CA CS Ashish Gupta

Chapter 7

Management and Administration

Chapter VII of the Companies Act, 2013

Total sections coverage – Sec 88 to 122 & the Companies (Management and

Administration) Rules, 2014)

Unit I: Registers and Returns

Under this chapter -

Sec 96 to 100 – deals with the General meeting of the company.

Introduction :

A meeting may be generally defined as a gathering or assembly or getting together of a number of

persons for transacting any lawful business. There must be at least two persons to constitute a

meeting. Therefore, one shareholder usually cannot constitute a company meeting even if he holds

proxies for other shareholders. However, in certain exceptional circumstances, even one person may

constitute a meeting.

Important terms used for meetings :

General meeting

✓ is the meeting of a company's shareholders as per the provisions of the Act.

✓ The general meeting can be an annual general meeting (AGM) or an Extraordinary General

meeting (EGM).

✓ An annual general meeting (AGM) is a mandatory yearly gathering of a company's interested

shareholders.

✓ The objective of holding an AGM is to provide an opportunity to members to discuss the

functioning of the company, and take steps to protect their interests.

✓ They can discuss any matter relating to the conduct of the affairs of the company.

✓ An Extraordinary General Meeting (an EGM) can be defined as a meeting of shareholders

which is not an AGM. The objective of holding an EGM is to discuss any matter of urgent

matter which cannot be postponed till the next Annual General Meeting.

Board Meeting, is the meeting of the board of directors of the company Sec 173 of companies Act,

2013

Class meeting is the meeting of special class of persons, like, creditors, preference shareholders, etc.

Sec 48 7 232 of Companies Act,2013

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For conducting General meetings of a company , below is the minimum requisitions for successful

completion of a General Meeting.

PROPER AUTHORITY TO CALL A GM

1. Board of Directors:

Board has power at common law to call any GM (viz. AGM as well as EGM).

Sec. 100 confers an express power on the Board to call an EGM, whenever the Board may

deem fit.

An individual director has no power to call a GM.

Notice of a GM given by a secretary or a director is invalid if it is given without the sanction

of the Board. However, the notice may be ratified by the Board.

2. Members

Member’s who fulfil the requirements of Sec. 100 are eligible to requisition an EGM. In case of

failure of the Board to call the EGM within the time limits given u/s 100, the members may

themselves call an EGM as per the provisions of Sec. 100.

3. Tribunal

An AGM may be called by the Tribunal u/s 97.

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An EGM may be called by the Tribunal u/s 98.

ANNUAL GENERAL MEETING (Sec. 96)

Applicability of Sec. 96

✓ It applies to all companies except One Person Company Sec 2 (62). It means ,it is mandatory

for all companies, except OPCs, to hold AGM as per Sec. 96.

Requirements of notice :

✓ The notice of AGM shall comply with the requirements as provided in Sec. 101.

✓ The notice of AGM shall clearly specify that the meeting is Annual General Meeting (AGM).

Last date for holding 1st AGM

Time limit

1st AGM is to be held within 9 months of close of 1st financial year.

If 1st AGM is so held, there is no need to hold AGM in the year of incorporation.

No extension - The ROC has no discretion to grant any extension for holding the 1st AGM.

Q1 – Abacus Limited was incorporated on 11th December 2018. When should the company hold its AGM? According to section 96(1), the company’s financial year will close on 31st March 2019. The company

may hold its first AGM by 31st December 2019, i.e. within 9 months of the close of its financial year.

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Last date for holding any other AGM, it means ( subsequent AGM)

Time limits without extension

(i) AGM is to be held within 6 months of close of the relevant financial year.

(ii) Not more than 15 months shall elapse between the date of one AGM and that of the next, i.e.

AGM is to be held within 15 months of the last AGM.

(iii) AGM is to be held in each calendar year.

The three time, limits given above are separate and cumulative. Non-compliance of any of them

would constitute an offence. Therefore, the last date for holding AGM shall be the earliest of the

above three limits.

Extension

The Registrar may, for any special reason, extend the time for holding the AGM by any period not

exceeding 3 months. For this company needs to apply to ROC before expiry of original time limit.

Time, Place and Day of AGM :

Time of AGM AGM shall be called during business hours, i.e. between 9 am and 6 pm.

Act used the word called it means AGM can be concluded after 6pm

also , but it should be called in between 9 am-6 pm

Day of AGM

AGM shall be called for a day which is not a National holiday. “National Holiday” for this purpose means and includes a day declared as National Holiday by the Central Government. According to SS–2, National Holiday means Republic Day i.e. 26th January, Independence Day i.e. 15th August, Gandhi Jayanti i.e. 2nd October and such other day as may be declared as National Holiday by the Central Government

Place of AGM

AGM shall be held at - the registered office of the company, or some other place within the city, town or village in which the

registered office is situated. However, the AGM of an unlisted company may be held at any place in India if consent is given in advance either in writing or by electronic mode by all the members. Exemption by CG CG may exempt any company from the provisions contained in Sec. 96(2) subject to such conditions as CG may think fit to impose.

FINANCIAL YEAR [Sec. 2(41)]

Meaning of 'financial year'[Sec. 2(41)]

-Financial year means the period for which the financial statement of the company is made up.

-Financial year means the period ending on 31st day of March every year.

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-In case of a company incorporated on or after 1st day of January, financial year means the period

ending on 31st day of March of the following year.

Any different period as financial year [Sec. 2(41)]

If

-a company is a holding company or a subsidiary or associate company of a company incorporated

outside India; and

-it is required to follow a different financial year for consolidation of its accounts outside India,

Then

- CG may, on an application made by such company in such form and manner as may be prescribed,

allow any period as its FY, whether or not that period is a year.

Lets explore through Some questions –

Q2- Ansh Private Limited closed its financial year on 31st March 2019.

