ACCOUNTS : STATUTORY BOOKS ,

FORMS AND CONTENTS OF BALANCE

SHEET AND PROFIT AND LOSS
ACCOUNTS
DR ANITA SABLE
ASSISTANT PROFESSOR
 BASICS FOR KEEPING
ACCOUNTS AND ITS NEED
• For an organization to function efficiently and
adhere to the statutory requirements, it is essential
to maintain certain records and registers.
• Maintaining such records and registers are
important for fulfilling the statutory, disclosure,
statistical, MIS purposes.
• Maintaining such records helps in ensuring that
the operations of an organization are systematic.
 COMPANIES ACT, 2013
Every company to keep and maintain at its
registered head office books of accounts and
relevant documents and the financial
statements for each FY (financial year).
These book provides a true and fair picture of
the company’s state of affairs .
 STATUTORY BOOKS

• Statutory Books are the official records kept by the company relating to
all legal and statutory matters.

• A company's statutory books are usually kept at the registered office of

the company.

• The books should be available to the general public for inspection

during reasonable office hours.

• Statutory Register refers to specific records about a company's

shareholders, directors, and the meetings held.

• The Companies Act, 2013 requires every company to furnish these

records before ROC (registrar of companies) within specific time limits
together with prescribed fees.
 CONTENTS OF A COMPANY'S
STATUTORY BOOK
• The register of shareholder
• The register of company directors and
secretaries
• The register of company directors' interests
• The register of charges
• The register of interests in shares if the
company is a PLC.
 TYPES OF REGISTERS
Register of Register of
Register of
Shares/Other Renewed and
Employee Stock
Securities Bought Duplicate Share
Options
Back Certificates

Register of
directors and key Register of
Register of charges
managerial Members
personnel

Register of the
company
 REGISTER OF THE COMPANY

• Every company accepting deposits must keep

at the registered office, one or more registers
for deposits accepted and/or renewed for a
period of 8 years. Such period must be from
FY (financial year) in which the entry was
made in such register.
 REGISTER MUST CONTAIN THE
FOLLOWINGS IN RESPECT OF
DEPOSITORS –
• Name, PAN and address of the depositors
• For minors, guardian details
• Particulars of the nominee
• ate and amount of each deposit
• Deposit receipt number
• Interest rate
• Duration of such deposit
• Repayable date
• The due date for interest payment
• Payment date of interest due
• Details with respect to deposit insurance
• Details of charge/ security created
• Other details with respect to deposit.
 REGISTER OF MEMBERS
• Register of the members separately for the equity
shares and preference shares.
• Register for the debenture holders
• Register for other security holders
• The registers must contain an index of the names.
• Further, member’s register, in case a company doesn’t
have the share capital, must have the following details
of each member:
– Name, address, E-mail, PAN, UIN, CIN, Occupation,
Nationality, Father’s /Mother’s Name/Spouse’s Name,
– Date of commencement of membership
– Date of cessation of membership
– Other details as necessary
 REGISTER OF DIRECTORS AND KMP

• Apart of the details of the DIRECTOR /KMP

also comprise details of the securities held by
them in the company or its subsidiary, holding,
associate companies or subsidiary of
company’s holding company.
• According to rule 17 of Companies
(Appointment and Qualification of Directors)
Rules, 2014,
 CONTENTS OF REGISTER
• DIN (Director Identification Number);
• Name and surname;
• Any previous name or surname;
• Father’s name, mother’s name and spouse’s name;
• Date of birth;
• Nationality (including the nationality of origin, if different);
• Residential address (present as well as permanent);
• The date of board resolution where the appointment was
made;
• Occupation;
• Date of appointment and reappointment;
• Date of cessation of office and reasons therefor;
 REGISTER OF CHARGES

• Register of charges must be maintained by a company in the Form

no. CHG 7.

• This register must contain details of the charges registered with the
registrar on assets, property, companies or undertaking along with
particulars of property that was acquired and which was subject to
charges and also particulars of modifications or satisfaction of any
charge.

• The register of charges must be permanently preserved at company’s

registered office, however, the instrument creating the charge must
be preserved for a period of 8 years from the date of satisfaction of
the charge by the said company.
 REGISTER OF RENEWED AND
DUPLICATE SHARE CERTIFICATES
• Particulars of each of the share certificates issued:
• in exchange for certificates which are
consolidated or sub-divided or in replacement of
certificates which are mutilated, defaced, old or
torn, worn out, decrepit, or where cages on the
reverse for the recording transfers are duly
utilized
• in lieu of certificates which are destroyed or lost
• must be entered in a Register of Renewed and
Duplicate Share Certificates which is to be
maintained in the Form No SH.2
• Form No SH.2, will specify against the name
of the person to whom a certificate has been
issued, the date of issue and number of the
certificates in lieu of which new certificate has
been issued, and the required changes
specified in Register of Members by
appropriate cross-references in “Remarks”
column.
• The register must be permanently preserved and
must be kept in custody of company’s company
secretary or any other person so authorized by
company’s Board.
• All the entries made in this register must be
authenticated by company’s company secretary or
such person as authorized by company’s Board in
this regard.
• Such register must be kept at the company’s
registered office or at a place where Register of
Members is maintained.
 REGISTER OF EMPLOYEE
STOCK OPTIONS
• Company must maintain the Register of
Employee Stock Options in the form no. SH.6 and
must enter therein particulars of an option
granted.
• Such register must be kept at the company’s
registered office or such other premise as per the
discretion of the board.
• The entries made in this register must be
authenticated by company’s company secretary or
such person as authorized by company’s Board in
this regard.
 REGISTER OF SHARES/OTHER
SECURITIES BOUGHT BACK
• As per Companies Act 2013, a register of shares and other securities bought
back needs to be maintained by a company in Form SH 10.

CONTENTS-

• Date of the passing of the special resolution authorizing the buy-back of

securities
• Date of Board’s approval
• Number and price of shares or other securities authorized for buyback
• Date of such opening and closing of the buy-back offer
• Date on which the buy-back was completed
• Description of the shares or other securities bought back by the company.
BALANCE SHEET AND PROFIT AND LOSS ACCOUNTS
section 211 of Act 1956 and 129 of 2013 Act

• (1) Every balance sheet of a company shall give a true and fair view
of the state of affairs of the company as at the end of the financial
year and shall, subject to the provisions of this section, be in the
form set out in Part I of Schedule VI,
• or as near thereto as circumstances admit or
• In such other form as may be approved by the Central Government
either generally or in any particular case ;
• In preparing the balance sheet due regard shall be had, as far as may
be, to the general instructions for preparation of balance sheet under
the heading " Notes " at the end of that Part :

Provided that nothing contained in this sub-section shall apply

to any insurance or banking company or any company engaged in
the generation or supply electricity or to any other class of company
for which a form of balance sheet has been specified in or under the
Act governing such class of company.
 Section 211(2)
• Every profit and loss account of a company shall give a
true and fair view of the profit or loss of the company
for the financial year and shall, subject as aforesaid,
comply with the requirements of Part II of Schedule VI,
so far as they are applicable thereto:
• Provided that nothing contained in this sub-section
shall apply to any insurance or banking company or any
company engaged in the generation or supply of
electricity, or to any other class of company for which a
form of profit and loss account has been specified in or
under the Act governing such class of company.
 211(3),(3)A,3(B) &3(C)
• (3) The Central Government may, by notification in the
Official Gazette, exempt any class of companies from
compliance with any of the requirements in Schedule
VI if, in its opinion, it is necessary to grant the
exemption in the public interest. Any such exemption
may be granted either unconditionally or subject to
such conditions as may be specified in the notification.

• (3A) Every profit and loss account and balance sheet of

the company shall comply with the accounting
standards.
• (3B) Where the profit and loss account and the balance sheet of the
company do not comply with the accounting standards, such
companies shall disclose in its profit and loss account and balance
sheet, the following, namely:-
• (a) the deviation from the accounting standards
• (b) the reasons for such deviation; and
• (c) the financial effect, if any, arising due to such deviation

• (3C) For the purposes of this section, the expression "accounting

standards" means the standards of accounting recommended by the
Institute of Chartered Accountants of India constituted under the
Chartered Accountants Act 1949 (38 of 1949) as may be prescribed
by the Central Government in consultation with the National
Advisory Committee on Accounting Standards established under
sub-section(1) of section 210A.

• Provided that standard of accounting specified by the Institute of

Chartered Accountants of India shall be deemed to be the
Accounting Standards until the accounting standards are prescribed
by the Central Government under this sub-section.
(4) The Central Government may, on the
application or with the consent of the Board of
directors of the company, by order, modify in
relation to that company any of the
requirements of this Act as to the matters to be
stated in the company's balance sheet or profit
and loss account for the purpose of adapting
them to the circumstances of the company.
• (5) The balance sheet and the profit and loss account of a company shall
not be treated as not disclosing a true and fair view of the state of affairs of
the company, merely by reason of the fact that they do not disclose:
• (i) in the case of an insurance company, any matters which are not required
to be disclosed by the Insurance Act, 1938 (4 of 1938) ;
• (ii) in the case of a banking company, any matters which are not required to
be disclosed by the Banking Companies Act, 1949 (10 of 1949) ;
• (iii) in the case of a company engaged in the generation or supply of
electricity, any matters which are not required to be disclosed by both the
Indian Electricity Act, 1910 (9 of 1910), and the Electricity (Supply) Act,
1948 (54 of 1948) ;
• (iv) in the case of a company governed by any other special Act for the
time being in force, any matters which are not required to be disclosed by
that special Act; or
• (v) in the case of any company, any matters which are not required to be
disclosed by virtue of the provisions contained in Schedule VI or by virtue
of a notification issued under sub-section (3) or an order issued under sub-
section (4).
• 6) For the purposes of this section, except where the context otherwise
acquires, any reference to a balance sheet or profit and loss account shall
include the notes thereon or documents annexed thereto, giving information
required by this Act, and allowed by this Act to be given in the form of
such notes or documents.
• (7) If any such person as is referred to in sub-section (6) of section 209 fails
to take all reasonable steps to secure compliance by the company, as
respects any accounts laid before the company in general meeting, with the
provisions of this section and with the other requirements of this Act as to
the matters to be stated in the accounts, he shall, in respect of each offence,
be punishable with imprisonment for a term which may extend to six
months, or with fine which may extend to ten thousand rupees, or with both

Provided that in any proceedings against a person in respect of an

offence under this section, it shall be a defense to prove that a competent
and reliable person was charged with the duty of seeing that the provisions
of this section and the other requirements aforesaid were complied with and
was in a position to discharge that duty :

Provided further that no person shall be sentenced to imprisonment

for any such offence unless it was committed willfully.
• (8) If any person, not being a person referred to in
sub-section (6) of section 209, having been
charged by the managing director or manager, or
Board of directors, as the case may be, with the
duty of seeing that the provisions of this section
and the other requirements aforesaid are complied
with, makes default in doing so, he shall, in
respect of each offence, be punishable with
imprisonment for a term which may extend to six
months or with fine which may extend to ten
thousand rupees, or with both :
Provided that no person shall be sentenced to
imprisonment for any such offence unless it was
committed willfully.
 FORM AND CONTENTS OF
BALANCE SHEET
• Balance sheets are one of the most
important financial statements of a business.
They disclose details relating generally
to assets and liabilities. They even show the
exact nature of these assets and debts.
 THE FORM OF A BALANCE SHEET

• Every balance sheet of a company has to be

prepared in consonance with (Revised)
Schedule VI of Companies Act, 1956.
Schedule VI also contains many other
disclosure requirements. Balance sheets and
statements of profits and losses must reflect
them as well.
 LIABILITIES.
ASSETS
CONTENTS OF BALANCE SHEET
1 Shareholders’ Fund
• According to Schedule VI, a balance sheet
must sub-classify shareholders’ fund as
follows:
• Share capital
• Reserves and surplus
• Money receivable against share warrants
2. Share Capital
• The notes to accounts in a balance sheet must state details
pertaining to share capital. They must also include the
following peculiar items and modifications:
• Disclosures for each class of shares must state the number
of shares outstanding.
• They must also disclose restrictions on distribution of
dividends and payment of capital.
• Further, to clarify the identities of promoters of the
company the notes to accounts must show details pertaining
to certain classes of shareholders.
• Details of authorized shares, paid-up capital, par value of
shares, the aggregate value of shares allotted to each class
of shareholders, etc. must be stated separately.
• Accountants also have to disclose the number of forfeited
shares, terms & conditions of convertible securities, number
of shares bought-back, etc.
3 Reserve and Surplus
• Every balance sheet has to classify all reserves and
surplus funds of a company in the following categories:
• Capital Reserve
• Capital Redemption Reserve
• Debenture Redemption Reserve
• Securities Premium Reserve
• Share Options Outstanding Account
• Revaluation Reserve
• Surplus funds like the balance of profit and loss
statement, dividend, bonus shares, etc.
4 Money Received Against Share Warrants
• The balance sheet must disclose all money receivable
from share warrants as a separate line under
Shareholders’ Funds.
5. Classification of Current and Non-Current Items
• All assets, liabilities and other peculiar items have to be
categorized as either current or non-current. This
classification is necessary because it helps in
understanding these items comprehensively.
• Current items are basically those that have a shorter
value of utilization period. Thus, they are realizable
within 12 months, they are tradeable, they are cash or
cash-equivalent, etc. On the contrary, all other assets
and liabilities are non-current. Hence, they are
realizable beyond the period of 12 months.
6 Liabilities
• Balance sheets show liabilities along with details
of share capital and equity. As we read above,
liabilities can be current or non-current.
• Current liabilities are basically those which are
repayable within 12 months. For example, trade
payables are current liabilities. Concurrently,
those that are payable after a year are non-current
or long-term liabilities. Thus, bank loans are
generally non-current debts.
7 Fixed Assets
• Balance sheets always depict all assets below
details of equity and liability. First, fixed assets
are described, and then current assets. Fixed
assets are nothing but non-current assets. Thus,
their useful life extends beyond 12 months.
Fixed assets include both tangible as well as
intangible assets. Apart from these assets, all
other assets are current assets.
• 8. Investments
• Even investments of a company are assets.
Furthermore, they can also be current or non-
current. Investments realizable within 12
months are current investments, while all
others are non-current.
9. Cash and Cash Equivalent
• All cash funds and cash-equivalent items of a
company are treated as current assets.
Balance sheets always have to show them
separately. All these rules generally have to be
followed strictly in balance sheets. Apart from
these, accountants also have to show other
peculiar items like trade payables, trade
receivables, inventories, provisions, etc.
•Thank you
 Dr Anita sable
Assistant professor
 Defer or suspend to a future time.
 Either at an appointed date or indefinitely /as decided
by the members present at a scheduled meeting.
 GM to be at its scheduled time.
 Meeting duly convened should not be adjourned
arbitrarily by the chairman
 Chairman can adjourn with the consent of members
 Meetings may be adjourned at any time, even after
some items of business have been transacted and
remaining items can be transacted at the adjourned
meeting.
 Meeting to be adjourn only for the bonafide reasons.

 If a chairman vacates the chair or adjourns the meeting

regardless of the view of the majority , those remaining
, even if a minority , can appoint a chairman and
conduct the business left unfinished by the former
chairman .
 If the intention and the effect of the adjournment were
to interrupt or delay the business, such an adjournment
would be illegal.

 If the intention and effect were to forward or facilitate

it and no injurious effects would result , such an
adjournment would generally be supported.
 If the meeting is adjourned without future date or for a
period of 30 days or more notice of the same must be
given.
 No fresh notice but the original notice with cover of an
intimation specifying the day, time and place of the
adjourned meeting.
 Also the intimation that certain items of business had
been transacted at the original meeting state the reason
for adjournment and list the remaining items to be
discussed in adjourned meeting.
 If the meeting is adjourned for less than 30 days if it is
a listed company with more than 5000 members, notice
should specify day ,date, time and venue of meeting
should be published immediately in a newspaper
having a side circulation within such states of India
where more than 1000 member reside.
 If meeting is adjourned for a period of less than 30 days
in case of listed company with more than 5000
members, notice thereof specifying the day, time ,date
and venue to be published immediately in a newspaper
having wide circulation within such state where more
than 1000 members reside.

 If an adjournment is for want of quorum, the adjourned

meeting shall be held on the same day , in the next
week at the same time and place, day not being
national holiday or as may be determined by the board.
 In case of meeting called by requisitionists within half
an hour from the time appointed for holding a meeting ,
a quorum is not present , the meeting shall stand
cancelled.
 At an adjourned meeting , only the unfinished business
of the original meeting shall be considered.
Thank you
APPOINTMENT AND
REAPPOINTMENT OF
DIRECTORS

DR. ANITA SABLE

ASSISTANT PROFESSOR
 APPOINTMENTS

 Company to have a board of directors –section 149

 Independent directors- section 149(4)
 manner of election of independent directors and maintenance of Data
Bank –section 150
 Appointment of directors elected by small shareholders –section 151
 Appointment of directors by members at general meeting (first
director)-section 152
 Fresh appointment section 160
 Appointment by nomination-section 161(3)
 Appointment by voting on individual basis –section 162
 Appointment by proportional representation –section 163
 Casual vacancies-section -161
 Additional directors section -161
 Appointment by board-section 161 and section 161(1)
 Appointment by tribunal-section 242 (j)
 INTRODUCTION

 Earlier even company , firm or association use to

be a director of another company but now
according to section 149 only an individual can be
the director of a company.
 An individual to be appointed as director need to
compulsorily have DIN.
 BOARD OF DIRECTORS

 Board of directors consist of individuals as directors.

 No. of directors minimum and maximum.
 Appointment of one women director by the central
government in class or classes of company need to be
complied within one year of enforcement of the Act of
2013.
 Every company is to have at least one director who has
stayed in India in the previous year at least for 182 days.
 INDEPENDENT DIRECTOR

a) Who is not managing director , whole time director or nominee

director.

b) A person of integrity and possesses expertise and experience.

c) Not a promoter, nor of its holding , subsidiary or associate company.

d) No pecuniary relationship of him or his relative with promoter, nor

of its holding , subsidiary or associate Company, directors during the
immediately preceding two financial years or during the current
financial year. Nor with the transaction amounting to two percent or
more of its gross turn over or total income or Rs. 50,00,000 for such
higher amount as may be prescribed which ever is lower, during the
two immediately preceding financial years or during the current
financial year.
 e) nether he nor his relatives-
1) Hold or has position of KMP or has been employee of
the company or its holding , subsidiary or associate
company in any of the three financial years in which he
is proposed to be appointed.
2) Is or has been an employee or proprietor or a partner ,in
any of the three financial years immediately preceding
the financial year in which he is proposed to be
appointed, of -
A. A firm of auditors or company secretaries in
practice or cost auditors of the company or its
holding , subsidiary or associate company or
B. Any legal or a consulting firm that has or had any
transaction with the company, its holding,
subsidiary or associate company amounting to 10
percent or more of the gross turnover of such firm.
3) Hold together with his relatives two per cent or
more of the total voting power of the company.
4) If a chief executive or director , by whatever name
called , of any non-profit organisation that receives
25 percent or more of its receipts from the
company or that holds two per cent or more of the
total voting power of the company.
 f) who posses such other qualifications as may be
prescribed.
 CHARACTERISTIC OF OFFICE OF
INDEPENDENT DIRECTOR
 Not entitle to stock option.
 He my receive his remuneration by way of fees (section
197(5).), reimbursement of expenses for participation in Board
and other meetings and profit related commission as may be
approved the members.
 He can be for 5 years on board.
 Eligible for reappointment by special resolution.
 Can not hold office for more than two consecutive terms.
 He will become eligible after expiry of 3years of ceasing to
become an independent director provided he is not associated
with the company in other capacity directly or indirectly.
 Only liable for those act which occurred with his knowledge ,
consent. Section 149(12)
 Provision relating to retirement of director by rotation are not
applicable to independent directors.
ELECTION OF INDEPENDENT DIRECTORS
AND MAINTENANCE OF DATA BANK
SECTION 150

 Data bank as contains-

 Names , addresses and qualification of persons
eligible and willing to act as independent director.
 Data bank must be maintained as prescribed by
CG.
 company with due diligence must take care before
picking up a person from data bank.
 Appointment must be approved GM.
 CG may prescribe the manner and procedure of
section.
 APPOINTMENT OF DIRECTORS BY
SMALL SHAREHOLDERS
SECTION 151
 Listed company may have one director elected by
small shareholders as prescribed.
 Small share holders means a shareholder holding
shares of nominal value of not more than Rs.
20,000 or such other sum as may be prescribed.
Thank you
 APPOINTMENT AND
REAPPOINTMENT OF DIRECTORS

DR. ANITA SABLE

ASSISTANT PROFESSOR
 APPOINTMENT OF DIRECTORS

By members in
Subscribers to By board of
general
memorandum directors
meeting

By the share
By third party
holders
APPOINTMENT BY SUBSCRIBERS
Section 2(56)
TO MEMORANDUM name clause
Registered office
clause
First director
Objects clause
Section 152(1)
Liability clause
Capital clause
If no provision is given that how this appointment will be done
than we need to see the article of association
Regarding 1st director
Internal
Subscribers to the MOA regulations and
Who are individual bye-laws
Will be deemed to be the first Contain
director until the director are duly appointed. regulations for
management of
the company
 FIRST DIRECTOR
SECTION 152(1)
 No provision

 AOA
 Regarding first directors appointment
 By subscribers to the MOA
 Provided he to be individual
 Will be deemed to be the first director until the directors are duly
appointed.
But in case of one person company
 An individual being a member will be considered deemed to be
the first director.
 Appointment of director in general
meeting section 152(2)to (7)
 Person is proposed to be appointed as a director.
 Furnish his DIN and declaration that he is not disqualified.
 His consent must be obtain in writing in form DIR2.
 The company shall file such consent with the (ROC)
registrar of the company in form DIR 12 within 30 days of
his appointment.
In case of appointment of an independent director
• Explanatory statement of notice calling the meeting.
• Shall also include the statement that in the opinion of the
board he fulfils the conditions of the section 149(6).
 ANNUAL ROTATION SECTION 152(6)
 Directors are liable to retire by rotation.
 Unless Article of association provides for retirement of all the directors by
annual rotation.
 If not only 1/3 can be given permanent appointment and the ret must be
liable to determination by rotation. These 2/3 directors are rotational
directors.
 The rotational directors must have been appointed at general meeting.
Similar provision is applicable to public company.
 Directors are liable to retire by rotation at every subsequent AGM.
 1/3 of rotational directors shall retire at every AGM(rounded to nearest
one)
 Order of retirement will be issued for who have been longest in office
since last appointment.
 If appointed on same day by mutual agreement or by lot.
REAPPOINTMENT SECTION-152
 Vacancy so created shall be filled in the same meeting or may
also resolve that the vacancies shall not be filled up.
 The AGM will be adjourn for next week same day, same time
and same place. Provided it is not a national holiday.
 After a week if no fresh appointment is made, nor a
resolution is passed against the appointment the retiring
directors shall be deemed to have been reappointed.
Except-
If the appointment of a
Unwillingness to
particular director was
continue given by retiring
put to vote, but the
director
resolution was lost

If special or ordinary
resolution is necessary for
Disqualified or incurred
his appointment by virtue
disqualification
of any of the aprovsions
of the act

Motion to appoint passed

without unanimous
consent being void under
section 162 not eligible
of reappointment.
FRESH APPOINTMENT- SECTION 160
 Fresh appointment in place of retiring one can be made.
 Notice in writing for should be left at the office of the company at least
14 days before the date of the meeting along with a deposit of Rs
1,00,000 .
 The amount shall be refundable one .
 In case candidate get elected as director or gets more than 25 % of total
valid votes notice may be given by the proposed director himself or by
anyone intending to propose him.
 Members may be informed by personal notice or by publication in two
local newspaper of which one must be in English and other in regional
language.
 The notice must contain that where only two directors were retiring
under annual rotation , but the company received notices from three
personal for appointment and there fore company is appointing one
more director.
 APPOINTMENT BY NOMINATION
section 161(3)
 Appointment through AOA without routed through the company’s
General meeting.
 An agreement among the shareholders is imbibed in AOA to that
every holder of 10% shares shall have the right to nominate a
director.
 Lending institutions some time have some of their nominees in
company board of directors for watching their interest.
 This is also called as NOMINEE DIRECTOR
 The board may appoint any person as a nominee director on the
bases of agreement or by CG by virtue of its shareholding in a
government company.
 APPOINTING BY VOTING ON
INDIVIDUAL BASIS SECTION 162

 All appointment of directors to be made by voting at

GM.
 Wishes of shareholders in relation to be each proposed
direction should be obtained.
 Two or more directors can not be appointed by single
resolution but if GM is so resolved more than one person
may be elected by the single resolution.
 Elected director must submit his written consent to act as
director to the ROC within 30 days of his appointment.
 APPOINTMENT BY PROPORTIONAL
REPRESENTATION SECTION 163

 Appointment are one by Majority vs. Minority (election by

simple majority).
 Section 163 enables the minority representation on the
board.
 AOA may have a clause of proportional representation for
the appointment.
 Proportional representation means by single transferable
vote or by a system of cumulative voting or otherwise.
 Such appointment are made in every 3 years .
 APPOINTMENT IN CASE OF
CASUAL VACANCIES

 Casual vacancies are the result of vacating before

the expiry of director’s term.
 Casual vacancies must be filled by procedure
prescribed in AOA or in absence of clause in AOA
by the directors to fill the vacancy in Board
meeting.
 So newly appointed director would only be the
director till the expiry of the period for which the
outgoing director would have held office.
 ADDITIONAL DIRECTORS
SECTION 161

 If AOA of provides Board can appoint additional

directors.
 The appointed directors should not exceed the
maximum fixed by the articles.
 In case the strength fell below the legal minimum
additional directors can be appointed by the remaining
directors.
 These additional directors will hold the office till next
AGM.
 Filing consent to act as director is not applicable.
 APPOINTMENT BY BOARD

First method- Second method-

AOA may empower the Section 161 authorises

directors to appoint the directors to fill
additional directors casual vacancies.
considering the
maximum number
fixed therein.
 APPOINTMENT BY TRIBUNAL
SECTION 242(J)

 The directors can be appointed by the tribunal for

prevention of oppression and mismanagement.
 Any kind of agreement between the shareholders
not to increase the number of directors and the
capital of the company and
 Not to do anything which is disturbing the
existing pattern of management is not binding on
the company.
Thank you
 DR ANITA SABLE
ASSISTANT PROFFESOR
 AUDITORS APPOINTMENT
(QUALIFICATION)
SECTION 141(1) –
• Statutory auditor – derives his duties , powers,
authority from statute. Companies Act
• Qualification –CA – Section 1(17)- CA means
who holds a valid certificate of practice under
subsection (1) of section 6 of the CA Act ,1949.
• An individual and also firm can be appointed as
an auditor of the company.
• He need to be a practising CA.
 WHEN FIRM CAN BE
APPOINTED AS AUDITOR

• Firm including a limited liability partnership,

whereof majority of the partners practising in
India are qualified for appointment as auditor
by its firm name to be the auditor of a
company.
• Such CA are also subject to the requirements
of ethical conduct as contained in the CA Act.
 WHO CANNOT BE APPOINTED AS AN
AUDITOR(DISQUALIFICATIONS)
Section 141(3)
1. A body corporate other than a limited
partnership registered under limited liability
partnership Act , 2008.
2. An officer or employee of company.
3. Person (partner/employee/officer of
company)
4. Person related to other in (related party
transaction)
5. A person directly or indirectly has business
relations hip with the company/its
subsidiary/holding /associate /subsidiary of
holding company for such amount as may be
prescribed.
6. A person’s relative is director or /in employment
of company as director /KMP
7. A full time employee elsewhere / person /partner
of firm holding appointment as its auditor , if such
persons or partner is at the date of such
appointment/reappointment holding appointment
as auditor of more than 20 companies.
8 Convicted for offence of fraud and period of 10 years has not
elapsed from the date of such conviction.
9 Any person whose subsidiary/associate company/any other form
of entity, is engaged as on the date of appointment in consulting
and specialised services as provided in section 144.
10 If auditor ceased to be a member of ICAI .
11 Adjudged as an unsound.
12 Adjudged as an insolvent/undischarged insolvent.
13 A statutory auditor can not be appointed as auditor a of company
for same period.
14 If he has vacated his office.
15 If the bank auditor takes the loan from the bank/or its branch
exceeding the limit prescribed.
16 The auditor not having Peer Review Certificate issued by peer
Review board can carry out audit of listed company relating to
accounting period commencing from April 1,2009.
17. Auditor debarred from attesting the financial
statement in respect of IPOs of companies.(initial
public offering refer to the process of offering
shares of a private corporation to the public in
new stock issuances).
18.Section -140(5) tribunal may by order remove an
auditor on being satisfied that he has acted
fraudulent manner /abetted / colluded in fraud
/relation to the company /director or officer .
19. An auditor against whom a final order of
tribunal has been passed shall not be eligible for
appointment for period of 5 years from the date of
order. Section 140(5).
 APPOINTMENT OF FIRST
AUDITORS SECTION 139(6)
• First auditors or auditors shall be appointed by
the BOD within 30 days of registration of
company.
• These will hold the office until the conclusion
of the first AGM.
• On failure of BOD members will appoint the
auditor in extraordinary GM within 90 Days.
• AOA may have the name of first auditor.(No
recognition to these appointment)
• First auditor will be appointed within 60 days
by comptroller and auditor general of India in
case of GC/company owned /controlled by
CG/SG/Governments / partly by the CG and
partly by one or more state Governments.
• If the CAG fails Board is authorised to appoint
first auditor within the next 30 days .
• If the board fails members shall appoint in
extraordinary GM within 60 days –section
139(7).
 APPOINTMENT OF
SUBSEQUENT AUDITORS
Section 139(1)
• Company in first AGM appoint auditor , he shall
hold office from conclusion of meeting till the
conclusion of its 6th AGM and thereafter till the
conclusion of every 6th AGM.
• For ratification at AGM by members.
• The subsequent auditor /auditors are appointed by
the members in AGM by passing an ordinary
resolution.
• Before such appointment consent in writing to be
obtained along with certificate.
The company (Audit and Auditors) Rules -1014 (Rule-4)
Auditor must satisfy that-
1. He is eligible and not disqualified
2. The proposed appointment is as per the term.
3. Appointment is within the limit laid with the Act.
4. The list of proceedings against auditor or audit firm
/partner/pending with respect to professional matters
of conduct, as disclosed in the certificate is true and
correct .
• Within 15 days of the meeting the auditor is
appointed, and will be informed by the
company.
• Company shall file notice of appointment with
registrar. –section 139(1)
 APPOINTMENT OF SUBSEQUENT AUDITOR
FOR A GOVERNMENT COMPANY

• CAG will appoint auditor for GC for each FY.

• He should be qualified.
• Appointment to be done within180 days of
commencement of FY
• Shall hold the office till the conclusion of
AGM.
• Auditor appointed from the conclusion of one
AGM until the conclusion of 6th AGM
 REAPPOINTMENT OF RETIRING AUDITOR

Section 139(9)-
• A retiring auditor may be reappointed at the
AGM-
– Provided not disqualified for reappointment
– Not unwilling
– SR has not been passed at the meeting appointing
somebody else instead of him
– SR has not been passed at the meeting providing
expressly that he shall not be reappointed.
 REMOVAL AND RESIGNATION OF AN
AUDITOR
Section 139(2)-
• Company can remove auditor and right of
auditor to resign form office.
• Act provides for specific procedure for
removal of Independent auditor and
conscientious auditor.
• The auditor resigning has to state the reason
for so.
 REMOVAL BEFORE EXPIRY OF THE
TERM.
• By passing SR after obtaining prior approval of CG
and reasonable opportunity to auditor section 140(1).
• Within 30 of BR the application shall be made to the
CG in form ADT-2 under companies(Audit and
Auditor)Rules , 2014.
• Form should contain the details of grounds of removal
and opportunity given to auditor, pendency of audit etc.
• Within 60 days CG’s approval, the GM of members
shall be held for passing the SR . Rule (7) of companies
(Audit and Auditors)Rules , 2014.
 RESIGNATION OF AUDITOR

• If auditor intend to resign before expiry of his

term ,needs to file a statement to registrar
within 30 days of his resignation.-section
140(2).
• Reasons and other relevant necessary facts in
form ADT-3.
• A failure to file shall be liable to punishment
with fine not less than 50 thousand and
maximum of 5 lakh –section 140(3).
 REMOVAL BY TRIBUNAL
• Under certain circumstances tribunal direct
company to remove auditor.
• Auditor has acted fraudulently.
• Abetted /colluded in any fraud by/or in relation
to company/its director/officer.
• Tribunal action may be –
By any
Application
Suo motu person
to CG
concern
Section 140(5)-
• On the application made by the CG and tribunal is
satisfied , within 15 days of receipt of application
by order stop auditor to function.
• The CG may appoint another auditor in his place.
• Removed auditor against whom the order of
tribunal is passed shall not be eligible for
appointment as an auditor of any company for a
period of 5 years from the date of passing of
order.
• In case of firm both firm and every partner
/partners acted fraudulently /abetted /colluded in
any fraud shall be held liable.
•Thank you
BOARD MEETINGS

DR ANITA SABLE
ASSISTANT PROFESSOR
 COLLECTIVE DECISION
MAKING FORUM
• Company being an artificial person need to
expresses its will or takes its decisions through
resolutions passed at the meetings of either its
directors or share holders.
• Power related to the affairs of the company are
divided between the Board and shareholder.
• Board of directors are directing mind and will
of the company.
• The BOD is the principle organ of company.
 DIVISION OF POWERS BETWEEN
SHAREHOLDERS AND DIRECTOR
• When the powers are vested in BOD AOA the shareholders
cannot interfere with them.
• If the shareholders are dissatisfied with the directors , they can
remove them in the manner provided in it by the AOA/ACT.
Jagdish Prasad Vs Paras Ram (1942)12 com cases 21 (All ):
AIR 1941ALL 360
The only way in which the general body of the shareholders
can control the exercise of the powers vested by the articles in
the directors is by altering the article or if opportunity arises,
under the articles by refusing to re-elect the directors of whose
action they disapprove.
They cannot themselves usurp the powers which by articles are
vested in the directors nor can the directors usurp the powers
vested by articles in the general body of the shareholders.
John Shaw & Sons (Salford)Ltd v. Shaw (1935) 2 KB 113.
 BOD
• Directors of the company are collectively
known as BOD/Board.
• But if the specific power is given to the
individual director , power cannot be exercised
by them collectively.
 MEETINGS
• Gathering /assembly /getting together of
number of persons for transacting any lawful
business.
• Meetings under company act must be
convened and held in perfect compliance with
the various provisions of Act/rules.
BOARD MEETINS AND ITS NEED
• Directors act through meetings .
• These meeting are the means to discuss the
business and take formal decisions.
• Directors can only act through the resolutions
passed at such meetings.
• In other words it can be correct to conclude that
directors should exercise its powers duly
convened at board meetings or must exercise their
powers collectively as board.
• These meetings can be adjourned or regulated by
the BOD as it thinks fit.
• The law provides that board must formally
meet once a quarter.
• Board meeting provides a forum for
deliberating on matters affecting the business
and affairs of the company.
MEETINGS OF THE DIRECTORS
• Because the directors exercise their powers at
periodical meetings it become essential to hold
the 1st meeting -within 30 days of the date of
incorporation.
• 4 times every year
• Subsequent meetings-Gape of 120 days in two
consecutive meetings (173)(1).
• Exception – CG may exempt class or classes of
companies or application with certain
modification, condition.
 OTHER COMPANY
• OPC
• SMALL COMPANY
• DORMANT COMPANY
At least one meeting of the BOD in each half
of a calendar year and the gap between the
two meeting is not less than 90 days.
Quorum requirement will not be their in
case of OPC with one director.
 PARTICIPATION
person Video Other audio
conferencing visual means
 MATTERS NOT DEALT THROUGH VIDEO
CONFERENCING /AUDIO VISUAL MEANS

CG has prescribed the list-

1. Approval of annual financial statements .
2. Approval of Board’s Report
3. Approval of prospectus
4. Audit committee meetings for financial
statement including consolidated financial
statement if any to be approved by the board.
5. Approval of matters relating to amalgamation,
merger, demerger, acquisition and takeover.
 IMPORTANT CONSIDERATION/THING
Rule3 of companies (meeting of Board and its powers)Rules, 2014
1. Necessary arrangement to avoid failure of video /audio visual
connection.
2. Due and reasonable care to safeguard the integrity/security
/identification procedures.
3. Proper transmission of communications.
4. Record minutes and proceedings.
5. Store the recordings
6. Store the other mechanism of recording as a records of company
before the completion of audit of particular year.
7. Directors are attending and have an access to the proceedings.
8. Participants are able to hear and see other participants .
9. Participant differently abled may make a request ot the board to
allow a person to accompany him.
10. Roll call to be taken and particulars will be asked.
1. Inform the board about the other person other than directors in the meeting.
2. Require quorum is present.
3. Date time and place of the meeting to be conveyed to all the persons
attending the meeting.
4. Registers to kept , signed and if the directors participating through electronic
means ,if have given the consent would be deemed to have been given
consent and it is so recorded in the meeting.
5. There can be repeat or reiteration by the directors.
6. If the motion is objected to and there is a need to put it to vote, the
chairperson shall call the roll and note the vote of each director who shall
identify himself while casting his vote.
7. No person except chairperson, director, company secretary or other whose
presence is necessary be allowed to access the place of meeting physically or
electronically.
8. At the end on each agenda item the chairman shall announce the summary of
decision taken along with minority vs., majority. And the same will be
disclosed to the directors.
9. After the draft minutes are complete will be circulated among all the
directors within 15 days of meeting either in writing/electronic and need to
be confirmed or give his comments regarding the accuracy of recording of
the proceedings within 7 days /reasonable time as decided by board.
10. Minutes shall be entered in minute book under section 118 and signed by
chairperson.
 Can a director participating through electronic
mode shall be counted for the purposes of Quorum?

• Yes , they shall be counted for the purposes of

quorum.
• But if they are excluded for any items of
business under the provisions of the Act or any
other law, they will not be counted in the
quorum nor will be entitled to vote .
 Can director participating telephonically or
teleconferencing be considered as participation ?
• Participation of director in a meeting
telephonically or meetings through
teleconferencing Cannot be considered as
participation of a director through electronic
mode or meeting through electronic mode.
• Rule 3 of the companies (Meeting of Board and
its powers ) the directors intend to participate in
the meeting through electronic mode need to
intimate at the beginning of the year. Such
intimation will be valid for one year only.
Ref- Rupak Gupta vs U.P. Hotels Ltd (2016) 71
 NOTICE OF BOARD MEETING
• At least 7 days notice in writing to be served to
every director either by hand/post/electronic
mode –section 173.
• Exception- meeting at shorter notice can been
called subject to the presence of independent
director or in his absence decisions taken shall
be circulated to all the directors and shall be
final only on ratification by at least one
independent director if any.
• If the independent director was not present and
he disapproves or abstains from ratifying the
minutes , the decision of the board fails.
• The company cannot therefore implement
decision until ratified by at least one ID.

PENALTY IN FAILURE OF GIVING

NOTICE
• Concern officer shall be liable to penalty of
Rs.25000/ -
 PROPER AUTHORITY TO CALL
MEETING OF BOD
Regulation 67(ii)Table F-
• Director
• On requisition of director the
manager/secretary shall at any time summon a
meeting of the Board.
• In consultation with the chairman or in his
absence the MD or in his absence the WTD or
any provided in AOA
 NOTICE MUST BE GIVEN TO
WHOM
• All directors
• Interested directors though he is precluded form voting
at the meeting on the business to be transacted.
• Notice of adjourned meeting need not be given unless
AOA provides (reason – adjournment is only a
continuation of meeting . No new business can be
introduced unless notice of such new business is given).
• Notice of adjourned meeting shall be given to all
directors who did not attend the meeting on the
originally convened date.
• Like original meeting the notice of adjourned meeting
also be given not less than 7 days before the meeting
even in case the date of the meeting is decided at the
original meeting itself.
 CONTENTS AND AGENDA OF BOARD
MEETING

• Agenda should be transacted at the meeting and notes

on agenda shall be given to the directors at least 7 days
before the date of meeting unless AOA provides for
some longer period.
• Agenda and Notes shall be sent by
hand/post/RPAD/courier/Email/other electronic means
on postal address/email address/electronic address/DIN
registered with the company.
• If any specific means is provided the be sent by that
means.
• Proof of sending should be maintained in soft form for
current/eight financial years whichever is later
• Notice , agenda and notes shall be sent to Original
Director and alternate directors.
• Notes on items of business of (unpublished price
sensitive information)may be given at a shorter period
with the consent of majority or directors including at
least 1 ID.
• General consent in relation to UPSI must be taken in 1st
Meeting and also whenever there is any change in
directors.
• Requisite consent must be taken before taking this
matters in meeting and shall be recorded in minutes.
• Additional notes may be circulated with the permission
of chairman and majority of directors present in
meeting including at least 1 ID. Unless he is absent or
no ID in the company.
 UNPUBLISHED PRICE
SENSITIVE INFORMATION
• Any information relating to company /securities,
directly/indirectly , that is not generally available and if made
generally available will materially affect the price of the
securities and shall , ordinarily include-

Change In Capital
Financial results Dividends
Structure

Mergers, de-mergers,
acquisitions, delisting
Material events with
, disposals and Change in KMP
listing agreement
expansion of business
, other transactions
 DATE,TIME AND PLACE OF THE BOARD
MEETING

• Notice must contain the time, place and date of

meeting.(Excluding National Holiday)
• Board meeting may be held at any place even
outside the business hours taking into
consideration the convenience of director.
• Meeting adjourned for want of quorum shall
also not be held on a national holiday.
 QUORUM FOR BOARD MEETING

• 1/3 of its total strength or 2 directors whichever is

higher.
• Participation of directors by video conferencing or by
other audio visual mode also to be counted for the
purpose of quorum.
• If due to interested directors , quorum could not be
formed ,then the number of disinterested directors
being not less than 2 shall be the quorum.
• Interested directors shall not be counted for the
purposes of quorum.
• Total strength shall not include directors whose places
are vacant.
 EFFECT OF VACANCY IN THE BOARD

• The continuing directors may act for the

purposes of increasing the number of directors
to that fixed for the quorum/of summoning a
GM .-section 174(2)
• If at any time interested directors exceed or is
equal to 2/3 of total strength the disinterested
directors present at the meeting, being not less
than 2 shall be the quorum of such meetings –
section 173(2)
 ADJOURNMENT FOR WANT OF QUORUM

• The chairman may if dissented or objected by the

majority of Directors present at a meeting at
which a quorum is present adjourn the meeting for
any reason , at any stage of meeting.
• If the meeting could not be taken for want of
quorum shall automatically stand adjourned till
the same day in the next week , at the same time
and place(if national holiday next succeeding
day)unless provided in AOA.
SECTION 175 PASSING OF RESOLUTION
BY CIRCULATION
• The resolution must be circulated to all the
directors/members of committee at their
addresses by prescribed mode.
• The resolution must be approved by a majority
by directors/members entitle to vote on the
resolution.
• 1/3 of total directors required for passing any
resolution at meeting , chairman have to put it
to be decided in the meeting.
 SECTION 118 MINUTES OF BOARD MEETING

• Minutes will be prepared and signed accordingly.

