none of those things.

Minutes: section 118

Section 118(1): what, how and when. Every company shall cause minutes of the proceedings of:

• every general meeting of any class of shareholders or creditors,
• every resolution passed by postal ballot, and
• every meeting of its Board of Directors or of every committee of the Board,

to be prepared and signed in such manner as may be prescribed and kept within thirty days of the conclusion of the meeting, or of the passing of the resolution by postal ballot, in books kept for that purpose with their pages consecutively numbered.

Three requirements to remember: within thirty days, signed in the prescribed manner, and pages consecutively numbered.

Section 118(2). The minutes shall contain a fair and correct summary of the proceedings.

Section 118(3). All appointments made at any of those meetings shall be included in the minutes.

Section 118(4): Board and committee minutes carry two extra items.

• (a) the names of the directors present; and
• (b) for each resolution passed, the names of the directors, if any, dissenting from, or not concurring with, the resolution.

That is how a director protects himself: a recorded dissent is the evidence that he did not concur.

Section 118(5) and (6): what may be left out, and who decides. There shall not be included any matter which, in the opinion of the Chairman:

• (a) is or could reasonably be regarded as defamatory of any person; or
• (b) is irrelevant or immaterial to the proceedings; or
• (c) is detrimental to the interests of the company.

And the Chairman shall exercise absolute discretion in regard to inclusion or non-inclusion on those grounds.

"Absolute discretion" is a strong phrase, and it is confined to those three grounds. The Chairman may not simply omit what he dislikes.

Section 118(7): evidence. The minutes kept in accordance with the section shall be evidence of the proceedings recorded in them.

Section 118(8): the presumptions. Where minutes have been kept in accordance with sub-section (1), then until the contrary is proved:

• the meeting shall be deemed to have been duly called and held;
• all proceedings shall be deemed to have duly taken place;
• resolutions passed by postal ballot shall be deemed to have been duly passed; and
• in particular, all appointments of directors, key managerial personnel, auditors or company secretary in practice shall be deemed to be valid.

Note "until the contrary is proved". These are rebuttable presumptions, unlike the conclusive effect that section 107(2) gives to the Chairman's declaration on a show of hands.

Section 118(9): reports of proceedings. No document purporting to be a report of the proceedings of any general meeting shall be circulated or advertised at the expense of the company unless it includes the matters required by this section to be contained in the minutes. So the company cannot publish a flattering summary that omits what the minutes must record.

Section 118(10): secretarial standards are compulsory.

Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980, and approved as such by the Central Government.

Two conditions: the standards must be specified by the Institute and approved by the Central Government. Those are the standards commonly called SS-1, for Board meetings, and SS-2, for general meetings.

Section 118(11): the penalty. On default in respect of any meeting, the company is liable to a penalty of twenty-five thousand rupees and every officer in default to five thousand rupees.

Section 118(12): tampering. If a person is found guilty of tampering with the minutes, he shall be punishable with imprisonment up to two years and with a fine of not less than twenty-five thousand rupees and up to one lakh rupees.

Note that this is the rare survivor. Most penalties in this Chapter were converted to civil penalties, but tampering with minutes still carries imprisonment, because it attacks the record itself.

Inspection of minute books: section 119

Section 119(1). The books containing the minutes of any general meeting or of a resolution passed by postal ballot shall:

• (a) be kept at the registered office; and
• (b) be open, during business hours, to inspection by any member without charge, subject to such reasonable restrictions as the company may by its articles or in general meeting impose, so however that not less than two hours in each business day are allowed for inspection.

Three points. Only the general meeting and postal ballot minutes are open, not the Board's. Inspection by a member is free. And whatever restrictions the company imposes, at least two hours every business day must be allowed.

Section 119(2): copies. Any member is entitled to be furnished, within seven working days after making a request, on payment of the prescribed fees, with a copy of any such minutes.

Section 119(3): the penalty. If inspection is refused, or a copy is not furnished in time, the company is liable to a penalty of twenty-five thousand rupees and every officer in default to five thousand rupees for each such refusal or default.

Section 119(4): the Tribunal. In the case of any such refusal or default, the Tribunal may, without prejudice to the penalty, by order direct an immediate inspection of the minute books, or direct that the copy required shall forthwith be sent to the person requiring it.

Electronic form: section 120

Without prejudice to any other provision, any document, record, register, minutes and the like which is required to be kept by a company, or allowed to be inspected or copies given to any person under the Act, may be kept, inspected or copies given in electronic form, in such form and manner as may be prescribed.

A worked example

Latur Foods Limited has a general meeting fixed for 20 September 2028.

A members' resolution. Members holding eleven per cent of the voting paid-up capital, which meets the section 100 threshold, want to propose a resolution restricting the managing director's powers, and want their reasons circulated.

Deadlines. To require notice of the resolution they must deposit a signed copy at the registered office not less than six weeks before the meeting, that is by 9 August 2028. To require circulation of their statement alone, two weeks would do, by 6 September 2028. They must also deposit or tender a sum reasonably sufficient to meet the company's expenses.

A trap the proviso closes. Suppose they deposited the requisition on 1 September and the company then called the annual general meeting for 10 October, a date within six weeks of the deposit. By the proviso to section 111(2) the copy is deemed to have been properly deposited, so the Board cannot defeat the requisition by choosing the date.

The statement is defamatory. The statement accuses the managing director of criminal conduct. Either the company or the managing director, as a person claiming to be aggrieved, may apply to the Central Government, which may declare that the section is being abused to secure needless publicity for defamatory matter, in which case the company need not circulate it: section 111(3). The order may also direct the requisitionists to pay the company's costs, even though they were not parties: section 111(4).

If the company simply ignores a good requisition, it and every officer in default pay twenty-five thousand rupees: section 111(5).