Ans - According to section 96(1) of the Act, the Company should hold its annual general meeting for

the year 2018-19 by 30th September 2019 unless an extension is granted by RoC on special reasons.

Q3- Infotech Ltd. was incorporated on 1.4.2016. No General Meeting of the company has been

held till 30.4.2018. Discuss the provisions of the Companies Act, 2013 regarding the time limit for

holding the first annual general meeting of the Company and the power of the Registrar to grant

extension of time for the First Annual General Meeting.

Answer

According to Section 96 of the Companies Act, 2013, every company shall be required to hold its first

annual general meeting within a period of 9 months from the date of closing of its first financial

year.

The first financial year of Infotech Ltd is for the period 1st April 2016 to 31st March 2017, the first

annual general meeting (AGM) of the company should be held on or before 31st December, 2017.

The section further provides that the Registrar may, for any special reason, extend the time within

which any annual general meeting, other than the first annual general meeting, shall be held, by a

period not exceeding three months.

Thus, the first AGM of Infotech should have been held on or before 31st December, 2017. Further,

the Registrar does not have the power to grant extension to time limit

MCQ’s of Sec 96

1. First AGM is to be held within ____ of close of _____

(a) 6 months; first financial year

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(b) 9 months; first financial year

(c) 6 months; first calendar year

(d) 9 months; first calendar year

2. An AGM, other than the first AGM, shall be held within ____ of close of _____

(a) 6 months; the relevant financial year

(b) 9 months; the year relevant financial year

(c) 6 months; the relevant calendar year

(d) 9 months; the relevant calendar year

3. Not more than _____ shall elapse between the date of one AGM and that of the next AGM.

(a) 12 months

(b) 15 months

(c) 9 months

(d) 18 months

4. In respect of an AGM, other than the first AGM, a company is required to satisfy _____of the

following requirements:

(1) AGM is to be held within 6 months of close of the relevant financial year.

(2) Not more than 15 months shall elapse between the date of one AGM and that of the next

AGM.

(3) AGM is to be held in each calendar year.

(a) Any one

(b) Any two

(c) All three

(d) None of these

5. The Registrar may, for any special reason, extend the time for holding ____ by any period not

exceeding ____

(a) The first AGM; 3 months

(b) Any AGM other than the first AGM; 3 months

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(c) The first AGM; 6 first AGM; 3 months

(d) Any AGM other than the first AGM; 6 months

6. A company is incorporated on 13th January, 2019. The first financial year and second financial

year of the company shall end on ______ and _____respectively.

(a) 31st March, 2019; 31st march, 2020

(b) 31st March, 2020; 31st March, 2021

(c) 31st December, 2019; 31st December, 2020

(d) None of these

7. AGM shall be called during business hours, i.e. between ____

(a) 9 am and 5 pm

(b) 9 am and 6 pm

(c) 10 am and 5 pm

(d) 10 am and 6 pm

8. AGM shall be called for a day which is not a _____ holiday.

(a) Public

(b) Bank

(c) Gazetted

(d) National

9. The AGM of a listed company shall be held at _____

(a) The registered office of the company

(b) Some other place within the city, town or village in which the registered office is situated

(c) Either (a) or (b)

(d) Any place within India

10. The AGM of _____ may be held at any place in India if consent is given in advance either in

writing or by electronic mode by ___

(a) A listed company; all the members

(b) An unlisted company; all the members

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(c) A listed company; 95% of the members

(d) An unlisted company; 95% of the members

MCQ’s Ans key -

1-b 2-a 3-c 4-c 5-b

6-b 7-b 8-d 9-c 10-b

POWER OF TRIBUNAL TO CALL AGM (Sec. 97)

1. Applicability

Sec. 97 applies where default is made in holding AGM as per Sec. 96.

2. Right of member to apply to Tribunal

If AGM is not held as per the provisions of Sec. 96, any member may make an application to the

Tribunal.

It means no power is provided to any director of a company , only member is allowed

3. Powers of the Tribunal

(a) The Tribunal may call a GM or direct the calling of a GM, which shall be deemed to be an AGM of

the company.

(b) The Tribunal may give such directions as it may think fit, including a direction that 1 member

present in person or proxy shall be the quorum.

Situations Quorum present (yes or No)

1. Mr. Avinash is a member of BPCL ltd, he is present in a AGM as conducted as per sec 97

2. Mr. Peeyush is a proxy as appointed by Mr. Avinash (member) of BPCL ltd, Peeyush is present in a AGM as conducted as per sec 97

3. Ms. Simran representing Abacus private limited one of the shareholder of BPCL ltd present in a AGM as conducted as per sec 97

POWER OF THE TRIBUNAL TO CALL EGM (Sec. 98)

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1. Impracticable to call an EGM

If for any reason, it is impracticable to call or hold or conduct an EGM, the Tribunal may order an

EGM to be called, held and conducted in such manner as it thinks fit.

2. Powers of the Tribunal

The Tribunal may give such directions as it may think fit (including a direction that 1 member

present in person or proxy shall be the quorum).

3. When are the powers exercisable by the Tribunal?

The Tribunal may exercise such power –

(a) on the application of a member; or

(b) on the application of a director; or

(c) suo motu.

In Lt. CDR. D.K. Chatterji v. Rapti Supertronics Pvt. Ltd. (2003) & Rohit Churamani v. Disha Research &

Marketing Services Pvt. Ltd., it was held that “any director can call meeting. However, any resolution

passed without required quorum is ipso facto void and all such board meetings and general meetings

held without quorum are illegal and set aside.

PUNISHMENT FOR DEFAULT IN COMPLYING WITH SECTION 96 or 97 or 98 (Sec. 99)

When is Sec. 99 attracted?

-If default is made in holding AGM u/s 96 or 97 or EGM u/s 98.

-If default is made in complying with any directions of the Tribunal.