• Minutes shall be kept within 30 days of conclusion of meeting at
registered office /place approved by board.
• minutes shall be kept in book with pages consecutively numbered.
• Minutes to contain fair and correct summary.
• Minutes will included appointment and particulars of directors
• No defamatory /irrelevant /detrimental to the company will be included.
• Chairman shall have absolute discretion what to include and not to
include .
• Minutes will form an evidence.
• Minutes kept will be deemed to be valid unless proved contrary.
• Secretarial standards specified by institute of company secretaries of
India and CG need to be observed .
CONTENTS OF MINUTES

GENERAL SPECIFIC
 GENERAL CONTENTS
• SR. No. and type of meeting, company name , day,
date, ,venue ,time of commencement and conclusion of
meeting.
• In case of adjourned, original meeting , adjourned
meeting , meeting convened but adjourned for want of
quorum etc.
• Names of directors , company secretary /invitees and
mode of participation
• Name of directors must be listed in alphabetical order
/logical manner but starting with the name of chair.
• Invitee if in relation if any need to be recorded.
 SPECIFIC CONTENTS
• Record of election of chairman of meeting.
• Record of presence of quorum.
• Names of directors who sought and were granted leave
of absence.
• Mode of attendance
• Electronic mode used than location and agenda items
director, company secretary or invitee participated.
• Noting of the minutes of the preceding meeting.
• Noting the minutes of the meetings of committees.
• Text of resolutions passed by circulation including
dissent/abstention.
• If interested director is not present nor vote.
• Views of ID insisted upon by director provided
not defamatory /irrelevant /immaterial
/detrimental of the company.
• Director has participated for part of meeting
and not participated in agenda items.
• Dissent and name of director dissented from
resolution/abstained from voting.
• Meeting held at shorter notice and transacting
of any item other than those included in the
agenda ratification by ID or Majority of
directors.
 OTHER RULES REGARDING
RECORDING OF MINUTES
• Contain fair and correct summary of proceedings.
• Written clear, concise and plain language.
• Any document , report ,notes placed before the board
and referred to in the minutes shall be indentified by the
initialling of such by company secretary/chairman.
• If any earlier resolutions or decision is superseded or
modified minutes shall contain a reference to such
earlier resolution/decision.
• Minutes of the proceeding meeting shall be noted at a
meeting of the board held immediately following date
of entry.
 FINALISATION OF MINUTES
• Within 15 days from the date of conclusion of meeting or committee
• Draft shall be circulated by hand/speed post /registered post
/courier/email/other recognised electronic means to all members of
Board/committee for their comments.
• Directors present/absent shall submit their comments within 7 days
from the date of circulation .
• Once the minutes are finalised and entered in the minutes book
within 30 days.
• Comment received after 30 days will be subject to chairman
discretion to consider.
• In absence of comment on draft minutes within time shall be
considered as approved.
• Director who cease to be a director after a meeting is entitle to
receive and comments irrespective of whether he attended meeting
or not.
SIGNING AND DATING OF MINUTES

• Minutes shall be signed and dated by the

chairman of meeting or by the chairman of next
meeting.
• Chairman shall initial each page sign the last page
and append signature ,,also mention date and
place .
• Minutes once signed shall not be altered .
• A copy of the signed minutes certified by the CS
/Authorised director shall be circulated to all
directors within 15 days after these are signed.
• Chairman of the company would be the
chairman for meetings of board.
• If the chairman himself is interested in any
items of business , he should entrust the
conduct of the proceedings in respect of such
item to any other disinterested director and
resume the chair after that time of business
has been transacted.
•Thanks
 DR ANITA SABLE
ASSISTANT PROFESSOR
 Company secretaries , the governance
professional are the natural conscience
keepers for the corporate section.
 They are the specialists in the field of
corporate governance.
 Regulations and processes are eyes and
ears of the board on the matters of
governance.
 All companies including private
companies are required to appoint CS in
whole time employment whose paid up
share capital is 5 crore rupees or more.
 SECTION 2(24) Act 2013-CS or Secretary
means a secretary as defined in clause
 ( c ) of sub-section (1) of section 2 of the
company secretaries Act ,1980 and who
is appointed by a company to perform
the functions of CS under this Act.
A CS means a person who is member of
the institute of Company secretaries of
India.
 A company secretary means who is
member of the ICSI and who is appointed
by a company to perform the functions of
a CS .
 Unlisted company
having paid -up
Listed company share capital of
rupees 5 crore or
more

Private company
having paid –up
share capital of Rs 5
crore or more
Resolution of the board containing
the terms and conditions of the
appointment including the
remuneration
 Shall not hold office in more than one
company except in its subsidiary company
at the same time .
 He may be appointed as a director of the
company with the permission of the board.
 I f holding office in more than one company
at the same time shall within a period of 6
months choose one company, in which he
wishes to continue as CS.
 If the office is vacated, the resulting
vacancy shall be filled up by the board at
a meeting of the board within a period of
6 months from the date of vacancy.
 If company contravenes the provisions –
shall be punishable with fine which shall
not be less than 1 lakh rupees and
maximum 5 lakh+ every director and
KMP including WTCS in default shall be
punishable with the fine of maximum 50
thousand and in case of continuing
contravention 1000 Rs per day after the
first during which the contravention
continues.
 1. Advertise the post, collect applications, hold interview,
short list the individuals for the position, and finalize the
terms of appointment.
 2. Convene a Board meeting after giving notice to all the
directors of the company as per section 173 of the Act. At the
board meeting, place the proposal of appointing Company
Secretary with the details of the person finalized and pass a
resolution appointing the company secretary and approving
the terms and conditions of his appointment.
 3. File return of appointment of company secretary with the
Registrar in Form DIR 12 within thirty days from the date of
appointment (date of joining office) and Form MGT. 14 is
also required to be filed along with such fee as specified in
Companies (Registration of offices and Fees) Rules, 2014.
 4. A Company Secretary shall not hold office in more than
one company except in its subsidiary company at the same
time.
 5. Make entries in the Register of directors and key
managerial personnel under Section 170 of the Act.
 6. Inform the Stock Exchange(s) where the company is
listed.
 7. Since key managerial personnel are included in ‘related
party’ as defined in section 2(76) of the Act, Please verify
whether the company secretary so appointed involved in
any related party transactions within the provisions of
Section 188 of the Act.
 CG has prescribed the following duties-
1. To provide the directors , collectively and individually , such
guidance as required with regard to their duties ,
responsibilities and powers.
2. To facilitate the convening of meetings and attend board,
committee and GM , and maintain its minutes .
3. To obtain approvals from the board, GM, government and
authorities required under the Act.
4. To represent before various regulators, tribunals and
authorities in connection with discharge of various functions
under Act.
5. To assist the Board in the conduct of the
affairs of the company.
6. To assist and advise the board in ensuring
good corporate governance and in
complying with the corporate governance
requirements and best practices.
7. To discharge such other duties as have been
specified u/Act/rules.
8. Duties assigned by the board time to time.
 Provides that provisions contained in
section 204 in relation to secretarial audit
and section 205 in relation to functions of
CS shall not affect the duties and
functions of the BOD, chairperson of the
company , MD or WTD under Act or any
other law for time being in force.
 He is officer of the company.
 He commands considerable influence with
the directors.
 he need to ensure the compliance with the
provision of Act/FEMA/SECURITIES
CONTRACT )REGULATION) Act , SEBI,
COMPETITION Act, etc.
 As an agent he has to carryout policy
decisions .
 Should not appoint a sub agent without
proper authority if otherwise will be liable.
 Make representation /enter into contract
on behalf of company.
 Cannot borrow money in the company
name.
 Cannot call company meeting.
 Cannot register transfer of shares without
board authority.
 He cannot acknowledge a debt in any suit
against the company.
 He act as a link with the outsiders.
 He binds the company with his acts
 He represents that he is authorise to
enter into contract on behalf of the
company.
 Managerial powers can be delegated to
the secretary .
General statutory
 Present in all meetings of company.
 Make a proper minutes of proceeding.
 Issues all necessary notices to member and
others .
 Conduct all correspondence with the
shareholders regarding issue of shares and
calls , making of transfer and forfeitures .
 In charge of books of company like register
of members, share ledger, transfer book ,
register of debenture holders etc.
 File all necessary returns with ROC.
 To provide to the directors of the company , collectively
and individually , such guidance as they may require
with their duties, responsibilities and powers.
 To facilitate the convening of meetings and attend board
, committee and GM and maintain the minutes.
 To obtain approvals from the board, GM Government
and other authorities.
 To represent before regulators , authorities .
 To assist the board in the company affairs.
 To assist and advice board for good corporate
governance and best practices.
 To discharge other duties specified in Act
 Such other duties as may be assigned by the board from
time to time.
Liabilities

Statutory Contractual
liabilities liabilities
1. Section 39(5)-Default in filing of returns
as to allotment-punishable with fine
which may extend to 1 thousand for per
day during which default continues or one
lakh which ever is less.
2. Section 56(4)- default in the preparation of
share/debenture certificates-
The company shall deliver the certificates
of all securities allotted transferred or
transmitted-
a) Within a period of 2 months from the date of
incorporation , in the case of subscribers to the
memorandum,
b) Within a period of 2 months from the date of
allotment , in the case of allotment of any of its
shares
c) Within a period of 1 months from the date of
receipt by the company of the instrument of
transfer under sub-section (2) , in the case of
transfer or transmission of securities.
d) Within a period of 6 months from the date of
allotment , in the case of allotment of
debentures.
 Where the securities are dealt with a
depository , the company shall intimate
the details of allotment of securities to
depository immediately on allotment of
such securities.
• In default the CS as an officer shall be
punishable with the fine of not less than 10
thousand rupees to maximum 1 lakh (section
56(6).
Default regarding register of Fine not less than 50 thousand – 3
members /debenture holders lakh , in case continuing one 1
thousand per day-section 88

Default in filing of particulars Imprisonment may extend to 6 month

regarding charges + fine of minimum 25 thousand –
maximum 1 lakh or both-86

Default regarding the publication of Penalty of 1 thousand rupees per day

name of company maximum 1 lakh rupees- section 12

Default in filing of annual returns Minimum 50 thousand –maximum 5

lakh –section 92

Default in holding AGM Maximum fine 1 lakh , continuing

default with further fine which may
extend to 5 thousand for very day.-
section 99
Default in circulation of members Fine may extend to 25000/-section
resolutions 111

Default in registering certain fine of minimum 1 lakh rupees –

resolution and agreements maximum 5 lakh –section 117

Default regarding recording of Fine of 5 thousand - section 118

minutes

Default in maintain minute books or Fine of 5 thousand for each refusal or

allowing inspection or furnishing default –section 119
copies of minutes to member

Failure to give notice of BM Penalty of 25 thousand .-section 173

Failure to maintain he register of Fine not less than 50,000 which may
directors and KMP extend to 5 lakh.

Failure to maintain register of inter – Imprisonment for a term may extend

corporate loans and investments to 2 years and with fine of minimum
25 thousand and maximum 1 lakh.-
section 186.
 Responsible for deducting income-tax
from the salaries of the staff and from
dividends /interest and depositing the
same in government treasury –INCOME
TAX ACT
 To ensure that documents like share
certificates, share warrants ,debenture
certificates , transfer forms etc are
properly stamped- INDIAN STAMP ACT
 Industries
Foreign
(development
Competition Act exchange
and
management Act
regulation)Act

SCRA and Employee state

SEBI Act
depositories Act insurance Act

Factories Act
,minimum wages Industrial
Act, Payment of dispute Act
wages Act,
1. He should carry out the order given to him.
2. Work for company and not allow his personal
interest to clash with company.
3. Liable to account for the secret profit made by
him by virtue of his position.
4. Personally liable if he acts beyond authority.
5. Liable for loss /damage caused by his
misconduct/ negligence in discharge of duties.
6. Liable to indemnify for loss suffered due to
some secret information.
7. Liable for fraud /wrong committed in
employment.
 Section 205-
1. To report to the Board about compliance
with the provisions of Act , the rules made
there under and other laws applicable to
the company
2. To ensure that the company complies with
the applicable secretarial std issued by the
ICSI and approved by the CG.
3. To discharge such other duties as may be
prescribed.
As a statutory officer

As a co-ordinator

As an administrative
officer
1. Responsible for the various legal requirements u/ Act 2013
and other Acts.
2. As one of KMP is also liable to punishment by way of
imprisonment/fine or otherwise for violation of the provision
3. To sign the annual return filed with ROC
4. Duty to report fraud.
5. To make declaration before the incorporation of the company
confirming that all the requirement of Act and Rules been
complied with respect to registration of company and the
registrar may accept declaration as evidence of such
compliance.
6. CS shall act a secretary to Audit Committee for listed
company.-Regulation 18(1) ( e ) of SEBI(listing obligations
and Disclosure Requirement) Regulations , 2015
7. Under Indian stamp Act- to see that the
documents like letter of allotment ,
share certificate , debentures,
mortgages are issued duly stamped.
8. CS is a principal officer U/ section 2
(35) of the Income Tax Act, 1961.
 CS to implement the conditions of the loan
agreement.
 If companies if assisted financially by the
financial institution , compliance certificate
format duly certified by the CS to be furnished
periodically at the board meeting.
1. CS must ensure effective execution and
implementation of the management policies
laid by the board.
2. He is communicating channel between board
and the executives .
3. He co-ordinates the actions of the other
executives and boards.
4. He is a link between company and its
shareholders, society and government.
 CS to provide to the directors , collectively and
individually , guidance regarding their duties,
responsibilities and process.
 He is responsible for transmitting the polices
and decisions of the board and GM secretarial
std-1and std-2 need to be observed.
 As an advisor on legal , financial and other
laws and problems .
 Decisions taken by the board are in consonance with legal
requirement .
 Ensure secrecy regarding matters discussed at such meeting.
 Duty to assist the board in the conduct of affairs of
company.
 To ensure that the chairman who is not MD does not
exercise substantial powers of the management .
 He is also required to keep the chairman and MD apprised
of changes in policies of government , obligations under
various statutes.
 To give balanced advice on matters of legal ramifications.
 To assist and advice the board in ensuring good corporate
governance and in complying with corporate governance
requirement and best practices.
 He is responsible to ensure that the returns and
reports received from various operational
executives are submitted in time, complete and
not conflict with corporate objectives.

 CS communicates with the outside agencies like

government .Semi-government bodies .

 To ensure that the information given to various

agencies do not conflict with each other and are
in accordance with the corporate objectives.
Trade unions Auditors shareholders

Government Community
Organizational Financial Office
administration administration administration

Administration-
Personnel
company’s
administration
properties
 Ensuring
Maintenance of
adequacy of
records of
systems of safety
company
and security
• A company other than a company
covered under Rule 8A which has a paid
up share capital of five crore rupees or
more shall have a whole– time Company
Secretary. •
 This means that all companies (including
Private Companies) are required to
appoint Company Secretary in whole
time employment whose paid up Share
Capital is five crore rupees or more.
 Thus, he can be punished in respect of offences under
Companies Act. A Secretary is guilty if he was
responsible to the company for conduct of its business.
Summons to company in civil matters can be served on
a secretary As per rule 2 of order 9 of Code of Civil
Procedure, in case of suit against a corporation,
summons can be served on
(a) Company Secretary, Director or other principal
officer of the corporation or
(b) By leaving it or by sending by post to registered
office of the corporation.
 Right to control and supervise the
working of his department.
 Right to sign a document /proceeding
requiring authentication by the
company.
 Has a right to be indemnified by the
company for any loss suffered by him
which discharge of his duties.
 He has right to receive remuneration/ to
be treated as preferential creditor.
 To borrow money in company name .
 To make allotment of shares or register
transfer of shares without the express
authority .
 No authority to convene a meeting of the
company without direction of
BOD/remove the name form register of
members/take policy decisions.
 A company secretary can be removed or dismissed
like any other employees of the organization.
 Since he is appointed by Board, the Board of
directors of a company has absolute discretion to
remove a company secretary or to terminate his
services at any time for any reason or without any
reason.
 However, principles of natural justice like show
cause notice, hearing, reasoned order etc. must be
followed.
 For wilful disobedience.
 For misconduct or moral turpitude.
 Negligence
 Incompetence or permanent disability.
1. A Company Secretary can be removed in accordance with the
terms of appointment and the Board can record the same.
2. Convene a Board meeting after giving notice to all the directors
of the company as per section 173, place the matter of
removal/resignation of the Company Secretary and pass a
resolution to the effect.
3. File Form DIR-12 in electronic mode within thirty days with
the Registrar of Companies together with requisite filing fees.
Evidence of Cessation (for example Resignation Letter) is an
optional attachment.
4. Inform the stock exchange where the company is listed.
5. Make entries in the Register maintained for recording the
particulars of Company Secretaries under section 170.
6. Issue a general public notice, if it is so warranted, according to
size and nature of the company.
7. The resulting vacancy shall be filled up by the Board at a
meeting of the Board within a period of six months from the
date of such vacancy.
 Sec2(25) – secretary in practice mean a
secretary who is deemed to be in
practice within the meaning of sub-
section (2) of section 2 of the companies
Secretaries Act, 1980
 Member of institute shall be deemed to
be in practice-
When individually /in partnership
with one or more members of the
institute in practice/in partnership with
members of such other recognised
professions may be prescribed ,he , in
consideration of remuneration received
or to be received , engage himself,-
 In the practice of the profession of CS to,
or in relation to , any company.
 Offers to perform /performs services in
relation to the promotion ,forming ,
incorporation, amalgamation,
reconstruction, reorganization /winding
up or
 Offers to perform /performs such
services-
• An authorised representative
• share transfer agent
• As issue house,
• A share and stock broker
• A secretarial auditor or consultant.
 Section -7-ICSI member

Who can practise CS ?

Section -6-ICSI member whether in
India/elsewhere after obtaining certificate
of practice.
Who cannot practice CS ?
1. A company whether incorporated in India
or abroad –section 26 of CS Act 1980.
2. Any person other than member of ICSI .
 Yes.
 Regulation 11 of CS regulation ,1982 various
circumstances has been provided-
1. The name is removed from register of
members.
2. Council is satisfied that certificate was issued
on basis of incorrect /misleading
/false/mistake/inadvertence information
3. Ceased to be in practice
4. Not paid the annual certificate fees on or
before 30 June of that year.
Thank you
COMPROMISES, ARRANGEMENT,
RECONSTRUCTIONS AND
AMALGAMATION

DR ANITA SABLE
ASSISTANT PROFESSOR
 MEANING

COMPROMISES ARRANGEMENT

RECONSTRUCTION AMALGAMATION
Compromise Settlement or adjustment of claims in
dispute by mutual concessions

Arrangement Reorganization of share capital of the

company by consolidation of shares of
different classes or division of shares into
shares of different classes or by both of
these methods
Reconstruction 1] The transfer of undertaking of an existing
company to another company , usually
incorporated for the purpose . The old company
ceases to exist. However , all the assets might not
pass to the new company.
2] the carrying on of substantially the same
business by the same persons.
3] the rights of the shareholders in the old
company are satisfied by their being allotted
shares in the new company.

Amalgamation Is the blending of two or more undertakings

(companies) into one undertaking, the shareholders
of each blending undertaking becoming
substantially the shareholders of the other company
which holds blended undertakings.
 COMPROMISES
• An agreement terminating a dispute between
parties as to the rights of one or more of them,
or modifying the undoubted rights of a party
which he has difficulty in enforcing.
 ARRANGEMENT
• Includes re-organisation of the share capital of
the company by exchange of the company’s
Assets for shares of the newly formed
company.
– Debenture holders being given an extension of
times for payment releasing their security in whole
or in part or changing their debenture for equity
shares in a new company.
– The creditors agreeing to receive cash in part
payment.

– The preference shareholders giving up their rights

to arrears of dividends, further agreeing to accept
a reduced rate of dividend in the future, and so on.
 STATUTORY PROVISIONS
SECTION 230 TO 240
• Said provisions are uniformly applicable to all
companies except section 233.
• Section 233- simplified procedure for merger
or amalgamation of –
– Two or more small companies or,
– Between a holding company and its wholly owned
subsidiary company
– Such other class or classes of companies as may be
prescribed.
 SECTION 230
1. Where a compromise or arrangement is proposed-

1. Between a company and its creditors or any class of them

2. Between a company and its members or any class of
them.
Company , its liquidator , or any member or creditor may
make an application to tribunal.
Company must place different in different interest in separate
classes.
Notice will be issued to all the necessary parties calling the
meeting.
• Statement will be explained in particular any
material interest of the directors , MD or
manager and the effect of the compromise on
their interest , and a copy of the valuation
report annexed to it.
• Statement of scheme and copy of valuation
report will also be displaced in the company
website and published in newspaper.
 CONTENTS OF NOTICE
• Time within which copies of the compromise may
be made available to concerned person free of
charge from the registered office of the company.
• Voting can be through presence , by proxy or by
postal ballot within one month from the date of
receipt of notice.
• Any objection can be made only by persons
holding not less than 10 % of shareholding or
having an outstanding debt amounting to not less
than 5 % of the total outstanding debt according
to the latest audited financial statement.
• Notice will also be sent to
– CG, income tax,RBI,SEBI ,registrar ,stock
exchange , official liquidator , competition
commission of India and other sectoral regulators
and authorities.
– To be told that representation can be made within
30 days from the date of receipt of notice .failing
that, will be presumed that they have no
representation to make.
APPROVAL BY THREE-FOURTH
• Scheme is approved by the above majority in value of
the creditors or members may be sanctioned by the
tribunal.
• If the scheme was not approved by the appropriate
majority of the creditors at their meeting , but
subsequently the creditors to the extent of requisite
majority filed individual affidavits before the court, is
sufficient compliance with the statutory requirement.
• The decision of the tribunal will be binding if the
scheme is fair, just and reasonable and not contrary to
law and public interest.
 CONDITIONS ENABLING THE TRIBUNAL TO
SANCTION THE SCHEME-
1. Compliance with the statutory provisions.
2. Bonafide exercise of majority power
3. Reasonableness of scheme
4. Burden of proving unfairness
5. Disclosure of material facts
6. Interest of creditors
7. No power to stay criminal proceedings
8. Advantages of court’s sanction
 DUTIES AND POWERS OF
TRIBUNAL
• Statute must be complied.
• Class was fairly represented by those who
attended the meeting and that the statutory
majority are acting bonafide and are not
coercing the minority in order to promote
interest adverse to those of the class whom
they purport to represent
• Arrangement will be reasonably approve.
 OTHER ASPECT TO BE FURTHER
CONSIDERED.

• Compliance with statutory provisions.

• Bonafide exercised of majority power
• Burden of proving unfairness
• Disclosure of material facts
• Interest of creditors
• No power to stay criminal proceedings.
• Advantages of court’s sanction
 POWER OF ENFORCEMENT AND
SUPERVISION SECTION 231.
• May introduce any modifications .
• Calling of extraordinary meeting of the
shareholders for constituting new BOD
• If the scheme court not be worked satisfactorily,
and the company is unable to pay its debt as per
the scheme , it may make an order of compulsory
winding up of the company.
• Interest of employees and workers must be
considered
• Reconsideration of sanctioned scheme.
 RECONSTRUCTION
• When company’s business and undertaking are
transferred to another company formed for that
purpose. It means a new company substantially
the same business is carried on and the same
persons are interested in it as in the case of the
old company.
 PURPOSES
• Change in the object of the company
• Material alteration of the rights of a class of
shareholders or creditors
 AMALGAMATION
• When two or more companies are joined to form a third
entity or one is absorbed into or blended with another.
• The purpose is to wipe out the merging companies and
to fuse them all into the new one created.
• New company will be having all properties, rights and
powers , subject to all duties and obligations of both the
constituent companies.
• Amalgamation is a process with an object of
amalgamation of one company with another is to
facilitate reconstruction of the amalgamating
companies and this matter is left to the body of
shareholders.
 POWERS OF AMALGAMATION
• Amalgamation provision must be there in
companies memorandum.
• If not there can be acquired by altering
memorandum.
• It is not necessary that company to be in
financial difficulties or should not be an
affluent company.
 FORMS OF RECONSTRUCTION
AND AMALGAMATION
• By sale of shares
• By sale of undertakings
• By sale and dissolution
• By a scheme of arrangement
 SALE OF SHARES
• Simplest process
• Shares are sold and registered in the name of
purchasing company
• Seller shareholder receive compensation
/shares in the acquiring company.
 SALE OF UNDERTAKING
• A transfer of whole or any part of the
undertaking or liability of a company to
another company. (Section 232)
• For the above purpose and application to be
made under section 230 and the tribunal may
sanction the scheme and make necessary
orders ( section 232(3)).
CONTENTS OF APPLICATION
• Scheme involves reconstruction of the
company or merger or amalgamation of two or
more companies.
• The result of construction or amalgamation
will be whole or any part of the company’s
undertaking ,property or liability is to be
transferred to another company or is proposed
to be divided among and transferred to two or
more companies.
 CALL OF MEETING
Section 230(3)to (6)
Consideration for meetings are-
1. Draft
2. Confirmation of filing the draft with the
registrar
3. Report of the director
4. Report on expert on valuation
5. Supplementary accounting statement.
 TRIBUNAL IF SATISFIED WOULD
MAKE ORDERS
a) Transfer of transferee company
b) Allotment or appropriation by the transferee company
c) Continuation by or against the transferee company of any legal
proceedings
d) Dissolution without winding up of any transferor company
e) Provision to be made for any persons who dissented from the
scheme
f) Share capital is held by any non-resident shareholder under foreign
direct investment or norms
g) Transfer of employee
h) Where a transferor company is listed company and the transferee is
an unlisted company
i) Incidental consequential and supplemental matters as deemed
necessary.
CERTIFICATE OF THE AUDITOR
• Scheme is not be sanctioned unless there is a
certificate of the company’s auditor to evident
that the scheme is in conformity with the
accounting standards. (section 133) section
232(3).
 EFFECT OF TRANSFER
• Where the order is passed for the transfer of any
property or liabilities , the property is to be transferred
to the transferee company and liabilities transferred are
to become liabilities of the transferee company.
• Any property which was subject to a charge may
become free from it if the order so provides.
• Companies in relation to which the order is passed have
to file a certified copy of the order with the registrar
within 30 days of receipt of the certified copy.
• Scheme to specify the date on which to be effective .
AFTER PASSING OF THE ORDER
• Company to see that the scheme is fully
implemented and for that to file a statement
with the registrar in the prescribed form at
prescribed time every year to indicate about its
compliance with the order .
• This statement is to be certified by the charted
accountant or a cost accountant or a company
secretary in practice.
 DEFAULT
• Defaulter transferor or transferee company in
compliance with the provisions will be liable
to pay fine of not less than Rs. 1,00,000
extending to rs 25,00,000.
• Every officer in default is liable to
imprisonment for a term extending up to one
year or with fine of not less than Rs 1,00,000
but may extend to rs 3,00,000 or with both.
 VESTING OF RIGHTS AND TRANSFER OF
OBLIGATIONS SECTION 232(3)
• All rights and obligations of the amalgamated company
become vested in the amalgamating company.
• The transfer of ownership of assets to the final merged
entity takes place on the date of merger.
• Company taking over another was allowed to continue
eviction proceedings.
• A formal transfer or sub situation is not necessary.
• When a transfer of property take place in terms of an
order , the right to continue the proceedings arises
automatically
• If the whole undertaking is taken over , all the rights
pass whether mentioned in a schedule or not
• Emerging company becomes a new tenant
(there is also transfer of tenancy rights).
• If the premises held by the transferor company
on lease and licence are not transferable and
will not include in valuation.
• Is the scheme by virtue of revival could not be
implemented unless the tenants on the
company's premises were evicted, the court to
pass a necessary orders for that purpose.
 REDUCTION OF CAPITAL IN
AMALGAMATION
• If the amalgamation involves merging to two
companies into a new company and the merging
companies are to be dissolved without winding up
, the preference shareholders of the merging
companies are to be paid back under the scheme
does not amount to reduction of capital.
• There is not prohibition or legal impediment on
reduction of share capital when it is a part of a
scheme of amalgamation , but the procedure for
reduction of capital has to be complied.
 CHANGE OF NAME
• Amalgamation does not involve change of
name of the company automatically.
• Proceeding need to be followed for the same.
– Name to be adopted by the amalgamated company
to be already on the record of registrar of
companies.
– Majority of shareholders had given approval to the
scheme and the change of name.
– If no objection the name could be changed.
 Merger or amalgamation of company with
foreign company section 234
• Section 230-240 apply to the schemes of merger
and amalgamations between companies
– registered under the companies Act.
– Companies incorporated in jurisdiction of such
countries as may be notified from time to time by CG.
CG may make rule consulting RBI.
Foreign company may with the approval of RBI merge
into a company registered under the Act or vice versa.
(foreign company means company or body corporate
incorporate outside India whether having a place of
business in India or not.)
 AMALGAMATION OF BANKING COMPANY

• Banking regulation Act , 1949 is a self contained

code on amalgamation of banking companies.
• Section 44A- RBI is having power to approve the
scheme of merger of banking companies.
• RBI is also empowered to determine market value
of shares of the objecting share holder who voted
against the scheme as well as to direct payment of
the value of the shares to the dissenting
shareholders.
SOME EXAMPLES OF BANK
MERGERS
 DEMERGER
• Sub-division of an enterprise into smaller units
or splitting up the units into more than one
parts or separating one or more units from the
main enterprise o and constituting them into
separate units .
 PROVISION RELATING TO DEMERGER
INCLUDES
• Some of the shareholders can get the shares
allotted in the demerged unit in exchange of their
holding in the original unit.
• Fair exchange ratio become necessary in
demerger.
• Application of section 230 is there.
• Single petition is enough for amalgamation or
demerger.
• Reduction of capital and also reorganisation of
capital can be sanctioned as a part of a scheme.
 Powers to acquire shares of shareholders dissenting
from scheme or contract approved by majority
section 235
• A scheme or contract may be proposed by one company to another
company for transfer of its shares or any class of shares.
• Company proposing is called as transferor and the other will be
called as transferee company.
• Scheme need to be approved within the period of 4 months from the
date of proposal.
• The scheme need to be accepted by shareholders with 9-10th
shareholding in value.
• Within two months of expiry of four months the transferee can give
a notice to any dissenting shareholder that it desires to acquire his
shares.
• After services of notice transferee company becomes entitled and
bound to acquire those shares on the specified terms.
• Dissenting shareholders can make an application to tribunal within
one month from the date of notice of acquisition to prevent the
above effect.
• If the tribunal decides not to pass an order
contrary ,after expiry of one month from the date
of notice or after a pending application has been
disposed of , the transferee company will sent
copy of notice to transferor company for transfer
of shares.
• The transfer and its execution to be in written
instrument.
• The transferee company will pay the amount
/consideration for price payable for the shares
acquired.
 THE TRANSFEROR COMPANY
OBLIGATIONS
1. To register transferee company as holder of
those shares.
2. Within one month of registration inform the
dissenting shareholders.
3. The amount received to be held in separate
bank account and then to disbursed to
shareholders within 60 days whose shares
have been compulsorily acquired.
 PURCHASE OF MINORITY
SHAREHOLDING SECTION 236
• If 90 % or more shares have been acquired , the acquirers to notify the
company of their intention to buy the remaining equity shares.
• Offer of price on the basis of valuation by a registered valuer need to be
made.
• Even the minority share holder may offer majority shareholder to purchase
their shares.
• Consideration amount to be deposited in bank account at hands of
transferor company for one year to enable it to disburse the amount to
entitled shareholders
• If the majority shareholders have received higher price they would share it
with the minority whose shares have been compulsorily acquired.
• Scheme to be fair and onus lies to show its unfairness upon the dissenter.
• Adequacy of information supplied to all the concern parties to the
transaction.
• Same offer to be given to those whose shares are to be acquired.
• Notice of acquisition to be given.
AMALGAMATION IN PUBLIC INTEREST

• If the CG is satisfied may order the amalgamation of companies in public

interest.
• The amalgamated company shall have such constitution , property , power,
rights , interest , authorities and privileges and shall be with such liabilities
,duties and obligations according to government order.
• Order may also contain consequential ,incidental and supplementary
provisions.
• If the rights of the members or the creditor are less in amalgamated
company will be entitle to compensation.
• Before ordering amalgamation CG to send a copy of proposed order in
draft to each concerned companies.
• Companies can raise the objections and suggestions within a period of two
months
• CG may modify the draft considering the objections and suggestions.
• Order copy have to be laid before both Houses of Parliament at the earliest
convenience.
REGISTRATION OF OFFERS OF SCHEMES INVOLVING
TRANSFER OF SHARES SECTION 238

• Issue of circular .
• A statement the transferee company disclosing the
steps to ensure that necessary cash will be
available should be made
• Every such circular has to be presented to the
registrar for registration and is not be issued
unless so registered.
• If registrar refuse need to give reasons and to
communicate the refusal within 30 days to parties.
• Registrar order is appealable one.
PRESERVATION OF BOOKS AND PAPERS
OF AMALGAMATION COMPANY
SECTION 239
• The books and papers of the concern
companies shall not be disposed of without the
prior permission of the CG.
• Before granting permission CG may appoint a
person to examine the books and paper to
ensure that the paper or books do contain any
evidence of the commission of an offence
relating to the entire process.
LIABILITY FOR OFFENCES BEFORE MERGER-
SECTION 240

• Liability in relation of offences committed by

officers in default prior to merger, etc, is to
continue after merger, etc also.
•Thank you
DIFFERENT KINDS OF
MEETINGS
DR ANITA SABLE
ASSISTANT PROFESSOR
 MEANING-

Gathering assembly

Getting
together for any
law full business
 DIFFERENT KINDS OF MEETING
SS-2 secretarial std on GM and Table F of schedule I

 It is a duty of the CS to ensure that the business at meetings

is conducted in conformity with the provision of the Act.
Meetings of
shareholders Meetings of
Meetings of directors
Debenture/bond
and their committee AGM,EGM, Class holders
meetings

Meetings of creditors Meetings of creditors

Court convened
and contributories in otherwise than in
meeting
winding up winding up
 ANOTHER CLASSIFICATION

Shareholders
meetings
1.Statutory meeting Meetings of the
Board meetings committees of the
2. AGM
board
3.EGM
4.Class meeting

Meeting s of creditors
Meetings of
Meetings of 1. For purpose other
contributories in
debenture -holders than winding –up
winding up
2. For winding up
Which company to hold AGM
 Every company,
 Whether public or private
 Having share capital or not
 Limited or unlimited
ANNUAL GENERAL MEETING
SECTION 96
 AGM to be called at least once in year .it is a meeting of its
shareholders.
 This meeting must be held within 9 months from the date of closing of
the first financial year and in any other case within a period of 6 months
, from the date of closing in the year of its incorporation.
 The registrar may for special reason, extend the time within which the
AGM other than first AGM meeting shall be held by a period not
exceeding 3 months.
 Between two meetings the gap should not be more than 15 months.
 These meeting is importance as it is for the protection of shareholders of
the company.
 It is a way through which the shareholders come together once in year to
review the working of the company.
 1st AGM- held within 9 months from the date of the closing
of its financial year . No extension of time can be allowed for
holding the first AGM.
 Subsequent AGM- one meeting held in each yeari.ee in
calendar year. If the first AGM has been held within 9 months
from the date of the closing of its FY then it need not hold
another AGM in the year of its incorporation.
 The gap within two AGMs must not be more than 15 months
.
 Meeting must be held not later than 6 months from the date
of the FY,
 EXTENSION OF TIME
 Registrar may for special reason may extend the
time . Other than the first AGM shall be held by
a period not exceeding 3 months( court are not
empowered to give such extension).

 If Annual Accounts are not ready-

AGM will be adjourned. A subsequent date will
be announced this will be date when the annual
accounts are expected to be ready.
 MEETING BEYOND STATUTORY
TIMES
 The meeting will be held valid.

CANCELLING OR POSTPONING OF CONVENED

MEETING
BOD can postpone or cancel a meeting , notice must be
already given. But the meeting must be postponed only for
the bonafide and proper reason.
 FEW IMPORTANT POINT REGARDING DAY , HOUR
AND PLACE OF AGM
 Every AGM will be called during business hours that is between 9
am. And 6 p.m. on any day that is not national holiday and shall 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.
 ( in case of Government companies in for the words “ such other
place as the CG may approve in this behalf ” , the word “ such
other place within the city, town or village in which the registered
office of the company is situate or such other place as the CG may
approve in this behalf ” shall be substituted.)
(notification No. GSR 463( E ) , dt 5/06/15 , as mended by ,
notification No. GSR 582 ( E ) , dated 13/06/2015.)
 CAN A COMPANY HOLD TWO
AGM ON THE SAME DAY?

