31

[Link].

ABILITY ENHANCEMENT COURSES (AEC)

SKILL ENHANCEMENT COURSES (SEC)

GROUP

COMPANY SECRETARIAL PRACTICE

 © UNIVERSITY OF MUMBAI
Dr. Suhas Pednekar
Vice-Chancellor
Universityof Mumbai,
Mumbai

Dr. Kavita Laghate Anil R Bankar

Professor Cum Director, Associate Prof. of History & Asst. Director &
Institute of Distance & Open Learning, Incharge Study Material Section,
Universityof Mumbai, Mumbai IDOL, University of Mumbai, Mumbai

Course and Programme : Dr. Madhura Kulkarni

Co-ordinator Asst. Prof-cum-Asst. Director, IDOL,
University of Mumbai, Mumbai-400 098
Course Writer : Dr. Subhash D’souza
ST. Joseph College,
Vasai.

: Prof. Shubhangi Kedare

P. D. Karkhanis college,
Ambernath

: Dr. Vinod Kamble

Bal Bharati’s MJP College of Commerce
Kndivali (West), Mumbai.

October 2019, [Link]., Ability Enhancement Courses (AEC) Skill

Enhancement Courses (SEC) Group Company Sectrarial Practice

Published by : Director Incharge,

Institute of Distance and Open Learning ,
University of Mumbai,
Vidyanagari, Mumbai - 400 098.

DTP Composed : Ashwini Arts

Gurukripa Chawl, M.C. Chagla Marg, Bamanwada,
Vile Parle (E), Mumbai

Printed by :
 CONTENTS
Unit No. Title Page No.

SECTION - I
1 Introduction to CompanyI 1
2 Company Secretary Practice 18
3 Company Documentation and Formation I 30
4 Secretarial Correspondence 55
SECTION - II
5 Management of the Compnay 71
6 Company Meetings 92
7 Dematerialisation and Online Trading 123
8 Reports and Winding up 141


 I

Institute of Distance and Open Learning

S.Y. [Link].
Revised Syllabus
With Effect from the Academic Year 2019-20
Ability Enhancement Courses (AEC)
Skill Enhancement Courses (SEC) Group
Company Secretarial Practice
Course Objective:
• To provide the learners an insight about Company Secretarial
Practices.
• To make the learners understand the role of Company
Secretary towards Company’s statutory provisions, rules and
regulations.
• To make the learners understand the various aspects of
Company Management, meetings and reports.

SECTION I
Sr. No. Modules
1 Introduction to Company
2 Company Secretary Practices
3 Company Documentation and Formation
4 Secretarial Correspondence

Sr. No. Modules /

1 Introduction to Company
 Introduction to Company – Features, Types -As
per Company’s Act, 2013.
 Company Secretary – Qualities, Qualifications,
Appointment procedure, Resignation & Removal.
 Role of Company Secretary–Rights,
Responsibilities, Liabilities of Company Secretary,
Career options of Company Secretary.
2 Company Secretary Practices
 Advisory Services – Role of Company Secretary as
an advisor to Chairman, Secretary as an liaison
officer between the (a) Company and Stock
Exchange (b) Company and Depository Participants
(c) Company and Register of Companies (ROC).
 II

 Representation Services of Company Secretary

at different forums- Company Law Board,
Consumer Forum, SEBI, Arbitration & conciliation
services, Cyber Law compliance, Secretarial
Standards – Advantages, Secretarial Standards by
ICSI, Secretarial Standards -1- 10.
 Secretarial Audit – Procedure and Stages, Need
and Importance, Scope.
3 Company Documentation and Formation
 Memorandum of Association (MOA) - Clauses,
Alteration of MOA, Ultra Vires. Articles of Association
(AOA) – Contents, Prospectus – Statement in Lieu of
Prospectus, Contents, Misleading Prospectus.
 Company Formation –Stages, Secretarial Duties at
each stage in public company and private company.
 Conversion & Reconversion of Private and
Public Company – Secretarial Procedure.
4 Secretarial Correspondence
 Correspondence– Shareholders, Debenture
Holders, Registrar of Companies, Stock Exchange &
penalties thereon
 Correspondence with SEBI, Company Law Board
and penalties thereon, Role of technology in
Secretarial Correspondence
 Specimens–
Letter to shareholders - Rights Issue, Bonus Issue,
Letter to ROC-Alteration of MOA/ AOA,
Letter to Stock Exchange –Listing of shares,
Letters to Government- Reconversion/Conversion,
Letter to Bank – Overdraft Facility

SECTION II

Sr. No. Modules

5 Management of Companies
6 Company Meetings
7 Dematerialisation and Online Trading
8 Reports and Winding Up
 III

Sr. Modules
No.
5 Management of Companies
 Directors – Appointment, Duties, Role, Directors
Report, Director Identification Number (DIN).
Types of Directors , Role of CEO, Non- Executive
Directors, Independent Director
 Auditor- Appointment, Duties, Rights & Powers,
Audit report.
Company Meetings
 Types of Company meeting, Secretarial Duties –
Before, During and after company meeting – Annual
General Meeting, Extra-Ordinary General Meeting,
Board Meeting.
 Notices, agenda, Chairman, Quorum& Proxy –
Concept and Statutory Provisions
 Motion, Resolution, Minutes – Concept, Types
 Voting, Minutes – Concept, Methods.
7 Dematerialisation and Online Trading
 Dematerialisation – Need and Importance,
Secretarial Duties, Procedures, Participants.
 Online Trading – Concept, Advantages &
Disadvantages, Bombay Stock Exchange Online
Trading (BOLT), BOSS.
 Listing of securities – Procedure, Advantages,
Secretarial Duties, and Scripts –Types.
8 Reports and Winding Up
 Company Reports – Types, Secretarial Duties with
regard to payment of dividend, Interest, Charges
and penalties.
 Winding up of a Company – Procedure, and
Statutory Provisions, Secretarial role in winding up.
 Specimen –
Notice and Agenda of Annual General Meeting,
Notice and Agenda of Board Meeting prior to Annual
General Meeting, Resolution for appointment of
Company Secretary,
Special Resolution for alteration of Memorandum of
Association,
Minutes of Board Meeting prior to Annual General
Meeting,
Minutes of Annual General Meeting.
 IV

Readings:
1. M. [Link] : Guide to Company Law Procedure; Wadhwa&
Company, Agra&Nagpur
2. K. [Link] : Company Law Practice; BharatLaw House,
New Delhi – 34
3. M. [Link] : Company Procedures and Register of
Companies , Tax Publishers, Delhi
4. A. [Link], : Company Notices, Meetings and B.
[Link] Resolutions, Taxmann, New Delhi
5. [Link] : Guide to the Companies Act, Wadhwa& Company,
Nagpur
6. [Link] : Company Notices, Meetings and
Resolutions, Kamal Law House, Kolkatta
7. D. K. Jain : E- Filling of Forms & returns
8. Taxmann : E-Company forms
9. [Link] : Depository Participants (Law & Practice)
10. ICSI Publications : Meetings
11. B. [Link] : Company Law
12. D. K. Jain : Company Law Procedures

References:
1. M. C. Bhandari : Guide to Memorandum, Articles and R. D.
Makheeja Incorporation of Companies; Wadhwa & Company,
Agra & Nagpur
2. Taxman : Company Law, Digest

Journals:
1. Chartered Secretary : ICSI Publication
2. Student Company Secretary : ICSI Publication
3. Company Law Journal : L.M. Sharma, Post Box No. 2693, New
Delhi – 110005.


 V

PAPER PATTERN
COMPANY SECRETRIAL PRACTICE
W.E.F. 2019-20
SECTION I

1. Define the terms (Any five) 10

2. Answer Any Three Out of six questions 30
3. Write notes on Any two out of four 10

SECTION II

4. Define the terms (Any five) 10

5. Answer Any Three Out of six questions 30
6. Write notes on Any two out of four 10


 1

1
INTRODUCTION TO COMPANY
Unit Structure:

1.0 Objectives
1.1 Introduction
1.2 Joint Stock Company
1.3 Company Secretary
1.4 Appointment Procedure, Resignation and Removal of
Company Secretary
1.5 Career Options
1.6 Rights, Responsibilities and Liabilities of Company Secretary
1.7 Exercise
1.8 References

1.0 OBJECTIVES

After studying the unit students will be able to:

 Understand Features and Types of Company
 Explain Qualities and Qualifications of Company Secretary
 Know Appointment procedure, Resignation and Removal of
Company Secretary
 Discuss Rights and Responsibilities of Company Secretary
 Describe Liabilities of Company Secretary
 Know the Career Options of Company Secretary

1.1 INTRODUCTION

The word company refers to association of people coming

together to achieve some common purpose. A Joint Stock Com-
pany is a voluntary association of people incorporated under Indian
Companies Act, the capital of which is divided into small number of
units which is known as ‘shares’. A person who purchases shares
of company is called ‘Shareholder’. Shareholders are the owners of
company because they contribute the capital of company and this
capital remains in the business for the life time of the company.
Shareholders get ‘dividend’ as return on their investment in the
company. Shareholders are not in a position to look after day to day
administration of the Company so they appoint their representatives
 2

known as ‘Directors’. Directors collectively are known as “Board”.

Board of Directors is the representatives of shareholders and man-
ages day to day administration of company.

1.2 JOINT STOCK COMPANY

1.2.1 Definition
According to Chief justice Marshall “A corporation is an ar-
tificial being, invisible, intangible and existing only in contemplation
of the law. Being a mere creation of law, it possesses only the
properties which the charter of its creation confers upon it either
expressly or as incidental to its very existence.”

According to Sec. 2(20) of Companies Act, 2013, “Com-

pany means a company incorporated under this Act or under any
previous company law.”

1.2.2 Features of Joint Stock Company

1) Voluntary Association: A Joint Stock Company is a voluntary

association of people. Any person irrespective of his/her caste,
creed, religion, region etc. can become member. A person can
be a member at his wish and leave membership as and when
he/she wants subject to provision in Articles of Association of
the company.

2) Incorporated Association: A Joint Stock Company is an incor-

porated association as it is registered under Indian Companies
Act, 2013. The registration is compulsory in India for every Joint
Stock Company irrespective of its size and nature of business.

3) Artificial Person: A Joint Stock Company is an artificial person

created by law. Just like a natural person, a Joint Stock Com-
pany can sign (common seal) documents, appoint employees,
purchase or sale assets and property and enter into contracts.

4) Independent Legal Entity: A Joint Stock Company can enjoy

separate legal status. Existence of Joint Stock Company is dif-
ferent from its shareholders and directors.

5) Perpetual Succession: A Joint Stock Company has perpetual

succession. The death, insolvency and insanity of any share-
holder or director does not affect continuity of company. There
is no death of company. However, it can be closed by following
legal procedure stated in the Companies Act.

6) Common Seal: A Company cannot sign physically so common

seal can be affixed on all the documents of company along with
 3

signature of Board of Directors. Common seal is treated as sig-

nature of company. It remains in the custody of Board of Direc-
tors of company.

7) Limited Liability: The liability of shareholders of company is

limited upto unpaid value of shares. Once the unpaid value of
shares is paid by shareholders, they are not liable to pay any
debts of company out of their personal property.

8) Separation of Ownership and Management: In Joint Stock

Company the ownership and management are different. Share-
holders are the owners of company and Board of Directors are
the Managers of company. The shareholders are large in num-
ber and spread over wide area. It is not feasible for them to par-
ticipate in management of company. So they appoint Board of
Directors as their representatives to look after day to day routine
of company.

9) Huge Membership: The membership of Joint Stock Company

is huge. A private limited company must have minimum 2 mem-
bers and maximum 200 members. A public limited company
must have minimum 7 members and maximum no limit on
membership.

10)Huge Capital: Joint Stock Company can collect huge capital

due to huge membership. They can collect capital by issue of
shares (owner’s fund) or debentures and bonds (debt fund).
They also accept public deposits. It obtains loans from banks
and financial institutions.

11)Transferability of Shares: Though the shares of Private Lim-

ited Company are not freely transferable, the shares of Public
Limited Company are freely transferable in open market. Any-
one who wishes to sell share can do so anytime.

12)Government Control: Functioning of Joint Stock Company is

controlled by Government. The purpose is to protect interest of
investors. It also helps to control frauds taking place in compa-
nies and maintain good governance in the functioning of com-
pany.
 4

1.2.3 Types of Companies

I) ON THE BASIS OF INCORPORATION

1) Statutory Company: These companies are incorporated under

special Act passed by the central or state legislative. This com-
pany functions as per provision of special law. Eg. Reserve
Bank of India (RBI), State Bank of India (SBI), Life Insurance
Corporation (LIC), Unit Trust of India (UTI).

2) Registered Company: These companies are incorporated un-

der the Companies Act, 2013 or any previous company law.
These companies function as per provisions of Companies Act,
2013.

II) ON THE BASIS OF MEMBERSHIP

1) Private Company: The private company has following features:

 Minimum paid up capital as prescribed by its Articles
 Prohibits issue prospectus to public for inviting for subscrip-
tion of shares
 Minimum 2 members and maximum 200 members are re-
quired.
 Restrict transferability of shares.

2) Public Company: The private company has following features:

 Minimum paid up capital as prescribed by its Articles
 Issue prospectus to public for inviting for subscription of
shares
 Minimum 7 members and maximum no limit on membership.
 Freely transferability of shares.

3) One Person Company: The concept of One Person Company

was introduced through the Companies Act, 2013. It is operated
by single promoter who has limited liability. Due to limited liabil-
ity, this business considered to be better than Sole Trading Con-
cern. This company can have more than one director and need
not to hold AGM. It is a private limited company and it has to ful-
 5

fill and comply with all the formalities of private company unless
otherwise specified in the Act.

III) ON THE BASIS OF LIABILITY OF MEMBERS

1) Company Limited by Shares: These companies have share

capital and liability of its members is limited upto unpaid value of
shares. At the time of winding up of company members are li-
able to pay only unpaid value on their shares. Most of the com-
panies in India are limited by shares.

2) Company Limited by Guarantee: Such companies may or

may not have share capital. At the time of winding up of com-
pany each member is liable to pay fixed sum of money specified
in Memorandum of Association of company to pay the debts
and liabilities of company.

3) Unlimited Liability Company: In this type of company, liability

of members is unlimited. In case company is having debts and
liabilities, the members have to sell their personal property
along with business property to repay debts and liabilities of
companies. Such companies are not very popular among inves-
tors.

IV) ON THE BASIS OF CONTROL

1) Holding Company: It is company which holds more than 50%

of shareholding in another company (Subsidiary Company).
This company controls the management of subsidiary company.
There are 2 types of holding company:

 By Share Holding: Controls more than 50% of total share

capital either at its own or together with one or more of its
subsidiary companies.

 By Management: Controls the composition of Board of Di-

rectors

2) Subsidiary Company: This Company is just opposite to hold-

ing company. More than 50% of its shares are purchased by
holding company. This company is controlled by holding com-
pany. Eg. Company ‘B’ is having total 10,000 shares out of
which Company ‘A’ holds 6000 shares. So Company ‘A’ is Hold-
ing Company and Company ‘B’ is Subsidiary Company.

V) OTHER TYPES

1) Government Company: Government company is the one in

which not less than 51% of paid up share capital is held by:
 6

 The Central Government

 State Government
 Partly by Central Government and Party by State Govern-
ment
 Subsidiary Company of a Government Company

Government Company may be a private company or public

company. It is registered under India Companies Act, 2013. Eg. Oil
and Natural Gas Corporation Ltd. (ONGC), Steel Authority of India
Ltd. (SAIL), Bharat Heavy Electrical Limited (BHEL), Hindustan
Machine Tools Ltd., Coal India Limited etc.

2) Foreign Company: It is a company incorporated outside India

but having a place of business in India whether:
 By itself or through an agent, physically or through electronic
mode and
 Conducts any business activity in India in any other manner.
Eg. Nestle India Ltd., Bata India Ltd., Whirlpool Corporation etc.

3) Dormant Company: The Companies Act, 2013 has introduced

concept of dormant company which would have adhere to fewer
compliance requirement. It means:
 The company has not made any significant accounting
transactions in last two years or
 It has not filed financial statements or annual returns in last
two years.
The ROC may issue notice to such company and enter their
name in register of dormant companies.

4) Listed Companies: It is a company which has any of its securi-

ties listed on any recognized stock exchange. Its securities are
traded on stock exchange. Such companies have to follow SEBI
guidelines and provisions of the Companies Act.

5) Small Company: A small company is other than a public com-

pany which has:
 Paid up share capital does not exceed Rs. 50 lakh or such
higher amount as may be prescribed or
 Turnover of which its last profit and loss account does not
exceed Rs. 2 crores or such higher amount as may be pre-
scribed.

6) Associate Company: It is a company over which another com-

pany exercises a significant degree of control which is less than
the degree of control exercised over a subsidiary company.

7) Company not for profit (Section 8): Such companies must ob-
tain license from the Central Government before they are incor-
 7

porated. The liability of their member is limited. They need not to

use word ‘limited’ or ‘private’ with their name.

Check your Progress :

 Define/explain the following terms
1) Joint Stock Company
2) Private Company
3) Holding Company
4) Listed Company
5) Company Limited by Shares

1.3 COMPANY SECRETARY

1.3.1 Meaning and Definition

The company secretary looks after various functions related
to correspondence, meetings and administration which ensures
smooth functioning of the organization. He/she is an important offi-
cer of the company.

