Annual General Meetings (AGM) of a Company

As explained by its name, AGM is an Annual meeting which is held by the board of directors. It is necessary for every company to hold his meeting, whether public or private, limited or unlimited or has a share capital or not.

How much is the GAP between two AGMs?

The FIRST AGM of the company must be held within 9 months from the closing date of the financial year. For example: the financial year ends in March 2018 so if it is the first AGM, it must held by December 2018. (NOTE: No time extension is allowed for first AGM)

The subsequent AGMs: There must be one meeting in each calendar year. If the meeting is adjourned due to some reason and is shifted to next calendar year by any reason, it will not be considered as meeting of that year. For Example: if the meeting is scheduled for 30 December, 2018 and by any reason for adjournment, gets shifted to 3 January, 2019, It will not be considered as a meeting for 2019 calendar year.

The gap between two AGMs must not be more than 15 months. An extension to the same can be for a maximum period of 3 months.

Read More

CONTRACT { Meaning & Elements}

MEANING:

Contract is an agreement by which two parties come in contact, where one party offers and the other accepts.
This offer and acceptance by the parties must be according to the law and through legal documentation.

Hence,

CONTRACT= AGREEMENT(offer and acceptance) + enforcement by LAW

ELEMENTS:

1. There must be two or more parties involved.

2. There must be an offer and be an acceptance.

3.There must be an intention to create a legal relationship. It must be free from fraudulent acts.

4. there must be an OBJECT and a consideration(monetary/non monetary).

5. Parties must have the capacity to get into a contract. Age must be more than 18 years (having a natural guardian) and 21years (having no natural guardian).the person must not be a lunatic.

6. Consent of all the parties involved.

7. no VOID/VOIDABLE agreement.

8. Contract must be in writing and attested by witnesses.

9. Enforcement by law is mandatory.

Read More

The Bhopal Gas Leak Disaster

It was the night of December 2/3, 1984, when a mass disaster which was held as the worst in these recent years was caused when the leakage of a poisonous gas - METHYL ISOCYANATE (mic) along with other toxic gases used to manufacture pesticides happened in BHOPAL( The capital of Madhya Pradesh- India) .
The plant from where these gases were leaking was of UNION CARBIDE INDIA LTD. which was a subsidiary company of UNION CARBIDE CORPORATION- a multinational company registered in U.S.A. which is now a wholly owned subsidiary of THE DOW CHEMICAL COMPANY.

The disaster resulted in deaths of over 5000 people and there were serious injuries to thousands of people in bhopal. In just few hours of the leak, the streets were filled with dead bodies of humans and animals. people suffered through permanent blindness, problems in respiration system, and damage to foetus of many pregnant women.

The main problem which took place after this was of the claims which were filed by the victims and their families. the cases were filed against the company in india, company in U.S.A , and also against the government. An ordinance by central government was passed after this to settle all the claims - THE BHOPAL GAS LEAK DISASTER( PROCESSING OF CLAIMS) ACT, 1985. which was passed on 29th march 1985. it had 12 sections , which had all the details about the claims for the disaster.

There was also an order by District and Sessions Judge to UCC( union carbide company) to pay an interim relief of Rs. 350 CRORES to the Gas victims,  which was further reduced to Rs. 250 crores by madhya pradesh High Court.

In this case the rule of ABSOLUTE LIABILITY appilies, hence there was no escape for the company on the grounds of SABOTAGE(destroy).

The Bhopalpost.com

Cases to be followed:
1. UNION CARBIDE CORPORATION v. UNION OF INDIA and Others (1989)1 SCC 674.

ARTICLE 137 of the indian constitution was applied to the case.

Read More

Ordinary, Special, Board and Unanimous Resolution

Resolution is passed by the members of the company i.e. the individuals who have their names on the register of Members of the company.

What is a resolution?
It is usually like a poll which is held by a company in its annual general meeting for passing orders.
The members of the company may cast their votes in a yes or no.
In a medium sized company it usually happens by show of hands for Yes and No in a decision to be taken by the company.


ORDINARY RESOLUTION:

In a simple language, an ordinary resolution can be said to be PASSED if there is a 51% YES for a decision and rest are in a NO.

Some matters in which Ordinary resolution can be passed:
1. Alteration in authorized capital
2. declaration of dividend
3. appointment of auditors
4. fixation of remuneration
5. election of directors.

SPECIAL RESOLUTION:

Why a special resolution? .
Answer to this question is that the LEGISLATURE of the country has made such rules in the COMPANIES ACT 2013, in which the company in passing certain decisions which may affect public at large must obtain a consent for that decision from its members.

Hence, in a special resolution that percentage has been exceed to 75% instead of 51%.