 If AOA do not contain any contrary provision , AGM

for the current year are also for the previous years can
be held on the same day. There should however be
separate notices for each meeting and they should be
held at different timings.
 BUSINESS TO BE TRANSACTED IN AGM
SECTION 102
ORDINARY BUSINESS SPECIAL BUSINESS
1. Considering financial statements and 1. Any other business scheduled to be
the reports of the BOD and auditor. transacted at the meeting .
2. The declaration of the dividend 2. The nature of concert or interest ,
3. The appointment of directors in the financial or otherwise m if any of –
place of retiring • Every director or the manager ,if any
4. The appointment of and the fixing • Every other KMP and
remuneration of the auditor. • Relatives of the person in above two.
5. Voting by postal ballot means voting Any additional contents and
by ballot , by post or by electronic information to reach the decision.
means, and is not permitted for The matters which may affects any
ordinary business. other company,
6. Facility for e-voting a substitute for The extent of shareholding interest in
voting at the GM is provided for all that managerial personnel of the first
business including ordinary business. mentioned company shall
If the extent of such shareholding is
not less than 2 % of the paid up share
capital of that company.
 EXEMPTION BY THE CG
 CG may exempt any company from the
provisions of the sub-section subject to the
conditions as it may impose.
 For the purpose of this subsection , “
national holiday means and includes a day
declared as national holiday by the CG.
 IN CASE OF SECTION 8 COMPANIES

 The time ,date and place of each AGM are decided

upon before hand by the board of directors having
regard to the directions , if any , given in this regard by
the company in its GM.
( notification No. GSR 466( E ) , dt 5-6-2015).
AGM OF UNLISTED COMPANY
AGM of unlisted company
may be held at any place in
India if consent is given in
writing or by electronic mode
by all the members in
advance.
 POWER OF THE TRIBUNAL TO
CALL AGM
 Section 97 in case of any default in holding AGM the
tribunal may , notwithstanding anything contained in this
Act or the article of the company , on the application of any
company and give such ancillary or consequential
directions as the tribunal thinks expedient.
 Such direction may also include a direction that one
member of the company present in person or by proxy shall
be deemed to constitute a meeting .
 A GM held in pursuance of sub section (1) shall, subject to
any directions of the tribunal , be deemed to be an AGM of
the company under this Act.
 SECTION 98 POWER TO CALL
MEETINGS OF MEMBERS , ETC.
 If for any reason it is impracticable to call a meeting of a
company , other than AGM , in the manner prescribed
either by Act or by AOA, the tribunal may either suo-motu
on the application of any director or member of the
company who would be entitled to vote at the meeting-
 Order a meeting of the company to be called , held and
conducted in such manner as the tribunal thinks fit.
 And give such ancillary or consequential directions as the
tribunal thinks expedient , including directions modifying or
supplementing in relation to the calling, holding and
conducting of the meeting, the operation of the provisions of
this Act or article of the company.
 Provided that such a direction may include a direction
that one member of the company present in person or
by proxy shall be deemed to constitute a meeting.
 Any meeting called, held and conducted in accordance
with any order made under sub-section (1) shall, for all
purposes , be deemed to be a meeting of the company
duly called , held and conducted.
 PUNISHMENT FOR DEFAULT IN COMPLYING
WITH PROVISIONS OF SECTION 96-98
 In case of default in complying with the
provisions or in complying with the directions
of tribunal , the company and every office in
default shall be punishable with fine which
may extend to one lakh and in case of
continuing default with a further fine which
may extend to 5 thousand rupees for every day
during which such default continues.
Notice of the meeting
 21 days clear notice-
a) Every member of the company
b) LR of deceased member
c) The assignee of an insolvent member
d) Auditor of company
e) Every director f the company
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 proceeding of the
meeting.
Notice may be given in writing .electronic mode like
email/attachment to mail/ notification providing electronic link
/uniform resource locator for accessing such notice.
 CLEAR 21 DAYS MEANS
 Day must be calculated excluding the day on the notice is served
and the day on which the meeting is to be held.
 In case of delivery by post, such service shall be deemed to have
been effected at the expiration of 48 hours after the letter
containing the same is posted.
 If the notice of a GM is sent by post , it must be posted at such
time as to give 21 clear days notice as required by the section
101+ 48 hours in addition .
 Each of the 21 days must be a full calendar day, so that notice can
be said to be not less than 21 days notice.
 EXTRAORDINARY GENERAL MEETING SECTION 100
RULE 17 OF THE COMPANIES (MANAGEMENT AND
ADMINISTRATION ) RULES, 2014
 General meetings other than AGM is called as extraordinary
general meeting.
 Board may whenever it deem fit may call EGM.
 Board by the directors on requisition
 By the requisitionists themselves
 By the tribunal.
(-Rule 17 calling of EGM by requisitionists. )
• Provided that EGM other than of the wholly owned subsidiary
of a company incorporated outside India , shall be held at a
place within India.
• The Board shall if the requisition is made by in case of
company having a share capital , such number of members who
hold, on the date of the receipt of the requisition , not less than
1/10 of such of the paid up share capital as on the date carries
the right of voting .
 BY THE DIRECTOR OF ITS OWN
ACCORD
 May call a GM of members at any time giving not less
than 21 days
 A shorter notice may also be valid with the consent of
the members holding 95% or more of the voting
power.
 BY THE DIRECTORS ON
REQUISTION SECTION 100
 COMPANY HAVING A SHARE CAPITAL - on the date of
receipt of requisition -of the members not less than 1/10 of
such of paid –up share capital of the company as on that day
carries the right of voting.
 COMPANY NOT HAVING SHARE CAPITAL- Who have,
on the date of receipt of the requisition, not less than 1/10 of
the total voting power of all the members having on the said
date a right to vote.
 Provided must have obtain no obligation to attach explanatory
statement . Have been deposited at the registered office and
signed by the requisitionists.
 BY THE REQUISITIONISTS
THEMSELVES
 If the BOD fails to call a meeting within the aforesaid period
the meeting may be called by requisitionists themselves
within 3 months of the date of deposit of the requistion.
 Section 100(2) provides that on requisition of a given
number of shareholders the directors must forthwith call a
meeting provided the requisition must be signed by holders
of at 1/10 paid up capital having the right to vote on the
matter of requisition. In case company has no share capital
the requisition must be signed by as many members as have
1/10 of the total voting power.
 The board may call EGM within the period specified in 21
days from the dt of receipt of the valid requisition.
 This requisition 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.
 If the board does to within 21 days call a meeting for the
consideration of that matter on a day not later than 45 days
from the dt of receipt of such requisition, the meeting may
be called and held by the requisitionists themselves within
a period of 3 months from the date of the requisition.
 The meeting shall be called and held at the same manner as
held by the board.
 The expenses incurred by the requisition 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.
CAN A SHARE HOLDER OR AND INSTITUTIONAL
SHAREHOLDER REQUISITION AN EGM
 YES REF. LIFE INSURANCE
CORPORATION OF INDIA VS. ESCORTS
LTD.
 BY THE TRIBUNAL SECTION 98
 If it is not practicable to call a EGM the tribunal may
direct –

On an application of
On its own motion
any director

On an application of
any member entitled
to vole at that
meeting
 Tribunal may director in respect to place, date and manner in
which the meeting to be held and conducted.
 It would be just and proper to hold EGM to transact the
normal business of the company.
 To appoint an independent chairman who would consider
and decide the eligibility of the persons as member/ proxies
at attend and vote at the meeting.
CLASS MEETING SECTION 48
 Share capital of the company is divided in different
classes of shares .
 The rights attached to class may be varied with the
consent in writing of the holders of not less than ¾ of
the issued shares of that class or
 With the sanction of a special resolution passed at a
separate meeting of the holders of the issued shares of
that class
 Provided
 Reason
 RIGHTS OF DISSENTIENT
SHAREHOLDERS-
 May apply to the tribunal within 21 days of the date of
consent or the passing of the SR the tribunal may
either confirm or cancel the variation.
 The company must within 30 days of the service of the
tribunal’s order , forward a copy of the order to the
registrar.
 NON COMPLIANCE MAY RESULT IN
IMPOSING PENALTY ON COMPANY
 Fine not be less than 25 thousand rupees which
may extend to 5 lakh.
 Every officer in default shall be punishable with
imprisonment for a term which may extend to 6
months or with fine not less than 25 thousand to
maximum 5 lakh or both.
 SEC 557 OF COMPANIES ACT 1956
 Meetings to ascertain wishes of creditors or contributories.
 In the matter of winding up of company the court may keep in
mind certain things.
 Have regard to the wishes of creditors or contributories of
the company, as proved to it by any sufficient evidence.
 If it thinks fit for the purpose of ascertaining those wishes ,
direct meeting in the manner prescribed by the court.
 While ascertaining the wishes of creditors , regards shall be
had to the value of each creditor’s debt.
 while ascertain regard shall be had to the number of voles
which may be cast by each contributory.
 THE MEETING OF THE CREDITORS OTHER THAN
WINDING UP SUB SECTION (3) OF SECTION 287
 For the purpose of determining the members of advisory
committee
 The company liquidator shall within 7 days of holding meetings of
the creditors or contributories, report the result to the tribunal.
 Advisory committee to be constituted and its constitution must be
reported in the report of liquidator the name of the members of
the Advisory committee so constituted.
 If the creditors or contributories could not reach the decision as to
who will be the members of committee company liquidator shall
at the time of making report apply to the tribunal for direction s as
to who will be member of advisory committee and shall fix a date
and shall be advertised .
 MEETINGS OF DEBENTURE
HOLDERS
 These meetings are called according to the rules
and regulations of the trust deed /debenture
Bond.
 These meetings are done or called upon if the
interest of debenture holders are involved at the
time of the reorganisation, reconstruction,
amalgamation or winding up of the company.
Thank you
DR .ANITA SABLE
ASSISTANT
PROFESSOR
Section 149-172
Artificial
invisible Intangible
being

Existing only in No mind or

contemplation of law body of self
These human agents are no one but directors.
Directors means a director appointed to the
board of company.
Directors means a person so appointed to
perform duties and functions of directors of
company.
Company to have a board of directors.
[Section 2(34) ] section 149 requires that-

Every Public company shall have at least three

Directors.
Every Private company shall have at least two
Directors.
One person company shall have at least one Director.

MAXIMUM DIRECTORS -15 in numbers

(As long as the requisite figure is maintained the

requirements of the Act are fully satisfied even if all
or substantially all the powers are delegated to a
single director as long as he is in office.)

(Whitehouse vs. Carlton Hotel (P) Ltd, (1987) 70 Aust

LR 251,High court of Australia).
The government may prescribe a class
or classes of companies wherein at least
one woman directors need to be
appointed.
 PUBLIC COMPANY
Public company -at least 3 directors
Having paid up share capital of rupees
5 core or more and 1000 or more
small shareholders
will be having a directors elected by
small share holders having share of
nominal value of 20,000 rupees or
less in public company
Section 2(10)
Directors collectively are called as
BOARD OF DIRECTORS or as
BOARD.
Section 2subsection 13 –
“Directors includes any person
occupying the position of a director
, by whatever name called.”

Position is very difficult to be

Defined
Ram Chand and Sons Sugar Mills (P) Ltd
V. Kanhayalal Bhargava, Air 1966 SC
1899: (1966)2 Comp LJ 224
 Commercial men managing a trading concern for the
benefit of themselves and of al the shareholders in it.
 Officers of the company.
 Controller of the company.
 Employee in different capacity(Lee vs. Lee Air Farming
Ltd. 1961 AC 12: (1960) 3 WLR 758: (1960) 3 AII ER
420(PC)
 Agent of the company
 Managing partners of the company.
 Trustee of the company. (Commercial trustee.)
 Directors of the company registered are the persons duly
appointed by the company to direct and manage the
business of the company.

Imperial Hydropathic Hotel Co. Blackpool vs. Hampson, (1882)

LR 23 Ch. D 1: 49LT150(CA)
Albert Judah Judah vs. Rampada Gupta, AIR 1959 Cal 715.
Directors are the agents of
the company . Directors are
the agent of the company
and not to its individual
members (except in the
special fact of the case
).
Directors contract in the name Company is liable and not the
and one the behalf of company director

Directors allotted shares to the Directors were not held liable.

people but the company failed
to give effect to the allotment

If the notice is given to the Notice to the company

director

Articles of association To represent in legal

empowered the managing proceedings does not enable
directors to represent the him to file a complaint for
company in legal proceedings dishonor of a cheque .
 Trustee as company ‘s money.
 Company’s properties
 Company’s power- applying funds and also liable
for misuse of the powers and in case of death their
death the cause of action survives against their
legal representatives.
 Nature of their office is peculiar.
 Directors manages the affairs of company for
shareholders benefit.
 Directors occupy fiduciary position.
 Directors are having power to make call.
 Powers to forfeit shares.
 Directors is the trustee of Company’s accounts
 Wealth and the business of the company
are controlled by the directors.
 Directors are the executives with
enormous powers to affect the lives of
labourers and consumers and
shareholders.
 According to the organic theory of
corporate life , a theory which treats
certain officials as organs of the company,
for whose action the company is to be
held liable just as a natural person is for
the action of his limbs.
 Directors are the brain of the company.
Brain , mind and will of company and
nerve Centre – Directors and
Managers

Hands to do work- servants and

managers
DIRECTOR’S REPORT AND LIABILITY ,
AUDITOR’S REPORT, DIRECTOR’S
RESPONSIBILITY, AUDIT COMMITTEES

DR ANITA SABLE
ASSISTANT PROFESSOR
 DIRECTOR’S REPORT /
BOARD’S REPORT
SECTION -130 Report of Board of Directors should be
‘ATTACHED’ to the Balance Sheet laid before the AGM.

PURPOSE –
A directors’ report is intended to explain to shareholders,
the company’s affairs, including its subsidiaries and the
nature and scope of company’s business.
The report is a summation of activities of the company in
the relevant financial year and an idea about possible future
developments.

ACT OF 1956-
In previous law there was a separate section 217 of the
Companies Act, 1956. The whole section was related to the
Report of Directors.
CONTENT OF BOARD REPORT
As per Section 134(3) of Companies Act, 2013 Director
Report shall include:
a) The web address if any , where annual return referred
to in sub-section (3) of section 92 has been placed.
b) Number of board meetings
c) Directors ‘responsibility statement
d) Detail of fraud reported by auditor under sub-section
(12) section 143 other than those which are
reportable to the CG
e) Statement on declaration given by independent
directors under sub-section (6) of section 149.
d) If company covered under sub-section (1) of section 178,
Company’s policy on directors appointment, remuneration
including criteria for determining qualifications , positive
attributes , independence of a director and other matters
provided under sub-section (3) of section 178.
e) Explanation or comments of auditor and the company
secretary in his report on every qualification , reservation and
adverse remark
f) Particulars of loans , guarantees and investments under section
186.
g) Contracts and arrangements particulars with related parties .
h) The state of company affairs
i) Amount company proposes to carry to any reserves.
j) Amount which it recommended should be paid by way of
dividend.
K) Material changes and commitments if any, affecting the
financial position of the company occurred between the end of
the financial year .
L) The conservation of energy technology absorption , foreign
exchange earnings and outgo.
M) A statement indicating development ad implementation of a
risk management policy for the company including
identification therein of elements of risk.
N) The detailed about the policy developed and implemented by
the company on corporate social responsibility initiatives
taken during the year.
O) In case of a listed company and every other public company
having such paid-up share capital as may be prescribed , a
statement indicating the manner in which formal annual
evolution of the performance of the board, its committees and
of individual directors has been made.
P) Other matter as may be prescribed.
 RULE 8 OF COMPANIES (ACCOUNT) RULES ,2014

a) Report shall be prepared on the stand alone on company’s

financial statements , highlight of performance of
subsidiaries, associates and joint venture companies their
contribution to the overall performance.
b) Particulars of contracts and arrangement with related
parties. Section 188(1)
c) Rule 8(3)-information regarding conservation of energy ,
steps taken or impact on conservation of energy,steps for
utilizing alternate sources of energy, the capital
investment on energy conservation equipments.
d) Information regarding technology absorption- the efforts
made, benefit derived, imported technology etc and
expenditure incurred on research and development.
d) foreign exchange earnings and outgo-
The foreign exchange earned in terms of the
actual inflows during the year and the foreign
exchange outgo during the year in terms of actual
outflows.
 RULE 8(5) OF COMPANIES (ACCOUNT )RULES
2014
a) The financial summary and highlights
b) The change in nature of business if any
c) Directors details or KMP appointed and resigned during the year.
d) Names of companies which become ceased to be its subsidiaries ,
joint ventures or associate companies during the year.
e) Details of deposit , accepted , remained unpaid, with any default ,
payment of interest if any.
f) The details of the deposits not in compliance with the requirements
of Act.
g) Details of significant and material orders passed by the regulators
/court/tribunals impacting status and company’s operations in future.
h) Details of adequacy of internal financial controls with reference to
the financial statements.
 DIRECTORS RESPONSIBILITY STATEMENT
(SECTION 134 (5) )
a) In the preparation of the annual accounts , the applicable std
has been followed with proper explanation relating to material
departures.
b) Application of polices ,there reasonableness and prudent
c) Proper and sufficient care for maintenance of adequate
accounting records in accordance with the provisions of the
Act for safeguarding the company assets.
d) The directors has prepared the annual account ,.
e) In case of listed company has laid down the internal financial
controls to be followed by the company.
f) The director had devised proper systems to ensure compliance
with the provisions of all applicable laws and that such
systems were adequate and operating effectively.
BOARD REPORT IN CASE OF
OPC
 SECTION 134(4)-
The report of the BOD to be attached to
the financial statement shall , in case of
OPC means a report containing
explanations or comments by the board
on every qualification, reservation or
adverse remark or disclaimer made by
the auditor in his report.
 SIGNING OF THE BOARD’S REPORT
 SECTION 134(6)
The board report and annexure shall be signed by its
chairperson of the company if authorised by the board.
Otherwise by at least two directors one of whom shall be
MD / by the director where there is one director.
• SECTION 134(7)
signed copy of every financial statement , including
consolidated financial statement if any shall be issued,
circulated or published along with a copy each of any notes
annexed to or formatting part of financial statement, the
auditor’s report, the board report referred to in sub-section
(3).
 PUNISHMENT

 Fine which shall not be less than 50

thousand but which may extend to Rs 25
lakh and
 Every officer of the company who is in
default shall be punishable with
imprisonment for a term which may extend
to 3 years or with fine which shall not be
less than Rs 50 thousand but which may
extend to Rs 5 lakh or with both.
PERFORMANCE EVALUATION
 Rule 8(4) of companies (Accounts ) Rules
2014-
Every listed company and every other public
company having a paid up share capital of
25 crore rupees or more in the report, would
make a statement indicating the manner in
which formal annual evaluation has been
made by the board of its own performances
and that of its committees and individual
directors.
 EVALUATION MECHANISM
1. Performance evolution of ID shall be
done by the entire BOD excluding the
director being evaluated.
2. On the basis of the report of
performance evaluation , it shall be
determined whether to extend or
continue the term of appointment of
the ID.
 REPORTING OF CORPORATE
SOCIAL RESPONSIBILITY (CSR)
 The board report shall include an annual report on
CSR containing particulars specified in Annexure.

CSR implies a concept, whereby companies

decide voluntarily to contribute to a better society
and a cleaner environment - a concept, whereby
the companies integrate social and other useful
concerns in their business operations for the
betterment of its stakeholders and society in
general in a voluntary way.
 PROCEDURE FOR PREPARATION
OF BOARD’S REPORT
Section 136(1) Act 2013-
• Every company public/private shall forward to its
members along with its annual financial statements, the
Board report.
• Both will be approved in the board meeting only. These matters
shall not be dealt with in any meeting held through video
conferencing or other audio visual means.
• According to section 92(3) the web link of annual return is t be
disclosed in the Board’s Meeting.
• Where it is proposed to pay dividend on equity or preference
shares , the Board’s report shall contain the recommendation of
the board as to the rate of dividend for the year under review for
the approval of member at AGM .
 As there must be some interval of time between the end of
the financial year and the day on which the board finalised
the board’s Report , the Board shall indicate in the report
the up- to -date status and position affecting the financial
impact n the operations of the company and the material
changes occurred having a bearing on the working of the
company.
 Not to disclose any information which is not in interest of
the company or help the competitors.
 Company to disclose regarding the committees of the
company CSR committee , Audit committee etc.
 Section 177(8) provides that the report shall disclose the
composition of an Audit committee if the board has not
accepted any recommendation of audit committee then
would give the reasons for the same.
 Details of the loan,gurantee and investment.
 All particulars of contracts or arrangement with related parties .
 Statement of development and risk management policy of
company.
 Section 177-(10) provides for disclosure of vigil mechanism by
the company on website.
 Section 197(12) r/w Rule 5 of the companies (Appointment and
Remuneration of Managerial personnel) Rules 2014-
 Ratio of remuneration of each director to the median remuneration
of employees of the company for the financial year.
 % increase in remuneration of each director , CFO,CEO.CS/manager
in financial year.
 % increase in median remuneration of employees in the financial
year.
 % increase made in the salaries of employees other than the
managerial personnel in the last financial year and its comparison
with the % increase in the Managerial remuneration and justification
thereof and point out if there are any exceptional circumstances for
increase in the managerial remuneration.
 Affirmation of remuneration with concern policy.
 Rule 5 of the companies(Appointment and remuneration of
managerial personnel )Rules , 2014 provides disclosure of a
statement having name of the top 10 employees in terms of
remuneration drawn and the name of every employee.

 Section 204(1) r/w Rule 9 of the companies(Appointment

and remuneration of managerial personnel )Rules , 2014
requires to annex the secretarial Audit Report in the form –
MR-3 with the Board report of the listed company and
specified public company having a paid-up share capital of
50 crore rupees or more. Or
Every public company having a turnover of 250 crore
rupees or more.
 section 134(3) (f) the board of directors shall be bound to
give full information and contain a suitable explanation in
the board report on any qualification , reservation and
adverse remark made by the auditors in their report on the
accounts audited by them and by the CS in practice in his
secretarial audit report.

 Rule 8(3) provides that the board report to include the

particulars in respect of conservation of energy /technology
absorption etc.
 VOLUNTARY REVISION OF FINANCIAL STATEMENT
/BOARD REPORT

 Section 131(1)- if appear to the directors that-

 Financial statement of the company
 The report of board , do not comply with the provision of section
129 or section 134
 They may prepare revised one in respect of any of the three
preceding financial years after obtaining approval of tribunal on an
application made by company in the form and manner prescribed
and copy of the order passed by the tribunal to be filed with the
registrar.
 The tribunal shall give notice to CG and Income tax authorities and
shall consider the representation if any made by the government /
authorities before passing any order under this section.
 Such statement / report shall be prepared / filed more than once in a
financial year.
AUDITOR’S REPORT
• The explanatory statement ,that he obtained all the
information for the purpose of audit and must reflect in
financial statement.
• Whether the books of accounts are properly
maintained and appears from his examination .
• Whether the company accounts of any branch office is
audited by the company’s auditor or not.
• Whether the company’s BS and P&L accounts dealt
with in the report are in agreement with the books of
accounts and return.
• The observation and comments of auditor on financial
transactions or matters which have any adverse effects
on the functioning of the company
 Whether the director is disqualified from being
appointed as a director according to the provision.
 The qualification, reservation , or adverse remarks
relating to the maintenance of accounts and other
matters connected therewith.
 Whether the company has adequate internal
financial controls with references to financial
statement in place and the operating effectiveness
of such controls.
 Such other matter as may be prescribed.
 RULE 11 OF COMPANIES
(AUDIT AND AUDITORS)RULES , 2014
 Whether the company has disclosed the impact, if any, of
pending litigation on its financial position in its financial
statement.
 Whether the company has made provision for material
foreseeable losses on long term contracts including
derivative contracts.
 Is there any delay in transferring amounts, required to
transferred , to the investor education and protection Fund
by the company.
If answered negatively than the reasons for the same must
be stated in the audit report-section 143(4).
SECTION 143(5)-
In case of
Government company
Any other company owned or controlled directly or
indirectly by CG /SG/Government /partly by the CG
and partly by one or more SG

The Comptroller And Auditor General Of India

shall appoint the auditor under sub-section (5)or sub-
section (7) of section 139
 This auditor shall be directed the manner in
which the accounts to be audited
 The auditor shall submit the copy of the
audit report to the comptroller and auditor –
general of India which among other things,
include the directions, if any issued by the
comptroller and auditor general of India , the
action taken and its impact on the accounts
and financial statement of the company.
 AUDITOR TO SIGN AUDIT
REPORT
Section 145 of Companies Act 2013-
• The auditor shall sign the auditor’s report/sign/certify
any other document of the company in accordance
with the provisions of sub-section (2) of section 141 ,
and
• the qualification , observations/comments on financial
transactions or matters, which have any adverse effect
on the report shall be read before the company
mentioned in GM
• Shall be open to inspection by any member of the
company.
Section 141(2)-
Where the firm including the limited liability
partnership is appointed as auditor of the company,
only the partners who are CA shall be authorised to act
and sign on behalf of the firm.
 COMPOSITION OF AUDIT
COMMITTEE SECTION 177(1)
 Every listed and other class/classes of companies are
required to constitute a Audit Committee as per the
requirements.
 The audit committee so constituted has power to give
recommendation to the board on matters relating to
appointment of auditors, internal financial controls
etc..
 The board report need to disclose the composition of
audit committee.
 If any of the recommendation of the audit committee
had not been accepted by the board, the same also shall
be disclosed in the board’s report-section 177(8).
 Every listed company and such other class/classes of
companies as may be prescribed to constitute an audit
committee as a committee of the BOD
 Consist of such number of directors as its members , as
may be determined by BOD.
 Number shall not be less than 3 out of which majority
shall be independent directors.
 Section 177(1) requires that the majority shall have the
ability to read and understand the financial statement.
 Members of audit committee shall elect a chairman from
themselves .
THE POSITION OF CHAIRMAN OF
AUDIT COMMITTEE

 Is not ex officio.
 It is open to any member to be elected as the chairman.
 Measure of objectivity, neither the MD nor the WTD
should be the chairman.
 SECTION 177(4) MANDATES
The audit committee shall act in accordance by the instruction of Board and
further shall include-
1. The recommendation for appointment , remuneration and terms of
appointment of auditors of the company.
2. Measures to review and monitor the auditor’s independence and
performance, and effectiveness of audit process.
3. Examination of the financial statement and the auditors report thereon.
4. Approval or any subsequent modification of transactions of the company
with related parties.
5. Scrutiny of inter-corporate loans and investments.
6. Valuation of undertaking or assets of company ,wherever it is necessary.
7. Process for evaluation of internal financial controls and risk management
system.
8. Monitoring the end use of funds raised through public offers and related
matters.
SECTION 177 IS SILENT ON -

Quorum for Frequency of

the meeting meeting

Criteria for
chairmanship
Thank you
DISCLOSURE OF ACCOUNTS
OF SUBSIDIARY COMPANIES
DR ANITA SABLE
ASSISTANT PROFESSOR
 CONSOLIDATED FINANCIAL
STATEMENTS
• All companies including unlisted companies and private
companies having one or more subsidiary company is
required to prepare consolidated financial statements.
• The clause does not exclude any company from such
requirement except that Central Government may exempt
any class or classes of companies from complying with any
such requirement, conditionally or unconditionally, in
public interest.
• Like financial statements, consolidated financial statements
shall also comply with accounting standards.
• The consolidated statements is required only if the company
has one or more subsidiaries.
• The word 'subsidiary' includes both, associate
company and joint venture.
• The term 'joint venture' has not been defined.
Associate includes a joint venture.
• If the company has only a joint venture or an
associate company but no subsidiary, even
then, consolidation of financial statements
shall be required.
 THE CONSOLIDATION OF FINANCIAL
STATEMENTS OF THE COMPANY AND
ACCOUNTING STANDARDS.

• The statement containing the salient feature of

the financial statement of a company’s
subsidiary or subsidiaries, associate company
or companies and joint venture or ventures
under the first proviso to sub-section (3) of
section 129 shall be in Form AOC-1 (Rule 5)
any shall be made in accordance with the
provisions of Schedule III
• Subject to however, that if the company
is not required to prepare consolidated
financial statements under the Accounting
Standards, it shall be sufficient if the
company complies with provisions on
consolidated financial statements
provided in Schedule III of the Act (Rule
6) of companies (Accounts)Rules ,2014.
 SECTION 129 FINANCIAL
STATEMENT
• [(3) Where a company has one or more subsidiaries or associate
companies, it shall, in addition to financial statements provided
under sub-section (2), prepare a consolidated financial statement of
the company and of all the subsidiaries and associate companies in
the same form and manner as that of its own and in accordance with
applicable accounting standards, which shall also be laid before the
AGM of the company along with the laying of its financial
statement under sub-section (2):
• Provided that the company shall also attach along with its financial
statement, a separate statement containing the salient features of the
financial statement of its subsidiary or subsidiaries and associate
company or companies in such form as may be prescribed:
• Provided further that the Central Government may provide for the
consolidation of accounts of companies in such manner as may be
prescribed.]
 SECTION 136(1)
• Disclosure of Financial Statements on the
website of holding company Every company
having a subsidiary shall place separate
audited accounts in respect of each of its
subsidiary on its Website; if company has any
website.
 Section 137(1)
ACCOUNTS OF OVERSEAS SUBSIDIARY
Every company having overseas subsidiary, shall
attach accounts of its overseas subsidiary, which
is incorporated outside India and does not have
established place of business in India, along with
financial statements of the company which have
been filed with the Registrar of Companies.
 CONSOLIDATED FINANCIAL
STATEMENT
• Holding Company Financial Statement
Consolidated Financial Statement of holding
company is required to disclose prescribe details
about subsidiary, associate Companies and Joint
ventures.
• If more than one Subsidiary If a Company has
one or more subsidiaries, associate companies and
Joint Ventures, it shall, prepare a consolidated
financial statement of the company and of all the
subsidiaries, associate companies and joint
venture in the same form and manner as that of its
own.
SEPARATE FINANCIAL STATEMENT
FOR HOLDING COMPANY
• This Statement is in addition to the Separate
financial statement of the holding company.
The consolidate financial statement shall also
be placed before the annual general meeting of
the holding company along with the laying of
its own financial statement.
 DISCLOSURE IN BALANCE
SHEET OF HOLDING COMPANY

• Balance sheet of holding company shall

specifically disclose investments in the
subsidiaries.
Disclosure in P&L account of Holding
Company
• Profit and Loss account of Holding company
shall disclose-
– (a) Dividends from subsidiary Companies
– (b) Provisions for losses of subsidiary Companies.

Every Company having a subsidiary or subsidiaries

has to submit consolidated financial statement in
addition to its own ‘financial statement’.
 DISCLOSURE ON WEBSITE(SUCH
DISCLOSURE IS REQUIRED ONLY IF THE
COMPANY HAS ITS WEBSITE)
• Company is required to:-
–(a) Place separate audited accounts in
respect of each of its subsidiary on its
website, if any and
–(b) Provide a copy of separate audited
financial statements in respect of each
of its subsidiary, to any shareholder of
the Company
 FINANCIAL STATEMENTS OF
SUBSIDIARIES
• ( a )Every company (listed or unlisted) having
subsidiary or subsidiaries shall:
• (b) place separate audited financial statements
in respect of each of its subsidiary on its
website, if any.
• (c) provide copy of separate audited financial
statements if any shareholder demands a copy
of the separate audited financial statements in
respect of each of its subsidiary.
INVESTMENT ONLY THROUGH
TWO LAYERS SECTION186(1)

• A company shall make investments through

not more than two layers of subsidiary
investment companies unless provided
otherwise.
DISCLOSURE IN B/S OF SUBSIDIARY

• Balance sheet of subsidiary Company

should disclose shares held by its
holding company or its ultimate
holding Company, or the ultimate
holding Company in aggregate.
 RESTRICTION ON APPOINTMENT
AS AUDITORS SECTION-226(4)
• A person can’t be appointed as
auditor, if he, his relative or partner is
holding any security or interest in the
Company or its subsidiary, or of its
holding or associate company or a
subsidiary of such holding company.
 COMBINED INVESTIGATION-
SECTION -219(A)
• If inspectors is appointed for a
company under section 213, he
can investigate affairs of its
subsidiary or holding company
also.
LOAN TO DIRECTOR SECTION -
185
• Company can’t give loan to directors of its
holding company.

REMUNERATION TO MD & WTD

SECTION-197(14)
A WTD or MD of a company who is getting
commission from the company can get
commission or remuneration from its holding or
subsidiary company, subject to disclosure by the
company in its annual report.
 PROSPECTUS OF HOLDING
COMPANY
• Prospectus of holding company
should contain particular of its
subsidiary.
 PROVISIONS UNDER OTHER
LAWS
• Holding and subsidiary companies are treated
as ‘Related Person’ for valuation purpose
under Central Excise Act.
• Holding and Subsidiary Companies are
deemed to act in concert for purposes of
takeover regulation of SEBI
• Companies act treats holding and subsidiary
companies as group Companies.
 PROCEDURE FOR PREPARATION,
FINALISATION OF BALANCE SHEET AND
PROFIT AND LOSS ACCOUNT

• At the close of the FY of the company, it

should prepare profit and loss accounts also
(Income and expenditure account for non-
profit making company).
• The company may keep such book of accounts
or other relevant papers in electronic mode in
the manner prescribed.
FOR THIS PURPOSED CERTAIN
STEPS NEED TO BE FOLLOWED
• Call a board meeting by issuing notices to all the
directors

• Hold a meeting of board and pass a resolution for

keeping account at a place other then the
registered office

• File the notice regarding address at which the

books of account may be kept to the registrar in
form AOC-5
• Internal and statutory audits of the accounts are the
continuous process. hence the accounts so prepared
should be duly audited.
• After auditing the record must be kept for Boards
approval.
• If the company is listed , notice of such board meeting
should also be sent to the stock exchanges where the
company’s securities are listed.
• Such approved annual audited accounts together with
the directors report , auditor’s report and notice of
meeting will be sent to the members, directors ,
auditors of the company and others entitled as provided
in the Act.
• The annual accounts and reports are to be laid before
the annual general meeting of the members of the
company for their adoption.
• If the company belongs to notified
category by the CG , the company
shall mandatorily file their financial
statement in Extensible Business
Reporting Language (XBRL) format
in the manner provided in Rule 12 of
companies (Account) Rules, 2014.
 BOOK MAINTAINED IN THE ELECTRONIC
FORM RULE 3 OF COMPANIES (ACCOUNT)
RULES ,2014
• The company shall intimate to the registrar on
an annual basis at the time of filing of financial
statement-
a) The name of the service provider.
b) The internet protocol address of service provider.
c) The location of the service provider(Wherever
applicable)
d) Where the books of account and other books and
papers are maintained in cloud , such address are
provided by the service provider.
RE –OPENING OF ACCOUNTS ON COURTS OR
TRIBUNAL’S ORDERS SECTION -130(1)

• A company shall not re-open its books of

accounts and not recast its financial statement
unless the application been made by CG,
Income Tax Authorities, Securities And
Exchange Board , any other statutory
regulatory body or authority or any person
concerned and an order is made by a court of
competent jurisdiction /tribunal to the effect
that-
a) The relevant earlier accounts were prepared in
fraudulent manner, or
b) The affairs of the company were mismanaged
during the relevant period , casting a doubt on
the reliability of financial statements.
The court would give a notice to authorities
above mentioned and also would take in the
consideration the representations if any before
passing any order under this section.
The accounts so revised /recast shall be final.
•THANK YOU
DIVISION OF POWERS BETWEEN
BOARD AND GENERAL
MEETINGS
DR ANITA SABLE
ASSISTANT PROFESSOR
 INTRODUCTION
• The power of the management of the company
is vested in the BOD by the AOA.
• The members directly cannot interfere with the
powers vested with the BOD unless it is
provided in AOA
 BIFURCATION OF POWERS
UNDER COMPANY LAW
• Regulation 73 of Table A of fourth schedule
confer upon the directors certain powers . These
powers are not exercised by the members.
• The powers which are exercised by the members
are to be provided under the AOA and MOA and
also could be traced under the company Act.
• Companies can adopt this regulation 73 with
slight modification or as it is.
• The business of the company may be managed
by the directors who may exercised all such
powers of company which the company not
exercised in the GM, provided the exercise of
the same shall not be inconsistent with the
provision prescribed by the company in the
GM.

• But this view always remain a debatable one.

Section- 179. Powers of Board

• (1) The Board of Directors of a company shall be

entitled to exercise all such powers, and to do all
such acts and things, as the company is authorised
to exercise and do:
• Provided that in exercising such power or doing
such act or thing, the Board shall be subject to the
provisions contained in that behalf in this Act, or
in the memorandum or articles, or in any
regulations not inconsistent therewith and duly
made there under, including regulations made by
the company in general meeting:
• Provided further that the Board shall not exercise
any power or do any act or thing which is directed
or required, whether under this Act or by the
memorandum or articles of the company or
otherwise, to be exercised or done by the
company in general meeting.
• (2) No regulation made by the company in
general meeting shall invalidate any prior act of
the Board which would have been valid if that
regulation had not been made.
• (3) The Board of Directors of a company shall exercise the
following powers on behalf of the company by means of
resolutions passed at meetings of the Board, namely:—
• (a) to make calls on shareholders in respect of money unpaid
on their shares;
• (b) to authorise buy-back of securities under section 68;
• (c) to issue securities, including debentures, whether in or
outside India;
• (d) to borrow monies;
• (e) to invest the funds of the company;
• (f) to grant loans or give guarantee or provide security in
respect of loans;
• (g) to approve financial statement and the Board’s report;
• (h) to diversify the business of the company;
• (i) to approve amalgamation, merger or reconstruction;
• (j) to take over a company or acquire a controlling or
substantial stake in another company;
• (k) any other matter which may be prescribed:
• Provided that the Board may, by a resolution
passed at a meeting, delegate to any committee
of directors, the managing director, the
manager or any other principal officer of the
company or in the case of a branch office of
the company, the principal officer of the
branch office, the powers specified in clauses
(d) to (f) on such conditions as it may specify:
• Provided further that the acceptance by a
banking company in the ordinary course of its
business of deposits of money from the public
repayable on demand or otherwise and
withdrawal by cheque, draft, order or
otherwise, or the placing of monies on deposit
by a banking company with another banking
company on such conditions as the Board may
prescribe, shall not be deemed to be a
borrowing of monies or, as the case may be, a
making of loans by a banking company within
the meaning of this section.
• Nothing in the clause (d) which deals with the
borrowing monies shall apply to borrowings by a
banking company from other banking companies
or from RBI,SBI or any other bank established by
or under any Act.
• Exercised of the power by the company would
mean arrangement made by the company with its
bankers for borrowing of money by way of
overdraft or cash credit or otherwise and not the
actual day to day operation on overdraft, cash
credit or other accounts by means of which the
arrangement so made is actually availed of.
• (4) Nothing in this section shall be deemed to
affect the right of the company in general
meeting to impose restrictions and conditions
on the exercise by the Board of any of the
powers specified in this section.
PROVISION APPLICABILITY TO
SECTION 8 COMPANY

• Exemption to section 8 company

• Also, in accordance with Section 117, CA 2013, a
copy of every board resolution must be submitted
with the Registrar within 30 days of the passing of
the resolution.
• In addition to this, Rule 8 of Companies Rules
2014 has given certain more powers to the board.
Namely, resolutions that can be passed at board
meetings:
• Making political contributions
• Appointing or removing key managerial
personnel.
• Appointing internal auditors and secretarial
auditors.
 THE DELEGATION OF POWERS OF THE BOARD

• The Board of Directors may delegate powers such

as investing monies, granting loans, giving
guarantee or security by passing a resolution in
the board meeting:
• Committee of Directors
• Managing Director
• Manager
• Any other principal officer of the company
• The principal officer of a branch office
RESTRICTIONS OF POWERS OF
THE BOARD
• In accordance with provisions of Section 180,
the company can impose restrictions and
conditions on the power of the board of
directors. Moreover, the shareholders are
responsible for imposing restrictions and
conditions of the power of the board. Thus, the
shareholders pass an ordinary resolution at a
general meeting to do this.
SECTION 180 RESTRICTION ON
POWERS OF BOARD
• The BOD shall exercise the following powers
only with the consent of company by special
resolution-
a. To sell , lease or dispose of whole or
substantially the whole of the company
undertaking( undertaking in which the
investment of the company exceeds 20%of its
net worth in the audit balance sheet of the
preceding financial year or an undertaking which
generates 20% of total income of the company
during previous financial year).
 b) To invest otherwise in trust securities the
amount of compensation received by it as a
result of any merger or amalgamation.
c) To borrow money where the money to be
borrowed together with the money already
borrowed by the company will exceed
aggregate of its paid –up-share capital and free
reserves and securities premium, apart from
temporary loans obtained from the company’s
bankers in the ordinary course of business.
d) To remit , or give time for the repayment of ,
any debt due from a director.
• Every SR passed by a company in GM in
relation to the exercise of the powers referred
to in clause (c) of sub-section (1) shall specify
the total amount up to which monies may be
borrowed by the BOD.
• Nothing in (a) of sub section (1) shall affect-
– The title of a buyer or other person who buys or
takes on lease any property , investment or
undertaking as is referred to in that clause in good
faith or
– The sale or lease of any property of the company
where the ordinary business of the company
consist of, or comprise , such selling or leasing.
• Any special resolution passed by the company
consenting to the transaction as is referred to in
clause (a) of sub- section (1) may stipulate
such condition as may be specified in such
resolution , including conditions regarding the
use , disposal or investment of the sale
proceeds which may result from the
transactions. But this sub section shall not be
deemed to authorise the company to effect any
reduction in its capital except in accordance
with the provisions contained in this Act.
• No debts incurred by the company in excess of
the limit imposed by clause( c ) of sub- section
(1) shall be valid or effectual , unless the
lender proves that he advanced the loan in
good faith and without knowledge that the
limit imposed by the clause had been
exceeded.
• This provision is not applicable to private
company.
 SECTION 181
COMPANY TO CONTRIBUTE TO
BONAFIDE AND CHARITABLE FUNDS

• BOD of company may contribute to bonafide

charitable and other funds after obtaining the
prior permission of the company in GM if such
contribution in case any amount the aggregate
of which in any financial year exceed 5 % of
its average net profit for the three immediately
preceding financial years.
 PROHIBITION AND RESTRICTIONS
REGARDING POLITICAL CONTRIBUTIONS

• Any company other then GC and company been in

existence for less than 3 FY may contribute any amount
directly or indirectly to political party by passing
resolution at the BOD meeting.
– A donation or subscription or payment for political purpose
– In the form of expenditure on advertisement in publication
– For advantage of political party for political purpose.
– If the contribution is in contravention of the provision of
this Act the company shall be punishable with fine which
may extend to 5 times the amount so contributed and every
officer in default shall be punishable with imprisonment
which may extend to 6 months and with fine which may
extend to 5 times the amount so contributed .
 Section 183
powers of the board and other person to make
contribution to national defence funds

• May contribute such amount as it thinks fit to

the national defence fund or any other funds
approved by CG for national defence.
• Company to disclose in its profits and loss
account the total amount or amounts
contributed during the FY to which the amount
relates.
•Thank you
DR ANITA SABLE
ASSISTANT PROFESSOR

GROWTH OF SECURITY MARKET

IN INDIA
STRUCTURE ,MEANING , NATURE , FEATURE AND ROLE
OF CAPITAL MARKET AND MAJOR REFORMS

CAPITAL MARKET
LONG TERM AND GOVERENED BY
SEBI

FINANCIAL INSTITUTIONS
SECURITY MARKET IFCL.IDBI,ICICI,LIC UTI, SFCS

GILT EDGED MARKET

Deals in government Corporate securities market
securities Trading in corporate securities

Primary market Secondary market

New issue securities Existing issued securities
MEANING OF CAPITAL MARKET

 Market dealing in the medium and long term

sources of the funds .
COMPONENTS OF CAPITAL MARKET

Supplier of Borrowers of
long term intermediaries
long term
funds funds
 Supplier of long term includes-individuals
,corporate, institutional investors, governments
 Borrowers of long term includes-agriculture,
industries , trade , governments etc
 Intermediaries includes- middle chain between
supplier and borrower
 Capital market is governed by SEBI
NATURE OF INDIAN CAPITAL MARKET
1. Organised and Unorganised sector

 There is demand for

productive investment
and are effected by
the government control

 There is demand for consumption

purposes and is outside the
government control
2. Demands comes from limited sectors-
Corporate houses
Government and semi government institutions etc.

