21

Companies Act, 2013: Meeting and Power of Board

A company is an association of several persons. Decisions are made in a company according to the view of the majority. Various matters are discussed and decided upon in meetings, which take place between members and between the directors. The Companies Act, 2013, contains several provisions for such meetings. These provisions have to be understood and followed.

For a meeting, there must be at least two persons. One member cannot constitute a company meeting even if he holds proxies for other members.

21.1 KINDS OF COMPANY MEETINGS

Broadly, meetings in a company are of the following types

1. Meetings of members:
   1. Statutory general meeting.
   2. Annual general meeting.
   3. Extraordinary general meeting.
2. Board meetings: It also includes meetings of the committees of the board.
3. Meetings of creditors:
   1. For purposes other than winding up, and
   2. For winding up.
4. Class meeting: Meetings of a particular class of shares.

21.2 REQUISITES OF A VALID MEETING

The following conditions must be satisfied for a meeting to be called a valid meeting:

21.2.1 By Proper Authority

A meeting must be properly convened. The persons calling the meeting must be authorised to do so. If the meeting is called by the person who does not have authority, meeting is said to be invalid.

21.2.2 Proper Notice

Proper and adequate notice must have been given to all those entitled to attend the meeting. The notice of meeting should have been given well in advance. The provisions regarding serving notice to the members for general meetings are discussed in detail in the next section.

21.2.3 Chairman

The meeting must be legally constituted. There must be a chairperson. It is not possible to convene a meeting if the chairperson is not present at the time of meeting.

21.2.4 Quorum

Quorum stands for the minimum number of members to be present at the meeting to discuss the subject matter at the meeting. The rules of quorum must be maintained and the provisions of the Companies Act, 2013 and the articles must be complied with. If the meeting is convened without quorum, the meeting will be invalid.

21.2.5 Other Rules

The business at the meeting must be validly transacted. The meeting must be conducted in accordance with the regulations governing the meetings. The rules of article of the association in this regard should be followed.

21.3 DIFFERENT MANNER OF SERVING NOTICE TO MEMBERS

Notice of general meeting can be given in any manner prescribed in Section 20:

1. By handing over the notice to the member personally, or
2. By post under a certificate of posting or by registered post or speed post.
3. By electronic means.

Notice is deemed to have been served on a person to whom the notice is addressed, if the notice is posted to him, by affixing stamps of requisite value at his address registered in India (Col. Kuldip Singh Dhillon v. Paragon Utility Financiers P Ltd)

In case of notice by post, notice of meeting is deemed to be served 48 hours after the time of posting irrespective of actual date of receipt of notice by the member. This is so even when the day after 48 hours happens to be a Sunday or holiday.

21.3.1 Notice in Case of Joint Holders

In case of joint holding, notice is necessary only to the first joint holder in the register of members, i.e., whose name appears first in the register.

21.3.2 Notice by Registered Post or by UPC

As per Section 20, a member can inform the company in advance that notice should be sent to him under a postal certificate or by registered post or courier with acknowledgement.

A member may request the company for delivery of document through a particular mode. He should deposit a sum sufficient to defray the expenses in doing so. If he has done that, and if the notice is not served the way the member wanted it to be served, the notice will not be deemed to have been given.

21.4 PROVISIONS REGARDING NOTICE OF GENERAL MEETING

A meeting cannot be held unless a proper notice containing the necessary information has been given at the proper time to all persons entitled to attend the meeting.

A notice convening a general meeting must be given at least 21 clear days prior to the date of meeting as per Section 101.

However, an annual general meeting may be called and held at a shorter notice, if consent is given in writing or electronic mode by members holding 95 percent of the total voting power of the company.

Notice of every meeting of the company must be sent to all members entitled to attend and vote at the meeting. Notice of the AGM must be given to the statutory auditor of the company.

The notice may be given to any member either personally or by sending it by post to him at his registered address, or if there is none in India, to any address within India supplied by him for the purpose.

Where notice is sent by post, service is effected by properly addressing, pre-paying and posting the notice.

A notice may be given to joint holders by giving it to the joint holder first named in the register of members.

A notice calling a meeting must state the place, day and hour of the meeting and must contain the agenda of the meeting.

The notice must describe type of meeting. A statement of the business to be transacted at the general meeting should be given in the notice.

Where any items of special business are to be transacted at the meeting, an explanatory statement setting out all material facts concerning each item of the special business including the concern or interest, if any, therein of every director and manager, if any, must be annexed to the notice. If it is intended to propose any resolution as a special resolution, such intention should be specified.

A notice convening an AGM must be accompanied by the annual accounts of the company, the director’s report and the auditor’s report.

The copies of these documents could, however, be sent less than 21 days before the date of the meeting if agreed to by all members entitled to vote at the meeting.

As per Section 101(3), notice of general meeting must be in writing and should be given to

1. All members as per the address available in Register of Members
2. In case of insolvent members, to their assignee by post or if the address is not known, to the earlier known address of the insolvent member
3. In case of deceased member, to his representatives, and if his address is not known, to earlier address of the deceased member/members.
4. To auditors
5. To preference shareholders
6. In case of joint holding, noticed is necessary only to first joint holder in the register of members, i.e., to the one whose name appears first in the register.

21.4.1 Accidental Omission to give Notice of General Meeting

An accidental omission to give notice to or non-receipt of notice by a member will not invalidate the proceedings of the meeting [Section 101(4)].

21.4.2 Intentional Omission

An intentional omission to send a notice to even one member will invalidate the meeting.

In Rajiv Khandelwal vs Amigo Multifilm it was held that all resolutions passed at an extraordinary general meeting (EOGM) were declared as null and void when it was found that proper notice of meting was not given.

21.5 ANNUAL GENERAL MEETING (AGM)—SECTION 96

An annual general meeting must be held by every type of company, public or private, limited by shares or by guarantee, with or without share capital or unlimited company, once in a year.

Every company must in each calendar year hold an annual general meeting. In addition, the gap between two annual general meetings should not be more than 15 months or within a period of six months from closing of the financial year.

However, a company should hold its first annual general meeting within nine months from the closing of the financial year. In such a case, it need not hold any annual general meeting in the year of its incorporation as well as in the following year.

21.5.1 Extension of Time for Holding AGM

In case there is any difficulty in holding any annual general meeting (except the first annual meeting), the registrar of companies (ROC) may, for any special reasons shown, grant an extension of time for holding the meeting by a period not exceeding three months, provided the application for the purpose is made before the due date of the annual general meeting.

However, general delay in the completion of the audit of the annual accounts of the company is not treated as ‘special reason’ for granting extension of time for holding its annual general meeting. Generally, in such circumstances, an AGM is convened and held at the proper time. All matters other than accounts are discussed. All other resolutions are passed and the meeting is adjourned to a later date for discussing the final accounts of the company. However, the adjourned meeting must be held before the last day of holding the AGM.

The AGM must be held on a working day during business hours (i.e. between 9.00 A.M. to 6 P.M.) 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.

Thus, AGM cannot be organised on a Sunday or a public holiday and it cannot be held in the evenings or in the night after business hours. As per Section 2 (38), public holiday means a ‘public holiday’ declared under ‘Negotiable Instruments Act’. Further, all Sundays are ‘public holidays’.

21.6 REPORT ON AGM—SECTION 121

Every listed public company is required to prepare a report on each annual general meeting including the confirmation to the effect that the meeting was convened, held and conducted as per the provisions of the Act and the rules made thereunder. A copy of the report is to be filed with the Registrar in Form No. MGT—15 within thirty days of the conclusion of annual general meeting, along with the prescribed fee.

According to Rule 31, the report shall be prepared in accordance with the following rules:

1. A report under this section shall be prepared in addition to the minutes of the general meeting.
2. The report shall be signed and dated by the chairman of the meeting or in case of his inability to sign, by any two directors of the company, one of whom shall be the managing director, if there is one.
3. Such report shall contain the details in respect of the following:
   • The day, date, hour and venue of the annual general meeting.
   • Confirmation with respect to appointment of chairman of the meeting.
   • Number of members who attended the meeting.
   • Confirmation of quorum.
   • Confirmation with respect to compliance of the Act and the Rules, secretarial standards made thereunder with respect to calling, convening and conducting the meeting.
   • Business transacted at the meeting and result thereof.
   • Particulars with respect to any adjournment, postponement of meeting, change in venue.
   • Any other points relevant for inclusion in the Report.
4. Such report shall contain a fair and correct summary of the proceedings of the meeting.