Matters in which special resolution will be passed:
1. reduction of share capital.
2. change in the registered office of the company from one state to another.

UNANIMOUS RESOLUTION:

It is also known as a Unanimous consent which means 100% consent of all the members present for the Annual general meeting have a positive consent for a decision to be passed by the company.

BOARD RESOLUTION

This resolution takes place between the Board of directors of the company. The members of the company play no role in this resolution.


                                                                                                                                                                   

Explanation for ADVOCATES and Law Students:

Resolutions have been explained under Section 114 of The Companies Act 2013.

ORDINARY RESOLUTION: (explained under Section 114 (1) )

When a motion is passed by a simple majority of the members of the company who are voting at the General meeting, it is said to have been passed by an Ordinary resolution.
The votes cast in favor (including CHAIRMAN -if any) are more than the votes cast against the resolution.

Some matters in which Ordinary resolution can be passed:
1. Alteration in authorized capital
2. declaration of dividend
3. appointment of auditors
4. fixation of remuneration
5. election of directors.


SPECIAL RESOLUTION:
According to Section 114 (2) , a special resolution is held:
1. The intention of the proposal must be notified to the members of the company by the way of Notice.
2. Notice must comply with the requirement of 21 clear days before the annual general meeting.
3. Votes cast in favor ( by poll or show of hands ) must be THREE TIMES the votes cast against the resolution.

ABSTENTIONS (if any) not to be taken into account.

Matters in which Special Resolution can be passed:
1. alter object clause of memorandum.
2. change in registered office of company from one state to another.
3.reduce share capital of the company.
4.alteration of Articles of association.


CASE REFERENCE:
 1. KIRLOSKAR ELECTRIC CO. LTD , In re[2003] 43 SCL 186 (Kar.)

UNANIMOUS RESOLUTION:

There is no particular definition in the COMPANIES ACT 2013 relating to The Unanimous Consent but SECTION 162(1) which says that- At a general meeting of a company, the motion for the appointment of two or  more persons as directors of the company by a single resolution shall not be moved unless a proposal to move such a motion has first been agreed to at the general meeting without any vote being cast AGAINST it.


BOARD RESOLUTION:

Under Section 173 of the Companies Act 2013,
1. every company shall hold its first board meeting within 30 days from its date of incorporation and thereafter 4 board meetings of its board of directors every year in such a manner that not more than 120 days shall intervene between two consecutive meetings of the board.

2.participation of directors can be In-person, by video conferencing or any other audio visual means which are capable of recording and recognizing the participation of the directors.

3. Notice for the meeting must be served in not less than 7 days . The notice must be in writing to every director at his address registered with the company and can be sent by hand delivery or post or by any electronic means.

Read More

THE ' KEY MANAGERIAL PERSONNEL' in a Company

SECTION 2(51) of the Companies Act 2013 :


A key managerial personnel is a person in relation to the company who is:


1. A whole time director;
2. The chief executive officer or the managing director or the manager;
3. The company secretary;
4. The chief financial officer;
5. any such officer as may be prescribed by the company.

Read More

Appointment of a Women Director on the Board of a Company

Under the COMPANIES ACT, 2013 :

Section 149(1) second proviso along with RULE 3 of the Companies( appointment and qualification of directors ) rules 2014, require to appointment of at least one woman director on the board of the following class of the companies:

1. every listed company,
2. every other public company having (a) paid up share capital of one hundred crore rupees or more or (b) turnover of three hundred crore rupees or more.

The appointment must be made within SIX months of the Incorporation ( if after the commencement of the Act)


In case of Casual vacancy:

an immediate appointment must be made and the place must be filled up by the board at its earliest but not later than the immediate next board meeting or THREE MONTHS from the date of such vacancy whichever is LATER.
                                                                                                                                                                   


According to The companies Act 2013, every company must appoint at least 1 woman director of its list of board of directors.
As we know that every company must have a minimum number of directors on board i.e. THREE directors for a public company, TWO directors in case of a private company and ONE director in case of a One person company and also must have a MAXIMUM of 15 directors (or more than 15 directors on passing a SPECIAL RESOLUTION).

So, the above classes of companies must have 1 woman director on its board.

Read More

Global Depository Reciepts- overview

GDR- Section 41 of the Indian Companies Act 2013

This Section must be read along with the following rules:
1. Companies ( issue of global depository receipts) rules 2014
2. Foreign Exchange management rules and regulations

This Section allows a company (which is eligible) to issue GDR's in any foreign country.

The first thing which a company must remember is the eligibility according to the above stated rules is necessary. the company must comply with the the FEMA rules for issuing Global Depository receipts.