Who shall be liable?

-The company.

-Every officer of the company who is in default.

Amount of fine

-Fine upto Rs. 1 lakh.

-Fine, in case of continuing default: Upto Rs. 5,000 per day.

MCQ’s of Sec 97 to 99

1. If AGM is not held as per the provisions of section 96, _____ may make an application to _____

(a) Any director; the Tribunal

(b) Any member; the Tribunal

(c) Any director; the Central Government

(d) Any member; the Central Government

2. Where the Tribunal makes an order calling an AGM of a company, it___ direct that 1

member___ shall be the quorum.

(a) Shall; present in person or proxy

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(b) May; present in person or proxy

(c)Shall; present in person

(d) May; present in person

3. If ____ an EGM, ______may order an EGM to be called, held and conducted in such manner as it

thinks fit.

(a) It is impracticable to call or hold or conduct; the tribunal

(b) A default is made in holding; the Tribunal

(c) It is impracticable to call or hold or conduct; the Central government

(d) A default is made in holding; the Central Government

4. The Tribunal may order an EGM to be called, held and conducted _______

(a) On the application of a member

(b) On the application of a director

(c) Suo motu

(d) Any of these

5. If a default is made in _____ the company and every officer of the company who is in default,

shall be punishable with fine upto Rs. 1 lakh and fine upto Rs. 5,000 per day in case of a continuing

default.

(a) Holding AGM under section 96

(b) Holding AGM under section 97

(c) Holding EGM under section 98

(d) Holding AGM under section 96 or 97 or EGM under section 98

MCQ’s Ans key

1-b 2-b 3-a 4-d 5-d

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EXTRAORDINARY GENERAL MEETING (EGM) (Sec. 100)

All general meetings other than AGM are called

extraordinary general meetings.

(A) EGM called by the Board suo motu.

-The Board may, whenever it deems fit, call an EGM.

However, the EGM of a company, other than of the wholly

owned subsidiary of a company incorporated outside India,

shall be held at a place within India.

(B) EGM called on requisition of members – The BOD shall

1. Eligible members

Company having a share capital

Member(s) holding > 1/10th of such paid-up capital of the company as on that date carries the right

of voting.

Company having no share capital

Member(s) holding > 1/10th of total voting power of all the members having on the said date a right

to vote.

2. Essentials of a valid requisition

(a) The requisition shall specify the matters for the consideration of which EGM is to be called. The

requisition shall be valid even if it does not specify the reasons for the matters proposed to be

considered.

(b) The requisition shall be signed by -

(i) all the requisitionists; or

(ii) a requisitionists duly authorised, by all other requisitionists.

(c) The requisition shall be deposited at the registered office.

(d) The requisitionists may make the requisition in writing or by electronic mode. The requisition

shall be sent-

(i) in writing; or

(ii) by sending an electronic request and attaching therewith a scanned copy of a duly signed

requisition.

(e) The requisitionists may propose a date for holding the EGM. The requisition shall be deposited at

least 21 clear days before such proposed date for holding the EGM.

3. EGM called by the Board

- On receipt of a valid requisition, the Board shall within 21 days proceed to call an EGM to be held

not later than 45 days from the date of deposit of requisition.

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-The notice shall be given to those members whose names appear in the Register of Members within

3 days of receipt of a valid requisition.

4. EGM called by Requisitionists

If the Board fails to call an EGM, it may be called by the requisitionists themselves, as follows:

Time period for holding EGM

-The EGM shall be held within 3 months from the date of deposit of the requisition.

Manner of calling EGM

- The requisitionists shall call the EGM in the same manner in which a meeting is called by the Board

of directors.

Rights of requisitionists

-The requisitionists shall be entitled to receive a list of members from the company.

-The list shall be made as on 21st day from the date of receipt of the requisition for calling EGM

together with such changes as have occurred upto 45th day from the date of receipt of requisition

for calling the EGM.

Day and place for holding EGM

-The requisitionists should convene the EGM on any day except national holiday.

-The requisitionists should convene the EGM at the registered office or in the same city or town in

which the registered office is situated.

Manner of giving notice

The notice of EGM shall be given by –

(i) speed post; or

(ii) registered post; or

(iii) electronic mode.

-Any accidental omission to give notice to any member shall not invalidate the proceedings of the

EGM.

-Non-receipt of notice by any member shall not invalidate the proceedings of the EGM.

Disclosures in notice

-The notice of EGM shall disclose the place, date, day and hour of the EGM.

-The notice shall disclose the business to be transacted at EGM, i.e. the agenda.

-If the resolution is to be passed as a special resolution, the notice shall disclose such a fact.

Reimbursement of expenses

All reasonable expenses incurred by the requisitionists by reason of the failure of the Board

to call EGM shall be repaid to the requisitionists by the company.

The sum so repaid shall be deducted from the remuneration of the defaulting directors.

Important case laws - Judicial Decisions

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[R Chettiar v M Chettiar).

-Where the Board failed to call the EGM, and the meetings were generally held at the registered office of the company, but the registered office was not made available to the requisitionists for holding the EGM, holding of EGM elsewhere was held to be valid

[Bharat Commerce and Industries Ltd. V ROC).

-An EGM may be held at any place, even though such place is outside the State in which registered office of the company is situated.

[LIC v Escorts Ltd.)

-An institutional shareholder, like LIC, has the same rights as every other shareholder to requisition an EGM for the purpose of considering removal of a certain number of directors. LIC could not be restrained from calling an EGM on the ground that the reasons for the proposed removal of directors had not been stated in the requisition

Questions from Examination – Sec 100

Q1- To remove the Managing Director, 40% members of Gaurav Ltd. submitted requisition for

holding extra-ordinary general meeting. The company failed to call the said meeting and hence the

requisitionists held the meeting. Since the Managing Director did not allow the holding of meeting

at the registered office of the Company, the said meeting was held at some other place and a

resolution for removal of the Managing Director was passed. Examine the validity of the said

meeting and resolution passed therein in the light of the provisions of the Companies Act, 2013.