21.7 NOTICE OF ANNUAL GENERAL MEETING

As per Section 101 of the Companies Act, 2013, a general meeting of a company may be called by giving a clear 21 days’ notice in writing.

The notice must state that the meeting is an annual general meeting. The time, date and place of the meeting must be mentioned in the notice.

The notice of the meeting must be accompanied by a copy of the annual accounts of the company, director’s report on the position of the company for the year and auditor’s report on the accounts. A proxy form should be enclosed with the notice.

Companies having share capital should also state in the notice that a member is entitled to attend and vote at the meeting and is also entitled to appoint proxies in his absence. A proxy need not be a member of that company.

21.8 DEFAULT IN HOLDING AN ANNUAL GENERAL MEETING—SECTION 97-99

If there is any default in holding an annual general meeting, any member of the company may apply to the tribunal. The tribunal may call, or direct the calling of the meeting, and give such ancillary or consequential directions as it may consider expedient in relation to the calling, holding and conducting of the meeting.

The tribunal may direct that one member present in person or by proxy shall be deemed to constitute the meeting. A meeting held in pursuance of this order will be deemed to be an annual general meeting of the company.

A fine which may extend to ₹ 1,00,000 on the company and every officer of the company who is in default may be levied and for continuing default, a further fine of ₹ 5000 per day during which the default continues may be levied.

21.9 USUAL BUSINESS AT AN AGM—SECTION 102

At every AGM, the following matters must be discussed and decided. Since such matters are discussed at every AGM, they are known as ordinary business. All other matters and business to be discussed at the AGM are special business.

The following matters constitute ordinary business at an AGM:

1. Consideration of annual accounts, director’s report and the auditor’s report.
2. Declaration of dividend, if any.
3. Appointment of directors in the place of those retiring.
4. Appointment of and the fixing of remuneration of the statutory auditors.

In case any other business (special business) has to be discussed and decided upon, an explanatory statement of the special business must also accompany the notice calling the meeting.

The notice must also give the nature and extent of the interest of the directors or manager in the special business, as also the extent of the shareholding interest in the company of every such person.

In case approval of any document has to be done by the members at the meeting, the notice must also state that the document would be available for inspection at the registered office of the company during the specified dates and timings.

21.10 EXTRAORDINARY GENERAL MEETING—EGM—SECTION 100

Every general meeting (i.e. meeting of members of the company) other than the annual general meeting is an extraordinary general meeting.

Such meeting is usually called by the board of directors for some urgent business which cannot wait to be decided until the next AGM. Every business transacted at such a meeting is special business.

An explanatory statement of the special business must also accompany the notice calling the meeting. The notice must also give the nature and extent of the interest of the directors or manager in the special business, as also the extent of the shareholding interest in the company of every such person.

In case approval of any document has to be done by the members at the meeting, the notice must also state that the document would be available for inspection at the Registered Office of the company during the specified dates and timings.

The Articles of Association of a Company may contain provisions for convening an extraordinary general meeting. It may provide that ‘the board may, whenever it thinks fit, call an extraordinary general meeting’ or it may provide that ‘if at any time there are not within India, directors capable of acting who are sufficient in number to form a quorum, any director or any two members of the company may call an extraordinary general meeting’.

21.11 EXTRAORDINARY GENERAL MEETING ON REQUISITION

The members of a company have the right to require the calling of an extraordinary general meeting by the directors. The board of directors of a company must call an extraordinary general meeting if required to do so by the following members:

1. members of the company, holding on date of receipt of requisition of EGM, not less than one-tenth of such of the voting rights in regard to the matter to be discussed at the meeting ; or
2. if the company has no share capital, the members representing not less than one-tenth of the total voting rights on the date receipt of requisition in regard to the said matter.

The requisition must state the objects of the meetings, be signed by the requisitioning members and deposited at the company’s registered office.

When the requisition is deposited at the registered office of the company, the directors should, within 21 days, move to call a meeting. The meeting should be actually be held within 45 days from the date of the lodgement of the requisition.

If the directors fail to call and hold the meeting as aforesaid, the requisitioners or any of them meeting the requirements as above, as the case may be, may themselves proceed to call a meeting within three months from the date of the requisition, and claim the necessary expenses from the company. The company can make good this sum from the directors in default.

At such an EGM, any business which is not covered by the agenda mentioned in the notice of the meeting cannot be voted upon.

21.12 EOGM BY TRIBUNAL—SECTION 98

If for any reason, it is impracticable to call a meeting of a company other than an annual general meeting, or to hold or conduct the meeting of the company, the tribunal may, either i) on its own motion, or ii) on the application of any director of the company, or of any member of the company who would be entitled to vote at the meeting, order a meeting to be called and conducted as the tribunal thinks fit, and may also give such other ancillary and consequential directions as it thinks fit expedient. A meeting so called and conducted shall be deemed to be a meeting of the company duly called and conducted.

21.13 PROXY—SECTION 105

In case of a company having a share capital and in the case of any other company, if the articles so authorise, any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself.

Every notice calling a meeting of the company must contain a statement that a member entitled to attend and vote is entitled to appoint one proxy in the case of a private company and one or more proxies in the case of a public company and that the proxy need not be member of the company. But in case of Section 8 Company, proxy to be appointed should be member of company.

A member may appoint another person to attend and vote at a meeting on his behalf. Such other person is known as ‘proxy’.

A member may appoint one or more proxies to vote in respect of the different shares held by him, or he may appoint one or more proxies in the alternative, so that if the first named proxy fails to vote, the second one may do so, and so on. A person appointed as proxy shall not act as proxy on behalf of more than 50 members and members holding the aggregate more than 10% of the total share capital of company carrying voting right.

The member appointing a proxy must deposit with the company a proxy form at the time of the meeting or prior to it giving details of the proxy appointed. However, any provision in the articles which requires a period longer than 48 hours before the meeting, for depositing with the company any proxy form appointing a proxy, shall have the effect as if a period of 48 hours had been specified in such provision.

The proxy form must be in writing and be signed by the member or his authorised attorney duly authorised in writing or if the appointer is a company, the proxy form must be under its seal or be signed by an officer or an attorney duly authorised by it. Proxy form should be in Form MGT-11.

Since proxy is a mere agent, he cannot appoint another proxy unless specifically authorised by the principal.

Right of member to vote in person supersedes rights conferred by grant of proxy. Where a member who has given proxy personally attends and votes and proxy also votes, the vote of member is valid and vote of the proxy is to be rejected. However, mere presence of a member does not imply revocation of proxy appointed by him.

A proxy is not entitled to vote except on a poll. Therefore, a proxy cannot vote on show of hands. A proxy cannot speak at the meeting. He is entitled to vote only at the poll. Since he cannot speak, he cannot ask questions in writing also, for in reality, it is a one-way mode of ‘speaking’. However, a proxy can demand a poll or join in demanding a poll.

A proxy can be appointed for general meetings. However, for board meetings, appointment of proxy is not allowed.

21.14 REVOCATION OF PROXY AFTER APPOINTMENT

The proxy can be revoked by the member at any time, and is automatically revoked by the death or insolvency of the member.

The member may revoke the proxy by voting himself before the proxy has voted, but once the proxy has exercised the vote, the member cannot recast his vote. Where two proxy forms by the same shareholder are lodged in respect of the same votes, the last proxy form will be treated as the correct proxy form.

21.15 QUORUM FOR GENERAL MEETING—SECTION 103

Quorum refers to the minimum number of members who must be present at a meeting in order to constitute a valid meeting.

Unless the articles of a company provide for larger quorum, the following number of members personally present will be quorum for a general meeting:

Situation	No of members to form quorum
Public company—if the number of members present as on date of meeting is not more than 1000	5 members
Public company—if the number of members present as on date of meeting is more than 1000 but not more than 5000	15 members
Public company—if the number of members present as on date of meeting is more than 5000	30 members
Private company	2 members

A meeting without the minimum quorum is invalid and decisions taken at such a meeting are not binding.

The articles of a company may provide for a quorum, without which a meeting will be construed to be invalid.

21.15.1 When Quorum is Required to be Present

It has been held by courts that unless the articles otherwise provide, a quorum needs to be present only when a meeting is commenced, and it is immaterial that there was no quorum at the time when the vote was taken.

Further, unless the articles otherwise provide, if within half-an-hour from the time appointed for holding a meeting of the company, a quorum is not present in person, the meeting :

1. if called upon the requisition of members, shall stand dissolved;
2. in any other case, it shall stand adjourned to the same day in the next week, at the same time and place, or to such other day and time as the Board of Directors may determine.

