CHAPTER IV
A. Directors [Topic 59 to 75]
B. Managing/ Whole‑time Director
[Topic 76 to 80]
C. Manager/Secretary [Topic 81 to 85]
D. Officer in Default [Topic 86 to 891
E. Auditors [Topic 90 to 105]
F. Sole Selling Agents [Topic 106 to 107]
G. Others [Topic 108 to 111]
1. Appointment of firm or
body corporate to an office or place of profit [Topic 108]
2. Waiver of refund of
paid money u/s. 314 [Topic 109]
3. Appointment of
constituted attorney [Topic 110]
4. Appointment of
Inspector to investigate [Topic 111]
(Topic 59 to Topic 75)
Topic
59
DO YOU WISH TO APPOINT A DIRECTOR IN THE GENERAL MEETING OTHER THAN THE RETIRING ONE?
1. Appointment of a director other than the
retiring one in the General Meeting will, in case of a private company not
being a subsidiary of a public company, be governed by its Articles of
Association. The items 2 to 8, therefore, will not apply to such a company. [Section 257(1) & (2)]
2. Give a notice to the company that you wish to
propose a person to be appointed as a director not less than fourteen days
before a General Meeting. Alternatively, a person himself may give notice of
his candidatuie as aforesaid.
3. Ensure that the aforesaid notice is either given by the
person who is not a retiring director or by some member.
4. There is no prescribed form for this notice
but ensure that such notice must be accompanied by a deposit of five hundred
rupees per candidate which will be returned if the candidate is elected. [Section 257(1)].
5. File the written consent of the person
proposed, with the company, before appointment, unless he himself has notified
his candidature. There is no prescribed form for this purpose also.
6. The aforesaid formality shall, however, not
be necessary where he, immediately before such appointment, was already the
Board appointed director of the company. [Section 264(1)].
7. Inform all the members about the aforesaid
Oroposal or candidature by serving individual notices on them not less than
seven days before the meeting. [Section 257(1)]
8. But it shall not be necessary for the company
to serve individual notices upon the members as aforesaid if the company
advertises such candidature or intention not less than seven days before the
meeting in at least two newspapers circulating in the place where the
registered office of the company is located. [Section 257(1A) proviso]
9. Out of the two newspapers
one should be published in the English language in an English newspaper and
the other in the regional language of that place where the registered office is
situated in any regional newspaper, both the newspapers having wide circulation
in that place. [Section 257(1A),
Provisos].
10. Forward three copies of this notice also to the
Stock Exchange with which the shares of your company are listed. [Clause 31(c) of the Standard Listing
Agreement].
11. Hold the General Meeting and pass the Ordinary Resolution by
simple majority for appointment. [Section 189(1)].
12. If the Articles of Association of your company
require passing of a Special Resolution for such appointment, then pass a
Special Resolution by three fourths majority. [Section 189(2)].
13. Send three copies of the notice and a copy of the
proceedings of the General Meeting to the Stock Exchange with which the shares
of our company are listed. [Clause 31(c) and (d) of the Standard Listing
Agreement].
14. The person so appointed cannot act as director
unless he files his consent in Form No. 29 within thirty days of his
appointment as a director with the concerned Registrar of Companies , after
paying the requisite fee prescribed under Schedule X to the Companies Act,
1956, either in cash, or treasury challan. [Rule 22].
15. The aforesaid condition
shall not, however, be necessary in case where such a person immediately before
his appointment as director was already the Board appointed director or a
retiring director of the same company. [Section 264(2)].
16. See that such director notifies about his
appointment to other companies in which he is a director, managing director,
manager or secretary within twenty days. [Section 305].
17. Keep in mind that if such
director does not do so, he will be punishable with fine of upto Rs. 5,000/-.
[Section 305(1)]
18. File Form No. 321 in duplicate
within thirty days of his appointment [Section 303(2)] with the concerned
Registrar of Companies after paying the requisite fee' prescribed under
Schedule X to the Companies Act, 1956, either in cash, or treasury challan.
[section 303(2) read with Rule 22].
19. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company, and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/‑ for every day during which the default continues. [Section
303(3)]
20. Refund the deposit of five
hundred rupees mentioned in item 4 of this topic to the person who has given
the notice of candidature of a director only when he is appointed, in the
General Meeting and not otherwise.
21. If the resolution passed is
a Special Resolution, file the same with Explanatory Statement with the
concerned Registrar of Companies in Form No. 23 within thirty days [Section
192(4)(a)] after paying the requisite fee as prescribed under Schedule X to the
Companies Act, 1956, either in cash, or treasury challan. [Rule 22].
22. Please keep in mind that, if
default is made in complying with the aforesaid requirement, the company and
every officer of the company will be punishable with fine upto Rs. 200/for
every day during which the default continues. [Section 192(5)]
23. Make
necessary entries in the Register of Directors Particulars. [Section 303(1)] in
the Register of Directors Shareholdings, etc. [Section 307].
24. Please also keep in mind
that if default is made in complying with the requirements of sections 303(1)
and 307(1), the company and every officer of the company who is in default will
be punishable, with fine upto Rs. 500/- for every day during which the default
continues in case of contravention of section 303(1) and in case of
contravention of section 307(1) with fine upto Rs. 50,000/‑ and also with
a further fine of upto Rs. 200/- for every day during which the default
continues. [Section 303(3) read with section 307(8)]
25. If the case falls under any of the Topics from 64 to 69
follow the procedure as mentioned therein.
26. If this increases the number
of directors mentioned in the Articles of Association of the company, take
note of Topic 70.
27. Take note of the provisions
of Sections 253, 274, 275, 278 and 284 of the Companies Act, 1956, as regards
disqualifications, disabilities, etc., of the persons to be appointed as
directors.
28. Promptly notify to the Stock
Exchange with which the shares of your company are listed the change in the company's
directors. [Clause 30(a) of the Standard Listing Agreement]
29. If you are a listed company,
note
A. that the Board of directors of the
company shall have an optimum combination of executive and non‑executive
directors with not less than fifty percent of the board of directors comprising
of non‑executive directors. The number of independent directors would
depend whether the Chairman is executive or non‑executive. In case of a
non‑executive chairman, at least one‑third of board should comprise
of independent directors and in case of an executive chairman, at least half of
Board should comprise of independent directors.
Explanation.‑For the
purpose of this clause the expression 'independent directors' means directors
who apart from receiving director's remuneration, do not have any other
material pecuniary relationship ortransactions with the company, its promoters,
its management or its subsidiaries, which in judgement of the board may affect
independence of judgement of the director. Except in the case of government
companies, institutional directors on the boards of companies should be
considered as independent directors whether the institution is an investing
institution or a lending. institution.
B. that all pecuniary relationship or
transactions of the non‑executive directors viz‑a‑viz the
company should be disclosed in the Annual Report. [Clause 49(1) of the Standard
Listing Agreement].
C. that, in case of the appointment of a
new director or re‑appointment of a director the shareholders must be
provided with the following information:
(a) A brief resume of the director;
(b) Nature of his expertise in specific
functional areas; and
(c) Names of companies in which the person
also holds the directorship and the membership of Committees of the board.
[Clause 49. VI of Standard Listing Agreement]
30. Further
Note that if your company's paid‑up share capital is less than Rs. 50 lakhs but is or more than Rs. 10 lakhs,
your company is required to obtain a Compliance Certificate from a secretary in
whole‑time practice to be filed with the Registrar of Companies
mentioning therein that the registers have been kept and maintained as stated
in Annexure A of the certificate, the forms have been duly filed with the
Registrar of Companies stated in Annexure B of the Certificate and the
appointment of director has been duly made as per paragraphs 1, 2 and 14 of the
Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section 383‑A(1) proviso].
Topic 60
DO YOU WISH TO RE‑APPOINT A DIRECTOR ON HIS
RETIREMENT?
1. Find out which director will
retire by rotation pursuant to Section 256(1) that is whether the director in
question falls within one‑third of two‑third of the directors
liable to retire by rotation as per Section 255(1).
2. Ascertain
whether the retiring director is willing to be re‑appointed. Normally,
the consent can be taken for granted.
3. Call a Board Meeting by gi
ving notice to all the directors of the company as per Section 286 to approve
the Accounts for the previous year and to consider the notice convening the
Annual General Meeting.
4. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of Rs. 1000/‑.
[Section 286(2)]
5. Issue noticest in writing at
least twenty‑one days before the date of the General Meeting [Section
171(1)] to the shareholders and also send three copies of such notice to the
recognised Stock Exchange with which the shares of your company are listed.
[Clause 31(c) of the Standard Listing Agreement].
6. Propose
the appointment of the director as an Ordinary Resolutiont and have the
Ordinary Resolution passed by simple majority. [Section 189(1)].
7. Forward a copy of the
proceedings of the Annual General Meeting to the Stock Exchange with which the
shares of your company are listed. [Clause 31(d) of the Standard Listing
Agreement].
8. Keep in mind that if your
company's paid‑up share capital is less than Rs. 50 lakhs but is or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein that the appointment of director has been duly made
as per paragraph 14 of the Form of Compliance Certificate appended to the
Companies (Compliance Certificate) Rules, 2001. [Section 383A(1) proviso]
Topic 61
DO YOU WISH TO APPOINT AN ADDITIONAL DIRECTOR?
1. Consult the Articles of
Association of your company to see whether they authorise the Board of
Directors to appoint additional directors [Section 260]; if not, complete
proceedings to alter them accordingly, vide Topic 26.
2. In the case of a public
company or its subsidiary, see that the written consent of the person to be
appointed as an additional director is filed with the company. There is no
prescribed form for the same.
3. The aforesaid formality
shall, however, be not necessary where he, immediately before such appointment,
was already a director of the company. [Section 264(1)].
4. Convene a Board Meeting
after giving noticel to all directors of the company as per Section 286 and
pass a resolution~ and appoint the additional director to hold office only up
to the date of the next Annual General Meeting. [Section 260, First Proviso].
5. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
6. See that such director
notifies about his appointment to other companies in which he is a director,
managing director, manager or secretary within twenty days. [Section 305].
7. Please
also keep in mind that if such director does not do so, he will be punishable
with fine upto Rs. 5000/-. [Section 305(1)]
8. File
Form No. 29 within thirty days of his appointment with the concerned Registrar
of Companies after paying the requisite fee. [Section 264(2)] as prescribed
under Schedule X to the Companies Act, 1956, either in cash, or treasury
challan [Rule 22].
9. The aforesaid condition
shall not, however, be necessary in case where such a person immediately before
his appointment as director was already the Board appointed director or a
retiring director of the same company. [Section 264(2)].
10. File Form No. 32 in
duplicate within thirty days of his appointment with the concerned Registrar of
Companies [Section 303(2)] after paying the requisite fee prescribed under
Schedule X to the Companies Act, 1956, either in cash, or treasury challan.
[Rule 22].
11. Make
necessary entries in the Register of Directors and in the Register of Directors
shareholdings, etc. [Sections 303(1) & 307].
12. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/- for every day during which the default continues in case of
contravention of section 303(1) and in case of contravention of section 307(1)
with fine upto Rs. 50,000/- and also with a further fine of upto Rs. 200/- for
every day during which the default continues. [Section 303(3) read with Section
307(8)]
13. Follow the procedure as stated in items
25 to 30 of Topic 59.
14. See that the number of
directors including the additional director does not exceed the maximum
strength fixed for the Board by the Articles of Association of your company.
[Section 260, Second Proviso].
15. Note that co‑option of
additional directors will fail for lack of bona fides if it can be shown that
such an appointment was intended just to gain majority for the managing
director in other subsequent meetings of the Board of Directors and the
convening of the meeting at which the additional director was appointed and the
resolutions passed thereat are also found to be invalid. [Dr. T.M. Paul v. City
Hospital (P.) Ltd. & other, (1999) 35 CLA 164 (Ker)].
16. Further note that if your
company's paid‑up share capital is less than Rs. 50 lakhs but is or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein that the registers have been kept and maintained
as stated in Annexure A of the Certificate and the forms have been duly filed
with the Registrar of Companies as stated in Annexure B of the certificate and
the appointment of additional director has been duly made as per paragraphs 1,
2 and 14 of the Form of Compliance Certificate appended to the Companies
(Compliance Certificate) Rules, 2001. [Section 383‑A(1) proviso]
Topic 62
DO YOU WISH TO APPOINT AN ALTERNATE DIRECTOR?
1. Consult the Articles of
Association of your company to see whether they authorise the Board of directors
to appoint an alternate director. Otherwise, either complete proceedings to
alter them accordingly vide Topic 26 or pass a resolutiont in your company’s
General Meeting authorising the Board of directors of your company to make such
appointment. [Section 313(1)].
2. In case of a public company
or its subsidiary, see that the written consent of the person to be appointed
as an alternate director is filed with the company. There is no prescribed form
for the same.
3. The aforesaid formality
shall, however, be not necessary where he immediately before such appointment was already a director of
the company. [Section 264(1)].
4. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
pass a resolutiont and appoint the alternate director to act for the original
director during his absence for a period of not less than three months from the
State in which the meetings of the Board are ordinarily held. [Section 313(1)].
5. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
6. The said alternate director
will not hold office as such for a period longer than that permissible for the
original director in whose place he has been appointed and shall vacate office
if and when the original director returns to the State in which Board Meetings
are ordinarily held. [Section 313(2)].
7. See that the director
notifies about his appointment to other companies in which he is a director,
managing director, manager or secretary within twenty days. [Section 305]
8. Please
also keep in mind that. if such a director does not do so, he will be
punishable with fine upto Rs. 5000/‑. [Section 305(1)]
9. File Form No. 29 within
thirty days of his appointment with the concdmed Registrar of Companies
[Section 264(2)] after paying the requisite fee as prescribed under Schedule X
to the Companies Act, 1956, either in cash, or treasury challan. [Rule 22]
10. The aforesaid condition
shall not, however, be necessary in case where such a person immediately before
his appointment as director was already a director of the same company.
11. File Form No. 32 in
duplicate within thirty days of his appointment with the Registrar of
Companies, [Section 303(2)] after paying the requisite fee prescribed under
Schedule. X to the Companies Act, 1956, either in cash, or treasury challan.
[Rule 22]
12. Make
necessary entries in the Register of Directors and in the Register of Directors
Shareholdings. [Sections 303(1) & 307]
13. Further keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/‑ for every day during which the default continues in case
of contravention of section 303(1) and in case of contravention of section
307(1) with fine upto Rs. 50,000/‑ and also with a further fine of Rs.
200/- for every day during which the default continues. [Section 303(3) read
with section 307(8)]
14. Follow the procedure as
stated in item 27 of Topic 59.
15. If the office of the
original director is determined before that director returns and the alternate
director is continuing his office then the provision of automatic reappointment
of retiring directors in default of another appointment shall not apply to the
alternate director. [Section 313(3)]
16. Note that if your company's
paid‑up share capital is less than Rs. 50 lakhs but is equal to or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein that the registers have been kept and maintained
as stated in Annexure A of the Certificate, the forms have been duly filed with
the Registrar of Companies as stated in Annexure B of the certificate and the
appointment of alternate director has been duly made as per paragraphs 1, 2 and
14 of the Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section 383‑A(1) proviso]
6. For the text of the Rules,
see Appendix 18 and for check points thereunder see Guidance Note on Compliance
Certificate issued by ICSI the text of which is given in Appendix 42.
Topic 63
DO
YOU WISH TO HAVE A CASUAL VACANCY IN THE OFFICE OF A DIRECTOR TO BE FILLED UP
BY YOUR BOARD?
1. In the case of a public
company or its subsidiary, see that the wifffiten consent from the person who
is proposed to be appointed in the casual vacancy is filed with the company.
There is no prescribed form for the same.
2. The aforesaid formality,
however, shall not be necessary where he immediately before such appointment
was already a director of the company. [Section 264(1)].
3. Convene a Board Meeting
after giving notice to all the directors of the company as per section 286 and
pass a resolutiont and appoint the director to hold office up to the period up
to which the director in whose place he is appointed would have held office if
it had not been vacated. [Section 262(2)].
4. Please keep in mind that
every officer of the company whose dutyis to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑.[Section 286(2)]
5. In the case of a private
company, not being a subsidiary of a public company, the procedure of
appointment will be governed by its Articles of Association.
6. In the case of other
companies, the procedure as given in items 1, 2 and 3 above will apply in
respect of filling up of casual vacancies in the offices of those directors who
were originally appointed in General Meeting subject to any provisions in the
Articles of Association to the contrary, if any, in this regard. [Section 262(1)].
7. The person so appointed
cannot act as director unless he files his consent in Form No. 29 within thirty
days with the concerned Registrar of Companies after paying the requisite fee
prescribed under Schedule X to the Companies Act, 1956, either in cash, or
treasury challan. [Rule 22].
8. The aforesaid condition
shall not, however, be necessary in case where such a person immediately before
his appointment as director was already a director of the same company.
[Section 264(2)].
9. See that the director
notifies about his appointment to other companies in which he is a director,
managing director, manager or secretary within twenty days. [Section 305].
10. Please also keep in mind
that if such a director does not do so he will be punishable with fine upto Rs.