Company secretary is appointed by the Board of Directors of

company as per provisions of Companies act. He/she acts as a link
between Board of Directors and Shareholders, Employees and out-
siders etc. He/she is closely connected with day to day activities of
company, so his/her views are considered for decision making in an
organization.

Definition of Company Secretary

According to Companies Act 2013 Section 2 (24) “Com-
pany Secretary or Secretary means a Company Secretary as de-
fined in Clause (c) of Sub-section (i) of Section 2 of the Company
Secretaries Act 1980 who is appointed by a company to perform
the function of a Company Secretary under this Act.”
The Oxford Dictionary defines secretary as “A person
whose work is to write for others, especially one who is employed
to conduct correspondence, keep records and to transact various
other businesses for another person or for society, corporation or
public body.”
 8

The Company Secretaries Act, 1980 defines Company

Secretary as – “a person who is a member of Institute of Company
Secretaries of India.”
1.3.2 Features of Company Secretary
1) An Individual: Only an individual can be appointed as secretary
of a company. A firm, Corporate Body, an institution etc. cannot
be appointed as secretary.
2) An Employee: A secretary is a paid employee in the company.
But he/she holds an important position in the organization.
3) Qualification: The secretary of a Joint Stock Company must be
a member of Institute of Company Secretaries of India (ICSI).
This is essential qualification required to have by Company Sec-
retary. Other qualification required by Company Secretary is
command over language as well as knowledge of office man-
agement, correspondence, Account and Finance, Technology
and so on.
4) Qualities: Along with educational qualifications, a secretary
need to have certain qualities such as accuracy, promptness,
tact, courtesy, leadership, loyalty, punctuality, sound judgement
etc. This enables him/her to discharge his/her duties efficiently.
5) Duties: A company secretary needs to perform various duties
which include correspondence, administration, convening meet-
ings, statutory functions, assist in formulating policies, financial
functions, providing information etc.
6) Appointment: The first secretary is appointed by company
promoters. Thereafter, company secretary is appointed by the
Board of Directors of a company by passing resolution in Board
Meeting.

1.3.3 Qualities of Company Secretary

1) Accuracy: Accuracy means correctness. A company secretary
must be accurate in his/her duties which include drafting letters,
recording minutes, filing documents with government depart-
ment and so on. Concentration is required for accuracy in work.
2) Adaptability: Adaptability means adjusting in changing situa-
tion. There is frequent change in government policies, man-
agement policies and so on. The secretary should adjust him-
self/herself with such changes.
3) Courtesy: It implies politeness and kindness. Since secretary
has to deal with many people day in and day out, he/she should
be courteous with them. This helps to create positive impression
about organization.
 9

4) Leadership: In order to get work done from subordinates, a

secretary should have leadership quality. Secretary should have
the ability to guide, advise, inspire and motivate the subordinate.
5) Loyalty: Secretary is custodian of secret information. He/she
should be loyal towards the organization. He/she should not
disclose confidential information to anyone.
6) Punctuality: This quality is related with time management and
refers to doing things at appropriate time. Delay in work can
create bad impression about the organization.
7) Cooperation: The secretary should be able to cooperate and
assist his subordinates in their work. This will enable to achieve
objectives of the organization.
8) Orderliness: It means doing the work in a systematic manner.
Secretary should sort out more important and least important
work. He/she should give importance to important work followed
by least important work.
9) Personality: A secretary should have pleasing, impressive and
winning personality. His personality can create cordial and
friendly atmosphere in the organization. Pleasing personality
enables the secretary to get respect from others.

1.3.4 Qualifications of Company Secretary

1) Educational Qualification: A company secretary must be the

member of the Institute of Company Secretaries of India (ICSI).
This is the basic essential qualification required to be a com-
pany secretary. In addition, he may have membership of the In-
stitute of Chartered Accounts of India (ICAI) or Membership of
the Institute of Cost and Works Accounts of India (ICWA).

2) Other Educational Qualification: Along with basic educational

qualifications a secretary should also possess other educational
qualification to discharge his/her function and duties efficiently.
Other educational qualifications are as follows:
 General Education: Secretary should have Masters’ Degree
in Economics, Commerce or Law.
 Legal Knowledge: A secretary should be well versed with
provisions of various acts such as Income Tax, Sales Tax,
Stamp Duty, Minimum Wages Act, Contract Act, Sale of
Goods Act, Negotiable Instruments Act etc.
 Command over Language: The secretary has to communi-
cate with members, government officers, visitors, press re-
porters etc. So he/she should have command over English
and other regional language both in oral and written form.
 10

 Knowledge of Accounting and Finance: The secretary

should have knowledge of Balance sheet and Profit and
Loss account. He/she should also have knowledge of finan-
cial planning and financial management of his/her company.
 Knowledge of Office Management: Secretary should have
complete knowledge about office management which is use-
ful for planning, organizing, coordinating, directing, staffing,
controlling etc. He/she should also know drafting, filing, re-
cord keeping, assigning work and so on.
 Knowledge of Human Relations: Secretary has to deal
with the directors, shareholders and the outsiders. He/she
must know how to deal with them. In short, he/she need to
have knowledge of human psychology.
 Knowledge of Technology Application: These days IT is
used extensively for varied purpose in an organization. The
company secretary should have knowledge of technology to
brings accuracy, speed and decency in the office work.

1.4 APPOINTMENT PROCEDURE, RESIGNATION

AND REMOVAL OF COMPANY SECRTARY

1.4.1 Procedure of Appointment

Following is the procedure of Appointment of Company Secretary :

1) Board Meeting: A Board meeting is convened and details of short

listed candidates for the post of Company secretary is placed before
Board meeting. After considering all applications, a suitable candi-
date is selected and Board Resolution for Appointment of Company
Secretary is passed. Formal appointment letter is issued to the per-
son finally selected.

2) Filing Return of Appointment of Company Secretary: In this

stage, a return of appointment of company secretary is filed with
Registrar of Companies (ROC) in Form DIR-12 within 30 days from
the appointment. Form MGT-14 is also required to be filed along
with fees. This form includes details such as particulars of company
secretary, PAN No., membership number, address, date of ap-
pointment and so on.

3) Making entry in the Register of Key Managerial Personnel

(KMP): Details of Company Secretary must be recorded in the reg-
ister of Key Managerial Personnel (KMP).

4) Intimation to Stock Exchange: If such company is listed then it

should give intimation to all the Stock Exchange where the com-
pany's securities are listed.
 11

1.4.2 Resignation and Removal of Company Secretary

The company secretary can resign by giving notice as per
terms and conditions of service agreement. The secretary can re-
sign due to persona reasons or unfavourable working conditions.
The Board of Directors may also remove the secretary by serving
notice to him/her by following a procedure.

The procedure for Removal / Resignation of Company

Secretary
1) Board Meeting: Board meeting is convened for final decision
on resignation / removal of company secretary. A resolution is
passed by the Board.
2) Filing of Form DIR-12: Form DIR-12 in electronic mode is filed
within 30 days with Registrar of Companies along with fees.
3) Intimation to Stock Exchange: The stock exchange where
share of the company are listed, is required to be informed
about resignation / removal of secretary.
4) Entries in the Register: Entry is made in the Register
maintained for recording the particulars of Company Secretary
under Section 170 of Companies Act.
5) Issue of General Notice: The Company may issue general
public notice informing regarding removal / resignation of
secretary.
6) Filing of Vacancy: A Board meeting is convened to filing of
vacancy of secretary within 6 months from the date of such
vacancy.

1.5 RIGHTS, RESPONSIBILITIES AND LIABILITIES

OF COMPANY SECRETARY

1.5.1 Rights of Company Secretary

Company Secretary is a senior level officer. He enjoys the rights
as per the agreement signed by him with the Company. Some
rights areas follows:
1) As a senior level officer Company Secretary can supervise, con-
trol and direct subordinate officers and employee.
2) A Company Secretary can sign any contract /agreement on be-
half of the company as a principle officer of a company, subject
to the delegation of power by the board of the company.
3) Company Secretary can issue guidelines for the employees on
behalf of the company.
4) Company Secretary can attend meeting of shareholders and the
meeting of board of directors.
 12

5) During Winding up he can claim his legal dues as a preferential

creditor of a company.
6) He can sign and authenticate the proceeding of meetings
(Board, Annual general or extra ordinary general meeting) and
other documents on behalf of the company where common seal
is not required.
7) Company Secretary is a Compliance Officer and he has a right
to blow whistle whenever he finds the conduct of the officers or
of the directors of the company are detrimental to the interest of
the company.

1.5.2 Responsibilities of Company Secretary

1) According to Company Act:
 To sign documents and proceedings requiring authentication
by the company.
 To deliver return of allotment the Registrar.
 To give notice to registrar for increase in the share capital.
 To deliver share certificate of allotment within 2 months after
transfer.
 To make entry for register of members of the share warrant.
 To send annual return
 To send notice of general meeting to every member of the
company.
 To make statutory books
 To sign every balance sheet and P/L accounts in case of a
non-banking financial company.
 To prepare minutes of every General Meeting and Board
Meeting within 30 days
 To file a resolution with the registrar.
2) According to IT Act:
 To ensure proper income tax is deducted at source from the
salary of employees
 To see that the certificate of TDS is issued.
 To ensure that the tax deducted is deposited to government
treasury
 To submit and verify various forms and returns
3) Under Indian Stamp Act:
 To see that the documents like letter of allotment and share
certificate etc. are properly stamped.
 13

4) Under other Act:

 To comply with other acts such as FEMA, Minimum Wages
Act, Industrial Dispute, Employee State Insurance Act etc.
5) General Responsibilities:
 To comply with internal regulations and legislation
 Duty to exercise due care and diligence
 To draft director report
 Maintaining the statutory registers of the company
 Ensuring Board decisions are properly communicated
 Registration of share transfers and issuance of related share
certificates
 Communicating with company shareholders
 Safe custody of common seal
 Certifying documents such as Certificate of Incorporation,
Memorandum and Articles of Association
 Giving legal advice to Directors
 To act as an information link

1.5.3 Liabilities of Company Secretary

 Statutory Liabilities
1) Filing the return of allotment
2) Delivering share certificate / Debenture certificate on time
3) Filing annual return
4) Holding Annual General Meeting (AGM)
5) Recording minutes of the meeting
6) Providing the P/L account and Balance sheet at AGM
7) Provide notice about Board Meeting
8) Maintain the register of members

 Contractual Liabilities
1) He/she is liable for any negligence on part of his duty. He/she
may be dismissed.
2) He/she must not do anything beyond his authority, if he/she
does he will be personally liable for loss.
3) He/she is under the obligation to not disclose any secret infor-
mation about the company to outsiders.
 14

4) He/she is liable for any secret profits made by him/her on ac-

count of his position
5) If the company secretary commits any fraud, he/she must in-
demnify to the company for any loss occurred.

1.6 CAREER OPTIONS

A career as a Company Secretary is financially rewarding

and prestigious. The Institute of Company Secretary of India (ICSI)
is the only recognized professional body in India to develop and
regulate the profession of Company Secretary. If a person has
good judgemental quality, legal aptitude, interest in current affairs
and good administrative policy, then company secretary is an ideal
career for such person.

1. Opportunities in Employment
A qualified company secretary can find good positions in the
private sector as well as in public sector, banks and financial institu-
tions. There is also opportunity in stock exchanges, the Department
of Company Affairs, Company Law Board and various government
departments. There is a statutory requirement for appointment of
company secretaries in listed companies.

Membership of ICSI is recognized for appointment to supe-

rior posts and services under Central Government. It is also recog-
nized for recruitment from Grade I and Grade IV in the Accounts
branch of the Indian Company Law Service. Almost every kind of
organization whose affairs are conducted by Board, Councils or
other association, federation, authority, commission etc. appoint
Company Secretary in a Key Administrative Position.

2. Role in the Company

The company secretary is an in-house legal expert and a
compliance officer of the Company. He/she is an expert in corpo-
rate laws, securities laws and capital market and corporate govern-
ance. He is the chief advisor to the Board of Director on best prac-
tices in corporate governance and is responsible for all regulatory
compliances of company. He/she is known as a corporate planner
and strategic manager. He has direct access to the top manage-
ment and the board room.

They have to manage all aspects of corporate meeting be it

Board Meeting, Annual General Meeting, interaction with important
clients and vendors, meetings with government and private delega-
tions. They may also have to take up the responsibility to manage
corporate events and manage clients.
 15

As an additional responsibility, company secretary also have

to keep a discerning eye on the expansion opportunities of the
company. Further, they have to take care of collaborations, joint-
ventures, mergers, takeovers within the country and outside.

Under the newly passed Companies Act, 2013, the

Company Secretary has been aptly bracketed in the Company’s
‘Key Managerial Personnel’.

3. Option of going into practice

After obtaining a ‘Certificate of Practice from the Institute,
Members of the Institute can opt for independent practice. Right
from the incorporation of a company till the time it is wound-up, a
company will require the services of a practicing company secretary
at some stage or the other.

Pursuant to Clause 49 of the Listing Agreement of stock ex-

changes, Practicing Company secretary has also been authorized
to issue certificate regarding compliance of conditions of Corporate
Governance as stipulated in the Clause.

Practitioners have also been recognized to appear before

various tribunals such as Company Law Board, the Securities Ap-
pellate Tribunal, Consumer Forum, Tax Tribunals etc. The Reserve
Bank of India has also recognized the Practicing Company Secre-
taries to undertake Diligence Report for Banks.

A practicing company secretary is an independent profes-

sional and is recognized to issue certificates and attend documents
inter alia under the Companies Act, the SEBI Act, Securities Con-
tracts and Regulation Act (SCRA), and Regulations made there un-
der, the Depositories Act, the EXIM Policy etc.

4. Opportunities abroad for CS

Many company Secretaries are already working in various
countries like the US, Canada, UK, Singapore, Malaysia, Thailand,
Australia, New Zealand, Middle-East, Africa etc. With their research
and legal bent of mind, their employers have recognized their pro-
fessional skill sets. They also possess managerial capabilities and
analytical skills.

After the globalization of services through WTO and GATS,

the field is opening in various countries for practicing company sec-
retaries as well. India is entering into bilateral Agreements with
countries like Singapore, Malaysia, Thailand and Mauritius etc.
These agreements recognize Company Secretary for free move-
ment of professional across borders.
 16

ICSI has entered into a MoU with the Institute of Chartered

Secretaries and Administrators, UK. This MoU recognizes Com-
pany Secretaries of both the countries on certain conditions. The
process of globalization and the process of comprehensive eco-
nomic cooperation that India is initiating has also set in motion mu-
tual recognition agreements between the ICSI and Institutes gov-
erning the profession in various other countries. This is opening up
the world to Company Secretaries.

1.7 EXERCISE

FILL IN THE BLANKS

1) Joint Stock Company is a _____________ (Voluntary Associa-
tion, Incorporated Association, Both)
2) Shareholders are _________ of Joint Stock Company. (Credi-
tors, Debtors, Owners)
3) _________ are appointed by shareholders to look after day to
day administration of the company. (Promoters, Directors, Sec-
retary)
4) _________ Company is incorporated outside India but having a
place of business in India. (Foreign, Government, Dormant)
5) The Secretary is a ______________ in a company. (Paid Em-
ployee, Owner, None of these)
6) A Company Secretary must be the member of the
_______________ (ICSI, WTO, EU)
7) A secretary requires to have _____________ quality. (Accuracy
and Orderliness, Leadership and Cooperation, Both)
8) ________________ is a right of Company Secretary. (Super-
vise and Direct subordinates, Default in filing the return of allot-
ment, Failure to maintain register of members.

ANSWER IN BRIEF
1) Define Joint Stock Company. Explain its features.
2) What are the different types of Companies as per Companies
Act, 2013?.
3) Discuss qualities required by a company secretary.
4) Explain qualification required by a company secretary.
5) Briefly explain appointment procedure of company secretary.
6) Write note on Resignation and Removal of Company Secretary.
7) What are the rights of Company secretary?
8) Highlight responsibilities of company secretary.
 17

9) Discuss the liabilities of Company Secretary.

10)Write note on Career options of Company Secretary.

1.8 REFERENCES

[Link]
[Link]
[Link]
[Link]
[Link]
Maharashtra State Board – Secretarial Practice – Std. XI textbook





 18

2
COMPANY SECRETARY PRACTICES
Unit structure:

2.0 Objectives
2.1 Introduction to Advisory Services of Company Secretary
2.2 Secretaries as a Liaison Officer between Company and
Stock Exchange
2.3 Representation Services of Company Secretary at Different
Forums
2.4 Cyber Law Ccompliance
2.5 Secretarial Standards by ICSI, Secretarial Standards -1- 10
2.6 Secretarial Audit – Procedure and Stages, Need and
Importance, Scope
2.7 Summary
2.8 Exercise

2.0 OBJECTIVES:

After studying the unit the students will be able:

 To explain the role of Company Secretary as an liaison officer
 To explain about Representation Services of Secretary at
different forums
 To explain the Secretarial Standards by ICSI, Secretarial
Standards -1- 10.
 To explain Secretarial Audit–Procedure and Stages, Importance
and scope

2.1 INTRODUCTION TO ADVISORY SERVICES OF

COMPANY SECRETARY:

Company secretary is regarded as a liaison officer. Company

secretary is mainly responsible for looking after the secretarial works.
He generally maintains liaison with the board of directors, employees,
shareholders, and other outside parties. Now a days, company
secretary is one of the most important persons who perform some
specified duties in the company form of business.