If at the adjourned meeting also, the quorum is not present within half-an-hour from the time appointed for holding the meeting, the members present shall form a quorum.

In case the tribunal calls or directs the calling of a meeting of the company, when default is made in holding an annual general meeting, the government may give directions regarding the quorum including a direction that even one member of the company present in person, or by proxy shall be deemed to constitute a meeting.

Similarly the tribunal may, direct a meeting of the company (other than an annual general meeting) to be called and hold, where for any reason it is impracticable to call a meeting and direct, that even one member present in person or by proxy shall be deemed to constitute a meeting.

21.15.2 Quorum of One Man

The word ‘meeting’ prima facie means coming together of more than one person. As such, with one man, a meeting cannot be held. However, there are certain exceptional situations when holding of meetings even with one member present in the meeting, as stated below, is held as valid.

If the entire share capital is held by one person, in such case the presence of that person alone shall constitute a quorum for any meeting of the company. In East v Bennet Bros. Ltd, it was held that a meeting of preference shareholders attended by the only preference shareholder of the company was proper.

According to Section 97 of the Companies Act, 2013, if default is made in holding the annual general meeting the tribunal may, on application of any member, call or direct calling of the said meeting and in such cases it may direct that one member present in person or by proxy shall be deemed to constitute a quorum for the meeting.

As provided under Section 98 of the Companies Act, 2013, the tribunal may order for holding of any other general meeting and may direct that one member present in person or by proxy shall constitute the quorum for the meeting.

21.16 CHAIRMAN OF A GENERAL MEETING—SECTION 104

For fair conduct of a meeting, a person is required to chair the meeting. The chairman of the board of directors generally chairs all the meetings. The articles of association of the company regulate the appointment of chairman of the board.

If there is no chairman or he is not present within 15 minutes after the appointed time of the meeting or is unwilling to act as chairman of the meeting, the directors present may elect one among themselves to be the chairman of the meeting.

If, however no director is willing to act as chairman or if no director is present within 15 minutes after the appointed time of the meeting, the members present should choose one among themselves to be chairman of the meeting. If, after the election of a chairman on a show of hands, poll is demanded and taken and a different person is elected as chairman, then that person will be the chairman for the rest of the meeting.

21.17 POWERS OF THE CHAIRMAN OF A GENERAL MEETING

The Act and the articles of the company provide various powers and duties of the chairman of a company, some of which are given below:

1. Section 107 of the Act empowers the chairman to declare the result of voting by show of hands.
2. As per Section 109 of the Act, a poll may be ordered by the chairman of a meeting and shall be ordered to be taken by him when demanded by members as specified in the said section.
3. Section 109 of the Act empowers the chairman of the meeting to appoint scrutinisers to scrutinise the votes given on the poll and to report to him.
4. The chairman has the power under Section 109 to remove any scrutiniser from office any time before the result of the poll is declared and to fill the vacancy caused by the removal.
5. As per Section 109 of the Act, the chairman of the meeting shall have the power to regulate the manner in which a poll shall be taken
6. As per Section 118 of the Act, the chairman has the power to exclude certain matters from the minutes of the meeting if he is of the opinion that (i) it is or would reasonably be regarded as defamatory of any person (ii) is irrelevant or immaterial to the processing or is detrimental to the interest of the company.
7. The chairman has to regulate the proceedings at the meeting, allow speakers to speak at the meeting and fix their time, check pandemonium at the meeting, and pull out persons using personal reference and irrelevant approaches.
8. The chairman has to see that the provisions of the Companies Act, 2013, articles of the company and any other law are complied with.
9. The chairman has to ensure that proper and correct minutes are prepared and signed within the time specified in the Act.

21.18 POLL—SECTION 109

The chairman may order a poll when a resolution proposed by the board is lost on the show of hands or if he is of the opinion that the decision taken on the show of hands is likely to be reversed by poll. When a poll is taken, the decision arrived at by poll is final and the decision on the show of hands has no effect.

A poll is allowed only if the prescribed number of members demand a poll. A poll must be ordered by the chairman if it is demanded:

1. in the case of a company having a share capital, by any member or members present in person or by proxy and holding shares in the company:
   1. which confer a power to vote on the resolution not being less than one-tenth of the total voting power in respect of the resolution, and
   2. on which an aggregate sum of not less than ₹ 5 Lakh has been paid up.
2. in the case of any other company, by any member or members present in person or by proxy and having not less than one-tenth of the total voting power in respect of the resolution.

As per Section 109 of the Companies Act, 2013, poll demanded on a question of adjournment shall be taken immediately. As per Section 104 of the Companies Act, 2013, a poll demanded on election of chairman of the meeting shall be taken forthwith. A poll demanded on any other matter except adjournment or election of chairman shall be taken at such time not being later than 48 hours from the time when the demand was made.

21.19 POSTAL BALLOT—SECTION 110

Postal ballot is one method of voting. As per Section 2(65), postal ballot includes voting by shareholders by postal or electronic mode instead of voting personally by presenting for transacting businesses in a general meeting of the company.

Passing of resolution by postal ballot will be mandatory relating to business as may be specified by Central Government under Rule 22 of Companies (Management & Administration) Rules, 2014. The company may get any other resolution passed through postal ballot, if it so desires.

All resolutions which are required to be passed at General Meeting can be got passed through postal ballot. However, holding of AGM is a statutory requirement as per Section 96 and holding of AGM is essential. Passing of resolution by postal ballot will not eliminate the requirement of holding AGM.

21.20 PROCEDURE FOR PASSING RESOLUTION BY POSTAL BALLOT

A company which seeks to pass resolution by postal ballot shall take the following steps:

1. Pass necessary board resolution for postal ballot. The board resolution should make the company secretary, along with one of the functional directors, responsible for the entire postal ballot process.
2. The board should also fix the date and time schedule for the various activities and finalise the calendar of events.
3. The board of directors shall appoint one scrutiniser, who is not in employment of the company. He may be a retired judge or any person of repute who, in the opinion of the board can conduct the postal ballot voting process in a fair and transparent manner. Any person, including a retired judge, CA, ICWA or ICSI or advocate can be appointed. However, only an individual can be appointed as scrutiniser by name. A firm or corporate body cannot be appointed as scrutiniser.
4. A ‘calendar of events’ prescribing dates for various events should be finalised in the same board meeting. The ‘calendar of events’ contains date of dispatch of notice, last date for receiving ballot, copy of board resolution etc.
5. A copy of board resolution, along with calendar of events, should be dispatched to the Registrar of Companies for information within one week of passing board resolution, for his information.
6. The company should send a notice to all shareholders along with draft resolution, explaining reasons thereof.
7. The company may make a note below the notice of Annual General Meeting, for understanding of members, that the transaction(s) at serial numbers as specified in the notice requires consent of shareholders through postal ballot. The notice should be placed on the website of the company, if any.
8. Postal ballot should be sent by registered post with Acknowledgement Due, along with a postage pre-paid envelope for facilitating communication of assent or dissent by the shareholder to the resolution. Notice can be sent by registered post or under certificate of posting or courier or electronic mode.
9. In addition, an advertisement should be published in a leading newspaper and in one vernacular newspaper circulating in the state in which the registered office of the company is situated, about having dispatched the ballot papers.
10. The assent or dissent must be sent within 30 days from date of posting of the letter.
11. The resolution will be deemed to have been passed if it is assented by the requisite majority of shareholders by means of a postal ballot.
12. Postal ballot should be posted to all members. The ballot should be serially numbered and have distinguishing water mark, to avoid printing of duplicate ballot papers. The ballot should be in the prescribed form.
13. A member can return the ballot in person or through courier at his own cost and it should be accepted.
14. The ballot can be signed by the first named shareholder and in his absence, by the next named shareholder. Unsigned postal ballots will be rejected.
15. Voting right shall be reckoned on the paid-up value of shares registered in the name of shareholder on the date of dispatch of notice.
16. The pre-paid envelope should be addressed to the scrutiniser appointed by the board.
17. The last date by which postal ballot has to reach the company should be specified in the postal ballot sent to members. Ballots received after that date will be strictly treated as reply not received. Ballot papers received after due date are to be ignored
18. The result should be declared on the website of the company along with the scrutiniser’s report.