5000/-. [Section 305(1)]
11. File Form No. 32 in
duplicate within thirty days of his appointment with the concerned Registrar of
Companies [Section 303(2)], after paying the requisite fee prescribed under
Schedule X to the Companies Act, 1956, either in cash, or treasury challan.
[Rule 22].
12. Make necessary entries in
the Register of Directors and in the Register of Directors Shareholdings.
[Sections 303(1) & 307].
13. Further keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/- for every day during which the default continues in case of
contravention of section 303(1) and in case of contravention of section 307(1)
with fine upto Rs. 50,000/- and also with a further fine of Rs. 200/- for every
day during which the default continues. [Section 303(3) read with Section
307(8)]
14. Follow the procedure as stated in item
27 of Topic 59.
15. Note that if your company's
paid‑up share capital is less than Rs. 50 lakhs but is equal to or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein that the registers have been kept and maintained
as stated in Annexure A of the Certificate, the forms have been duly filed with
the Registrar of Companies as stated in Annexure B of the certificate and the
appointment of director has been duly made as per paragraphs 1, 2 and 14 of the
Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section 383‑A(1) proviso]
Topic 64
DO
YOU WISH TO APPOINT A DIRECTOR TO THE VACANCY CREATED BY REMOVAL OF A FORMER DIRECTOR?
1. While obtaining special
notice from a member for removing a director, vide Topic 71, obtain
simultaneously special notice also for appointing another person as a director
in his place. [Section 284(2) & (5)].
2. Inform
the members about the special notice having been received by the company, vide
Topic 151.
3. In the case of a public
company or its subsidiary, see that the written consent of the persons to be
appointed are filed with the company. There is no prescribed form for the same.
4. The aforesaid formality is
not necessary where he, immediately before such appointment, was already an
additional or alternate director of the company. [Section 264(1)].
5. Convene a Board Meeting
after giving notice$ to all the directors of the company as per Section 286 and
take the decision of such appointment and also to fix the date, time and place
of the General Meeting.
6. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
7. Issue
noticest in writing at least twenty‑one days before the date o the
General Meeting proposing the Ordinary Resolution with suitable Explanatory
Statement. [Section 171(1) read with section 173(2)].
8. Hold the General Meeting and pass an Ordinary Resolution by ordinary majority [Section 189(1)] appointing the director in place of the one removed to hold office until the date up to which his predecessor would have held office had he not been so removed. [Section 284(5)].
9. Forward three copies of the
notice and a copy of the proceedings of the General Meeting to the Stock
Exchange with which the shares of your company are listed. [Clause 31(c) and
(d) of the Standard Listing Agreement].
10. Alternatively, do not
appoint him in the general meeting but appoint him in a board meeting in the
manner in which a casual vacancy is filled up, vide Topic 63. [Section 284(6)].
11. Promptly notify to the Stock
Exchange with which the shares of your company are listed, the change in your
company's Board of directors. [Standard Listing Agreement].
12. The person so appointed
cannot act as director unless he files his consent in Form No. 29 within thirty
days with the concerned Registrar of Companies, after paying the requisite fee
prescribed under Schedule X to the Companies Act, 1956 either in cash or by way
of treasury challan. [Rule 22(1)]
13. The aforesaid condition
shall not, however, be necessary in case where such a person was immediately
before his appointment as director already a director of the same company
[Section 264(2)] that is if he is a director reappointed after retirement or an
additional or alternate director, or a director filling a casual vacancy or a
director named in the company's Articles of Association.
14. See that the director
notifies about his appointment to other companies in which he is a director,
managing director, manager or secretary within twenty days. [Section 305].
15. Please also keep in mind that
if such a director does not do so, he will be punishable with fine upto Rs.
5000/‑ [Section 305(1)]
16. File Form No. 32 in
duplicate within thirty days of his appointment with the concerned Registrar of
Companies [Section.303(2)], after paying the requisite fee prescribed under
Schedule X to the Companies Act, 1956, either in cash, or treasury challan.
[Rule 22].
17. Make necessary entries in
the Register of Directors and in the Register of Directors' Shareholdings.
[Sections 303(1) & 307].
18. Further keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/_6 for every day during which the default continues in case of
contravention of section 303(1) and in case of contravention of section 307(1)
with fine upto Rs. 50,000/- and also with a further fine of upto Rs. 200/- for
every day during which the default continues. [Section 303(3) read with Section
307(8)]
19. Follow the procedure as
stated in item 27 of Topic 59.
20. Note that if your company's
paid‑up share capital is less than Rs. 50 lakhs but is equal to or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein that the registers have been kept and maintained
as stated in Annexure A of the Certificate, the forms have been duly filed with
the Registrar of Companies as stated in Annexure B of the certificate and the
appointment of director has been duly made as per paragraphs 1, 2 and 14 of the
Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section 383‑A(1) proviso]
Topic 65
DO
YOU WISH TO APPOINT A DIRECTOR WHO WILL NOT BE LIABLE TO RETIRE BY ROTATION?
1. Consult the Articles of
Association of your company to see whether they authorise the appointment of
directors not liable to retire by rotation subject, of course, to Sections 255
and 256 (which provide that not less than two‑thirds of the total number
of directors are liable to retire by rotation and one‑third of these two‑thirds
must retire at every Annual General Meeting); if not, complete proceedings to
alter them accordingly vide Topic 26.
2. Convene a Board Meeting
after giving noticet to all the directors of the company as per Section 286 and
take the decision of such appointment, and also to fix the date, time and place
of the general meeting.
3. Please keep in mind that every
officer of the company whose duty is to give notice of the Board Meeting as
aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/- [Section 286(2)]
4. Central Government's
approval is not needed where the appointment or re‑appointment of
managerial personnel is made in terms of Section 269 read with Schedule XIII of
the Act.
5. See
that the number of non‑retiring directors does not exceed one‑third
of the total number of directors. [Section 255].
6. The ordinary resolution passed
at the general meeting should be subject to Central Government's approval if
such appointment is not made in terms of Section 269. [Circular No. 3 of 1989
File No. 3/19/88‑CL‑V, dated 13‑4‑1989].
7. Make an application to the
Central Government for the approval of the appointment of a director who will
not be liable to retire by rotation. [Section 268].
8. Before
making such an application give a general noticet to all the members
indicating the nature of the application.
9. Publish the notice at least
once in a newspaper in the principal language of the district in which the
registered office of the company is situated and circulating in that district
and at least once in English in an English newspaper circulating in that
district. [Section 640B].
10. The
application to the Central Government shall be in Form 25B and shall have the
following enclosures:
(i) Two certified true copies each of the
notices published in the newspapers together with a certificate by the company
as to the due publication thereof. [Section 640B].
(ii) A certified true copy of the Memorandum
and Articles of Association together with a certified true copy of the changed
Articles, where they have been altered.
(iii) A treasury challan or demand draft
evidencing the payment of requisite fee prescribed under the Companies (Fees on
Application) Rules, 1999.
(iv) A certified true copy of the resolution
of the Board or of the General Meeting, as the case may be.
11. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑, as the case may be, in cash and as prescribed by
the Companies (Fees on Application) Rules, 1999, by way of treasury challan
prepared in triplicate and paid into any of the specified branches of the
Punjab National Bank for credit.
12. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.e.f. 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
13. Two
copies of the challan will be given back to the depositor who should file the
original copy along with the documents mentioned in item 10.
14. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi, and the said demand draft should be
filed along with the documents mentioned in item 10.
15. Send a copy of the
application with all enclosures to the concerned Registrar of Companies .
[Rule 20A].
16. See that the written consent
of the proposed director is filed with the company. There is no prescribed form
for the same. This formality, however, shall not be necessary where he
inuptediately before such appointment was already a director of the company.
[Section 264(1)].
17. Appoint the person concerned
as a director not liable to retire by rotation either in the General Meeting or
in the Board Meeting as per the terms of Articles of Association.
18. If the Articles of
Association is silent on such matter then the first appointment of a director
not liable to retire by rotation should be through the General Meeting.
[Section 255(2)].
19. Issue noticesl at least
twenty‑one days before the date of the General Meeting proposing the
Ordinary Resolution with Suitable Explanatory Statement. [Section 171(1) read
with section 173(2)].
20. Hold
the General Meeting and pass the ordinary Resolutiont by simple majority for
appointment. [Section 189(1)].
21. Send three copies of the
notice and a copy of the proceedings of the General Meeting to the Stock
Exchange with which the shares of Y, our company are listed. [Clause 31(c) and
(d) of the Standard Listing Agreement ].
22. The person so appointed
cannot act as director unless he files his consent in Form No. 29 within thirty
6 days with the concerned Registrar of Companies, after paying the requisite
fee prescribed under Schedule X to the Companies Act, 1956, either in cash,
demand draft or treasury challan. [Rule 22].
23. The aforesaid condition
shall not, however, be necessary in case where such a person was immediately
before his appointment as director already a director of the same company.
[Section 264(2)].
24. See that the director
notifies about his appointment to other companies in which he is a director,
managing director, manager or secretary within twenty days. [Section 305].
25. Please keep in mind that if
such a director does not do so, he will be punishable with fine upto Rs. 5000/‑.
[Section 305(1)]
26. File Form No. 32 in
duplicate within thirty days of his appointment with the concerned Registrar of
Companies [Section 303(2)], after paying the requisite fee prescribed under
Schedule X to the Act, either in cash, demand draft or treasury challan. [Rule
22].
27. Make necessary entries in
the Register of Directors and in the Register of Directors Shareholdings.
[Sections 303(1) & 307].
28. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/‑ for every day during which the default continues in case of
contravention of section 303(1) and (2) and in case of contravention of section
307(1) with fine upto Rs. 50,000/‑ and also with a further fine of upto
Rs. 200/‑ for every day during which the default continues. [Section
303(3) read with Section 307(8)]
29. Follow the procedure as stated in item
27 of Topic 59.
30. If your company is a
Goverment company then Central Government's approval is not required for the
appointment of such a director.
31. If the appointment is as per
the terms of Section 269 read with Schedule XIII of thw Act, then ttle a return
in Form No. 25C within 90 days of such appointment.
32. If such a director also
becomes the managing director of the company then the Ordinary Resolution
should be filed in Form No. 23 within 30 days of its passing with the concerned
Registrar of Companies [Section 192(4)(c)] after paying the requisite fee
prescribed under Schedule X to the Act either in cash, demand draft or treasury
challan. [Rule 22].
33. Please
also keep in mind that if your company fails to comply with the aforesaid
filing, the company and every officer of the company who is in default will
punishable with fine of Rs. 200/‑ for every day during which the default
continues. [Section 192(5)]
34. If your
company is a Government Company then provisions of Section 268 will not apply
to your company.
35. Note that as per the
Citizen's Charter of the Department of Company Affairs, Schedule I, Serial No.
9, the application will be processed within 30 days. [No. 5/25/99‑CL‑V,‑
Press Note 9/99, dated 9‑8‑1999].
36. Please keep in mind that if
your company is a public company and is also having a paid‑up share
capital of Rs. 5 crores or more and has a director appointed by small
shareholders of your company, he need not have to retire by rotation and for
that no application has to be made to the Central Government. [Section 268 read
with Rule 4(6) of the Companies (Appointment of the Small Shareholders Director
Rules, 2001.]
37. Note that if your company's
paid‑up share capital is less than Rs. 50 lakhs but is equal to or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein that the registers have been kept and maintained
as stated in Annexure A of the Certificate, the forms have been duly filed with
the Registrar of Companies and the Central Government as stated in Annexure B
of the certificate and the appointment of director has been duly made as per
paragraphs 1, 2 and 14 of the Form of Compliance Certificate appended to the
Companies (Compliance Certificate) Rules, 2001. [Section 383A(1) proviso]
Topic 66
DO
YOU WISH TO APPOINT AN EXECUTIVE OF YOUR COMPANY ON THE BOARD OF DIRECTORS?
A. As a director (other than as a managing director or whole‑time
director) :
1. Convene
a Board Meeting by giving noticet to all the directors of the Company as per
Section 286 and consider the terms and conditions on which the Executive is to
be appointed as a director and fix up day, time, place and agenda for convening
a General Meeting for passing a Special Resolution in this regard. [Section
314].
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meetings
as aforesaid and who fails to do so will be punishable with fine of Rs. 1000/‑.
[Section 286(2)]
3. Ensure that a person, firm
or body corporate connected with a Director is not appointed to an office or
place of profit carrying a total monthly remuneration of Rs. 10,000/‑, or
more [Rule 10C(1)] without the consent of the company accorded by a Special
Resolution.
4. To do so obtain a
declaration from the person proposed to be appointed to any such office or
place of profit in writing to the effect that he is connected with a director
of the company in any one of the ways referred to in Section 314(1)(b) either
before or at the time of such appointment. [Section 314(2A)].
5. Issue noticesl in writing at
least twenty‑one days before the date of the General Meeting with suitable
Explanatory Statement. [Section 171(1) read with section 173(2)].
6. Hold the General Meeting and
pass the Special Resolutiont by three fourths majority. [Section 189(2)].
7. Forward promptly to the
Stock Exchange with which the shares of your company are listed, three copies
of the notice and a copy of the proceedings of the General Meeting. [Clause
31(c) and (d) of the Standard Listing Agreement].
8. Complete the formalities prescribed
for appointment of a Director vide Topic 59.
9. If the person so appointed
is a partner or relative of the director or manager of your company and he
draws as an executive of the company a total monthly remuneration of not less
than twenty thousand rupees [Rule 10C(2)], then in addition to the Special
Resolution obtain approval of the Central Government vide Topic 69.
10. File
with the concerned Registrar of Companies' the copy of Special Resolution with
Explanatory Statement in Form No. 23 within thirty days of passing of the
resolution [Section 192(4)(a)] after paying the requisite fee prescribed under
Schedule X to the Companies Act, 1956, either in cash, or treasury challan.
[Rule 22].
11. Please keep in mind that if
your company fails to comply with the aforesaid filing, the company and every
officer of the company who is in default will be punishable with fine upto Rs.
200/‑ for every day during which the default continues. [Section 192(5)]
12. Note that if your company's
paid‑up share capital is less than Rs. 50 lakhs but is equal to or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein that your company has obtained necessary approvals
from the Board of Directors and members of your company pursuant to section 314
and that the appointment of director has been duly made as per paragraphs 11
and 14 of the Form of Compliance Certificate appended to the Companies
(Compliance Certificate) Rules, 2001. [Section 383‑A(1) proviso]
B. As a wholetime
director/managing Director:
1. Same as above in A except
that section 314 will not apply by virtue of the exemption contained in sub‑section
(3) thereof.
2. But after the meeting
approves the appointment, unless such appointment is made in accordance with
the conditions specified in Parts I, II and III of Schedule XIII to the
Companies Act, 1956, apply to the Central Government in Form No. 25A. [Section
269(2)].
3. The aforesaid application
should be made after giving general noticet to members of your company
indicating the nature of the application to be made to the Central Government
by publishing the said notice at least once in the regional languages in a
newspaper of the principal language of the district in which the registered
office of the company is situated and circulating in that district and at least
once in English in an English newspaper circulating in that district. [Section
640 B].
4. Forward three copies of the
general notice published in the newspaper to the Stock Exchange with which the
shares of your company are listed. [Clause 31(e) of the Standard Listing
Agreement].
5. Forward to the Stock
Exchange with which the shares of your company are listed, a copy of the
proceedings of the General Meeting and three copies of the notice of the
General Meeting. [Clause 31(c) and (d) of the Standard Listing Agreement].
6. Make
the application in Form No. 25A within ninety days from the date of appointment
and enclose the following:
(a) A certified true copy of the existing
and proposed agreement in this regard, if any;
(b) A certified true copy of the resolution passed;
(c) A certified true copy of the audited
balance‑sheet and the profit and loss account of the company for the last
two years;
(d) Where the company has not yet commenced
any business or whose accounts have not been audited:
(i) a certified true copy of the
prospectus, if issued;
(ii) particulars of capital proposed;
(iii) amount of long‑term loans and
sources of such loans;
(iv) expected date of commencement of
production/business;
(v) estimated turnover and profit for the
next three years;
(vi) details of industrial licence, if any;
(vii) extent of foreign collaboration, if any;
(e) A certified true copy of the Memorandum
and Articles of Association revised up‑to‑date marking the relevant
Article or the authority under which the appointment is made;
(f) Certified true copies of the notices
published in the newspaper(s) certified by the company to have been duly
published;.
(g) A treasury challan or demand draft
evidencing the payment of requisite fee prescribed under the Companies (Fees
on Applications) Rules, 1999. Fees will be paid in double as the prescribed
Form consists of two approvals, one for appointment and payment of remuneration
and another for payment of minimum remuneration and therefore equivalent to
making two applications;
(h) Send a copy of the application along
with all the documents to the concerned Registrar of Cornpanies [Rule 20A].
7. If
the application fee is paid by way of treasury challan, then pay the requisite
fee of minimum Rs. 500/‑ and maximum of Rs. 2000/‑, as the case may
be, as prescribed by the Companies (Fees on Applications) Rules, 1999, by way
of treasury challan prepared in triplicate and paid into any of the specified
branches of the Punjab National Bank'o for credit.
8. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.e.f. 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
9. Two copies of the challan
will be given back to the depositor by the said branch of the bank and, the
original copy should be filed along with the documents mentioned in item 6.
10. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi, and the said demand draft should be
filed along with the documents mentioned in item 6.
11. Send to every member within
twenty‑one days of the passing of the Board resolution an abstract of the
terms of the contract. [Section 302(7)].
12. Please keep in mind that if
any, default is made in complying with the aforesaid requirement, the company
and every officer of the company who is in default will be punishable with fine
upto Rs. 10,000/‑. [Section 302(5)]
13. It is
usual to hold the General Meeting after the approval of the Central Government
is received.
14. If the General Meeting is
held earlier, the resolution should preferably provide for modification of the
terms by the Board of directors so that the need to hold another General
Meeting for adopting the modifications is avoided if the Central Government
varies the terms.
15. Where the Articles of
Association of the company do not have any provision for the appointment of a
Whole‑Time or Managing Director, it is necessary to alter the Articles of
Association accordingly vide Topic 26.
16. Note that as per the
Citizen's Charter of the Department of Company Affairs, the application to the
Central Government will be processed within 30 days. [No. 5/25/99‑CL‑V,
Press Note No. 9/99, dated 9‑8‑1999].
17. Further note that if your
company's paid‑up share capital is less than Rs. 50 lakhs but is equal to
or more than Rs. 10 lakhs, your company is required to obtain a Compliance
Certificate from a secretary in whole‑time practice to be filed with the
Registrar of Companies mentioning therein that the form as mentioned in
Annexure B of the certificate has been duly filed with the Central Govemment
and that the appointment of director has been duly made as per paragraph 14 of
the Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001.[Section 383‑A(1) proviso]
Topic 67
DO
YOU WISH TO APPLY FOR APPOINTMENT OF A GOVERNMENT DIRECTOR? (STEPS TO BE TAKEN
BY MIEMBERS)
1. Make your application to the
Company Law Board, Principal Bench, New Delhi, or to the Additional Principal
Bench Chennai as the case may be, by way of a petition to be prepared in Form
No. 1 in Annexure II to the Company Law Board, Regulations, 1991 and annex
thereto the following:
(i) Documentary and/or other evidence in
support of the statements made in the petition, as are reasonably open to the
petitioner.
(ii) Documentary evidence in proof of the
eligibility and status of the petitioner with the voting power held by each of
them.
(iii) Affidavit verifying the aforesaid petition.
(iv) Demand draft evidencing payment of the fee of Rs. 2,500/-.
(v) Certified true copy of the Memorandum
and Articles of Association of the company.
(vi) Certified true copy of the latest
audited balance‑sheet and profit and loss account with the Directors' and
Auditors' Reports.
(vii) Memorandum of Appearance in Form No. 5
of the Company Law Board Regulations, 1991 with a certified true copy of the
authorisation from the individual members who are applicants or the executed
Vakalatnama, as the case may be. If the member is a company then certified true
copy of the board resolution of that company.
(viii) Original acknowledgment of the concerned
Registrar of Companies.
2. The affidavit should be
prepared on a non‑judicial stamp paper of the requisite value prevalent
in the State and should be either notarised by the Notary Public or sworn
before the Oath Commissioner.
3. The said affidavit should be
drawn up in first person and shall state the full name, age, occupation and
complete residential address of the deponent and shall be signed by the
deponent. [Regulation 14(5) of the Company Law Board Regulations, 1991].
4. If the deponent is not
personally known to the person, before whom the affidavit is sworn, he shall be
identified by a person who is known to the person before whom the affidavit is
sworn. [Regulation 14(6) of the Company Law Board Regulations, 1991.
5. The said affidavit should
clearly and separately indicate the statements which are true to the knowledge
of the deponent, information received by the deponent belief of the deponent
and information based on legal advice. [Regulation 14(7) of the Company Law
Board Regulations, 1991].
6. The affidavit shall also
include the name and complete residential address of the person from whom the
information has been received by the deponent and whether the deponent believes
that information to be true or not, where any statement is stated to be true to
the information received by the deponent. [Regulation 14(8) of the Company Law
Board Regulations, 1991].
7. Please ensure that the
aforesaid petition is written, type‑written, cyclostyled or printed,
neatly and legible on one side of the substantial paper of foolscap size in
double space and separate sheets shall be stitched together and every page
consecutively numbered. Numbers and dates specified therein should be expressed
in figures as well as in words. [Regulation 11 of the Company Law Board
Regulations, 1991].
8. The petition should be
divided into separate paragraphs which should be numbered serially and shall
state thereon the matter and the name of the company to which it relates.
[Regulation 12 of the Company Law Board Regulations, 1991].
9. Please also ensure that the
aforesaid petition is presented by the petitioner in original and four extra
copies thereof in person or through authorised representative to the office of
the Bench or be sent by registered post with acknowledgement due addressed to
the Secretary or Bench officer of the Bench concemed, as the case may be.
[Regulation 14(1) of the Company Law Board Regulations, 1991].
10. Affix court fee stamps of
the requisite value 4 on the original petition, before submission.
11. Please furnish a copy of the
complete set of the petition to the concerned Registrar of Companies before
filing it with the Company Law Board and attach a photocopy of his endorsement
to the petition. [Regulation 14(3) of the Company Law Board Regulations, 1991].
12. Please furnish a copy of the
complete set of the petition to the Central Government, Department of Company
Affairs, Shastri Bhavan, 5th Floor, 'A' Wing, Dr. Rajendra Prasad Road, New
Delhi, before filing it with the' Company Law Board and attach a photocopy of
their endorsement to the petition. [Regulation 14(3), second proviso of the
Company Law Haard Regulations, 1991].
13. Pay the filing fee of Rs.
2,500/- as per Rule 3 read with Rules 4 and 5 of the Company Law Board (Fees on
Applications and Petitions) Rules, 1991, by way of demand draft drawn in favour
of Pay and Accounts Officer, Department of Company Affairs, New Delhi and
payable at New Delhi.
14. Ensure that the petition is
made by not less than one hundred members of the company or by members of the
company holding not less than one‑tenth of the total voting power therein.
[Section 408(1)].
15. Also ensure that the
petition explains the circumstances under which the appointment of Government
Directors is necessary to prevent the affairs of the Company being conducted
either in a manner which is oppressive to any members of the company or in a
manner which is prejudicial to the interests of the Company or to public
interest.
16. Also ensure that the
petition sets forth the name of the company, with its status, date of
incorporation, the address of its registered office, authorised capital, paid
up capital with division of different classes of shares and terms of issue, if
any, in the case of preference shares, main objects in relief for which the
company is formed, present business activities of the company and should also
set forth the grounds for making the petition and the nature of reliefs prayed
for. [Regulation 16 of the Company Law Board Regulations, 1991].
17. Ensure that the petition is
based upon a single cause of action and seeks one or more reliefs provided that
they are consequential to one another. [Regulation 20 of the Company Law Board
Regulations, 1991].
18. Actually the concerned Bench
Office is required to serve a copy of a complete set of the petition on all the
respondents but in actual practice to save time, the petitioner should serve a
copy of the complete set of the petition on all the respondents by registered
A/D post.
19. After such service the
petitioner should file an affidavit attaching original postal receipts to the
effect that a copy of the complete set of petition has been duly served on all
the respondents.
Topic 68
1. Consult the Articles of
Association of your company to see whether they authorise the appointment of
directors by proportional representation; otherwise, complete proceedings to
alter them accordingly vide Topic 26.
2. State in the Articles of
Association that not less than two‑thirds of the total number of your directors
shall be appointed according to the principle of proportional representation,
whether by a single transferable vote or by a system of cumulative voting or
otherwise, the appointment being made once in every three years and casual
vacancies being filled as usual under Section 262.
3. The precise mode of such
proportional representation has to be spelt out in the Articles of Association.
[Section 265].
4. In cumulative voting system
several directors are voted for at the same time by casting votes for the total
number of shares multiplied by the number of directors to be elected i.e. each
shareholder for one share has as many votes as there are directors to be
elected.
5. A shareholder in respect to
each share can give all votes due from him to a single candidate or distribute
it between two or more candidates. Thus the majority group can cast all their
votes in favour of one candidate and secure his election.
6. There are two main systems
of proportional voting which provides for representation also of minority viz.,
(i) cumulative voting, and (ii) voting by single transferable vote. These are
explained below.
7. Cumulative voting is the
system by which several directors are to be voted for at the same time by
casting votes for the whole number of shares held multiplied by the number of
directors to be elected for a candidate or distributing the votes among a part
of the vacancies to be filled instead of straight voting or casting votes
according to the number of shares held, for all the vacancies.
8. Thus a minority is allowed
to secure representation on the Board of directors.
9. Without a cumulative voting
a bare majority of the shareholders may elect the full Board and thus the
control of the company could be exercised without having representatives of the
minority on the Baord.
Examples : Suppose there are 1000 shares, 800 shares from a majority group and
the other 200 shares from a minority group. The shareholders have to elect five
directors to the Board. A, B, C, D and E are nominated by the majority group
and F is nominated by the minority group. Since five directors have to be
elected, each shareholder has five votes for holding one share. Shareholders,
in respect of each share, can give all the five votes to a single candidate or
distribute it to two or more candidates.
Total votes castwill be:
1000 x 5 = 5000
Total number of vacancies :
5
Each candidate receiving =
5000/5 = 1000 votes
or more shall be deemed to
be elected to the Board although those who get less may also be considered
elected. Therefore, the result will depend on the cumulative voting secured.
The minority group can cast
all their votes in favour of F. F will get 200 x 5 = 1000 votes.
A, B, C, D and E will
together get 800 x 5 = 4000 votes. Average votes for each of the candidates in
this group will be 4000/5 = 800 votes. Each and everybody among A, B, C, D and
E cannot get more than 800 votes. If any of them gets single additional vote
i.e. 801 votes, another of them will get less than 801 votes. If the minority concentrates
on one candidate, he is very likely to get elected unless the minority is
negligible.
10. Under the system of voting
by single transferable vote all the names of the candidates for election are
entered in the ballot paper. Each voter has only one vote.
11. Each voter has to indicate
his first, second, third preferences and so on by marking in the ballot paper
for the candidates.
12. The above mentioned
preferences will be equal to the number of candidates to be elected.
13. In the first instance, only
the first preferences are counted and any candidate who receives the number of
votes called "quota" is declared elected.
14. The quota is calculated as
follows :
The quota is = Total number
of votes polled / (Number of candidates to be elected + 1) + 1
15. If there are four candidates
to be elected as directors and the votes polled are 500, then the quota is
500/(4+1) +1 = 101
16. If four candidates get 101
votes each they will get elected. They will together get 404 votes. The balance
is 96 votes. Even if all their remaining votes go to a single candidate, he
cannot be elected.
17. Every
person who can obtain the support of 101 votes among 500 votes will surely get
elected as a director.
18. If a person obtains more
than the quota number of votes, the surplus votes in his favour will be
transferred to other candidates in order of preference.
19. The surplus vote are added
to the first preference votes obtained by the candidates until some of them
also get the quota number of votes.
20. The aforesaid process is
repeated until all the required number of candidates for the directorate
obtain the quota number of votes.
21. When the candidates do not
get the quota number of votes even after distribution of surplus votes the
candidate who has obtained the least number of first preference is eliminated.
22. The
second preferences on these ballot papers are transferred to other candidates
against whose names they are marked.
23. Thus the aforesaid process
is repeated until sufficient number of candidates get the quota number of
votes.
Example : Let it be assumed that five directors are to be elected and seven
candidates A, B, C, D, E, F and G are contesting.
The first preferences are
counted
A gets 200 votes
B gets 95 votes
C gets 93 votes
D gets 74 votes
E gets 60 votes
F gets 58 votes
G gets 20 votes
Total 600 votes. The quota is 600/(5+1) + 1 = 101
A gets more than the quota
and he is declared elected, and if A has surplus 99 votes in his favour, his
papers are scrutinised and the second preference found in them are counted.
It is found that second preference on D are= 25
on E are = 5
on F are = 10
on G are = 60
Total : 200
Surplus first preference of A
to be transferred to D 25/(200) x 99 = 12
to be transferred to E 5/(200) x 99 = 2
to be transferred to F 10/(200) x 99 = 4
to be transferred to G 160/(200) x 99 = 2
Total votes of A transferred = 99
Now the poll is :-
A = 200
B = 95
C = 93
D = 74 +
12 = 86
E = 60 +
2 = 62
F = 58 +
4 = 62
G = 20 +
81 = 101
G gets the quota and he is
deemed to be elected. There is no surplus vote in favour of G. F who has got
the lowest first preference is eliminated. His 58 papers are scrutinised and
the second preference in favour of
B = 6
do D = 16
do E = 30
C= 6
58
After transferring 2nd
preference in F's papers to the appropriate candidate the poll is :-
A = 200
B = 95 + 6 = 101
C = 93 + 3 = 96
D = 86 + 16= 102
E = 62 + 30 = 92
F = 62
G = 101
B and D get elected having
obtained the quota. Now E who has got the next lowest first preference of 60 is
eliminated. His ballot papers are scrutinised and it is found that there are 27
second preferences on C. These are ordered C's votes. Now C's votes will be 99
+ 27 = 126
The final poll will be :-
A = 200
B = 101
C = 126
D = 102
E = 62 (eliminated)
F = 62 (eliminated)
G = 101
A, B, C, D and G are elected
as directors.
24. By these systems, a majority
of 51 % or more of the shareholders cannot monopolise all the directorships. A
minority of respectable strength is enabled to elect their representatives and
while the minority is given representation, the majority still elects directors
proportionate to their strength.
25. File Form No. 29 within
thirty days of his appointment with the concerned Registrar of CompanieS [Section
264(2)] after paying the requisite fee as prescribed under Schedule X to the
Companies Act, 1956, either in cash, or treasury challan. [Rule 22].
26. File Form No. 32 in
duplicate within thirty days of his appointment with the concerned Registrar of
Companies [Section 303(2)], after paying the requisite fee prescribed under
Schedule X to the Companies Act, 1956, either in cash, or treasury challan.
[Rule 22].
27. Make necessary entries in
the Register of Directors and in the Register of Directors Shareholdings.
[Sections 303(1) & 307].
28. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/- for every day during which the default continues in case of
contravention of section 303(1) and in case of contravention of section 307(1)
with fine upto Rs. 50,000/- and also with a further fine of Rs. 200/- for
everyday during which the default continues. [Section 303(3) read with Section
307(8)]
29. Follow the procedure as
stated in item 27 of Topic 59.
30. Note that if your company's
paid‑up share capital is less than Rs. 50 lakhs but is equal to or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein that the registers have been kept and maintained
as stated in Annexure A of the Certificate, the forms have been duly filed with
the Registrar of Companies as stated in Annexure B of the certificate and the
appointment of director has been duly made as per paragraphs 1, 2 and 14 of the
Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section 383‑A(1) proviso]
Topic 69
1. Take a declaration in
writing from the individual, being proposed to be appointed to any office or
place of profit carrying a total monthly remuneration of ten thousand rupees or
more [Rule 10C(1)] stating that he is connected with a director in any of the
ways mentioned in Section 314(1)(b). [Section 314(2A)].
2. Convene a Board Meeting
after giving noticet to all the directors of the company as per Section 286 to
consider the proposal and to fix up the date, time, place and agenda for the
General Meeting to pass Special Resolutiont taking the consent for holding the
office or place of profit. [Section 314].
3. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meetings
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
4. Such consent can also be
accorded in the General Meeting held for the first time after the holding of
such office or place of profit where a relative or a partner of a director has
been appointed to such office or place of profit without the knowledge of the
director concerned.
5. The aforesaid consent can be
obtained within three months of such appointment even if the first General
Meeting has been held earlier than that. [Section 314(1), First and Second
Provisos].
6. However, if the persons
mentioned in Section 314(1B)(a) are appointed to any office or place of profit
carrying total monthly remuneration of not less than Rs. 20,000/‑ [Rule
10C(2)], prior consent of the company in General Meeting by Special Resolution
and approval of the Ceiftral Government is necessary.
7. No such declaration need be
obtained and no such Special Resolution need be passed if the individual is a
relative of a director who does not hold any office or place of profit in the
company. [A.R. Sundarsanam v. Madras Pursawalkam Hindu Janopakara Saswatha
Nidhi Ltd., (1985) 57 Com Cases 776 (Mad)].
8. Apply to the Central
Government in Form No. 24W along with the following documents or papers:
(a) A certified true copy of the Special Resolution passed by
the Company.
(b) A treasury challan or demand draft
evidencing the payment of the requisite fee, prescribed under the Companies
(Fees on Applications) Rules, 1999.
(c) A certified true copy of annual
accounts together with directors' and auditors' reports for the last three
financial years.
(d) A copy of the rules of the company
relating to terms and conditions in regard to perquisites as applicable to its
employees. If there are no rules, a certificate from the secretary or a
director of the company to the effect that similar perks at the same rates are
being paid to other employees of the company in the equivalent grade.
9. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs.
500/‑ and maximum of Rs. 2000/‑, as the case may be, and as
prescribed by the Companies (Fees on Applications) Rules, 1999, by way of
treasury challan prepared in triplicate and paid by cash into any of the specified
branches of the Punjab National Bank for credit.
10. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w. ef 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
11. Two copies of the challan
will be given back to the depositors by the said branch of the bank and the
original copy should be filed with the form mentioned in item 8.
12. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi, and the said demand draft should be
filed along with the form mentioned in item 8.
13. Deliver a copy of the
application along with a copy of all enclosures to the concerned Registrar of
Companies.
14. No such application need be
made to the Central Government if the incumbent is not in receipt of
remuneration month by month, every month. [Ravinder Kumar Sangal v. Auto Lamps
Ltd., (1984) 55 Comp Cas 742 (Delhi)].
15. Issue noticest in writing at
least twenty‑one days before the general meeting along [Section 17(1)
read with section 173(2)] with suitable Explanatory Statement.
16. Hold the General Meeting,
and pass the Special Resolution by three fourths majority. [Section 189(2)].
17. Forward three copies of
notices issued to the shareholders and a copy of the proceedings of the General
Meeting to the Stock Exchange with which the shares of your company are listed.
[Clause 31(c) and (d) of the Standard Listing Agreement].
18. File a copy of the Special
Resolution with Explanatory Statement in Form No. 23 with the concerned
Registrar of Companies within thirty days of the passing [Section 192] after
paying the requisite fee prescribed under Schedule X to the Act, either in
cash, demand draft or treasury challan. [Rule 22].
19. Please keep in mind that, if
default is made in complying with the aforesaid requirement, the company and
every officer of the company who is in default will be punishable with fine of
upto Rs. 200/‑ for every day during the default continues. [Section
192(5)]
20. If a relative of a managing
director or a whole‑time director is appointed to an office or place of
profit carrying a monthly remuneration of Rs. 20,000/‑ or more, then
approval of the Central Government will not be necessary under Section 314 (1B)
since such approval is already taken under Sections 198, 269, 310 or 311 but
the special resolution required under Section 314 (1B) will have to be passed
by the company. [Vide Circular No. 14/75 [8/12/314 (1B)]/75‑CL‑V,
dated 5‑6‑1975].
Note.‑ If a director receives
remuneration for performing functions of his office, the provisions of Section
314 will not apply. In case the director, his relative, partner or other
individual, firm or company [as mentioned in Section 314(1)] is appointed to
such an office or place, then the said provisions will only apply if the total
monthly remuneration amounts to rupees five hundred or more in each case. Where
office or place of profit is held by a director on the company's subsidiary,
then also these provisions will not apply if the remuneration so received is
paid over to the company or its holding company. The provisions of Section 314
also do not apply in respect of appointment of a managing director, manager,
banker or trustee for the debenture holders of the company. Any remuneration
for services rendered by any managing or whole‑time director for services
rendered by him in any other capacity shall not be included in his remuneration
calculated as per provisions of Section 198. [Section 309(1), Proviso].
21. Note that as per the
Citizen's Charter of the Department of Company Affairs, Schedule I Serial No.
10, the application will be processed within 30 days. [No. 5/25/99‑CL‑V;
Press Note No. 9/99, dated 9‑8‑1999]
22. Further note that if your
company's paid‑up share capital is less than Rs. 50 lakhs but is equal to
or more than Rs. 10 lakhs, your company is required to obtain a Compliance
Certificate from a secretary in whole‑time practice to be filed with the
Registrar of Companies mentioning therein that the forms have been duly filed
with the Registrar of Companies and Central Government as stated in Annexure B
of the certificate and the company has obtained necessary approvals from the
Board of Directors and members of your company pursuant to section 314 and that
the appointment of director has been duly made as per paragraphs 2, 11 and 14
of the Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section 383‑A (1) proviso]
Topic 70
DO
YOU WISH TO INCREASE OR REDUCE THE NUMBER OF DIRECTORS ON YOUR COMPANY'S BOARD?
A. In case a reduction in
number is proposed :
1. In the case of a private
company or a deemed public company [section 43A], the number of directors
should not go below two, and in the case of any other public company three.
[Section 252].
2. The Articles of Association
may provide for an even higher number of minimum directors, and in that case,
the number cannot go below that unless the Articles are altered accordingly
vide Topic 26.
3. Obtain resignation from the
director to vacate office or pass an ordinary resolution to reduce the number
under Section 258 or remove him under section 284 as per Topic 71, and keep in
mind that the resignation takes effect from the date of resignation. [S. B.
Shankar v. Amman Steel Corporation, (2002) 110 Comp. Cas. 50].
4. In any case, file with the
concerned Registrar of Companies the particulars regarding change in the number
of directors in Form No. 32 in duplicate within thirty days of such change
[Section 303] after paying the requisite fee prescribed under Schedule X to the
Companies Act, 1956, either in cash, or treasury challan. [Rule 22].
5. Please keep in mind that if
default is made in complying with the aforesaid requirement, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/- for every day during which the default continues. [Section
303(3)]
7. If the shares of your company
are listed on a recognised Stock Exchange, promptly notify to it such change in
the number of directors. [Clause 30(a) of the Standard Listing Agreement].
8. See that the director
notifies the change so occurred to other companies in which he is a director,
managing director, manager or secretary within twenty days. [Section 305].
9. Please keep in mind that if
the said director does not notify as above, he will be punishable with fine
upto Rs. 5000/- [Section 305(1)]
B. In case an increase in
number is proposed
1. The number of directors
cannot be increased exceeding the limit fixed by the Articles of Association
unless they are suitably altered.
2. In the case of a public
company, or any of its subsidiary company, an increase in the number of directors
cannot be made even by altering Articles of Association except with the
previous approval of the Central Government:
(a) in the case of a company which was in
existence on the 21st day of July, 1951, an increase which was within the
permissible maximum under its Articles of Association as in force on that date;
and
(b) in the case of a company which comes or
may come into existence after that date, an increase which is within the
permissible maximum under its Articles of Association as first registered if
the increase is beyond the number of twelve [Section 259].
3. For the increase within the
number twelve make only the necessary changes in the Articles of Association by
Special Resolutions, if any, vide Topic 26.
4. Government directors
appointed under Section 408 and nominee directors of certain financial
institutions governed by special statutes which dispense with the requirements
of these provisions of the Act, will not be taken into account while counting
the number of directors for the above purpose.
5. In case the number of
directors is exceeded beyond twelve irrespective of whether the said number is
fixed by the Articles of Association of the company or not:
(i) Convene a Board Meeting after giving
noticet to all the directors of the company as per Section 286 to consider the
increase in number beyond the limits stated in item I above, and fix up the
date, time, place and agenda for convening a General Meeting to (a) pass an
Ordinary Resolution, and (b) appoint director as per Topic 59 both effective
from the date of approval of the Central Government;
(ii) Issue notices in writing at least
twenty‑one days before the date of the General Meeting proposing the
Ordinary Resolution with suitable Explanatory Statements. [Section 171(1) read
with section 173(2)];
(iii) Forward three copies of such notice to
the Stock Exchange with which the shares of your company are listed. [Clause
31(c) of the Standard Listing Agreement];
(iv) Hold the General Meeting and pass the
Ordinary Resolution by simple majority. [Section 189(1)];
(v) Forward a copy of the proceedings of
the General Meeting to the Stock Exchange with which the shares of your company
are listed. [Clause 31(d), of the Standard Listing Agreement];
(vi) Where an application is to be made to the Central Government:
(a) Give general noticet to all the members
indicating the nature of the application to be made to the Central Government;
(b) Publish the aforesaid notice at least
once in a newspaper of the principal language of the district in which the
registered office of the company is situate and circulating in that district
and at least once in English language in an English newspaper circulating in
that district. [Section 640B];
(c) Make the application in Form No. 24 and
enclose the following:
(i) Certified true copies of each of the
Memorandum and Articles of Association and of those which were in force on 21st
July, 1951 or, if the company came into existence later on, then on the date of
its registration;
(ii) A certified true copy of the Ordinary
Resolution passed and the full proceedings of the General Meeting with full
details about votings in a separate sheet;
(iii) A treasury challan or demand draft
evidencing the payment of requisite fee prescribed under the Companies (Fees on
Applications) Rules, 1999;
(iv) Certified true copies of the notices
together with a certificate by the company as to the due publication thereof,
(d) Forward three copies of the general
notice published in the newspapers to the Stock Exchange with which the shares
of your company are listed. [Clause 31(e) of the Standard Listing Agreement];
(e) Send a copy of the application along
with a copy of all the documents enclosed to the application to the concerned
Registrar of Companies. [Rule 20A].
6. The appointment of the
director made in the General Meeting stated above will be effective only on
receipt of the approval of the Central Government.
7. Alternatively, the
appointment of the director may not be made at that meeting; but on receipt of
the Government's approval, it may be made in the Board Meeting as an additional
director under Section 260 as per Topic 61.
8. The aforesaid procedure is
to be followed only by public companies and their subsidiaries.
9. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑and
maximum Rs. 2000/‑, as the case may be, and as prescribed by the
Companies (Fees on Applications) Rules, 1999, by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National Bank 12 for credit.
10. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as amended
vide GSR 251(E), dated 21‑6‑1996 (w.e.f. 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
11. Two copies of the challan
will be given back to the depositor by the said branch of he bank and the
original copy should be filed with the documents mentioned in item 5(vi)(c).
12. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi, and the said demand draft should be
filed along with the documents mentioned in item 5(vi)(c).
13. In case the number of
directors exceed twelve and the Articles of Association of the company have
fixed the number at less than twelve,
(i) Follow the steps given in item 5 of
this Topic except that instead of Ordinary Resolution, there will be a Special
Resolution to alter the Articles of Association to first have the number of
directors more than twelve.
(ii) File the Special Resolution with Explanatory
Statement with the concerned Registrar of Companies in Form No. 23 within
thirty days of its passing [Section 192] after paying the requisite fee
prescribed under Schedule X to the Companies Act, 1956, either in cash, or
treasury challan. [Rule 22].
14. Please keep in mind that if
the Special Resolution is not filed as aforesaid, the company and every officer
of the company who is in default will be punishable with fine upto Rs. 200/‑
for every day during which the default continues. [Section 192(5)]
15. In any other case:-
Either appoint the director
as an additional director under Section 260 as per Topic 61 or appoint him in
the General Meeting as per Topic 59 and complete the respective formalities as
stated in the said respective Topics.
16. If your company is a
Government company then provisions of Section 259 will not apply to your
company.
17. Note that, as per the
Citizen's Charter of the Department of Company Affairs, Schedule I Serial No.
8, the application made to the Central Government is to be processed within 30
days. [No. 5/25/99‑CL‑V,‑ Press Note No. 9/99, dated 9‑8‑1999.
Topic 71
DO YOU WISH TO REMOVE A DIRECTOR?
1. Note that the following
directors cannot be removed unless otherwise specifically stipulated in the
terms of their appointment. [Section 284(1) and proviso and sub‑section
(7)(b)] :
(a) In the case of a private company, a
director who is holding office for life on the 1st day of April,
1952;
(b) All the directors, where the company
has adopted the proportional representation method of appointment of directors
in accordance with Section 265;
(c) A director appointed by the Central Government under Section
408;
(d) A director appointed by the Industrial
Finance Corporation or a State Financial Corporation [Section 25(2)] under the
Industrial Finance Corporation Act, 1948 and Section 27(2) of the State
Financial Corporation Act, 1951] or any other financial institution where the
Act constituting such financial institution makes a similar provision.
2. For removing any other
director, obtain a special noticet from a member proposing an Ordinary
Resolution for removing the director. [Section 284(2)]. Such special notice
must comply with the provisions of Section 188 of the Act. Pedley v. Inland
Waterways Association Ltd., (1977) 1 All ER 209 (Ch D).
3. Forthwith send a copy of the
special noticet to the director concerned.[Section 284(3)].
4. Issue noticesf of the
General Meeting in writing at least twenty‑one days before the meeting
stating about the special notice and proposing the Ordinary. Resolution for
removal. [Section 171(1) read with section 173(2)].
5. State in the notice the fact
about representations, if any, made by the director concerned and enclose the
copy of the representation.
6. If the representation could
not be sent along with the notice for the reason of having been received late,
send the same later on. [Section 204(4)].
7. Forward three copies of the
notice to the recognised Stock Exchange with which the shares of your company
are listed. [Clause 31(c) of the Standard Listing Agreement].
8. Hold the General Meeting and
pass the Ordinary Resolutiont by simple majority. [Section 189(1)].
9. If the representations were
not sent to the members earlier for the reason that they were received too late
or because of default of the company, read out the same in the meeting if the
director concerned so requires.
10. The director concerned has
also the right to be heard at the meeting. But in certain circumstances, the
Court can exempt the company from sending or reading out the representations.
[Section 284(4)].
11. Forward a copy of the
proceedings of the General Meeting to the Stock Exchange with which the shares
of your company are listed. [Clause 31(d) of the Standard Listing Agreement].
12. Notify the change promptly
to the Stock Exchange with which the shares of your company are listed. [Clause
30(a) of the Standard Listing Agreement].
13. File Form No. 32 in
duplicate with the concerned Registrar of Companie within thirty days of the
change in the appointment of directors to notify the change [Section 303(2)]
after paying the requisite fee prescribed under Schedule X to the Act, either
in cash, or treasury challan. [Rule 22].
14. Please keep in mind that if
default is made in complying with the aforesaid requirement, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/- for every day during which the default continues. [Section
303(3)]
15. See that the director so
removed notifies the change to the other companies in which he is a director,
managing director, manager, or secretary within twenty days. [Section 305].
16. Please also keep in mind
that if the said director does not do so, he will be punishable with fine upto
Rs. 5000/‑. [Section 305(1)]
17. A director can be removed in
any other manner also if there is any specific condition in that regard in the
terms of his appointment. [Section 284].
18. Note that if a person
functions as a director when he knows that the office of director held by him
has become vacant, he will be punishable with fine upto Rs. 5000/‑ for
each day on which he so functions as a director. [Section 283(1)(k) & (2A)]
Topic 72
DO
YOU HAVE A CASE WHERE THE OFFICE OF A DIRECTOR STANDS VACATED UNDER SECTION 283?
1. Verify the instances in
which the office of a director becomes vacated as mentioned in Section
283(1)(a) to (1).
2. If your company is a private
company which is not a subsidiary of a public company, it may by its Articles
of Association provide that the office of director shall be vacated on any
grounds in addition to those specified in section 283(1)(a) to (b). [Section
283(3)]
3. Convene a Board Meeting
after giving noticel to all the directors of the company as per Section 286 and
pass the necessary Resolution directing the Secretary of the company to inform
the concerned director.
4. Please keep in mind that if
default is made in complying with the aforesaid requirement, the company and
every officer of the company who is in default will be punishable with fine of
upto Rs. 1000/‑. [Section 286(2)]
5. Inform the director
immediately about his vacating the office, by way of a letter.
6. See that the office of the
director gets vacated not before thirty days from the date of the adjudication,
sentence or order, if the office of the director becomes liable to be vacated
for any of the following three reasons, namely:
(i) the director is adjudged an insolvent;
(ii) the director is convicted by a court
and sentenced to imprisonment for 6 months or more;
(iii) the director becomes disqualified by an
order of the Court restraining fraudulent persons from managing companies under
Section 203. [Section 283(2)(a)].
7. If in any of the above three
cases an appeal is preferred, then see that the office of the director gets
vacated not before seven days from the date on which such appeal is disposed
of. [Section 283(2)(b)].
8. If in any of these cases a
further appeal is preferred within the aforesaid seven days, then see that such
vacation takes place after such further appeal is disposed of. [Section
283(2)(c)].
9. Please also keep in mind
that if a person functions as a director when he knows that the office of
director held by him has become vacant on account of any of the
disqualifications specified in item 1 above, he will be punishable with fine
upto Rs. 5000/- for each day on which he so functions as a director. [Section
283(2A)]
10. File Form No. 32 in
duplicate with the concerned Registrar of Companies within thirty days of the
vacation of office of the director to notify the change [Section 303(2)] after
paying the requisite fee as prescribed under Schedule X to the Companies Act,
1956, either in cash, or treasury challan. [Rule 22].
11. Further keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company will be punishable with fine upto Rs. 500/- for
every day during which the default continues. [Section 303(3)]
Topic 73
DO
YOU WISH TO APPOINT A DIRECTOR OF YOUR SUBSIDIARY COMPANY?
1. Check first whether your
subsidiary company is a board controlled subsidiary under Section 4(1)(a) or a
shareholding subsidiary under Section 4(1)(b).
2. If your subsidiary is a
board controlled subsidiary then do the following:
(a) Check whether the Articles of
Association of the subsidiary provide for the appointment of the majority of
directors of that subsidiary and also remove. them.
(b) If so, then convene a Board Meeting of
the subsidiary after giving noticesl to the directors of the subsidiary as per
Section 286 and pass a resolution appointing directors of your subsidiary.
3. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meetings
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
4. Once such directors are
appointed they will hold office at the discretion of the Board of Directors of
the holding company and need not face election or appointment by the general
meeting of the subsidiary. Neither they will be required to retire by rotation.
5. Within thirty days of such
appointment your subsidiary company should file Form No. 32 in duplicate
[section 303(2)] and Form No. 29 [section 264] with the concerned Registrar of
Companies after paying the requisite fee prescribed under Schedule X to the Act
either in cash, or treasury challan (Rule 22).