The educational background, knowledge, training and

exposure that a Company Secretary acquires makes him a versatile
professional capable of rendering a wide range of services to
 19
companies of all sizes, other commercial and industrial
organizations, small scale units, firms etc.

Services rendered by Practising Company Secretary are as

follows :
Promotion, formation and incorporation of companies, and
matters related therewith including choice of type of company,
availability of name, drafting of Memorandum and Articles of
Association and other documents, their stamping and registration
with the Registrar of Companies.

2.2 SECRETARIES AS A LIAISON OFFICER

BETWEEN COMPANY AND STOCK EXCHANGE:

2.2.1 Secretaries as a Liaison Officer between Company and

Stock Exchange
Services under the Securities Exchange Board of India Act, 1992
are as follows -
1. Complete support, certifications and assistance in the
implementation and compliance of Listing Agreement.
2. Complete support and advisory services for Listing and delisting
of Shares from the Indian and Foreign Stock Exchanges.
3. Complete support, advisory & transaction services to companies
in implementing Regulations, notifications, circulars and orders of
SEBI issued under SEBI Act 1992.
4. Complete support in drafting replies to Show Cause notices
issued by SEBI and making representation before the
Adjudicating Officer of SEBI.
 20
5. Filing Appeal against the orders of SEBI in Securities Appellate
Tribunal and allied services.

2.2.2 Secretaries as a Liaison Officer between Company and

Depository Participants

Depository is an institution or a kind of organization which

holds securities with it in DeMat form, in which trading is done among
shares, debentures, mutual funds, derivatives, F&O and
commodities. The intermediaries perform their actions in variety of
securities at Depository on behalf of their clients. These
intermediaries are known as Depositories Participants (DPs).

Fundamentally, There are two sorts of depositories in India.

One is the National Securities Depository Limited (NSDL) and the
other is the Central Depository Service (India) Limited (CDSL). Every
Depository Participant (DP) needs to be registered under this
Depository before it begins its operation or trade in the market.
Depository provides its services to investors through its agents
called depository participants (DPs). These agents are appointed by
the depository with the approval of SEBI. According to SEBI
regulations, among others, three categories of entities i.e. Banks,
Financial Institutions and Members of Stock Exchanges registered
with SEBI can become DPs. Depository Participant is described as
an Agent of the depository. They are the intermediaries between the
depository and the investors. The relationship between the DPs and
the depository is governed by an agreement made between the two
under the Depositories Act. In a strictly legal sense, a DP is an entity
who is registered as such with SEBI under the sub section 1A of
Section 12 of the SEBI Act.

Company Secretary acts as Compliance Officer and ensures

compliance with SEBI (Prohibition of insider Trading) Regulations,
1992 including maintenance of various documents., Securities
Compliance and Certification Services, Compliance with rules and
regulations in the securities market particularly, Internal Audit of
Depository Participants , Certification under SEBI (DIP) Guidelines,
Audit in relation to Reconciliation of shares, Certificate in respect of
compliance of Private Limited and Unlisted Public Company .
 21
2.2.3 Secretaries as a Liaison Officer between Company and
Registrar of Company:

The Registrar of Companies (ROCs) is an office under the

Indian Ministry of Corporate Affairs that deals with administration of
the Companies Act 1956 and Companies Act2013. These officers
are from Indian Corporate Law Service cadre. There are currently
22 Registrars of Companies operating from offices in all major
states of India. Some states, such as Maharashtra and Tamil Nadu,
have two Registrars of Companies each. Section 609 of the
Companies Act, 1956 tasks the ROCs with the primary duty of
registering companies.

The office of the ROC maintains a registry of records related to

companies registered with them, and permits the general public to
access this data on payment of a fee. The Registrar of Company
takes care of company registration (also known as incorporation) in
India, completes reporting and regulation of companies and their
directors and shareholders, and also oversees government
reporting of various matters including the annual filling of various
documents.

Role of company secretary has a great importance in every

stage of company formation. A secretary plays a vital role for
company before incorporation and after incorporation. Secretary
submits necessary forms and documents to the registrar of Joint
Stock Company for getting certificate of incorporation .He prepares
Memorandum and Articles of Association. He ccollects certificate of
commencement from the registrar of Joint Stock Company and
arrange statutory meeting .He prepares statutory report and files the
copy of such report with the registrar of the company. Preparation,
validation and filing of resolutions, agreements, documents, notices
and various returns with the company Registrar are some of the
important work done by Company Secretary an liaison officer
between Company and Registrar of Companies.
 22

2.3 REPRESENTATION SERVICES OF COMPANY

SECRETARY AT DIFFERENT FORUMS:

Company Secretary is a vital link between the company and its

Board of Directors, shareholders, government and regulatory
authorities. He ensures that Board procedures are both followed and
regularly reviewed and provides guidance to Chairman and the
Directors on their responsibilities under various laws. He commands
high position in the value chain and acts as conscience seeker of the
company. He represents on company’s behalf on various forums.

1. Corporate Laws Advisory Services :

Advising companies on Compliance of legal and procedural
aspects, particularly under SEBI Act, SCRA and rules and
regulations made there under Foreign Exchange Management Act,
Consumer Protection Act, Depositories Act , Environment and
Pollution Control Laws ,Labour and Industrial Laws , Co-operative
Societies Act , Mergers and Amalgamations and Strategic Alliances ,
Foreign Collaborations and Joint Ventures ,Setting up subsidiaries
abroad, Competition Policy and Anti Competitive Practices, IPR
Protection, Management, Valuation and Audit , Drafting of Legal
documents etc.

2. Representation Services:
Company Secretary’s representation services include Corporate
Laws Advisory and Representation Services. It also includes
Financial Market Services .
 23
3. Financial Market Services :
Public Issue, Listing and Securities Management, Adviser
/consultant in issue of shares and other securities, Preparation of
Projects Reports and Feasibility Studies, Syndication of Loans from
banks & financial institutions, Loan Documentation, Listing of
securities/ delisting of securities with recognized stock exchange,
Ensuring compliance of the Takeover Regulations and any other
laws or rules as may be applicable in this regard etc.

4. Finance and Accounting Services :

Internal Audit, Secretary to Audit Committee, Working capital
and liquidity management, Determination of an appropriate capital
structure, Analysis of capital investment proposals, Budgetary
controls, Accounting and compilation of financial statements etc.

5. Taxation Services :
Advisory services to companies on tax management and tax
planning under Income Tax, Excise and Customs Laws ,
Preparing/reviewing various returns and reports required for
compliance with a the tax laws and regulations etc.

6. International Trade and WTO Services :

Advising on all matters related to IPRs and TRIPs Agreement of
WTO, International Commercial Arbitration, Advising on and issuing
certificates on EXIM Policy and Procedures, Advising on Intellectual
Property, licensing and drafting of Agreement, Acting as registered
Trade Mark Agent etc.

7. Management Services:
Advising on Legal Structure of the organization, Acting as
management representative to obtain ISO Certification ,Corporate
Communications and Public Relations ,Communication with
stakeholders, Advisory services for Brand equity and image building,
Manpower planning and development, Performance appraisal,
Motivation and remuneration strategies ,Industrial relations ,work
studies and performance standards, Advising on industrial and
labour laws , Information Technology, Compliance with cyber laws,
Conducting Board Meetings through video-conferencing and
teleconferencing, Advising on software copyright and licensing ,
Development of management reports and controls, Maintenance of
statutory records in electronic form ,Sending notices to shareholders
by electronic mode ,Filing of forms/documents in electronic form with
Registrar of Companies and other statutory authorities etc.

8. Company Law Board, Consumer Forum, SEBI, Arbitration &

Conciliation Services:
Company Secretary represents on behalf of a company before
Company Law Board, National Company Law Tribunal, Competition
Commission of India, Securities Appellate Tribunal , Registrar of
 24
Companies, Consumer Forums, Tax Authorities ,Other quasi-judicial
bodies and Tribunals etc. He also plays important role in arbitration
and Conciliation.

2.4 CYBER LAW COMPLIANCE:

As we know that open-source license is a type of license for

computer software and other products that allows the source code,
blueprint or design to be used, modified and/or shared under defined
terms and conditions. Usage of open source content in a sensitized
manner is critical for any business and needs utmost care to handle it
in right way. Software audit is the need of the hour. It includes :

1. Software Licensing Agreements (Drafting & review)

2. Information Security & Cyber security Policy
3. Software (High-Level/Design) Audit
4. Compliance to IT Act,
5. User Data Privacy Compliance,
6. Data Transfer Compliance,
7. GDPR Compliance,
8. Black-box (manual) testing from Legal Perspective.
9. Websites Audit
10. Litigation pertaining to IT Act

The company secretary is responsible for the efficient

administration of a company, particularly with regard to ensuring
compliance with Cyber Law, statutory and regulatory requirements
and for ensuring that decisions of the board of directors are not
against the present Cyber Law. To ensure this Software audit must
be done periodically.

2.5 SECRETARIAL STANDARDS BY ICSI,

SECRETARIAL STANDARDS -1- 10:

In order to have uniformity in the practices adopted by different

companies, the Institute of Company Secretaries of India (ICSI) has
released 10 secretarial standards including standard on board
meeting, dividend and transmission of shares. Company Secretary
should excel in new areas like corporate restructuring, insolvencies,
mergers, amalgamations, international tax planning, GST etc. Here's
a list of Secretarial Standards:

SS-1 : Secretarial Standards on Meeting of Board of Directors.

SS-2 : Secretarial Standards on General meetings.
SS-3 : Secretarial Standards on Dividend.
 25
SS-4 : Secretarial Standards on Registers and Records.
SS-5 : Secretarial Standards on Minutes.
SS-6 : Secretarial Standards on Transmission of Shares and
Debentures.
SS-7 : Secretarial Standards on Passing Resolutions by Circulation.
SS-8 : Secretarial Standards on Affixing of common seal.
SS-9 : Secretarial Standards on Forfeiture of Shares.
SS-10 : Secretarial Standards on Board's Report.

Out of the above mentioned Secretarial Standards, only 3 are

effective as on till date, they are:-

SS-1 Secretarial Standard on Meetings of the Board of Directors.

SS-2 Secretarial Standard on General Meetings.
SS-3 Secretarial Standard on Dividend .

2.6 SECRETARIAL AUDIT – PROCEDURE AND

STAGES, NEED AND IMPORTANCE, SCOPE:

Secretarial Audit is a compliance audit. It is a part of total

compliance management in an [Link] helps to detect
noncompliance and to take corrective measures. Secretarial Audit is
a process .It is done to check compliance with the provisions of
various laws and rules/ regulations/procedures, maintenance of
books, records etc., by an independent professional. It is done to to
make sure that the legal and procedural requirements are complied
with the legal and procedural requirements and also followed
due processes.

It is essentially a mechanism to monitor compliance with the

requirements of stated laws.
 26
2.6.1 Secretarial Audit Report:
The Secretarial Auditor expresses an opinion as to whether
there exist adequate systems and processes in the company
commensurate with the size and operations of the company to
monitor and ensure compliance with applicable laws, rules,
regulations and guidelines. Secretarial Audit helps to detect the
instances of non-compliance and facilitates taking corrective
measures. It thus provides necessary comfort to the management,
regulators and the stakeholders, as to the statutory compliance,
good governance and the existence of proper and adequate
systems and processes.

2.6.2 Scope of Secretarial Audit:

Secretarial Audit is to be on the principle of “Prevention is better
than cure” rather than post-mortem exercise and to find faults. It
acts as an effective compliance risk management tool or a
governance tool. The benefits of Secretarial Audits are available to
all stakeholders including promoters, executive directors, officers of
the company, regulators, government authorities, investors,
financial institutions, banks, creditors etc.

Reporting on the compliance of five laws as mentioned:

a) Companies Act, 2013 and the rules made there under;
b) Securities Contracts (Regulation) Act, 1956 (‘SCRA’), and the
rules made there under;
c) Depositories Act, 1996, and the rules made there under;
d) Foreign Exchange Management Act, 1999 and the rules and
regulations made there under to the extent of Foreign Direct
Investment, Overseas Direct Investment, and External
Commercial Borrowings;
e) Regulations and Guidelines prescribed under the Securities and
Exchange Board of India Act, 1992 (‘SEBI Act’).

2.6.3 Reporting on the compliance of secretarial standards

issued by the Institute of Company Secretaries of India:
1. Reporting on Compliance with the Listing Agreement;
2. Reporting on compliance of ‘Other laws as may be applicable
specifically to the company which shall include all the laws which
are applicable to specific industry for example for Banks- all laws
applicable to Banking Industry; for insurance company-all laws
applicable to insurance industry etc.
3. Examines and reports regarding the adequacy and efficiency of
the systems and processes with other laws.
4. Monitors and ensures compliance with general laws like labor
laws, competition law, environmental laws.
5. Examines and reports on the specific observations or
qualification, reservation or adverse remarks in respect of the
 27
Board Structures/system and processes relating to the Audit
period.
6. Secretarial Auditor may rely on reports given by statutory
auditors or other designated professionals to check compliance
with other laws like Income Tax, Customs, GST etc.

2.6.4 Process of Secretarial Audit :

Secretarial Auditor or the firm of Secretarial Auditors shall

provide the checklist for carrying out the secretarial audit of the
company depending upon the nature of business activities carried
on by the Company.

2.6.5 Objectives of Secretarial Audit:-

1. To verify and report on compliances of applicable laws and

Secretarial Standards
2. To point out non-compliances and inadequate compliances;
3. To protect the interest of various stakeholders i.e. the customers,
employees etc;
4. To avoid any unwarranted legal actions/penalties by law
enforcing agencies and other persons as well.
 28
2.6.5 Benefits of Secretarial Audit:
Benefits are manifold and its beneficiaries are many. Secretarial
audit enables Legal Compliance Management .Ever increasing
complexities of Laws and responsibilities of Directors make it
imperative .Secretarial Audit helps to detect the instances of
non-compliance and facilitates taking corrective measures. It audits
the adherence of good corporate practices by the company.
Following are the points which indicates the benefits of Secretarial
Audit.
1. Secretarial Audit assures the promoters of a company that those
in- charge of its management are conducting its affairs in
accordance with the requirements of laws and the owners‟
stake is not being exposed to unintended risk.
2. It helps the companies to build their corporate image.
3. Secretarial Audit provides comfort to the Non-executive/
Independent Directors that appropriate mechanisms and
processes are in place to ensure compliance with laws
applicable to the company, thus mitigating any risk from a
regulatory or governance perspective.
4. Secretarial Audit helps the investors in taking informed
investment decision, as it evaluates the company in terms of
compliance and governance norms being followed by the
company.
5. The Secretarial Audit provides an in-built mechanism for
enhancing corporate compliance generally and help restore the
confidence of investors in the capital market through greater
transparency in corporate functioning.

2.6.6 The need for Secretarial Audit:

1. It is an effective mechanism to make sure of the compliance with
the legal and procedural requirements.
2. It provides a level of confidence to the directors and Key
Managerial Personnel etc.
3. Secretarial Audit ensures legal and procedural requirements. So
directors can concentrate on important business matters.
4. It strengthens the goodwill of a company for their regulators and
stakeholders.
5. Secretarial Audit is an effective governance and compliance risk
management tool.
6. It helps the investor in analyzing the compliance level of
companies, thereby increases the reputation.

2.6.7 Conclusion:
Secretarial Audit is an independent, objective assurance
intended to add value and improve an organization’s operations. It
 29
helps to accomplish the organization’s objectives by bringing a
systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, control, and governance
processes.

2.7 SUMMARY:

Company secretary is regarded as a liaison officer. He generally

maintains liaison with the board of directors, employees,
shareholders, and other outside parties. Now a days, company
secretary is one of the most important persons who perform some
specified duties in the company form of business. Company
Secretary acts as Compliance Officer and ensures compliance with
SEBI (Prohibition of insider Trading) Regulations, 1992 including
maintenance of various documents, Securities Compliance and
Certification Services etc. In order to have uniformity in the practices
adopted by different companies, the Institute of Company
Secretaries of India (ICSI) has released 10 secretarial standards
including standard on board meeting, dividend and transmission of
shares. Secretarial Audit is to be on the principle of “Prevention is
better than cure” rather than post-mortem exercise and to find faults.
It acts as an effective compliance risk management tool or a
governance tool.

2.8 EXERCISE

1. Discuss the Advisory Services of Company Secretary.

2. Explain the role of Secretary as an liaison officer between
Company and Stock Exchange.
3. Explain the role of Secretary as a liaison officer between Co. and
Depository Participants.
4. Explain the rrepresentation Services of Company Secretary at
different forums.
5. Discuss the Secretarial Standards by ICSI.
6. What do mean by Secretarial [Link] the importance of
Secretarial Audit?