3. There are very few supplier for long term funds-

banks
House hold saving,
Insurance companies ,
Corporate houses and
Governments.
CAPITAL MARKET

• The part of a financial system concerned with

raising capital by dealing in shares, bonds, and
other long-term investments.
• Refer to the places where savings and
investments are moved between suppliers
of capital and those who are in need of capital.
• Capital markets consist of the primary market,
where new securities are issued and sold, and
the secondary market, where already-issued
securities are traded between investors.
FUNCTIONS OF CAPITAL MARKET
 It acts in linking investors and savers.
 Facilitates the movement of capital to be used more
profitability and productively to boost the national income.
 Boosts economic growth.
 Mobilization of savings to finance long term investment.
 Facilitates trading of securities.
 Promotion of industrial growth.
 Acceleration of capital formation.
 Raising long term capital
 Finance of five years plans. Government can issue new
securities or can sell existing securities in secondary market
for financing projects.
 Availability of ready market. Many number of buyer
and sellers are available in stock exchanges all the
time thus plays a great role in maintaining the
liquidity in the stock market
 Create opportunities- the activities of capital
market determine the rate of capital formation in
an economy, capital market offers attractive
opportunities to those who have surplus funds so
that they invest more and more in the capital
market.
MAJOR REFORMS IN CAPITAL MARKET
 Establishment of SEBI – established in 1988 and got
legal status in 1992.
 Aim of sebi- to protect the interest of investors in securities
market and for matters connected therewith or incidental
thereto.
 Establishment of creditors rating agencies-
 CRISIL- THE CREDIT RATING INFORMATION SERVICES OF
INDIA LIMITED, 1988
 ICRA- THE INVESTIMENT INFORMATION AND CREDIT RATING
AGENCY OF INDIA, 1991
 CARE-CREDIT ANALYSIS AND RESEARCH LIMITED
These three asses the financial health of financial institution
and agencies related to the stock market activities. It is a
guide for the investors also in evaluating the risk of their
investments.
 Raising electronic transactions- reduced paper
work, saves money, time and energy of investors
and encourage more people to join capital market.
 Growing Stock Exchanges- BSE,NSE and
OTCEI(over the counter exchange of India)
 Investors protection- establishment of IEPF( the
investors education and protection funds) in 2001.
It educate and guide investors . And protect the
interest of small investors from frauds.
SECURITY

Under Company Act 2013“securities” means the

securities as defined in clause (h) of section 2 of
the Securities Contracts (Regulation) Act, 1956
(42 of 1956)
SECURITIES
Section 2(h) of the Securities Contracts (Regulation) Act 1956(SCRA).
“securities” include—
• Shares, scrips, stocks, bonds, debentures, debenture stock or other
marketable securities of a like nature in or of any incorporated company
or other body corporate;
• Derivative
• Units or any other instrument issued by any collective investment
scheme to the investors in such schemes
Security receipt as defined in clause (zg) of section 2 of the
Securitization and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002
• Units or any other such instrument issued to the investors under any
mutual fund scheme
• Government securities;
• Such other instruments as may be declared by the Central Government
to be securities; and rights or interest in securities;
CLASSIFICATION OF SECURITIES

Securities can be divided into-

 Government securities

 Corporate securities

This division is on the basis of source of the

issue.
TYPES OF CORPORATE SECURITES
CORPORATE SECURITIES

 Organizations issue various kinds of shares to

clean up assets from different investors. Before
Companies Act, 1956 public companies used to
give three sorts of shares-
 Preference Shares,
 Ordinary Shares

 Deferred Shares.

The Companies Act, 1956 has restricted the kind of

shares to just two-Preference share and Equity Shares.
EQUITY SHARE

 Equity shares are also called ordinary shares or common shares.

 These shares speak to the proprietors’ capital in an organization.
 The holders of these shares are the genuine proprietors of the
organization.
 They have a command over the working of the organization.
 Equity shareholders are delivered a profit in the wake of paying it to
the preference shareholders.
 The pace of profit on these shares relies on the benefits of the
organization.
 Equity shares are long-term financing sources for any company.
These shares are issued to the general public and are non-
redeemable in nature.
 Investors in such shares hold the right to vote, share profits and
claim assets of a company. The value in case of equity shares can be
expressed in various terms like par value, face value, book value and
so on.
PREFERENCE SHARES

 These shares have certain preferences when contrasted with

a different type of shares.
 There is a preference for installment of profit. At whatever
point the organization has distributable benefits, the profit is
first paid on preference share capital.
 Different investors are delivered dividend just out of the rest
of the benefits, assuming any.
 The second preference for these shares is the
reimbursement of capital at the hour of liquidation of the
organization. In the wake of paying outside loan bosses,
preference share capital is returned. Equity shareholders will
be covered just when preference share capital is returned.
NO PAR STOCK

 A no-par value stock is issued without the

specification of a par value indicated in the
company's articles of incorporation or on
the stock certificate. ...
 No-par value stock prices are determined by
the amount that investors are willing to pay for
the stocks on the open market.
DEFERRED SHARES

 A deferred share is a share that does not have any

rights to the assets of a company
undergoing bankruptcy until all common
and preferred shareholders are paid.
 It may also be a share that is issued to company
founders that restricts their receipt of dividends until
dividends have been distributed to all other classes of
shareholders.
 Deferred shares can also be awarded to venture
capital and other private investor groups as part of a
long-term investment in a company.
CREDITOR SHIP SECURITIES

 Creditor ship Securities also known as debt

finance which means the finance is mobilized
from the creditors.
 Debenture and Bonds are the two major parts
of the Creditor ship Securities.
 Debentures. A Debenture is a document issued
by the company.
 A company can raise finances by issuing
debentures. A debenture may be defined as the
acknowledgement of debt by a company.
 Debentures constitute the borrowed capital of the
company and they are known as creditor ship
securities because debenture holders
are regarded as the creditors of the company.
 The debenture holders are entitled to periodical
payment of interest at a fixed rate and are
also entitled to redemption of their debentures as
per the terms and conditions of the issue.
 The word debenture is derived from the Latin word
„Lebere‟ meaning „to owe‟. In its simplest sense it
means a document which either creates or
acknowledges a debt.
 A debenture may be defined broadly, as “an instrument in writing,
issued by a company under its seal and acknowledging a debt for a
certain sum of money and giving an undertaking to repay that sum
on or after a fixed future date and mean while to pay interest thereon
at a certain rate per annum of stated Intervals.
 ”As per Sec. 2 (12) “debenture includes debenture stock, bonds and
other securities of a company whether constituting a charge on
the assets of the company or not.”
 In the words of Chitty J. “Debenture means a document which either
creates a debt acknowledges it, and any document which fulfills
either of these conditions is a debenture.”
 Palmer defines a debenture as “any instrument under seal of the
company, evidencing a deed the essence of it being admission of
indebtedness”.
 Debenture is a document under the company's seal
which provides for the payment of the principal sum and
interest there on at regular intervals which is usually
secured by a fixed or floating charge on the
 company's property or undertaking and which
acknowledges a company.”
 On the analysis of above definitions, a debenture may
be defined as an instrument executed by company
under its common seal acknowledging indebtedness to
some person or persons to secure the sum advanced.
 Debentures are usually bonds issued by the company .
SECURITY MARKET
 A securities market is a system of
interconnection between all participants
(professional and nonprofessional) that
provides effective conditions: to attract new
capital by means of issuing
new security (securitization of debt) to transfer
real asset into financial asset.
 Security market is a component of the
wider financial market where securities can be
bought and sold between subjects of the economy,
on the basis of demand and supply.
 Security markets encompasses stock
markets, bond markets and derivatives
markets where prices can be determined and
participants both professional and non
professional can meet.
 DIVISION OF SECURITY MARKET
 Securities markets can be split into two levels:
 Primary markets-where new securities are issued, and
secondary markets where existing securities can be
bought and sold.
 Secondary markets- can further be split into organised
exchanges, such as stock exchanges and over-the-
counter, where individual parties come together and
buy or sell securities directly.
For securities holders knowing that a secondary market
exists in which their securities may be sold and
converted into cash increases the willingness of people
to hold stocks and bonds and thus increases the ability
of firms to issue securities.
 There are a number of professional participants of
a securities market and these include;
 brokerages, broker-dealers, market
makers, investment managers, speculators as well
as those providing the infrastructure, such
as clearing houses and securities depositories.
 A securities market is used in an economy-
 to attract new capital,
 transfer real assets in financial assets,
 determine prices which will balance demand and
supply and
 provide a means to invest money both short and long
term.
 A securities market is a system of interconnection between all participants
(professional and nonprofessional) that provides effective conditions:
 To attract new capital by means of issuing new security (securitization of
debt)
 To transfer real asset into financial asset
 To invest money for short or long term periods with the aim of deriving
profitability
 Commercial function (to derive profit from operation on this market)
 Price determination (demand and supply balancing, the continuous process
of prices movements guarantees to state correct price for each security so
the market corrects mispriced securities)
 Informative function (market provides all participants with market
information about participants and traded instruments)
 Regulation function (securities market creates the rules of trade, contention
regulation, priorities determination)
 Transfer of ownership (securities markets transfer existing stocks and bonds
from owners who no longer desire to maintain their investments to buyers
who wish to increase those specific investments
 Insurance (hedging) of operations though securities market (options,
futures, etc.)
CAPITAL MARKET IN INDIA THEN AND NOW
 Foundations laid in socialist based economy of
four decades in India , with strict government
control over private sector participation, foreign
trade and foreign direct investment,
 India opened its gates to the outside world in
the early 1990s.Since then its economy and
financial markets underwent radical changes,
largely in response to the economic crisis of the
late 1980s.
 the primary market is that part of the capital markets
that deals with the issue of new securities.
 Companies, governments or public sector institutions
can obtain funding through the sale of a new stock or
bond issue.
 This is typically done through a syndicate of securities
dealers. The process of selling new issues to investors is
called underwriting. In the case of a new stock issue,
this sale is a public offering.
 Dealers earn a commission that is built into the price of
the security offering, though it can be found in the
prospectus. Primary markets create long term
instruments through which corporate entities borrow
from capital market...
FEATURES OF PRIMARY MARKETS ARE:

 This is the market for new long term equity capital. The primary market
is the market where the securities are sold for the first time. Therefore, it
is also called the new issue market (NIM).
 In a primary issue, the securities are issued by the company directly to
investors.
 The company receives the money and issues new security certificates to
the investors.
 Primary issues are used by companies for the purpose of setting up new
business or for expanding or modernizing the existing business.
 The primary market performs the crucial function of facilitating capital
formation in the economy.
 The new issue market does not include certain other sources of new long
term external finance, such as loans from financial institutions.
Borrowers in the new issue market may be raising capital for converting
private capital into public capital; this is known as "going public."
FEATURES OF SECONDARY MARKET

 The secondary market, also known as the

aftermarket, is the financial market where
previously issued securities and financial
instruments such as stock, bonds, options, and
futures are bought and sold.
 The term "secondary market" is also used to refer
to the market for any used goods or assets, or an
alternative use for an existing product or asset
where the customer base is the second market
CHANGES IN THE DECADE
 The government control on foreign trade and
investment were loosened and the barriers to
entry in the days of the license raj were relaxed.
 The emergence of Securities and Exchange Board
of India (SEBI) as the supreme capital market
regulator showed India’s commitment to come
across as a strong economic force, through
establishing market best practices of enhanced
corporate disclosure and increased investor
protection.
 The establishment of National Stock Exchange
(NSE), a state-of-the art exchange, with
sophisticated technology to improve trading
practices and reduce unethical dealings,
supported by a strong legal framework and
technological base to strengthen the governance
structure, has been the highlight of the Indian
capital market in the last decade. The opening up
of the economy has increased the flow of Foreign
Direct Investment (FDI) and has put India on the
global map, as a new-age economic force to
reckon with.
 The increased level of sophistication in the
market has been duly supported by
increasingly complex instruments like
derivatives and other structured products.
 Several steps have been taken by the regulator
to enhance the level of corporate governance
and reporting requirements of the Indian stock
market.
 Significant legislation has taken place in this
area to curb market malpractices.
 The large scams and frauds have taught us
that growth without a robust governance
structure falls short of global expectations.
 The regulators have been active in responding
to such events and in certain cases have
undertaken proactive measures to stop such
events from recurring.
JOURNEY OF THE INDIAN CAPITAL MARKET FROM THE
PRE REFORM ERA TO THE CURRENT ERA OF
LIBERALIZATION AND ENHANCED GOVERNANCE.
 1991-The depleting foreign currency reserves
forced India to start the process of economic
liberalisation. The reforms were accomplished by
allowing increasing competition and greater
foreign participation to provide fillip to the troubled
economy
 The capital markets reforms in 1991were
preceded by a regime which ensured almost
complete control of the state over the financial
markets
 Initial Public Offerings (IPO) were controlled
through the Capital Issues Control Act.
 The Controller of Capital Issues (CCI) controlled the
price and quantity of IPO and trading practices were
short of transparency.
 The banking sector too was significantly controlled.
There were few private banks and those faced
challenges on their expansion plans. The banking
sector suffered from lack of competition, low capital
base, low productivity and high intermediation cost
 After the nationalisation of large banks in 1969
and 1980, the government-owned banks
dominated the banking sector. The Reserve
Bank of India (RBI) controlled the interest rates
and the financial sector was replete with entry
barriers, significantly restricting opportunities
for the establishment of new banks, insurance
companies, mutual funds and pension funds.
 The Unit Trust of India (UTI) created in 1964 was the
only mutual fund and it enjoyed complete monopoly of
the mutual fund business up until 1988.
 The early 1990s therefore, was a time when the primary
role of the financial system in India was to channel
resources from the excess to the deficit. The role of
technology was limited and customer relationship and
service was not a priority. Risk management procedures
and prudential norms were weak, affecting asset
portfolio and profitability
STOCK EXCHANGE
 The Bombay Stock Exchange (BSE), the oldest and the largest stock
exchange in India, traded for two hours in a day with an open outcry system.
 The exchange was managed in the interests of individual members, a
majority of whom had inherited their seats.
 A large proportion of stocks listed on the exchange were not actively traded.
 There was minimum supervision from the exchanges and speculation was
rampant.
 There were regional exchanges which were unconnected and engaged in
open outcry system of trading.
 Each exchange had a board representative nominated from the Capital
Markets division of the Ministry of Finance, the then regulator of the capital
markets.
 The capital market reforms were based on improving two fundamental
aspects. First, the improvement in the legal reporting framework and second
the improvement in the technology framework.
LEGAL FRAMEWORK
 A key element of the reform strategy was building a strong independent
market regulator.
 The SEBI Act, which came into force in early 1992, established SEBI as
an autonomous body.
 The apex capital market regulator was empowered to regulate the stock
exchanges, brokers, merchant bankers and market intermediaries.
 The Act provided SEBI the necessary powers to ensure investor
protection and orderly development of the capital markets. The
introduction of free pricing in the primary capital market has
significantly deregulated the pricing control instituted by the erstwhile
CCI regime.
 While, the issuers of securities can now raise capital without seeking
consent from any authority relating to the pricing, however the issuers
are required to meet the SEBI guidelines for Disclosure and Investor
Protection, which, in general, cover the eligibility norms for making
issues of capital (both public and rights) at par and at a premium by
various types of companies
 The freeing of the pricing of issues led to an
unprecedented upsurge of activity in the
primary capital market as the corporate
mobilized huge resources. However, it did
expose the inadequacies of the regulations.
NEED FOR REGULATIONS

Proper Allocation of Funds:

 Capital Market is an important platform
for allocating idle savings from the people to
productive channels of an economy. It puts the idle
funds in proper investment.
Formation of capital:
 Capital market helps in the formation of capital by
adding capital to the existing capital in the economy.
This helps in the expansion of capital in the economy
Platform for Investment:
 Capital market raises resources for longer periods of time. Thus
it provides an investment avenue for people who wish to invest
resources for a long period of time. It provides suitable interest
rate returns also to investors. Instruments such as bonds,
equities etc. definitely provide diverse investment avenue for
the public.
Accelerates Economic Development:
 The financial requirements of the businesses are met by
the capital market regulators as it makes funds available for the
longer period. Capital market regulators also helps in the
research and development. This results in increasing the
productivity of the economy.
Provides Service:
 Capital Market regulators provides various services like
medium and long-term loans consultancy services. export
finance etc.
THANK YOU
KEY MANAGERIAL
PERSONNEL

DR ANITA SABLE
ASSISTANT PROFESSOR
 KEY MANAGERIAL PERSONNEL
SECTION 2(51)

WHOLE
MANAGING
MANAGERS TIME
DIRECTORS
DIRECTOR

CHJIEF CHIEF
COMPANY
EXECUTIVE FINANCIAL
SECRETARY
OFFICER OFFICER
ROLE OF KMP
 They are the employee of the company.
 They hold the key position in the
company.
 Law imposes a greater responsibility of
overall functioning of company .
 It is their duty to protect the interest of all
stakeholders.
 KMP CONSIST OF
Section 203 R/W Rule 8 Of Companies (Appointment And
Remuneration Of Managerial Personnel )Rules, 2014

Public company and listed Whole time key managerial

company having paid up share personnel( managing director
capital of ten crore rupees or or chief executive officer or
more manager and in their absence a
whole time director)
Private company and public Exempted from appointing key
companies with a paid up share managerial personnel
capital of less then above
Every company which has a paid Have a whole time company
up share capital of five crore secretary. The company secretary
rupees or more will not be termed as KMP
APPOINTMENT OF KMP
 Appointment shall be done by board.
 Appointment shall be done in the meeting
of board.
 With the period of 6 months from the date
of vacancy.
 PENALTY FOR NON COMPLIANCE

 Company is liable for penalty of 5 lakh

rupees and every director and KMP in
default will be liable to the penalty of
50,000/-rupees.
 If the default is continuing one – further
penalty of one thousand rupees for each day
and but not exceeding five lakh rupees.
Thank you
APPOINTMENT OF
DIRECTORS

DIN
DIRECTOR IDENTIFICATION NUMBER
DIN ( DIRECTORS
IDENTITIFICATION
NUMBER)
DR ANITA SABLE
ASSISTANT PROFESSOR
 DIN
Unique identification number allotted to an- Existing
Director or a person intending to become the
Director but he need to apply for the same under
section 153.
Allotment of DIN has been provided under section
154.
Having DIN is prerequisite for filing of certain
company related documents.
A person having a DIN can only be appointed as
director –section 152(3)
DIN is provided by the central government.
Procedure for obtaining DIN
Rule 9-Appliction for allotment of DIN
 Making an application electronically in form DIR-
3 to CG.
 Payment of fees prescribed under companies
(registration offices and fees )rules , 2014
 Form shall be signed and submitted electronically
by applicant to be verified digitally by either a
chartered accountant in practice or a company
secretary in practice or a cost accountant in
practice or a company secretary in full time
employment of the company or managing director
of director of company in which the applicant is to
be appointed as director.
 Allotment of DIN Rule 10
 Generation of application NO.(Provisional
DIN)

 Approval/Rejection by the central government.

 Intimation through letter by post/

electronically/other mode within a period of one
month from the receipt of such application.

 Also direct for rectification or incomplete details to

be filled by resubmitting within a period of 15 days.
if not complied within a prescribed period will treat
it as invalid.
 APPROVAL /REJECTION
 In case of rejection of application –no
refund/adjust of fees.
 All DIN allotted to individual(s) by the CG before
the commencement of these rules shall be deemed
to have been allotted under these rules.
 Validity of DIN-life time and shall not be
provided to any other person.
 A director can also obtain DIN, maximum of 3
directors can apply at the time of incorporation of
a company by filing form INC-32(SPICe). These
directors can be allotted DIN if the application is
approved.
Intimation of changes in particulars
specified in DIN application

Rule 12
 Any required change in DIN must be
intimated to CG within 30 days from the
date of change.
 Cancellation or deactivation of
DIN
Rule 11-
CG or Regional Director or any officer
authorised by regional director being
satisfied with the application received and
verification may cancel the DIN.
 GROUNDS OF CANCELLATION
OR DEACTIVATION

Obtained Death of
Found duplicate wrongfully or concerned
fraudulently person

Declared lunatic
Adjudged
by competent
insolvent
court
 Before cancellation or deactivation
opportunity of being heard shall be given.
 De-activated DIN shall be re-activated only
after e-form DIR-3KYC is filed along with
fee .
 SURRENDER OF DIN
 Apply in form DIR-5 with declaration that
he has never been appointed as director in
any company .

 DIN is not used for filing of any document

with any authority.

 CG after verification of e- record shall

deactivate the DIN.
THANKS
LAWS AND PROCEDURE OF
VARIOUS MEETINGS
DR ANITA SABLE
ASSISTANT PROFESSOR
 PROCEDURE OR REQUISITE FOR VALID
MEETING

• Meeting properly conveyed

• Notice
• Quorum
• Chairman
• Minutes
 PROPERLY CONVEYED
• Gap between AGM should not exceed 15 months.
• Should be called during business hours ( 9am -6pm) other than
national holiday
• Authorised person should only meeting example.

Liquidator at AOA any

Tribunal if
member BOD winding of person
prescribed
company authorised

• Tribunal can call or direct the company to call AGM if

company default in holding AGM.
• Board may call also an EGM
• If board fails then even the members are
eligible to call EGM.
 NOTICE
• Date , time , place day agenda , business and any other detail of meeting.
• Notice shall be sent not less than 21 day
• Sent by post before 25 days or electronic mode , hand ,speed post
• Shorter notice through the consent of members (not less than 95%)
• Place will be usually the registered office or in the same city of registered
office
• Notice should be given to every member , LR, assignee of an insolvent
member
• Auditor or auditors of the company
• Every director
• Omission of notice accidentally to any concerned party shall not invalidate
the proceedings of the meeting.
• If meeting is adjourned fresh notices not required unless AOA demands
 DOCUMENTS NEED TO BE
ATTACHED GM
• Audited financial statement
• Directors report
• Auditor report
• Explanation statement for special business if
any (EGM) also
• Proxy forms (AGM and EGM)
 Quorum
• If AOA provide for a larger number, then that
would prevail or else .
In case of public company (on the date of meeting)
• If total no. of member is less than 1000 then 5
members should be personally present
• If total number of members is more than 1000
then and not less than 5000 then 15 members
should personally present.
• If total no. of members exceeds 5000 then 30
members should personally present.
 IN CASE OF PRIVATE
COMPANY
• 2 members shall personally present.
• Preference share holder are not considered unless they
have voting rights
• If the quorum is not present the meeting shall be
adjourned to next week, same day ,same place ,same
time or such other time , place and date as board may
determine
• Notice of adjourned meeting should be given within 3
days of the state of the meeting via advt. in newspaper .
One in English and one in vernacular language.
• If in the adjourned meeting if the quorum is not present
then the members present shall be the quorum.
 CHAIRMAN
• As per AOA
• Members personally present in the meeting
shall elect one among themselves
• Election by show of hands or poll in necessary.
• If poll is demanded than elected chairmen by
show of hands shall lead the poll, later the
chairmen elected by poll will lead the meeting.
 MINUTES
• Minutes of meeting shall be prepared and signed by the
members of the meeting as prescribed
• Kept ready within 30 days of the conclusion of every such
meetings
• Minutes of meeting shall contain fair and correct summary
of proceedings
• Appointments made in such meeting shall be included in the
minutes.
• Names of the directors presents and names of directors who
have passed the resolution shall be included in the minutes
(BOD)
• Opinion of chairmen shall be included
• Act as an evidence of the proceedings of the meeting.
 PROCEDURE FOR HOLDING AN AGM
SECTION 96(1)
• Held by every company other than OPC every
year.
• Company specify the meeting as such in the
notices calling AGM
• 1st AGM to be held within a period of 9 months
from the date of closing of the first financial year
of the company.
• If held according to aforesaid it is not necessary
to hold any AGM in the year of its incorporation.
• Other AGM to be held within a period of 6
months from the date of closing of the FY. Not
more than 15 months shall elapse between the
date of two AGM.
• The registrar may for the special reason extend
the time within which any AGM shall be held,
by period not exceeding 3 months . However
the registrar may not extend the time for 1st
AGM.
• AGM to be called in the business hours. And not on
national holiday.
• AGM shall be held at the either registered office of the
company. Or other place within the city, town or village
in which the registered office of the company is situate.
• GC may convene its AGM at such other place as the
CG may approve in this behalf.
• In case of section 8 companies –time date, place, of
each AGM are decided upon before hand by the BOD
on the basis of directions if any given.
• Relaxation to the private companies .
Role of company secretary in AGM
• Before the meeting.
• At the meeting
• After the meeting
 PROCEDURE FOR HOLDING
EGM
• Board on requisition call EGM
• Requisition shall set out the matters for consideration
and shall be signed by the requisitionists and sent to the
registered office of the company.
• If Board does not within 21 days from the date of the
receipt of valid requisition in regard to any matter
proceed to call a meeting for the consideration of that
matter on a day not later than 45 days from the date of
receipt of such requisition, the meeting may be called
and held by the requisitionists themselves within a
period of 3 months from the date of the requisition.
• A meeting by the requisitionists shall take
place in the same manner as held by the board
.
• Reasonable expenses incurred in calling a
meeting shall be subject to reimbursement.
 Procedure for meeting by
requisitionists
• Requisition set out the matter for consideration,
signed by the requisitionists and sent to the
registered office.
• If Board does not within 21 days from the date of
the receipt of valid requisition in regard to any
matter proceed to call a meeting for the
consideration of that matter on a day not later
than 45 days from the date of receipt of such
requisition, the meeting may be called and held
by the requisitionists themselves within a period
of 3 months from the date of the requisition.
• A meeting by the requisitionists shall take
place in the same manner as held by the board.
• The members may on requisition convening of
an EGM in accordance with the subsection.
• Providing requisition is in writing or through
electronic mode at least clear 21 days prior to
the proposed date of such EGM.(Rule 17(1))
• The notice shall specify the date , day and hour of the
meeting and shall contain the business to be transacted at
the meeting.
• If the resolution is to be proposed as a special resolution ,
the notice shall be given to that effect.
• The notice shall be signed by all the requisitionists or by a
requisitionists duly authorised in writing by all other
requisitionists on their behalf or by sending an electronic
request attaching therewith a scanned copy of such duly
signed requisition.
• No explanatory statement is required .
• Requisitionists may disclose the reasons for the
resolution(s) which they propose to move at the meeting.
• The notice shall be given to those members whose
names appeal in the register of the members within 3
days on which the requisitionists deposit with the
company a valid requisition for calling an EGM.
• If the meeting is not convened, the requisitionists shall
have a right to receive list of members together with
their registered address and number of shares held and
the company concerned is bound to give a list of
member together with their registered address made as
on 21 day from the date of the valid requisition together
with changes if any , before the expiry of the 45 days
from the date of receipt of a valid requisition.
• Notice to be given by post or electronic mode .
Accidental omission to give notice to or the non-
receipt of such notice by , any manner shall not
invalidate the proceedings of the meeting.
• Reasonable expenses incurred by shall be
reimbursed by company and the sum 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.
 PROCEDURE FOR THE CLASS
MEETINGS
• Regulation 6 of the Table F
• AOA will have to be suitable modified or incorporate
depending on the needs of the each class.
• A class meeting will have to convened by the board of
directors in the same manner as calling any other
extraordinary GM. The board will authorise the secretary or
any other competent officer to issue the notice.
• The other procedure of notice service , person to whom
notice to be given etc are similar to those of GM.
• If the company is listed then it has to be submit to the stock
exchange , within 48 hours of the conclusion of class
meeting , details regarding the voting results in the format
prescribed in clause 35 A of the listing Agreement.
•Thank you
 DR ANITA SABLE
ASSISTANT PROFESSOR
 Applicable to the management of the affairs of the
company.
 In this resolution is passed either by simple majority or
by ¾ majority.
 Once a resolution is passed by majority it is binding on
all the members of company.
 Minorities interest is affected by the resolution .
 Each person impliedly consents to submits to the will
of the majority of the members.
 If some wrong is done to the company , it is the
company which is the legal entity having own
personality. Therefore it is The company who only can
institute a suit against the wrongdoer
 The minority shareholders individually can not have
right to file a suit against the majority.
 Two distinct but linked proposition of law was referred.
◦ Court will not ordinarily intervene in the case of an internal
irregularity if the matter is one which the company can ratify
or condone by its own internal procedure
◦ Where it is alleged that a wrong has been done to the company
, prima facie the company will be the proper plaintiff to file the
suit.(only an injured party can sue)
What if all the directors have done fraud and have
injured the company. Because the company is
composed of members, losses to the company also
affects all the members not simply the majority or
minority . Why then , should an individual member not
sue since he has been injured?
 Injury simply is not enough. There has to be breach of
duty.
 The directors owe no duty to the individual member ,
but only to the company as whole . A company is a
person and if it suffers injury due to breach of duty owe
to it , than the company would be the proper plaintiff to
act.
 ICICI v Parasrampuria Synthetic Ltd. The court held
that mechanical and automatic application of this rule
to the Indian situations , Indian conditions and Indian
corporate realities would be improper and misleading.
 This principle of FOSS VS HARBOTTLE applies
where a corporate right of a member is infringed and
not when an individual right of a member is denied.
 The individual rights of a member arise in part from the
contract between the company and individual which is
implied on his becoming a member and in part from the
general law.
 ◦ ENTITLE TO CERTAIN RIGHTS-
1. Have his name and shareholding entered on the register of
members
2. To prevent unauthorised additions or alterations to the entry
3. To vote at meetings of members
4. To receive dividends which have been duly declared or which
have become due under the article
5. To exercise pre-emption rights over other members share which
are conferred by the articles
6. To have his capital returned in the proper order of priority in the
winding up of the company or on duly authorised reduction of
capital
 Entitle to
1. Restrain the company to speak at meetings of members
2. To move amendments to resolutions proposed at such meetings.
3. To transfer his shares
4. Not to have his financial obligations to the company increased
without his consent
5. To exercise very many rights conferred on him by the companies Act
2013 , such as his right to inspect various documents and registers
kept with the company ,
6. To have a share certificate issued to him in respect of his shares.
7. To appoint a proxy to vote on his behalf at meetings of members.
 The court will be inclined to treat a provision in the
MOA and AOA as conferring a personal rights on a
member only if he has a special interest in its
observance distinct from the general interest which
every member has in the company adhering to the
terms of its constitution.
 A member cannot bring a personal action for the loss he has
suffered by the diminution in the value of his share
resulting from breaches by the defendants if the provisions
of the company’s MOA or AOA which does not confer
personal rights on members or from breaches of fiduciary
duties owed by the defendants to the company even if the
member can prove a conspiracy between the defendants to
commit the breach complained of ,
The diminution in the value of his shares is merely a
reflection of the loss suffered by the company , and the
proper remedy therefore is for the company to sue the
defendants or in appropriate circumstances for a
derivative action to be brought.
 If the person wants to bring action for the wrong done either to
his company or to compel his company to conduct its affairs
according to its constitution and rules and even if the person
has not personally suffered any loss-
◦ The individual person(plaintiff) does not sue in his own
right alone , but on behalf of himself and all his fellow
members other than those , if any , against whom relief is
sought.
◦ The company to be made defendant ,
◦ If he seek to enforce a corporate claim against other persons,
the company must still be joined as co-defendant so that it
may be bound by the judgment , and then only the order
could be implemented.
 The individual member’s action in these exceptional
cases may be described as representative for the reason
it is brought on behalf of himself and persons other
than himself who would go along with him to protect
their legitimate corporate rights.
 When the relief is sought against 3rd parties for the
company’s benefit, the action may also be described as
derivative ,because the individual member sues to
enforce a claim which belongs to company and his
right to sue is derived from it.
1. If the action succeeds , any property or damage
recovered will go to the company.
2. The plaintiff shareholders can complain in a derivative
action of wrong committed before he became a
member. But a derivative action commenced by a
member may not be continued by him if he ceased to
be a member. But yes, the court may allow it to be
continued by some other member in substitution as
plaintiff.
 Plaintiff in a representative action is not an agent for
the person on whose behalf he sues.
 Plaintiff can discontinue the action without their
consent.
 The defendant can raise any defences against him
which could be raised if he were suing in his own right
alone including his participation and acquiescence in
the defendant wrong doing.
 Other persons on whose behalf he sues are not liable
for costs if the action is unsuccessful.
 The court will allow derivative action –

◦ To proceed if it is brought for the benefit of the company.

◦ If the plaintiff motive is to benefit a rival concern which has
encouraged him to sue and has indemnified him against costs ,
the action will be stayed.
 Indemnity ought to be granted was whether he legal
action constituted a reasonable and prudent course to
take in the interest of the company.
 Indemnity should not be granted if it could not be
shown that the proceedings had an even change of
success or if it was opposed by a majority of the
independently held shares.
 It means the minority shareholders may bring
an action to protect their interest-
1. Ultra vires and illegal acts
2. Breach of fiduciary duties
3. Fraud or oppression against minority
4. Inadequate notice of a resolution passed at a
meeting of members.
5. Qualified majority
6. Where the personal rights of an individual
member have been infringed
7. Statutory exceptions
1. Variations of class rights –section 48
2. Request for investigation –section 213
3. Scheme of compromise or arrangement- section 230
4. Oppression and mismanagement –section 241 and
section 397
5. Rights of dissentient shareholders under take-over
bids –section 235
6. Class action –section 245
Thank you
 MANAGER –
PROVISIONS
UNDER
COMPANY LAW

DR ANITA SABLE
ASSISTANT
RPOFESSOR
 MEANING
SECTION 2(53)
• As an individual who, subject to the
superintendence, control and direction of the
BOD ,has the management of whole , or
substantially the whole , of the affairs of the
company,
• It includes a director or any other person
occupying the position of manager , by
whatever name called whether under a contract
or service or not.
 CHARACTERISTICS OF THE
OFFICE OF MANAGER

• Unlike the MD he is entrusted with the

substantial powers of management of the
company.
• He has the management of the
whole/substantially the whole, of the affairs of
the company.
• No company shall appoint at the same time , a
MD and Manager.
APPOINTMENT OF MANAGER OF A
PRIVATE COMPANY

• At the time of the appointment the approval by

the company at a GM and that of the CG is not
required. Section 196 sub-section (4)and
(5)shall not be applicable to private
companies.
•Thank you
 MANAGING DIRECTORS-
APPOINTMENT , DISQUALIFICATION

Dr Anita Sable
Assistant professor
MANAGING
DIRECTOR
section 2(54)
 MANAGING DIRECTOR
 Director who, by virtue of the AOA or
an agreement with the company or a
resolution passed in its GM or by its
BOD is entrusted with substantial
powers of management of the affairs of
the company and includes a director
occupying a position of MD , by what
ever name called.
 APPOINTMENT OF MD

Agreement
AOA
with company

Resolution
Or its BOD
passed in GM
 PURPOSE OF APPOINTMENT OF
DIRECTOR
 Entrusting him with the substantial powers of the management of the affairs of the
company.
 The director having a position of MD may have some other name but with same
designation in the company.
 These powers so conferred are alterable by the company.
 He is the member of senior management of the company.
 He is responsible for the daily operations of the company.
 He is also appointed for promoting and expanding the company.
 Substantial power includes-
Director occupying the position of MD by whatever
name called.
But would not include- administration of routine nature.
Like signing of cheque/share certificate/ to direct registration of transfer of any share .
 TERM
 Only 5 years.
 Eligible for reappointment . But no reappointment shall
be made earlier than one year before the expiry of his
term.
CONDITIONS
• A MD must be a director before he can be appointed as
MD.
• An individual shall not e appointed or reappointed as a
chairperson as well as MD at the same time unless ,
provided in AOA, or company carry multiple
businesses.
 APPOINTMENT OF MD
 A person less than 21 of years and more than 70 years.
 A person can be appointed at the age of 70 years also but
by passing a special resolution and an explanatory
statement justifying such appointment shall be annexed to
the notice for motion of appointment.
 Insolvent or at any time been adjudged as an insolvent. It
means he has not at time suspended payment to his
creditors or has made a composition with them.
 Any person convicted with an offence and convicted for the
offence for which the punishment is more than 6 months
cannot be appointed as or continued to be MD.
 The terms and condition of the appointment and
remuneration payable shall be approved by the BOD at the
meeting which shall be subject to approval by a resolution
at the next GM of the company and by the CG. (section
196(4)).
 A return in the prescribed form shall be filed within 60
days of such appointment with ROC.
 If the appointment is not approved by the GM , any act
done by him before approval shall not be deemed to be
invalid.-section 196(5).
 This provision is not applicable to IFSC public company
and private companies nor to Government company.
 PROCEDURE FOR APPOINTMENT
SECTION -196
1. Hold a board meeting giving notice to all director .
 Take a decision on the person to be appointed as MD
ensuing he is not disqualified .
 Approve the draft agreement to be signed and executed
by and between the company and the proposed MD (it
is not mandatory).
 Fix time ,date and venue for holding a GM .
 Approve notice of the GM along with the explanatory
statement as required by sections 101,102 of Act
 To authorise company secretary to issue notice of the
GM on behalf of Board.
 Hold the GM and get the resolution passed approving
appointment of the MD.
 In case it is not according to Act the approval of CG is
necessary (Section 201).
 Execute the agreement, as approved by the Board with
the MD.
 Make necessary entries in the register of the directors,
other records and registers of the company.
 File the documents with the registrar.
 Inform all concerned about the appointment , and issue
a general notice in newspaper about he appointment of
the MD.
Appointment of person as MD , who is
MD of another company

Section 203(3)-
 A company may appoint or employ a person as its
,managing director, if he is the MD or Manager of one
and of not more than one , other company .
 Provided the appointment is approved by resolution
passed at a meeting of Board of all the directors in
meeting after serving due notice.
 APPOINTMENT OF MD OF
PRIVATE COMPANY

• Sub section (4) &(5) of section 196-shall not be

applicable to private companies.

• If the appointment of MD is approved by the company

in GM approval of CG in not required.
REMUNERATION OF THE MD
 Section 197 and Schedule V of the companies Act, 2013.
 But this provision is not applicable to private company.

By
AOA resolution
AOA
provides for special
resolution
Can be paid

Monthly Specified %
payment of net profit

Partly by one way

and partly by the
other
 Procedure For Removal Of MD/WTD Before
Expiry Of His Term Of Office
 No specific provision in Act.
 There is a contract between them and the company.
 Breach of contract attracts the compensation under section
202
 Only an appointing authority can remove him.
 He can be removed by board or in general GM provided he
is appointed by them.
 AOA may contain the removing procedure.
 If the appointment also provides for the determination of
the office of MD/WTD prior to expiry of term either by the
party giving 3 months notice or so to the other condition,
the same will apply.
Remuneration will include
 Remuneration payable to him for the services rendered by
him in any other capacity.

What amount received by the director will not be included

in the maximum limit of remuneration received by him?

 In case some professional services are rendered by him on

the bases of his requisite qualification ( in the opinion of
nomination and remuneration committee if applicable to the
board) shall not be included for considering the limits
Remuneration in the private
companies
 No restriction on managerial remuneration .
Remuneration in Government company
 Remuneration in the government company-section 197
will not apply.
 Reason-
Managerial remuneration depend upon the total net
profit of the company and section 197 provides for
overall maximum managerial remuneration and
managerial remuneration in case of absence or
inadequacy of profit.
 Remuneration payable by the public company
section 197 and the manner of calculation is
provided under section 198
 11% of net profit.
 Any remuneration in excess to 11% is subject to
compliance of conditions under schedule V.
 In case of non compliance, remuneration will be subject to
the approval of company in GM.
 In case one MD/WTD remuneration shall not exceed 5%.
 If more then one not exceeding 10%
 If need to exceed, approval of company in GM by special
resolution is compulsory after satisfying the conditions in
section and Schedule V.(Not applicable to NIDHI
companies)
 Nidhi companies can give the remuneration payable to any
one MD/WTD/ Manager exceeding 5% of net profits of the
company.
 For Nidhi companies also do not have any restriction for
payment of remuneration to non-executive directors.

 A Nidhi company is a type of company in the Indian non-

banking finance sector, recognized under section 406 of
the Companies Act, 2013. Their core business is borrowing
and lending money between their members. They are also
known as Permanent Fund, Benefit Funds, Mutual
Benefit Funds and Mutual Benefit Company.
 The percentage shall not include sitting fees for attending
meetings of board committee payable to the directors.

It is a fees for attending meetings of board or committee.

It shall not exceed the amount prescribed in Rule 4 of companies
(Appointment And Remuneration Of Managerial Personnel )Rule 2014
Rule -4 sitting fees would be decided by the BOD and shall not exceed
Rs. one lakh per meeting of Board or committee. Also that the sitting
fees would be equal for all including independent and women director.
 Section 197 not applicable to specified
IFSC public company

 International Financial Services Centers'

 private companies being set up in international financial
services centers' (IFSC) from the norms of
the Companies Act 2013.
 IFSCs are set up in special economic zones, and deal with
flows of finance, financial products and services across
borders.
 What if the director draws or receives the
excess amount against the prescribed limit?