6. Please also keep in mind
that if default is made in complying with filing Form No. 32. as aforesaid, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 500/- for every day during which the default continues. [Section 303(3)]
7. If the shares of your
subsidiary company are listed on a recognised Stock Exchange, promptly notify
to it the appointment of directors [Clause 30(a) of the Standard Listing
Agreement].
8. See that directors so
appointed in the subsidiary notify such appointment to other companies in which
they are directors, within twenty days. [Section 305]
9. Please keep in mind that if
the directors so appointed do not notify their appointments as above, the
directors will be punishable with fine upto Rs. 5000/-. [Section 305(1)]
10. Note that if your subsidiary
company's paid‑up share capital is less than Rs. 50 lakhs but is equal to
or more than Rs. 10 lakhs, then it is required to obtain a Compliance
Certificate from a secretary in whole‑time practice to be filed with the
Registrar of Companies mentioning therein that the forms as stated in Annexure
B of the certificate have been duly filed with the Registrar of Companies and
that the appointment of director has been duly made as per paragraphs 2 and 14
of the Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001 .[Section 383‑A (1) proviso]
Topic 74
1. Check
first whether your company is a public company or not and if so whether the
paid‑up share capital of your company is Rs. 5 crores or more or not.
2. Further check whether your
company has 1,000 or more small shareholders holding shares of nominal value of
Rs. 20,000/‑ or less in your public company.
3. If aforesaid is the case
then your company may have at least one director of your company elected by the
said small shareholders in the manner as given in the Companies (Appointment of
the Small Shareholder Director) rules, 2001.
4. Keep in mind that while
appointing a small shareholder's director, your company may either act sue motu and elect such a director from
amongst small shareholders or upon the notice of small shareholders who are not
less than one tenth of the total small shareholders and have proposed the name
of a person who shall also be a small shareholder of your company. [Rule 4(1)
of the aforesaid Rules.]
5. Where small shareholders of
your company are proposing a person's name to be elected as a director, see
that the notice of their intention for such proposal is left with your company
at least 14 days before the meeting under the signature of at least 100 small
shareholders specifying name, address, shares held and folio number and
particulars of shares with differential rights to dividend and voting if any of
the person whose name is being proposed for the post of director and of other
small shareholders proposing such person as a candidate for the post of
director of small shareholder (Rule 4(2) of the said Rules]
6. Also see that the person
whose name has been proposed for the post of small shareholders' director has
signed and filed with your company his consent in writing to act as a director.
[Rule 4(3) of the said Rules]
7. Ensure,
that the person proposed to be appointed as small shareholders' director of
your company does not suffer from the following disqualifications:
(i) he has been found to be of unsound
mind by a court of competent jurisdiction and the finding is in force;
(ii) he is an undischarged insolvent;
(iii) he has applied to be adjudicated as an
insolvent and his application is pending;
(iv) he has been convicted by a court of any
offence involving moral turpitude and sentenced in respect thereof imprisonment
for not less than 6 months and a period of 5 years has not elapsed from the
date of expiry of the sentence;
(v) he has not paid any call in respect of
shares of the company held by him, whether alone or jointly with others and 6
months have elapsed from the last day fixed for the payment of the call; or
(vi) an order disqualifying him for
appointment as director has been passed by a Court in pursuance of section 203
and is in force unless the leave of the Court has been obtained for his
appointment in pursuance of that section. [Rule 5 of the aforesaid Rules].
8. Convene a Board Meeting
after giving notices to the directors of your company as per section 286 to
take the decision of the requirement of the aforesaid appointment and also to
fix the date time and place of the General Meeting where such a director will
be elected by the small directors.
9. If your public company is a
listed company then ensure that the resolution to appoint a nominee director
under section 252(1) proviso is passed only through postal ballot. [Section
192A read with Rule 4(h) of the Companies (Passing of the Resolution by Postal
Ballot) Rules, 2001.]
10. Please keep in mind that
every officer of the company whose duty is to give notice of Board Meetings as
aforesaid and who fails to do so will be punishable with fine upto Rs. 1000/‑.
[Section 286(2)]
11. See that the number of
directors including the director elected by the small shareholders of our
company does not exceed the number of directors fixed by your company's
Articles of Association.
12. Issue notices at least
twenty‑one days before the date of the General Meeting proposing the
Ordinary Resolution with suitable Explanatory Statement. [Section 17(1) read
with Section 173(2)]
13. Hold
the General Meeting and have the director elected by simple majority by the small shareholders of your company, by
passing an Ordinary Resolution.
14. Ensure that the tenure of
small shareholders' director is for a maximum period of years subject to meeting the requirement of the provisions of the
Companies Act, 1956 except that he need not have to retire by rotation. [Rule
4(6) of the aforesaid Rules.
15. Keep in mind that the same
person if so desired by small shareholders, may be elected again for another
period of 3 years on the expiry of his tenure. [Rule 4(7) of the aforesaid
Rules].
16. Send three copies of the
notice and a copy of the proceedings of the General Meeting to the Stock
Exchange with which the shares of our company are listed. [Clause 31(c) and (d)
of the Standard Listing Agreement ]
17. The person so appointed
cannot act as a director unless he files his consent in Form No. 29 within
thirty days with the concerned Registrar of Companies after paying the
requisite fee prescribed under Schedule X of the Companies Act, 1956, either in
cash, demand draft or treasury challan. [Rule 22].
18. See that the director so
appointed notified about his appointment to other companies in which he is a
director, managing director or manager or secretary within twenty days.
[Section 305]
19. Please
keep in mind that if such director does not do so, he will be punishable with
fine upto Rs. 5000/‑. [Section 305(1)]
20. File
Form No. 32 in duplicate within thirty days of his appointment with the
concerned Registrar of Companies [Section 303(2)], after paying the requisite
fee prescribed under Schedule X to the Act, either in cash, demand draft or
treasury challan. [Rule 22]
21. Make necessary entries in
the Register of Directors and in the Register of Directors Shareholdings.
[Section 303(1) & 307]
22. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/- for every day during which the default continues in case of
contravention of section 303(1) and (2) and in case of contravention of section
307(1) with fine upto Rs. 50,000/‑ and also with a further fine of Rs.
200/‑ for every day during which the default continues. [Section 303(3)
read with section 307(8)]
23. Take note of the provisions
of Sections 253, 274, 275, 278 and 284 of the Companies Act, 1956 as regards
disqualifications, disabilities, etc. of the person appointed as a director.
24. Promptly notify to the Stock
Exchange with which the shares of your company are listed the change in the
company's directors. [Section 30(a) of the Standard Listing Agreement].
25. Treat the small
shareholders' director appointed as above as director for all other purposes
except for appointment as whole‑time director or managing director [Rule
4(8) of the aforesaid Rules]
26. Ensure that the small
shareholders' director appointed as above does not hold office at the same time
as small shareholders' director in more than two companies. [Rule 7 of the
aforesaid Rules.]
27. Note that if your company's
paid‑up share capital is less than Rs. 50 lakhs but is equal to or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein that the registers have been kept and maintained
as stated in Annexure A to the certificate, the forms have been duly filed with
the Registrar of Companies stated in Annexure B of the Certificate and the
appointment of director has been duly made as per paragraphs 1, 2 and 14 of the
Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section 383‑A(1) proviso].
Topic 75
DO
YOU HAVE A CASE WHERE THE OFFICE OF A SMALL SHAREHOLDERS'DIRECTOR STANDS VACATED?
1. Verify the instances in
which the office of a small shareholders' director becomes vacated as mentioned
under Rule 6 (i) to (viii) of the Companies (Appointment of the Small
Shareholders Director) Rules,2001.
2. Convene a Board Meeting by
giving notice to all the directors of your company as per section 286 and pass the necessary Resolutiont directing
the Secretary of the your company to inform the concerned director.
3. Please keep in mind that
every offi6er of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine up to Rs.
1000/-. [Section 286(2)].
4. Inform the director
immediately about his vacating the office, by way of a letter.
5. File with the concerned
Registrar of Companies in Form No. 32 in duplicate within thirty days of the
vacation of office of the small shareholders' director to notify the
change,[Section 303(2)], after paying the requisite fee prescribed under
Schedule X of the Companies Act, 1956, either by cash, demand draft or treasury
challan. [Rule 22].
6. Further keep in mind that if
default is made in complying with the afore said requirement, the company and
every officer of the company who is in default will be punishable with fine of
up to Rs.500/‑ for every day during which the default continues. [Section
303(2)].
7. Note the provisions of Rule
6 of the Companies (Appointment of the Small Shareholders' Director) Rules,2001
for vacation of office of a small shareholders' director as given below :
(i) if such person so elected, as director
of small shareholders ceases to be a small shareholder' director on and from
such date on which he ceased to be a small shareholder;
(ii) if he has been rendered disqualified by
virtue of Rule 5(i) as being found to be of unsound mind by a Court of
competent jurisdiction and the finding is in force;
(iii) if he fails to pay any call in respect
of shares of the company held by him, whether alone or jointly with others,
within six months from the last date fixed for the payment of the call;
(iv) if he absents himself from three
consecutive meetings of the Board of Directors, or from all meetings of the
Board of Directors for a continuous period of three months, whichever is
longer, without obtaining leave of absence from the Board of Directors;
(v) if he is a partner of any private
company of which he is a director, accepts a loan, or any guarantee or security
for a loan, from the company in contravention of section 295;
(vi) if he acts in contravention of section 299;
(vii) if he becomes disqualified by an order of Court under section
203;
(viii) if he is removed in pursuance of section
284.
B.
Managing/Whole‑time Director
(Topic 76 to Topic 80)
Topic 76
DO
YOU WISH TO APPOINT ONE OF YOUR DIRECTORS TO BE A MANAGING DIRECTOR?
1. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
approve the draft agreement or the ten‑ns and conditions on which the
managing director is proposed to be appointed and appoint the managing director
and fix up the date, time, place and agenda of the General Meeting to pass an
Ordinary Resolution or a Special Resolution for the appointment.
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meetings
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/-. [Section 286(2)]
3. Note that if your company
has a director appointed by your company's small shareholders', he cannot be
appointed as a managing director. [Section 252(1) proviso read with Rule 4(8)
of the Companies (Appointment of Small Shareholders' Director) Rules,2001.]
4. Comply with the provisions
of Sections 297 and 299 regarding disclosure of interest of directors etc. and
in the case of public companies and their subsidiaries and holding companies
those of Section 300 also regarding abstaining from discussion and voting etc.
5. Please also keep in mind
that if default is made in complying with the provisions of sections 299 and
300, every director who fails to comply will be punishable with fine upto Rs.
50,000/‑. [Sections 299(1) & 300(4)]
6. In the case of public
companies and their subsidiaries, where the proposed managing director is
already a managing director in another company, a Board resolutiont will be
necessary, of which prior notice should have been given and all the directors
present at the meeting should have consented to that resolution. [Section 316].
7. Issue noticest in writing of
the general meeting at least twenty‑one days before the date of the
meeting along with the relevant explanatory statement. [Section 171(1) read
with section 173(2)].
8. Hold the General Meeting and
appoint the managing director by passing an Ordinary Resolution by simple
majority. [Section 189(1)].
9. If the managing director to
be appointed has not attained the age of 25 years but has attained the age of
majority or if the proposed managing director has attained the age of 70 years
then have the appointment approved by passing a Special Resolution without the
approval of the Central Government. [Schedule XIII, Part I(C)].
10. If special resolution is to
be passed then hold the General Meeting and appoint the managing director by
passing a Special Resolution by three fourths majority. [Section 189(2)].
11. In the case of a public‑
company, or its subsidiary, the appointment in the Board Meeting and the
General Meeting will be effective only on approval of the Central Government if
the appointment is not made in accordance with the conditions specified in
Parts I, Il and III of Schedule XIII to the Act.
12. Where application is to be
made to the Central Government as aforesaid, then do the following:
(a) Give general noticet to all the members
indicating the nature of the application to be made to the Central Government;
(b) Publish the notice at least once in the
regional language in a newspaper of the principal language of the district in
which the registered office of the company is situated and circulating in that
district and at least once in English in an English newspaper circulating in
that district. [Section 640B];
(c) Forward three copies of the general
notice published in, the newspaper to the Stock Exchange if the shares of your
company are listed on a recognised Stock Exchange. [Clause 31(e) of the
Standard Listing Agreement];
(d) Forward to the Stock Exchange with
which the shares of your company are listed, a copy of the proceedings of the
General Meeting and three copies of the notice of the General Meeting. [Clause
31(c) and (d) of the Standard Listing Agreement];
(e) Make the application in Form No. 25A
within ninety days from the date of appointment and enclose the following:
(i) A certified true copy of the existing
and proposed agreement in this regard, if any;
(ii) A certified true copy of the Board as
well as the General Meeting resolution;
(iii) A certified true copy of the audited
balance‑sheet and the profit and loss account for the last two years;
(iv) Where the company has not yet commenced
any business or whose accounts have not been audited :
(a) a certified true copy of the
Prospectus, if issued;
(b) particulars of capital proposed;
(c) amount of long term loans and sources
of such loans;
(d) expected date of commencement of
production/business;
(e) estimated turnover and profit for the
next 3 years;
(f) details of industrial licence, if any;
(g) extent of foreign collaboration, if
any;
(v) A certified true copy of the Memorandum
and Articles of Association revised up‑to‑date marking the relevant
article or the authority under which the appointment is made;
(vi) Certified true copies of the notices
published in the newspaper(s) certified by the company as to the due
publication thereof;
(vii) A treasury challan or demand draft
evidencing payment of requisite fee prescribed under the Companies (Fees on
Applications) Rules, 1999.
13. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs.
500/‑ and maximum Rs. 2000/‑, as the case may be, and as prescribed
by the Companies (Fees on Applications) Rules, 1999 by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National Bank for credit.
14. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.ef 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
15. Two copies of the treasury
challan will be given back to the depositor and original copy should be filed
along with documents mentioned in item 12(e).
16. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable avany bank located in New Delhi, and the said demand draft should be
filed along with the documents mentioned in item 12(e).
17. Send a copy of the
application along with all the documents to the concerned Registrar of
Companies. [Rule 20A]
18. Send an abstract of the ten‑ns
of the contract to all the members within twenty‑one days from the date
of entering into the contract and a memorandum clearly specifying the interest
or concern of any other director in the contract, if any. [Section 302(2)]
19. Forward promptly to the
Stock Exchange with which the shares of your company are listed, three copies
of the above abstract and memorandum. [Clause 31 (c) of the Standard Listing
Agreement]
20. File a certified true copy
of the resolution of the Board or agreement executed and the Ordinary
Resolution appointing the managing director with the concerned Registrar of
Companies in Form No. 23 within thirty days of the passing or making thereof
[Section 192], after paying the requisite fee as prescribed under Schedule X to
the Companies Act, 1956, either in cash, or treasury challan. [Rule 22]
21. Please keep in mind that if
default is made, in complying with the afore said requirement, the company and
every officer of the company who is in default will be punishable with fine of
upto Rs. 200/‑ for every day during which the default continues. [Section
192(5)]
22. See that the managing
director files a consent in writing with the company to act as a director after
appointment if he was not a director before his appointment.
23. File Form No. 29 with the
concerned Registrar of Companies within thirty days of his appointment [Section
264(2)], after paying the requisite
fee as prescribed under Schedule X to the Companies Act, 1956, either in cash,
or treasury challan. [Rule 22]. This will be done if such a person is not a
director in the same company before his appointment.
24. File Form No. 32 in
duplicate with concerned Registrar of Companies within thirty days of the
appointment [Section 303], after
paying the requisite fee as prescribed under Schedule X to the Companies Act, 1956, either in cash, postal order, or
treasury challan. [Rule 22]
25. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company, will be punishable with fine upto Rs. 500/- for
every day during which the default continues. [Section 303(3)]
26. See that the managing
director notifies about his appointment to other companies in which he is a
director, managing director, manager or secretary within twenty days. [Section
305]
27. Please keep in mind that if
the managing director fails to do so, he will be punishable with fine upto Rs.
5000/‑. [Section 305(1)]
28. Make necessary entries in
the Register of Directors' Particulars etc. [Section 303(1)]
29. Please
also keep in mind that if the required entries as aforesaid are not made, the
company and every officer of the company who is in default will be punishable
with fine of upto Rs. 500/‑ for every day during which the default
continues. [Section 303(3)]
30. Take note of the provisions
of Sections 197A, 267, 316 and 317 regarding disqualifications, disabilities
etc. of a person to be appointed as a managing director.
31. Where application to the
Central Government is not required to be made, then file within ninety days
from the date of appointment in the General Meeting a return in Form No. 25C
with the concerned Registrar of Companies [Section 269(2)], after paying the
requisite fee as prescribed under Schedule X to the Companies Act, 1956, either in cash, or treasury
challan, along with a certificate either from the auditor or secretary of the
company or a secretary in the whole time practice stating that the requirement
of Schedule XIII have been complied with.
32. If your company is either a
public company or a private company which is a subsidiary of a public company
and also if your company's paid‑up share capital is rupees five crores or
more, then appointment of either a managihg director or a whole‑time
director or a manager is a must. [Section 269(1) read with Rule 10A(1)].
33. If your company is a
Government Company then provisions of Section 269 will not apply to your
company.
34. Note that as per the
Citizen's Charter of the Department of Company Affairs, Schedule I Serial no.