ISSUING METHODS:

The Depository receipts can be issued by the company in either of the following manner:
1. public offering : invitation to public to opt. for GDR's.
2. Private placement: placement on its own wish either to another company or an individual.


CONDITIONS NECESSARY:

1. company must pass a special resolution ( votes cast in favor must not be less than 3 times of the votes cast against) at its general meeting.
2. GDR's shall be issued by an overseas bank which is appointed by the company.
3. The underlying shares( if any) shall be kept in the custody of a domestic custodian bank.
4. The company shall appoint a merchant banker or a practising chartered accountant/ practising cost accountant/ practising companies secretary to oversee all the compliance relating to issue of GDR's.
5. To make a compliance report.

Read More

EFFECTS OF ULTRA VIRES

The following are the effects of an act which is ULTRA VIRES:


1. VOID AB INITIO: The acts are null and void ab initio. The company is not bound by these acts, even the company cannot sue or sued upon the same.

2. INJUNCTION: in case a company is about to go for an act of ultravires, any member (even 1) can get an order of injunction from the court to restrain the company from doing such act.

3. PERSONAL LIABILITY: it becomes the personal liability of the directors if there is an ultravires act as it is the duty of the directors to ensure that the capital of the company is used for legitimate businesses only.

Read More

Stock Appreciation Rights Scheme (SARS)

Stock Appreciation Rights Scheme is a new scheme permitted by SEBI (securities exchange board of india) under which a company grants SARS to employees.

It shall contain the details of the manner in which the scheme is to be implemented.
A company shall have freedom to implement cash settled or equity settled SAR scheme.
if there are fractional shares then consideration for fractional shares must be settled in cash.

BOARD of directors must make necessary disclosures in regard of the same, and must be made by the company to the prospective SAR grantees.

VESTING PERIOD:
the minimum vesting period will be one year in case of a company issuing a SAR scheme.if the SAR scheme has been granted in lieu of another company or of a company going to be amalgamated and the schemes are need to be adjusted within the minimum vesting period.

Read More

IMPORTANT CHANGES IN THE COMPANIES ACT 2013- INCORPORATION

1. TYPES OF COMPANIES

a) 1956  (i) Private  (ii) Public

b) 2013  (i) Private  (ii) Public  (iii) One Person Company.

2. MAXIMUM NUMBER OF MEMBERS IN PRIVATE COMPANY

a) 1956- Maximum of 50 members

b) 2013- it can have a maximum of 200 members

3. Commencement of business Certification

a) 1956- applicable only to public companies

b) 2013- now applicable to all companies having share capital

4. Object Clause of MOA

a) 1956- divided into Main objects, ancillary objects  and other objects.

b) 2013- to contain all objects for which the company is proposed and the matters considered                           necessary in furtherance thereof.

Read More

ONE PERSON COMPANY (OPC)

One Person company means a company which has just one member.

It is defined under Section 2 of The Companies Act 2013.

An OPC is incorporated as a private Limited Company, in which there will be just one member and there is prohibition in regard to invitation to the public for subscription of the securities of the Company.

FEATURES OF OPC:

1.  An OPC can be categorised into two sub heads:
     a) Company limited by gaurantee
     b) Company limited by Shares.

If an OPC is limited by Shares then it must fulfill the following 3 conditions

a) it shall have a minimum paid up capital of ₹1 lac
b) right to transfer its shares is restricted.
c) Prohibition on any invitation to public to subscribe for the securities of the Company.



2. An OPC is required to give itself a legal identity by its name and the activities and business it will be working on. 

3. The Words ' ONE PERSON COMPANY' should be mentioned along with the name of the company.

Read More

The Principle of Non-Interference (Rule in Foss v. Harbottle)

The General Principle of Company Law is that every member holds equal rights with other members of the Company. In case of difference(s) among-st the members the issue is decided by a vote of majority.
In such cases Minorities of shareholders often feel oppressed . Though the company law provides for protection of minority shareholders when their rights are trampled by the majority, it is not available when the majority does anything in exercise of the powers for internal administration of the company.

 The following are the advantages of rule in FOSS v. HARBOTTLE

1. Recognition of separate legal personality of the Company.
2. Need to preserve right of majority to decide.
3. Multiplicity of futile suits avoided
4. Litigation at a suit of a Minority futile if majority does not wish it.