 30

3
COMPANY DOCUMENTATION AND
FORMATION I
Unit Structure

3.0 Objectives
3.1 Introduction
3.2 Memorandum of Association (MOA)
3.3 Articles of Association (AOA)
3.4 Distinction between Memorandum and Articles of Association
3.5 Prospectus
3.6 Statement in Lieu of Prospectus
3.7 Misleading Prospectus
3.8 Distinction between Prospectus and Statement in Lieu of
Prospectus
3.9 Company Formation – Stages and Secretarial Duties
3.10 Conversion of Companies
3.11 Summary
3.12 Exercise
3.13 References

3.0 OBJECTIVES

After studying the unit students will be able to:

 Understand and discuss Concept of Memorandum of
Association, its clauses and alteration
 Understand and discuss Concept of Articles of Association and
its content
 Understand and discuss Concept of Prospectus and Statement
in Lieu of Prospectus
 Explain stages and secretarial duties in company formation
 Know Secretarial Procedure involved in conversion and
reconversion of public and private company

3.1 INTRODUCTION

A Joint Stock Company is an artificial entity created by Law

by registering under Companies Act. Formation of Joint Stock
Company requires preparation of certain documents and submits to
 31

the Registrar of Companies as per the provisions of Companies

Act, 2013. The process of formation gets completed once these
documents are approved by the Registrar. Important company
documents are Memorandum of Association (MOA), Articles of
Association (AOA) and Prospectus / Statement in Lieu of
Prospectus. Company promoters play an important role in
preparation of these documents and formation of company.

3.2 MEMORANDUM OF ASSOCIATION (MOA)

3.2.1 Meaning and Definition

MOA is the charter of the company. It is treated as the constitution
of the company. It defines the scope of its activities. It contains the
rights, privileges and powers of the company. MOA establishes the
relationship of the company with the members. The whole business
of the company is built up according to Memorandum of
Association. A company cannot undertake any business or activity
not stated in the Memorandum. It can exercise only those powers
which are clearly stated in the Memorandum. Preparation of MOA is
the first step in formation of a company. It is prepared by promoters
and submitted to the Registrar for the incorporation of a company.

Lord Cairns defines “Memorandum of Association is the

fundamental document of the company. It is foundation on which
structure of company stands. It lays down limitations of its
activities.”

As per Section 2 (56) of the Companies Act, 2013 states

Memorandum means the memorandum of association of a
company as originally framed or as altered from time to time in
pursuance of any previous company law of this Act.

3.2.2 Clauses of Memorandum of Association

1. Name Clause: It is the first clause of MOA. A company is free

to select any name it likes. But the name should not be identical
or similar to that of a company already registered. It should not
also use words like King, Queen, Emperor, Government Bodies
and names of World Bodies like U.N.O., W.H.O., World Bank
etc. A company name should end with the word ‘limited’ in case
of a public limited enterprise, and ‘private limited’ in the case of
a private limited enterprise. Eg. ‘ABC Private Limited’ in case
of the private company, and ‘ABC Ltd’ for a public company.

2. Domicile Clause: The memorandum must mention the state in

which registered office of the company is situated. The domicile
clause will not exactly contain the address of the registered of-
fice, but the state or union territory in which the registered office
 32

of the company is located. The registered office of a company

can be shifted from one place to another within the town with a
simple intimation to the Registrar. Whereas, to shift the regis-
tered office to other state, Memorandum should be altered ac-
cordingly.

3. The Object Clause: This is the most important clause. It states

the objects of the company for which the company is proposed
to be incorporated. The company is not legally entitled to do any
business other than specified in object clause. This clause en-
ables general public to know the purpose for which capital is
raised by company. It enables to know the extent of powers of
company. The objects are divided into three subcategories:
 Main Objective: It states the main business of the company.
 Incidental or Ancillary: These objects are ancillary to the
attainment of the main objects of the company
 Other objectives: Any other objects which the company
may pursue and are not covered in above (a) and (b)

4. Liability Clause: The liability clause declares the liability of

members of the company to be either limited or unlimited. The
MOA of the company limited by shares must declare that the
liability of the members of the company is limited. The MOA of a
company limited by guarantee must state the amount of con-
tribution that every member agrees to contribute to the assets of
the company in the event of the company being wound
up. However, in case of a unlimited company, the liability of di-
rectors or managers of a company may be unlimited, if specified
in the memorandum.

5. Capital clause: This is valid only for companies having share

capital. These companies must specify the amount of Authorized
capital divided into shares of fixed amounts. Further, it must state
the names of each member and the number of shares against
their names. It is usually expressed as “the share capital of com-
pany is Rs. 100 crores, divided into 100 lakh equity shares of
Rs. 100/- each’. The company should decide its authorized capital
after considering its long term financial needs. The company can
issue different types of shares to raise the capital from market.

6. Subscription (Association) Clause: This clause contains dec-

laration by the subscribers to the MOA that they are desirous of
forming themselves into a company. The subscribers to the
Memorandum must take at least one share (qualification
shares). The minimum number of members is two in case of a
private company and seven in case of a public company. Signa-
tures shall be attested by witnesses. Each subscriber must put
his signature along with his name and address.
 33

3.2.3 Format of Memorandum of Association

MEMORANDUM OF ASSOCIATION
Section 14 Table B
1. Name Clause : The name of company is ‘J.P. CEMENT
LIMITED’
2. Domicile Clause : The registered office of the company will be
situated in Maharashtra
3. Object Clause : Main Object: The main object for which the
company is established is ‘Manufacturing of
Cement’. Incidental Object: The object
incidentals of above main objects are
acquisition and setting up of machinery,
marketing of finished products etc. Other
Object: The other object for which company is
established are manufacturing of steel and steel
related products.
4. Liability Clause : The liability of members is limited
5. Capital Clause : The share capital of company is Rs. 100
crores, divided into 100 lakh equity shares of
Rs. 100/- each.
6. Subscription Clause : We, the several persons, whose names and
address are subscribed are desirous of being
formed into a company in pursuance of this
Memorandum of Association, we respectively
agree to take the number of shares in the
capital of company set opposite our respective
names.
Name and Address of Number of Shares Witness to the
Subscribers taken by each and Signature
their Signature
1. Mr. Shridhar Joshi, Mumbai 1200
2. Mr. Ajay Rao, Pune 1000
3. Mr. Sunil Jain, Thane 1500 Mr. A. S. Rane
4. Mr. Bharat Soni, Mumbai 1800
5500

Dated at ____ (Place) _______ the____(Day)__ day of ___(Date &

Month)__2019.

Common
Seal

Have a look on format of MOA of ‘Godrej Consumer Products Ltd.’ at

[Link]
policies/[Link]
 34

3.2.4 Alteration in Memorandum of Association

Any Company which intends to make any change to the
Memorandum of Association (MOA) of its company, will have to
comply with the provisions of Section- 13 of Companies Act, 2013
and any other applicable provisions of the Act and applicable rules.
Company can alter its Memorandum by way of alteration in follow-
ing clause of Memorandum of Association:

1. Alteration in Name Clause: Section 13 of the Company Act,

2013 deals with change in name which says that:
a) The name of the company can be changed by a special
resolution and the name approved by the Ministry of Corpo-
rate Affairs (MCA) on prescribed application.
b) By obtaining the approval of Central Government. Approval
of Central Government is not required if the change relates
to the addition/deletion of the words “private” to the name.

The power of change in name of company has now been

delegated to Registrar of Companies. The company secretary has
to follow the procedure for changing name of company which in-
cludes Board meeting, special resolution in meeting of members,
application in Form INC to the ROC and so on.

After submission of necessary documents to ROC, fresh cer-

tificate of incorporation is issued by ROC. The company needs to
give notice of the same in newspaper. Changes need to be made
everywhere such as common seal, letter head, registers and other
records of company.

2. Alternation in Domicile Clause: The procedure for making

changes in domicile clause of company is as follows:
a) In case a company changes registered office from one place
to another, in the same state, a special resolution is need to
be passed in general meeting.
b) In case a company shifts its office from one state to another
then a special resolution is to be passed in the general meet-
ing. In addition to this, a confirmation order from Central
Government is to be obtained.

3. Alteration in Object Clause: A company may change its ob-

jects as enshrined in its MOA in accordance with the provisions
of Section 13 of the Act. Now alteration of object clause requires
passing of a special resolution in the general meeting. A copy of
special resolution is filed with the Registrar within 30 days of its
passing. The details, as may be prescribed, in respect of such
resolution shall also be published in the newspaper (one in Eng-
lish and one in vernacular language)
 35

4. Alteration in Liability Clause: The liability clause may be al-

tered so as to make liability of director unlimited, if authorized by
‘Articles of Association’. The director has to give consent in writ-
ing to this effect. For this purpose a special resolution is passed
and copy of it is to be filed with the Registrar within 30 days of
passing the resolution.

5. Alteration in Capital Clause: A company can alter its share

capital, if authorized by ‘Articles of Association’. The company
can alter share capital in the following ways :
a) Increase in share capital by issue of new shares
b) Reduction in share capital
c) Reorganization of capital structure
d) Conversion of share into stock

In order to increase the share capital, a company has to

pass only ordinary resolution. In order to reduce or reorganize the
share capital a company has to pass special resolution and obtain
court sanction.

6. Alteration in Subscription Clause: A Company in its life span

can’t alter the ‘Subscription Clause’ or can’t alter the ‘Subscriber
Sheet’. Subscriber Sheet used at the time of Incorporation of
Company shall be used for the life span of the Company.

3.2.5 Ultra Vires

It is derived from Latin words meaning “ultra” which means
‘beyond’ and “vires” meaning ‘power or authority’. So it can be said
that anything which is beyond the authority or power is called ultra-
vires. In the context of the company, it refers to anything which is
done by the company or its directors which are beyond their legal
authority or which was outside the scope of the object of the com-
pany is ultra-vires.

 Significance of Ultra Vires Doctrine

The doctrine of ultra vires applies to the Memorandum of As-
sociation (MOA) of a company. The MOA contains scope of activi-
ties to be done by company in its objects clause and a company
cannot undertake any activity which is not defined MOA. Any activ-
ity done beyond scope of MOA is considered as an ultra vires activ-
ity. Such activities are null or void and all ultra vires transactions
can never be subsequently ratified or validated, not even by the
consent of the shareholders. This is meant to protect the interests
of the shareholders and creditors of the company.

 Effects of Ultra Vires

The directors entering into ultra vires contracts may be liable
to the third party for breach of warranty of authority. The directors
 36

can be held personally liable by the company for acts done by them
ultra vires to MOA.

If the directors of the company divert company’s capital, for

purpose alien to the company’s MOA, they will be personally liable
to replace it.

Similarly, if a director makes an ultra vires payment to an

outside party, he can be compelled to make good the funds used.
The director who refunded the money could also get indemnity as
against the person who received the payment knowing fully well
that the payment is given to him was ultra vires.

Similarly, ultra vires borrowing does not create the relation of

creditor and debtor.

A contract which is ultra vires the company will have no legal

effect. Such contract are void and are not biding upon the company
and the company can neither sue nor be sued.

3.3 ARTICLES OF ASSOCIATION (AOA)

3.3.1 Meaning and Definition:

AOA is a document which prescribes the rules and bye-laws
for the general management within the company and for the
attainment of its object as given in the memorandum of association
of the company.

The AOA are a subordinate to the Memorandum of

Association of the company. Memorandum states the objects and
purposes for which the company is formed, whereas Articles define
how the business of company should be carried on. They define the
rights, duties, powers of the management of a company as between
themselves and the company at large.

Lord Justice Bowen defines “The articles of association are

internal regulations of company and are for the benefits of
shareholders.”

As per Section 2 (5) of the Companies Act, 2013 “articles”

means the articles of association of a company as originally framed
or as altered from time to time or applied in pursuance of any
previous company law or of this Act.

3.3.2 Contents of Articles of Association

Section 5(1) and section 5(2) of the Companies Act, 2013
provide for the contents of the articles of association which is as
follows:
 37

1. Share capital including division of shares into different

classes, rights of various shareholders, share certificates etc.
2. Lien on shares, call on shares, forfeiture of shares, buy back
of shares, surrender of shares.
3. Procedure for issues of shares, allotment of shares, transfer
of shares, transmission of shares, conversion of shares into
stock
4. Alteration and reduction in share capital
5. Procedure for convening, holding and conducting different
meetings of members, directors and creditors. Provisions re-
lating to notice, quorum, voting etc.
6. Appointment, powers, duties, qualifications, remunerations,
etc. of directors. Borrowing power of directors
7. Declaration and payment of dividend and creation of reserves
8. Appointment and remuneration of auditors. Audit of com-
pany’s account
9. Capitalization of profits / reserves
10. Use of company’s common seal
11. Procedure for issue of share certificate and share warrant
12. Alteration in the Articles of Association
13. Payment of commission on shares and debentures to under-
writers
14. Provisions relating to winding up of company. Appointment of
liquidator
15. Dematerialization of shares

Have a look on format of AOA of ‘TATA Communication Ltd.’ at

[Link]

3.4 DISTINCTION BETWEEN MEMORANDUM AND

ARTICLES OF ASSOCIATION

Points Memorandum of Articles of

Association Association
1) Meaning MOA is the charter of the AOA is a document
company. It is treated as which prescribes the
the constitution of the rules and bye-laws for
company. It defines the the general
scope of its activities. management within
the company.
2) Type of It contains power and It contains rules and
Information objects of the company regulations of the
Contained company
 38

3) Status It is primary and supreme It secondary

document of company. It document. It is
is subordinate to the subordinate to
Companies Act Memorandum of
Association.
4) Major It contains six clauses It can be drafted as
Content 1) Name Clause per requirement of
company.
2) Domicile Clause
3) Object Clause
4) Liability Clause
5) Capital Clause
6) Subscription
Clause
5) Obligatory It is obligatory to prepare It is not obligatory to
for all companies. prepare for all
companies. A public
company limited by
shares can adopt
‘Table A’ in place of
Articles.
6) Alteration Alteration can be done, Alteration can be done
after passing Special in the Articles by
Resolution in Annual passing Special
General Meeting (AGM) Resolution at Annual
and previous approval of General Meeting
Central Government or (AGM)
Company Law Board is
required.
7) Relations Defines the relation Regulates the
between company and relationship between
outsiders such as company and its
creditors, debtors etc. members
8) Act done The act done beyond the The act done beyond
beyond the scope is absolutely void the scope can be
scope rectified by
shareholders

3.5 PROSPECTUS

3.5.1 Meaning and Definition:

A prospectus is a document issued by the company inviting
the public and investors for the subscription of its securities. It is
required to be issued only after the incorporation of the company.
 39

These documents describe stocks, bonds and other types of

securities offered by the company. A prospectus is always
accompanied by performance history and financial information of
the company. The reason for accompanying such information along
with the prospectus is to make sure that, the investors are well
aware of the company’s background and overall performance and
the investors do not fall into the prey of investing in a bad company.
Prospectus is a kind of advertisement for attracting people for
subscribing shares of company. It is expected to provide correct
and reliable information about company to the investors. Company
Act has made various provisions regarding preparing and issue of
prospectus. There is provision in Company Act regarding penalties
and punishment for providing misleading information in prospectus.
Every prospectus issued to the public must be printed, divided into
paragraphs, dated, sealed and signed by all the directors. A copy of
it must be filed with the Registrar and issued to the public within 90
days of filing with Registrar.

Section 2 (70) of Companies Act defines prospectus as, “A

prospectus means any document described or issued as a
prospectus and any notice, circular, advertisement or other
document inviting offers from the public for the subscription or
purchase of any securities of a body corporate.”

3.5.2 Content of Prospectus

1) The names and addresses of the registered office of the com-
pany, company secretary, Chief Financial Officer, auditors, le-
gal advisers, bankers, trustees, if any, underwriters and such
other persons as may be prescribed;
2) The dates of opening and closing of the issue;
3) A declaration made by the Board or the Committee authorized
by the Board in the prospectus that the allotment letters shall
be issued or application money shall be refunded within fifteen
days from the closure of the issue or such lesser time as may
be specified by SEBI;
4) A statement by the Board of Directors of separate bank ac-
count;
5) The details of the underwriters and the amount underwritten
by them;
6) The consent of trustees, advocates, merchant bankers, regis-
trar, lenders, and experts;
7) The authority for the issue and the details of the resolution
passed, therefore;
8) The capital structure of the company in the prescribed man-
ner;
 40

9) Procedure and time schedule for allotment and issue of securi-

ties;
10) Main objects of the issue, the purpose for requirements of
funds, funding plan, the summary of the project appraisal re-
port and such other particulars as may be prescribed;
11) Minimum subscription, amount payable by way of premium,
issue of shares otherwise than on cash;
12) The details of any litigation or legal action pending or taken by
any Ministry or Department of the Government or a statutory
authority against any promoter of the issuer company during
the last five years immediately preceding the year of the issue
of the prospectus;
13) The details of default and non-payment of statutory dues;
14) The details of directors including their appointment and remu-
neration, and particulars of the nature and extent of their inter-
est in the company;
15) The disclosure for sources of promoters’ contribution;
16) A statement about declaration of compliance of the provisions
of act and a statement to the effect that nothing in the pro-
spectus is contrary to the provisions of the Act. It must also
contain a declaration that nothing in the prospectus is contrary
to the provision of the SEBI Act, 1992 and the rules and regu-
lation made there under.
If a prospectus is issued in contravention of the provisions of
26 (1) of the Act, the company shall be punishable with fine which
shall not be less than Rs. 50,000/- and which can be extended upto
Rs. 3 lakhs and every person who is in default shall be punishable
with imprisonment for a term which may be extend to 3 years or
with fine which shall not be less than Rs.50,000/-

Have a look on format of Prospectus of ‘Infosys Ltd.’ at

[Link]
releases/Documents/2013/[Link]

3.6 STATEMENT IN LIEU OF PROSPECTUS

3.6.1 Meaning and Definition:

The company issues prospectus in order to collect share
capital from public. However, sometimes a company collects capital
from private placement which includes its promoters, directors, their
friends and relatives, and not from general public, in such situation
‘Statement in Lieu of Prospectus’ must be filed with the Registrar of
Companies.
 41

A statement in lieu of prospectus gives practically the same

information as a prospectus and is signed by all the directors or
proposed directors. A copy of it must be filed with the Registrar at
least 3 days before actual allotment of shares. If these provisions
are not complied with, then company and its directors are held re-
sponsible. They are punishable with fine which may extent upto Rs.
1,000/-. Liability for misrepresentation in the Statement in lieu of
prospectus is same as in the case of prospectus.