 If any director draws or receives, directly or indirectly by way of

remuneration any such sums in excess of the limit prescribe
 Or without requisite approval
 Shall refund to company within 2 years or lesser period as may
be allowed by the company.
 Until such sum is refunded ,hold it as a trust for the company.
 If the company has defaulted in payment of dues to any –
Bank
Public financial institution
Non convertible Debenture holder
Other secured creditor
The prior approval of the above Shall be obtained by the company before
obtaining the approval in the GM.
 Procedure for fixation of remuneration to
MD/WTD/Manager
 Board meeting of all the directors to pass an OR/SR for fixing
the remuneration of MD.
 Notice in writing at least 21days before GM.
 Pass the resolution in GM by OR/SR.
 In case of SR –file form MGT-14 with explanatory statement
with the ROC within 30 Days.
 Company will execute a agreement with the MD.
 Agreement must be approved by board and CG.
 Necessary entries in register of directors , other records and
register of company.
 Issue general notice in Newspapers about appointment of MD.
DEFAULT BY INDIVIDUAL /COMPANY

Individual person Company in default

shall be liable to a shall be liable to a
penalty of one lakh penalty of 5 lakh
rupees rupees
 Auditor of the company shall in his report under
section 143 shall make a statement –
 As to the remuneration paid by the company to its
directors in accordance of section.
 Whether remuneration paid to any director is in excess
 Give such other detail as may be prescribed.
 Revision of remuneration of MD and
WTD
 Similar procedure as that of fixing of remuneration at the
time of appointment will be applicable.

Applicability of
Section 197
sch. V

Or
shareholders
approval
 DISQUALIFICATION OF A MANAGING
DIRECTOR OF A COMPANY
Section 196(3) of the Companies Act, 2013, mandates that a company shall not
appoint, or continue the employment of any person as Managing Director, Whole-
time Director or Manager if he falls under any of the following conditions.

 If the person is below 21 years or has attained 70 years of age; although a

person above 70 years of age can be appointed by a special resolution.
 If the person is an undischarged insolvent or has at any time been adjudged an
insolvent.
 If he has at any time suspended payments to his creditors or makes, or has at
any time made a composition with them.
 If he has any time been convicted by a court for an offence and sentenced for
more than a period of six months.
 If he has been sentenced to imprisonment for any period, or to a fine exceeding
one thousand rupees, for the conviction of an offence under various Acts as
mentioned under section 196 (3) of the Companies Act, 2013.
 These regulations are more severe and exacting than those of disqualification of
an ordinary director and in addition, they are absolute and mandatory in nature.
THANK YOU
MINUTES OF MEETING

DR ANITA SABLE
ASSISTANT PROFESSOR
 MINUTES IN GENERAL
• Meeting minutes are notes that are recorded during a meeting.
• These minutes tell us about discussion , motion proposed,
voted on and activities undertaken .
• Minutes provides us an accurate record of what transpired
during the meeting.
• Minutes also tells us about date, time of the meeting , name of
the attendees and also absent participants
• Acceptance of , or amendments made to the previous meetings
minutes, decision made regarding each item on the agendas
like activities undertaken or agreed upon,
• next steps, outcomes of election , motion accepted or rejected
, new business and date and time of the next meeting etc.
 MINUTES
• The matters which must be covered while
drafting the minutes of the meeting whether
for GM or for Board is covered under section
118 .
• These are of two types-
– Minutes of narration
– Minutes of resolution
 MINUTES OF NARRATION
• These are the records of events or items of business which
do not required formal resolution to establish them.

• Minutes of narration includes-

1) Names of those who are present at meeting

2) Signing of minutes of the previous meeting
3) Recording of leave of absence
4) Taking note of financial statements, reports ,plans etc which are
tabled and considered at meeting.
5) Recording and tabling and consideration of correspondence .
6) Taking a note of receipt of notice of interest from the directors.
 MINUTES OF RESOLUTION
• These are the records of formal decision of
directors /shareholders and are prefixed by the
word resolved .
• Such a resolution may simply cover the
resolution passed or alternatively may also
indicates the name of the proposer and the
seconder and showing the quantum of votes
with which it was carried .
MAINTENANCE OF MINUTES
• To be recorded in books maintained for that purpose.
• A distinct minutes book shall be maintained for meetings of
the members of the company creditors and others as may be
required under the Act.
• Minutes may be maintained in electronic from , may be
decided by the board and shall be maintained with timestamp.
• Pages shall be consecutively numbered.
• Minutes shall not be pasted or attached to the minutes book ,
or tampered with.
• Minutes meetings , if maintained in loose-leaf form, shall be
bound periodically depending on the size and volume.
• Minutes book shall be kept in the registered office /or other
place approved by board.
CONTENTS OF THE MINUTES

General Specific
contents contents
 GENERAL CONTENTS
• It should state name , date , day , venue and
time of commencement and conclusion of the
meeting.
• Shall record the names of the directors and the
company secretary present at the meeting.
 SPECIFIC CONTENTS
• Record of election of chairman of the meeting.
• The fact that registers, documents , the auditor's report
and secretarial audit report are available for inspection.
• The record of presence of quorum
• The number of member present in person including
representatives.
• The number of proxies and the number of shares
represented by them.
• The preference of the chairmen of the audit committee ,
nomination and remuneration committee and
stakeholders relationship committee or their authorised
representatives.
• Secretarial auditor , the auditor or their authorised
representatives , the court/tribunal appointed
observers etc.
• Summery of opening remarks
• Reading of qualifications, observations or
comments or other remarks on the financial
transactions , matters which have any adverse
effect on the functioning of the company as
mentioned in the report of the auditor/secretarial
auditor.
• Summary of the clarification on various agenda
items.
• The type of resolution , name of the person
proposed, seconded, majority with which the
resolution passed.
• In case of poll , the names of scrutinisers
appointed and the number of votes cast in
favour and against the resolution and invalid
votes.
• If the chairman vacates the chair in respect of
any specific item, the fact and other person in
his place took the chair also need to be
mentioned.
• The time of commencement and conclusion of
meeting.
• If the resolution is passed by e-voting/postal
ballot a brief report on it conducted along with
the reports and signed by the directors /
authorised by the board.
 RECORDING OF MINUTES
• Contain fair and correct summary
• Written in clear , concise and plain language
• Each item of business taken up at the meeting
shall be numbered.
 ENTRY IN THE MINUTES
BOOKS

• To be entered in the minutes books within 30

days from the date of conclusion of meeting.
• Date of entry of minutes in the minutes books
shall be recorded by CS.
• Minutes once entered shall not be altered.
 SIGNING AND DATING OF
MINUTES
• Signed and dated by the chairman of
meeting/or person authorised within 30 days of
GM.
• 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.
INSPECTION AND EXTRACT OF
MINUTES
• Directors and members are entitled to inspect
the minutes of all GM including resolutions
passed by postal ballot.
• Minutes extract to be given only after it is
signed.
 PRESERVATION OF MINUTES
AND OTHER RECORDS
• Preserved permanently in physical or electronic
form with timestamp.
• Office copies of notices, scrutiniser’s report and
related papers shall be preserved physical or in
electronic form for current or for eight financial
years, whichever is later and may be destroyed
thereafter with the approval of the board.
• Minutes books shall be kept in the custody of the
CS
 Minutes of proceedings of GM ,meeting of
BOD and other meeting and resolution passed
by the postal ballot

Section 118 r/w Rule 25 of companies (management

and administration ) Rules , 2014

• Every company to maintain the minutes of the GM of

any class of shareholder/creditors/resolution passed
by the postal ballot /meeting of BOD / committee
meetings etc to be prepared and signed in the
prescribed manner.
 IN CASE OF IFSC PUBLIC AND
PRIVATE COMPANY
• The minutes of every meeting /BOD /Every
committee of the board to be prepare and signed
as prescribed at or before the next board
/committee meeting.
• Distinct minutes book shall be maintained for
each type of meeting namely.
• General meeting of the members
• Meetings of the creditors
• Meetings of the board
• Meetings of each of the committee of the board.
• Rule 25(1)(d) provides that each page of every
such book shall be initialled or signed and the
last page of the book shall be dated and signed.
– In case of minutes of board meeting/ committee-
chairman of said meeting or chairman of next
succeeding meeting.
– GM, by the chairman of the meeting within 30
days or by the authorised person by the board.
– Resolution passed by postal ballot, the chairman of
Board within the period of 30 days or by the
authorised person by board.
 CONTENTS OF MINUTES
• Appointments in meetings
• Name of the directors present at meeting and
• Name of the directors dissenting from or not
concurring with the resolution.
• Chairman shall be having an absolute
discretion regarding inclusion and non-
inclusion of any matter in the minutes if found
to be defamatory , irrelevant , detrimental of
company’s interest.
 OBSERVANCES OF
SECRETARIAL STANDARDS
• Section 118 (10) company to observe the
above standard specified by the Institute of CS
of India constituted under section 3 of the
Company Secretaries Act, 1980, and approved
as such by the CG .
• But these standards are not applicable to IFSC
public and private company.
 DEFAULT PROVISION
SECTION 118(11)
• Penalty of Rs 25000 and every defaulting
officer is liable to penalty of Rs 5000.

Liability for tempering with minutes section

118(12)
• Person found guilty is liable for punishment
with imprisonment for a term extending to two
years and with fine which may extend to Rs
1,00,000.
•Thank you
OPPRESSION AND
MISMANAGEMENT
Dr Anita Sable
 Act has an oppressive
1. Not calling a GM and keepings shareholders
in dark.
2. Non-maintenance of statutory records and
not conducting affairs of the company in
accordance with the companies Act.
3. Depriving a member of the right to dividend.
4. Transfer of shares held by a company to
some shareholders otherwise than by making
an offer to all.
5. Allotment of shares by director in a manner by which an existing
majority of shareholder is reduced to a minority.
6. Continuous refusal by company to register shares with an ulterior
motive of retaining control over affairs of company.
7. Failure to distribute the amount of compensation received on
nationalization of business of company among members were required
to distributed.
8. Countermanding decision of BOD who control majority powers and not
allowing board to perform its function.
9. Where directors of private company pass a resolution in which they are
interested without disclosing nature of their interest.
10. If a sale of assets is made by a company to some of its director and
simultaneously loan is made to purchasers to finance this sale .
11. Refusal to register transmission under will.
12. Issue of further shares benefiting a section of the
shareholders.
13. Registration of transfers in violation of articles.
14. Diversion of business opportunity
15. Acts of directions/ company leading to financial crisis
of the company are prejudicial to the interests of
shareholders and the company .
16. Irregularities in allotment and transfer of shares ,
siphoning off funds of the company to other
companies for unknown/unwanted purpose , irregular
removal of petitioners from the board ,deflection in
stock maintained by the company, petitioner having
been projected as an expert in the line of business of
the company in the prospectus and on the strength of
a general body resolution keeping such expert out of
the due posts in the company.
17. Issue
of shares by book entry only, director removed in EGM for which he
received no notice , shares allotted by defending director to himself without
board meeting, a family partition deed executed after the alleged acts of
oppression and even then not brought before the board or the EGM.
18. In a family centered company even through it is public company, or a
company in guise of partnership, wherein participation of family members
agreed to by members/partners, removal of members/a partner from
management can be considered to be an act of oppression in spite of the
fact that the same is a directional complaint, which as such cannot be
entertained for relief under section 387 and 398.
19. The MD cum chairman for life of a closely held company was removed
form the position of MD by invoking section 274(1)(b) now section 164
claiming that he was an undischarged insolvent .
20. In a family centered company and board consisting of family members,
when board meeting is held in an irregular manner and decisions of far
reaching significance taken without the presence of all the directors and
specially the managing director, the acts of such decision taking constitute
grave oppression.
21. With a view to seeing that the NRI petitioner does not attend the
board meeting of the company of which he was the chief promoter,
notices of such meetings , contrary to the provisions of the Articles,
were sent to his Indian address and systematically his majority
shareholding was reduced to minority.
22. A company incorporated long back as an association not for profit
sought to amend its articles to provide that any Christian church or
other Christian body in India or abroad shall be entitled to
nominate one member to the association on paying a sum of
rupees 2o,ooo per annum and that too for two years was held as
discriminatory as other members were not subject to such
conditions and hence oppressive against the background that since
1887 all such bodies could nominate members and were not
subject to these conditions.
PASSING OF RESOLUTIONS BY
POSTAL BALLOT
DR ANITA SABLE
ASSISTANT PROFESSOR
RESOLUTIONS
 Resolutions to be drafted in clear and distinct terms .
 These resolutions embody the decisions of meetings.
 CONTENTS OF RESOLUTIONS
 All essential facts example –resolution is for re-appointment of MD etc.
is subject to CG approval, terms and conditions of appointment etc.
 No surplus or meaningless words or phrases to be included.
 References to documents approved at a meting should be clearly
identified .
 Resolutions must include the relevant provisions or sections of the Act
and the Rules pursuant to which they are being passed.
 If the resolution required CG approval /confirmation of NCLT must be
included in the resolution.
 A resolution must indicated its effectiveness.
 Must confine to subject matter .
 Two distinct matter to be avoided in one resolution.
 It should be concise, Crisp and precise ,flexible to cover eventualities.
 Lengthy resolutions need to be divided into paras and to be arranged in
logical order .
 Resolution must be easily understandable.
MATTERS TO BE SANCTION BY
ORDINARY RESOLUTION
Sr. no. matters section

1 To change name applied by furnishing wrong or 4(5)(ii)

incorrect information

2 To rectify the name of the company 16(1)

3 After the capital clause of MOA for limited 13
company having share capital

4 Conversion of unlimited company into limited 65

company

5 Acceptance of public deposit 73(2)

6 Authorise a representative to participate in GM 113(1)
7 Appointment of auditor 39
8 Removal of director 169(1)

9 Company to have board of directors 149

10 Appointment of directors 152

11 Appointment of Manager and WTD 196(4)

12 Re-appointment of retiring director

13 Remuneration of director 197

14 Related party transaction in certain companies or above 188(1)

certain threshold limit
 MATTERS REQUIRING SPECIAL
RESOLUTION
Sr. no. matters section

1 Alteration of article under entrenchment 5(3)

2 Shifting of registered office outside local limit 2(5)

3 Alteration of memorandum 13(1)

4 Change in object clause where money raised from public 13(8)

through prospectus and still was unutilized amount out of
the money so raised

5 Conversion of private company into public company 14(1)

6 Conversion of public company into private company 14(1)

7 Conversion of private company into one person company

8 Variation in the terms of a contract referred to in the 27(1)
prospectus or objects for which the prospectus was issued

9 Issue of global depository receipt 41

10 Variation of shareholders rights 48(1)

11 Issue of sweet equity shares 54(1)

12 Issue of share capital under employees stock options 62(1)

13 Issue of share capital to any person other than members or 62(1)(c)

employees

14 Issue of convertible debenture 62(1)( c)

15 Reduction of share capital 66(1)

16 Funding of purchase of share by trust for benefit of 67(3)
employees
17 Buy back of shares other than through board resolution 68(2)
18 Issue of convertible debenture 71(1)
19 Place of keeping registers and returns other than registered 94(1)
office
20 Removal of auditor before expiry of term 140(1)
21 Appointment of more than 15 directors 149(1)
22 Re-appointment of retiring ID 149(10)
23 Specify a lesser number of companies in which a director may 165(2)
be director

24 Exercise of restricted powers by board 180(1)

25 Approval of certain non-cash transaction with directors 192(1)

26 Appointment of MD or WTD or manager who 196(2)
has attended age of 70

27 Appointment of managing or WTD or manager on 197(4)

certain terms
28 Request for investigation of affairs of the company 210 (1)

29 Removal of the name of the company from the 248(2)

register of companies

30 Resolution for winding up of the company by 271(1)

tribunal
31 Applicability of Table –F of schedule –I on 371(3)
company registered under Part I of the chapter XXI
MATTERS REQUIRING SPECIAL
NOTICE
1 Resolution for appointment of an Section
auditor other than the retiring 140(4)
auditor at an AGM
2 Resolution at an AGM to provide that a Section
retiring auditor shall not be re- 140
appointed
3 Resolution to remove a director before Section
the expiry of his period of office 169(2)

4 Resolution to appoint another director Section

in place of the removed director 169(5)
PASSING OF RESOLUITONS BY POSTAL BALLOT
SECTION 110 R/W RULE 22 OF THE COMPANIES
(MANAGEMENT AND ADMINISTRATION )Rules 2014 as
amended by Amendment Rules 2016

 Section 2(65) Voting by postal ballot means -

Electronic
Post
mode
SECTION 110 DEALS WITH VOTING
BY POSTAL BALLOT
 Postal ballot is different from voting through electronic
mode.
 This method gives shareholders the right to vote on
items of business of a corporate body without actually
attending its GM in person/proxy.
 Allow the shareholder to take part in decision making
process regardless their location/physical presence at
appointed day and place to approve or reject the
proposal .
 This procedure encourage corporate democracy and
promote good governance.
COMPANIES NOT REQUIRED TO
TRANSACT BUSINESS THROUGH
POSTAL BALLOT (RULE 22(16))

OPC
Other companies having up
to 200 members.
 BUSINESS TRANSACTED
THROUGH POSTAL BALLOT
Sr. items section
no.
1. Alteration of object clause of MOA or company in -
existence immediately before the commencement of
the Act alteration of the mail objects of the MOA

2 Alteration of AOA for insertion/ removal of Section 2 sub-

provisions are required to be included in the Article section(68)
of a company in order to constitute it a private
company.
3 Change in place of registered office outside the local Section 12 sub-
limit of any city, town or village section (5)
4 Change in object for which company has raised Section 13 sub
money form public through prospectus and still has section (8)
any unutilised amount out of the money so raised
Sr. No. Items sections

5 Issue of shares with differential rights as to Section 43(ii)

voting or dividend or otherwise

6 Variation in the rights attached to a class of Section 48

shares or debentures or other securities

7 Buy back of shares by company Section 68

8 Election of director Section 151

9 Sale of whole or substantially the whole of Section 180 subsection (1)

an undertaking of a company clause (a)

10 Giving loans or extending guarantee or Section 186 sub section

providing security in excess of the limit (3) Rile 22(16)
 PROCEDURE FOR POSTAL BALLOTS Rule 22 of
Companies (Management And Administration )Rules
2014

 Notice(postal , electronic, courier, advertisement) to all

shareholder along with draft resolution explaining the
reason.(1),(2) and (3)
 Members will be called give their assent or dissent with
30 days from the date of dispatch of notice.
 Notice shall also be place on company website and would
remain there till the last date for receipt for postal ballots
from the members.(4)
 Board to appoint one scrutinizer (not company employee)
who can conduct fair and transparent postal ballot voting.
(5)
 Consent and availability of scrutinizer to be obtain in
writing.(6)
 Received postal ballot shall be kept in the safe custody
(8)
 After receipt of assent and dissent of the shareholder in
writing on a postal ballot, no person shall deface or
destroy the ballot paper or declare the identity of the
shareholder (8)
 Scrutinizer to submit his report as soon as possible after the last
date of receipt of postal ballots not later than 7 days. (9)
 Scrutinizer to maintain their register manually/electronically to
record assent/dissent . (10)
 These records will be under the safe custody of the scrutinizer
till the chairman considers ,approves and signs the minutes and
then will be returned to the company to preserve the same (11)
 Assent and dissent received after 30 days shall be treated as if
the reply from the member has not been received (12)
 The result to be declared by placing it with scrutinizer report on
the company website. (13)
 Provision of rule 20 regarding voting by electronic means shall
apply , as far as applicable , mutatis mutandis to this rule in
respect of the voting by electronic means (15)
Thank you
 POWERS OF CENTRAL
GOVERNMENT TO DIRECT
SPECIAL AUDIT AND COST
AUDIT
DR ANITA SABLE
ASSISTANT PROFESSOR
• SECTION 148 OF THE COMPANIES ACT
2013 EMPOWERS THE CG
Central Government direct

Companies engaged in the production of goods or

providing services prescribed by the CG , and
having overall turnover from all its product and
services of rupees 35 crore /more during
immediate preceding financial year
• Particular relating to the utilisation of material
/labour/ to other items of cost shall also be
included in the books of account kept by that
class of companies.

• Before issuing a order would consult

regulatory body constituted for such special
act.
• If found necessary by CG, It may direct that
the audit of cost records of class of companies
, which are covered above and which having
net worth of amount as prescribed /turnover
shall be conducted in the manner specified in
the order.
• The audit shall be conducted by cost
accountant appointed by the Board on the
remuneration determined by the members as
may be prescribed. Provided he should not be
auditor under section 139
 DUTY OF THE COST AUDITOR
• To comply with the cost auditing standards.

COST AUDITING STANDARD

Standard as are issued by the INSTITUTE OF
COST AND WORKS ACCOUNTANTS OF
INDIA, with the approval of CG
 COST AUDIT REPORT
• Signed cost auditor’s report on the cost records
examined and cost statements need to be
prepared as per the companies (Cost Records
And Audit)rules 2014
 QUALIFICATION OF COST
AUDITOR
• Qualification , disqualification , rights , duties
obligations as the auditors .
• The cost auditor shall submit its cost audit report
to BOD.
• The cost statement , other statement to be
annexed to the cost audit report shall be approved
by the BOD before they are signed on behalf of
the Board by any of the director authorised by
Board , for submission to the cost auditor to
report thereon.
 OBLIGATION ON THE
COMPANY
• A company shall within 30 days from the date
of receipt of a copy of the cost audit report
furnish the CG with such report along with full
information and explanation on every
reservation or qualification contained .
• If on receiving the report the CG is of the
opinion that any further information is
necessary, it may call such further information
and explanation and the company shall furnish
the same within the time prescribed by the CG.
 PENALTY
• The company and every officer in default –
punishable in the manner provide in subsection
(1) of the section 147- with fine which shall
not be less than 25 thousand but may extend to
5 lakh and every officer in default shall be
punishable with the imprisonment for a tem
which may extend to 1 year or with fine which
shall not be less than 10 thousand rupees but
which may extend to one lakh rupees or with
both.
• If cost auditor is in default- section (2) to (4) of
section 147
• Any contravention with the provision of
Section 139-Appointment
• Section 143- Power And Duties Of Auditor
• Section 144- Prohibited Services
• Section 145- Signing Of Audit Report
Shall he punishable with the fine of Rupees 25
thousand which may extend to Rupees 5 lakh-
section 147(2) or four times the remuneration
of the auditor, whichever is less.
• If the auditor is found to have done the above
act knowingly or willingly with the intention
to deceive the company or its
shareholders/creditors/tax authorities-fine not
less than rupees 50 thousand rupees but may
extend to rupees 25lakhs or eight times the
remuneration of the auditor which ever is less
and imprisonment which may extend to one
year.
 IF AUDITOR IS CONVICTED
• Auditor is liable to refund the remuneration
received from the company and for the
damages to the company/statutory
bodies/authorities/to other person for loss
arising out of incorrect or misleading
statements in audit report-section 147(3)
• CG shall by notification specify any statutory
body or authority or an officer for ensuring
prompt payment of damages to the company or
the person/body /authority or officer shall
after payment of damages to such company or
person file a report with the CG in respect of
making such damages in such manner as may
be specified in the said notification.
•Thank you
 DR ANTIA SABLE
ASSISTANT PROFESSOR
 SECTION 179
 BOD is entitled to exercise all powers and to do all acts
and things which the company can do.

Restrictions limitations
 CHARACTERISTICS OF THE
DIRECTORS POWER
 The power of the directors are co-extensive with the
powers of the company.
 Once elected and in control have almost total power
over company operations until removed.
 The BOD is not competent to do what the ACT,MOA
and AOA requires to be done by Shareholders in GM.
 Directors powers are subject to the provisions In ACT,
MOA, AOA , nor should be inconsistent with the
regulations made by company in GM.
 Power to file a suit on behalf of company is conferred
on director only by passing a resolution.
 STATUTORY POWERS OF
DIRECTOR
Powers must be exercisable by the BOD in GM of the by
passing resolution

1. After being elected and in control ,power over company

operations until they are removed.
2. Powers which are entrusted to them in MOA and AOA.
a. To make calls on shareholders for money unpaid on their
shares.
b. To authorise buy-back of securities.
c. To issue securities , debentures inside or outside India.
d. To borrow monies
e. To invest the company funds.
f. To grant loans ,guarantee or security for loan.
g. To approve financial statement and board’s report
h. to diversify the company business.
i. to approve amalgamation , merger or reconstruction.
j. to take over a company or acquire a controlling or
substantial stake in another company.
k. Any other matter which may be prescribed.

Clause (d) shall not be applicable to borrowings by a

banking company from, other banking companies or from
the RBI , SBI or other Banks established by/under Act.
 OTHER POWERS OF THE DIRECTORS

1. Power to fill casual vacancy.

2. Power to appoint first auditor.
3. Power to make political contribution.
4. Power to appoint alternate and additional directors.
5. Power to declare interim dividends.
6. Power to appoint or remove KMP.
7. Power to declare solvency(voluntary winding up of
company)
8. Power to recommend the rate of dividends on company
share subject to approval of shareholders
9. To constitute nomination and remuneration committee .
 POWERS WHICH CAN BE EXERCISED
ONLY BY PASSING OF RESOLUTION

1. To sell of lease any company assets.

2. Allow time to the director or loan repayment.
3. To borrow money in excess of paid –up-capital and
free reserve.
4. Appoint sole agent for more than 5 years.
5. Issue bonus share and for recognition of share
capital.
6. Contribute money for charitable purposes exceeding
Rs 50,000/ or 5% of average profits of 3 years(which
ever is greater).
 MANAGERIAL POWERS OF THE
DIRECTORS

In the interest of shareholders the Board exercise the

powers namely-
1. To contract with 3rd party.
2. Recommend dividends.
3. Allot forfeit or transfer shares.
4. Decide terms and conditions for issue of debentures.
5. Form policy and issue instructions for effective
business.
6. Appoint MD , manager and Company Secretary .
7. Control or supervision over subordinates.
 SHAREHOLDER’S INTERVENTION IN
EXCEPTIONAL CASES
 Company is an institution owned and controlled by its
shareholders and hence ultimate and final authority is
shareholders.

 The inherent , residuary and ultimate powers of the

company lie with the GM of shareholders.

 Shareholders can interfere in management by

replacing the existing management or by bring new
one.
 EXCEPTIONAL SITUATIONS OF
INTERFERENCE BY SHAREHOLDERS
1. Malafide act of the director/directors.
2. Board incompetent(all the directors are interest in a
transaction of the company.)
3. Dead lock –when the directors are unwilling to act or on
account of deadlock unable to act.
4. Residuary powers- residuary powers of the company
reside in the GM of Shareholders. Example : where the
power to allot shares is conferred by the AOA on its
directors and they act in excess of that power a residuary
inherent power remains in the company to validate the
allotment by an OR in GM.
 GENERAL/STATUTORY DUTIES OF
DIRECTORS
SECTION 166
1. Act according AOA.
2. Act in good faith
3. Promote objects of company for benefit and interest of all its
members, employees, shareholders and community and for
protection of environment.
4. Exercise duties with reasonable care , skill and diligence.
section 166(3)
5. Exercised independent judgment.
6. Shall not have any direct or indirect interest , conflicts or
possibly may conflict with the interest of company.
7. Will not assign his office.
8. Not to contravene the provisions of this section else would be
punishable with fine will be not less than 1 lakh rupees and
maximum 5 lakh rupees.
SPECIFIC DUTIES OF THE DIRECTORS

 Disclose shareholding in the company.

 Disclose interest in the contract of company.
 Self particulars ( Name, address and occupation).
 Take up qualification shares within 2 month of his
appointment.
 Decide minimum subscription and issue prospectus.
 Duty not to publish and false or misleading statement
in the prospectus.
 BOD must be ready to call extra ordinary GM.
 To call statutory meeting or AGM.-section 96
 Ensure full and correct disclosure in the prospectus as
required by law.
 Sign the prospectus before sent to ROC.
 Deliver the prospectus to ROC before it is issued to public.
 To deposit public money in scheduled bank.
 To file return of allotment of securities with ROC
 Declare dividends and arrange for payments.
 File with ROC the reports and resolution as required by
Act.
 Issue , forfeit and transfer shares.
 Perform other duties as prescribed by the Act.
 Contribution to NDF (national defence fund and disclose
in company profit and loss account )during the financial
year of related amount section 183(2).
 Duty to obtain DIN.- section 156 and 159
 Not to mislead by offer document. Section 34 and 35
 Not to induce investors for share subscription. -section 36
 Not to issue irredeemable preference shares. section 55
 File annual return . Section 92
 Duty to maintain books and auditing of books- section 128
 Duty to appoint auditors. Section -128
 To ensure planning and execution of corporate social
responsibility initiatives. section -135
 Not to receive loan from the company.-185
 To receive remuneration in confirmation of provisions-section
197
 Duty to make declaration of solvency in winding up of the
company-section 305
LIABILITIES OF THE DIRECTORS

Against Against
company rd
3 party

Criminal
liability
 LIABILITY AGAINST COMPANY

 Make good for loss caused by him.

 Due to his ultra virus act(entered into a contract beyond
his powers.)
 Fiduciary liability for Breach of trust of
company(making secrete profit out of company.)section
166(2)
 For negligence.
 Non performance of his duties.
 Carelessness
 Dishonest act for making personal profits.
 For co-directors activity.
DIRECTORS LIABILITY TOWARDS 3RD PARTY

 For misleading statements in prospectus.

 For acting fraudently.
 Failure to repay application money on non receipt of
minimum subscription.
 Failure to repay application money on refusal to list shares
by the stock exchange.
 Acting in their own name and not in the name of company.
 Acting beyond the powers given by the company.
 Unlimited liability given under MOA.
 Liability at the company at the time of winding up.
CRIMINAL LIABILITY OF DIRECTORS
For fraud or non compliance of provisions

Imprisonment
Fine
Both
FOLLOWING ACT ATTRACTS THE CRIMINAL
LIABILITY

1. Mis -statement in prospectus.

2. Failure to file return on allotment with the ROC.
3. Failure to give notice to the ROC for conversion of share
into stock.
4. Failure to issue share certificate and debenture
certificate.
5. Failure to maintain register of the members and register
of debenture holders.
6. Default in holding AGM.
7. Failure to provide Annual Accounts and Balance Sheet.
8. For holding the office of director in more than prescribed
companies.
DUTY OF CARE AND SKILL INCLUDES-

There ought to be an The director has to exercise

exhibition of such degree of in the performance of his
skill as my reasonably be duty such care as an
expected from a person with ordinary man might be
the particular director's expected to do on his own
knowledge and experience. behalf

All powers vested in

directors must be exercised
in good faith and in the
interest of the company.
 SPECIAL STATUTORY PROTECTION
AGAINST LIABITY SECTION 463
 Where in the proceeding for negligence , default,
breach of duty, misfeasance or breach of trust , it
appears to the court that the director sued has acted
honestly and reasonably and that having regard to
all the circumstances of the case, he ought fairly to
be excused either wholly or partly from his liability on
such term as the court may think fit.
Regard to all
Honestly Reasonably the
circumstance
Liabilities of directors towards the contract in which
directors are interested
Every director directly or indirectly interest in actual or
proposed contract or arrangement either below have to
disclose the nature of his concern or interest at the GM
in which the contract for arrangement is discussed.

Body corporate in which

he is director or in With the firm or other
association with any other entity in which is a
director holds more than partner, owner , or
2% shareholding or is a member
promoter, manager, CEO
What if director has some interest in the
contract ?

Not to Disclose at the

participate in first meeting
such meetings about his interest
What if director dose not disclose
his interest ?

Contract becomes
voidable.
 INTEREST ?
Section 2(49)-

“Interested director means a director who is in any way,

whether by himself or through any of his relatives or firm,
body corporate or other association of individuals in
which he or any of his relatives is a partner , director or a
member interested in a contract or arrangement or
proposed contract or arrangement , entered into or to be
entered into by or on behalf of a company”
 In other words such interest which is in conflict with the
director’s duty towards company.
 Such interest is covered under mischief of rule /called as
personal in business sense.
Suppose if the board is already
aware
A formal disclosure is
not necessary.
 Effect upon a transaction

 There is no ban on a contract.

 Only important is it should be disclosed ,bonafide and
fair.
 Non-disclosure will make the contract voidable and
not void.
Thank you
OPPRESSION AND
MISMANAGEMENT
DR ANITA SABLE
ASSISTANT PROFESSOR
 OPPRESSION
• Is not defined in company Act 1956
• Oppression as per Section 397(1) of
Companies Act 1956 has been defined as
'when affairs of the company are being
conducted in a manner prejudicial to public
interest or in a manner oppressive to any
member or members'.
 GENERAL MEANING
• Oppression is the exercise of authority or power in a
burdensome, cruel, or unjust manner. It can also be defined
as an act or instance of oppressing, the state of being
oppressed, and the feeling of being heavily burdened,
mentally or physically, by troubles, adverse conditions, and
anxiety.
• It also means causing harm or injury by unjust exercise of
power or discretionary authority , specially with unjust
motives.
• In the context of company law it means depriving of one or
more shareholders of their legitimate expectations or other
unfair treatment by the controlling shareholders.
 Elder v. elder and Watson ltd.
Shanti Prasad Jain V. Kalinga Tubes
Vijay Kumar Narang V. Prakash Coach Builders(p) Ltd.

• An act to constitute oppression need not be

illegal or violative of any statutory provision.
Oppression is a phenomenon which one has to
infer from facts and circumstances of the case
by examining impact of the act on complaining
members.
• Oppression must involve an element of lack of
probity or fair dealing.
NATURE-OPPRESSION MAY BE PAST OR CONTINUING
NATURE

• Oppression may be past or continuing in nature-

Section 241(1)(a)
• Any person having a right to apply to the tribunal if the
affairs of the company have been or are being conducted in
a manner prejudicial to public interest or prejudicial or
oppressive to him or any member or members of the
company or prejudicial to the interest of the company.
• Even the past affairs are also covered by this clause.
• Relief may be granted even against the past act of
oppression.
 ACT AS AN OPPRESSIVE
1. Not calling a GM and keepings shareholders
in dark.
2. Non-maintenance of statutory records and not
conducting affairs of the company in
accordance with the companies Act.
3. Depriving a member of the right to dividend.
4. Transfer of shares held by a company to some
shareholders otherwise than by making an
offer to all.
5. Allotment of shares by director in a manner by which an
existing majority of shareholder is reduced to a minority.
6. Continuous refusal by company to register shares with an
ulterior motive of retaining control over affairs of
company.
7. Failure to distribute the amount of compensation received
on nationalization of business of company among
members were required to distributed.
8. Countermanding decision of BOD who control majority
powers and not allowing board to perform its function.
9. Where directors of private company pass a resolution in
which they are interested without disclosing nature of their
interest.
10. If a sale of assets is made by a company to some of its
director and simultaneously loan is made to purchasers to
finance this sale .
11. Refusal to register transmission under will.
12. Issue of further shares benefiting a section of the
shareholders.
13. Registration of transfers in violation of articles.
14. Diversion of business opportunity
15. Acts of directions/ company leading to financial crisis
of the company are prejudicial to the interests of
shareholders and the company .
16. Irregularities in allotment and transfer of shares ,
siphoning off funds of the company to other
companies for unknown/unwanted purpose , irregular
removal of petitioners from the board ,deflection in
stock maintained by the company, petitioner having
been projected as an expert in the line of business of
the company in the prospectus and on the strength of a
general body resolution keeping such expert out of the
due posts in the company.
17. Issue of shares by book entry only, director removed in EGM for which he
received no notice , shares allotted by defending director to himself without
board meeting, a family partition deed executed after the alleged acts of
oppression and even then not brought before the board or the EGM.

18. In a family centered company even through it is public company, or a

company in guise of partnership, wherein participation of family members
agreed to by members/partners, removal of members/a partner from
management can be considered to be an act of oppression in spite of the
fact that the same is a directional complaint, which as such cannot be
entertained for relief under section 387 and 398.

19. The MD cum chairman for life of a closely held company was removed
form the position of MD by invoking section 274(1)(b) now section 164
claiming that he was an undischarged insolvent .

20. In a family centered company and board consisting of family members,

when board meeting is held in an irregular manner and decisions of far
reaching significance taken without the presence of all the directors and
specially the managing director, the acts of such decision taking constitute
grave oppression.
21. With a view to seeing that the NRI petitioner does not
attend the board meeting of the company of which he was
the chief promoter, notices of such meetings , contrary to
the provisions of the Articles, were sent to his Indian
address and systematically his majority shareholding was
reduced to minority.

22. A company incorporated long back as an association not

for profit sought to amend its articles to provide that any
Christian church or other Christian body in India or abroad
shall be entitled to nominate one member to the association
on paying a sum of rupees 2o,ooo per annum and that too
for two years was held as discriminatory as other members
were not subject to such conditions and hence oppressive
against the background that since 1887 all such bodies
could nominate members and were not subject to these
conditions.
23. Only rights as shareholders can be agitated and no
private agreement can be considered.
24. Lack of equity in allotment of further shares or not
making even an offer to a shareholder.
25. Sending notices to a shareholder to a place where
he did not reside.
26. Irregular appointment of director on the strength of
irregular allotment of shares is an act of oppression.
27. Allotment of shares behind the back of the
appellant to turn minority into majority is an act of
oppression.
28. Where it is difficult to appreciate appointment of
directors , holding of board meetings and transfer
of shares by respondents as no conclusive evidence
could be produce, the petition filed under section
397 /398 now section 241 has to allowed.
30 . Non- issue of share certificate after receipt
of application money and allotment by the
board is an act of oppression.
31. The personal guarantees given by erstwhile
promoters for loans taken by the company
have to be replaced by new guarantees for
releasing the original guarantors, when they
either cease to be in the management of the
company or when their stakes in the company
get substantially reduced. The refusal by the
company is an act of oppression.
32. Transfer of shares disturbing parity of
shareholding between contesting parties,
respondent garnering controlling interest
through –

– Appointment of respondent group’s members as

director with a view to control board and
– Ouster of the MD in a board meeting, where no
notice of the meeting was served on the person
ousted constitute oppression.
33. Forfeiture of shares by amending the AOA to effect forfeiture of
shares of minority shareholders for cessation of business and non-
payment of business dues is an act of oppression.

34. In a situation of quasi partnership , where members held equal

shares and took part in the management , breach of a decision
collectively taken is an act of oppression.

35. When a company is incorporated with restriction as to type of

persons who may be its members, provisions can also be introduced
in article by amendment that confine members of a class of persons
having common business. Therefore , confining members to cable
operators in business by amendment of articles is not illegal , also
when the only business of the company is to provide services to its
members and some members failed to pay for services, company ‘s
articles might permit to expel such members and forfeit the
concerned shares. The amendments of the articles to provide held to
be not oppression.
36.When in terms of will of a deceased person,
his shares in a company are passed on to a
trust and a bank was appointed as the trustee of
the trust , refusal by the company to rectify the
register of members to substitute the name of
the back in place of the deceased and
surreptitiously raising the share capital of the
company to decrease the shareholding of the
deceased, amounts to oppression.
37. While go grievance, which does not relate to
the affairs of the company can be entertained
under section 397 (now 241), acts of irregular
removal of a director cum shareholder and
wrongful transfer of shares recorded in the
board meeting do constitute oppression.
38. Illegal appointment and removal of directors,
allotment of shares and manipulation of
accounts, amounts to oppression and
mismanagement in affairs of company.
39. Illegal and ultra virus action by the board
controlled by the CMD and his group
constituting majority .
40. Voting by interested director on a resolution.
41. At attempt by the persons managing company
to sell immovable property of company at
under price for their personal gain.
42. Sale of property to a relating entity at throw
away price.
43. Non allotment of shares as per promoters’
agreement.
 ACT HELD AS NOT OPPRESSIVE

1. Unwise , inefficient or careless conduct of a director.

2. Non-holding of the meeting of the directors.
3. Not declaring dividends when company is making losses.
4. Mere filing of a suit for recovery of money from an ex-director.
5. Denial of inspection of books to a shareholder
6. Lack of details in notice of a meeting
7. Non-maintenance of records
8. Drawing of remuneration by a director to which he is not legally
entitled .
9. Negligence and inefficiency in managing the affairs of a company.
10. Where a resolution is passed by the members in a general meeting
suspending operation of section 81.
11. Increasing the voting rights of the shares held by the management.
13. If the sale agreement is executed by the NRI and the scrips and
transfer deed were handed over to an agent , all the
consideration was also received by the opposite party. Then
party after lapse of time cannot raise an issue of oppression.
14. As a result of a bonafide sale of shares of majority group, the
EGM held at the instance of such majority group, authorised
the BOD to appoint nominees of the proposed acquirer in the
board shall not amount to be oppression.
15. Where petitioners and respondents being directors have filed
various suits against each other involving financial
irregularities and clandestinely selling title deed of a plot of
land, cannot be considered as oppressive or mismanagement .
16. Petition made under section 397 and 398 (now 241) having
underlying oblique motive is to be dismissed and hence not
oppressive.
17. Allegation already looked into by the court cannot be raised in
a petition to CLB.
18. By prejudicial conduct against the company’s interest and also
on grounds of waiver, estoppels and acquiescence, the
petitioner had disentitled itself from being granted any
equitable relief.
19. Petition under section 397 and 398 now section 241 is
maintainable only in respect of affair so the respondent
company and cannot extend to the affairs of individuals
respondents.( petition cannot be entertained based on
private agreement , allegation brought for irregularity in
allotment of shares after eight years etc).

20. Allegations of transfer of shares to an outsider to the

hitherto composition of shareholding and inducting the
outsider as a director in violation of AOA and in not
sending the notice to petitioner is not an oppression.
21. Mere expression of desire to gain control over the
company by the minority is not an act of oppression.
22. Casting of vote in AGM , convened under tribunal
direction , by valid power of attorney holders on behalf
of certain shareholders to elect directors is not
oppression.
23. A preference shareholder cannot allege oppression in
matters of allotment of equity shares.
24. Grievances of petitioners flow from share purchase
agreement between them and respondents not an act of
oppression.
25. Conduct of majority shareholders must lacked probity
and was unfair necessary for act of oppression.
26. Opening multiple bank accounts without proof of
diversion of funds not oppression.
27. Merely passing of enabling resolution to authorise
board.
28. Holding of EOGM and allotment of shares
strictly not meeting the requirements of the
Act.
29. Allegation not substantiated.
30 . petitioner was terminated from the post of
MD on his failure to achieve the targets as
per his employment agreement. Petitioner
was bound by agreement he entered into
and was not covered by generalized
provisions earmarked as rights of
promoters.
 Scope of provision
1. The oppression must relate to the manner in
which the affairs of the company concerned are
being conducted and the conduct complained of
must be such as to oppress a minority of the
members qua shareholders.
2. Oppression complained of must be shown to be
brought about by a majority of members
exercising as shareholders predominant voting
power in the conduct of the company affairs.
3. Facts on which the petitioner relay must be relevant to
disclose that the making of winding up order would unfairly
prejudice the minority members qua shareholders.