21.21 BUSINESS PASSING RESOLUTION THROUGH POSTAL BALLOT

As per Rule 22 of Companies (Management & Administration) Rules, 2014, following businesses shall be passed through postal ballot only in the case of listed company:

1. Alteration in the object clause of memorandum
2. Alteration of articles defining private company
3. Alteration of articles of associations (AOA) in relation to insertion of provisions defining private company.
4. Issue of sweat equity to promoters in case of listed company.
5. Issue of shares with differential voting rights.
6. Variation of shareholders’ right.
7. Buy-back of shares.
8. Election of small shareholders’ director.
9. Sale of the whole or substantially whole of undertaking of company.
10. Giving loans or extending guarantee or providing security in excess of limit specified under Section 186.

One-person Company and other companies having members up to 50 are not required to transact any business through postal ballot.

21.22 ADJOURNMENT OF MEETING

Adjournment means suspending the proceedings of a meeting for the time being so that the meeting may be continued at a later date and time fixed in that meeting itself at the time of such adjournment or decided later on.

Only the business not finished at the original meeting can be transacted at the adjourned meeting.

The majority of members at a meeting may move an adjournment motion at a meeting. If the chairman adjourns the meeting, ignoring the views of the majority, the remaining members can continue the meeting.

The chairman cannot adjourn the meeting at his own discretion without there being a good cause for such an adjournment. Where the chairman, acting bona fide within his powers, adjourns the meeting as per the view of the majority, the minority members cannot to continue with such meeting and, if they do the proceedings there will be null and void.

Despite provisions in the articles that chairman can adjourn meeting only with the consent of members, in the following cases, he may adjourn the meeting on his own:

1. If there is no quorum within half-an-hour.
2. Short adjournment for unruly behaviour

An adjourned meeting is merely the continuation of the original meeting and therefore, a fresh notice is not necessary, if the time, date and place for holding the adjourned meeting are decided and declared at the time of adjourning it.

If a meeting is adjourned without stipulation as to when it will be continued, fresh notice of the adjourned meeting must be given. If the article of the company provides, a fresh notice is required to be given for the adjourned meeting.

Time for poll is not adjournment; it is only recess. If meeting is stopped for holding a ‘poll’, it is not ‘adjournment’ but a ‘recess’. Poll is part of meeting and meeting is said to be continuing when poll is being held.

21.23 MEETING OF DEBENTURE HOLDERS

A company issuing debentures may provide for the holding of meetings of the debenture holders. At such meetings, generally matters pertaining to the variation in terms of security or to alteration of their rights are discussed. All matters connected with the holding, conduct and proceedings of the meetings of the debenture holders are normally specified in the Debenture Trust Deed. The decisions at the meeting made by the prescribed majority are valid and lawful and binding upon the minority.

21.24 MEETING OF CREDITORS

Sometimes, a company, either as a running concern or in the event of winding up, has to make certain arrangements with its creditors. Meetings of creditors may be called for this purpose. A company may enter into arrangements with creditors with the sanction of the court for reconstruction or for any other arrangement.

The court/tribunal, on application, may order the holding of a creditors’ meeting. If the scheme of arrangement is agreed to by majority in number of holding debts to a value of three-fourth of the total value of the debts, the court may sanction the scheme. A certified copy of the court’s order is then filed with the registrar. The court order is binding on all the creditors and the company only after it is filed with registrar.

Similarly, in case of winding up of a company, a meeting of creditors and of contributories is held to ascertain the total amount due by the company and also to appoint a liquidator to wind up the affairs of the company.

21.25 ONE-MAN MEETING

Normally, one person cannot constitute a meeting even if he holds proxies for all members. However, in the following circumstances, one person shall form the quorum for a general meeting:

1. If all the shares of a particular class are held by one person [East vs Bennet Bros. Ltd].
2. If there is only one creditor or debenture-holder, he constitutes quorum for the creditors / ‘debentureholders’ meeting.
3. Company Law Board may issue directions under Section 97 or Section 98 that one member, present in person or by proxy, shall constitute quorum.

21.26 MOTION

Motion means a proposal to be discussed at a meeting by the members. A resolution may be passed accepting the motion, with or without modifications or a motion may be entirely rejected.

A motion, on being passed as a resolution becomes a decision. A motion must be in writing and signed by the mover and put to the vote of the meeting by the chairman.

Only those motions which are mentioned in the agenda to the meeting can be discussed at the meeting. However, motions incidental or ancillary to the matter under discussion may be moved and passed.

Generally, a motion is proposed by one member and seconded by another member.

21.27 KINDS OF RESOLUTIONS

Resolutions mean decisions taken at a meeting. A motion, with or without amendments is put to vote at a meeting. Once the motion is passed, it becomes a resolution. A valid resolution can be passed at a properly convened meeting with the required quorum. There are broadly three types of resolutions:

1. Ordinary resolution—Section 114
2. Special resolution—Section 114
3. Resolution requiring special notice—Section 115

21.27.1 Ordinary Resolution

An ordinary resolution is one which can be passed by a simple majority, i.e., if the votes (including the casting vote, if any, of the chairman) at a general meeting cast by members entitled to vote in its favour are more than the votes cast against it. Voting may be by way of a show of hands or by a poll, provided 21 days notice has been given for the meeting.

21.27.2 Special Resolution

A special resolution is one which is passed by a 75 % majority only, i.e., the number of votes cast in favour of the resolution is at least three times the number of votes cast against it, either by a show of hands or on a poll in person or by proxy. Form MGT-14 is required to be filed with the registrar of companies along with an explanatory statement.

The intention to propose a resolution as a special resolution must be specifically mentioned in the notice of the general meeting. Special resolutions are needed to decide on important matters of the company.

Examples where special resolutions are required are:

1. To alter the domicile clause of the memorandum from one state to another or to alter the objects clause of the memorandum.
2. To alter the articles of association
3. To change the name of the company by omitting ‘Limited’ or ‘Private Limited’.

21.28 RESOLUTION REQUIRING SPECIAL NOTICE—SECTION 115

There are certain matters specified in the Companies Act, 2013, which may be discussed at a general meeting only if a special notice is given regarding the proposal to discuss these matters at a meeting.

A special notice enables the members to be prepared on the matter to be discussed and gives them time to indicate their views on the resolution. Special notice is given by any member holding not less than 1% of total voting power or holding shares on which an aggregate sum not exceeding ₹ 5,00,000 has been paid up.

In case special notice of resolution is required by the Companies Act, 2013 or by the articles of a company, the intention to propose such a resolution must be notified to the company at least 14 days before the meeting. The company must, within seven days before the meeting, give the notice of the proposed resolution to its members.

Notice of the resolution is required to be given in the same way in which notice of a meeting is given, or if that is not practicable, the company may give notice by advertisement in a newspaper having an appropriate circulation or in any other manner allowed by the articles, not less than seven days before the meeting.

The following matters require Special Notice before they are discussed at the meeting:

1. To appoint, at an annual general meeting appointing an auditor, a person other than a retiring auditor.
2. To resolve at an annual general meeting that a retiring auditor shall not be reappointed.
3. To remove a director before the expiry of his period of office.
4. To appoint another director in place of the removed director.
5. Where the articles of a company provide for the giving of a special notice for a resolution, in respect of any specified matter or matters.

A resolution requiring special notice may be passed either as an ordinary resolution (simple majority) or as a special resolution (75 % majority).

21.29 MINUTES OF PROCEEDINGS OF GENERAL MEETING—SECTION 118-119

Every company must keep minutes of the proceedings of general meetings and of the meetings of board of directors and its committees. The minutes are a record of the discussions made at the meeting and the final decisions taken thereat.

Every company must keep minutes containing details of all proceedings at the meetings. The pages of the minute books must be consecutively numbered and the minutes must be recorded therein within 30 days of the meeting. They have to be written directly on the numbered pages. Pasting or attaching of papers is not allowed.

Each page of every such minutes books must be initiated or signed and last page of the record of proceedings of each meeting in such books must be dated and signed by:

1. the chairman of the meeting or that of the succeeding meeting in the case of a meeting of the Board of directors or committee thereof, and
2. the chairman of the meeting within the aforesaid 30 days or in the event of the death or inability of that chairman within the period, by a director duly authorised by the Board of Directors for the purpose, in the case of a general meeting.

The tribunal, however, may not object if minutes are maintained in loose leaf form provided all other procedural requirements are complied with and all possible safeguards against manipulation or interpolation of the minutes are ensured.

The loose leaves must be bound at reasonable intervals. Entering the minutes in a bound minute book by a chemical process, which does not amount to attachment to any book by pasting or otherwise is permissible, provided the original signatures of the chairman are given on each page on the mechanical impression of the minutes,.