Ans.

The requisition is valid

assuming that the requisitionists hold at least 10% of the paid up share capital of the

company

since the requisition need not disclose the reasons behind the resolutions proposed at the

EGM (LIC v Escorts).

Holding of EGM at a place other than the registered office is valid

-since the Board failed to call the EGM within the time prescribed u/s 100, thereby entitling the

members to call, hold and conduct the EGM;

-since the registered office was kept lock, and so it was not possible for the requisitionists to hold

the EGM in the same manner in which GMs are ordinarily held, viz. at the registered office of the

company.

Resolution removing the MD is valid

- since the EGM was called, held and conducted, and the resolution removing MD was passed in

accordance with the provisions of the Act. (R Chettiar v M Chettiar]

Q2 - The Board of directors of Illusions Private Limited, a company registered in New Delhi, has

decided to call an EGM in Madrid, Spain on 2nd October 2018. Discuss whether the EGM can be

convened on the said date.

Ans - No, the meeting cannot be convened in the manner as stated in the facts of the question. As

per Rule 17(2) of the Companies (Management and Administration) Rules, 2014, the requisitionists

should hold the meeting in the registered office of the company or in the same city or town in which

the registered office is situated and it should be a working day.

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Q3 - The members of the Blue Peacocks Private Limited, holding 1/10th voting power of the

company, requisitioned a meeting on 14th August, 2018 to the Board of Directors. However, the

directors did not pay any attention to such a requisition and did not call an extra-ordinary

meeting. Discuss the consequences of the contravention of the same in accordance with the

Companies Act, 2013.

Ans : Where the Board, after the receipt of the requisition, does not within 21 days call for a meeting

within 45 days of the date of requisition, then the requisitionists may themselves call and convene

the meeting within 3 month from the date of requisition.

MCQ’s of Sec 100

1. In case of a company having a share capital, one or more members holding _____ a company

are eligible to requisition an EGM.

(a) 1/10th

(b) 1/5th

(c) 1/3rd

(d) 50%

2. A requisition for calling an EGM shall not be valid if it does not specify____

(a) The matters for the consideration of which EGM is to be called

(b) The reasons for the matters proposed to be considered

(c) Either (a) or(b) or both

(d) None of these

3. The requisitionists’ ____ propose a date for holding the EGM. The requisition shall be deposited

at least ____clear days before such proposed date for holding the EGM.

(a) May; 14

(b) Shall; 14

(c) May; 21

(d) Shall; 21

4. On receipt of a valid requisition, the Board shall within____ proceed to call an EGM to be held

not letter than_____ from the date of deposit of requisition.

(a) 7 days; 21 days

(b) 14 days; 30 days

(c) 14 days; 45 days

(d) 21 days; 45 days

5. On receipt of a valid requisition, if the Board fails to call an EGM, it may be called by the

requisitionists themselves within ____ from the date of deposit of the requisition.

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(a) 6 weeks

(b) 45 days

(c) 60 days

(d) 3 months

6. All ____incurred by the requisitionists by reason of the failure of the Board to call EGM shall be

repaid to the requisitionists by ____

(a) Expenses; the defaulting directors

(b) Reasonable expenses; the defaulting directors

(c) Expenses; the company

(d) Reasonable expenses; the company

MCQ’s Ans key:

1-a 2-a 3-c 4-d 5-d 6-d

LENGTH OF NOTICE, CONTENTS OF NOTICE AND NOTICE TO WHOM? (Sec. 101)

Clear days' notice

(a) Any GM may be called by giving at least

21 clear days' notice.

(b) Where a notice of GM is sent by post, it

shall be deemed to be served at the

expiration of 48 hours after the letter

containing the same is posted (Rule 35(6)

of the Companies (Incorporation) Rules,

2014).

(c) Part of the day on which the notice is

deemed to be served on the member cannot be added to the part of the day upto the time of the

GM so as to make it one day. Each of the 21 days must be full / complete days.

(d) The day on which the notice is deemed to be served on the member, and the day of the GM have

to be in addition to the 21 days.

To summarize whole concept –

1 day Date of service of notice

1 day Date of GM

2 days (48 hours) Notice sent by post

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21 days Clear days

So , total of above is 25 days , if notice is sent before 25 days of GM , then it can be said that it is sent before 21 clear days to comply the requirement of section 101.

Manner of giving notice

The notice shall be given -

(i) in writing; or

(ii) by electronic mode, in such manner as may be prescribed.

Shorter notice

Any GM may be called after giving shorter notice if consent, in writing or by electronic mode, is

accorded thereto-

(i) in the case of an AGM, by not less than 95% of the members entitled to vote thereat; and

(ii) in the case of EGM, by -

(a) majority in number of members holding not less than 95% of such part of the paid-up share

capital of the company as gives a right to vote at the meeting, in case of a company having a share

capital; or

(b) members having not less than 95% of the total voting power, if the company has no share capital

Contents of notice

The notice shall specify -

(i) place, date, day and hour of GM; and

(ii) business to be transacted at the GM (i.e., agenda)

Notice to whom

The notice shall be given to -

(i) every director;

(ii) every member;

(iii) legal representatives of the deceased member;

(iv) official assignee of the insolvent member; and

(v) auditor(s).

Effect of omission to give notice

Accidental omission to give notice of GM shall not invalidate the proceedings of GM.

Non-receipt of notice by any person entitled to receive notice of GM, shall not invalidate the

proceedings of GM.

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Procedure for notice given - Electronic mode permitted

A company may give notice through electronic mode.