4. A situation in which majority shareholders by an abuse of

their predominant voting power are treating the compnay
and its affairs as if they were their own property to the
prejudice of the minority shareholders and in which just and
equitable grounds would exist for the making of a winding
up order but in which the alternative remedy provided by
the present provision by way of appropriate order might
well be open to the minority shareholders with a view to
bringing to an end the oppressive conduct of the majority.
5. The power conferred on the court to grant a
remedy in an appropriate case appears to envisage
a reasonably wide discretion vested in the court in
relation to the order sought by a complainant as
the appropriate equitable alternative to a winding
up order.
6. The action is not based on the legality or illegality
of action complained of is of primary importance
but whether the acts is oppressive is of paramount
importance.
 OPPRESSION OF MAJORITY
• Remedies against oppression or mismanagement are available not only to the
minorities but also with the majority.

• If the tribunal is satisfied that the company’s interest is being seriously prejudiced
by the activities of one or the other group of shareholders.

• Where the majority is prevented from protecting itself by controlling the directors
at general body meetings despite the clear indication in the articles that majority
rule bases on the right to demand poll should operate as a correcting influence, the
majority becomes an artificial minority entitled to claim protection under the
section 397 and 398 of Act of 1956.

• Petition may also be made if the requisite conditions of section 399 (now 244) are
satisfied ,petition may be made by shareholders having majority shareholding.

• When the majority is denied his legitimate right and is wrongfully reduced to
minority.
 LIMITATION PERIOD FOR
FILING THE PETITION

• Article 137 of limitation Act

Petitioner cannot rely upon events (act of
Oppression) more than 3 years prior to the date
of the filing of the petition.
 COMMON TYPES OF OPPRESSION AND
MISMANAGEMENT ARE

Grossly inefficient
management in Misappropriation of
Fraudulent transactions
disregard of the best funds of the compnay
interests of companies

Absence of the proper

legal authority on the
Illegality in the conduct
part of directors to
of board meetings and
carry on the
general meetings
management of
companies
 NATURE OF RELIEFS
1. A direction by the court for the proper conduct of the affairs of the
company.
2. Removal of the existing directors or some of them from the management
of the company.
3. Declaration that the removal of the peritioner(s) from the management of
the compnay was invalid , and that his/their appointments or rights were
to remain unaffected.
4. Appointment of an administration or receiver during the interim period
till final judgment of the tribunal.
5. Revision of the company’s accounts and recovery of funds alleged to
have been misappropriated by the existing management.
6. An order that the affairs of the compnay should be investigated.
 WHO CAN APPLY
1. In case of the compnay having a share
capital-
at least 100 members or
by at least 1/10 of the total number of its
members , whichever is less.
2. In case of compnay not having share capital –
application will be valid is signed by al least
1/5 of the total number of members of the
company.
 BESIDES MEMBERS, OTHERS MAY
ALSO APPLY FOR RELIEF
1. Under section 241(2) Act 2013 , the CG , or any
person authorised by the CG , has a right to file a
petition.
2. A legal representative of a deceased , on whom
title to the shares devolves by operation of law,
even though not registered as member can
present the petition.
3. Trustees of a shareholder/member may also
make a petition.
4. Shareholders in management.
 REQUISITES OF VALID
APPLICATION
1. The applicant or applicants must have paid all calls and other sums
due on their shares.

2. In case of joint holders of shares shall be counted as one member.

The tribunal has the right to waive all or any of the requirements
to enable the members to make the application under section 241
under companies Act 2013 . Where any members of a compnay are
entitled to make an application ,any one or more member after
taking consent of the requisite number of members may make the
application on behalf of them.
 WHO CANNOT APPLY
1. A member /(s) whose calls are in arrears.
2. A holder of letter of allotment of a partly paid share
3. A holder of a share warrant
4. A holder of a share certificate to bearer
5. A transferee of shares who has not lodged the shares for
transfer to the company.
6. Shareholders of a holding company cannot file petition
against a subsidiary of the holding compnay.
7. BOD of the holding compnay , where the directors did
not hold shares in the subsidiary cannot make petition .
 POWER OF THE TRIBUNAL
section 242(1)
• To make any order as it may think fit .
• Before granting the court must satisfy itself that-
– The company's affairs have been or are being
conducted in a manner prejudicial or oppressive to any
member or members or prejudicial to public interest or
in manner prejudicial to the interests of the company.
– To wind up the company would unfairly prejudice
such member or members, but that otherwise the facts
would justify the making of a winding up order on the
ground that it was just and equitable that the company
should be wound up.
RELIEF UNDER SECTION 242
1. The regulation of conduct of affairs of the
company in future.
2. The purchase of shares or interests of any
company by other members thereof or by the
company.
3. In the case of purchase of its shares by the
company as aforesaid , the consequent reduction
of its share capital
4. Restrictions on the transfer or allotment of the
shares of the company.
5. The termination , setting aside or modification of any
agreement , howsoever arrived at, between the company and
the MD , any other director or manager upon such terms
and conditions as may in the opinion of the tribunal , be just
and equitable in the circumstances of the case.

6. The termination , setting aside or modification of any

agreement between the compnay and third person

7. Setting aside of any transfer, delivery of goods ,payment

,execution or other act relating to property. made or done by
or against the company within 3 months before the date of
the application under this section, which would , if made or
done by or against an individual , be deemed in his
insolvency to be a fraudulent preference.
8. Removal of MD , Manager or any director.
9. Recovery of undue gains by the MD Manager or
Director during the period of his appointment as
such and the manner of utilisation of the recovery
including transfer to investor education and
protection Fund or repayment to identifiable
victim.
10. Manner of appointment of MD or Manager
11. Imposition of cost
12. Any other matter 242(2)
 ACT HELD AS MISMANAGEMENT
1. Serious infighting between directors.
2. Illegal board of directors
3. Gross neglect of interest of the company.
4. Diversion of funds of the company for benefiting majority group.
5. Bank account operated by unauthorised persons
6. Advance of loans without execution of a document.
7. No serious action to recover amounts embezzled.
8. Continuation in officer after expiry of term and infighting among directors.
9. Sale of assets at law price and without compliance with the Act
10. Collusive sale of assets by lending institutions.
11. Company doomed to trade unprofitably.
12. Violation of statutory provision and those of articles.
13. Erosion of company's substratum
14. Violation of memorandum
15. Non existence of names of petitioners in the register of
members and valid share certificates etc.
16. Non compliance of terms of consent order and non
appearance at hearing.
17. Controlling group having control over significant
business without the consent or knowledge of other
groups.
18. Transfer of shares in contravention of articles
19. False information to statutory authorities.
20. Diversion of funds.
21. Illegal Appointment and removal of directors
22. Irregularities including financial irregularities.
23. Refusal to reconstitute the BOD
24. Removal of directors in violation of section 169
 ACT NOT HELD AS AN MISMANAGEMENT

1. Building up of reserves, or non-declaration of dividend

especially when it does not result in devaluation of shares.
2. Incurring loss cannot be said that it is mismanaged.
3. Removal of secretary by BOD
4. Keeping of money in term deposit
5. Arrangement with creditors in company’s bonafide interest.
6. Removal of director and termination of works manager’s
services.
7. Mismanagement cannot be alleged in pre-production stage.
8. Mere breach of fiduciary duty resulting in suffering of
interest of company or public interest
 EFFECT OF ARBITRATION CLAUSE

• If there is a arbitration clause in the AOA , the

tribunal will not stay a petition under section
241 for relief against oppression or
mismanagement in the affairs of the company.
Appeal against the orders of the tribunal and
variation of the order of tribunal
Section 430 –any suit or proceedings in respect of any
matter which the tribunal or appellate tribunal or
appellate tribunal is empowered to determine under this
Act or any other law, no civil court shall have
jurisdiction to entertain such suits or proceedings.
Section 421- any person aggrieved by the order or
decision of tribunal may prefer an appeal to the
Appellant tribunal within 45 days of the date of receipt
by him of the copy of the order or decision.
An appeal against the order of appellate tribunal shall
have to be made to the supreme court of India.
Whether the provisions of evidence Act and CPC
are applicable to proceedings under section 241

Evidence Act had no application to enquiries

conducted by Tribunals even though they
might be judicial in character.
The tribunal shall be guided by the principle of
natural justice and shall act in its discretion to
regulate its own procedure.
Interim order can be passed by the tribunal
provided it is necessary and prima facie case.
 LIMITATION ON INHERENT
POWERS OF TRIBUNAL

• Interim order can be passed in specific

circumstances and not in general terms .
• The tribunals power to pass interim order
under section 242 is restricted to matters of
oppression and mismanagement under section
241 only.
CLASS ACTION
 CLASS ACTION SECTION 245
• It is an alternative remedy available to
members , depositors of the company or any
of them .
• It is a law suit in which one or several person
join together and sue on behalf of a larger
group of persons.
 REQUIREMENT OF CLASS
ACTION
• Questions are common to all affected.
• Large number of persons are involved
• Person affected is very large making it impractical
for all of them to join hands.
• It should be brought by the prescribed number of
members or members , depositor(s) or any class.
• This remedy can be exercised only when the
affairs of the compnay are conducted in such a
manner that is prejudicial to the interest of the
company or its members or depositors
Who can not exercise this remedy of
class action

•Banking Company
 Who may file an application
1. In case of the company having a share capital-
at least 100 members or
by at least % of the total number of its members as may be
prescribed , whichever is less.
OR
any member or members holding not less than such
percentage of the issued share capital of the company as may
be prescribed .
only those who have paid all the calls or other sum are
eligible to join the application .

2. In case of company not having share capital –

application will be valid is signed by at least 1/5 of the total
number of members of the company. (section 245(3)(i)
 Draft rules under the companies Act
2013
1. In case of the company having a share
capital-
at least 100 members or
by at least 1/10 of the total number of its
members , whichever is less.
Or any member or members singly or jointly
holding not less than 10% of the issued share
capital of the company.
Application on behalf of the depositors

• Not less than 100 depositors , or not less than

10% of the total number of depositors,
whichever is less or any depositor or
depositors singly or jointly holding not less
than 10% of the total value of outstanding
deposits of the company.
• Once the application is made cannot be
withdrawn without the leave of the tribunal.
Against whom the application may be
made
• Against company
• Its directors
• Any expert
• Advisor
• Consultant
• Any other person who has made incorrect or
misleading statement to the company or for any
fraudulent , unlawful or wrongful act or conduct
or any likely act or conduct on his part.
 RELIEFS section 245(1)
• To restrain the company from committing an act which
is ultra vires the article or memorandum of the
company.
• To restrain the company from committing breach
• Declaring a resolution to be void
• Restrain the company or director to act on void
resolutions
• Restrain from contrary act
• Restrain from taking action contrary to any resolution
• To claim damages /compensation /demand etc.
• To seek any other remedy as the tribunal may deem fit.
 TRIBUNAL TO TAKE INTO
CONSIDERATION
• Application is made in good faith.
• Evidence of involvement of any person other than
director /officer in the matters of company taking action
contrary to any resolution passed by the members.
• Possibility of pursuing the cause of action in ones own
right .
• On personal interest direct or indirect
• Cause of action is an act or omission that is yet to occur
• Cause of action is an act or omission that has already
occurred.
 PROCEDURE
• Service of notice
• Consolidation into single application
• Two class action for same cause of action will not be allowed
• Cost or expenses
• According to the rules the notice shall be published within 7 days of
admission of the application
• Date of notice in paper shall be taken as the date of serving the
public notice.
• Notice on website of company
• Notice with all particulars.
• Applicant to bear the cost or expenses connected with the
publication of the public notice.
 ORDER OF TRIBUNAL SECTION
245(6)
• Binding on the company, its members, depositors,
auditor, audit firm ,expert, consultant , advisor or
any other person associated with the company.
• Applicant to pay cost not exceeding 1 lakh rupees
if the application is found frivolous or vexatious
• Failure to comply with the tribunal order will be
punishable with fine which shall not be less than
rupees 5 lakh and maximum to rs 25 lakh.
• Punishment for officer in default may extend to
imprisonment of maximum 3 years and fine up to
25 thousand and maximum to rs 1 lakh.
•Thank you
 DR. ANITA SABLE
ASSISANT PROFESSOR
As per the section 253 of companies Act 1956-
1. Major
2. Person of sound mind
3. Not insolvent
4. Not been arrested for more than 6 months within last 5 years.
5. Not be defaulter of call money to company for more than 6
months
6. Subscriber qualification shares as may be of Rs 5000.
7. Not have been declared as disqualified by the court of law.
8. Individual
9. Intend to work as director
10. Competent to contract under contract Act.
11. Qualification if any prescribed under AOA.
 RULE 5 OF THE COMPANIES (APPOINTMENT AND
QUALIFICTION OF DIRECTORS )RULES , 2014
1. Appropriate skills, experience and knowledge in one or more
fields of -

Finance Law Management Sales Marketing

Other disciplines
Corporate Technical related to the
Administration Research Governance Operations company’s
business
2. None of this relatives -
• Is indebted to the company , its holding , subsidiary or
associate company or their promoters or directors.

• has given a guarantee or provided any security in

connection with indebtedness of any third person to the
company or its holding……………………………for
an amount of 50 lakhs rupees , at any time during the
two immediately preceding financial years or during
the current financial years.
1. Unsound mind declared by competent court.
2. Is an undischarged insolvent.
3. Applied to be adjudicated as an insolvent (pending
application)
4. Convicted by a court for an offence involving moral
turpitude(Rule 2(1) (s) of the companies (specification of definitions details )
rules , 2014).And sentenced to imprisonment for not less
than six months and a period of 5 years has not elapsed
from the date of expiry of the sentence. If he is
convicted for 7 years or more will become ineligible.
5. Court or Tribunal has passed an order and the order in
in force disqualifying him from the appointment as a
director for the reason of promotion, formation or
management of the company.
6. He has not paid any calls of any shares of the company
held by him alone or jointly with others and 6 months
have elapsed from the last day fixed for the payment of
the call.
7. At any time during the final preceding five years,
he/she has been convicted of an offence involving
Related Party Transactions which are governed under
Section 188 of the Companies Act, 2013.
8. Where he/she has not obtained a DIN.
9. Where he/she is the director of a company that has either –

a. Failed to file the annual returns for 3 years running.

b. Failed to pay interest on/repay the deposits for over a year.
c. Failed to pay any dividend that was declared for over a year.
d. Failed to redeem debentures or pay interest on debentures for
over a year

If the director of the company is in default of clause (a) or clause

(b) shall not be considered to be disqualified for a period of 6
months from the date of his appointment.

With regard to this particular provision, non-eligibility for

directorship will be for a period of five years from the date of
such default, be it in that particular company or any other
company.(Rule 14 of the companies (appointment and qualification of directors )Rules , 2014
and Condonation Of Delay Scheme , 2018.
 The names of the directors who are
disqualified will be published on the MCA
portal.

 The DIN allotted to that specific director will

be deactivated by the Registrar of Companies.
 Disqualification will be provided under AOA
of company.
 Also the disqualification provided in sub-
sections (1) and (2) will be applicable.
 Disqualification referred to in clauses (d) ,( e )
and (g) of sub-section 1 shall continue to
apply even if the appeal or petition has been
filed against the order of conviction or
disqualification. i.e.-
(d) Convicted by a court for an offence involving
moral turpitude (Rule 2(1) (s) of the companies (specification of
definitions details )rules , 2014). And
sentenced to imprisonment for
not less than six months and a period of 5 years has not
elapsed from the date of expiry of the sentence. If he is
convicted for 7 years or more will become ineligible.

(e) Court or Tribunal has passed an order and the order in in

force disqualifying him from the appointment as a
director.

(g) At any time during the final preceding five years, he/she
has been convicted of an offence involving related party
transactions which are governed under Section 188 of the
Companies Act, 2013.
Make an File writ
appeal petition
 The disqualification stated in clauses (d) (e ) and (f)-
(f)- He has not paid any calls of any shares of the company
held by him alone or jointly with others and 6 months have
elapsed from the last day fixed for the payment of the call.
The disqualification are not to take effect –
I. For 30 days from the date of conviction.
II. If an appeal or petition is preferred within such 30 days ,
until the 7 days are expired from the date of disposal of the
same.
III. If any further appeal or petition is preferred against the order
or sentence within seven days until it is disposed of.
 A private company which is not subsidiary of public
company may add to the additional disqualifications.

 Public company and its subsidiary private company

cannot increase the disqualification or add
qualification.

 This provision is not applicable to stock exchange

public company they can increase the grounds of
disqualification for membership of its governing
council.
 New Directors to be appointed. This will ensure that
the compliances, regulatory or statutory, are observed
to the full.
 Filing of an application with the National Company
Law Tribunal (NCLT) in case because of non-
compliance with regard to the filing of returns, the
status of the company is moved to “Strike Off”, an
application may be filed with the NCLT moving
towards restoring the “Active” status for the company
again.
Approval -
 When the company enters into any transaction with the
related party in relation to any transaction provided under
section 188 have to pass a board resolution by simple
majority present and voting.(refer section 173)
 Company must be given approval by audit committee
(section 177)
 Such transaction must be approved by the members but if
the threshold limits are exceeded approval by members
through ordinary resolution.(section 114)
(threshold limits has been provided under rules company’s
meeting of board and its powers rule 2014)
 Section 2 (76) of the companies Act 2013
I. A director or his relative.
II. A KMP or his relative
III. A firm , in which a director , manage or his relative is
partner.
IV. A private company in which a director or manager
(or his relative) is a member or director.
V. A public company in which a director or manager
director and holds along with his relatives more than
two per cent of its paid –up share capital.
Vi. Any body corporate whose board of directors managing director
or manger is accustomed to act in accordance with the advice ,
directions or instructions of a director or manager.

Vii. Any person on whose advice, directions or instructions a

director or manager is accustomed to act.( provision provided
under vi and vii will not apply to the advice, directions or
instructions of a director or manager)

viii. Any body corporate which is a-

a. Holding , subsidiary or an associate company of such company,
b. A subsidiary of a holding company to which it is also a
subsidiary or
c. An investing company or the venture of the company.
d. such other person as may be prescribed. Rule 3 of companies
(Specification of definition details )Rules 2014.( a director other
then an independent director or KMP of the holding company or
his relative with reference to a company shall be deemed to be a
related party).
 20 companies director except private company and government company.

 In case of public company the maximum of restricted to 10.( it includes directorship in private
companies that are either holding or subsidiary company of public company also)

 The members of a company may by a special resolution specify any number of companies in
which a director of the company may act as directors –section -165(2).

 If a person holds the directorship of the company more than the permitted limits will be liable
for penalty of rs 25000/- per day.

 If AOA provides for less number of directorship to be passed by special resolution.

 If having more than 20 director ship before the law came into existence then the director
should intimate to ROC and the other companies of his directorship Within the period of one
year form the date of provisions.

 After such resignation , he cannot accept directorship in more than the specified number
except up to one year.
Thanks
REMOVAL ,
REMUNERATION
OF DIRECTORS
DR. ANITA SABLE
ASSISTANT PROFESSOR
 REMOVAL OF DIRECTORS BY
SHAREHOLDERS SECTION 169
 A company may by ordinary resolution , remove director.
 Director appointed by the tribunal under section 242
cannot be removed.
before the expiry of the period of his office after giving
him a reasonable opportunity of being heard .
 An independent director reappointed for second term
under section 149 sub section (10) shall be removed by
special resolution after giving him reasonable opportunity
of being heard.
 This provision will not apply in case company availed
itself of the option to appoint not less than 2/3 of total
number of directors by proportional representation.
PROCEDURE FOR REMOVAL
 Special notice from a member of company
proposing an ordinary resolution.
 Send a copy to director to be removed.
 Call a general meeting through board resolution.
 Notice of general meeting in writing at least 21
clear days before the meeting .
 Notice should state the fact of the representation
made by the director concerned and also send the
copy of representation to every member of the
company to whom the notice of the meeting is sent.
 In case representation is received late and could not
be sent to the members shall be read out at the
meet. The director concerned has the right to being
heard.
 NCLT on the application received either by the
company or by aggrieved person ,if satisfied may
dispense with the procedure of sending copy(
situation of securing needless publicity for
defamatory matter)
 PROCEDURE IN CASE OF LISTED COMPANY

 Sent notice of GM to stock exchange(s) within 24 hours of the occurrence

of the event.(Regulation 30(6)of SEBI(Listing Obligations and Disclosure
Requirements) Regulations, 2015).

 Hold the GM and passed the OR or SR in case of Independent directors

who was reappointed for second term.

 Forward of copy of proceedings within 24 hours of the occurrence of the

event to the Stock exchange(s)

 Ensure the said form is digitally signed by the MD or Manager or secretary

of the company . Also certified by the company secretary or CA or
Accountant in whole time practice.
 Company must file director’s particulars in form DIR-12 with the ROC
within 30 days of the removal after paying the requisite fee electronically.
 For filing form DIR-12 following documents need to be attached-

Declaration by
Letter of Declaration by the appointee
appointment the first director director in form
DIR-2

Notice of Evidence of Interest in other

resignation cessation entities
 The particulars of the director and other aspects to be entered by
the company in registers maintained .section 170 and 189

 Appointee director must inform the company the name of other

companies in which he is director about his appointment.

 General public notice in the newspaper intimating removal of

director must be given except for protection of the company and
benefit of the general public.
 REMOVAL BY THE NATIONAL
COMPANY LAW TRIBUNAL SECTION 241

 Application must be made to NCLT under section 241

of the Companies Act 2013.

 The application must be for oppression or

mismanagement

 Tribunal will conduct its proceedings.

 On being satisfied would remove the director under

section 242(2) (h) of the Act.
 Procedure For Removal Of MD/WTD Before Expiry
Of His Term Of Office

 No specific provision in Act.

 There is a contract between them and the company.
 Breach of contract attracts the compensation under section
202
 Only an appointing authority can remove him.
 He can be removed by board or in general GM provided he
is appointed by them.
 AOA may contain the removing procedure.
 If the appointment also provides for the determination of
the office of MD/WTD prior to expiry of term either by the
party giving 3 months notice or so to the other condition,
the same will apply.
IF THE OFFICE OF THE KMP IS
VACATED
 Board will fulfil the vacancy in meeting within a
period of six months from the date of vacancy.
 and if the company makes default with the same
shall be liable to the penalty of 5 lakhs and every
director and KMP in default shall be liable to pay
50 thousand.
 If the default is continuing, further penalty of
1000/- daily for each day will be attracted but not
exceeding 5 lakhs rupees.
 REMUNERATION OF DIRECTORS
SECTION 197 OF ACT 2013

 Remuneration must be determined by-

By ordinary
AOA Resolution

Special
Resolution
Can be paid

Monthly Specified %
payment of net profit

Partly by one way

and partly by the
other
Remuneration will include
 Remuneration payable to him for the services rendered by him
in any other capacity.

What amount received by the director will not be included in

the maximum limit of remuneration received by him?

 In case some professional services are rendered by him on the

bases of his requisite qualification ( in the opinion of
nomination and remuneration committee if applicable to the
board) shall not be included for considering the limits
Remuneration in the private companies

 No restriction on managerial remuneration .

Remuneration in Government company

 Remuneration in the government company-section

197 will not apply.
 Reason-
Managerial remuneration depend upon the total net
profit of the company and section 197 provides for
overall maximum managerial remuneration and
managerial remuneration in case of absence or
inadequacy of profit.
 Remuneration payable by the public company
section 197 and the manner of calculation is
provided under section 198
 11% of net profit.
 Any remuneration in excess to 11% is subject to
compliance of conditions under schedule V.
 In case of non compliance, remuneration will be
subject to the approval of company in GM.
 In case one MD/WTD remuneration shall not exceed
5%.
 If more then one not exceeding 10%
 If need to exceed, approval of company in GM by
special resolution is compulsory after satisfying the
conditions in section and Schedule V.(Not applicable to
NIDHI companies)
 Nidhi companies can give the remuneration payable to
any one MD/WTD/ Manager exceeding 5% of net profits
of the company.
 For Nidhi companies also do not have any restriction for
payment of remuneration to non-executive directors.

 A Nidhi company is a type of company in the Indian

non-banking finance sector, recognized under section 406
of the Companies Act, 2013. Their core business is
borrowing and lending money between their members.
They are also known as Permanent Fund, Benefit
Funds, Mutual Benefit Funds and Mutual
Benefit Company.
 The percentage shall not include sitting fees for attending
meetings of board committee payable to the directors.

It is a fees for attending meetings of board or committee.

It shall not exceed the amount prescribed in Rule 4 of companies
(Appointment And Remuneration Of Managerial Personnel )Rule 2014
Rule -4 sitting fees would be decided by the BOD and shall not exceed Rs.
one lakh per meeting of Board or committee. Also that the sitting fees
would be equal for all including independent and women director.
 Section 197 not applicable to specified
IFSC public company

 International Financial Services Centers'

 private companies being set up in international
financial services centers' (IFSC) from the norms of
the Companies Act 2013.
 IFSCs are set up in special economic zones, and deal
with flows of finance, financial products and services
across borders.
 What if the director draws or receives the excess
amount against the prescribed limit?

 If any director draws or receives, directly or indirectly by way of

remuneration any such sums in excess of the limit prescribe
 Or without requisite approval
 Shall refund to company within 2 years or lesser period as may be
allowed by the company.
 Until such sum is refunded ,hold it as a trust for the company.
 If the company has defaulted in payment of dues to any –
 Bank
 Public financial institution

 Non convertible Debenture holder

 Other secured creditor

The prior approval of the above Shall be obtained by the company before
obtaining the approval in the GM.
If the company has no profits/inadequate profits
SECTION 197(3)

The company shall pay to its director any

remuneration subject to the provisions of schedule
V.
Remuneration To Independent Director

 Not entitle to stock option.

 Will receive a remuneration by way of sitting fees.
 Receive reimbursement of expenses for
participation in the board and other meetings and
profit related commission as approved by members.
 Procedure for fixation of remuneration to
MD/WTD/Manager
 Board meeting of all the directors to pass an OR/SR for
fixing the remuneration of MD.
 Notice in writing at least 21days before GM.
 Pass the resolution in GM by OR/SR.
 In case of SR –file form MGT-14 with explanatory
statement with the ROC within 30 Days.
 Company will execute a agreement with the MD.
 Agreement must be approved by board and CG.
 Necessary entries in register of directors , other records
and register of company.
 Issue general notice in Newspapers about appointment of
MD.
DEFAULT BY INDIVIDUAL /COMPANY

Individual person Company in

shall be liable to a default shall be
penalty of one liable to a penalty
lakh rupees of 5 lakh rupees
 Auditor of the company shall in his report under
section 143 shall make a statement –
 As to the remuneration paid by the company to its
directors in accordance of section.
 Whether remuneration paid to any director is in
excess
 Give such other detail as may be prescribed.
 Procedure for payment of
remuneration to PART-TIME DIRECTORS

Neither a MD nor WTD

1% of the net profit of the company , If there is a MD
/ WTD.

3% of the net profits in any other case.

This provision is not applicable to Nidhi Companies.

Director may also receive a sitting fee for attaining
meetings which shall not exceed 1 lakh rupees per
meeting
Procedure for giving remuneration to other directors as
monthly amount or commission as % of profit

 Board meeting shall be called.

 Passing of resolution
 Consent of members for such payment
 Notice convening the GM should be sent to
members, directors and auditor of the company.
 Taking a GM and passing of resolution for payment
of remuneration on commission basis to non-WTD
 Revision of remuneration of MD
and WTD
 Similar procedure as that of fixing of remuneration
at the time of appointment will be applicable.

Section 197 Applicability

of sch. V

Or
shareholders
approval
 WAIVER OF RECOVERY OF
REMUNERATION
 Company shall not waive the recovery of any sum
refundable to it unless approved by company by SR
within 2 years from the date the sum become
refundable.
 If the company has defaulted in payment of dues to any –
 Bank
 Public financial institution
 Non convertible Debenture holder
 Other secured creditor
The prior approval of the above Shall be obtained by the company
before obtaining the approval in the GM for such waiver.
Thank you
 DR ANITA SABLE
ASSISTANT PROFESSOR
1. Right of access at all times to the books of account
and vouchers of company wherever kept.
2. Call for information and explanation as consider
necessary for the performance of his duties .
3. Inquire for information regarding loans and
advances made by company on basis of security
have been properly secured and the term on which
have been made are whether prejudiced to the
interest of company/its members.
 Whether transactions of the company which
are represented merely by book entries are
prejudicial to the company’s interest.
 Whether the company assets consist of
shares,debentures,securities are sold at less
price in comparison to the purchase price by
the company.
 Whether the loan and advances made by the
company are shown as deposits.
 Personal expenses has been charged to revenue
account.
 If the shares has been allotted for cash ,whether cash
has been received against that allotment, if not cash
has actually been no received, whether the position
as state in the account books and the balance sheet is
correct , regular and not misleading.
 Auditor of the holding company shall also have the
right to access records of all subsidiaries relating to
consolidation of its financial statement with that of
subsidiary and associate companies (amended w.e.f.
9th Feb 2018)
 If the accounts of the any branch office are audited by a person
other than the company’s auditor , the branch auditor shall
submit a report to the company’s auditor. The company auditor
will be entitled to receive a report from the branch auditor and
deal as may deem necessary in his report.
 Company auditor is entitle to visit the branch office for his
performance of his duties.
 Right to access books, accounts and vouchers of branch
office.
 Right to access to copies /extracts from the books of accounts
of branch if the branch office is located outside India.
To receive To sign
Auditors lien
notices etc reports

Right to Right to
remuneration attend GM
SITUTATION OF REAPPOINTING/NOT REAPPOINTING
OF RETIRING AUDITOR
1. Right to receive notice of the resolution.
2. Right to make a written representation to the company
and request its notification to members of the company.
3. Right to get his representation circulated among the
members.
4. Also the copy of representation shall be filed with the
registrar.
5. Right to get his representation read out in the meeting if
not sent to the members due to delay in receiving /default.
 Compliance
To make report Making
with auditing
section 143 auditors report
standards

Duty to make
Duty to report Duty to attend
statement in
fraud GM
prospectus
Duty to produce Duty to produce
documents evidence

Duty to acquaint
themselves with
their duties
 To accept a certificate from the company
management ,that the applicable provisions of the Act
have been complied.
 To verify relevant documents/records of the company.
 Verify whether a member of the company has given
special note of the resolution required at least 14 days
before the date of GM.
 Verify whether the special notice is sent to the
members.(section 115)
 Verify whether representation received from the retiring
auditor, if any, has been sent to the members of the
company as required under section 140(4)(iii).
 Verify whether the representation received from the
retiring auditor has been considered at the GM and the
resolution proposed by the special notice has been
properly passed to the GM .
 Obtain the copy of relevant minutes of the GM duly
certified by the chairman of the meeting .
 Should communicate with the outgoing auditor in
writing before accepting the audit assignment to inquire
whether any professional reason exists for him not to
accept the audit.(CA Act 1949).
1. Shall make a report of the accounts examined by him.
2. On every financial statement which are required by or
under this Act to be laid before GM
3. To state in his report that accounts examined and
financial statement are true and fair view of –
1. The state of company’s affairs as at the end of its financial
year.
2. The profit or loss for the year
3. Cash flow for the year and such other prescribed matters .
4. To prepare his report after considering the provisions of Act.
- The accounting and auditing standards.
• Any contravention with the provision of
section 139-appointment
• Section 143- power and duties of auditor
• Section 144-prohibited services
• Section 145- signing of audit report
Shall he punishable with the fine of Rupees 25
thousand –Rupees 5 lakh- section 147(2) or
four times the remuneration of the auditor,
whichever is less.
 If the auditor is found to have done the above act
knowingly or willingly with the intention to deceive the
company or its shareholders/creditors/tax authorities-
fine not less than rupees 1 lakh but may extend to
rupees 25lakhs and imprisonment which may extend to
one year.
 Auditor is liable to refund the remuneration received
from the company and for the damages to the
company/statutory bodies/authorities/to other person
for loss arising out of incorrect or misleading
statements in audit report-section 147(3)
 In case if the auditor is firm , the partner/partners shall
be jointly and severally liable.
 Criminal liability of audit firm other than fine, shall
devolve only on the concerned partners , who acted in a
fraudulent manner or abetted or as the case may be
concluded in any fraud.(Rule 9)
 It is a duty of the auditor to provide only those services provided
under the Act/approved by BOD/audit committee
 This does not include-
a) Accounting and book keeping services.
b) Internal audit
c) Design and implementation of any financial information
system.
d) Actuarial services
e) Investment advisory services
f) Investment banking services
g) Rendering of outsourced financial services
h) Management services
i) Any other kind of services as may be prescribed.
 If the auditor is an individual –individual
himself/relative/any person connected/associated /any entity
in which the individual has significant influence /control
/whose name /trade ,ark/brand is used by the individual.
 If the auditor is a firm or LLP(limited liability
partnership)- such firm /LLP either itself or through its
partner /through its parent/subsidiary /associate /through
any entity in which the firm/LLP/partner has significant
influence or control /whose name /trade mark /brand is used
by the firm /LLP /any of its partners.
Thank you
LIQUIDATOR’ S ROLE IN
WINDING UP
DR ANITA SABLE
ASSISTANT PROFESSOR
 LIQUIDATORS
 On the commencement of winding up of company the
company does not come to an end. Its assets are to be
realised and distributed among the debenture –holders,
creditors, shareholders etc.

 Some one has to act as an agent is called as liquidator

or official liquidator
 The process of winding up can be
divided in

Compulsory winding up voluntary winding up

Definition
Company liquidator-section 2(23)
A person appointed by
 (a) the tribunal in case of winding up by the tribunal
 (b) by the company or creditors in case of voluntary
winding up , as a company liquidator from a panel of
professionals maintained by the CG under section
275(2)
Liquidator appointed by the tribunal
 The tribunal at the time of passing a winding up order has to
appoint an –
 official liquidator or liquidator from the panel maintained under
section 275(2).
 Provisional liquidator or the company liquidator has to be
appointed from a panel maintained by the CG consist of –
 CA , Advocates, CS , Cost Accountants or Firms or Bodies corporate
having such CA (s) and other professionals notified by the CG for from a
firm or body corporate of persons having a combination of such
professionals as may be prescribed and having at least 10 years experience
in company matters.
PROVISIONAL LIQUIDATOR
 A tribunal at its discretion can appoint a provisional liquidator, before the
winding up order is made.
 Before making appointment of the provisional liquidator notice shall be
served to the company for the representation if any.
 Aim and objective of appointing provisional liquidator-
 To safe guard the assets of the company till the appointment of liquidator
is done.
• He will have all the powers of the liquidator unless the tribunal imposes
restrictions/limitations on exercise of such powers by the provisional
liquidators.
• He may conduct inquiries and investigation a ordered by the CG or the
tribunal on matters arising out of winding up proceedings.
• A provisional liquidator may be asked by the tribunal to furnish such
security as it may direct at his own cost.
• All the cost , charges and expenses incurred by the provisional liquidator
shall be paid out of all the assets of the company.
 APPOINTMENT OF COMPANY
LIQUIDATOR SECTION 275

 Appointment of official liquidator or a liquidator from the

penal maintained amongst the insolvency professionals
registered under the insolvency and Bankruptcy code,
2016 as the company liquidator.
 Within 7 days of the appointment of a company liquidator
or provisional liquidator ,the tribunal shall intimate to the
liquidator so appointed and the registrar (section 277(1)).
 POWERS AND DUTIES OF COMPANY
LIQUIDATORS SECTION 290
i) To institute or defend any suit, prosecution or other
legal proceedings, civil or criminal in the name of the
company.
ii) To carry on the business of the company.
iii) To sell the immovable property and actionable claims of
the company by public auction or private contract with
power to transfer the whole thereof to any person or
body corporate.
iv) To sell the whole of the undertaking of the company as
a going concern
v) To raise the required money as the security of the assets
of the company.
vi) To inspect the records and returns of the company on the
files of the Registrar without payment of any dues.

vi) To prove rank and claim in the insolvency of any

contributory , for any balance against his estate.

vii) To institute or defend any suit , prosecution or other legal

proceedings , civil or criminal , in the name and on behalf of
the company.

viii) To invite and settle claim of creditors , employees or any

other claimant and distribute sale proceeds in accordance
with priorities established under this Act.

ix) To draw, accept, make and endorse any bill of exchange,

hundi or promissory note on behalf of the company.
xi) To take out in his official name , letters of
administration to any deceased contributory,
obtaining payment of any money due from
contributory or his estate which cannot be
conveniently done in the name of the company.
xii) To obtain any professional assistance form any
person , appoint any professional in discharge of
his duties , obligation and responsibilities and for
protection of the assets of the company, appoint
an agent to do any business which the
company liquidator is unable to do himself.
xiii) To take all such actions, steps or to sign ,
execute and verify any paper, deed,
document, application, petition, affidavit,
bond or instrument as may be necessary.
xiv) To apply to the tribunal for such orders or
directions as may be necessary for winding
up of the company.
 DUTIES OF COMPANY LIQUIDATOR
IN WINDING UP BY THE TRIBUNAL
1. Conduct equitably and impartially all proceedings in the winding up
according to the provisions of the law , and must perform such duties in
reference thereto as the tribunal may impose.

2 To bring the property of company in his custody and control.

3 Submit preliminary report to the tribunal within 60 days from the winding
up order.

4 Must call meeting of the creditors and contributories for determining the
person to be appointed as members of advisory committee if need to be
constituted within 30 days from the date of the direction of the Tribunal.
The company liquidator shall chair the meeting of the advisory committee.

5 Must keep all sums received by him, on behalf of the company into some
scheduled bank, unless the tribunal otherwise allows deposit in a non-
scheduled bank.
6 To keep proper books , entries, minutes of the
proceedings and other matters as in the manner
prescribed. These could be inspected by any creditor or
contributory personally or by his agent subject to the
control of the tribunal.
7 To get the accounts of the company completed and bring
them up to date.
8 If he is authorised to carry on the business of the
company ,separate books of accounts shall be
maintained in respect of the business in conformity with
the books usually kept by the company.
9 To present at least twice in each year , the tribunal an
account of his receipts and payments as company
liquidator.

10 To provide vouchers and other information needed by

the tribunal and registrar as and when required.

11 Sent printed copy of the accounts so audited or a

summary thereof by post to every creditor and to every
contributory unless the tribunal orders otherwise.
 Preliminary report by the company liquidator is an important
step in the winding up proceedings.

 The details in the report helps in assessing the financial

position of the company in liquidation by taking stock of its
assets, liabilities and contributories , fixing the tie limit of
winding up and the manner of sale of the company’s assets.

 The company liquidator may , with the leave of the tribunal ,

disclaim onerous properties belonging to the company.