All appointments of officers made at any of the meetings must be included in the minutes of the meeting.

In the case of a meeting of the board of directors or its committee, the minutes must also state the names of directors present at the meeting and the names of directors, if any, dissenting from, or not concurring with a resolution passed at the meeting.

The chairman may exclude from the minutes any matters which are defamatory, irrelevant or immaterial or which are detrimental to the interests of the company. The discretion of the chairman with regard to the inclusion or exclusion of any matter is absolute and unfettered.

Where minutes of the proceedings of any meeting have been kept properly, they are, unless the contrary is proved, presumed to be correct, and are valid evidence that the meeting was duly called and held, and all proceedings thereat have actually taken place, and in particular, all appointments of directors or liquidators made at the meeting shall be deemed to be valid.

The minute books of the proceedings of general meetings must be kept in the registered office of the company. It should be kept in custody of the company secretary or director as authorised by passing a resolution.

Any member has a right to inspect, free of cost during business hours at the registered office of the company, the minutes books containing the proceedings of the general meetings of the company. Further, any member shall be entitled to be furnished, within 7 days after he has made a request to the company, with a copy of any minutes on payment of ₹ 10 for each page or part of page.

If any inspection is refused or copy not furnished within the time specified, the tribunal is empowered to direct immediate inspection or sending of copy and penalise the company and its officer in default with fine. However, the minutes books of the board meetings are not open for inspection of members.

21.30 MEANING OF BOARD OF DIRECTORS

Company being an artificial entity, has to act through natural persons and they are named as directors and collectively as board of directors. The management of the affairs of the company is vested in the board of directors and thus they become the working organ of the company.

The board of directors of a company is entitled to exercise all such powers and to do all such acts and things as the company is authorised to exercise and do. The powers of the board can be classified into following categories:

1. Power that could be exercised only at the meeting of the board:
   • Section 179 of Companies Act, 2013
   • Section 182 of Companies Act, 2013
   • Section 183 of Companies Act, 2013
2. Power that could be exercised only with the consent of the company at general meeting:
   • Section 180 of Companies Act, 2013.
   • Section 181 of Companies Act, 2013
   • Section 192 of Companies Act, 2013

The board of directors of a company cannot enter in to the following transactions:

1. Forward dealing in securities of the company—Section 194 of Companies Act, 2013
2. Insider trading—Section 195 of Companies Act, 2013

21.31 POWERS OF THE BOARD OF DIRECTORS WHICH CAN BE EXERCISED AT THEIR MEETING—SECTION 179

Section 179 of the Companies Act, 2013, specifies certain powers which can be exercised by the board only by passing a resolution at a board meeting. However, some of these powers may be delegated by the board in the manner prescribed.

Powers exercisable only by a resolution at a board meeting as per Act:

As per Section 179 and other various provisions of Companies Act, the board shall exercise the following powers only by means of a resolution passed at a meeting of the board:

1. To make calls on shares.
2. To authorise buy-back up to 10% paid up capital and free reserve in a year.
3. To issue securities including debentures, whether in or outside India.
4. To borrow money
5. To invest funds of the company.
6. To grant loans or give guarantee or provide security in respect of loans.
7. To approve financial statement and the board’s report.
8. To diversify the business of the company.
9. To approve amalgamation, merger or reconstruction.
10. To take over a company or acquire a controlling or substantial stake in another company.

Powers exercisable only by a resolution at a board meeting as per rules of Companies Act 2013:

1. To make political contributions.
2. To appoint or remove key managerial personnel (KMP).
3. To appoint internal auditors and a secretarial auditor.

21.31.1 Delegation of Powers

The power to invest, borrow and grant loan or guarantee or security can (Point nos. d to f as mentioned above) be delegated. Power of board can be delegated to a committee of board or managing director, manager or other principal officer of the company or by branch officer in case of branch by means of a resolution passed by the board. Resolution delegating powers should be passed at a board meeting. Power to make inter-corporate loans and investments cannot be delegated by the company according to Section 186. The company, in a general meeting, may impose any restrictions and conditions on the exercise by the board of any of the powers specified above.

Besides the powers specified in Section 179, there are certain other powers also which can be exercised only at the meeting of the board:

1. The power of filling casual vacancies in the board.
2. The power to make political contributions—as per Section 182 of Companies Act, 2013

For the following matter, the consent of every director entitled to vote and present is required at the board’s meeting:

1. The power to appoint a person as managing director or manager who is holding either office in another company—Sections 203 of Companies Act, 2013.
2. The power to give loan to, or invest in any shares of, any other body corporate—Section 186 of Companies Act, 2013

21.32 PROHIBITION AND RESTRICTION REGARDING POLITICAL CONTRIBUTIONS BY DIRECTORS—SECTION 182

Contribution means any payment made without consideration. It includes donation, subscription or any other payment. It includes contribution made to a political party or to any person for political purpose.

Section 182 considers political contribution made whether directly or indirectly. Directly means the company has contributed towards the expenses for political party or donation made to political party. Indirect contribution means payment made to any person for benefit which a political party has obtained from that person.

Political contribution also includes any expenditure incurred by a company on advertisement in any publication by or on behalf of a political party or for its advantage.

Government companies and companies which have been in existence for less than three financial years are not allowed to make political contributions. Political contribution may be made by any other company is subject to the following conditions:

1. The aggregate amounts contributed and proposed to be contributed by a company in any financial year shall not exceed 7.5% of its average net profits of preceding last three financial years.
2. Board resolution should be passed.

Following details regarding contribution should be disclosed in profit and loss account:

1. the amount of contributions during the financial year
2. the name of the party or person to which the amount has been contributed.

21.32.1 Penalty

If contribution is made in contravention:

1. the company shall be punishable with fine up to 5 times the amount so contributed and
2. the officer who is in default shall be punished with imprisonment up to six months and fine which may extend to five times the amount of contribution.

21.33 POWER OF THE BOARD TO MAKE CONTRIBUTION TO NATIONAL DEFENCE FUND—SECTION 183

A company can contribute any amount to national defence fund or any other fund approved by the central government for the purpose of defence fund. The amount can be contributed to national defence fund by the board of directors or any person or authority exercising powers of board or of the company in a general meeting.

The provision of Section 183 is overriding to Sections 180, 181, 182 and anything contained in memorandum or article of association of company. The company should disclose in its profit and loss account the total amount contributed to national defence fund in the financial year.

21.34 POWERS THAT CAN ONLY BE EXERCISED BY THE BOARD OF DIRECTORS OF A PUBLIC COMPANY WITH THE CONSENT OF THE COMPANY IN A GENERAL MEETING—SECTION 180

The Companies Act, 2013, imposes certain restrictions on the powers of the Board. As per Section 180(1) of the Act, the Board shall not exercise the following powers without prior consent of the shareholders in a general meeting:

1. Sell, lease or otherwise dispose of the whole, or substantially the whole of undertakings of the company.

   Important Note for Section 180(1)(a):

   The same provision is applicable when a company has more than one undertaking. The company can sell, lease or otherwise dispose of any one of the undertaking.

   Meaning of undertaking: An undertaking is that in which a company has made investment more than 20% of its net worth or that which generates 20% of the total income as per the last audited balance sheet.

   Net worth: Net worth is the aggregate value of paid-up capital (+) all reserves created out of profits and securities premium account (−) accumulated losses, deferred expenditure and miscellaneous expenditure not written off as per last audited balance sheet.

   Substantially the whole of undertaking: This stands for 20% or more value of undertaking as per the last audited balance sheet in any financial year.

   This provision is not applicable when the general business of a company is to sell or lease property.

2. Invest, otherwise than in trust securities, the compensation received in respect of the compulsory acquisition of any undertaking of the company as a result of merger or amalgamation.
3. Borrow money, if money already borrowed, together with the money to be borrowed will exceed the aggregate of paid-up capital and free reserves of the company.

   Important Note for Section 180(1)(c)

   Temporary loans obtained from the company’s bankers in the ordinary course of business are not considered as borrowings. Temporary loans mean loans repayable on demand or loans repayable within six months of the date of the loan. Loan for short term, cash credit arrangements, discounting of bills are examples of temporary loans. Loan raised for the purpose of financial expenditure of capital nature is not temporary loan.

   Banking companies are granted exemption from provision of this section in the ordinary course of business.

   The resolution passed in the general meeting shall specify the total amount up to which money may be borrowed by the Board; otherwise the resolution shall be void.