10, the application if made to the Central Government will be processed within
30 days. [No. 5/25/99‑CL‑V, Press Note no. 9/99, dated 9‑8‑1999].
35. Further note that if the
application of a person as a managing director is not approved by the Central
Government, he should vacate office as such on the date on which the decision
of the Central Government is communicated to the compa,n and if he omits or
fails to do so he will be punishable with fine upto 5000/‑ for every day
during which he omits or fails to vacate such office. [Section 269(6)]
36. Note also that if your
company's paid‑up share capital is less than Rs. 50 lakhs but is equal to
or more than Rs. 10 lakhs, your company is required to obtain a Compliance
Certificate from a secretary in whole‑time practice to be filed with the
Registrar of Companies mentioning therein that the registers have been kept and
maintained as stated in Annexure A of the certificate, the forms have been duly
filed with the Registrar of Companies and the Central Government as stated in
Annexure B of the Certificate and the appointment of director has been duly
made and that the said appointment has been made in compliance with the provisions
of section 269 read with Schedule XIII and the approval of the Central
Government has been obtained in respect of such appointment not being in terms
of Schedule XIII as per paragraphs 1, 2, 14 and 15 of the Form of Compliance
Certificate appended to the Companies (Compliance Certificate) Rules, 2001.
[Section 383‑A(1) proviso].
Topic 77
1. See whether your company is
a public company or a subsidiary of a public company. A public company which
has become so under Section 43A [(Provisions of section 43A except sub‑section
(2A) have been made inapplicable by the Companies (Amendment) Act, 2000 vide
sub‑section (11) of that section] is also included.
2. Keep in mind that a director
appointed by small shareholders' of a public company having a paid‑up
share capital of Rs. 5 crores or more although is a director but he is not to
retire by rotation and the provisions of section 268 will not apply to him.
[Rule 4(6) of the Companies (Appointment of Small Shareholders' Director)
Rules, 2001.
3. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
take the decision for the amendment to be made in any provision relating to the
appointment or re‑appointment.
4. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meetings
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/-. [Section 286(2)]
5. Also decide in the aforesaid
board meeting the contents of the proposed amendment.
6. Publish a general notice to
the members indicating the nature of the application proposed to be made to the
Central Government regarding such amendment of the provision of appointment or
re‑appointment. [Section 640B(2)(a)].
7. The general notice aforesaid
should be published at least once in a regional newspaper in the principal
language of the district in which the registered office of the company is
situate and circulating in that district and at least once in English in an
English newspaper circulating in that district. [Section 640B(2)(b)].
8. Prepare a draft of proposed
amendment.
9. Hold a Board Meeting after
giving notice to all the directors of the company as per Section 286 or a
General Meeting, after giving notice in writing at least twenty‑one days
before the date of the meeting [Section 171(1)] whichever is required to be
held as per your company's Articles of Association, and place and approve the
amendment prepared as above by a resolution.
10. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meetings
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
11. Send an abstract of the
terms of variation to every member of the company within twenty‑one days
of passing of the resolution making such variation in the terms of appointment.
[Section 302]
12. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 10,000/-. [Section 302(5)]
13. If the amendment is to be
made in any provision relating to the appointment or re‑appointment of
any managing, whole‑time or non rotational director contained in the
company's Memorandum or Articles of Association, then alter the Memorandum or
the Articles of Association as per Topic
26 or Topic 29.
14. If the amendment leads to a
variation in any existing provision of the Articles of Association, then the
approval of the Central Government is needed in addition to Special Resolution.
But if the amendment leads to an insertion of a new provision in the Articles,
no approval of the Central Government is needed [Clarification vide Letter No.
1(12)/CL‑I/ 65, dated 4‑11‑1965].
15. Apply to the Central
Government in Form No. 25W along with
the following documents:
(i) Receipted treasury challan or demand
draft in token of payment of the requisite fees, as prescribed by the Companies
(Fees on Applications) Rules, 1999;
(ii) Seven certified true copies of the
resolution passed in the Board or General Meeting for approving the amended
provision;
(iii) A certified true copy of each document
in which the amendments is proposed to be made, both original and revised
(Articles, Memorandum, Agreement, Board or General Meeting resolution);
(iv) Two certified true copies of each notice
(English and vernacular) published under Section 640B.
16. Forward a copy of the
application together with a copy of each of the documents enclosed in the above
application, simultaneously to the concerned Registrar of Companiess. [Rule
20A].
17. File a certified copy of the
Board or General Meeting resolution along with the copy of the Explanatory
Statement in Form No. 23 with the concerned Registrar of Companies within
thirty days after the passing thereof [Section 19,2(4)(c)], after paying the
requisite fee as prescribed under Schedule X to the Companies Act, 1956, either
in cash, or treasury challan. [Rule 22].
18. Please also keep in mind
that if default is made in complying with the aforesaid requirements, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 200/- for every day during which the default continues.
[Section 192(5)]
19. Pay the requisite fees
pursuant to the Companies (Fees on Applications) Rules, 1999, on the
application to be made to the Central Government for such amendment, either through
treasury challan or by demand draft.
20. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑, as the case may be and as prescribed by the
Companies (Fees on Applications) Rules, 1999, by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National Bank for credit.
21. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.ef 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
22. Two copies of the treasury
challan will be given back to the depositor and the original copy should be
filed along with documents mentioned in item 15.
23. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi, and the said demand draft should be
filed along with the documents mentioned in item
15.
24. If your
company is a Government Company then provisions of Section 268 will not apply
to your company.
25. Note that as per the
Citizen's Charter of the Department of Company Affairs, Schedule I, Serial No.
9, the said application of the Central Government will be processed within 30
days. [No. 5/25/99‑CL‑V, Press Note No. 9/99, dated 9‑8‑1999]
Topic 78
1. Verify whether your company
is a public company or its subsidiary. Deemed public companies [Section 43A]
are also subjected to the restrictions. [Section 316(2)].
2. Convene a Board Meeting
after giving noticet to all the directors of the company as per Section 286 and
approve the appointment or employment of the company's managing director who is
a managing director or manager of another company, whether public or private,
in the Board Meeting with the consent of all the directors of the company
present at that Meeting and pass a resolution. [Section 316(2), Proviso].
3. Please keep in mind that
every officer of the company whose duty is to give notice of the, Board
Meetings as aforesaid and who fails to do so will be punishable with fine of
Rs. 1000/-. [Section 286(2)]
4. Before holding the Board
Meeting as aforesaid, give specific noticet of the Board Meeting to all the
directors of the company then in India along with resolution to be moved
thereat regarding the above appointment. [Section 316(2), Proviso].
5. Verify whether there is an
order of the Central Government permitting any person to be appointed as a
managing director of more than two companies for the purpose of proper working
of these companies as a single unit under a common managing director.
6. In the aforesaid case, no
Board approval is necessary [Section 316(4)].
7. Also verify if the Central
Government has imposed a restriction on the Managing Director not to be
appointed as a Managing Director of any other company, under Section 637A of
the Act.
8. Further verify whether the
managing director to be appointed in more than one company draws remuneration
from one or both companies the total of which does not exceed the higher
maximum limit admissible as per Part II Section I and Section II of Schedule
XIII from any one of those companies. [Schedule XIII, Part I (d) read with Part
II, Section III].
9. If there is no such order
and you want to obtain an order from the Central Government to permit
appointment of a managing director in more than two companies, then do the
following :-
(a) Prepare an applicationj in the forrn of
a representation stating the facts and reasons on the basis of which you are
asking for the order;
(b) Attach the following documents along with it :
(i) A certified true copy of the latest
audited balance‑sheet of each of the companies;
(ii) A certified true copy of the Memorandum
and Articles of Association of each of the companies;
(iii) Certified true copies of the Board's
resolution of each of the companies;
(iv) A detailed bio‑data of the
managing director to be appointed as such;
(v) Treasury challan or demand draft
evidencing payment of requisite fee as per the Companies (Fees on Application)
Rules, 1999.
10. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑, as the case may be, and as prescribed by the Companies
(Fees on Application) Rules, 1999, by way of treasury challan prepared in
triplicate and paid in cash into any of the specified branches of the Punjab
National Bank for credit.
11. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.e.f 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
12. Two copies of the treasury
challan will be given back to the depositor and the original copy should be
filed along with documents mentioned in item
9(b).
13. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi, and the said demand draft should be
filed along with the documents mentioned in item 8(b).
14. If your company is a
Government Company then provisions of Section 316 will not apply to your
company.
15. Note that under sub‑section
(4) of section 316 the Central Government may by order permit any person to be
appointed as a managing director of more than two companies if it is satisfied
that it is necessary that companies should for their proper working function as
a single unit and have a common managing director.
16. Note that if your company's
paid‑up share capital is less than Rs. 50 lakhs but is equal to or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein inter alia that
the appointment of managing director has been duly made in compliance with the
provisions of section 269 read with Schedule XIII to the Act and approval of
the Central Government has been obtained in respect of such appointment not
being in terms of Schedule XIII as per paragraphs 14 and 15 of the Form of
Compliance Certificate appended to the Companies (Compliance Certificate)
Rules, 2001. [Section 383A (1) proviso].
Topic 79
DO
YOU WISH TO APPOINT ONE OF YOUR DIRECTORS TO BE A WHOLE‑TIME DIRECTOR?
1. See that the Articles of
Association of the company provide for the office of the whole‑time
director and if not, then such provision has to be made by passing a resolution
of the General Meeting.
2. Call a Board Meeting after
giving noticet to all the directors of the company as per Section 286 and
consider the terms and conditions on which the whole‑time director is to
be appointed.
3. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meetings
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
4. Please also keep in mind
that if your company has a director appointed by your company's small
shareholders under section 252(1) proviso, he cannot be appointed by your
company as a whole‑time director. [Rule 4(8) of the Companies
(Appointment of the Small Shareholders' Director) Rules, 2001.
5. In the same Board Meeting
also fix up the date, time, place and agefida for calling a General Meeting.
6. If the whole‑time
director to be appointed has not attained the age of 25 years but has attained
the age of majority or if the proposed whole‑time director has attained
the age of 70 years then have the appointment approved by passing a Special
Resolution without the approval of the Central Government. [Schedule XIII, part
I(C)].
7. In the case of a public
company or its subsidiary, the appointment has to be in the General Meeting and
approval of the Central Government will be necessary unless such appointment is
made in accordance with the conditions specified in Parts I, II and III of
Schedule XIII to the Act. [Section
269(2)].
8. Issue notices at least
twenty‑one days before the date of the meeting with suitable Explanatory
Statement and hold the General Meeting, and pass the Ordinary Resolutionj or a
Special Resolution as the case may be. [Section 171(1) read with sections
173(2) and 189(1)].
9. Forward three copies of the
notice and a copy of the proceedings of the General Meeting to the Stock
Exchange with which the shares of your company are listed. [Clause 31(c) and
(d) of the Standard Listing Agreement
10. Where an application is to
be made to the Central Government, as afore said, adopt the same procedure as
described under item 12 of Topic 76.
11. If your company is a
Government company, then Government approval is not required for his
appointment.
12. If any executive of the
company is elected to the Board as a director, then he also becomes a deemed
whole‑time director by the Explanation given in Section 269 and thus he will also be appointed
in the manner mentioned above provided he is in the whole‑time employment
of the company as a director and he continues to be in the whole‑time
employment as a director and not as an executive.
13. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑, as the case may be, and as prescribed by the
Companies (Fees of Applications) Rules, 1999, by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National Bank for credit.
14. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.e.f 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
15. Two copies of the treasury
challan will be given back to the depositor and the original copy should be
filed with documents enclosed to the application to the Central Government.
16. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi" and
payable at any bank located in New Delhi, and the said demand draft should be
filed with the documents enclosed to the application to the Central Government.
17. Send a copy of the
application along with all the documents to the concerned Registrar of
Companies. [Rule 20A].
18. Send an abstract of the
terms of the contract to all the members within twenty‑one days from the
date of entering into the contract and a memorandum clearly specifying the
interest or concern of any other director in the contract, if any. [Section
302(2)]
19. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 10,000/‑.[Section 302(5)]
20. Forward promptly to the
Stock Exchange with which the shares of your company are listed, three copies
of the above abstract and memorandum. [Clause 31 (c) of the Standard Listing
Agreement]
21. File a certified true copy
of the resolution of the Board or agreement executed and the Ordinary
Resolution appointing the whole‑time director with the concerned
Registrar of Companies in Form No. 23 within thirty da s of the passing or
making thereof, [Section 192], after paying the requisite fee as prescribed
under Schedule X to the Companies Act, 1956, either in cash, or treasury
challan. [Rule 22]
22. Please also keep in mind
that if default is made in complying with the aforesaid requirements, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 200/‑ for every day during which the default
continues. [Section 192(5)]
23. See that the whole‑time
director files a consent in writing with the company to act as a director after
appointment if he was not a director before his appointment.
24. File Form No. 291 with the
concerned Registrar of Companies within thirty days of his appointment [Section
264(2)], after paying the requisite fee as prescribed under Schedule X to the
Companies Act, 1956, either in cash, or treasury challan. [Rule 22]. This will be done if such a person is not a director in
the same company before his appointment as a whole‑time director.
25. File
Form No. 32 in duplicate with the concerned Registrar of Companies within
thirty days of the appointment [Section 303], after paying the requisite fee
as prescribed under Schedule X to the Companies Act, 1956, either in cash,
postal order, or treasury challan. [Rule
22]
26. Further keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/- for every day during which the default continues. [Section 303(3)]
27. See that the whole‑time
director notifies about his appointment to other companies in which he is a
director, managing director, manager or secretary within twenty days. [Section 305]
28. Further keep in mind that if
the whole‑time director fails to do so, he will be punishable with fine
upto Rs. 5000/‑. [Section 305(1)]
29. Make
necessary entries in the Register of Directors' Particulars etc. [Section 303(1)]
30. Further keep in mind that if
the required entries as aforesaid are not made, the company and every officer
of the company who is in default will be punishable with fine upto Rs. 500/-
for every day during which the default continues. [Section 303(3)]
31. If your company is either a
public company or a private company which is a subsidiary of a public company
and also if your company's paid‑up share capital is rupees five crores or
more, then appointment of either a managing director or a whole‑time
director or a manager is a must. [Section 269(1) read with Rule 10A(1)].
32. Note that if your company's
paid‑up share capital is less than Rs. 50 lakhs but is equal to or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein inter alia that
the registers have been kept and maintained as stated in Annexure A of the
Certificate, the forms have been duly filed with the Registrar of Companies as
stated in Annexure B of the Certificate and the appointment of director has
been duly made and also the appointment of whole time director has been made in
compliance with the provisions of section 269
read with Schedule XIII to the Act and approval of Central Government has
been obtained in respect of the said appointment not being in terms of Schedule
XIII as per paragraphs 1, 2, 14 and
15 of the Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001.
Topic 80
DO
YOU WISH TO REMOVE A MANAGING[WHOLE‑TIME DIRECTOR BEFORE THE EXPIRY OF
HIS TERM OF OFFICE?
1. Please Note.‑ That
appointment of a Managing or a Whole‑time Director is a contract between
him and the company. Removal in breach of contract will entail payment of
compensation under Section 318. Nevertheless, only the appointing authority can
remove him. Thus he can be removed by the Board or the General Meeting
depending on whether the Board or the General Meeting had appointed him.
2. As there is no specific provision
for the removal of the managing or the whole‑time director, provisions,
if any, made in the Articles of Association should be followed failing which
Section 284 relating to removal of director shall apply whereupon they will
cease to hold such office as soon as they cease to be directors on the Board.
3. See that a special notice
regarding such removal is furnished to the company before fourteen days of the
date of the General Meeting, exclusive of the day it is posted and the day of
the meeting. [Section 190(1) read with Section 284(2)]
4. As soon as the special
notice is received, send a copy of the notice to the managing or the whole‑time
director concerned. [Section 284(3)]
5. Give noticel to the members
regarding the special notice received by the company to remove the managing or
the whole‑time director within seven days of the date of the General
Meeting either by advertisement or by any mode allowed by the Articles of
Association of the company. [Section
190(2)]
6. Send a copy of the representations,
if any, made by the aggrieved managing or the whole‑time director to
every member of the company to whom notice of the General Meeting has been
sent.
7. If the aforesaid
representation cannot be so sent, then see that the representations are read
out at the meeting.
8. Do not send a copy of the
representation to the members or do not allow it to be read in the meeting if
you get a Company Law Board's order restricting such action, on the application
either of your company or any person who claims to be aggrieved. [Section
284(4), Proviso].
9. Convene a Board Meeting
after giving notice to all the directors of the company as per section 286 to
fix the date, time, place and agenda of the General Meeting to remove the
managing or the whole‑time director by passing an Ordinary Resolution.
10. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meetings
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
11. Issue notice at least twenty‑one
days before the date of the General Meeting along with the relevant Explanatory
Statement. [Section 171(1) read with section 173(2)].
12. Hold the General Meeting and
pass an Ordinary Resolution by simple majority removing the managing or the
whole‑time director. [Section 189(1)].
13. Promptly forward to the
Stock Exchange with which the shares of your company are listed, three copies
of the notice and a copy of the proceedings of the General Meeting. [Clause
31(c) and (d) of the Standard Listing Agreement].