 Any person aggrieved by any act or decision of the company

liquidator may apply to the tribunal , and the tribunal may
confirm , reverse or modify the act or decision complained of ,
and make such further order as it thinks just in the
circumstances
 TERMS AND CONDITIONS OF THE SERVICE AND
THE REMUNERATION OF THE LIQUIDATOR

 The tribunal is empowered to fix the terms and conditions

including remuneration of the liquidator or provisional
liquidator.
 The fee is based on task to the performer, experience,
qualification of such liquidator and size of the firm.
 Within 7 days of appointment such liquidators shall either
accept or inform non acceptance due to conflicting of
interest, or lack of independence to the tribunal .
 The obligation shall continue for the full term of
appointment.
 Removal and replacement of
liquidator
 The tribunal shall specify the manner in which the
company liquidator shall perform his duties.
 The tribunal is empowered to remove any liquidator or
provisional liquidator, if there are sufficient grounds of
misconduct , fraud or misfeasance, professional
incompetence, or failure to exercise due care and
diligence,
 Before removal the tribunal shall give a reasonable
opportunity of being heard. In case of death,
resignation, or removal of liquidator, the tribunal may
transfer the work to another liquidator.
 Penal provisions for company
liquidators-
 If the company liquidators default in submitting the
statement that a company is in liquidation under section
344 shall be punishable with fine which shall be not less
than rupees 50 thousand but may extend to rupees 3 lakh.
 Section 349-351-it is obligation on the official liquidator to
pay the monies received by him in his capacity as official
liquidator of any company, into the public account of India
in RBI. Every company liquidator is required to open a
special bank account with a scheduled bank for this
purpose .
 In case of the company liquidator retaining any money
exceeding rupees 5000 or such sum as may be authorised
by the tribunal for more than 10 days , he shall-
Pay interest on the amount so retained in
excess , at the rate of 12% per annum and be
liable to penalty determined by the tribunal.
Be liable to pay any expenses occasioned by
reason of his default and
He shall also be liable to have all or such
part of his remuneration , as the tribunal may
consider just and proper, disallowed or may
also removed from his office.
 If the company liquidator make a default in paying the
money into the company liquidation dividend and
undistributed assets account
 Pay interest on the amount so retained in excess ,
at the rate of 12% per annum and be liable to
penalty determined by the Registrar.
 To pay any expenses occasioned by reason of his
default and
 Where the winding up is by the tribunal , to have
all or such part of his remuneration, as the tribunal
may consider just and proper, to be disallowed ,
and to be removed form his office by the tribunal.
 Default by the company liquidator to
make returns section 353

 On the application moved by the contributory, creditor or

the registrar ,Tribunal is empowered to make an order
directing the company liquidator to make good-
 Good the default make in filing
 Delivering or making any return
 Account or other document
 In giving any notice which he is by law required to file,
deliver, make or give.
Within 14 days after the service of notice to him.
The tribunal in its order may provide that all costs of , and
incidental to , the application shall be borne by the company
liquidator .
The company liquidator also remains liable to any penalties
imposed under any other law for the time being in force.
Thank you
ASSISTANT PROFESSOR
 Controller of Capital Issues(CCI) to show who will be
the in charge of capital in socialist India
Regulatory Authority before SEBI came into existence;

Derived authority from the Capital Issues (Control)

Act, 1947.
By virtue of this Act the government decided which
company could raise how much capital.
No company shall, “except with the consent of the
Central Government, make an issue of capital.
 The control over the amount as well as its pricing
converted the office of CCI into a zero-risk, high return
lottery-ticket dispenser, as the prices of the shares
offered to the public through capital markets were
tremendously undervalued,
 giving a huge margin to investors and speculators on
listing.
 Since the asymmetric information was in favour of
companies,
 the government possibly considered its role as one that
created a balance in favour of investors.
 gave CCI the power to revoke the consent or
recognition accorded under any of the provisions or,
where such consent or recognition is qualified with any
conditions, change all or any of those conditions.
 choosing, applying, taking the risk and getting the
returns was left to individual households. By ensuring
that the prices of shares were kept low, the government
ensured gains to small investors. But this meant that
enterprises were not able to get the right value.
Following the gradual opening up of the economy, the
CCI was repealed on 5 August 1992
 Due to malpractices the
customers started losing
confidence and faith in the
stock exchange.
1. To protect the interest of investors in securities.
2. To promote the development of security market.
3. To regulate the securities market and for matters
connected therewith or incidental thereto.
 INTRODUCTION AND BACKGROUND

SEBI(as an interim administrative body) Securities and Exchange

Board of India (SEBI) was first established in as a non-
statutory body

Established by GOI on 12th April 1998 with an object to promote –

 Orderly and healthy growth of securities market
 To provide protection to the investors of security market
 for regulating the securities market
{Entire administration and function of the this body was under GOI.}
  Ordinance was passed and SEBI an interim
administrative body got statutory powers on 30 Jan
1992 and became an autonomous body by the Indian
parliament.

SEBI head quarter business district of Bandra Kurla

Complex in Mumbai

Northern, Eastern, Southern and New Delhi, Kolkata, Chennai,

Western Regional Offices and Ahmadabad

Local offices Jaipur , Bangalore , Guwahati,

Bhubaneshwar, Patna, Kochi
and Chandigarh
 The chairman -Nominated by the Union
Government of India.
 Two members-Officers from the Union
Finance Ministry.
 One member -Reserve Bank of India.
 Five members -Nominated by the Union
Government of India, out of
them at least three shall be
whole-time members.
 To protect the interests of
investors in securities and to
promote the development of.

 To regulate the securities

market and for matters
connected there with or
incidental there to".

Issuers of
securities Investors

Market
intermediaries
QUASI-LEGISLATIVE CAPACITY

QUASI-JUDICIAL BODY

QUASI-EXECUTIVE
 is that in which a public administrative agency or
body acts when it makes rules and regulations. When
an administrative agency exercises its rule-making
authority, it is said to act in a quasi-legislative manner.
Administrative agencies acquire this authority to make
rules and regulations that affect legal rights through
statutes. This authority is an exception to the general
principle that laws affecting rights should be passed
only by elected lawmakers.
 SEBI drafts regulations in its legislative capacity,
 is a non-judicial body which can interpret law. It is an
entity such as an Arbitration panel or tribunal board,
that can be a public administrative agency but also
a contract- or private law entity, which has been given
powers and procedures resembling those of a court of
law or judge, and which is obliged to objectively
determine facts and draw conclusions from them so as
to provide the basis of an official action. Such actions
are able to remedy a situation or impose legal penalties,
and they may affect the legal rights, duties of specific
parties.
 SEBI passes rulings and orders in its judicial
capacity
 SEBI conducts investigation and enforcement action in
its executive function
1. To approve by−laws of Securities exchanges.
2. To require the Securities exchange to amend their
by−laws.
3. Inspect the books of accounts and call for periodical
returns from recognized Securities exchanges.
4. Inspect the books of accounts of financial
intermediaries.
5. Compel certain companies to list their shares in one
or more Securities exchanges.
6. Registration of Brokers and sub-brokers
 Commodity Derivatives Market Regulation Department (CDMRD)
 Corporation Finance Department (CFD)
 Department of Economic and Policy Analysis (DEPA)
 Department of Debt and Hybrid Securities (DDHS)
 Enforcement Department – 1 (EFD1)
 Enforcement Department – 2 (EFD2)
 Enquiries and Adjudication Department (EAD)
 General Services Department (GSD)
 Human Resources Department (HRDM)
 Information Technology Department (ITD)
 Integrated Surveillance Department (ISD)
 Investigations Department (IVD)
 Investment Management Department (IMD)
 Legal Affairs Department (LAD)
 Market Intermediaries Regulation and Supervision Department (MIRSD)
 Market Regulation Department (MRD)
 Office of International Affairs (OIA)
 Office of Investor Assistance and Education (OIAE)
 Office of the chairman (OCH)
 Regional offices (ROs)
 Technical Advisory Committee
 Committee for review of structure of infrastructure
institutions
 Advisory Committee for the SEBI Investor Protection
and Education Fund
 Takeover Regulations Advisory Committee
 Primary Market Advisory Committee (PMAC)
 Secondary Market Advisory Committee (SMAC)
 Mutual Fund Advisory Committee
 Corporate Bonds & Securitization Advisory Committee
 A regulator by pushing systematic reforms aggressively
and successively.
 Credited for quick movement towards making the
markets electronic and paperless
 Active in setting up the regulations as required under
law
 SEBI did away with physical certificates that were
prone to postal delays, theft and forgery, apart from
making the settlement process slow and cumbersome
by passing Depositories Act, 1996
 Been instrumental in taking quick and
effective steps in light of the global meltdown
and the Satyam fiasco.
 It increased the extent and quantity of
disclosures to be made by Indian corporate
promoters
 It liberalised the Takeover Code to facilitate
investments by removing regulatory structures.
 Increased the application limit for retail
investors
 There are in all 10 chapters
Sr. NO. chapters contents
1 I Definitions
2 II Establishment of SEBI
3 III Transfers of assets ,liabilities etc
4 IV Powers and functions of SEBI
5 V Registration certificate
6 VA Prohibition of manipulative and deceptive devices, insider trading and
substantial acquisition of securities or control
7 VI Finance, accounts and audit
8 VIA Penalties and adjudication
9 VIB Establishment, jurisdiction, authority and procedure of the securities
appellate tribunal

10 VII Miscellaneous
Section 3(1) Central Government may, by notification, appoint, a
Board by the name of the Securities and Exchange
Board of India.

Section 3(2) Board shall be a body corporate

1.Having perpetual succession
2.A common seal,
3.With power to acquire, hold and dispose of property,
both movable and immovable, and to contract, and
shall, by the said name, sue or be sued.

head office Bombay.

offices other places in India.

 Section 4 (1)
 The chairman - Nominated by the Union
Government of India.
 Two members- Officers from the Union
Finance Ministry.
 One member - Reserve Bank of India.
 Five members - Nominated by the Union
Government of India, out of
them at least three shall be
whole-time members.
Section 4(2)
 The general superintendence, direction and management of the affairs
of the Board.
 May exercise all powers and do all acts and things which may be
exercised or done by the Board.

Section 4(3)
 The Chairman shall also have powers of general superintendence and
direction of the affairs of the Board and may also exercise all powers
and do all acts and things which may be exercised or done by that
Board.
Section 4(4)
• Appointment.
Section 4(5)
 Chairman and the other five members shall be persons of ability,
integrity and standing who have shown capacity in dealing with
problems relating to securities market .
 have special knowledge or experience of law, finance, economics,
accountancy, administration or in any other discipline which, in the
opinion of the Central Government, shall be useful to the Board.
 The term of office and other conditions of service of the
Chairman and the members referred to in clause (d) of sub-
section (1) of section 4 shall be such as may be prescribed.

 The Central Government shall have the right to terminate the

services of the Chairman or a member appointed.

 At any time before the expiry of the period , by giving him notice
of not less than three months in writing or three months’ salary
and allowances in lieu thereof,

 The Chairman or a member, as the case may be, shall also have
the right to relinquish his office, at any time before the expiry of
the period prescribed under sub-section (1), by giving to the
Central Government notice of not less than three months in
writing.
 The Central Government shall remove a
member from office if Not without
reasonable
opportunity of
being heard

Convicted for
Adjourned the offence
Unsound
insolvent of moral
mind
turpitude

abused his position as to render his

continuation in office detrimental to the public
interest:
Section 11

Section 11A

Section 11AA

Section 11B

Section 11C

Section 11D
1. Regulating the business in stock exchanges and any other
securities markets.
2. Registering an regulating the working of intermediaries.
3. Registering and regulating the working of venture capital funds
and collective investment schemes , including mutual funds.
4. Promoting and regulating self-regulatory organisations.
5. Prohibiting fraudulent and unfair trade practices.
6. Promoting investors education and training of intermediaries.
7. Prohibiting insider trading in securities.
8. Regulating substantial acquisition of shares and takeover of
companies.
9. Calling for information, undertaking inspection, conducting
inquiries and audits of stock exchanges, mutual funds, other
persons associated with the securities Markets and
intermediaries/self regulatory organisations in the securities
market..
◦ From any person including any bank or any authority or board or
corporation established or constituted by or under any central or state
Act.
◦ Which in opinion of SEBI , shall be relevant to any investigation or
inquiry by SEBI in respect of any transaction in securities.
◦ To any such agencies, as may be specified by SEBI , such
information as may be considered necessary by it for the efficient
discharge of its functions
◦ To the authorities whether in India or outside India having function
similar to those of SEBI , in the matters relating to the prevention or
detection of violation in respect of securities law , subject to the
provisions of other laws for the time being in force in this regard.
◦ Sebi for the purpose of furnishing any information to any authority
outside India, may enter into an arrangement or agreement or
undertaking with such authority with the approval of central
government.
 Performing such functions and exercising such powers
under the provisions of the securities contract
(regulation)Act 1956 , as may be delegated to it by the
CG.
 Levying fees or other charges for carrying out the
purpose of this section
 Conducting research for the above purpose
 Performing such other functions as may be prescribed.
 SEBI MAY TAKE MEASURES
◦ To undertake inspection of any book, or register or other
document or record of any listed public company which
intends to get its securities listed on any recognised stock
exchange where SEBI has reasonable grounds to believe that
such company has been indulging in insider trading or
fraudulent and unfair trade practices relating to securities
markets
 To undertake inspection of any book, or register or
other document or record of any listed public company
or public company.
 Which intends to get securities listed on any recognised
stock exchange where SEBI has reasonable grounds to
believe that such company has been indulging in
insider trading or fraudulent and unfair trade practices
relating to securities market
 Provides that for carrying out the duties
assigned to it under the Act SEBI has been
vested with the same powers as are available
to a civil court.
 Sebi may , by an order or for the reasons to be recorded in
writing in the interest of investors or securities market take
any of the following measures either pending investigation
or inquiry or on completion of such investigation or enquiry
namely-
a. Suspend the trading of any security in a recognised stock
exchange.
b. Restrain persons from accessing the securities market
c. Suspend any office –bearer of any stock exchange
d. Impound and retain the proceeds or securities in respect of any
transaction.
e. Attach for a period exceeding one month with prior approval of a
magistrate having jurisdiction , one bank account of any
intermediary or any person associated with securities market in
any of the Act or rules or regulations made there under
f. Direct any intermediary or any person associated with the
securities market in any manner may dispose of or alienate an asset
forming part of any transaction which is under investigation
 To regulate or prohibit issue of prospectus, offer document
or advertisement soliciting Money for issue of securities
 Without prejudice to the provisions of the companies Act,
2013(Section 26 of the companies Act)
a. Specify, by regulations-
I. the matters relating to issue of capital , transfer of securities and
other matters incidental thereto and
II. The manner in which such matters shall be disclosed by the
companies.
b. By general or special orders-
I. Prohibit any company from issuing prospectus , any offer
document or advertisement soliciting money form the public for
the issue of securities.
II. Specify the conditions subject to which the prospectus , such offer
document or advertisement, if not prohibited , may be issued.
 Section 11B power to issue directions-
a. To any person or class of persons referred to in section 12
, or associated with the securities market; or
b. To any company in respect of matters relating to issue of
capital, transfer of securities and other matter incidental
thereto, as may be appropriate in the interests of investors
in securities and the securities market.
If SEBI is satisfied after making due enquiries , that is necessary-
I. In the interest of investors , or orderly development of securities
market, or
II. To prevent the affairs of any intermediary or other person referred
to in section 12 being conducted in an manner detrimental to the
interests of investors or securities market or
III. To secure the proper management of any such intermediary or
person.
1. Grounds for investigation
Where SEBI has reasonable ground to believe it may, at any
time by order in writing , direct any person specified in the
order to investigate the affairs of such intermediary or persons
associated with the securities market and to report thereon to
SEBI.

2. Duty of officers to produce Accounts and Records.

3. Powers of investigating Authority may keep in its custody any

books, registers , other documents and record for six months
and thereafter shall return.

4. To examine on oath-in relation to the affairs of his business

and may administer an oath accordingly and for that purpose
may require any of those persons to appear before it personally
.
 Shall be punishable with= imprisonment for a term
which may extend to one year, or with fine which may
extend to one crore rupees, or with both , and also with
a further fine which may extend to 5 lakh rupees for
every day after the first during which the failure or
refusal continues.
5. To take notes on examination.
6. Seizer of records.
 If SEBI finds , after causing an inquiry to be made that
any person has violated, or is likely to violate any
provisions of this Act, thereunder , it may pass an order
requiring such person to cease and desist from
committing or causing such violation.
 SEBI shall not pass such order in respect of any listed
public company or a public company which intends to
get its securities listed unless SEBI has reasonable
grounds to believe that such company has indulged in
insider trading or market manipulation.
Section 12
 Provides that the following intermediaries are required to obtain a
registration certificate from Sebi to buy, sell or deal in securities
◦ Stock broker
◦ Sub broker
◦ Share transfer agent
◦ Banker to an issue different market policy
◦ Trustee of trust deed
◦ Registrar to an issue
◦ Merchant banker
◦ Underwriter
◦ Portfolio manager
◦ Investment adviser
◦ Depository participant
◦ Custodian of securities
◦ Foreign institutional investor
◦ Credit rating agency
◦ Such other intermediary
 Every application for registration would in be made in
such manner and on payment of such fees as may be
determined by SEBI Regulations .
 SEBI may , by order suspend or cancel a certificate of
registration in such manner as may be determined by
SEBI regulations.
 However , no such order shall be made unless the
person concerned has been given a reasonable
opportunity of being heard.
 A person shall not directly or indirectly
a. Use or employ in connection with the issue , purchase or
sale of any securities listed or proposed to be listed on a
recognized stock exchange any manipulative or deceptive
device.
b. Engage in any act, practice , or course of business which
operates or would operate as fraud or deceit upon any
person.
c. Engage in insider trading.
d. Acquire control of any company or securities more than
the percentage of equity share capital of a company
whose securities are listed or proposed to be listed on a
recognised stock exchange in contravention of the
regulations made under this Act.
SR NO. SECTION PARTICULAR
1 15A Failure to furnish information , return etc
2 15B Failure by any person to enter into agreement with
client
3 15C Failure to redress investor grievances

4 15D Default in case of mutual funds

5 15E Failure to observe rules and regulations by an asset

management company
6 15F Default in case of stock brokers

7 15G Insider trading

8 15H Non –disclosure of acquisition of shares and takeovers

9 15 HA Fraudulent and unfair trade practices

10 15HB Contravention where no separate penalty has been
provided
 Listed
intermediaries
companies

Any other
person
 Failure to furnish any document , return or report
 File any return or furnish any information , books or
other documents within the time specified therefore in
the regulations
 To maintain books accounts or records

Penalty of Rs 1 lakh per day

during which such failure
continues or Rs 1 crore ,
whichever is less
 Failure to enter into an agreement with his
client

Penalty of Rs 1 lakh per day .

During which such failure
continues or Rs. 1 crore,
whichever is less.
 Applicability-listed company and intermediaries

 Contravention- failure to redress the grievances of

investors, after having been called upon by the board in
writing to redress the grievances of investors

 Penalty- 1 lakh per day during which such failure

continues or rs 1 crore , whichever is less.
 Applicability –mutual funds /collective investment
scheme

 Contravention- doing such activity without obtaining

certificate of registration , or fails to company the
conditions specified in the governing regulations

 Penalty – penalty of rs 1 lakh per day during which

such failure continues or rs 1 crore, whichever is less
 Applicability –Asset Management Company

 Contravention – fails to comply with any of the

regulations providing for restrictions on the activities of
the asset management companies

 Penalty of rs 1 lakh per day during which such failure

continues or rs.1 crore, whichever is less
 Applicability – stock broker

 Contravention-
◦ fails to issue contract notes
◦ Fails to deliver any security
◦ Charges excess brokerage

Penalty -
• penalty not exceeding 5 times the amount of contract
note

• penalty of rs 1 lakh per day during which such failure

continues or rs 1 crore, whichever is less

• penalty of rs 1 lakh or 5 times the amount of brokerage

excess charged whichever is higher
 Applicability – any insider

 Contravention- contravention of provisions of insider

trading regulations

 Penalty of rs 25 crore or 3 times the amount of profits

made out of such insider trading, whichever is higher.
◦ (Minimum is 10 lakh rs)
 Applicability- any acquirer/person acting in concert

 Contravention – contravention of provision of takeover

code regulations

 Penalty- penalty of rs 25 crore or 3 times the amount of

profits made out of such failure , whichever is higher.
◦ (Minimum is rs 10 lakh )
 Applicability – listed companies , intermediaries or any
other person

 Contravention- indulgence in any fraudulent and unfair

trade practices

 Penalty- penalty of rs 25 crore or 3 times the amount of

profits made out of such practices , whichever is higher
◦ (minimum 5 lakh)
 Applicability – listed companies, intermediaries or any
other person

 Contravention – contravention of any of the provision

of the Act where no specific penalty is specified

 Penalty which may be extend to rs 1 crore.(residue

penalty)
◦ (minimum 1 lakh)
 SEBI appoints any of its officers not below the rank of
division chief to be an adjudicating officer for holding
inquiry in the prescribed manner after giving any person
concerned a reasonable opportunity of being heard for the
purpose of imposing any penalty.

 The adjudicating officer has powers to summons and

enforce the attendance of any person acquainted with the
facts and circumstances of the case to give evidence or to
produce a document which in the opinion of the
adjudicating officer may be useful for a relevant to the
subject matter of the inquiry and if ,on such inquiry, he is
satisfied that the person has failed to comply with the
provisions , he may impose such penalty as he thinks fit in
accordance with the provisions of any of those sections.
 SEBI may call for and examine the record of any
proceedings under this section and if it considers that the
order passed by the adjudicating officer is erroneous to the
extent it is not in the interests of the securities market, it
may, after making or causing to be made such inquiry as it
deems necessary pass an order enhancing the quantum of
penalty, if the circumstances of the case so justify.

 However, no such order without giving reasonable

opportunity of being heard .

 Further , nothing contained in this shall not be applicable

after an expiry of a period of three months form the date of
the order passed by the adjudicating officer or disposal of
the appeal under section 15-T , whichever is earlier.
Section 15 J

 While adjudging the amount of penalty, the

adjudicating officer shall have due regard to the
following factors,
◦ The amount of disproportionate again or unfair advantage,
wherever quantifiable, made as a result of the default.
◦ The amount of loss caused to an investor or group of investors
as a result of the default.
◦ The repetitive nature of the default.
 Provides that all sums realised by way of penalties
under this Act credited to the consolidated fund of
India.
 Section 15 JB deals with settlement of administrative and civil
proceeding by SEBI . Any person against where any proceedings
have been initiated or may be initiated under section 11 , section
11B section 11 D , section 12(3) or section 15-I , may file an
application in writing to SEBI proposing for settlement of
proceeding initiated or to be initiated for the alleged defaults.

 SEBI , may, after taking into consideration the nature , gravity

and impact of defaults, agree to the proposal for settlement ,on
payment of such seem by the defaulter or on such other terms as
may be determined by SEBI in accordance with the regulations
made under this Act.

 Settlement proceedings shall be conducted in accordance with

the procedure specified in the regulations made under this Act .
No appeal shall lie under section 15 T against any order passed
by SEBI or adjudicating officer as the case may be.
 Without prejudice to any award of penalty by the
adjudicating officer under SEBI Act, if any person
contravenes or attempts to contravene or abets the
contravention of the provisions of this Act or of any
rules or regulations made there under, he shall be
punishable with imprisonment for a term which may
extend to 10 years or with fine which may extend to 25
crore rupees or with both.
 If any person fails to pay the penalty imposed by the
adjudicating officer or fails to comply with any of his
directions or orders, he shall be punishable with
imprisonment for a term which shall not be les than one
month but which may extend to 10 years or with fine
which may extend to 25 crore rupees or with both.

Section 24A-
 Any offence punishable under this Act , not being an
offence punishable with imprisonment only or with
imprisonment and also with fine , may before or after
the institution of any proceeding, be compounded by a
Securities Appellate Tribunal or a court before which
such proceedings are pending.
Sr section
n
o.

1 15 K Establishment SAT
2 15 L composition
3 15 M , Qualification of appointment of presiding officer or
15MA,15MB member
and 15MC

4 15N tenure
5 15O Salary and allowances and other terms and conditions
of services of presiding officer
6 15 P , 15 Filling up of vacancies
PA
7 15 Q Resignation and removal
Sr.no. sections particulars

8 15R Orders constituting appellate tribunal to be final

and not to be invalidate as proceedings

9 15 S Staff of the SAT

10 15 T Appeal to the SAT

11 15 U Procedure and powers of the SAT

12 15 V Right to legal representation

13 15 W limitation

14 15 X Presiding officer members and staff of SAT to be

public servants

15 15 Y Civil court not to have jurisdiction

16 15 Z Appeal to supreme court

 SAT

 Presiding officer-sitting or retired judge of SC or sitting

or retired chief justice of HC or a sitting or retired judge
of HC who has completed not less than 7 years of
service as a judge in HC
 The presiding officer of the SAT shall be appointed by
the CG in consultation with the chief justice of India or
his nominee.
 Two members- he is person of ability, integrity ,a and
standing who has shown capacity in dealing with
problems and experience of corporate law, security laws
finance economics or accountancy
 A member of SEBI or any person holding a post at
senior management level at SEBI cannot be appointed
as presiding officer or member of SAT during his
services as such with SEBI or with two years from the
date on which he ceases to hold office as such in SEBI
 5years-presiding officer
 5 years- members

 And also eligible for reappointment

 It has also been provided that the person attaining the
age of 68 years cannot hold office as the presiding
officer of SAT . Also a person who has attained the age
of 62 years cannot hold the office as member of SAT.
 It clear that no order of the CG shall be called in
question in any manner, and no Act or proceedings
before a SAT shall be called in question in any manner
on the ground merely of any defect in the constitution
of SAT.
 SAT will dispose of the appeal within 6 months
 Any person aggrieved by the decision of the recognised
stock exchange or adjudicating officer or any order of SEBI
may appeal to SAT
 Within 45 days from the date of order on which a copy of
order or receiving of decision by the appellant in such form
and on such fees as prescribed.
 On receipt of appeal and after giving the parties to
opportunity of being heard pass order as thinks fit,
confirming , modifying or setting aside the order
 The SAT may entertain an appeal after the expiry of the said
period of 45 days if it is satisfied that there was sufficient
cause for not filing it within that period.
 Shall not be bound by the procedure laid down by the CPC.
1908
 SAT shall have powers to regulate their own procedure
including the places at which they shall have their sittings.

a. Summoning and enforcing the attendance of any person and

examining him on oath.
b. Requiring the discovery and production of documents
c. Receiving evidence on affidavits
d. Issuing commissions for the examination of witnesses or
documents
e. Reviewing its decisions
f. Dismissing an application for default or deciding it ex parte
g. Setting aside any order of dismissal of any application for default
or any order passed by it ex parte
h. Any other matter which may be prescribed.
 Any person aggrieved ( the appellant)
 May either appear in person or authorise one or more
chartered accountants or company secretary or cost
accountants or legal practitioners or any of its officers
to present him in SAT.

 Section 15 W- limitation
◦ The provisions of the limitations Act, 1963 shall apply.
 Presiding officer and other officer and employees of SAT
are deemed to be public servants within the meaning of
section 21 of the IPC( Indian penal code)

 SECTION 15 Y- JURISDICTION OF CIVIL COURT

 No civil court has jurisdiction to entertain any suit or
proceeding in respect of any matter which an adjudicating
officer appointed under the Act or SAT under this Act is
empowered by or under this Act to determined and no
injunction shall be granted by any court or other authority
in respect of any action taken or to be taken in pursuance of
any power conferred by or under this Act.
 Any person aggrieved by any decision or order of the
SAT may file an appeal to the SC within 60 days form
the date of communication of the decision or order of
the SAT to him on any question of fact or law arising
out of such order.

 It has been provided that the SC may , if it is satisfied

that the applicant was prevented by sufficient cause
form filing the appeal within the said period , allow it
to be filed within a further period not exceeding 60
days.
 Any person aggrieved by an order of SEBI made under this Act may prefer
an appeal to the central government within such time the appeal shall not
be admitted if it is preferred after the expiry of the period prescribed
therefore.

SECTION 20 A-
◦ BAR OF JURISDICTION
◦ No order passed by SEBI or the adjudicating officer under this Act shall
be appealable except as provided in section 15 T or section 20 and no
civil court shall have jurisdiction in respect of any matter within SEBI or
the adjudicating officer is empowered by or under , this Act to pass any
order and no injunction shall be granted by any court or other authority
in respect of any action taken in pursuance of order passed by SEBI or
the adjudicating officer by or under SEBI Act
 Power to issue directions in writing to SEBI on
questions of policy as it may deem fit from time to
time.

 Give an opportunity to SEBI to express its view before

any such directions is given

 The decision of the CG as to whether a question is one

of the policy or not shall be final.
 If at any time the central government is of opinion that:
a. On account of grave emergency , SEBI is unable to
discharge the functions and duties
b. SEBI has persistently made default in complying with
any direction issued
c. Circumstances exist which render it necessary in the
public interest so to do
Supersede SEBI for such period, no exceeding 6 months,
as may be specified in the notification
 Within 3 months from the end of financial years.
 Central government will forward report to parliament.

Section 19- Delegation Of Powers

SEBI may , by general or special order in writing
delegate to any member ,officer of SEBI or any other
person subject to such conditions, if any as may be
specified in the order, such of its powers and functions
under the Act as it may deem necessary.
 The CG may on recommendations by SEBI, if satisfied that
any person who is alleged to have violated any of the
provisions of this Act has made a full and true disclosures in
respect of alleged violations, grant to such persons
immunity from prosecution for any offence under this Act.
 It has also been provided that recommendations of SEBI
shall not be binding upon the CG.
 Immunity can be withdrawn by the CG on satisfaction that
person had in the course of the proceedings not complied
with the condition on which the immunity granted and had
given false evidence.
 Such a person may be tried for the offence with respect to which
the immunity was granted or for any other offence of which he
appears to have been guilty in connection with the contravention.

 He shall also become liable to the imposition of any penalty

under this Act to which such person would have been liable had
not such immunity been granted.

 Section 24 B- however , no such immunity shall be granted by

the CG in cases where the proceedings or the prosecution for any
such offence have been instituted before the date of receipt of
application for grant of such immunity.
1. Section 26 Congnizance Of Offences

2 Section 26 A Establishment Of Special Courts

3 Section 26 B Offences Triable By Special Courts

4 Section 26 C Appeal And Revision

5 Section 26 D Application Of Code To Proceedings

Before Special Court
 Clause (1) lays down that no court shall take cognizance of any
offence punishable under this Act or any rules or regulations
made thereunder , save on a complaint made by SEBI
 SECTION 26A
(1)Empowered the CG for providing speedy trial of offences under
this Act, by notification, establish or designate as many special
courts as may be necessary.
(2) A special court shall consist of a single judge who shall be
appointed by the CG with the concurrence of the chief justice of
the HC within whose jurisdiction the Judge to be appointed is
working.
(3) A person shall not be qualified for appointment as a judge of the
special court unless he is immediately before such appointment
before such appointment , holding the office of a sessions judge
or an additional sessions judge, as the case may be.
 Section 26 B- stipulates that notwithstanding anything
contained in the cr.p.c , all offences under this Act ,
shall be taken cognizance of and tribale by the special
court established for the area in which the offence is
committed or where there are more special courts than
one for such area, by such one of them as may be
specified in this behalf by the HC concerned.
Section 26 C -Provides for the Appeal and Revision-

 The HC may exercise, so far as may be applicable, all

the powers conferred by chapter XXIX and XXX of the
Cr.p.c. on a High Court, as if a Special Court within the
local limits of the jurisdiction of the HC were a court of
session trying cases within the local limits of the
jurisdiction of the HC.
 Section 26D (1) provides that the provisions of the
code of Cr.P.C shall apply to the proceedings before a
special court and for the purposes of the said
provisions, the special court shall be deemed to be a
court of session and the person conducting prosecution
before a special court shall be deemed to be a public
prosecutor within the meaning of clause (u) of section 2
of the code of criminal procedure , 1973.
 Section 27

Where an offence under this Act has been committed by a

company , every person who at the time the offence was
committed was in charge of and was responsible to, the company
for the conduct of the business of the company , as well as the
company, shall be deemed to be guilty of the offence and shall be
liable to be proceeded against the punished accordingly.

However , this provision shall not render any such person liable
to any punishment provided in this Act if he proves that the
offence was committed without his knowledge or that the had
exercised all due diligence to prevent the commission of such
offence.
Fails to pay the penalty Fails to comply with any
imposed by the direction of SEBI for
adjudicating officer or refund of monies or

Fails to comply with a

direction of
Fails to pay any fees due
disgorgement order
to SEBI
issued under section 11
B or
 The Recovery Officer may draw up under his signature
a statement in the specified form specifying the amount
due from the person ( such statement being hereafter in
the chapter referred to as certificate) and shall proceed
to recover from such person the amount specified in the
certificate
  Any officer of SEBI who may be authorised by the
general or special order in writing to exercise the
powers of the recovery officer
 Section (2) empowered the recovery officer to seek the
assistance of the local district administration while
exercising the powers.
Attachment
and sale of the Attachment Arrest of Appointing a
person’s of the the person receiver for the
management of
movable person’s and his the person’s
property and bank detention in movable and
immovable immovable
property
accounts prison
Thank you
 DR ANITA SABLE
ASSISTANT PROFESSOR
 “Sole Selling Agent" has not been defined in the
Companies Act, 1956.
 Section 294 deals with the appointment of sole selling
agents to require approval of company in general
meeting
 It may be defined as an individual, firm, or body
corporate, who or which has been appointed by a
company as an agent with exclusive rights to sell the
specified products of the company in a specified area.
 The one who is given an
exclusive right to sell the goods
of the company to the exclusion
of all others including the
company itself.
 To create a market.
 To increase the demand of the product.
Section 294(1)-
 No company shall after the
commencement of the companies
(Amendment )Act , 1960 , appoint a
sole selling agent for any area for a
term exceeding 5 years at a time
The relationship of the company and
the sole selling agent so appointed is
that of a principal and an agent and
is governed by the provisions
contained in the Indian Contract
Act, 1872 regarding agents.
Sole Selling Agents are not employees of
company
A body corporate, firm or individual can
be appointed as sole selling agent.
 Sole selling agent can be appointed for
some products or whole category of
products by the company.
 The company can’t appoint sole selling
agent for more than 5 years at a time.
Appointment should be Board of company may
subject to approval of share appoint a sole selling agent
holders.

If appointment is rejected by It ceases to be invalid if not

the shareholders the same approved by the company
would be invalid from the same in the GM
period.

Disclosure of material
information is required Ceases from the date of
meeting
There has to be a clause in the
agreement
 Call a meeting of Board of director
 Determine the name of sole selling agent
to be appointed,
 If the paid up share capital is > 50 lakhs
and the appointee does not have a
substantial interest in the company, the
board may also resolve to appoint him as
sole selling agent subject to the approval
of the general body meeting
 If the appointee has substantial interest
in the company or the paid up share
capital of the company is 50 lakh or more
, application for approval of the central
government should be made.
 Ref. Form 1 of The Companies
(Appointment Of Sole Agents) Rule,
1975
 The terms and conditions of appointment
or re-appointment do not contain the
tenure exceeding 5 year , at a time.
 Issue notice for holding the GM, where the
paid up share capital is 50 lakh or more it
shall require passing a special resolution ,
otherwise an ordinary resolution will be
sufficient.
 Forward three copies of notices and copies of
proceedings of GM to Stock Exchanges with
which the share of the company are listed.
 At the time of
appointment the
Should not
Demand paid up capital is
have
of product substantial more than 50
is less interest ( 5 lakh, it should be
than lakh or 5% approved by the
supply of paid up SR of
capital)
shareholders or
CG

 In case of non acceptance of any of the above ground

would make the appointment invalid.
 Demand of the product is less than supply.
 The CG may , by notification in the official
gazette , declare that sole selling agents shall
not be appointed by a company for sale of
such products as may be specified in the
declaration.
 Based on these powers , CG has prohibited the
appointment of sole selling agents for sugar,
vanaspati, cement, paper etc at different times.
 The CG has been given powers to approve or
to refuse to approve the appointment of SSA
who has substantial interest in the company.
 Such appointment should be previously
approved by the CG .
 As per section 294AA (3) no company having
paid up share capital of rupees 50 lakh or more
shall appoint a SSA except with the consent of
company accorded by a SR and the approval
of the CG.
 To produce all books and records for
inspection.
 To provide all types of assistance to the
person.
 For any breach, company or every officer of
the company who is in default shall be
punishable with the fine which may extend to
Rs 50,000 and with a further fine of not less
than 500 Rs per day after the first date during
which the refusal or neglect continues.
 It is the duty of secretary to ensure that the
appointment of SSA is not prohibited by CG,
 To ensure that the terms and conditions are as
per the Indian Contract Act, 1872,
 To place the proposal before the BOD of
company for (passing appropriate resolutions)
and CG (for approval) at proper times as per
the provisions of this Act etc.
Paid-up capital structure of the company Statutory requirements for the
appointing SSA appointment of SSA
Where the company’s paid –up share capital OR section 294(2)
is less than rupees fifty lakhs
Where the company’s paid –up share capital SR and approval of the CG –section
is rupees fifty lakhs or more 294AA(3)

Where the company’s paid –up share capital The previous approval of CG and consent of
is less than rupees fifty lakhs but the the company in GM by OR- section 294AA9(
proposed SSA has substantial interest in the 2) R/W 294(2)
company

Where the company’s paid –up share capital The previous approval of CG and consent of
is rupees fifty lakhs or more and the the company in GM by OR- section 294AA(
proposed SSA has substantial interest in the 2) and (3).
company
SECTION 294(5)-
a) If terms and conditions are prejudicial to
company.
b) If the company refuses or neglects to furnish
any such information, the CG may appoint a
suitable person to investigate and report on
the same.
c) The CG may make a suitable variations in
those terms and conditions-
 If a company has more than one SSA in any area and it
appears to CG that it may not be necessary , it may
direct the company to provide necessary information to
declare any of them as SSA based on the information
given or
 If the company refused to do so , based on the report of
the investigator appoint for this purpose, the CG may
declare , if found necessary that one of them is the
SSA.
 The term ‘ appointment’ in
relation to SSA and sole buying
or purchasing agent includes re-
appointment.
Appropriate to Given salary or
the services commission for
rendered the task given

Approved by SR in GM and by
CG when the paid –up capital is
more than Rs 50 lakh or more
 Appointment must be conditional.
 Appointment must be approved in the
first GM held, after his appointment, by
the shareholders.
 Appointment should be subject to the approval
of shareholders BOD of a company may
appoint a sole selling agent If appointment is
rejected by the shareholders, it would invalid
from the same period.
 cease to be valid if it is not approved by the
company in the first general meeting
disclosure of material information. Cease from
the date of the meeting clause in agreement.
 Section 294A :- Appointment of a sole
selling agent

A Body corporate or firm or individual

can be appointed as sole selling agent.
 That’swhy there is a tenure of 5
years of SSA as directed by
Central Government.
 That’s why Central Government prohibit
the appointment of SSA when it is of the
opinion that
 Demand > Supply, or
 Service of SSA is not necessary to create
a market.
 Due to this factor, Central govt. has laid down
restrictions where there is a substantial interest
of SSA in the company, as follows:
 Previous approval of Central govt. when
person applying for the right holds Paid up
capital of either 5% or Rs. 5 Lakhs.
 Approval of Central govt. + Special
Resolution must be passed if paid up capital of
the company is Rs. 50 Lakhs or more.
 Voluntary resignation during amalgamation or
otherwise – No compensation.
 Non-approval in AGM – Only on which work has been
done by SSA.
 Company fails to bring resolution before shareholders
in AGM – Yes, because there is a breach of duty on the
part of Board of Directors.
 Unexpired tenure’s salary with a limit of
3 years’ “salary” where salary means
average of the salaries received by SSA
before resignation with a limit of 3 years.
Thank you
TAKE OVER CODE

DR ANITA SABLE
ASSISTANT PROFESSOR
EVOLUTION OF TAKEOVER CODE
 MEANING OF TAKEOVER

Takeover is acquisition of substantial shares and

control over the Target Company to expand or to
diversify the business in an inorganic manner.
 INTRODUCTION
• A Takeover takes place when one company acquires
controlling interest over another company. Takeover and
acquisition is a form of inorganic corporate restructuring
where the management of the company changes its hands.
• Sometimes it is done with the consent of the board of the
management of the target company. This is known as
friendly takeover.
• Sometimes it is done without the consent of the board of
management , which is known as hostile takeover.
• There is a third category which is known as bailout
takeover. In a bailout takeover, the financially weak target
company is bailed out to a strong company with the
interference of a financial institution or a bank
 TAKEOVER DIFFERS FROM MERGERS
AND AMALGAMATIONS
• In case of merger or amalgamation, both the
companies become one and merge with each other
whereas in case of takeover, there continues to be two
distinct companies, and the assets, liabilities and stock
are not shared or merged.
• An acquisition is another variation and brings changes
in the management of the company. An acquisition of
shares could result in a takeover. Acquisition
necessarily involves the purchase of shares of a target
company which can further lead to acquisition of
voting power. When such a purchase of shares is with
an intention to take control of the target company,
such an acquisition becomes a takeover.
• The trend of takeovers and acquisitions in India
witnessed significant regulatory changes in 2011, when
the new Takeover Regulations came into force.
Particularly, the new regulations1 were brought into
force to govern the public listed companies in India.

• The basic principles which applies to an acquisition and

a takeover is that in case of takeover compliance of
both the takeover code as well as that of the Act is
necessary, while in case of only acquisition compliance
of only the Act is required.
• When acquisition becomes a takeover, the
provisions of the SEBI Takeover code 2011
becomes applicable. Similarly, if an acquisition
results in a combination, then the provisions of
the competition act 2002 also becomes
applicable, and the approval of the competition
commission of India is required. And if the
acquisition results in either inflow or outflow of
funds, to or from India, then the provisions of
FEMA 1999 would become applicable.
Regulator for Takeovers & Acquisitions
in India
• Indian corporate sector is multi sectoral and
multi regulated by various regulatory
authorities. Other than the Companies Act,
the major Act which governs corporate
activities is the Securities and Exchange Board
of India Act, 1992. Companies are also
governed according to their kinds viz: public
and private. Takeovers can be divided
according to the kinds of companies and
whether they are listed or unlisted.
 Takeover of unlisted companies
• The unlisted companies are governed by the provisions of
the Companies Act whereas the affairs of the public listed
companies are regulated and governed by the SEBI to
ensure that investors interests are not adversely affected.
• Under the Companies Act 1956, takeover/acquisition of
shares of unlisted companies was dealt under section 395
which provided for both power as well as duty of the
acquirer company to acquire the shares of the target
company.
• Similar provisions have been given under section 235 and
236 of the Companies Act 2013. Section 236 of the Act
provides a unique feature of the purchase of minority
shareholding, if the acquirer company becomes registered
holder of the ninety percent of the issued equity share
capital of the company.
 Takeover of listed companies
• In case of takeover of listed companies, other than the
SAST Regulations, compliance to the listing agreement
is also required.
• The provisions of Securities Contract Regulation Act,
1957 and various rules and regulations framed there
under apply in case a company has to takeover or
acquire another target company.
• The main regulation which applies to the acquisition or
takeover transaction of public companies is the SEBI
(Substantial Acquisition of Shares and Takeovers)
Regulation 2011.
• These regulations have been amended several times
before to address the needs of the business world.
APPLICATION OF THIS CODE
 Need for Takeover Code
• The need to govern takeovers and acquisitions
emerged from the need to govern those corporate
houses which made it a fashion to acquire controlling
interest in other companies.
• Takeovers turn hostile when done without the consent
of the management of the target company.
• There are probabilities that such an acquisition process
would adversely affect the interest of the investors &
shareholders of the target company.
• Takeover is a corporate decision and should be
beneficial for the shareholders at large and not merely
the individuals. The need was felt long back in 1980s
when the attempts were seen to undertake hostile
takeover activity
• A greater need was realized after the
introduction of LPG (Liberalization,
Privatization, Globalization) model in
1991 which required the Indian corporate
sector to indulge in various cross border
activities.
• The LPG model opened the gates of Indian
economy for foreign investors and began a
trend where in the companies wanted to
restructure themselves by inorganic means
such as mergers & acquisitions.
• The most important reason behind having
a proper takeover regulation was to
achieve the objective behind the SEBI Act
i.e. to protect the interests of the
shareholders of the target companies
besides achieving the desired target of the
acquirer companies.
• A need was felt to have a code which could imbibe within itself the principles
of corporate democracy, transparency, fairness and equal opportunity to all.