Meaning of electronic mode

The expression “electronic mode' means any communication sent by a company through its

authorized and secured computer programme which is capable of producing confirmation and

keeping record of such communication addressed to the person entitled to receive such

communication at the last electronic mail address provided by the member.

Requirements of link or URL

The notice made available on the electronic link or Uniform Resource Locator (URL) has to

be readable, and the recipient should be able to obtain and retain copies.

The company shall give the complete Uniform Resource Locator (URL) or address of the

website and full details of how to access the document or information.

Procedure for notice given by e-mail

Modes permitted for sending notice

A notice may be sent -

(i) by e-mail as a text; or as an attachment to e-mail; or

(ii) as a notification providing electronic link or Uniform

Resource Locator for accessing such notice.

E-mail to whom

The e-mail shall be addressed to the person entitled to receive such e-mail

(a) as per the records of the company; or

(b) as provided by the depository.

Opportunity to members to register and update e-mail addresses

The company shall provide an advance opportunity at least once in a financial year, to the members

to register their e-mail addresses and to update their e-mail addresses.

Subject line in the e- mail

The subject line in e-mail shall state -

(i) the name of the company;

(ii) notice of the type of meeting,

(iii) place and the date on which the meeting is scheduled.

Opportunity to members to download software

If notice is sent in the form of a non-editable attachment to e-mail, such attachment shall be -

(i) in the Portable Document Format (PDF); or

(ii) in a non-editable format

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together with a ‘link or instructions' for recipient for downloading relevant version of the software.

Maintenance of records by the company

The company should use a system which produces –

(i) confirmation of the total number of recipients e-mailed; and

(ii) a record of each recipient to whom the notice has been sent.

A copy of such record and any notices of any failed transmissions and subsequent re-sending

shall be retained by the company.

Failure in transmission not to affect company's obligation

The company's obligation shall be satisfied when it transmits the e- mail.

The company shall not be held responsible for a failure in transmission beyond its control.

If a member fails to provide or update relevant e-mail address to the company, or to the

depository participant as the case may be, the company shall not be in default for not

delivering notice via e-mail.

E-mails through in- house facility or outsourcing

E-mails through in- house facility or outsourcing

The company may send e-mail through –

(i) in-house facility; or

(ii) its Registrar and transfer agent; or

(iii) any third party agency providing bulk e-mail facility as may be authorised by the company.

Notice to be placed on the website

The notice of GM shall be simultaneously placed on

(i) the website of the company, if any; and

(ii) such website as may be notified by CG.

Questions from Examination – Sec 101

Q1 - Dev Limited issued a notice for holding of its annual general meeting on 7th November, 2014.

The notice was posted to the members on 16.10.2014. Some members of the company allege that

the company had not complied with the provisions of the Companies Act, 2013 with regard to the

period of notice and as such the meeting was not validly called. Referring to the provisions of the

Act, decide -

i. Whether the meeting has been validly called?

ii. If there is a shortfall in the number of days by which the notice falls short of the statutory

requirement, state and explain by how many days does the notice fall short of the

statutory requirement?

iii. Can the shortfall, if any, be condoned?

Ans.

Day of holding the AGM- 7th November, 2014.

CA CS Ashish Gupta

Day of despatch of notice - 16th October, 2014.

Days to be excluded

Day of holding the AGM (i.e. 7th November, 2014)

Day of despatch of notice (16th October, 2014)

2 days for service of notice (i.e. 17th and 18th October, 2014).

Number of days’ notice given - 19 days.

Number of days’ notice required u/s 101 - 21 days.

(i) AGM has not been validly called - since 21 days' notice of the AGM has not been given to the

members.

(ii) The notice is short - by 2 days.

(iii) The shortfall may be condoned - if consent is given for such shorter notice by at least 95% of

the members entitled to vote at such AGM.

Q2 - XYZ Limited called its Annual General meeting on 28th September, 2014. The notice of the

meeting was posted on 6th September, 2014. With reference to the provisions of the Companies

Act, 2013 examine whether the notice given by the company was valid.

Ans.

Day of holding the AGM - 28th September, 2014.

Day of despatch of notice - 6th September, 2014.

Days to be excluded

Day of holding the AGM (i.e. 28th September, 2014)

Day of despatch of notice (6th September, 2014)

2 days for service of notice (i.e. 7th and 8th September, 2014).

Number of days’ notice given - 19 days.

Number of days’ notice required u/s 101 - 21 days.

AGM has not been validly called - since 21 days' notice of the AGM has not been given to the

members.

The notice is short - by 2 days.

The shortfall may be condoned

if consent is given for such shorter notice by at least 95% of the members entitled to vote at such

AGM.

MCQ’s of Sec 101

CA CS Ashish Gupta

1. Any general meeting may be called by giving at least ____ clear days' notice.

(a) 7

(b) 14

(c) 21

(d) 30

2. Where a notice of general meeting is sent by post, it shall be deemed to be served at the

expiration of _____letter containing the same is posted.

(a) 24 hours

(b) 48 hours

(c) 72 hours

(d) 96 hours

3. An AGM may be called by giving a shorter notice if consent, in writing or by electronic mode, is

accorded thereto by not less than ____ of the members entitled to vote thereat.

(a) 90%

(b) 95%

(c) 100%

(d) None of these

4. ____ omission to give notice of a general meeting shall not invalidate the proceedings of the

general meeting.

(a) Deliberate

(b) Accidental

(c) Planned

(d) Strategic

5. The company shall provide an advance opportunity at least ____, to the member register their

e-mail addresses and to update their e-mail addresses.

(a) Once in a financial year

(b) Twice in a financial year

(c) Thrice in a financial year

CA CS Ashish Gupta

(d) Once in every quarter

6. A notice of general meeting may be sent by e-mail as _____

(a) A text

(b) An attachment to e-mail

(c) A notification providing electronic link or Uniform Resource Locator for accessing such notice

(d) Any of these

7. ______is entitled to receive the notice of every general meeting.