4. Remit, or give time for the repayment of any debt due by a director. However, advance given in the ordinary course of business to a director may be renewed by a banking company without the approval of the general meeting.

Section 180 is applicable to all companies. Special resolution is required to be passed at general meeting.

21.35 PROHIBITION AND RESTRICTION REGARDING CHARITABLE FUND BY DIRECTORS—SECTION 181

The board of directors of a company may contribute or donate to bona fide charitable and other funds with prior permission obtained at a general meeting when such aggregate amount of contribution, in any financial year, exceeds 5% of its average net profit for three immediately preceding financial years. Any amount spent for the welfare of employees (e.g., a school or a hospital for the benefit of employees) is included within the meaning of charitable contribution.

The resolution passed by shareholders in a general meeting must specify the total amount up to which money may be contributed by the board. This section is applicable to all companies.

21.36 RESTRICTION ON NON-CASH TRANSACTION INVOLVING DIRECTORS—SECTION 192

Section 192 regulates arrangements in respect of acquisition of assets for consideration other than cash between a company and a director of company or holding company or its subsidiary company or its associate or person connected with such director. A company cannot enter into an agreement by which:

1. a director of the company or its holding, subsidiary or associate company or a person connected with him acquires assets for consideration other than cash, from the company; or
2. the company acquires assets for consideration other than cash, from such director or person so connected.

Such arrangements shall require prior approval by resolution in a general meeting. If a director or a connected person is a director of its holding company, approval is also required to be obtained by passing a resolution in a general meeting of the holding company. The notice of special resolution shall include the particulars of the arrangement along with the value of the assets involved in such arrangement duly calculated by a registered valuer. If arrangement is entered into by a company or its holding company in contravention of provisions, it is voidable at the instance of company. The arrangement will be valid if:

1. restitution of any money is not possible and the company has been indemnified by any other person; or
2. any rights are acquired bona fide for value and without notice of the contravention of the provisions of this section by any other person.

21.37 PROHIBITION ON FORWARD DEALINGS IN SECURTIES OF COMPANY—SECTION 194

The director or key managerial personnel (KMP) should not buy in the company or its holding company or subsidiary or associate company:

1. a right to call for delivery or a right to make delivery at a specified price and within a specified time, of a specified number of relevant shares or a specified amount of relevant debentures; or
2. a right, as he may elect, to call for delivery, or to make delivery at a specified price and within a specified time, of a specified number of relevant shares or a specified amount of relevant debentures.

The director or any other KMP of company is punishable with imprisonment for a term which may extend to 2 years or with fine of not less than ₹ 1 lakh but not more than ₹ 5 lakh or with both if he contravenes the above provisions. Securities acquired in contravention are required to be surrendered to the company.

21.38 PROHIBITION ON INSIDER TRADING—SECTION 195

Section 195 prohibits directors or key managerial personal of a company from dealing in securities of the company or counselling, procuring or communicating, directly or indirectly, about any non-public price sensitive information to any person.

Price sensitive information means any information which relates, directly or indirectly, to a company and which if published is likely to materially affect the price of securities of the company. However, prohibition is not applicable if the director or KMP is required to communicate in ordinary course of business or profession or employment or under any law.

If a person contravenes this provision, he shall be punishable with imprisonment up to 5 years or fine not less than ₹ 5 lakhs but which may extend to ₹ 25 Crore or three times the amount of profits made out of insider trading, whichever is higher or with both.

21.39 FREQUENCY OF BOARD MEETINGS—SECTION 173

A company can convene any number of board meetings to discuss business as required. The first board meeting should be held within 30 days from the date of incorporation of the company. Subsequent board meetings shall be held in such a way that:

1. At least four board meetings are held in a calendar year.
2. The maximum gap between two meetings is not be more than 120 days.

A one-person company, small company and dormant company:

1. Should hold at least one board meeting in each half of the calendar year.
2. Should ensure that the minimum gap between two meetings is not less than 90 days.

If a board meeting is called but could not be held due to want to quorum, provision of Section 173 is complied with as per Section 174(4) of the Companies Act, 2013.

21.40 DAY, TIME AND PLACE OF BOARD MEETING

A board meeting can be held during business hours and on a day which is not a public holiday. However, if the meeting is adjourned for want of quorum and if the articles do not otherwise provide, the meeting will stand adjourned automatically to the same day, in the next week at the same place and time. If that day happens to be a public holiday, then to the meeting is held on the next succeeding day, which is not a public holiday at the same place and time.

The board meeting can be held at any place. It is not necessary to hold board meeting at the registered office. Board meeting can be held by way of video conferencing also. (The provisions for board meeting through video conferencing is explained in detail at a later part of this chapter) Directors can hold a board meeting even outside India. Such board meetings can be held outside business hours.

21.41 NOTICE OF BOARD MEETING—SECTION 173

Board meeting should be called by giving 7 days’ notice in writing to the directors at their registered addresses, by hand delivery, by post or by electronic means.

21.41.1 Meeting at Shorter Notice

Board meeting can be called at shorter notice subject to following conditions:

1. If the company is required to have an independent director:
   • Presence of at least one independent director is required.
   • In case of absence of independent director, the decision taken at such meeting shall be circulated to all the directors, and shall be final only on ratification thereof by at least one independent director.
2. If the company is not required to appoint an independent director, the meeting can be called at a shorter notice without any conditions to be complied with.

As per Regulation 67 of Table F of Companies Act, 2013, a board meeting can be called by any director or manager or secretary on requisition of director.

Notice is also required to be given to every other director at his usual address in India. Parameshwari Prasad Gupta vs Union of India, Supreme Court has held that for a board meeting to be effective, it must be duly convened by proper notice to each director and in default, the meeting is irregular.

If the loan agreement with bank or financial institute provides, notice of board meeting should be given to them. If the directors specify a particular method of sending notice, it should be given as per the specified method. Notice should be given to a director even if he has stated that he will not be able to attend. Notice should be given to a director even he cannot participate or vote on the subject to be transacted at the meeting. For adjourned board meeting, fresh notice is not required to be given but if the board meeting is adjourned sine die, fresh notice is required.

No format of notice is prescribed by the act. Notice of the board meeting shall specify that a director can participate either through audio or video means instead of personal presence. Failure to send notice even to a single director would render the resolution passed at the meeting null and void. If there is a default in providing the notice, every officer (company secretary) who is responsible is liable to pay a fine of ₹ 25,000.

21.42 CONTENT OF BOARD MEETING NOTICE

Notice of board meeting contains details regarding place, date and time of the meeting. Agenda is not mandatory for board meeting but it is a good corporate practice. However for the following subject matters, agenda is compulsory:

1. When a public company or a private company which is a subsidiary of a public company would like to appoint a person as its managing director, if he is the managing director or manager of one and not more than one, other company including a private company which is not a subsidiary of a public company (Section 203 of Companies Act, 2013).
2. Where a public company or a private company which is a subsidiary of a public company wants to appoint a person as its manager, if he is the manager or managing director of one and not more than one other company (Section 203 of Companies Act, 2013).
3. When a company grants inter-corporate loan in excess of limit (Section 186 of Companies Act, 2013).

21.43 QUORUM FOR BOARD MEETING—SECTION 174

It is necessary for directors to attend board meetings personally. Proxies are not allowed at board meetings. However, any expert can attend a board meeting, if he is invited by the board subject to condition that he cannot vote. If any person is invited as an expert at a board meeting, he is known as special invitee. Special invitees are not counted for quorum.

Quorum means minimum number of directors competent to transact and vote on any business before the meeting. Quorum for board meeting is one-third of the total strength (fraction in that one-third is rounded off as one) or 2 directors whichever is higher.

Example

A Ltd has 9 directors on board. Quorum will be 1/3 × 9 = 3 or 2 whichever is higher. So in the given case, the quorum is 3 directors. But if the board has 8 directors, quorum will be 1/3 × 8 = 2.66. Any fraction is rounded off as one. So it will be 3 or 2 (whichever is higher).

Directors whose place is liable to be vacant should not be considered for calculating total strength.

Example

A Ltd has 10 directors on board. Before the board meeting, one director resigned. Thus, the total strength will be 9 directors and the quorum will be 1/3 × 9 = 3 or 2 whichever is higher.

The article of association of a company may provide for a higher quorum. If the number of directors is reduced below quorum, then the remaining directors may hold the meeting for the following purposes: to call a general meeting or to increase the number of directors. It was held in the case of Rajan N. Doshi vs British Burma Petroleum Co. Ltd. that a single director cannot act for a purpose other than calling general meeting for the appointment of directors.