• With such broad objectives, SEBI enacted the Takeover Regulations 1994
which were further amended in 1997. In the light of the changing market
policies and changing needs of the corporate world, there was again a need felt
for new regulations to govern mergers & acquisitions.

• Thus, in 2009, a committee was constituted by SEBI under the chairmanship of

Mr. C. Achuthan, popularly known as the TRAC (Takeover Regulations
Advisory Committee) to look into the challenges and loopholes in the Takeover
Regulations 1997.

• The Achuthan committee recommended several changes in the 1997

Regulations. The committee report was not accepted in whole by the SEBI but
approved major recommendations of it.

• Thus, Takeover Regulations were replaced by the new SEBI (Substantial

Acquisition of Shares & Takeovers) Regulations, 2011.
PURPOSE OF TAKEOVER REGULATIONS
. SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND
TAKEOVER CODE) REGULATIONS 2011
Substantial acquisition of shares and voting rights
• Acquiring shares of a target company is a decision of the company.
Acquisition of shares in a substantial percentage leads to acquisition of
control and finally takeover of a target company.

• Acquisition by a company can be of shares, voting rights or control.

Acquisition of shares can be either direct or indirect. Direct acquisition
is when control of a public listed company is by way of acquisition of
shares of the target company directly, where as indirect acquisition is
done by acquiring shares of a holding company/parent company of the
target company.

• The takeover code mandates an open offer process for both direct as
well as indirect acquisition of shares, voting rights or control if such
acquisition triggers the threshold prescribed under the Takeover code.
• Regulation 3 of the code requires a public announcement to be
made for every acquisition of shares, voting rights or control
which is more than twenty five percent but less than the
maximum permissible non public shareholding in a financial
year.
• Thus, there is no requirement of going through an open offer
process by making a public announcement if the acquirer
acquires shares up to 24.99% within a financial year.
• Open offer process requirement should be fulfilled only when
there is a substantial acquisition of shares, voting rights or
control.
• Having done substantial acquisition of shares or voting rights
or control by making a public announcement, if an acquirer
has to acquire additional shares, entitling him to exercise more
than five percent of the voting rights in a financial year, he is
again required to make public announcement of an open offer.
• The concept of creeping acquisition allows an
acquirer to acquire additional shares every year
up to five percent for which he is not required to
follow the open offer process.
• Under the Takeover Code of 1997, an acquirer
was mandated to make an open offer if he, alone
or through persons acting in concert, were
acquiring 15% or more of voting right in the
target company. This threshold of 15% has been
increased to 25% under the Takeover Code of
2011.
 Acquisition of control
• Acquisition of control substantially differs
from acquisition of shares and voting power.
• Regulation 6 of the Takeover Code mandates
making of a public announcement of an open
offer for acquisition of control directly or
indirectly, over a target company.
• This is irrespective of acquisition or holding of
shares or voting rights in a target company.
 Indirect acquisition of shares or
control
• The concept of Indirect acquisition of shares has been
recognized under Regulation 5 of the Takeover Code
2011.
• It explains indirect acquisition as the acquisition of
shares, voting rights or control over any other company
which would enable the acquirer of shares, voting
rights or control to exercise such percentage of voting
rights, which would otherwise have triggered an open
offer process over which would enable the acquirer to
exercise control over a company. Certain indirect
acquisitions are regarded as ‘deemed direct
acquisitions’ if such indirect acquisition satisfy the
following conditions such as:
• (a) the proportionate net asset value of the target
company as a percentage of the consolidated net asset
value of the entity or business being acquired exceeds
80 percent; or
• (b) the proportionate sales turnover of target company
as a percentage of the consolidated sales turnover of the
entity or business being acquired exceeds 80 percent; or
• (c) the proportionate market capitalisation of the target
company as a percentage of the enterprise value for the
entity or business being acquired exceeds 80 percent;

The ‘deemed direct acquisition’ has to follow the same

mandatory open offer related requirements as a direct
acquisition of shares, voting rights or control.
 Voluntary Offer
• Regulation 6 provides an option to make a voluntary
offer under the Takeover code 2011, to those
shareholders who already hold at least 25 percent or
more but less than 75 percent of the shares or voting
rights of that company, to further consolidate their
existing shareholding in the company.
• This is a unique option which was not present under
the Takeover Code, 1997.
• Voluntary offer enables such shareholders to acquire
further shares representing at least 10 percent of the
total shareholding of the company.
• But this flexibility is not offered to the shareholders
without any restrictions, such as :
• i) a person who (together with PACs) has acquired
shares or voting rights in the preceding 52 weeks
otherwise than pursuant to an open offer is not
entitled to make a voluntary offer;
• ii) during the offer period of such voluntary offer,
acquisition of any shares in the target company are
prohibited;
• iii) the acquirer who makes a voluntary offer is not
entitled to acquire any shares of the target company
for a period of six months after the completion of that
voluntary offer, except by way of another voluntary
offer or a competing offer; and
• iv) the shares proposed to be acquired under the
voluntary offer should not be in such number so as to
reduce the public shareholding of the target company
below the minimum permissible limit, assuming that
the offer is accepted in full.
TYPES OF ACQUISITON
TYPES OF TAKEOVER
INITIAL THRESHOLD
Delisting through takeovers
 Offer Size – Regulation 7
• The open offer size has been fixed by the
Takeover Code, 2011. Regulation 7 explains
that any acquirer who has already made
substantial acquisition of shares, voting rights
or control can make an offer for at least twenty
six percent of the total shares of the target
company, within a period of tenth working day
from the closure of the tendering period.
• The voluntary open offer made through public
announcement under regulation 6 enables the acquirer
to acquire at least such number of shares as would
entitle him to exercise an additional ten percent of the
total shares of the target company.
• But the post acquisition holding of the acquirer should
not exceed the maximum permissible non-public
shareholding applicable to such target company. The
limitation in terms of offer size is not same in case of a
competing offer.
• If the offer is a competing offer and the acquirer has
made a voluntary offer, then he is entitled to increase
the number of shares within a period of fifteen working
days, to such number as he deems fit.
• After the lapse of fifteen days, the acquirer shall not be
able to increase the offer size.
 OFFER PRICE REGULATION-8
• The formula for calculating offer price, in the interest
of the shareholders and the target company has been
determined under the Takeover Code, 2011.
• Any acquirer who makes an open offer, either directly,
indirectly or through voluntary offer shall make it at a
price in accordance with the regulations.
• In the case of direct and indirect acquisition of shares or
voting rights in, or control over the target company, the
offer price shall be the highest of,—
• (a) the highest negotiated price per share of the target company for any acquisition
under the agreement attaching the obligation to make a public announcement of an
open offer;

• (b) the volume weighted average price paid or payable for acquisitions whether by
the acquirer or by any person acting in concert with him, during the fifty two weeks
immediately preceding the date of the public announcement;

• (c) the highest price paid or payable for any acquisition, whether by the acquirer or
by any person acting in concert with him, during twenty six weeks immediately
preceding the date of the public announcement

• (d) the volume weighted average market price of such shares for a period of sixty
trading days immediately preceeding the date of the public announcement as traded
on the stock exchange where the maximum volume of trading in the shares of the
target company are recorded during such period, provided such shares are
frequently traded;

• (e) where the shares are not frequently traded, the price determined by the acquirer
and the manager to the open offer taking into account valuation parameters and
such other parameters as are customary for valuation of shares of such companies;
and

• (f) the per share value computed under sub-regulation (5), if applicable.
 Mode of payment –Regulation -9
• The Takeover Code provides great flexibility to pay the offer price
in a number of ways. It may be either paid in cash or by issue,
exchange or transfer of listed shares in the equity share capital of the
acquirer.
• It may also be paid in the form of listed secured debt instruments
issued by the acquirer. Another mode of payment can be by way of
issue, exchange or transfer of convertible debt securities.
• The code also permits a combination of the all above modes of
payment.
• The shareholders have an option to make a payment in cash where
the shares have been acquired during the fifty two weeks
immediately preceding the date of public announcement and such
an acquisition makes him exercise more than ten percent of the
voting rights in the target company and has been paid for in cash.
General Exemptions- Regulation-10
• The Takeover Code provides a list of exempted acquisitions where
the acquirers are not required to make an open offer or public
announcement:
• (a) acquisition pursuant to inter se transfer of shares amongst
qualifying persons, being,—
– (i) immediate relatives;
– (ii) persons named as promoters in the shareholding pattern filed by
the target company in terms of the listing agreement or these
regulations for not less than three years prior to the proposed
acquisition;
– (iii) a company, its subsidiaries, its holding company, other
subsidiaries of such holding company, persons holding not less than
fifty per cent of the equity shares of such company, other companies in
which such persons hold not less than fifty per cent of the equity
shares, and their subsidiaries subject to control over such qualifying
persons being exclusively held by the same persons;
– persons acting in concert for not less than three
years prior to the proposed acquisition, and
disclosed as such pursuant to filings under the
listing agreement;
– shareholders of a target company who have been
persons acting in concert for a period of not less
than three years prior to the proposed acquisition
and are disclosed as such pursuant to filings under
the listing agreement, and any company in which
the entire equity share capital is owned by such
shareholders in the same proportion as their
holdings in the target company without any
differential entitlement to exercise voting rights in
such company
 Completion of acquisition- Regulation 22

• The acquisition process gets complete only after the expiry of the
offer period. The Takeover Code mandates the opening of an escrow
account into which amount in cash equal to one hundred percent of
the consideration as fixed between the parties has to be deposited.
• After the period of twenty one working days from the date of
detailed public statement, the Code allows the parties to act upon the
agreement and acquire shares, voting rights or control over the target
company.
• The maximum period for the acquirer to complete the acquisition
process is twenty six weeks from the expiry of the offer period. This
time period of twenty six weeks may be extended by the Board in
case there is an extraordinary circumstances.
• The Board before granting such extension would look into the
interests of investors in genera
 Withdrawal of open offer- Regulation 23

• The Takeover Code 2011 allows to with draw an open offer once made only under following
circumstances:
• (a) statutory approvals required for the open offer or for effecting the acquisitions attracting
the obligation to make an open offer under these regulations having been finally refused,
subject to such requirements for approval having been specifically disclosed in the detailed
public statement and the letter of offer
• (b) the acquirer, being a natural person, has died;
• (c) any condition stipulated in the agreement for acquisition attracting the obligation to make
the open offer is not met for reasons outside the reasonable control of the acquirer, and such
agreement is rescinded, subject to such conditions having been specifically disclosed in the
detailed public statement and the letter of offer; or
• (d) such circumstances as in the opinion of the Board, merit withdrawal. (2)If the open offer is
withdrawn, the acquirer, within two working days, is required to make an announcement in
the same newspaper in which the public announcement of the open offer was published.
• The Code also mandates the information to be given in writing to the Board, all stock
exchanges on which the shares of the target company are listed, and the target company at its
registered office
 Role Of Independent Directors
• The present times has witnessed a wave of change in the corporate
world. There was a need felt for greater accountability and
transparency in the corporate transactions.
• The legislature tried to imbibe such principles in M & A transactions
in the form of the new Companies Act, 2013 and the new Takeover
Regulations, 2011and various other amendments in corporate law.
• The role of directors, especially independent directors, has been
redesigned under these regulations. The Takeover Code of 2011,
makes it mandatory for the board of directors of the target company
to constitute a committee of independent directors (who are entitled
to seek external professional advice on the same) to provide written
reasoned recommendations on such open offer, which the target
company is required to publish.
 CONCLUSION
• The need for a change in the corporate laws was much needed. The
takeover code 2011 reflects such a change which has tried to meet
the interests of shareholders as well as promoters.
• The Code provides various unique features which were not present
in the previous Code such as exit opportunities for public
shareholders to exit, raising the threshold for making an open offer
from fifteen percent to twenty five percent, indirect acquisition,
revised list of exemptions and many more.
• The listed public companies are required to strictly comply with the
requirements given under the code, otherwise it would result in
delisting of the shares of such companies.
• Such strict compliance of the regulations is necessary to ensure that
investors are protected from the adverse effects which takeovers,
especially hostile takeover, may create on their interests.
• The Takeover Code 2011 focuses on the principles of corporate
democracy, transparency, fairness and ensuring the interests of
investors
 VOTING
CONDUCT OF POLL
E- VOTING
AND PROCEDURE

DR ANITA SABLE
ASSISTANT PROFESSOR
 VOTING
Business of meeting is Share holder have a
done in the form of right to discuss
resolutions passed at every proposed
the meeting. resolution and to
move amendments.

After the resolution is

discussed it is put to
vote
Methods of voting
The voting is carried out
electronically

If poll is demanded under section

109

At a general meeting the resolution

put to the vote of the meeting be
decided on a show of hands.
 POLL
• Method of voting in which votes are cast by the
member in person or by proxy in proportion to the
number of shares held by him.
• Section 47(1) voting right of member(holding
equity shares) on a poll shall be in proportion to
his share of the paid up capital of the company.
Means one share one vote.
• Section 43- every equity shares having
differential rights as to voting.
• Voting right on a poll to be in proportion with the
paid-up share capital.
• In Nidhi company – no member shall exercise
voting rights on poll in excess of 5% of total
voting rights of equity shareholders.
• Preference shareholder has a right to vote on any
resolution , his voting right on a poll shall be in
the same proportion as the capital paid –up
Preference share bears to the total paid up equity
capital of the company.
• Private limited company- In MOA can provide for
a exemption of section 43 and 47.
• IFSC through MOA/AOA can provide an
exemption of 43 and 47 section.
 TIME FOR TAKING A POLL AT
GM
• If poll is demanded on the question of
adjournment of meeting or
• If it pertains to the resolution for election of a
chairman of the meeting

It must be taken
immediately after
demanded
• When poll is demanded on any other
resolution, the chairman should decide the
time for taking a poll and such poll should be
taken within.

48 hours from the

time when the
demand was made
 SECTION 109
• The chairperson has power to order a poll before or on
declaration of result of a voting on his own motion.
• Companies having share capital - the members present
or their proxies with 1/10th of voting power or members
holding not less than 5 lakh rupees may demand a poll
before or on declaration of result.
• Companies not having share capital-, the members
present in person or by proxy having not less than
1/10th of the total voting powers may demand poll
before or on declaration of result.
IF THE DEMAND OF POLL IS RECEIVED

Section 109(2)
• Those who have present the demand may
withdraw at any time .
• But cannot be withdrawn once the chairman
declares that a poll will be taken and then
adjourns the meeting for that purpose , fixing
the time and hour of poll.
• The chairman has the right to order a poll to be
taken on any resolution either of his own
motion or when it is validly demanded by one
or more member/s.
• He can order a poll before a resolution is put to
the vote on a show of hands or on the
declaration of the result of voting by a show of
hands.
 BUSINESS OTHER THAN THAT UPON
WHICH A POLL IS DEMANDED
• It can be proceeded with , pending the
conducting of the poll.
• If the chairman refused to order a poll even
after a valid demand has been made, the
business on the agenda for which the poll was
demanded and which was carried through by
show of hands becomes invalid.
• Poll when validly demanded should be taken ,
even if the chairman had refused to grant the
poll.
• The meeting should be re-convened or a new
meeting should be convened to hold the poll or
to consider the item for which valid demand
poll was not granted
 VOTING THROUGH ELECTRONIC MODE
SECTION 108 COMPANIES ACT 2013

• It is process for recording votes by the

members using computer base machine to
display on electronic ballot and to record the
vote and also the numbers of votes polled in
favour or against, such that the entire voting
gets registered and counted in a electronic
register in the centralized server.
• Any company may opt voting through
electronic mode
• Even the CG may prescribe certain companies
for compulsory electronic voting in GM.
• Regulation 44 of listing regulations- listed
entity shall submit to the stock exchange
within 48 hours of conclusion of its GM details
regarding the voting results in the format
specified by the board.
• Every company having its equity shares listed
on a recognised stock exchange or a company
having not less than 1000 members shall
provide to its members facility to exercise their
right to vote on resolution proposed to be
considered at the GM by Electronic modes.
 PROCEDURE FOR E- VOTING
RULE 20 COMPANIES (MANAGEMENT AND
ADMINISTRATION ) RULES , 2014
• Notice to all – post, e-mail , courier service.
• Notice to be place on website
• Notice must contain that company is providing facility for
voting by E- means and the business must be transacted
through such voting
• Facility for e- voting to be made available .
• Facility for remote e-voting to be made available
• If members who have case their vote by remote e-voting
prior to the meeting may attend but shall not cast their vote
again.
• Notice to contain the manner, time period, login Id, process
of generating or receiving the password and casting of vote
in a secure manner.
• Company to move a public notice (ADVT.) to be
publish immediately after completion of despatch of
notices for the meeting at least 21 days before the date
of GM, at least in one paper of English language in an
English newspaper having countrywide circulation
containing all the details example-
– Business to be transacted,
– Mode
– Date and time
– Manner in which the login Id to be obtain
– Statement that remote voting not allowed beyond particular
date and time
– The manner of voting
– Voting only once by the member
– Person entitle for remote e-voting facility.
• Website address of the company and the agency where
notice of the meeting is dispatched.
• Name , designation, address , email id and phone
number of the person responsible to address the
grievances connected with facility for e-voting.
• Public notice to be displayed on the company website.
• The remote e-voting shall remain for not less then 3
days and shall close at 5.00pm on the date preceding the
date of GM.
• The members holding shares either in physical form or
in dematerialised form as on the cut-off date, may opt
for remote e-voting.
• No subsequent change in the voting is allowed.
• At the end of the remote e-voting period ,facility
shall be blocked.
• In case the company opts to provide e voting
system during GM , the facility will remain in
operation till all the resolutions are considered
and voted upon in the meeting and may be used
for voting only by the members attending the
meeting and who have not exercised their right to
vote through remote e- voting.
• Board will appoint one or more scrutiniser with
their consent not in the employment of company
to scrutinise the voting and remote e-voting
process in a fair and transparent manner.
– Scrutiniser may be CA in practice
– Cost accountant in practice
– Company secretary in practice
– Advocate
– Any other person not in company employment
• Count of votes cast
• Unlock the vote cast in presence of at least 2
witness not in employment
• make not later than three days of conclusion of
the meeting consolidated scrutiniser’s report of
the total votes cast in favour or against .
• Report to be submitted to the chairman or person
authorised by chairman in writing.
• Declaration of result .
• The result of the poll shall be deemed to be the
decision of the meeting and final .
• The chairman is also bound by the result.
• The decision shall be recorded in minutes of the
meeting.
• Private company- AOA may have specific
provision with respect of demand for poll.
• The poll is complete on the day when the
result is ascertained and declared , and not
when the voting is complete.
•Thank you
WINDING UP OF
COMPANY
DR ANITA SABLE
ASSISTANT PROFESSOR
SECTION 270 TO 365
 WINDING UP
• Winding up of a company is defined as a process
by which the life of a company is brought to an
end and its property administered for the benefit
of its members and creditors.
• An Administrator, called a liquidator is appointed
and he takes control of the company, collects its
assets, pays its debts and finally distributes any
surplus among the members in accordance with
their rights.”
• It is a process by which the management of a
company's affairs is taken out of its directors hands, its
assets are realised by a liquidator, and its debts and
liabilities are discharged out of the proceeds of
realisation and any surplus of assets remaining is
returned to its members or shareholders.
• At the end of the winding up, the company will have no
assets or liabilities , and it will therefore be simply a
formal step for it to be dissolved, that is , for its legal
personality as a corporation to be brought to an end.
 DIFFERENCE BETWEEN
WINDING UP AND DISSOLUTION
Winding up dissolution
proceeding by means of which company The legal existence of company is brought
is dissolved and in course of dissolution, to an end by dissolution
assets are realized, liabilities are paid off
and surplus is distributed among
members.
Winding up precedes the dissolution. it is the final stage where the existence of
company is withdrawn by law.
The liquidator can present the company in Once the order of dissolution is made by
winding up proceeding. the Court, liquidator cannot represent the
company.
Winding up proceeding can be started For the dissolution of the company, order
without the intervention of the court. of the court is essential.
Any person can proceed against the No proceedings can be started against the
company which is being wound up. company which has been dissolved.
 DIFFERENCE BETWEEN
WINDING UP AND INSOLVENCY
Winding up insolvency
It is a process by which company is It is inability of a debtor to pay debts as
dissolved. The assets are collected, they fall due. A person is said to be
liabilities are paid off out of assets or from insolvent when his liabilities exceeds his
contributions by members and if surplus assets and against whom Court makes
left, it is distributed among members order of adjudication.

A company cannot be adjudged as An individual can be adjudged as

insolvent insolvent
A company can be wound up even if it A person can be adjudged as insolvent
financially sound. when he is unable to pay his liabilities.
During winding up proceeding, the In insolvency proceedings, the assets of
property is vested in the Company. person are vested in Official Receiver.
After completion of proceedings, the After completion of proceedings, the
Company is dissolved. insolvent person is discharged from
liabilities.
 BACK GROUND
• There were three modes of winding up of the
Companies registered under Companies Act,
1956.
• By court
court • Compulsory winding up by court

• Voluntary winding up
voluntary • Members and creditors

• Winding up
Supervision
of court • Subject to supervision of the court
 CIRCUMSTANCES IN WHICH THE COMPANY
MAY BE WOUND UP BY THE COURT
SECTION 433 OF THE COMPANIES ACT, 1956-
• If the company has resolved that the company be wound up by the Court by
passing special resolution; or
• If the company has defaulted in delivering the statutory report to the
Registrar or in holding the statutory meeting; or
• If the company does not commence its business within a year from its
incorporation, or suspends its business for a whole year; or
• The number of its members in public company is reduced below seven and
in private company below two; or
• The company is not able to pay the debts; or
• The Court is of the opinion that company should be wound up on just and
equitable grounds; or
• The company has defaulted in filing balance sheet or annual return with the
Registrar for any 5 consecutive years; or
• If the act of the company goes against the interests of sovereignty, integrity
and security of India, friendly relation with foreign states, public order,
decency or morality; or
• Inability to pay debts – A company shall be deemed to be unable to pay its
debts when the creditor has served on the company a demand in writing for
payment of the debt,

• Just & Equitable Grounds – Court has complete discretion to decide just
& equitable grounds for winding up of a company. Some of the grounds on
which court ordered the winding up of company under this clause,
– When the object of the company is fraudulent,
– When substratum of the company has disappeared i.e original object
become impossible to attain;
– The object for which the company is formed is illegal or becomes
illegal by change in law;
– The object for which company was incorporated has been completed;
– Deadlock in management due to differences among rival group and
disagreement cannot be resolved in general or board meeting;
– There has been mismanagement and misapplication of funds by
directors of private company.
 WHO MAY FILE PETITION FOR
WINDING UP
Section 439 of Companies Act, 1956

• The directors can make a petition in the name of the company with
the sanction of general meeting by way of special resolution.
• The creditors can make a petition if the company is unable to pay
the debts. The creditors include assignee of debt, a decree holder, a
secure creditor, a debenture holder or trustee of debenture holders.
• A contributory can present winding up petition if number of
members in case of public company is reduced below 7 and below 2,
in case of private company.
• The Registrar of companies, after obtaining prior sanction of the
central government, can present a petition on winding up of
company.
 VOLUNTARY WINDING UP
(Section 488 of Companies Act, 1956)

• The company and its creditors may apply to

court for directions or orders but usually they
are left to settle their affairs within themselves.
• There are two kinds of voluntary winding up,
– Member’s Voluntary winding up
– Creditor’s voluntary winding up.
Voluntary winding up can be passed with an
Ordinary Resolution (When the time span fixed in
the Article of Association has expired) else with a
Special Resolution (In all other cases).
 DIFFERENCE
Members voluntary winding up Creditors voluntary winding up
Where a company is solvent & declaration Where a company is solvent, the
of solvency is made by the directors, it is declaration of solvency is not made by the
called members’ voluntary winding up directors.

Dominant control remains in the hands of In creditors’ winding up, dominant control
the members of the company. remains in hands of the creditors.
There is no meeting of creditors and the In creditors’ winding up, meetings of
liquidator is appointed by the company. creditors have to be called at the
beginning and subsequently the liquidator
is appointed by the creditors.

The liquidator can exercise some of his The liquidator can do so with the sanction
powers with the sanction of a special of the court or the Committee of
resolution of the company. inspection or of meeting of creditors.
 MODES OF WINDING UP
SECTION 270(1)
• With the passing of insolvency and bankruptcy code , 2016 a
company can now be wound up under the companies Act 2013 only
by the tribunal.

• AIM OF INSOLVENCY AND BANKRUPTCY CODE, 2016-

– To consolidate and amend the laws relating to insolvency resolution of
companies and limited liability entities, partnerships and individuals,
which are contained in various enactments, into a single legislation.
– Providing resurrection and resolution in a time bound manner for
maximization of value of debtor’s assets.
– An overarching framework to aid sick companies to either wind up
their business or engineer a revival plan and for investors to exit.
– Has empowered the operational creditors to initiate the insolvency
resolution process, if default occurs.
 WINDING UP BY THE TRIBUNAL

• Grounds of compulsory winding up section 271

– By SR. 271(a)
– If the company acting against the interests of sovereignty
and integrity of India, the security of the state , the friendly
relations with foreign states , public order, decency or
morality .section(271)
– Company’s affair’s been conducted in a fraudulent or
unlawful manner etc . Section 271(c).
– Company making default in filing with the registrar its
financial statements or Annual returns for immediately
preceding five consecutive financial years –section 271(d)
– Just and equitable . Section 271 (e ).
WINDING UP BY SPECIAL RESOLUTION
(SECTION 271(a))

• Company may by special resolution resolve to wound

up by the tribunal . Tribunal to see that winding up is
not opposed to public interest or the interest of the
company as a whole.
• The company has to call for General body meeting and
pass a SR and also to set out grounds in the explanatory
statement appended telling why such winding up of the
company is called for.
• The tribunal has a discretion and under no obligation to
order winding up .
• The tribunal must exercise its discretion in judicial
manner.
 company acting against the interests of
sovereignty and integrity of India, the security
of the state , the friendly relations with foreign
states , public order, decency or morality
.section(271)

• The tribunal will entertain petition under this

clause only from the CG or SG and will order
winding up on receipt of the petition .
 Company’s affair’s been conducted in a fraudulent or
unlawful manner etc . Section 271(c).

• The registrar or any other person authorized by the CG

may make application to the tribunal for winding up.
• Tribunal may entertain the petition on the following
grounds-
– Affairs of company are being conducted in a fraudulent
manner
– Formation was for fraudulent purposes
– The person concerned in formation and management have
been guilty of fraud, misfeasance or misconduct in
connection therewith.
• Order investigation into the affairs of a company . And
accordingly the CG may make a petition to the tribunal for
winding up of the company.
 Company making default in filing with the registrar its
financial statements or Annual returns for immediately
preceding five consecutive financial years –section 271(d)

• Provides a ground of winding up for default in

filing financial statements or annual returns. It is a
feature of non –accountability and indiscipline in
running the affairs of the company including
government company.
• This clause can be invoked on non filing of both
or any one for consecutive five immediately
preceding years.
 Just and equitable ground Section 271 (e ).
• Tribunal will give a weightage to the interest of the company ,
its employees, creditors and shareholders and the interest of
the general public.
• The relief based on the just and equitable clause is in the
nature of the last resort when the other remedies are not
efficacious to protect the general interest of the company.
• Some of the Just and equitable grounds may be-
a) Disappearance of substratum
a) Where the subject matter of the company is gone.
b) The object of incorporation is failed.
c) Impossibility to carry on the business
d) Existing or probable assets are insufficient to meet the
existing liabilities.
b) illegality of object and fraud-
c) Deadlock in management-if it is impossible to
manage a company’s affairs because the voting
power at board and GM is divided between
two dissenting groups, the tribunal will resolve
the deadlock by making a winding up order.
Example- company is having two directors who
are its only shareholders and who hold an
equal number of voting shares.
• When the company is bubble it means it never had any real business .
These companies are also called as fly-by-night companies.

• Oppression- a winding up petition may lie where the principal shareholders

have adopted an aggressive or oppressive policy towards the minority.

• Grounds analogous to dissolution of partnerships-if the company is a

private one and its share capital is held wholly or mainly by its directors , it
is in substance a partnership in corporate from , and the tribunal may will
order its winding up in the same situation as it would order the dissolution
of a partnership on the ground that it is just and equitable.

• Requirements for investigation- investigation can only be obtained in a

winding up by the tribunal .

• Broad democratic legal principles of fairness must be considered by the

tribunal before passing winding up order.

• Company lacking in commercial morality or incapable of maintaining or

producing relevant records.
Who can make petition section 272

All or any of
Contributory
company the specified
(s)
persons

Person
Registrar authorised by CG or SG
CG
COMPANY SECTION 272(1)(a)
Situtation-1-
• A company may make a petition for its winding up after
passing special resolution for the same under section
304.

Situation -2
• If the directors find the company to be insolvent due to
circumstances which ought to be investigated by the
tribunal , directors may file a petition for winding up
order on behalf of the compnay without obtaining the
sanction of the General Meeting.
 CONTRIBUTORY’S PETITION SECTION
272(1)(b)
Section 2(26)-Contributory means person liable to contribute to the assets of a
company in the event of its wound up.
• Legal representative of a deceased shareholder is a contributory .
• The deceased shareholders has to be a natural person.
• Company can not authorise its representatives for filing suits or
proceedings of winding up.
Situation-1
• If the shares in respect of which he is a contributory or some of them were
originally allotted to him , or have been held by him and registered in his
name for at least 6/18 months preceding the commencement of winding up,
or have devolved upon him through the death of former holder.
Situation -2
• Whose call is in arrear may not be presenting winding up petition unless he
pays the call in the tribunal or satisfies that he is willing to pay the same.
 JOINT PETITION OR ALL OR ANY OF THE
SPECIFIED PERSONS SECTION 272(1)( C)

• Any combination of company and the

contributories can present a petition for winding
up.

Company+contributories
= winding up petition
REGISTRAR SECTION 272(1)(d)
Situation-1
– If the company acting against the interests of sovereignty and integrity of India,
the security of the state , the friendly relations with foreign states , public order,
decency or morality .

Situation-2
– Company’s affair’s been conducted in a fraudulent or unlawful manner etc . .

Situation-3
– Company making default in filing with the registrar its financial statements or
Annual returns for immediately preceding five consecutive financial years
Registrar to present the petition only after getting sanctioned by the CG.CG to
give sanction only after an opportunity of being heard has been given to the
company.
Registrar to file the petition within a reasonable time after obtaining the sanction
failing which the tribunal shall not recognise the sanction was valid.
 PERSON AUTHORISED BY CG
SECTION 272(1)(e )

• CG may authorise any person to file a petition

before the tribunal.
 CG/SG section 272(f )
• If it appears from the report of inspectors
appointed to investigate the affairs of the
company under section 213 on the ground that it
is just and equitable to wound up the company.
• The government may authorise any person to act
on its behalf including registrar.
• Government is empowered to file winding up
petition if the company is acting against
sovereignty and integrity of India or security of
state etc.
 WINDING UP PROCEDURE BY
THE TRIBUNAL
Procedure for making and service of winding up petition-
• Petition to be listed before the tribunal once it is filed.
• If the petition is by the person –
– notice to the company (opportunity of being heard to be
provided to the company)
– Copy of petition to be served on contributory or creditor
– Petition to be advertised in one daily English newspaper
and one daily newspaper in the principal language
circulating the state where the registered office of the
company is situated at least 14 days before the date fixed
for hearing.
– A tribunal may allow to withdrawn by the tribunal
subsequently.
 The tribunal may also permit substitution of the
petitioner under following circumstances
1. If the petitioner is not entitled to present.
2. Fails to advertise petition within the prescribed time
by rule or by order of the tribunal
3. Consents to withdraw the petition, or to allow it to be
dismissed or the hearing to be adjourned or fails to
appear in support of his petition when it is called on
the day originally fixed for hearing thereof or any day
to which the hearing has been adjourned.
4. Does not apply for an order in terms of the prayer of
his petition
5. Where in the opinion of the tribunal there is other
sufficient cause for an order being made.
• Winding up of the company shall be deemed to commence at the time of the presentation of the petition for
the winding up.

• Until winding up order is made , the company will have to comply with the requirements of the Act as are
required of a company not wound up.

• Company to file its objections through the affidavit not less than 5 days before the date fixed for hearing,
along with a statement of affairs within 30 days or may be extended by the tribunal for another 30 days in
case of exigency or special circumstances. Section 274(1)

• The copy of the same statement of affair to be served upon the petitioner , contributory or creditor coming
in support of petition

• If a rejoinder need to be filed in reply to the affidavit shall be filed not less then 2 days before the hearing
(Rule-5 of the Draft Companies(winding up )Rules 2013.

• Failure in filing of statement of affairs as ordered by the tribunal , the company shall forfeit the right to
oppose the petition.

• The director and other officer of the company are required to submit the books of account completed and
audited up to the date of the order.

• Failure to file the statement will make the director or officer liable to imprisonment extending to 6 months
or fine of not less than rupees 25 thousand which may extend to 5 lakh rupees or both.

• Prima facie case for winding up is to be made out.

 If the petition is filed by the
company-
• Petition shall be accompanied by a statement
of affairs in the form and manner
prescribed.

• Statements duly certified by the CA in

practice, shall state facts up to the date not
more than 15 days prior to the date of making
the statement(Rule 5 of the Draft
Companies(Winding up) Rules 2013
 CONSENT TERM MAY BE FILED BY THE PARTIES
BEFORE THE TRIBUNAL

• If the parties enter into MOU for repayment of

debt during the pendency of the petition for
winding up , the same could be filed before the
tribunal
• This consent terms in MOU will become order of
the court under relevant rules.
• If the tribunal pass order on the bases of consent
terms without framing points(issues) for
consideration and the parties are not permitted to
adduce evidence, the order is to be set aside and
referred back to the company judge.
 POWERS OF THE TRIBUNAL TO PASS FOLLOWING ORDERS
SECTION 273

Appointment of
Dismiss with provisional liquidator Interim
or without or company till order as
making of order of
cost winding up think fit

Make a Other order

winding up
order with or as it thinks
without cost fit.
 OTHER ORDERS

order sale of
companies assets Order payment of
Recommend
even before actually money to the
investigation
passing winding up petitioning creditor
order.

On restrictions or
Power to reschedule limitations on the
payment powers to pass
orders
 IMPORTANT POINT TO BE
REMEMBERED
• Winding up order can even be passed when the assets of the
company have been mortgaged to an amount equal to or in
excess of those assets or that the company has no assets.

• The tribunal may even when the petition is made on just and
equitable ground refuse to order the winding up if the other
remedy is available to the petitioners .

• The tribunal for the purposes of giving regard to the wishes

of creditors ,contributories as proved to it by any sufficient
evidence and for the purpose may direct that their meeting
may be held or conducted as directed by the tribunal, further
can also appoint the chairman for the meeting to report to
the tribunal the outcome of the meeting.
CAN A WINDING UP ORDER CAN
BE RECALLED
Yes
Example-
1 A reference is pending with the BOARD FOR INDUSTRIAL
AND FINANCIAL RECONSTRUCTION

• Agency of the government of India , part of department of

financial services of the Ministry of Finance ,set up in January
1987 with an objective
– to determine sickness of industrial companies
– To assist in reviving those that may be viable and shutting
down the others
– Now this is dissolved and referred all proceeding to NCLT
and NCALT as per provision of Insolvency and Bankruptcy
code.
2 . Issued ex parte winding up order –
Parbati Dasgupta Vs Official Liquidator (2005) 64 SCL
169(cal)

Recall of order or permanent stay was prayed by the petitioner. It was

seen in appeal that petitioner for the winding up petition was not the
creditor himself but purportedly was his constituted attorney. All through
out the proceedings all the paper including even Vakalatnama were
signed not by the creditor but by the attorney. In this case the question of
life status of the creditor came before the tribunal. It was observed that
life status of the creditor was not on records whether he was alive. As per
the provisions of section 108 of the evidence act he is to be presumed to
be dead. the appeal tribunal held that concerned creditor was alive at
the time of the initiation of the proceedings and there accordingly
granted permanent stay on the winding up order .
3. When the winding up order was based on wrong
information.
 CAN A WINDING UP ORDER BE PASSED
WITHOUT HEARING THE COMPANY
CONCERNED?
• Yes
– If the order is passed taking into consideration
whole financial aspects through a questionnaire
and information regarding relevant transactions
was sought and affidavit filed showing company’s
financial position.
 CONSEQUENCES OF WINDING
UP ORDER
1. Tribunal within a period of not exceeding 7 days cause intimation to
company liquidator /provisional liquidator and the Registrar.
2. Registrar to make an endorsement of the order in his records relating to
the company and notify in the official gazette. Registrar shall also inform
to stock Exchange where the securities of the company are listed.
3. Order of winding up is deemed to be a notice of discharge of the officers
and employees of the company except when the business of company is
continued for the beneficial winding up of the company.
4. Tribunal gets jurisdiction to entertain or dispose of any suit or
proceedings or claim made by or against the company before or after the
winding up order.
5. All actions and suits against the company except cases on appeal pending
before the supreme court or high court are stayed, unless tribunal gives
leave to continue or commence proceedings.
6. The order operates in the interests of all the creditors and all the
contributories.

7. Company liquidator/provisional liquidator shall take possession and

control of the assets of the company and shall be deemed to be in custody
of the tribunal.

8. Any dispositions of the property of the company including actionable

claims and any transfer of shares in the company or alteration in the status
of members made after the commencement of winding up shall , unless
the tribunal otherwise orders , be void.

9. Any attachment, distress or execution put in force , without leave of the

tribunal , against the estate or effects of the company after the
commencement of the winding up shall be void.

10. Any sale held without leave of the tribunal of any of the properties or
effects of the company after the commencement of winding up shall be
void .

11. Any floating charge created within 12 immediately preceding the

commencement of winding up is void unless it is proved that the
company after the creation of the charge was solvent.
GENERAL POWERS OF THE TRIBUNAL
IN CASE OF WINDING UP BY TRIBUNAL

DELIVERY OF
SETTLEMENT OF
PROPERTY TO SET OFF
LIST OF
COMPANY
CONTRIBITORIES SECTION 295
LIQUIDATOR
SECTION 285
SECTION 283

POWER TO MAKE POWER TO ADJUST

CALLS RIGHTS OF
CONTRIBUTORIES
SECTION 296 SECTION 297
 TO ORDER PUBLIC
POWER TO ORDER EXAMINATION OF
COSTS PROMOTERS,
SECTION 298 DIRECTORS
SECTION 300

POWER TO MODIFY
THE TERMS AND
POWER TO ARREST CONDITIONS AFTER
ABSCONDING PERSON CONFIRMATION OF
SECTION 301 SALE OF PROPERTIES
 Winding up of an unregistered
company section 375
• No voluntarily winding up.
• On the provision of compulsory winding up is
applicable.
• Circumstances which leads to wound up-

Company is dissolved or
has ceased to carry on
Unable to pay Just and
business or is carrying on
business only for the debts equitable
purposes of winding up
its affairs ground
Company will be considered unable to pay the
debts under following circumstances
• Neglect to pay the sum on demand or to secure or
compound for it to the satisfaction of the creditor.

• Any suit or other proceedings have been instituted against

any member of any debt or demand due, or claimed to be
due from the company or from him in his character of
member, and notice in writing of the institution of the suit
or proceedings having been served on the company and the
company has not within ten days thereafter-

– Paid , secured or compounded the debt or demand or

– Procured the suit or legal proceedings to be stayed or
– Indemnified the defendant to his satisfaction against the suit or
other legal proceedings and against all costs , damages and
expenses to be incurred by him by reason of the same.
• If the execution or other process issued on a
decree or order of any court or tribunal in
favour of a creditor against the company or
any member thereof is returned unsatisfied in
whole or in part.
• If it is otherwise proved to the satisfaction of
the tribunal that the company is unable to pay
its debts.
 Liability to pay the debts by
contributories
• Rule 47 of the draft companies (winding up)
Rules 2013 –
– Every person is liable to contribute to the payment
of any debt or liability of the company, the cost,
charges and expenses of winding up or for the
adjustment of rights of the members among
themselves shall be deemed to be a contributory
– Includes the legal representatives of deceased
contributories and
– assignees of the insolvent contributories
 Procedure for winding up of
unregistered company and firm

Application of
procedure relating to
compulsory winding
up by tribunal will be
applicable.
 WINDING UP OF A FOREIGN
COMPANY
• Where a company is incorporated outside India
and which has been carrying on business in
India ceases to carry on business in India , may
be wound up as an unregistered company
notwithstanding that the company has been
dissolved or otherwise ceased to exist as such
under the laws of the country under which it
was incorporated section 376.
•THANK YOU