(a) Every member

(b) Every promoter

(c) The Registrar

(d) All of these

MCQ’s Ans key

1-c 2-b 3-b 4-b 5-a 6-d 7-a

ORDINARY BUSINESS AND SPECIAL BUSINESS (Sec. 102)

Ordinary business Meaning At an AGM [Sec. 102(2)(a)]: Following business shall be ordinary business: (a) Consideration and adoption of financial statements, Auditors Report and Board's Report (b) Declaration of dividend (c) Retirement of directors by rotation and appointment of directors in the place of those retiring (d) Retirement of auditors and appointment of auditors in the place of those retiring, and fixing of remuneration of auditors

Special business Meaning At an AGM: All business except that specified u/s 102(2)(a) shall be deemed as special business.

At any other GM: No business shall be deemed as ordinary business.

At any other GM: All business shall be deemed to be special business.

Explanatory statement Explanatory statement

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Explanatory statement is not required for transacting any item of ordinary business.

Explanatory statement shall be annexed to the notice for transacting every item of special business.

Explanatory statement

Explanatory statement shall be annexed to the notice for transacting every item of special business.

Contents of explanatory statement

(a) Material facts

(b) Nature of concern or interest (financial or otherwise) of -

(i) every director and manager;

(ii) every other key managerial person;

(iii) relatives of every director, manager and key managerial person.

(c) Any other information and facts that may enable members to understand the meaning, scope

and implications of the items of business and to take decision thereon.

(d) If special business relates to, or affects, any other company, the extent of shareholding in that

other company of every promoter, director, manager and every other key managerial person shall

be disclosed, if the extent of such shareholding is 2% or more of the paid up share capital of that

other company.

(e) If special business refers to any document which is to be considered at the GM, the time and

place where such document can be inspected shall be specified in the Explanatory Statement.

Effects of non-disclosure -

If, as a result of non-disclosure or insufficient disclosure in Explanatory Statement, any benefit

accrues to promoter, director, manager or other key managerial personnel or their relatives, such

person shall hold such benefit in trust for the company, and shall compensate the company to the

extent of benefit derived by him.

Punishment for default

If any default is made in complying with the provisions of this section, every promoter, director,

manager or other key managerial personnel of the company who is in default shall be liable to a

penalty of -

(a) Rs. 50,000; or

(b) 5 times the amount of benefit accruing to the promoter, director, manager or other key

managerial personnel or any of his relatives, whichever is higher.

Questions from Examination – Sec 102

Q1 - A company served a notice of general meeting upon its

members. The notice stated that a resolution to increase the

share capital of the company would be considered at such

meeting. A shareholder complains that the amount of the

CA CS Ashish Gupta

proposed increase was not specified in the notice. Is the notice valid?

OR

ABC Limited served a notice of a general meeting upon its members. The notice stated that a

resolution to increase the Share Capital of the company would be considered at the meeting. A

member complains to the company that the amount of the proposed increase was not specified in

the notice. In the light of the provisions of the Companies Act, 2013 examine the validity of the

notice.

Ans.

Increase in share capital -is an item of special business.

Explanatory statement is required -for every item of special business.

Material facts must be disclosed -in the explanatory statement.

Amount of proposed increase in share capital

- is a material fact which ought to be disclosed in the explanatory statement;

-since the explanatory statement must contain all the information and all the facts that may enable

the members to understand the meaning, scope and implications of the items of business and to

take decision thereon.

The notice is not valid in the given case

- since the provisions of Sec. 102 are mandatory;

-since notice given, or any resolution passed in the GM, without containing the explanatory

statement or without disclosing the material facts, is invalid.

Q2 - M.H. Company Limited served a notice of general meeting upon its shareholders. The notice

stated that the issue of sweet equity shares would be considered at such meeting. Mr. A, a

shareholder of the M.H. Company Limited complains that the issue of sweat equity shares was not

specified fully in the notice. Is the notice issued by M.H. Company Limited regarding issue of sweat

equity shares valid according to the provisions of the Companies Act, 2013? Explain fully.

Ans.

Issue of sweat equity shares -is an item of special business.

Explanatory statement is required -for every item of special business.

Material facts must be disclosed -in the explanatory statement.

Material facts in the given case are -

(a) Number of shares

(b) Current market price

(c) Consideration

(d) The class of directors or employees to whom such equity shares shall be issued (Sec. 54).

The notice is not valid in the given case

-since the provisions of Sec. 102 are mandatory;

CA CS Ashish Gupta

-since notice given, or any resolution passed in the GM, without containing the explanatory

statement or without disclosing the material facts, is invalid.

MCQ’s of Sec 102

1. Statement (1): In an extraordinary general meeting, all business shall be deemed as ordinary

business.

Statement (2): In an annual general meeting, no business shall be deemed as special business.

(a) Only Statement (1) is correct

(b) Only Statement (2) is correct

(c) Both the Statements are correct

(d) None of the Statements

2. Explanatory statement shall be annexed to the notice for transacting every item of ____

(a) Ordinary business

(b) Special business

(c) Both (a) and (b)

(d) Business requiring special notice

3. If special business relates to, or affects, any other company, the extent of shareholding in that

other company of every promoter, director, manager and every other key managerial person shall

be disclosed, if the extent of such shareholding is ____or more of the paid up share capital of that

other company.

(a) 2%

(b) 5%

(c) 10%

(d) 20%

MCQ’s Ans key

1-d 2-b 3-a

QUORUM FOR GM (Sec. 103)

1. Meaning of quorum

CA CS Ashish Gupta

Quorum means the minimum number of members who must be present in order to constitute a

valid meeting.

