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.

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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.

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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.

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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.

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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.

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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

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WHAT IS NOT COVERED UNDER RETRENCHMENT?

The following cannot be held as RETRENCHMENT:

1. Termination of services by the way of PUNISHMENT due to some disputed action done by the workmen.

2. If there is a voluntary retirement of Workmen as per section 2(OO) (a)


3. SUPERANNUATION- means if a person attains an age of retirement.

4. Termination of Contract: Where the Contract will not be renewed further. It has been permanently terminated.

5. Termination of Services On the Grounds of Continuous ILL HEALTH. ( Section 2(OO) (c) )

Photograph Source: Google Images

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PROXY

A proxy is a representative of a member, who can attend an AGM-Annual General meeting by having an authority letter from the member he is representing in the meeting.

The authority letter must be signed and duly stamped by the appointer with the mentioned date.
The Proxy is not allowed to speak at the meeting but he is eligible to demand a poll and can vote on a poll.

A Proxy cannot vote by the means of post.

Lodgement of proxy is possible 48 hours before the time of appointment of meeting.

* any representative of a body corporate or President of Country or Governor of a state will not be held as proxy, the member must be personally present in the due course of the meeting.

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DIFFERENT KINDS OF COMPANIES

 The following FLOW CHART explains the different kinds of Companies and their classification.

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Characteristics of a Company

The characteristics of a Company or Advantages of Forming a company are as follows:

The above flowchart shows the different characteristics which are explained under:

a) Separate legal entity:

From the day the Company incorporates it holds its own identity which a separate and different from the members who constituted the same.
it has its own identity in the eyes of Law.

b) Limited Liability:

it is the most principle advantage for a company . A company limited  by shares if goes into losses, it has to pay off the debts till the extent of its own extent.
Example, if a company has debts of ₹25 lac and it has an asset value of ₹20 lac then it can pay off ₹20 lac to the creditors of the company and it wont be liable further to pay ₹5 lac.

if it would have been an unlimited company, the members of the company becomes personally liable if the company has no funds to pay off all the debts the company has.

c) Perpetual succession:

MEMBERS MAY COME, MEMBERS MAY GO but the COMPANY will go on FOREVER.
it means the company has its own life, it is nowhere connected to the life of its members.

AN INCORPORATED BODY NEVER DIES.

d) Separate Property:

 A company is a Legal Person and hence it is capable of having its own assets and property.
It can enjoy the owning, disposing off the property in its own name.
The property of the company is not the property of its shareholders.

e) Common Seal:

It is known as the Official Signature of the company. As we know that the company has no physical existence hence it has to act through its agents and every contract in which a company is going to be must have a common seal engraved in the particular document.

f) Capacity to sue and to be sued:

Being company a separate legal identity, it can sue anyone and can be sued IN ITS OWN NAME.


g) Transferability of Shares :

Shares of a company are freely transferable. In the case of a Private company, there are some restrictions in the subject of transfer. A company must provide in the Articles the manner of restriction it is going to apply in the case of transferability of shares.

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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.

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COMPANY- An UNTROUBLESOME method

Section 3(1) of the Companies Act 1956 defines :
" A Company means a Company formed and registered under the Companies Act 196 and it includes an existing company".

Some other definitions for company are:

• A Company is legally an entitled apart from its members, capable of rights and duties of its own and endowed with the potential of perpetual succession.
• A Company is a combination of political, social, economic and legal institution.
• A Company is a Legal person or legal entity separate from and capable of surviving beyond the lives of its members. ( famous case of SOLOMON v. SOLOMON & Co.)
• It is an artificial person created by the process of Law.

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WAGES

WAGES:
According to section 2(h) of The Minimum Wages Act, 1948, Wages means all remunerations capable of being expressed in terms of money and includes house rent allowance but does not include:

1. The value of any House rent accommodation, supply of light, water, medical, any other amenity or any service excluded by general or social order of the appropriate Government;

2. Contribution by the employer to any Pension Fund or under any scheme of social Insurance;

3. Travelling Allowance;

4. any amount paid to defray special expenses entailed on him by the nature of his employment;

5. any gratuity payable on discharge.

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