Quorum is required to be present throughout the meeting. A meeting held without quorum is invalid. Interested directors will not be counted for the purpose of quorum. If, at any time, interested directors exceed or equal to 2/3rd of the total strength, the remaining non-interested shall be the quorum, provided it is not less than two. If quorum is not present, the meeting is adjourned.

21.44 MATTERS WHICH CANNOT BE DEALT AT BOARD MEETING THROUGH VIDEO CONFERENCING

The following matters cannot be dealt at a board meetings held though video conferencing:

1. Approval of the annual financial statements;
2. Approval of the board’s report;
3. Approval of the prospectus;
4. Audit committee Meetings for consideration of accounts; and
5. Approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

21.45 CHAIRMAN OF BOARD MEETING

For a valid board meeting, a proper person should be in the chair. Article of association will normally provide for election of chairman and the period up to which he is to hold office. Regulation 70 of Table F of Companies Act, 2013, prescribes the provision for appointment of chairman of a board meeting.

The board may elect a chairman of its meetings and determine the period of his office. If no chairman is elected or if, at any meeting, the chairman is not present within 5 minutes after the time appointed for holding the meeting, the directors present may select any one of them to be chairman of the meeting. Chairman of board and chairman of meeting are different. Chairman of meeting is the chairman only for one meeting.

In case of equality of votes, the chairman of the board has second or casting vote. Casting vote is available to the chairman of board either on show of hand or on poll. The chairman of meeting also has a casting vote on equality if the article of the company does not restrict it specifically. The chairman has absolute discretion in using casting vote. He may refuse to cast second vote on equality. Only a director can be the chairman of a board meeting.

21.46 VOTING AT BOARD MEETING

Matters at a board meeting are decided by a majority of votes. There are three exceptions to the majority rule. In the following matter, unanimous approval of board is required:

1. Appointment of managing director, if the person is already a managing director or manager (Section 203 of Companies Act, 2013).
2. Appointment of manager, if the person is already a manager (Section 203 of Companies Act, 2013).
3. Inter-corporate loan (Section 186 of Companies Act, 2013).

A director cannot participate or vote on the resolutions in which he is interested. Voting at board meeting is by show of hands only. Poll method is not available as each director is entitled for one vote.

21.47 MINUTES OF BOARD MEETING—SECTION 118

‘Minute’ means the official record of the proceeding of a meeting. It should be recorded within 30 days from the conclusion of meeting. However, it is not required to be signed within 30 days. Separate minute books should be prepared for board, general and committee meetings.

Each page of minute book should be numbered consecutively. Each page of the minute book should be initialled or signed and the last page of the minute shall be dated and signed by the Chairman of the said meeting or the Chairman of the next meeting. It is not necessary that chairman of subsequent meeting should have attended meeting. No attachment shall be made to the minute’s book by pasting or otherwise. The chairman has the power of inclusion or non-inclusion of any matter in the minutes, if he is of the opinion that such matter is defamatory of any person or it is irrelevant or immaterial or it is detrimental to the interest of the company.

The minutes book must be a bound book. However maintaining minute book in loose leaf is permitted but in such circumstances, the company must get it bounded within a reasonable interval of time (not more than 6 months).

The Companies Act, 2013, does not contain any provision regarding inspection or supply for copy of minute to shareholders. Unless the article of association provides to the contrary, a shareholder has no right of inspection or of obtaining copies of the minutes of its board meetings (MCA View).

A statutory auditor, as part of discharge of his duties, is required to verify the minutes and is entitled to demand extract and preserve them as audit papers. Similarly, a cost auditor or a company secretary in practice, for the purpose of secretarial audit, has the right to verify the minutes of board meeting and demand extracts thereof. MCA has clarified that the minutes book shall be kept at the registered office and that it can be moved only when the board meeting takes place outside the registered office of the company for that purpose. The company shall observe secretarial standard with respect to board meeting.

Where the minutes of the proceeding of the board or a committee thereof have been kept in accordance with Section 118, then until the contrary is proved.

1. The meeting shall be deemed to have been duly called and held
2. All proceedings thereat shall be deemed to have been duly taken place and
3. All appointment of directors/resignation at the meeting shall be deemed to be valid.

LIST OF LANDMARK JUDGEMENTS

1. Amrit Kaur Puri vs Kapurthala Flour Oil & General Mills Co. (P) Ltd (1984)

   Company can fix higher quorum for board meeting than what is specified under Companies Act.

2. Marshall’s Valve Gear Co. vs Manning Wardel & Co. Ltd (1909)

   Shareholders are competent to intervene in respect of matters delegated to BOD, when directors act for their own personal interest in complete disregard of interest of company.

3. B. N. Vishwanathan vs Tiffins B. A. and (P) Ltd (1953)

   Shareholders may exercise power in general meeting where none of directors was validly appointed.

4. Barron vs Potter (1914)

   When there is deadlock in management, majority shareholders may exercise powers in general meeting.

5. P. K. Neangadi vs Malayalee Bank Ltd (1971)

   Where director has misapplied or misappropriated money or property of company, the court may order him to repay the money or restore property or to pay compensation.

6. Ferrucccio Sias vs Jai Manga Ram Mukhi (1998)

   Notice of board meeting sent by fax is adequate notice.

7. R. Khemka vs Decccan Enterprises (P) Ltd (1998)

   Telephonic invitation or oral invitation cannot amount as notice of board meeting.

8. Ernakulaum Financiers vs Joseph Chandy (1998)

   Once a meeting is requisitioned, the board is under obligation to hold EOGM.

9. LIC vs Escorts Ltd (1986)

   Requisitioners are not required to disclose reason for their proposed resolution for EOGM.

10. Radheshyam Tulsian vs Panchmukhi Investment (2002)

    Meeting without notice and without quorum is invalid.

11. NVR Nagappa Chettair vs Madras Race Club (1951)

    Twenty-one days’ notice is mandatory for GM, unless expressly waived by members by giving consent.

12. Rajiv Khandelwal vs Amigo Multifilm (1999)

    Intentional omission to send notice to even one member will invalidate the meeting.

13. Palak Kumar vs Cine & Supply (2002)

    No business can be transacted at GM for which notice was not given.

14. T. V. Mathew vs Nadukkara Agro Processing (2002)

    There is no provision to grant extension for holding first AGM.

15. Bejoy Kumar Karkani vs Asst. ROC (1985)

    If accounts are not ready, the meeting may be adjourned, but even the adjourned meeting must be held within the statutory period including the time extension allowed.

16. Young vs South African Etc. (1896)

    Preference share holder is also member of company.

17. Cousins vs International Brick Co. Ltd (1931)

    A proxy may be described as an agent appointed as a member to act on his behalf at the meeting.

18. Maxwell Dyes Chemicals vs Kothari Industrial Corporation (1996)

    Fresh proxy is not necessary for the adjourned meeting.

19. John vs Rees (1969)

    Chairman can adjourn meeting shortly for unruly behaviours.

20. Jackson vs Hamlyn (1953)

    Time taken for poll is not adjournment, it is only recess.

21. Tamal Kumar Majumdar vs UOI (2000)

    Voting is a basic right of a member.

22. Ebrahim Sai vs South Indian Industries Ltd (1938)

    Director is entitled to notice even if he is out of India and that right to receive notice cannot be waived.

23. Parmeshwari Prasad Gupta Vs UOI (1974)

    Failure to send notice even to one director would render the resolution passed at the meeting null and void.

24. Maharani Yogeshwari vs Lake Shore place Hotel (1996)

    Quorum is required at the adjourned board meeting also.

25. Amit Kumar Puri vs Kapurthala Flour Oil Mills (1984)

    Article of association can provide higher quorum but not lower quorum for board meeting.

26. Ashish das Gupra vs Satvinder Singh (2000)

    Board meeting is invalid, if there is no quorum and all decisions at such meeting are also invalid.

27. Pramod Kumar Mittal vs Sourthern Steel (1980)

    Notice of board meeting need not be given unless article provides otherwise.

28. Nazir Hoosein vs Darajus Bhattena (2000)

    Chairman of board of directors is central figure in holding the meeting and is the controlling factor in the conduct of a meeting.