Quorum - Public company

Number of members as on the date of meeting Required quorum

Upto 1,000 5 members personally present

More than 1,000 but upto 5,000; 15 members personally present

More than 5,000 30 members personally present

Articles may provide for a larger number as the quorum.

Private company- Quorum

-2 members personally present shall be the quorum.

-Articles may provide for a larger number as the quorum.

Lack of quorum- Legal effect

If the quorum is not present within half-an-hour from the time fixed for holding the GM, then

Case I: EGM was called by requisitionists u/s 100

The meeting shall stand cancelled.

Case II: Any other case

(i) The meeting shall adjourn to such day, time and place as may be determined by the Board.

(ii) However, if the Board has not so determined the day, time and place, the meeting shall adjourn

to same day, time and place in the next week.

(iii) At least 3 days' notice of adjourned meeting shall be given to the members either individually or

by publishing an advertisement in 2 newspapers (one in English and one in vernacular language).

(iv) If at the adjourned meeting also, quorum is not present within half-an-hour from the time fixed

for holding the GM, the members present shall be the quorum.

Quorum when required

Quorum needs to be present throughout the meeting & every resolution passed.

Thus, quorum is required at the time of passing each and every resolution.

Attention – Read Sec 112 & 113 along with Sec 103

REPRESENTATIVE (Sec. 112 and 113)

Representation of the President and Governors (Sec. 112)

CA CS Ashish Gupta

If the President of India or Governor of a State is a member in any other company, he may

authorise such person as he thinks fit to act as his representative at any GM or class meeting

of such company.

A person appointed as a representative is entitled to exercise the same rights and powers

(including the right to vote by proxy and postal ballot) as if he were a member of the

company.

Representation of corporations at meetings of companies (Sec. 113)

If a body corporate is a member in any other company, it may, by a resolution of its Board of

directors, authorise such person as it thinks fit to act as its representative at any GM or class

meeting of such company.

A person appointed as a representative is entitled to exercise the same rights and powers

(including the right to vote by proxy and postal ballot) as if he were a member of the

company.

Questions from Examination – Sec 103,112 & 113

Q1 - The articles of association of X Ltd. require the personal presence of 7 members to constitute

quorum of general meetings. The following persons were present in the extra-ordinary general

meeting to consider the appointment of Managing Director:

(i) the representative of Governor of Madhya Pradesh.

(ii) B and C, shareholders of preference shares,

(iii) D, representing Y Ltd. and Z Ltd.

(iv) E, F, G and H as proxies of shareholders.

Can it be said that the quorum was present in the meeting?

Ans.

A shall be treated as a member personally present

- since he is the representative of the Governor of Madhya Pradesh (Sec. 112).

B and C are not members personally present

-since preference shareholders can vote only in relation to such matters which directly affect their

rights.

-since appointment of MD does not directly affect the rights of preference shareholders.

D shall be treated as two members personally present

-since each of the two body corporates shall be treated as a member personally present (Sec. 113).

E, F, G and H are not members personally present

since the words 'personally present' exclude proxies.

The quorum is not present in the given case

-since the quorum can be increased by the articles (from 5 to 7, in the given case);

CA CS Ashish Gupta

-since only 3 members are personally present in the given case, but quorum required is 7.

Q2 - DJA Company Ltd. has only 50 preference shareholders. A meeting of the preference

shareholders was called by the company for amending the terms of these shares. Mr. A, was the

only preference shareholder who attended the meeting. He, however, held proxies from all other

shareholders. He took the Chair, conducted the meeting and passed a resolution for amending the

terms of the issue of these shares. Referring to the provisions of the Companies Act, examine the

validity of the meeting and the resolution passed thereat.

Ans.

A meeting means coming together of more than one person. Therefore, one member cannot

constitute a meeting.

The meeting and resolutions passed thereat are not valid

- since presence of a single member (viz. Mr. A) does not constitute a meeting;

-Since same judgment was given in Sharp v Dawes

Q4 - The quorum for a General meeting of a public company is 15 members personally present

according to the provisions of the articles of association of the company. Examine with reference

to the provisions of the Companies Act, 2013, whether there is proper quorum at a General

meeting of the company which was attended by the following persons:

(i) 13 members personally present

(ii) 2 members represented by proxies who are not members of the company

(iii) One person representing two member companies.

Ans.

Required quorum -15 members personally present (since the quorum can be increased by the

articles).

Member personally present -13.

Members present by proxies -2 -Not counted in quorum.

Representative - representing two companies is counted as two members personally present (Sec.

113).

Total number of members personally present -15.

Whether quorum is present? -Yes.

Q5 - State the legal position in the following circumstances with reference to the provisions in the

Companies Act, 2013. At an adjourned extraordinary general meeting of a Public Ltd. Company

adjourned for want of quorum, only 3 members are personally present.

Ans.

The quorum is present at the adjourned EGM

CA CS Ashish Gupta

since if an EGM is not held for want of quorum, and at the adjourned EGM also, quorum is not

present within half an hour from the time fixed for holding the adjourned EGM, then, the members

present shall be the quorum (Sec. 103(3)].

Q6 - The Board of Directors of ABC Limited called an Extra-ordinary General Meeting of the

company to transact certain urgent matters. The meeting could not be held for want of requisite

quorum. As a result, the meeting was adjourned to next week. Again, at the adjourned meeting

also the requisite quorum was not present. Members present at this meeting held the meeting

and passed certain resolutions. With reference to provisions of Companies Act, examine the

validity of the meeting and state whether resolutions passed at such meeting shall be binding

upon the company and its members.

Ans.

The resolutions passed at the EGM are valid and binding

- since if an EGM is adjourned for want of quorum, and the required quorum is again not present in

the adjourned EGM, then, the members present shall be deemed to be the quorum [Sec. 103(3)].