A statement in lieu of prospectus is defined as “a public docu-

ment prepared in the second schedule of companies ordinance by
every such public company which does not issue a prospectus on
its formation by filing with the registrar before allotment or shares of
debentures, and signed by every person who is named therein”.

3.6.2 Contents of a Statement in Lieu of Prospectus:

1. Name of company
2. Statement of capital
3. Description of the business
4. Names, addresses and occupations of directors
5. Estimated initial expenses
6. Names of vendors and details of property
7. Material contracts
8. Director’s interests
9. Minimum subscription

3.7 MISLEADING PROSPECTUS

The prospectus must provide fact and reliable information to

the investors. The investors decide to invest in particular company
based on the information supplied through prospectus.

A prospectus is said to be misleading or untrue in two of

following cases :
 A statement included in a prospectus shall be deemed to be
untrue, if the statement is misleading in the form of and
context in which it is included.
 Omission, from prospectus, of any matter that misleads the
investors.

Contravention of Section 26 of the Companies Act, 2013

 If a prospectus is issued in contravention of the provisions of
this section, then the company shall be punishable with a fine,
not less than Rs.50,000/- which may extend to Rs. 3 Lakhs,
and
 42

 Every person who is party to the issue of the prospectus shall

be punishable with imprisonment for a term which may extend
to 3 years or with a fine, not less than Rs.50,000/- which may
extend to Rs. 3 Lakhs, or with both.
Criminal Liability for Misstatement in the prospectus
Where a prospectus is issued which includes any statement
which is untrue or misleading in form or context or any matter is
likely to mislead the investor, then every person who authorizes the
issue of prospectus shall be punishable with imprisonment for a
term which may not be less than 6 months, but which may extend
to 10 years; or a fine not less than the amount involved in fraud but
it may extend to three times the amount of fraud; or with both.
Civil Liability for Misstatement in the prospectus
If there is any inclusion or omission of any matter in the pro-
spectus issued, which is misleading and the person who has sub-
scribed the securities has sustained any loss or damage, then the
company and every person who is a director, promoter and expert
at the time of issue of prospectus, shall be responsible and be li-
able for punishment under section 36 of the act, and shall be liable
to pay compensation to every person who has sustained such loss
or damage.

3.8 DISTINCTION BETWEEN PROSPECTUS AND

STATEMENT IN LIEU OF PROSPECTUS

Points Prospectus Statement in Lieu of

Prospectus
1) Meaning A prospectus is a When a company collects
document issued by the capital from among its
company inviting the promoters, directors, their
public and investors for friends and relatives, and not
the subscription of its from general public, in such
securities. situation ‘Statement in Lieu
of Prospectus’ must be filed
with the Registrar of
Companies.
2) Purpose It is used for publicity for It is used only for the filing
subscription of securities with the Registrar.
as well as filing with the
Registrar.
3) Suitability Large public limited Small public companies can
companies issue raise capital privately.
prospectus to collect huge
capital.
4) Filing with It is filed with Registrar, It is filed with Registrar, 3
Registrar 90 days prior to issue to days prior to allotment of
public shares.
 43

3.9 COMPANY FORMATION – STAGES AND

SECRETARIAL DUTIES

Formation of Joint Stock Company is lengthy and time

consuming procedure. It involves many formalities also preparation
and submission of various documents. Company promoters play
vital role in the procedure of formation of company. They develop
idea of new business, undertake incorporation formalities and
obtain incorporation certificate, collect required capital and finally
secure trading / commencement certificate.
3.9.1 Various stages in Company Formation

1. Promotion Stage: This is the first stage in the formation of

company. Here, all the preliminary work of company formation is
completed. This includes discovering business opportunity and
organizing resources. At this stage promoter plays an important
role to implement the business idea and bring it into action. The
promoter is the person who is concerned with the promotion of
business enterprise. For example, Dhirubhai Ambani is the
promoter of Reliance Industries.

2. Incorporation / Registration Stage: Incorporation /Registration

brings company into existence. A company is formed only when
it is registered under the Companies Act. Here, necessary doc-
uments such as Memorandum of Association and Articles of
Association of company, List of directors, written consent of di-
rectors, notice of the address of registered office of company
and statutory declaration are submitted and required stamp duty
is paid. The registrar scrutinizes documents and if he is satis-
fied, the name of company is entered in the register. On com-
pletion of these formalities, the Registrar issues ‘Certificate of
Incorporation’.
 44

Certificate of Incorporation
No 2893 OF 1938-1939

I hereby Certify that TATA CHEMICALS LIMITED is this day

incorporated under the Indian Companies’ Act VII of 1913, and that the
Company is Limited.

Given under my hand at Bombay this Twenty- third day of

January One Thousand Nine Hundred and Thirty – nine.

The Seal of the

Registrar of
companies,
(Sd.) BEHRAMJI M. MODI,
Bombay The Registrar of Companies

Source: [Link]

3. Capital Subscription / Collection Stage: A private company

can commence its business as soon as it receives ‘Certificate of
Incorporation’. A public company can commence its business
only after receiving the ‘Certificate of Commencement / Trading
Certificate’. After getting ‘Certificate of Incorporation’, a public
company issues a prospectus to invite public to subscribe its
shares. Public company fixes the minimum subscription. A
company must collect this amount within 60 days from the date
of issue of prospectus. If the minimum subscription is not col-
lected by the company, it does not get ‘Certificate of Com-
mencement / Trading Certificate’ and it has to refund the
amount of the applicant within 8 days. To avoid such situation,
the company appoints underwriter who give guarantee of mini-
mum subscription of shares of company.
4. Commencement of Business / Trading Certificate Stage:
This is the last stage of company formation. After completing the
sale of the required number of shares, a promoter approaches
to Registrar and submit various documents and necessary filing
fees is paid. The Registrar then scrutinizes the documents. If he
is satisfied he issues a certificate known as ‘Certificate of Com-
mencement of Business’. After receiving ‘Certificate of Com-
mencement / Trading Certificate’ a public company can start its
business activities.
 45

Certificate for Commencement of

Business
(Pursuant to section 103 (2) of the Indian Companies Act, 1913)
-------------------------------------
I hereby certify that the Tata Chemicals Limited which was incorporated
under the Indian Companies Act, 1913, on the Twenty-third day of January
1939, and which has this day filed a duly verified declaration in the
prescribed form that the conditions of section 103(1) (a) to (d) of the said
Act have been complied with, is entitled to commence business.

Given under my hand at Bombay this Twenty-seventh day of April one

thousand nine hundred and Thirty-nine.

The Seal of the

Registrar of (Sd.) BEHRAMJI M. MODI,
companies, The Registrar of Companies
Bombay

Source: [Link]

3.9.2 Secretarial Duties at Various Stages of Company

Formation
The company secretary plays a very important role in the
Promotion and Incorporation of a company. He acts as the adviser
to the promoters and helps them in preparatory work to be
performed and legal formalities to be observed in this connection.
 Secretarial Duties at the Promotion Stage
1. To arrange the meetings of the promoters for promotion of com-
pany.
2. To attend the meetings of the promoters, supply necessary in-
formation to promoters, record the proceedings and maintain
the minutes of these meetings.
3. To ascertain from the Registrar of Companies if the proposed
name of the company is available for registration.
4. To help the promoters in the finalization of the various preli-
minary contracts with vendors, underwriters, bankers, brokers,
solicitors, auditors, managerial personnel etc.
5. To get Memorandum, and Articles of Association prepared and
printed
 46

6. To see that all other prescribed documents for the registration of

the company are ready for delivery to Registrar. The documents
includes:
a) a written consent of the Directors to act in that capacity and
to purchase qualification shares,
b) the notice of address of the Registered office of the com-
pany, and
c) a statutory declaration stating that all the legal require-
ments of the Act precedent to incorporation have been
complied with

 Secretarial Duties at the Incorporation / Registration Stage

1. The promoter selects three names of company and the
secretary files an application for the availability of name of the
company along with required fees to the ROC.
2. The secretary submits various documents to ROC for registra-
tion of company to obtain the Certificate of Incorporation from
the Registrar. The documents include:
a) Memorandum of Association
b) Articles of Association
c) List of Directors
d) a written consent of the Directors to act in that capacity and
to purchase qualification shares,
e) the notice of address of the Registered office of the com-
pany, and
f) a statutory declaration stating that all the legal requirements
of the Act precedent to incorporation have been complied
with
g) Payment of prescribed filing and registration fees and stamp
duty

 Secretarial Duties at the Capital Subscription / Collection

Stage
1. The first meeting of Board of Directors will be convened to
deal with:
a) Appointment of secretary
b) Appointment of Managing Director and other responsible
officers
c) Appointment of banker, broker, solicitors and auditor
d) Approve design of common seal of company
e) Underwriting agreement with underwriter to secure minimum
subscription
 47

f) Decide minimum subscription amount

g) Approve draft of prospectus
h) Listing of shares on a stock exchange
2. Get common seal prepared as per designed approved and
open the Bank Account
3. Prepare underwriting agreement with underwriter
4. Obtain consent letter from bankers, solicitors, auditors,
underwriters, brokers etc. for incorporating their names in
prospectus
5. Get prospectus and share application form printed. Get
printed copy of the prospectus signed by directors of
company
6. Submitting application stock exchange for getting shares
listed on stock exchange
7. File a copy of prospectus with ROC. Then it is issued to
public within 90 days from filing with ROC which includes
share application form.
8. Make arrangement with banker to receive application money
received from investors.
9. Convey Board meeting to pass resolution for allotment of
shares.
10. The secretary issues ‘Letter of Allotment’ to those whom
shares are allotted. Secretary issues ‘Letter of Regret’ to
whom shares are not allotted (in case of over subscription)
along with refund order
11. File return of allotment to ROC within 30 days of allotment of
shares
12. Issue share certificate to every shareholder within 3 months
from date of allotment of shares
13. Maintain register of members which includes name of
shareholders and other share related details.

 Secretarial Duties at the Commencement of Business /

Trading Certificate Stage
1. File following declarations with ROC:
a) A statement of declaration that a copy of prospectus or
statement in lieu of prospectus is filed with the Registrar.
b) A statement of declaration that minimum subscription
amount has been collected
c) A declaration that directors have purchased and paid for
qualification shares
 48

d) A statutory declaration that all the legal requirements have

been complied with
2. Along with above documents, necessary filing fees is paid
3. Collect the ‘Certificate of Commencement / Trading Certificate’
from ROC.

3.10 CONVERSION OF COMPANIES

Conversion of companies means changing legal status of

company i.e. from private to public and public to private. It can be
done by completing the necessary legal procedures and formalities.

As per Section 18 of Companies Act, 2013 a company

registered under one class can convert into another class by
alteration of MOA and AOA of company. However, consent of
shareholders is required for such decision.

3.10.1 Conversion of Private Company into a Public Company

Section 14 of Companies Act, 2013 (Section 31 of Erstwhile
Companies Act 1956) plays an important role during conversion of
a Private company into a Public company. It involves alteration of
article of association of Private Company under section14 which
cannot be done without passing special resolution of Shareholders
in the General Meeting. Secretarial procedure for Conversion of a
Private Limited Company into a Public Limited is as following:

1) Convening Board Meeting: The secretary convens a board

meeting in accordance with the provisions of section 173(3) of
the Companies Act, 2013. The agenda of this meeting is:
a) Pass a board resolution to get approval of Directors for con-
version of a Private company into a public company by alter-
ing the AOA.
b) Fix date, time and place for holding Extra-ordinary General
meeting (EGM) to get approval of shareholders, by way of
Special Resolution, for conversion of a Private company into
a Public company.
c) To approve notice of EGM along with Agenda and Explana-
tory Statement to be annexed to the notice of General Meet-
ing as per section 102(1) of the Companies Act, 2013;
d) To authorize the Director or Company Secretary to issue No-
tice of the Extra-ordinary General meeting (EGM) as ap-
proved by the board under clause 1(c) mentioned above.

2) Issue of EGM Notice: The secretary makes arrangement to is-

sue Notice of the Extra-ordinary General meeting (EGM) to all
Members, Directors and the Auditors of the company in accor-
 49

dance with the provisions of Section 101 of the Companies Act,

2013;

3) Convening Extra Ordinary General Meeting: The Extra-

ordinary General meeting (EGM) is held and the Special Reso-
lution is passed, to get shareholders’ approval for Conversion of
Private Company into a Public company along with alteration in
articles of association under section 14 for such conversion.

4) Filing Documents with ROC: For alteration in Article of Asso-

ciation for conversion of Private Company into a Public com-
pany under section 14, few E-forms will be filed with concerned
Registrar of Companies at different stages as following:

a) E-form MGT.14: This form is for filing special resolution with

ROC, passed for conversion of Private Company into a Pub-
lic company. Attachments of E-form MGT.14 includes:
 Notice of EGM along with copy of explanatory statement
under section 102;
 Certified True copy of Special Resolution;
 Altered memorandum of association;
 Altered Articles of association
 Certified True copy of Board Resolution may be attached
as an optional attachment.

b) E-form INC.27: This form is for Application for conversion of

a private company into a public company. Attachments of E-
form INC.27:
 It is mandatory to attach Minutes of the member’s meet-
ing where approval was given for conversion and altered
articles of association.
 Altered Articles of Association;
 Certified True copy of Board Resolution may be attached
as an optional attachment.
 Other information if any can be provided as an optional
attachment(s)

As per Section 18, after receiving the documents for conver-

sion of a Private Company into a Public Company, ROC shall sat-
isfy itself that the Company has complied with the requisite provi-
sions for registration of company. If so satisfied, ROC shall close
the former registration and issue fresh certificate of incorporation,
after registering the documents submitted for change in class of
company.
 50

3.10.2 Conversion of Public Company into a Private Company

1) Convening Board Meeting: A meeting of Board of Director is

convened by company secretary by sending them notice of
meeting. At the Board Meeting, the resolution approving
conversion from a public company to a private company has to
be passed. Secondly, a resolution to call an extraordinary
general meeting must be passed.

2) Convening an Extra-ordinary General Meeting (EGM): Notice

is sent to all the members regarding EGM. An explanatory
statement specifying the business to be transacted at the
meeting has to be annexed to the notice. An extraordinary
general meeting is vital to get the approval of the members of
the company before proceeding with the conversion. At the
extraordinary general meeting, a special resolution approving
the alterations to the Memorandum of Association and Articles
of Association needs to be passed.

3) Filing Documents with ROC: The company has to intimate

the Registrar of Companies within 30 days of passing the reso-
lution to convert from a public company to a private company.
Following documents are required to be submitted to the ROC:

a) Form MGT-14 (Filing of Resolutions and agreements

with the Registrar): The Company has to intimate the
Registrar of Companies within 30 days of passing the
resolution to convert from a public company to a private
company. Resolutions are filed with the Registrar in Form
MGT-14 along with the prescribed fees as prescribed in the
Companies (Registration offices and fees) Rules, 2014.
The following documents have to be attached with the form:
 Copy of the resolution(s)
 Copy of the explanatory statement
 Altered Memorandum of Association
 Altered Articles of Association
 Copy of the agreement
 Any other optional documents

b) File form INC-27 (Conversion of public company into

private company or private company into public com-
pany): Pursuant to Section 14 of the Companies Act, 2013,
any alteration to the articles of association has to be inti-
mated to the Registrar vide Form INC-27 to enable the con-
version. The form has to be filed with the Registrar of com-
 51

panies, along with the application fees. The following docu-

ments have to be submitted along with the form-
 Minutes of the members’ meeting
 Altered articles of association
 Order of competent authority (Central Government)

4) Intimation about Conversion: The secretary needs to do

publicity regarding conversion introduced for the information of
shareholders and outsiders. Intimation of change will be
communicated to the stock exchange where company shares
are listed.

5) Fresh Certificate of Incorporation: The company secretary

has to surrender existing certificate of incorporation to the ROC
with a request to issue fresh certificate of incorporation with
necessary changes into it.

3.10.3 Reconversion of Public Company into a Private

Company

1) Convening an Extra-ordinary General Meeting: After the

Board of Director take decision for the reconversion of public
company into private company, suitable arrangements will be
made for convening EGM for taking final decision about
reconversion by the members. In EGM, special resolutions for
making relevant changes in the Memorandum and Articles of
Association will be passed.

2) Submission of application to the Central Government: After

passing resolution, the company will have to submit application
to the Central Government in the prescribed form for securing
the approval to the reconversion. After securing such approval,
the ROC will be informed accordingly.

3) Securing approval of the Central Government: On the

receipt of such application, the Central Government will make
the scrutiny of the application and if satisfied, it will give sanction
for the conversion. The company becomes private company
with the effect from the date of approval of the Central
Government. The changes in the name will be effective from the
date of issue of fresh Certificate of Incorporation by the ROC. All
documents, relating to conversion will be filed with the Registrar,
along with a printed copy of the altered articles.