Exception to this rule are:

a) Action by shareholders UNDER COMMON LAW
 An individual member may sue for declaration that the resolution complained of is VOID in the following cases:

1. ULTRA VIRES acts by directors
2. Fraud on minority
3. Wrongdoers in control
4. Resolution requiring special majority bt passed by simple majority
5. Breach of duty
6. Individual rights AS A MEMBER are affected.


b) Statutory remedies under Companies ACT

1. Variation in class rights
2. schemes of reconstruction and amalgamation
3. oppression and mismanagement can act as a ground
4. Alternative remedy to wind up.
5. Investigation by Government

Read More

Register of POSTAL BALLOT

According to The Companies(passing of resolution by postal ballot) rules 2011

The register shall contain:
a) Particulars in respect of consent or dissent received , including electronic media
b) Name and address of SHAREHOLDERS
c) Folio Number
d) Number of Shares held
e) Nominal value of Shares
f) Whether the Shares have Voting Rights(differential voting or non-voting rights)

Read More

Various Statutory Registers To Be Maintained By The Company

The Statutory Registers to be maintained are:

1. Register of Investments in Securities not Held in Company's Name 

2. Register of Deposits 

3. Register of Securities Bought Back

Read More

Contents of a Notice given to shareholders of a Company

The following are the contents of a notice which is given to shareholders before any meeting to be held.

A- Name of the Company and Address of the Registered Office.

B- Nature of Meeting.

C- Day, Date, Place and Time of Meeting.

D- Business to be transacted.

E- Resolutions to be passed.

F- Date of Notice and issuing authority.

G- Requirements( if any) relating to Proxy.

H- Requirement relating to Explanatory statement.

I- Intimation about Investor Education Protection Fund.

Read More

Memorandum of Association AND Articles of Association

The following are the points of difference between MOA and AOA.

Read More

ILLEGAL ASSOCIATION

An Association which contravenes the provisions given under section 11 of the Companies Act 1956, is declared as an Illegal Association.

An ILLEGAL ASSOCIATION is not an association for illegal purpose.

- What does Section 11 says:

According to Section 11 -

1. No company, association or partnership consisting more than 10 persons which has been formed for carrying on the business in BANKING , unless registered as per Companies Act or any other INDIAN law. In simple words, a company which is going to do a banking business must not have more than 10 persons/ members in the formation of the company.

2. No company, association or partnership consisting 20 or more persons which is formed for the purpose of carrying out any other business which has an object of GAIN/PROFIT, unless registered under Companies Act or any or Indian Law. In simple words, a company carrying any other business must not have more than 20 persons/Members at the time of incorporation of the company.


When there is a contravention of Section 11 then every member carrying business shall be personally liable for all its liabilities incurred in such business. In addition to this, every person who is a member of the company is also liable for fine which can extend to ₹10,000.

An ILLEGAL ASSOCIATION  cannot sue to recover any debt or other property also it cannot be sued to recover any money lent to it to carry on any business.

POINTS TO REMEMBER:

1. No Contracts can be enforced by or against any illegal association.
2. such association cannot be wound up under the Companies Act.
3. The income generated out of such association, cannot escape the net of TAX.

Read More

BODY CORPORATE

As per Section 2(7) of the Companies Act 1956, a BODY CORPORATE includes a company which has been incorporated outside India.

It does not include- a co-operative society registered under any law relating to co-operative societies or any any body corporate which the central Government may notify in this regard.

EVERY INCORPORATED COMPANY IS A BODY CORPORATE BUT THE REVERSE i.e EVERY BODY CORPORATE IS NOT A COMPANY as:
There are many bodies corporate which are not incorporated as Companies.

Read More

PRIVATE COMPANY

The term Private company is defined under section 3(1) (iii) as:

A private company is one which has a minimum paid up capital of ONE LAC RUPEES or such higher paid up capital as may prescribed and by its Articles of Association.

WHAT IS THE LIMIT OF MEMBERS?

The MAXIMUM number of members should be 50 excluding the employee which are being members.

IS THERE ANY RESTRICTION ON TRANSFER OF SHARES?

The Articles of Association of a company could restrict the transfer of its shares. Example: a member can transfer his shares to another member and not in the open market.

POINTS TO REMEMBER:

1. It prohibits invitation to public for subscription to shares in or debentures of the company.
2. It also prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.

Read More

PUBLIC COMPANY

Section 3(1) of the Companies Act 1956 , defines a PUBLIC COMPANY as:

• A Company which is NOT a PRIVATE Company.
• Which has a minimum paid up capital of FIVE LAC RUPEES or such other higher paid up capital as may be prescribed.
• is a PRIVATE COMPANY which is a SUBSIDIARY of a Company which is not a private company.

POINTS TO REMEMBER:

1. In a case of a PRIVATE COMPANY there is no restriction in number of debenture holders but only invitation to Public is Prohibited. there must be a restriction to transfer of shares not prohibition
2. JOINT HOLDERS of the company will be counted as single members. 

Read More