Q7 - The Annual General Meeting of KMP Limited was held on 30th April, 2015. The Articles of

Association of the company is silent regarding the quorum of the General Meeting. Only 10

members were personally present in the above meeting, out of the total 2,750 members of the

company. The Chairman adjourned the meeting for want of quorum. Referring to the provisions of

the Companies Act, 2013, examine the validity of Chairman's decision.

Ans.

The required quorum is

-15 members personally present since the total number of members of the company exceed 1,000

but does not exceed 5,000.

The AGM shall automatically adjourn

- to the same day, time and place in the next week or to such other date, time and place as the

Board may determine, since the quorum is not present within half an hour from the time fixed for

the commencement of the meeting.

The question of adjournment by the chairman does not arise

- since, in case of absence of quorum, the meeting automatically adjourns without requiring any

direction by the chairman regarding adjournment.

Q8 - KMN Ltd. scheduled its annual general meeting to be held on 11 March, 2018 at 11:00 A.M.

The company has 900 members. On 11th March, 2018 following persons were present by 11:30

A.M.

(1) P1, P2 & P3 shareholders

(2) P4 representing ABC Ltd.

(3) P5 representing DEF Ltd.

(4) P6 & P7 as proxies of the shareholders

CA CS Ashish Gupta

(i) Examine with reference to relevant provisions of the Companies Act, 2013, whether quorum

was present in the meeting.

(ii) What will be your answer if P4 representing ABC Ltd., reached in the meeting after 11:30 A.M.?

(iii) In case lack of quorum, discuss the provisions as applicable for an adjourned meeting in terms

of date, time & place.

(iv) What happens if there is no quorum in the Adjourned meeting?

Ans.

The required quorum is

-5 members personally present, since the number of members of KMN Ltd. as on the date of

meeting does not exceed 1,000.

P1, P2 and P3 shall be counted in determining quorum

-since they are members personally present.

P4 and P5 shall be counted in determining quorum

-since they are representatives of ABC Ltd. and DEF Ltd., and as per section 113, representative of a

body corporate shall have all the rights of a member personally present, and so they shall be

counted while determining quorum.

P6 and P7 shall not be counted in determining quorum

-since they are not members personally

-since the words 'personally present' exclude proxies.

(i) The quorum is present in the given case

-since 5 members are personally present in the given case.

(ii) If P4 reached in the meeting after 11:30 am

-there will be no quorum within half an hour from the time fixed for the commencement of the

meeting, and so the meeting shall not commence, but shall be adjourned.

(iii) In case of lack of quorum

-the meeting shall adjourn to the same day, time and place in the next week or to such other date,

time and place as the Board may determine.

(iv) If there is no quorum in the adjourned meeting

-the members present shall be deemed to be the quorum (Sec. 103(3)].

MCQ’s of Sec 103, 112 & 113

1. In case the number of members as on the date of meeting is _____, the quorum shall be ____

members personally present.

(a) More than 1,000 but upto 5,000; 30

CA CS Ashish Gupta

(b) More than 5,000; 50

(c) Upto 1,000; 7

(d) None of these

2. In case of a company having 2,500 members as on the date of the meeting, the quorum shall

be____ member personally present.

(a) 5

(b) 15

(c) 30

(d) 50

3. If the quorum is not present within half-an-hour from the time fixed for holding an

extraordinary general meeting called by the requisitionists under section 100, then, _____

(a) The meeting shall adjourn to such day, time and place as may be determined by the Board

(b) The meeting shall adjourn to same day, time and place in the next week

(c) The members present shall be the quorum

(d) The meeting shall stand cancelled

4. If the quorum is not present within half-an-hour from the time fixed for holding a general

meeting (other than an extraordinary general meeting called by the requisitionists under section

100), then, _____

(a) The meeting shall adjourn to such day, time and place as may be determined by the Board

(b) The members present shall be the quorum

(c) The meeting shall stand cancelled

(d) None of these

5. Quorum needs to be present _____

(a) At the commencement of GM

(b) At the time of passing each and every resolution

(c) Both (a) and (b)

(d) At any time during the meeting

MCQ’s Ans key

CA CS Ashish Gupta

1-d 2-b 3-d 4-a 5-a

CHAIRMAN OF GM (Sec. 104)

Election by show of hands [Sec. 104(1)]

Unless the articles of the company otherwise provide,

the members personally present at the meeting

shall elect one of themselves to be the Chairman thereof

on a show of hands.

Poll for election of chairman [Sec. 104(2)]

If a poll is demanded on the election of the Chairman, it shall be taken forthwith in

accordance with the provisions of this Act and the Chairman elected on a show of hands

under sub-section (1) shall continue to be the Chairman of the meeting until some other

person is elected as Chairman as a result of the poll, and such other person shall be the

Chairman for the rest of the meeting.

Summary of Sec. 104:

Appointment as per articles

The Chairman shall be appointed as per the provisions contained in the articles of the company.

Appointment as per the procedure given u/s 104

If the articles do not contain any provision regarding the appointment of Chairman, then, the

Chairman shall be appointed as follows.

(a) Members personally present shall elect one of themselves to be the Chairman.

(b) Election of Chairman shall be made by voting on a show of hands.

(c) If a poll is demanded on the election of a Chairman, it shall be taken forthwith.

(d) During the poll, the Chairman elected as a result of show of hands shall continue to be the

Chairman.

(e) If some other person is elected as a Chairman as a result of the poll, he shall be the Chairman for

the rest of the meeting.

MCQ’s of Sec 104

1. Statement (1): If a poll is demanded on the election of the Chairman, it shall be taken within 48

hours of demand for poll.

Statement (2): On a poll being taken, the Chairman elected on a show of hands shall continue to

be the Chairman of the meeting.

(a) Only Statement (1) is correct

(b) Only Statement (2) is correct

CA CS Ashish Gupta

(c) Both the Statements are correct

(d) None of the Statements is correct

Ans - b