3.11 SUMMARY

MOA is the charter of the company. It is treated as the

constitution of the company. It defines the scope of its activities. It
 52

contains the rights, privileges and powers of the company. MOA

establishes the relationship of the company with the members.
There are six Clauses of MOA namely Name clause, Domicile
clause, Object clause, Liability clause, Capital clause, and
Subscription clause. Different authorities need to be approached for
making alternation in clauses of MOA and undertake necessary
formalities.

Ultra-vires refers to anything which is done by the company

or its directors which is beyond their legal authority or which was
outside the scope of the object of the company. This is meant to
protect the interests of the shareholders and creditors of the
company.

AOA is a document which prescribes the rules and bye-laws

for the general management within the company and for the
attainment of its object as given in the memorandum of association
of the company. It includes details about internal management of
company.

A prospectus is a document issued by the company inviting

the public and investors for the subscription of its securities. It is
required to be issued only after the incorporation of the company. It
includes details about securities issued in the market which enables
investors to take decision about investing in company.

Sometimes a company collects capital from private

placement which includes its promoters, directors, their friends and
relatives, and not from general public, in such situation ‘Statement
in Lieu of Prospectus’ must be filed with the Registrar of
Companies.

Misleading prospectus refers to a statement included in a

prospectus is to be untrue. Omission, from prospectus, of any
matter misleads the investors.

The formation of company includes 4 stages namely

Promotion stage, Incorporation / Registration Stage, Capital
subscription / collection stage and finally Commencement of
business / Trading Certificate stage. The secretary needs to
perform various activities during all these stages.

Conversion of companies means changing legal status of

company i.e. from private to public and public to private. It can be
done by completing the necessary legal procedures and formalities.

As per Section 18 of Companies Act, 2013 a company

registered under one class can convert into another class by
alteration of MOA and AOA of company. However, consent of
 53

shareholders is required for such decision. The secretary needs to

perform various activities during conversion of company.

3.12 EXERCISE

FILL IN THE BLANKS

1) _________ is a fundamental document of a company
(MOA,AOA, None of these)
2) ____________ clause in memorandum of association contains
the state in which registered address of the company is situated.
(Name, Domicile, Subscription)
3) _________ refers to anything which is done by the company / a
director which is beyond their legal authority or which was out-
side the scope of the object of the company. (Ultra Wire, Ultra
Vires, Ultra Virus)
4) _______________ is internal regulations of company. (Prospec-
tus, Statement in lieu of prospectus, Articles of Association)
5) ______________ is first stage in company formation. (Promo-
tion stage, Incorporation stage, Capital subscription stage)
6) _______________ Company can commence its business as
soon as it receives Certificate of Incorporation. (Private, Public,
Both Not)

DEFINE/EXPLAIN THE FOLLWING TERMS

1) Memorandum of Association
2) Articles of Association
3) Ultra Vires
4) Prospectus
5) Statement in Lieu of Prospectus
6) Misleading Prospectus
7) Formation stage of Company formation
8) Incorporation stage of Company formation
9) Capital stage of Company formation
10)Commence of Business stage of Company formation
11) Conversion of Company

ANSWER IN BRIEF
1) Define Memorandum of Association. Explain its various clauses.
2) What is Articles of Association? Describe its content.
3) Write a note on Ultra Vires.
 54

4) Distinguish between Prospectus and Statement in Lieu of

Prospectus.
5) Write a note on Misleading Prospectus.
6) Describe various stages involved in company formation.
7) Explain secretarial duties involved at Promotion stage of
company formation.
8) What are the secretarial duties involved at Incorporation stage
of company formation?
9) Briefly describe secretarial duties involved at Capital
subscription stage of company formation.
10) Elaborate secretarial duties involved at Commencement of
Business stage of company formation.
11) Write a note on Conversion of Companies.
12)Briefly explain reconversion of public company into private
company.

3.13 REFERENCES

[Link]
memorandum-of-association-under-company-act-2013-and-format-
of-moa/

[Link]
contents-of-moa/
[Link]
association/

Doctrine of Ultra Vires under Company Law – What acts will be

deemed as ultra vires? By HarshJain - June 1, 2018, Ipleaders
intelligent solutions
[Link]

What Is The Content For The Articles of Association By

Vyoma Mehta - May 9, 2016
[Link]

Information to be stated in the Prospectus of a Company By

prathik sharavi May 22, 2018
[Link]

[Link]
[Link]
company/
[Link]
[Link]

 55

4
SECRETARIAL CORRESPONDENCE
Unit Structure :

4.0 Objectives
4.1 Introduction
4.2 Correspondence
4.3 Role of Technology in Secretarial Correspondence
4.4 Specimens
4.5 Summary
4.6 Exercise
4.7 References

4.0 OBJECTIVES

After studying the unit students will be able to:

 Know circumstances requiring secretarial correspondence with
the Shareholders, Debenture Holders, Registrar of Companies,
Stock Exchange and penalties thereon
 Know circumstances requiring secretarial correspondence with
the SEBI, Company Law Board and penalties thereon
 Discuss role of technology in Secretarial Correspondence
 Write Specimen of Letter to Shareholders, ROC, Stock
Exchange, Government, Bank

4.2 INTRODUCTION

Correspondence refers to communication in writing. It is an

exchange of ideas, information, views and opinions in a respect of
certain matters in a written form. The secretary receives letter from
various concerned parties such as shareholders, directors, stock
exchange, bankers’, creditors and others. So the secretary has to
reply to them promptly. He/She is also responsible for submission
of annual reports, returns and so on. Accurate, timely and careful
correspondence creates better image of company among outsider.
 56

4.2 CORRESPONDENCE

4.2.1 Correspondence with Share Holders

Shareholders are the owners of the business since they

contribute to the capital of the company. They are large in numbers
and scattered over large area. So they cannot contribute to the
routine activities of the business also they may not have required
skills to handle business activities. In such case they appoint
elected representatives who are called as directors.

The circumstances under which secretarial correspondence

takes place with the members of company as are follows:

1) Company Meeting
 Notice and Agenda of AGM
 Circulars
 Annual report and audit report

2) Issue of shares
 Letter of allotment in reply to application of shares
 Regret letter for inability to allot any share
 Issue of share certificate
 Issue of bonus shares and right issue

3) Call on shares
 Letter for demanding call money on shares
 Letter of reminder for call money
 Warning letter for forfeiture of shares due to non-payment of
call money
 Notice of forfeiture of shares

4) Transfer and Transmission of Shares

 Notice of lodgement of transfer to the transferor and
transferee
 Letter informing approval of the transfer of shares to the
transferor and transferee
 Letter informing non-approval of the transfer of shares to the
transferor and transferee
 Letter informing approval of the transmission of shares to
legal heir of deceased shareholder

5) Payment of Dividend
 Notice of dividend payment and dividend warrant
 Notice of dividend mandate
 57

6) Termination of Membership
 Notice of termination of membership due to forfeiture of
shares
 Letter for informing of surrender of shares
 Letter for informing of conversion of shares into share
warrant

7) Others
 Notice of loss of share certificate
 Issue of duplicate share certificate
 Reply to complaint and queries raised by shareholders

4.2.2 Correspondence with Debenture Holders

Debenture refers to the debt (loan) instrument issued by
company under its common seal. As company issues share for
raising capital from market, in the same way debentures are also
issued. Share capital is own capital of the company but debenture
capital is a loan of the company which has to be repaid after certain
period of time. They are creditors of the company. Interest is paid to
debenture holders as return over their investment made into
company. Debenture holders are not concerned with the
management of company. They are only concerned about their
repayment of capital and payment of interest. They get priority over
shareholders for repayment of capital and payment of interest.

 The circumstances under which secretarial correspondence

takes place with the debenture holders of company as are
follows:
1) Letter informing allotment of debentures
2) Letter informing issue of debenture certificate
3) Letter informing payment of interest on debentures
4) Letter informing conversion of convertible debentures into equity
shares
5) Letter informing redemption of debentures

4.2.3 Correspondence with Registrar of Companies (RoC)

The Registrar of Companies (ROC) is appointed by the
Central Government to register and supervise matters relating to
registration of companies under Company Act. They also control
affairs of the company. Every company has to submit certain
documents like Memorandum and Articles of Association to ROC in
order to receive Certificate of Incorporation and Commencement
Certificate.
 58

 The circumstances under which secretarial correspondence

takes place with the ROC as are follows:
1) Filing statutory report after Statutory meeting
2) Submission of Return of Allotment of share after allotment of
shares is done
3) Filing annual return after completion of financial year and
approval in AGM
4) Extension time for holding AGM in unavoidable situations
5) Filing special resolutions
6) Alterations in MOA and AOA
7) Conversion and reconversion of company

4.2.4 Correspondence with the Stock Exchange

Stock exchange is a market place where buying and selling
of securities is done which is already issued by company. So it is
called secondary market. A company has to list (register) its
securities with one or more stock exchanges in order to trading take
place in their securities. The secretary has to undertake
correspondence with the stock exchange to inform about
happenings in the company. This correspondence is obligatory on
the part of company otherwise it attracts penalty.
 The circumstances under which secretarial correspondence
takes place with the Stock Exchange are as follows:
1) Listing of securities with the stock exchange
2) Informing about alteration in Memorandum of Association
3) Information about Board Meeting and AGM, change in Board of
Directors, Rate of dividend declared
4) Information about issue of Bonus Shares and Right issue
5) Submission of compliance report on corporate governance
within 15 days from the end of quarter
6) Submission of Annual Report within 21 days of its approval in
AGM
7) Any other information required by stock exchange

4.2.5 Correspondence with the Securities and Exchange

Board of India (SEBI)

Securities and Exchange Board of India (SEBI) is a

regulatory body of the Government of India. It controls the
securities market. It was established on April 12, 1992 under
the SEBI Act, 1992. It is headquartered at the Bandra Kurla
Complex in Mumbai, India. It has regional offices in major cities of
India such as New Delhi, Kolkata, Chennai and Ahmedabad.
 59

The Preamble of the Securities and Exchange Board of India

describes the basic functions of SEBI is the protection of investors
interests in securities and to be a platform to promote, develop and
regulate the securities market in India as well as the relating mat-
ters that are connected with it.
The SEBI is permitted to approve rules and laws pertaining
to the stock exchanges. It also implies that SEBI should enforce the
laws for stock exchanges to follow. SEBI examines books of ac-
counts of financial mediators and recognized stock exchanges. An-
other role of SEBI is to urge respective companies to list their
shares in stock exchanges and manage the registration of distribu-
tors/brokers.
 The circumstances under which secretarial correspondence
takes place with the SEBI are as follows:
1) SEBI receives large number of complaints from Shareholders
and Investors related to payment of dividend, repayment of
capital, transfer of shares, and so on. SEBI solves these
complaints in cooperation with concerned company. The
secretary has to give prompt attention to correspondence with
SEBI and solve these complaints in time.
2) Company receives letters and notices from SEBI. Secretary has
to give prompt reply to it.
3) Any other information required by SEBI.
4.2.6 Correspondence with the Company Law Board
The Central Government in terms of Section 10 (E) of the
Companies Act, 1956 constituted an independent Company Law
Board (CLB) vide Notification No. 364 dated the 31st May, 1991.
The CLB is a quasi-judicial body, exercising equitable jurisdiction,
which was earlier being exercised by the High Court or the Central
Government. The Board has powers to regulate its own proce-
dures. The Company Law Board has framed Company Law Board
Regulations 1991 prescribing the procedure for filing the applica-
tions/petitions before it. The Central Government has also pre-
scribed the fees for making applications/petitions before the Com-
pany Law Board, under the Company Law Board, (Fees on applica-
tions and Petitions) Rules 1991. The Board has its Principal Bench
at New Delhi, and four Regional Benches located at New Delhi,
Mumbai, Kolkata and Chennai.

 The circumstances under which secretarial correspondence

takes place with the Company Law Board are as follows:
1) Conversion or reconversion of company
2) Alteration to Memorandum and Articles of Association
3) Petition filed by any investor and shareholders on oppression
and mismanagement of the company.
 60

4.3 ROLE OF TECHNOLOGY IN SECRETARIAL

CORRESPONDENCE

Fast changes have been taking place in all facets of life

including the business organization. This is as a result of
technological advancement. Every business organization today
requires facts and accurate information for quick decision- making
and high productivity. The employees including the secretary
expects certain supports which can be technological (machines and
equipments) and human.

In the past, manager used to dictate memo and letters, while

the secretary used to type them. Today’s secretaries are exposed to
office technology/automation including the Internet that makes work
easier and knowledge more accessible. It is now easier to send
messages by telex, electronic mails (e-mails) fax and
telephones. This is the era of computers and information
technology, which has become an enabler of greater convenience
to the secretary. The role of technology in secretarial
correspondence is as follows:

1) Increase in speed and accuracy in correspondence with various

people and authorities
2) Reduce wastage of resources
3) Reduces cost paper, printing and other stationery requirement
4) Increases efficiency of secretary
5) Enables storage of data for future reference
 61

4.4 SPECIMENS

4.4.1 LETTER TO SHAREHOLDERS

 Letter for issue of Bonus Shares

GALAXY STEEL INDUSTRIES LIMITED

140/A, MIDC, Andheri (E), Mumbai – 400093.
www [Link] Tel: 022-2222 5588
Ref.: BS/01/2018-19 16th January, 2019
Mr. Sandeep Baga
Laxmi Villa, Gogate Wadi,
Goregaon (W), Mumbai-400063
Sub: Bonus Issue of Equity Shares

Dear Sir,
I am directed by the Board of Directors to inform you that at the Ex-
traordinary General Meeting held on 29th December, 2018 sharehold-
ers have unanimously approved the recommendation of Board of Di-
rectors to issue bonus shares in the ratio of 1:1 (i.e., one bonus share
for each fully paid equity share held by the shareholder).

Details of bonus shares issued to you are as follows :

D.P. ID No. Client ID Shares held Bonus Shares allot-

No. as on record ted
date
M-354/2 10032758 100 100
For further queries (if any), in respect of the above, kindly do write to
our Registrar and Share Transfer Agent at the address given below:
GALAXY STEEL INDUSTRIES LIMITED
140/A, MIDC, Andheri (E), Mumbai – 400093.
Tel: 022-2222 5588
Email: galaxysi@[Link]
Thanking you.

Yours faithfully,
For Galaxy Steel Industries Ltd

Sd/-
Secretary
 62

 Letter for issue of Right Issue

GALAXY STEEL INDUSTRIES LIMITED

140/A, MIDC, Andheri (E), Mumbai – 400093.
www [Link] Tel: 022-2222 5588

Ref.: BS/01/2018-19
28th May, 2019

Mr. Sandeep Baga

Laxmi Villa, Gogate Wadi,
Goregaon (W), Mumbai-400063

Sub: Offer letter for Right Issue of 1,00,00,000 equity shares of

Rs. 10 each at par

Dear Sir,
This is to inform you that in pursuant to the Board meeting held on
25th May, 2019, a resolution is passed to issue 1,00,00,000 equity
shares of Rs. 10 each at par aggregating Rs. 10,00,00,000/- to the
equity shareholders on right basis in the ratio of 1:1 equity shares for
every 1 equity shares held on 25th May, 2019.

You are hereby informed that the Board of Directors have decided to
increase the subscribed and paid up capital of the Company by issue
of 1,00,00,000 equity shares of Rs. 10 each by right offer to equity
share holders as on 25th May, 2019 on proportionate basis and
conditions as laid down, in application form and in Board resolution.

As a shareholder on the afore mentioned date, being fixed as offer

date, we are pleased to inform you that you are entitled to for the
“rights shares offer” in reference to details as mentioned in the
enclosed application form.
Thanking you.

Yours faithfully,
For Galaxy Steel Industries Ltd
Sd/-
Secretary
 63

4.4.2 LETTER TO REGISTRAR OF COMPANIES

 Letter to Registrar of Companies for filing alteration in the

Memorandum of Association of Company

GALAXY STEEL INDUSTRIES LIMITED

140/A, MIDC, Andheri (E), Mumbai – 400093.
www [Link] Tel: 022-2222 5588

Ref.: MOA/01/2018-19
16th January, 2019

The Registrar of Companies,

Maharashtra State,
Marine Lines,
Mumbai-400020

Sub: Alteration in Memorandum of Association in Name Clause

Sir,

This is to inform you that the Extra Ordinary General Meeting of the
Company was held on 13th January, 2019 at Registered Office of the
Company. All members unanimously passed the Resolution No. 0223
to change name of company from ‘Galaxy Steel Industries Limited’ to
‘Galaxy Steel India Limited’.

Following documents are enclosed for your reference and registration:

1) Form INC – 22 along with certified copy of Board Resolution
2) Certificates to be sent along with Form INC-22for registration.

Kindly acknowledge the receipt of documents.