Representation. One member is a State Government holding through the Governor, who appoints a representative under section 112; another is a body corporate which authorises a representative by Board resolution under section 113. Both are deemed members: they may speak, vote on a show of hands and count towards the quorum, unlike a proxy.

Minutes. The meeting concludes on 20 September. Minutes must be prepared, signed in the prescribed manner and kept within thirty days, by 20 October, in a book with consecutively numbered pages, containing a fair and correct summary and all appointments made.

A Board meeting the same week. Its minutes must additionally record the names of the directors present and, for each resolution, the names of any directors dissenting or not concurring. Ms Kadam votes against the sale of a division and asks for her dissent to be recorded; section 118(4)(b) requires it, and it is her protection.

Something is left out. A shareholder made a remark at the general meeting alleging fraud by a supplier. The Chairman forms the opinion that it could reasonably be regarded as defamatory and omits it. He may, and by section 118(6) his discretion on that ground is absolute.

Evidence. A year later a director's appointment is challenged. Because the minutes were kept in accordance with section 118(1), until the contrary is proved the meeting is deemed duly called and held, the proceedings duly taken place, and the appointment valid: section 118(8).

Inspection. A member asks to see the minute book. He may inspect the general meeting minutes at the registered office, during business hours, free, and the company must allow at least two hours each business day however it restricts inspection. He cannot demand the Board's minutes under section 119. He asks for a copy; it must come within seven working days on the prescribed fee. If it does not, the company pays twenty-five thousand rupees and every officer in default five thousand, and the Tribunal may order the copy to be sent forthwith.

And a warning. A clerk alters a page of the minute book to remove Ms Kadam's dissent. That is tampering, and under section 118(12) it carries imprisonment up to two years and a fine of twenty-five thousand to one lakh rupees.

Distinctions that carry marks

What this does NOT mean

It does not mean any member can force a circulation. The threshold is the section 100 one, and the requisitionists must pay for it.

It does not mean the Chairman may omit whatever he likes. His absolute discretion is confined to the three grounds in section 118(5).

It does not mean members may see the Board's minutes. Section 119 opens only the general meeting and postal ballot minutes.

It does not mean minutes are conclusive. Section 118(8) works until the contrary is proved. Only the chairman's declaration under section 107(2) is conclusive.

Quick revision

• 111(1): on a requisition by the section 100 number of members, the company must give notice of their resolution and circulate their statement.
• 111(2): deposit at the registered office, six weeks for a resolution, two weeks otherwise, with a sum reasonably sufficient for the expenses. Proviso: a resolution requisition is deemed properly deposited if the AGM is then called within six weeks of the deposit.
• 111(3) and (4): the Central Government may declare the right is being abused to secure needless publicity for defamatory matter, and may order the requisitionists to pay the company's costs. 111(5): penalty twenty-five thousand rupees.
• 112 and 113: the President, a Governor or a body corporate may appoint a representative, who is deemed a member and may vote by proxy and postal ballot.
• 118(1): minutes of every general meeting, postal ballot resolution, and Board and committee meeting, prepared, signed and kept within thirty days, in books with consecutively numbered pages. (2) fair and correct summary. (3) all appointments. (4) Board minutes also record directors present and dissenters.
• 118(5) and (6): exclude what the Chairman considers defamatory, irrelevant or immaterial, or detrimental to the company; his discretion on those grounds is absolute.
• 118(7) and (8): minutes are evidence; and until the contrary is proved the meeting was duly called and held, the proceedings duly took place, and appointments of directors, KMP, auditors and company secretaries in practice are valid.
• 118(9): no company-funded report of proceedings unless it includes what the minutes must contain. 118(10): secretarial standards of the ICSI, approved by the Central Government, are compulsory.
• 118(11): company twenty-five thousand, officer in default five thousand. 118(12): tampering, imprisonment up to two years and twenty-five thousand to one lakh rupees.
• 119: general meeting and postal ballot minutes at the registered office, free inspection by any member, at least two hours each business day; copy within seven working days on fees; penalty twenty-five thousand and five thousand; the Tribunal may order immediate inspection or despatch.
• 120: documents, registers and minutes may be kept, inspected and copied in electronic form.

Test yourself

1. What must members do to have their resolution circulated? Requisition in writing by the number of members required by section 100, with a signed copy deposited at the registered office not less than six weeks before the meeting for a requisition requiring notice of a resolution, or two weeks for any other requisition, together with a sum reasonably sufficient to meet the company's expenses: section 111(1) and (2).

2. When need a company not circulate a members' statement? Where, on the application of the company or of any person claiming to be aggrieved, the Central Government declares by order that the rights under the section are being abused to secure needless publicity for defamatory matter: section 111(3). The order may also require the requisitionists to pay the company's costs.

3. Within what time must minutes be kept, and in what form? Within thirty days of the conclusion of the meeting or the passing of the postal ballot resolution, prepared and signed in the prescribed manner, in books kept for the purpose with their pages consecutively numbered: section 118(1).

4. What extra particulars must Board minutes contain? The names of the directors present, and, for each resolution passed, the names of the directors, if any, dissenting from or not concurring with it: section 118(4).

5. What do properly kept minutes prove? They are evidence of the proceedings recorded, and, until the contrary is proved, the meeting is deemed to have been duly called and held, the proceedings to have duly taken place, postal ballot resolutions to have been duly passed, and appointments of directors, key managerial personnel, auditors and company secretaries in practice to be valid: section 118(7) and (8).

6. Who may inspect the minute books, and of which meetings? Any member, without charge, during business hours at the registered office, of general meetings and postal ballot resolutions only, with not less than two hours in each business day allowed however the company restricts inspection; and he may require a copy within seven working days on payment of the prescribed fees: section 119.