TEST YOUR KNOWLEDGE

1. Discuss the different kinds of meeting.

   (Ref. Para-21.1)

2. What are the requisites of a valid general meeting?

   (Ref. Para-21.2)

3. Every general meeting, in order to be valid, must be duly conveyed, properly constituted and conducted. Comment.

   (Ref. Para-21.2)

4. By what different methods notice of general meeting can be served?

   (Ref. Para-21.3)

5. Notice of general meeting must be served by UPC. Comment.

   (Ref. Para-21.3)

6. Explain the provisions regarding notice of a general meeting.

   (Ref. Para-21.4)

7. Omission go give notice of general meeting invalidate meeting. Comment.

   (Ref. Para-21.4)

8. What are the provisions under Companies Act regarding holding annual general meeting?

   (Ref. Para-21.5)

9. Write short note on time limit for holding annual general meeting.

   (Ref. Para-21.5)

10. Annual general meeting should be held within six months from end of the financial year. Comment.

    (Ref. Para-21.5)

11. What remedy is available when a company defaults in holding annual general meeting?

    (Ref. Para-21.8)

12. What is significance of annual general meeting?

    (Ref. Para-21.9)

13. What is extraordinary general meeting? When it is called?

    (Ref. Para-21.10)

14. State the circumstances in which an extra-ordinary general meeting can be called on requisition?

    (Ref. Para-21.11)

15. When can an extraordinary general meeting be called by Tribunal?

    (Ref. Para-21.12)

16. Explain the provisions regarding proxy.

    (Ref. Para-21.13)

17. Any person can be appointed as proxy. Is it correct?

    (Ref. Para-21.13)

18. Proxy, once appointed, is irrevocable. Comment.

    (Ref. Para-21.14)

19. What is the meaning of quorum? What are the provisions of quorum under Companies Act?

    (Ref. Para-21.15)

20. Can one person constitute quorum?

    (Ref. Para-21.15)

21. Write short note on chairman of general meeting.

    (Ref. Para-21.16)

22. When should the chairman order for poll?

    (Ref. Para-21.18)

23. What is postal ballot? Is it mandatory for all business?

    (Ref. Para-21.19)

24. State the procedure for postal ballot.

    (Ref. Para-21.20)

25. Write down any five businesses which can be passed by way of postal ballot.

    (Ref. Para-21.21)

26. Adjourned meetings do not require fresh notice. Comment.

    (Ref. Para-21.22)

27. When and by whom is a meeting of debenture holders called?

    (Ref. Para-21.23)

28. Write short note on meeting of creditors.

    (Ref. Para-21.24)

29. One man can convene a valid meeting. Comment.

    (Ref. Para-21.25)

30. What do you understand by motion?

    (Ref. Para-21.26)

31. Write short note on minutes of general meeting.

    (Ref. Para-21.29)

32. What are the different types of resolution which may be passed by a company?

    (Ref. Para-21.27)

33. When is a company required to pass special resolution?

    (Ref. Para-21.27)

34. Which resolutions require special notice?

    (Ref. Para-21.28)

35. What are the provisions for the minutes of a general meeting?

    (Ref. Para-21.29)

36. Certain powers are to be exercised by the board of directors of company only at the board meeting. What are those powers?

    (Ref. Para-21.31)

37. Explain the powers available to the board of directors only with consent of shareholders.

    (Ref. Para-21.34)

38. At what frequency should board meetings be held?

    (Ref. Para-21.39)

39. Can a company convene a board meeting on a public holiday?

    (Ref. Para-21.40)

40. At which place can a board meeting be convened?

    (Ref. Para-21.40)

41. What is the notice period required for a board meeting?

    (Ref. Para-21.41)

42. No notice of board meeting was sent to one of the directors. Is the meeting valid?

    (Ref. Para-21.41)

43. What should be contents of notice for a board meeting?

    (Ref. Para-21.42)

44. What is the quorum for a board meeting? How is it calculated?

    (Ref. Para-21.43)

45. Who can be the chairman of a board meeting?

    (Ref. Para-21.45)

46. How is voting is carried out at a board meeting?

    (Ref. Para-21.46)

47. State the provisions under Companies Act for preparation and signing of minutes of meetings.

    (Ref. Para-21.47)

MULTIPLE-CHOICE QUESTIONS

1. The time gap between two AGMs shall not exceed _________.
   1. 15 months
   2. 18 months
   3. 16 months
   4. None of these
2. The first AGM must be held within _________ from the incorporation of the company.
   1. 15 months
   2. 18 months
   3. 12 months
   4. None of these
3. Every AGM must be held within _________ from the end of the F.Y.
   1. 4 months
   2. 6 months
   3. 9 months
   4. None of these
4. Any company cannot hold AGM on a public holiday.
   1. Yes
   2. No
5. AGM should be held
   1. at the head office.
   2. within the same town or city where the registered office is situated.
   3. at the corporate office.
   4. None of these.
6. Board of directors has the authority to issue notice of the general meeting.
   1. Yes
   2. No
7. Notice of the general meeting should be sent to preference shareholders also.
   1. Yes
   2. No
8. The proxy must be a member of the company. Do you agree with this statement?
   1. Agree
   2. Disagree
9. In case of private company the quorum should be
   1. two members
   2. three members
   3. four members
   4. None of these
10. Quorum for a general meeting should be present at the
    1. commencement of meeting.
    2. middle of the meeting.
    3. end of the meeting.
    4. Any time during meeting.
11. Before AGM ________ report is sent by the directors to its members.
    1. Statutory
    2. Audit
    3. Annual
    4. None of the above
12. ________ company is/are required to hold A.G.M.
    1. Public company
    2. Private company
    3. Government company
    4. All the three
13. The resolutions passed at AGM are ________
    1. Valid
    2. Void
    3. Voidable
    4. Void ab initio
14. Every business transacted at an EGM is a/an ________ business.
    1. Ordinary
    2. Special
    3. Both (i) & (ii)
    4. None of the above
15. In the absence of quorum, the proceedings of the meeting will be ________.
    1. valid
    2. void
    3. voidable
    4. None of the above
16. If quorum is not present within ________ time, the meeting will stand dissolved.
    1. ½ Hr.
    2. 1 Hr.
    3. 1½ Hr.
    4. 2 Hr.
17. ________ Order is empowered to call an EGM even though one member is present in person or by proxy.
    1. Tribunal
    2. Government
    3. ROC
    4. None of these
18. Voting right cannot be exercised in case of ________
    1. calls in advance
    2. calls in arrears
    3. Both (i) and (ii)
    4. None of the above
19. Who can use the casting vote in the case of equality of votes?
    1. Chairman
    2. Director
    3. Auditor
    4. Manager
20. The chairman, on his own motion, ________ also orders a poll.
    1. must
    2. should
    3. may
    4. None of the above
21. The chairman conducts the poll within ________ hours from the demand.
    1. 24
    2. 48
    3. 72
    4. 36
22. Depositing of proxy with the company should be made within how many hours?
    1. 24
    2. 48
    3. 36
    4. 72
23. If the notice contains a special business, then an ________ statement shall be enclosed.
    1. explanatory
    2. enquiry
    3. Both (i) and (ii)
    4. None of the above
24. Proxies cannot vote on ________.
    1. show of hands
    2. poll
    3. Both (i) & (ii)
    4. None of the above
25. ________ Proxies cannot vote onis the official recording of the proceedings of a meeting
    1. Quorum
    2. Minutes
    3. Both (i) and (ii)
    4. None of the above
26. Minutes, in the case of a general meeting, should be recorded within ________ days from the date of conclusion of every meeting.
    1. 10
    2. 20
    3. 30
    4. 40
27. Loose-leaf minutes are to be bound into books at regular intervals of ________ months.
    1. 6
    2. 7
    3. 8
    4. 9
28. A special resolution is passed with
    1. simple majority
    2. 60% majority of members present
    3. 75% majority of members present
    4. None of the above
29. A poll can be demanded by any member present in person or by proxy if he has voting powers at least equal to:
    1. 1/5th
    2. 1/10th
    3. 1/20th
    4. 1/30th
30. Which of the following meeting can be held more than once in a calendar year?
    1. E.G.M
    2. Creditors’ meeting for winding up
    3. A.G.M
    4. None of the above
31. The expenses of holding an E.G.M by the requisitionists will be ultimately borne by ________.
    1. company
    2. requisitionists
    3. all directors in default
    4. None of the above

ANSWER KEYS

1. i
2. ii
3. ii
4. i
5. ii
6. i
7. i
8. ii
9. ii
10. i
11. iii
12. iv
13. i
14. ii
15. ii
16. i
17. i
18. i
19. i
20. iii
21. ii
22. ii
23. i
24. i
25. ii
26. iii
27. i
28. iii
29. ii
30. i
31. iii