Thanking you,

Yours faithfully,
For Galaxy Steel Industries Ltd.
Sd/-
Secretary

Encl : As above
 64

 Letter to Registrar of Companies for filing alteration in the

Articles of Association of Company

GALAXY STEEL INDUSTRIES LIMITED

140/A, MIDC, Andheri (E), Mumbai – 400093.
www [Link] Tel: 022-2222 5588

Ref.: AOA/01/2018-19
16th January, 2019

The Registrar of Companies,

Maharashtra State,
Marine Lines,
Mumbai-400020

Sub: Alteration in Articles of Association

Sir,

This is to inform you that the Extra Ordinary General Meeting of the
Company was held on 13th January, 2019 At Registered Office of the
Company. All members passed the Special Resolution No. 0224
altering 22nd clause of Articles of Association regarding qualification
shares of directors.
The original article was that directors shall hold at least 5 equity shares
(qualification shares) of Rs. 100/- each. The same has now been
altered as the director should hold at least 10 equity shares
(qualification shares) of Rs.100/- each in the company.
Following documents are enclosed for your reference and registration:
1) Duly filled Form No. MGT-14
2) Copy of Special Resolution
3) Explanatory Statement annexed to the notice of the General
Meeting at which the special resolution was passed
4) Copy of new Articles of Association
5) Filing fees cheque
Kindly acknowledge the receipt of documents.
Thanking you,
Yours faithfully,
For Galaxy Steel Industries Ltd.
Sd/-
Secretary
Encl : As above

Encl : 1) Form INC – 22 along with certified copy of Board Resolution

2) Certificates to be sent along with Form INC-22
 65

4.4.3 LETTER TO STOCK EXCHANGE

 Letter to Stock Exchange for Listing of Shares

GALAXY STEEL INDUSTRIES LIMITED

140/A, MIDC, Andheri (E), Mumbai – 400093.
www [Link] Tel: 022-2222 5588

Ref.: SE/01/2018-19
16th January, 2019

The Secretary,
The Bombay Stock Exchange Ltd.
Mumbai-400020

Sub: Application for Listing of Shares

Sir,

This is to inform you that the Board Meeting was held and
resolution no. 0656 dated 10th January 2019 is passed, for
making application for listing of shares with your stock exchange
for issue size of Rs. 50 crore.

Following documents are enclosed for your reference and

registration:
1) Duly filled Application Form
2) Copy of Memorandum and Articles o Association
3) Certified copy of the Certificate of Incorporation

We shall complete the listing procedure as per guidelines of

Bombay Stock Exchange.

Thanking you,

Yours faithfully,
For Galaxy Steel Industries Ltd.

Sd/-
Secretary

Encl : As above
 66

4.4.4 LETTER TO GOVERNMENT FOR CONVERSION /

RECONVERSION OF COMPANY

GALAXY STEEL INDUSTRIES LIMITED

140/A, MIDC, Andheri (E), Mumbai – 400093.
www [Link] Tel: 022-2222 5588

Ref.: Gov/01/2018-19
16th January, 2019

The Secretary,
The Ministry of Corporate Affairs,
Government of India,
New Delhi-1

Sub: Conversion of private company to public company

Sir,

This is to inform you that an Extra-ordinary general meeting of the

company was held on 4th January 2019. The members unanimously
passed special resolution for conversion of private company into
public company.

We have submitted require documents to Registrar of Companies,

Mumbai, Maharashtra and requested to issue new Certificate of
Incorporation.

We request you to consider our application for the proposed

conversion and do the needful.

Thanking you,

Yours faithfully,
For Galaxy Steel Industries Ltd.

Sd/-
Secretary

Encl : 1) Copy of Special Resolution

2) New set of Articles of Association
 67

4.4.5 LETTER TO BANK FOR OVERDRAFT FACILITY

GALAXY STEEL INDUSTRIES LIMITED

140/A, MIDC, Andheri (E), Mumbai – 400093.
www [Link] Tel: 022-2222 5588

Ref.: bank/01/2018-19
16th January, 2019

The Manager,
State Bank of India
Malad (E) Branch,
Mumbai - 400097

Ref. No. : Current A/c No. 1234567890

Sub: Request to grant overdraft facility

Sir,

This is to request you that kindly consider granting us overdraft

facility of Rs. 50,000/- (Rupees Fifty Thousand) for the period
of 1st February 2019 to 30th April 2019 to meet our working
capital requirement.

We would like to offer our assets as security against the

overdraft facility. We will remain committed in honouring the
payments in due time. We are willing to bear the interest rates
on the overdraft that may be levied from time to time.

We expect that you will find above mentioned security adequate

and agree to provide us overdraft facility. We shall complete
other formalities after hearing from you.

Your early favourable reply will be very much appreciated.

Thanking you,

Yours faithfully,
For Galaxy Steel Industries Ltd.

Sd/-
Secretary
Encl : As above
 68

4.5 SUMMARY

Correspondence refers to communication in writing. It is an

exchange of ideas, information, views and opinions in a respect of
certain matters in a written form. The secretary receives letter from
various concerned parties such as shareholders, directors, stock
exchange, bankers’, creditors and others. So the secretary has to
reply to them promptly.

Shareholders are the owners of the business since they

contribute to the capital of the company. The circumstances under
which secretarial correspondence takes place with the members of
company are for company meeting, issue of shares, call on shares,
transfer and transmission of shares, payment of dividend,
termination of membership and so on.

Debenture refers to the debt (loan) instrument issued by

company under its common seal. Debenture holders are creditors
of the company. The circumstances under which secretarial
correspondence takes place with the debenture holders of company
are allotment of debentures, issue of debenture certificate, payment
of interest on debentures, conversion of convertible debentures into
equity shares, redemption of debentures and so on.

The Registrar of Companies (ROC) is appointed by the

Central Government to register and supervise matters relating to
registration of companies under Company Act. They also control
affairs of the company. The circumstances under which secretarial
correspondence takes place with the ROC as are Filing statutory
report, Submission of Return of Allotment of share, Filing annual
return, Extension time for holding AGM, Filing special resolutions,
Alterations in MOA and AOA, Conversion and reconversion of
company and so on.

Stock Exchange is a market place where buying and selling

of securities is done which is already issued by company. The
circumstances under which secretarial correspondence takes place
with the Stock Exchange are Listing of securities, Informing about
alteration in Memorandum of Association, Information about Board
Meeting and AGM, Information about issue of Bonus Shares and
Right issue, Submission of Annual Report and so on.

Securities and Exchange Board of India (SEBI) is a

regulatory body of the Government of India. It controls the
securities market. The circumstances under which secretarial
correspondence takes place with the SEBI are complaints related to
investors and shareholders, reply to notice and circulars received
from SEBI and other information required by SEBI.
 69

The Company Law Board has framed Company Law Board

Regulations 1991prescribing the procedure for filing the
applications/petitions before it by any investor and shareholders on
oppression and mismanagement of the company. The
circumstances under which secretarial correspondence takes place
with the Company Law Board are Conversion or reconversion of
company, Alteration to Memorandum and Articles of Association,
Petition filed by any investor and shareholders and so on.

In the past, manager used to dictate memo and letters, while

the secretary used to type them. Today’s secretaries are exposed to
office technology/automation including the Internet that makes work
easier, fast, accurate and reduced the cost and wastage of
resources.

4.6 EXERCISE

FILL IN THE BLANKS

1) The secretary undertake correspondence regarding call on
shares with __________ (Debenture holders, Stock Exchange,
Shareholders)
2) The secretary undertakes correspondence regarding payment
of interest with __________. (Debenture holders, , Sharehold-
ers, Both)
3) ______________is appointed by Central Government to regis-
ter and supervise matters relating to registration of companies
under Company Act. (Registrar of Companies, Stock Exchange,
Company Law Board)
4) A company has to list (register) its securities with
______________ in order to trading take place in their securi-
ties. (Registrar of Companies, Stock Exchange, Company Law
Board)
5) _____________ controls the securities market. (SEBI, Share-
holders, Board of Directors)
6) Investor and shareholders can file the applications/petitions be-
fore ___________on oppression and mismanagement of the
company. (Board of Directors, Promoters, Company Law Board)
7) Technology _____________ the secretarial correspondence.
(Slows, Mistakes, Speeds)

DEFINE/EXPLAIN THE FOLLWING TERMS

1) Correspondence
2) SEBI
3) Stock Exchange
4) Company Law Board
5) Registrar of Companies
 70

ANSWER IN BRIEF
1) Explain the various circumstances under which company
secretary needs to undertake correspondence with
shareholders.
2) Discuss the various circumstances under which company
secretary needs to undertake correspondence with debenture
holders.
3) Describe the various circumstances under which company
secretary needs to undertake correspondence with Registrar
of Companies.
4) Elaborate the various circumstances under which company
secretary needs to undertake correspondence with Stock
Exchange.
5) Explain the various circumstances under which company
secretary needs to undertake correspondence with SEBI.
6) Discuss the various circumstances under which company
secretary needs to undertake correspondence with Company
Law Board.
7) Write a note on Role of technology in secretarial
correspondence.
8) Write a letter to shareholders informing about right issue.
9) Write a letter to shareholders informing about bonus issue.
10) Write a letter to ROC relating to Alteration in MOA.
11) Write a letter to ROC relating to Alteration in AOA.
12) Write a letter to Stock Exchange informing about listing of
shares
13) Write a letter to Government relating to conversion of
company.
14) Write a letter to Bank for availing overdraft facility.

4.7 REFERENCES

[Link]
[Link]
[Link]
[Link]



 71

5
MANAGEMENT OF THE COMPANY
Unit structure:

5.0 Objectives
5.1 Introduction
5.2 Director of the Company
5.3 Appointment of Directors
5.4 Resignation by Director / Removal of Directors
5.5 Powers / Rights of Company Directors
5.6 Duties of Company Directors
5.7 Chairman of the Company / Board of Directors
5.8 The Chief Executive Officer (CEO)
5.9 Company Auditors
5.10 Summary
5.11 Exercises

5.0 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

5.1 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
business 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 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:
 72

According to Sec. 2 (13) of the Companies Act, “Director

includes any person occupying the position of director 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 which he is called.

5.2 DIRECTOR OF THE COMPANY

5.2.1 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 details 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 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.
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 company
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 does act
only through its directors. This suggests that the Directors
(collectively) occupy the most influential position in the company
management.

5.2.2 Legal Position of Company Directors :

1. Under the Companies Act, the Board of Directors is a must for
the management and administration of company.
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.
 73

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 an 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 powers.

5.2.3 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
shares, 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 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.
 74

Although, the directors have been referred as the trustees, or

the managing partners of the company, but in real sense they are
none of them. 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.”

5.2.4 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 has 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
 75

management of the company or fraud or misfeasance in relation

to the company.

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.

5.2.5 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.
 76

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 misappropriation 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 must be proved.

b) Liability to outsiders (Outside Parties):

The Directors 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 fine
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 debenture certificates.
7. For failure to give notice to Registrar as regards consolidation of
share capital
 77

5.2.6 Remuneration of Directors :

Directors' remuneration is the process by which directors of a
company are compensated, either through fees, salary or 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 the net profit as
calculated in a manner laid down in section 198 of the Companies
Act, [Link] 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 eligible 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 the Articles or the
shareholders resolve for the same in the general meeting. The
Articles usually provide for the payment of remuneration to directors
in the form of honorarium. According to Section 198, total
managerial remuneration payable to directors, managing 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.

5.3 APPOINTMENT OF DIRECTORS

5.3.1 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 meeting may by ordinary

resolution, increase or reduce the number of its directors within the
limit fixed as per Articles [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 the 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 does 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
 78

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 are 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
company. 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 company

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 public
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 applicable to
private companies.

At Subsequent AGMs out of the two-thirds directors liable 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.

5.3.2 Legal restrictions on the appointment of Directors :

A. Legal Restrictions on First 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 directors 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.
 79

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.

5.3.3 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.

5.3.4 Appointment of Directors by the Central Government :

With a view to preventing mismanagement, the Central
Government may appoint such number of directors as 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 Central 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.

5.3.5 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 control on the companies financed by
them.
 80

5.4 RESIGNATION BY DIRECTOR / REMOVAL OF

DIRECTORS:

5.4.1 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
resignation 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 of 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.

5.4.2 Removal of Directors:

According to section 149 of the Companies 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 [Link] per Company Act Shareholders can
remove a Director from the Company before the expire 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)

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 against 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).
 81

5.5 POWERS / RIGHTS OF COMPANY DIRECTORS

The directors enjoy wide powers as regards the management of

the company. However, their powers are not unlimited but subject to
legal provisions and 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 collectively and not individually. Similarly, the
directors have to pass necessary resolutions in their meetings for
using such powers.

5.5.1 Statutory Provisions 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.

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 directors, to appoint

alternate directors and to appoint additional directors, 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 Annual 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.

5.6 DUTIES OF COMPANY DIRECTORS

The duties of directors are divided into two categories ie.

Statutory duties and General duties.
 82

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 the 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 said 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 Board must be held in every year.
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 Directors 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 as 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.
 83

4. Finally, the Directors are expected to make full and complete

disclosure in any contract in which they are directly or indirectly
interested (Section 299).

5.7 CHAIRMAN OF THE COMPANY / BOARD OF

DIRECTORS

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 elected 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 listed 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.

5.7.1 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 by the directors) and as
such a non-shareholders director can also be appointed as a
chairman at a Board meeting.
 84

5.7.2 Role of the Chairman at the Board Meetings

1) Chairman has to see that Board meeting has been properly
convened and that the required quorum is 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 to take care and see that proceedings 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 to 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 as
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 the
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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5.8 THE CHIEF EXECUTIVE OFFICER (CEO)

5.8.1 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

5.8.2 Roles and Responsibilities 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 CEO

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. Evaluating the work of executives of the company, including
vice presidents and presidents.
 86

5. Maintaining awareness of the competitive market landscape,

expansion opportunities etc.
6. Ensuring that the company maintains high social responsibility.
7. Setting strategic goals and making sure they are measurable
and describable.
8. Working 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
and return.

5.9 COMPANY AUDITORS

5.9.1 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 accounting 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 appears as a preface in financial statements. Separate,
private reports may also be issued to company management and
regulatory authorities as well.
 87

5.9.2 Rights 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 times 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 office.

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 Signature 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
the 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 against 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
 88

technical advice. This is necessary to give his opinion in his

report.

5.9.3 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 provision
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, whether 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
 89

information and explanations given to him as shown by the

books of accounts.

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 been 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 and 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 answer.

1. 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.

2. 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.

3. 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:

4. 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.
 90

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 issued by an existing company shall contain a report
from the auditor of the company regarding:

(i) Profits and losses;

(ii) Assets and liabilities of the company and its subsidiaries; and
(iii) Rates of dividends paid by the company for each of the five 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 payments 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 than 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 made 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 “.

5.10 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 Directors must be
presided over by a chairman. Regulations regarding appointment of
a chairman are given in the Articles of a company. Normally, the
 91

Board elects its chairman for a particular period. Chief executive

officer (CEO) is appointed as 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. 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 methods and, on
occasion, work on a consultancy basis, helping organizations to
spot ways to boost operational efficiency.

5.11 EXERCISE

1. Discuss the powers of Chairman of the Board of Directors.

2. Explain the role played by CEO
3. Explain the procedure 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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6
COMPANY MEETINGS
Unit Structure :

6.0 Objectives
6.1 Introduction
6.2 Types of Company Meetings
6.3 Shareholders Meetings
6.4 Annual General Meeting and Secretarial Duties
6.5 Board Meetings
6.6 Minutes of Board Meetings
6.7 Chairman
6.8 Proxy
6.9 Motion
6.10 Resolution
6.11 Voting
6.12 Exercise

6.0 OBJECTIVES

After studying the unit the students will be able to:

 Explain the types of Company Meetings
 Understand the concepts Notices, 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

6.1 INTRODUCTION:

Company forms of business organisation 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. Moreover, the company meetings are
governed by the specific provisions laid down Chapter VII
“Management and Administration” in the Companies Act, 2013 and
 93
also the rules made there under. Company secretary should have
an eye over the conduct of meetings and preparations of meetings.

6.2 TYPES OF COMPANY MEETINGS:

6.2.1 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 defined 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 (1971), 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 transaction 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.

6.2.2 Types of Meeting

Meetings under the Companies Act, 2013 may be classified as:

1. Shareholders meeting-
a. Annual General Meeting,
b. Extra-Ordinary General Meeting
c. Class Meeting

2. Directors Meeting-
a. Board Meeting
b. Committee Meeting

3. special meeting-
a. Class meeting
b. Creditors meeting
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4. Other meetings:
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.

6.3 SHAREHOLDERS MEETINGS

Shareholders meetings 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 meeting 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 statutory meeting under the new companies Act i.e. Companies
Act, 2013

6.3.1 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 general 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
 95
be held either at the registered office of the company or at some
other place within the city, town or village in which the registered
office of the company is situated.

 Notice of meeting: A general meeting of a company may be

called by giving not less than clear twenty-one days ‘notice
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 electronic 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 meeting.

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 of 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 meeting 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.
 96
Section 121. Prescribes for the Report on annual general
meeting.—
1) Every listed public 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 company 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 as 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. Punishment 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 which such default continues

6.3.2 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
meeting.

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.
 97
Section 100. Governs Calling of extraordinary general
meeting.–
(Convened by directors - Convened by directors on the requisition
of the shareholders u/s 100)

1) The Board may, whenever it deems fit, call an extraordinary

general meeting of the company.
2) The Board shall, at the 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 vote, 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 the 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 requisitionists 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:
 Scheduling 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
 98
2. During EGM:
 Reading the company EGM meeting notice
 Ascertaining quorum
 Providing all necessary information and documents to
chairman of the meeting.
 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 Registrar within 30 days of the meeting.

6.3.3 Class Meeting of Shareholders covers class meetings of

preference shareholders:
These meetings are convened and conducted when matters
relating to the rights of specific classes i.e. preference shareholders
or debenture 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
important to call a meeting of such affected shareholders and to
pass a resolution required under the provisions of the Companies
Act.

6.4 ANNUAL GENERAL MEETING AND

SECRETARIAL DUTIES

Every Company, apart from One-person Company (OPC)

must have to hold in addition 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 within the period of 6 months. [Section 96(1) of the
Companies Act, 2013]

6.4.1 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.

6.4.2 Quorum of meeting:

As provided under section 103 of the companies act the quorum
of the company will be:
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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;
 30 in case of more than 5000 members 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 displayed 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.
 100
8. Attendance slip and proxy form should be attached along with
notice with clear instruction of filling and stamping
9. Such meeting convened properly issuing notice should not be
postponed or cancelled.

6.4.3 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 following 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
case 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 General 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
issue 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.
 101
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 publication in a newspaper.
4. In case of listed company, a notice in advance 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 in 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 exchanges 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), auditors 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
copies 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
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15. In consultation with the chairman or the Managing Director,
prepare a detailed agenda for the meeting
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 the 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
chairman.
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 meeting.
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;
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 After the Meeting:
1. To prepare minutes of the proceedings.
2. To record the minutes of the meeting and get them signed by
the Chairman within thirty days of the meeting.
3. To send intimation of appointment/re-appointment of directors.
File Form DIR-12 with the Registrar of 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 Audit 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 proceedings 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

6.5 BOARD MEETINGS

6.5.1 Types of Board Meetings

 Meetings of the Board Committees
A member 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 elected 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 collective 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.
 104
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 shall convene at 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.

6.5.2 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 company 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 member 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 taken 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
 105
item is significant should be taken up by the board without
prior written notice.

6.5.3 Quorum for board 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.
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.

6.5.4 Agenda of board 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. 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 participants may expect from
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
included 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
or 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 director at
the address registered with company.
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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 should 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.

6.5.5 Duties of company secretary 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, time 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 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 other 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 entering 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.
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6.6 MINUTES OF BOARD MEETING:

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 taken at the Meeting.

6.6.1 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 form of maintenance shall be authorised by
the Board.
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 Minutes
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.
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6.6.2 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 he participated.
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 the 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.
 109
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 time of commencement and conclusion of the Meetings.

6.6.3 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 written 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 the
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 combination of these two methods will be
good depending upon nature and proceeding of meeting.

6.6.4 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 of 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 Chairman 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.
 110
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 case 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 Minutes shall be identified by initialling of such
document, report or notes by the Company Secretary or the
Chairman.

6.6.5 Finalisation of Minutes

Within fifteen days from the date of the conclusion of the
Meeting of the Board or the Committee, the draft Minutes 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.

6.6.6 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 the Board or by the Chairman.
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.

6.6.7 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

6.6.8 Inspection and Extracts of Minutes:

1. The Minutes of Meetings of the Board and any Committee
thereof can be inspected by the Directors.
 111
2. Extracts of the Minutes shall 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.

6.6.9 Preservation 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 or 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 transferor 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
purpose by the Board.

6.7 CHAIRMAN

6.7.1 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 in charge of meeting and his
presence 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.
 112
6.7.2 Section 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 demanded 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.

6.7.3 Duties and functions of chairman:

1. The chairman has to see that the meeting is properly convened

over which he is presiding. Chairperson 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 power 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 interest of the
company.
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.
 113
11. To decide the priority of speakers is also one of the important
duties of chairman of the meeting.

6.7.4 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 meeting.
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.

6.8 PROXY

6.8.1 Meaning and Statutory provisions

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”.

6.8.2 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.
 114
3. A member may appoint one or more proxies to vote in respect
of the different shares held by him or he may appoint one or
more proxies in 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 be 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 company 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 will 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 proxy.
10. A person appointed as proxy shall not act as proxy for more
than fifty members or for more than prescribed number of
shares.
 115
Form No. MGT-11
Proxy form
[Pursuant to section 105(6) of the Companies Act, 2013 and rule
19(3)
of the Companies (Management and 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
Name of the member (s):
Registered address:
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 …… day 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 ended 31st March, 2015.

2To ratify the appointment of M/s. S R B C & Co. LLP (FRN:

324982E),
Chartered Accountants (Firm Registration No. 101720W) as
Statutory
 116
Auditors of the Company

3To appoint Mr. Ajay Kaushal as the director of the company

4 To appoint Mr. Mr. Srinivasu Nagesvar Mallapragada as the
director
of the company.

Signed this…… day of……… 20…. Affix

Revenue
Signature of shareholder
Stamp
Signature of Proxy holder(s)

Note: This form of proxy in order to be effective should be duly

completed and deposited at the Registered Office of the
Company, not less than 48 hours before the commencement of
the Meeting.

6.9 MOTION

6.9.1 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.

6.9.2 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.
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.
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6.9.3 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 specific 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
required. 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 in 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
disagrees with the speaker or chairman ordinarily. But he can
raise it on any one of the following justified reasons:
i. Incorrect procedure 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 remarks against any member
which are insulting.
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 the 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.
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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 sufficient 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 taken on the matter. For
example; if the report presented in the board meeting, and if
directors feel that few need to be studied again then such
director can move such refer back motion.
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6.10 RESOLUTION:

6.10.1 Meaning
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. The resolutions must be clearly and correctly worded.

6.10.2 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 the 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 should be clear cut intention to treat it as a special
resolution expressed in notice of general meeting. There should
be 21 days’ notice is necessary for passing of such a resolution.
 The concerned members must be provided with the text of
resolution 21 days in advance before passing such resolution.
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 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

6.11 VOTING

6.11.1 Meaning

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, 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.

6.11.2 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 members 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, chairman 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 provided
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.
 121
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 whether 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. Though 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 against 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.

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 of the company.
Voting through electronic means enables the voter to record their
vote using computer or mobile.

6.12 EXERCISE

1) Explain the duties of company secretary before, during and after

the Annual General meeting?
2) Explain the duties of company secretary before, during and after
the board meeting?
3) What are the different kinds of company meeting?
 122
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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7
DEMATERIALISATION AND ONLINE
TRADING
Unit structure:

7.0 Objectives
7.1 Introduction to Dematerialization
7.2 Importance of Dematerialization
7.3 Process / Procedure of Dematerialization
7.4 Participants in Dematerialization
7.5 Secretarial Duties in regard to Dematerialisation
7.6 Online Trading - Concepts
7.7 Bombay Stock Exchange Online Trading (BOLT)
7.8 Listing of Securities
7.9 Scripts
7.10 Summary
7.11 Exercise

7.0 OBJECTIVES

After studying the unit the students will be able to:

 Understand the 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.

7.1 INTRODUCTION TO DEMATERIALIZATION

7.1.1 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 physical share transfer.
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Demat / dematerialization 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 electronic form.

7.1.2 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 responsible 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).

7.2 IMPORTANCE OF DEMATERIALIZATION

7.2.1 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, could 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 saving 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.
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7.2.2 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
2. In case of sale of share transaction faster payments is
possible.
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 settlement 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 [Link],
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 transfer 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
banks.
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.
 126

7.3 PROCESS/PROCEDURE OF
DEMATERIALIZATION

Following is the process of Dematerialisation

1. The client (registered 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
submission, 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, debenture etc.) are as given in the DRF. If the form and
security count 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 order 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 they 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 partly
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 locked-

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
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is then released by the 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 request 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 form and a covering letter to the Issuer/ R&T agent.
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 certificates
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 request 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 securities until the issuer or
its R&T Agent has rejected the earlier request and informed NSDL
and the DP about it.

7.4 PARTICIPANTS 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
form. Currently, there are two depositories registered with SEBI
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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 of securities. Such a
company need to register itself with depository. India, most of
the public limited companies are issuer companies.

4. Beneficial owner /Investor:

The one who opens demat account is an investor and ultimate
beneficiary. He is the one whose name is recorded with
depository and through his demat account he get bonus shares
and dividend.

7.5 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
draft 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 compulsory 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.
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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 allotment to the
depository immediately.

7.6 ONLINE TRADING – CONCEPT

7.6.1 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 enables 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 has been increased as compared
to offline transactions

7.6.2 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.
 130
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 kind 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.

7.6.3 Disadvantages of Online Trading

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 share 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. Investor is at the mercy of internet connection. If
the internet 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 people experience
when gambling, according to a recent study on excessive
trading published in the journal Addictive Behaviours.
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7.7 BOMBAY STOCK EXCHANGE ONLINE TRADING

(BOLT),

7.7.1 Introduction
BSE was established in 1875, as "The Native Share & Stock
Brokers' 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
(Regulation) 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 1995which 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 centralized exchange-based internet trading system i.e.
[Link]. This enables the investors to trade online on BSE
platform.

7.7.2 Advantages of BOLT:

 The system shows scrip, market related information required by
investors on continuous basis.
 It has capacity 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:[Link]
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7.7.3 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
default 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 market
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 absence 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 any 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 default 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 like. Usual alerts on
orders trades, scrip-wise gainers and losers and the like would
also be available.

7.8 LISTING OF SECURITIES

7.8.1 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 to trading on a stock exchange. Listing is
not compulsory under the 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.
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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 /securities 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.

7.8.2 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 company 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.

7.8.3 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 consultation with the
recognized stock exchange where the shares are proposed to
be listed.
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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 disclosures that have to
be made by the company on a continuous basis.

7.8.4 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.

7.8.5 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 proposes 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.

7.8.6 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 Memorandum 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.
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7. The company enters into a listing agreement by paying the
prescribed fees and submitting the necessary documents and
particulars.
8. Shares are then are available for trading.

7.8.7 Advantages

A. Advantages to listed company

1) Listed securities are preferred by the investors 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 shareholding.
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 liquidity 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.
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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 interests. 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
investors to take informed decisions.
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 decisions
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.
7.8.8 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 time.
Listing is not that fruitful for checking the malpractices and artificial
price hike of securities.
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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 fluctuations 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 security holders.
5. The management might enter into an agreement with brokers
to artificially increase prices before a fresh issue and benefit
from that. Common public 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 take 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.

7.8.9 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 debenture 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
 138
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 from 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 general 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 and there is sufficient public interest in
its securities.

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 agreement 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.

7.9 SCRIPTS:

The word scrip has various meanings in different context.

Sometimes it 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 sense, 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 shareholders a scrip
dividend, it offers them the choice to receive dividends in the form
of more shares or in cash.
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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-cumulative
b) Participating and non-participating
c) Redeemable and irredeemable
d) Convertible and non-convertible

7.10 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
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Online transaction increases the speed of buying and selling
of securities with the aid of internet. This 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 screen 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.

7.11 EXERCISE

1. Explain the advantages 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 regarding 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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8
REPORTS AND WINDING UP
Unit structure:

8.0 Objectives
8.1 Introduction
8.2 Types of Company Reports
8.3 Dividends
8.4 Secretarial Duties with regard to Payment of Dividend
8.5 Charges
8.6 Punishment
8.7 Winding up of a Company
8.8 Specimen
8.9 Summary
8.10 Exercise

8.0 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& Statutory
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

8.1 INTRODUCTION

During the management of company, various kinds of

reports are being made. These reports do play the role of
effective communication between the shareholders and directors
of the company. For directors it is mandatory to prepare Annual
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report i.e. Board’s report which provide details of annual
accounts to the shareholders. Likewise, section 143(2)
prescribes for the Auditor’s report to be presented by him on the
basis of 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
secretarial reports for investigation and reporting.

8.2 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 social 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 significant
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
companies Act:
ii) Disclosures under Section 134
iii) Disclosure pursuant to listing agreement]
iv) Other Disclosures under Companies Act, 2013.

Normally following matters are highlighted in the Annual report:

i) Chairman’s speech,
ii) Director’s report under section 217,
 143
iii) Auditor’s report under section 227,
iv) Balance sheet, Profit and loss account, schedules
forming part of balance sheet and profit and loss 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 true
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 the 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 (8) 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 with 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 maintenance of accounts and other matters connected
therewith;
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(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 provisions under the statutes but Board’s
report and Auditor’s reports are the two main important reports
used in the company.

8.3 DIVIDENDS

8.3.1 Meaning of Dividend:

The term ‘dividend’ has been defined under Section 2(35)
of the Companies Act, 2013. The term “Dividend” 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 paid-up on
the shares held by them.

8.3.2 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 dividends

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 Dividend 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 declared or paid by a Company for any
financial year except out of the profits of the company for that
year arrived at after providing for depreciation in accordance
with section 123(2) of the Act or out of profits of the
 145
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)]
 Dividend 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 account 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 statement 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 continues and the Company shall be
liable to pay simple interest @ 18% 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
 146
interest @ 12% p.a. till it transfers the same and the interest
accruing on such amount 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)].

8.4 SECRETARIAL DUTIES WITH 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 companies 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 closure 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 closure 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 the 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.
 147
12. Holding AGM and passing ordinary resolution for declaring
the payment of dividend to the shareholders of the company.
13. Preparing the statement of dividend in case of all
shareholders.
14. Ensuring that the dividend tax is paid to the tax authorities
within stipulated 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 unpaid 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 expiry of 7 years from
the date of transfer to unpaid dividend account.

8.5 CHARGES

8.5.1 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 undertaking 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. Banks 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 Companies 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
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charge. The company is not supposed to transfer this kind of
a charge unless the charge holder is paid off his due for the
same.

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 crystallisation 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.
E-Form Purpose
No.
Creating or Modifying charge (for other than
1. CHG-1
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.

Notice of appointment or cessation or receiver
6. CHG-6
or manager.
7. CHG-7 Register of charges.
Application for condonation of delay shall be
8. CHG-8
filed the Central Government.
Creating or modifying the charge in (for
9. CHG-9
debentures including change in rectification)
10. CHG-10 Application for delay to the registrar.

8.5.2 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 within 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-8
4. File the approval received with Registrar in Form INC-28.
5. If registrar is satisfied, he shall issue a certificate of
registration in Form CHG-2
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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

8.6 PUNISHMENT:

8.6.1 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 may 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, 448, 449, 450, 451, 452 and 453
Section 447.

Punishment 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
any 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 person, 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 person losing is legally entitled.
 150
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 penalty for the committed
offence.

Section 448. Punishment for false statement.— Save as

otherwise provided in this Act, if in any return, report, 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 particulars, 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 intentionally gives
false evidence—

(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 under 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, confirmation, 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 person 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
 151
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 member or creditor or
contributory thereof, be punishable with fine which shall not be
less than one lakh rupees 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 wrongfully 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.— If 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 duly 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 for which that name or title has
been used.

8.7 WINDING UP OF A COMPANY

8.7.1 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 comes 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 company can be initiated either –
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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 creditors 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 Tribunal.
 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
under Chapter XIX.

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 resolution
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

8.7.2 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 resolution 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.
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 Step 2: Issue notices in writing calling for the General
Meeting of the Company 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 commence 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 passed in the General Meeting for winding up of
the company.

 Step 8: 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 of 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 Tribunal 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.
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 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.

8.7.3 Winding up by Tribunal

 National Company Law Tribunal can be 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 the 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 sovereignty

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 authorized 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 fraudulent or unlawful purpose or
the persons concerned in formation 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 financial years;

 If the tribunal is of the opinion that it is just and equitable that

the company should be wound up.
 155
8.7.4 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 Companies 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 Government in this behalf;
 By the Central Government or State Government in case of
Company acting against the interest of sovereignty and
integrity of India.

8.8 SPECIMEN:

A. Notice and agenda of Annual General Meeting:

ABC COMPANY LIMITED

(Address of the Registered 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 Profit 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
rotation 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

Sd/-
Dated:

Secretary

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.
 156
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 information and
reference.

Yours 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 Certificate of Incorporation of the Company.
4. To appoint:
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 decide 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 preliminary 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.
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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

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 Director 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 Members
and the Share Transfer Register will remain closed and also
to authorize the secretary to issue notice regarding the
 158
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 FURTHER 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 for 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 communicate 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] AT [ADDRESS OF REGISTERED OFFICE]

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 welcomed 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.
 159
Leave of Absence
[Name of the director] 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 before 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 __________ had 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 report.
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 _______ together 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 _________.
The Chairman placed before the board, the Audited 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 1998 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 General Meeting.”

“Resolved further that [Name of the person(s) authorized] be

and are hereby authorized jointly / severally to take such steps
 160
as may be necessary in relation to the above and file such
documents with the Registrar of Companies, [concerned state].”

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 1998
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] be

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 Chairman 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

Financial year ending 31st March 1998 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].

6. Approval for the re-appointment 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
 161
Board after 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 of 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 Company
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 Board 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 been 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 for 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 calling 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, 1956, 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 Companies
Act, 1956.”

“Resolved further that [Name of the person(s) authorized] be

and is hereby authorized to sign and issue such notice to the
members of the Company and to do, all other necessary acts for
the conduction of the First Annual General Meeting of the
Company.”
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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 Tuesday. 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 the 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 was appointed as an
 163
Additional Director with effect from April 17, 2002 on the
Board of the Company in terms of Section 260 of 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 Companies 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 business, the meeting was terminated
with a vote of thanks to the chair proposed by Mr. Rajkumar
Gupta and seconded by Mr. J. Kumar.

8.9 SUMMARY:

Company reports are very important as it serves as a

medium of communication between the directors and
shareholders. Company 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 charge.

Section 447, section 448, 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 is 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.

8.10 EXERCISE

1. What is the procedure for voluntary winding up of the

company?
2. Explain the secretarial duties regarding declaration and
payment of dividend?
 164
3. Write short notes on the following:
a. Charges b. Penalties
c. Annual Report d. Audit Report
4. Explain the procedure of winding up company by tribunal.

5. Give the Specimen of the followings:

a. Notice and 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