14. File Form No. 32 in
duplicate with the concerned Registrar of Companie within thirty days of the
passing of the Ordinary Resolution removing the managing or the whole‑time
director [Section 303(2)], after paying the requisite fee as prescribed under
Schedule X to the Companies Act, 1956, either in cash, or treasury challan.
[Rule 22].
15. Please keep in mind that if
default is made in complying with the aforesaid requirements the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/‑ for every day during which the default continues. [Section
303(3)]
(Topic 81 to Topic 85)
Topic 81
DO YOU WISH TO APPOINT A MANAGER?
1. Convene a Board Meetin g
after giving noticel to all the directors of the company as per Section 286 and
approve the draft agreement or the terms and conditions on which the manager is
proposed to be appointed and fix up the date, time, place and agenda of the
General Meeting for the appointment.
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meetings
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
3. Issue notices in writing at
least twenty‑one days before the date of the meeting along with the
relevant Explanatory Statement. [Section 171(1) read with Section 173(2)]
4. Comply with the provisions
of Sections 297 and 299 regarding disclosure of interest of directors etc. and
in case of public companies and their subsidiaries and holding companies those
of Section 300 also regarding abstaining from discussion and voting etc.
5. In the case of public
companies and their subsidiaries, where the proposed manager is already a
manager or managing director in another company, a Board resolution will be
necessary, of which prior notice should have been given and all the directors
present at the meeting should have consented to the resolution. [Section
386(2)].
6. Hold the General Meeting and
appoint the manager by passing an Ordinary Resolution by simple majority.
[Section 189(1)]
7. If the manager to be
appointed has not attained the age of 25 years but has attained the age of
majority or if the proposed manager has attained the age of 70 years then have
the appointment approved by passing a Special Resolution. [Schedule XIII, Part
I(c)]
8. If Special Resolution is to
be passed then hold the General Meeting and appoint the manager by passing a
Special Resolution by three‑fourths majority. [Section 189(2)]
9. In the case of a public
company, or its subsidiary, the appointment in the Board Meeting and the
General Meeting will be effective only on approval of the Central Government if
the appointment is not made in accordance with the conditions specified in
Parts I, II and III of Schedule XIII to the Act. [Section 269 read with section
388]
10. Where application is to be
made to the Central Government as aforesaid do the following ‑.
(a) Give general notice to all the members indicating
the nature of the application to be made to the Central Government;
(b) Publish the notice at least once in a
newspaper of the principal language of the district in which the registered
office of the company is situated and circulating in that district and at least
once in English in an English newspaper circulating in that district. [Section
640B read with section 3881;
(c) Forward three copies of the general
notice published in the newspaper to the Stock Exchange with which the shares
of your company are listed. [Clause 31(e) of the Standard Listing Agreemene];
(d) Forward to the Stock Exchange with
which the shares of your company are listed a copy of the proceedings of the
General Meeting and three copies of the notice of the General Meeting. [Clause
31(c) and (d) of the Standard Listing Agreement];
(e) Make the application in Form No. 25A
within ninety days from the date of appointment and enclose the following:
(i) A certified true copy of the existing
and proposed agreement in this regard, if any;
(ii) A certified true copy of the Board as
well as the General Meeting resolution;
(iii) A certified true copy of the audited
balance‑sheet and the profit and loss account for the last two years;
(iv) Where the company has not yet commenced any
business or whose accounts have not been audited :
(a) a certified true copy of the Prospectus, if issued;
(b) particulars of capital proposed;
(c) amount of long‑term loans and
sources of such loans;
(d) expected date of commencement of
production/business;
(e) estimated turnover and profit for the
next three years;
(f) details of industrial licence, if any;
(g) extent of foreign collaboration, if
any;
(v) A certified true copy of the Memorandum
and Articles of Association revised up‑to‑date marking the relevant
article or the authority under which the appointment is made;
(vi) Certified true copies of the notices
published in the newspaper(s) certified by the company as to the due
publication thereof,
(vii) A treasury challan or demand draft
evidencing payment of requisite fee prescribed under the Companies (Fees on
Application) Rules, 1999.
11. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑, as the case may be, and as prescribed by the
Companies (Fees on Applications) Rules, 1999, by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National Bank for credit.
12. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.ef 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
13. Two copies of the treasury
challan will be given back to the depositor by the said branch of the bank and
the original copy should be attached to the application mentioned in item
10(e).
14. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of."Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi, and the said demand draft should be
attached to the application mentioned in item 10(e).
15. If any director of the
company is in any way, whether directly or indirectly concerned or interested
in the appointment of the manager, then send an abstract of the terms of the
contract to all the members within twenty‑one days from the date of
entering into the contract and a memorandum clearly specifying the interest or
concern of any other director in the contract, if any. [Section 302(1)(a)]
16. Forward promptly to the
Stock Exchange with which the shares of your company are listed, three copies
of the above abstract and memorandum. [Clause 31(c) of the Standard Listing
Agreement]
17. See that the manager files a
consent in writing with the company to act as a manager after a ppointment if he was not a director or
manager before his appointment.
18. File Form No. 32 in
duplicate with the concerned Registrar of Companies' within thirty days of the
appointment [Section 303], after paying the requisite fee as prescribed under
Schedule X to the Companies Act, 1956, either in cash, or treasury challan. [Rule
22]
19. Please also keep in mind
that if default is made in complying with the aforesaid requirements, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 500/- for every day during which the default continues.
[Section 303(3)]
20. See that the manager
notifies about his appointment to other companies in which he is a director,
managing director, manager or secretary within twenty days. [Section 305]
21. Further keep in mind that if
the manager fails to do so, he will be punishable with fine upto Rs. 5000/‑.
[Section 305(1)]
22. Make necessary entries in
the Register of Directors' Particulars etc. [Section 303(1)]
23. Further keep in mind that if
the required entries as aforesaid not made, the company and every officer of
the company who is in default will be punishable with fine upto Rs. 500/‑
for every day during which the default continues. [Section 30‑3(3)]
24. Take note of the provisions
of Sections 197A, 317, 384, 385, 386 and 388 regarding disqualifications,
disabilities, etc. of a person to be appointed as a manager.
25. Where application to the
Central Government is not required to be made, then file within ninety days
from the date of appointment in the General Meeting a return in Form No. 25C
with the concerned Registrar of Companies [Section 269(2) read with Rule
10A(2)], after paying the requisite fee as prescribed under Schedule X to the
Companies Act, 1956, either in cash, or treasury challan [Rule 22]
26. The aforesaid return should
be accompanied by a certificate either from the auditor or secretary of the
company or a secretary in the whole‑time practice stating that the
requirements of Schedule XIII have been complied with.
27. If your company is either a
public company or a private company which is a subsidiary of a public company
and also if your company's paid‑up share capital is rupees five crores or
more, then appointment of either a managing director or whole‑time
director or a manager is a must. [Section 269(1) read with Rule 10A(1)]
28. If your company is a
Government Company then provisions of Sections 386 and 388 will not apply to your company.
29. Note that if your company's
paid‑up share capital is less than Rs. 50 lakhs but is equal to or more
than Rs. 10 lakhs, your company is required to obtain a Compliance Certificate
from a secretary in whole‑time practice to be filed with the Registrar of
Companies mentioning therein inter alia that the registers have been kept and
maintained as stated in Annexure A of the Certificate, the forms have been duly
filed with the Registrar of Companies as stated in Annexure B of the
Certificate and the appointment of manager has been made in compliance with the
provisions of section 269 read with Schedule XIII of the Act and approval of
the Central Government has been obtained in respect of the said appointment not
being in terms of Schedule XIII as per paragraphs 1, 2 and 15 of the Form of
Compliance Certificate appended to the Companies (Compliance Certificate)
Rules, 2001 [Section 383‑A(1) proviso ].
Topic 82
DO YOU WISH TO APPOINT A COMPANY SECRETARY?
1. Only persons who are Company
Secretaries within the meaning of Section 2(1)(c) of the Companies Secretaries
Act, 1980, and individuals possessing the prescribed qualifications can be
appointed as secretary of a company. [Section 2(45)].
2. In the case of companies
having paid‑up share capital of not less than rupees fifty lakhs, it is
obligatory to appoint a whole‑time secretary. [Section 383A].
3. Please keep in mind that if
your company fails to comply with the requirement, the company and every
officer of the company who is in default will be punishable with fine upto Rs.
500/‑ for every day during which the default continues. [Section
383A(1A)]
4. However, when there are more
than two directors on the Board, then one of them if otherwise qualified within
the meaning of Companies (Appointment and Qualifications of Secretary) Rules,
1988, may act as secretary and not otherwise.
5. The qualifications
prescribed for appointment as secretary by the Companies (Appointment and
Qualifications of Secretary) Rules, 1988 are:
(a) In the case of companies having a paid‑up
share capital of Rs. 50 lakhs or more:
(i) Membership of the Institute of Company
Secretaries of India;
(b) In the case of any other company:
(i) membership of the Institute of Company
Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of
1980);
(ii) pass in the Intermediate ‑examination
conducted either by the Institute of Company Secretaries of India constituted
under the Company Secretaries Act, 1980, (No. 56 of 1980) or by the earlier
Institute of Company Secretaries of India incorporated on 4th October, 1968
under the Companies Act, 1956 (1 of 1956) and licensed under Section 25 of that
Act;
(iii) post graduate degree in commerce or
corporate secretaryship granted by any University in India;
(iv) degree in law granted by any university;
(v) membership of the Institute of
Chartered Accountants of India constituted under the Chartered Accountants Act,
1949 (38 of 1949);
(vi) membership of the Institute of Cost and
Works Accountants of India constituted under the Cost and Works Accountants
Act, 1959 (23 of 1959);
(vii) post graduate degree or diploma in
management sciences, granted by any University, or the Institutes of
Management, Ahmedabad, Calcutta, Bangalore or Lucknow;
(viii) post diploma in company secretaryship
granted by the Institute of Commercial Practice under Delhi Administration or
Diploma in Corporate Laws.and Management granted by the Indian Law Institute,
New Delhi;
(ix) post graduate diploma in company law and
secretarial practice granted by the University of Udaipur; or
(x) membership of the Association of
Secretaries and Managers, Calcutta, registered under the West Bengal
Registration of Societies Act, 1961 (XXVI of 1961).
6. In the case of a company
having a Company Secretary with any of the qualifications mentioned in item
5(b) above it is necessary to appoint a Company Secretary with qualifications
mentioned in item 5(a) above within one year of the increase in paid‑up
share capital to rupees fifty lakhs and above.
7. Irrespective of the size of
paid‑up capital, and existing company secretary, notwithstanding his
qualifications, who had continued to enjoy protection upto 30‑10‑1980,
under the old Companies (Secretary's Qualification) Rules, 1975, shall continue
to enjoy such protection.
8. Convene a Board Meeting
after giving noticel to all the directors of the company as per Section 286 and
pass a resolution appointing the secretary and approving the terms and
conditions of his appointment.
9. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/-.[Section 286(2)]
10. Ensure that the interests of
directors are disclosed in accordance with the provisions of sections 297 and
299.
11. Please keep in mind that
every director who fails to disclose his interests as aforesaid will be
punishable with fine upto Rs. 50,000/-. [Section 299(4)]
12. In the case of a public
company or its subsidiary or holding company, no director who is interested or
concerned in any way, whether directly or indirectly, in the contract of
appointment should take part in discussion or voting, nor his presence should
be counted for quorum for the said purpose. [Section 300]
13. Please keep in mind that
every director who knowingly contravenes the provisions of this section will be
punishable with fine upto Rs. 50,000/‑. [Section 300(4)]
14. File Form No. 32 in
duplicate with the concerned Registrar of Companies within thirty days of the
appointment [Section 303] after paying the requisite fee prescribed under Schedule X to the Companies
Act, 1956, either in cash, or treasury challan. [Rule 22]
15. Please also keep in mind
that if default is made in complying with the aforesaid requirements, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 500/‑ for ever day during which the default continues.
[Section 303(3)]
16. The person appointed has to
notify about his appointment to other companies in which he is a director,
managing director, manager or secretary within twenty days of his appointment.
[Section 305]
17. Make necessary entries in
the Register of Particulars of Directors etc. [Section 303(1)]
18. Further keep in mind that if
the required entries as aforesaid are not made, the company and every officer
of the company who is in default will be punishable with fine upto Rs. 500/-
for every day during which the default continues. [Section 303(3)].
19. If the case falls within the
purview of Section 314, complete the formalities as mentioned in Topic 69.
20. If the person appointed as secretary fails to disclose to other companies in which he is a director, managing director, manager or secretary within twenty days of his appointment he will be punishable with fine of upto Rs. 5000/- [Section 305(1)]
Topic 83
DO YOU WISH TO REMOVE THE COMPANY SECRETARY?
1. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
take the decision of removing the existing secretary only if the secretary is
not named in the Articles of Association for, in that case, the Article will
have to be altered accordingly vide Topic 26.
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
3. Intimate
the secretary regarding the decision of the Board and ask him to give
representation to the Board within fifteen days of the date of intimation.
4. Again hold a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
consider the representation, if any, made by the secretary and cancel the
agreement entered into by the company with the secretary.
5. In the same Board Meeting appoint a
secretary in place of the removed secretary.
6. File Form No. 32 in
duplicate with the concerned Registrar of Compani to intimate about the removal
of the existing secretary and appointment of new secretary, within thirty days
of such removal as well as appointment [Section 303(2)] after paying the
requisite fee as prescribed under Schedule X to the Companies Act, 1956, either
in cash, or treasury challan. [Rule 22]
7. Please also keep in mind
that if default is made in complying with the aforesaid requirements, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 500/- for every day during which the default continues.
[Section 303(3) ]
8. Inform the members and the
public, if desired by the Board, through a newspaper advertisement about the
removal of the existing secretary and the appointment of the new secretary.
9. Intimate the secretary so
appointed in the Board Meeting.
10. In case your company's
shares are listed on a recognised Stock Exchange then forward to the Stock
Exchange three copies of the newspaper advertisement promptly. [Clause 31(e) of
the Standard Listing Agreement].
Topic 84
DO YOU WISH TO APPOINT A SECRETARY IN WHOLE‑TIME
PRACTICE?
1. Note that appointing a
Secretary in whole‑time practice is compulsory for a company whose shares
are listed on a recognised Stock Exchange, as per the provisions of Section 161
[Proviso to sub‑section (1) of section 161] for having the annual return
signed by a Secretary in whole‑time‑practice before it is filed
with the Registrar.
2.
A. Also note that appointing a Secretary
in whole‑time practice is also
compulsory for a company whose paid‑up share capital is less than
Rs. 50 lakhs but is Rs. 10 lakhs or more, because such a company is required to
file with the Registrar of Companies' a Certificate of Compliance as to whether
the company has complied with all the provisions of the Act obtained from
Secretary in whole‑time practice. [Section 383‑A(1), proviso read
with Rule 3 of the Companies
(Compliance Certificate) Rules, 2001].
B. Ensure that the certificate is filed
with the Registrar in the Form appended to the Companies (Compliance
Certificate) Rules, 2001], or as near thereto as circumstances admit, in
respect of each financial year within thirty days from the date on which the
annual general meeting was held along with requisite filing fee as per Schedule
X.
C. Where the annual general meeting has
not been held, file with the Registrar such certificate within thirty days from
the latest day on or before which that meeting should have been held in accordance
with the provisions of the Act.
D. Every secretary in whole‑time
practice for the purpose of issue of certificate shall have right to access at
all times to the registers, books, papers, documents and records of the company
whether kept in pursuance of the Act or any other Act or otherwise and whether
kept at the registered office of the company or elsewhere and shall be entitled
to require from the officers or agents of the company, such information and
explanations as the secretary in whole‑time practice may think necessary
for the purpose of such certificate.
E. Every certificate shall be laid by the company in its
annual general meeting.
F. A copy of such certificate should be
attached to the Board's Report referred to in section 217 [Section 383‑A(1),
Proviso]
3. Please keep in mind that if
your company fails to comply with the afore said requirement, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 500/- for every day during which the default continues. [Section 383‑A(1A)]
4. Note further that an option
is available with you to appoint a Secretary in whole‑time‑practice
for filing a declaration of compliance with the Registrar of Companies while
forming a company, under Section 33(2) of the Act, for certification of
compliance with the requirements of Schedule XIII in return to be filed with
the Registrar in the matter of appointment of managerial personnel without
Government approval, and for filing a duly verified declaration relating to commencement
of business under Section 149 of the Act. [Clause (d) of Subsection (1), Clause
(c) of Sub‑section (2), sub‑clause (ii) of Clause (b) of Subsection
(2A) of Section 149].
5. Ensure before appointing the
Secretary in whole‑time‑practice, that the individual concerned
satisfies the definition of Secretary in whole‑time‑practice in
clause (45A) of Section 2, i.e., he is a member of the Institute of Company
Secretaries of India and is not in full time employment anywhere.
6. Note that the individual
proposed to be appointed holds a certificate of practice from the Institute of
Company Secretaries of India and that the said certificate is of current
validity.
7. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 pass
a Board Resolution appointing the individual as Secretary in whole‑time‑practice
either generally for performing the duties and functions of a Secretary under
the Act (if yours is not a company which is otherwise compulsorily required to
appoint a whole‑time Secretary under Section 383‑A) or for
discharging the functions in respect of a specific assignment, such assignment
being mentioned in the body of the Resolution.
8. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
9. While drafting the
Resolution, you may limit the tenure of appointment or limit the appointment to
specific assignment or both.
10. See that the remuneration to
be paid to the Secretary in whole‑time practice should also be mentioned
in the Resolution.
11. You may, if you so desire,
pass the aforesaid Resolution after appointing the Secretary in whole‑time‑practice
or after assigning the job to him, the Resolution being in the nature of a
ratification.
12. As an alternative, if the
Managing Director or any other officer is so empowered, the appointment can be
made by a letter addressed to the individual appointed as Secretary in whole‑time
practice.
13. Such
appointment is as valid as an appointment made by a Resolution prospective or
retrospective.
14. Where you decide to appoint
a Secretary in whole‑time practice to perform the duties and functions of
Secretary of the company, please maintain the Register under Section 303.
15. In the aforesaid case file
Form No. 32 in duplicate with the Registrar of CompanieS within 30 days of the
appointment, [Section 303(2)] after paying the requisite fee prescribed under
Schedule X of the Act, either in cash, or treasury challan. [Rule 22].
16. Please also keep in mind
that if default is made in complying with the aforesaid requirements, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 500/‑ for every day during which the default
continues. [Section 303(3)].
17. Please see that the person
appointed notifies about his appointment to other companies in which he is a
Director, Managing Director, Manager or Secretary within 20 days of his
appointment [Section 305]
18. Further keep in mind that if
he fails to do so, he will be punishable with fine upto Rs. 5000/‑.
[Section 305(1)]
19. If you choose to appoint a
Director of the company (not being in wholetime employment anywhere), please
ensure that the requirements of Section 314 are complied with vide Topic 69.
20. Keep in mind that the
services of a company secretary in whole‑time practice are also needed
under sub‑rule (1) and (2) of Rule 10 of the Private Limited Company and Unlisted Public Limited Company (Buy‑back
of Securities) Rules, 1999.
Topic 85
DO
YOU WISH TO DEFEND YOUR FAILURE TO APPOINT A QUALIFIED COMPANY SECRETARY?
1. Note that appointing a whole‑time
Secretary is complusory for a company having paid‑up share capital of not
less than rupees fifty lakhs. [Section 383 A(1)].
2. Further note that appointing
a whole‑time secretary is although not compulsory for a company whose
paid‑up share capital is less than rupees fifty lakhs but a company whose
paid‑up share capital is rupees ten lakhs or more must file with the
Registrar of Companies a Compliance Certificate obtained from a secretary in
whole‑time practice in the Form appended to the Companies (Compliance
Certificate) Rules, 2001 in respect of each financial year of your company
within 30 days from the date of holding the annual general meeting as to
whether the company has complied with all provisions of the Act or not and a
copy of such certificate should be attached to the Board's Report referred to
in section 217. [Section 383‑A(1) Proviso].
3. Note also that the company
and every officer of the company who fails to appoint a whole‑time
Secretary or a secretary in whole‑time practice as aforesaid becomes
punishable with fine of upto Rs. 500/‑ for every day of default. [Section
383A(1A)].
4. Note also that you are
liable to be prosecuted for mere failure to appoint a whole‑time
Secretary where you are required to do so and the penalty is fine of Rs. 500/-
for every day during which the failure continues. [Section 383‑A (1A)].
5. In the aforesaid prosecution
proceedings, the following defences are open to you:
(a) You had made reasonable efforts to
appoint a whole‑time Secretary but without success. Whether the efforts
made by you are reasonable or not will be a question of fact. Thus, you cannot
defend your case by showing that you had advertised for a Company Secretary on
a salary of Rs. 1000/‑ and no one applied in response to that
advertisement. The Secretary is, in law and in fact, the Chief Administrative
Officer of the Company, a salary which even the lowest worker in the company
gets cannot be offered to a Company Secretary.
(b) The financial position of your company
is such that it is beyond your capacity to engage a whole‑time Secretary.
A good case would be made out when you can show that a part of your paid up
capital has also been eroded by accumulating losses and taking that erosion
into account, your net paid up capital is now less than rupees fifty lakhs
being paid up share capital requiring appointment of a whole‑time
Secretary. [Section 383A(1A), Proviso].
6. Keep in mind that to take
the aforesaid defences at the time of trial of the criminal proceedings if any
initiated by the Registrar of Companies and not thereafter by invoking the inherent
power of the High Court. [Sandur Investment Company Ltd. v. ROC (2001) 34 SCL
586 (Kar)].
(Topic 86 to Topic 89)
Topic 86
1. Note that in the absence of
an enabling provision in this behalf, you cannot charge a person with
responsibility for compliance of any provision of the Act to shift the guilt
from one person to another.
2. Note that the provisions of
the Act which enable you to charge a person for responsibility for compliance
are contained in the proviso to Sub‑section (5) of Section 209, proviso
to Sub‑section (5) of Section 210, proviso to Subsection (7) of Section
211 and proviso to Sub‑section
(9) of Section 212.
3. Note that since authority
and responsibility go together, Section 292 of the Act which contains certain
enabling provisions to delegate the authority which vests in the Directors can
be invoked by the company to charge specified Directors constituting a
committee, the Managing Director, the Manager or any other principal officer of
the company or any of its branch with the responsibility which attaches to the
exercise of the authority delegated to them.
4. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
pass a Board Resolution in which the specific officer should be named along
with the specific section of the Act whose compliance is intended to be ensured
by charging such person with the responsibility.
5. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
6. Before charging such person
with responsibility, obtain his written consent in Form No. 1 AB.
7. Apart from complying with
the requirements‑of sub‑sections (2), (3) and (4) of Section 292,
while delegating the authority in terms of the proviso to Subsection (1) of
that section, it will be necessary to spell out the Resolution of delegating
the responsibility for compliance as well.
8. File a return in Form No.
1AA within thirty days of passing the Board Resolution with the concerned
Registrar of Companies, after paying the requisite fee as prescribed under
Schedule X of the Companies Act, 1956, either in cash, demand draft or treasury
challan. [Rule 4BB(1) read with Rule 22]
9. See that the above mentioned
return is accompanied by the consent given to the Board of Directors by the
person so charged with the responsibility in Form No. 1AB. [Rule 4BB(2)].
10. See also that the above
mentioned return is accompanied by a certified true copy of the Board
Resolution so passed for the purpose.
11. Where the consent given by
the person, charged with responsibility, to the Board of Directors, is revoked
or withdrawn, your company should file within thirty days of such revocation or
withdrawal, with the concerned Registrar of Companies a return in Form No. 1AC
after paying the requisite fees prescribed under Schedule X of the Companies
Act, 1956, either in cash, or treasury challan. [Rule 4BB(3) read with Rule
22(3)]
12. Note that since no specific
penalty is imposed for not filing the aforesaid returns within the prescribed
time in section 5 itself, the general provision of penalty provided in section
629A will be applicable ‑which is fine of upto Rs. 5,000/‑ and also
a continuing fine of upto Rs. 500/-. for every day after the first during which
the contravention continues.
Topic 87
1. Please refer Clause (f) of
Section 5 of the Companies Act, 1956.
2. Before charging a person
with responsibility for compliance, please identify the specific section for
which compliance is required.
3. Ensure that the section so
identified uses the expression "officer of the company who is in
default".
4. Where such expression does
not occur, it would not be open to you to charge a person with responsibility
for compliance unless the section itself contains an enabling provision in this
behalf.
5. Obtain written consent of
the person proposed to be charged with responsibility for compliance in Form
No. 1AB unless the person charged is present in the meeting of the Board in
which the Resolution charging him with the responsibility is passed and his
presence has been duly recorded.
6. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
pass the necessary Board Resolution charging the person with the responsibility
for compliance.
7. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/-. [Section 286(2)]
8. Do not forget to mention the
specific provision of the Act whose compliance is sought to be attached to the
person charged.
9. Do not forget that the
Managing Director or whole‑time Director or Manager or Secretary or a
person in accordance with whose instructions the Board of Directors are
accustomed to act cannot be charged with the responsibility for compliance under
clause (f) of section 5.
10. The person charged as
aforesaid must be other than a person falling under any of the categories
mentioned in clauses (a) to (e) of Section 5. It is, however, open to the Board
to charge a director under clause (f).
11. File with concerned
Registrar of Companies the return in Form No. 1AA within thirty days of passing
of the Board Resolution under clause (f) of Section 5, after paying the
requisite fee as prescribed under Schedule X of the Companies Act, 1956, either
in cash, or treasury challan. [Rule 4BB(1) read with Rule 22].
12. See that the above‑mentioned
return is accompanied by the consent obtained from the person as mentioned in
item 5 in Form No. 1AB.
13. See also that the above‑mentioned
return is accompanied by a certified true copy of the Board Resolution so
passed for the purpose.
14. Where the consent given by
the person, charged with responsibility, to the Board of Directors, is revoked
or withdrawn, your company should file within thirty days of such revocation or
withdrawal, with the concerned Registrar of Companies a return in Form No. 1AC
after paying the requisite fees prescribed under Schedule X of the Companies
Act, 1956, either in cash, or treasury challan. [Rule 4BB(3) read with Rule
22].
15. Note that since no specific
penalty is imposed for not filing the aforesaid returns within the prescribed
time, in section 5 itself the general provision of penalty provided in section
629A will be applicable which is fine of upto Rs. 5000/‑ and also a
continuing fine of upto Rs. 500/‑ for every day after the first during
which the contravention continues.
Topic 88
1. Note that a Director can be
charged with the responsibility for compliance either under clause (f) or under
clause (g) of Section 5.
2. Note, however, that when a
Director is charged under clause (f), he is charged in the capacity of
"any person" and not as director.
3. Where a director is charged
in the capacity of "any person", the company may have a Managing or
Whole‑time Director or Manager or Secretary and yet he will be charged
under clause (f) of Section 5.
4. Note further that when a
Director is charged with responsibility for compliance under clause (g) of
section 5 he is charged in the capacity of a Director and he can be so charged
only if the company does not have either a Managing or a whole‑time
Director or a Manager.
5. Note, again, that it is not
a compulsory requirement of clause (e) of Section 5 that a Director of the
company must necessarily be charged with the responsibility for compliance if
it is a Board managed company.
6. The only consequence of not
charging a Director;th such responsibility under clause (g) of section 5 is
that all the directors of company will jointly and severally be responsible for
compliance.
7. Convene a Board Meeting
after giving noticel to all the directors of the company as per Section 286 and
pass a Resolution of the Board specifiying the Director concerned and also
spelling out the specific provision of the Act whose compliance is sought to be
attached to the Director charged. [Section 5(g)].
8. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
9. File a return in Form No.
1AA with the concerned Registrar of Companies within thirty days of the passing
of the Resolution of the Board aforesaid, after paying requisite fee as
prescribed under Schedule X of the Companies Act, 1956, either in cash, or
treasury challan. [Rule 4BB read with Rule 22].
Topic 89
DO
YOU WISH TO KEEP OUT SOME OFFICERS FROM BEING CHARGED WITH OFFENCE?
1. Note that all the officers
or persons referred to in various clauses of Section 5 are not to be treated as
being simultaneously responsible for compliance with any provision of the Act.
2. All of these officers are
not to be taken together as officers in default when it comes to the question
of identifying the officer in default for purpose of prosecution.
3. Keep in mind that the Act
uses the expression "every officer who is in default" and not the
expression "all officers in default by definition".
4. Note that a Managing
Director having whole or substantial powers of management can be charged with
responsibility for compliance whenever there is violation of any section of the
Act which uses the expression "every officer who is in default".
5. It is difficult for that
Managing Director to escape responsibility unless he can show that, as regards
specific provision, another person has been duly charged with the
responsibility for compliance.
6. Note further that although a
whole‑time Director is like a Managing Director having substantial powers
of management, yet depending upon the particular area of Management over which
he exercises substantial powers that his responsibility is to be fixed.
7. A Whole‑time Director
(Marketing) cannot be said to be responsible for violation of any section of
the Act dealing with financial discipline.
8. Where, however, no
particular area of management is assigned to a Whole‑time Director, it
will be difficult for the Whole‑time Director to escape responsibility,
he being treated on the same footing as a Managing Director.
9. Note that where a company
has more than one Managing Director, all of them will be jointly and severally
liable unless areas of responsibility have been clearly demarcated by the company
and an intimation to this effect is available with the Registrar. Such an
intimation may be available with the Registrar of Companies in terms of
specific resolution passed under Section 292 of the Act.
10. Note further that the
Secretary of the company is invariably an officer in default, he being a
principal officer responsible for compliance with the regulatory provisions of
the statute.
11. Note again that where a
person has been charged with the responsibility for compliance under clause (f)
of Section 5, others can escape responsibility but, the Secretary of the
company will remain an officer in default along with the person charged.
12. Note again that in the case
of a company which is managed by the Board of Directors and which does not have
any of the managerial persons mentioned in clauses (a) to (c) in Section 5, all
the Directors can escape responsibility by charging one of the Directors with
the sole responsibility of compliance with all the provisions of the Act where
the expression "officer who is in default" does occur. Of course if
such a company has a Secretary, the Secretary will be liable along with such a
Director.
13. It has been clarified by the
Department of Company Affairs in the light of Rajasthan High Courts' judgement
on Ravinder Narayan and others v. Registrar of Companies, Rajasthan, Jaipur,
that where the penal provisions provide for punishment of officers in default
prosecution be filed against the Managing Director(s), Whole‑time
Director(s) and Manager, apart from the Secretary, if any, and the company and
only in those cases where, there is no such managerial personnel that is
Managing/Whole‑time Directors/Manager, prosecution be filed against all
ordinary directors, apart from the Secretary, if any, and the company. [Circular
No. 6/94, F. No. 3‑41‑93‑CL‑V, dated 24‑6‑1994].
(Topic 90 to Topic 105)
Topic 90
DO YOU WISH TO APPOINT OR RE‑APPOINT AN AUDITOR?
A. Appointment of the
first auditor:
1. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286
within one month of the incorporation of the company and pass a resolution
appointing the first auditor of the company to hold office till the conclusion
of the first Annual General Meeting and fixing his remuneration. [Section
224(5)]
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
3. Ensure that the person
appointed as the first auditor of the company does not hold any security of
that company after a period of one year from the date of commencement of the
Companies (Amendment) Act, 2000. [Section 226(3)(e)]
4. Keep
in mind that for the purposes of the above security means an instrument which
carries voting rights. [Section 226(3)(e) Explanation]
5. If the Board fails to do so
within one month after the incorporation of the company hold a General Meeting
by issuing noticest in writing at least twenty‑one days before the date
of general meeting with relevant explanatory statement after fixing up the
date, time, place and agenda by convening a Board Meeting and pass Ordinary
Resolution by simple majority appointing the first auditor. [Section 224(5),
Proviso (b) read with sections 171(1), 173(2) and section 189(1)]
6. If a General Meeting is held
for this purpose then forward promptly to the Stock Exchange with which the
shares of your company are listed, three copies of the notice and a copy of the
proceedings of the General Meeting. [Clause 31(c) and (d) of the Standard
Listing Agreement].
7. Intimate the auditor immediately about
his appointment.
B. Appointment of the
retiring auditor :
1. In case of any appointment
to be made in respect of any financial year, get a written certificate from the
auditor to the effect that the appointment, if made, will, be in accordance
with the limits specified in Section 224(1B). [Section 224(1), Proviso].
2. Note that the provisions of
sub‑section (1B) of section 224 will not apply on and after the
commencement of the Companies (Amendment) Act, 2000 to a private company.
[Section 224(1B) fourth proviso]
3. Convene an Annual General
Meeting after issuing notices in writing at least twenty‑one days before
the meeting along with relevant explanatory statement and pass an Ordinary
Resolution by simple majority in the Annual General Meeting appointing the
retiring auditor and fixing his remuneration, the notice of the said meeting
should contain the said agenda. [Section 171(1) read with section 173(2) and
section.166 ].
4. Forward three copies of the
notice and a copy of the proceedings of the Annual General Meeting to the Stock
Exchange with which the shares of your company are listed. [Clause 31(c) and
(d) of the Standard Listing Agreement].
5. In the case of a company in
which not less than twenty‑five per cent of the subscribed share capital
is held whether singly or in combination by (a) a public financial institution
or a Government Company or Central Government or any State Government, or (b)
any financial or other institution established by any Provincial or State Act
in which a Statd Government holds not less than fifty‑one per cent of the
subscribed capital, or (c) a Nationalised Bank or an Insurance Company carrying
on general insurance business, the appointment or reappointment of an auditor
at each Annual General Meeting shall be made by passing a Special Resolutionf
by three‑fourths majority. [Section 224A].
6. Remember that the provisions
of the aforesaid three clauses (a) (b) (c) are not mutually exclusive and would
apply to all cases of shareholding in any combination by any of the
institutions mentioned therein [General Circular No. 14 of 2001 dated 16‑7‑2001
of the Department of Company Affairs]
7. Intimate the auditor of his
appointment within seven days. [Section 224(1)].
8. The Auditor has to inform
the concerned Registrar of Companies' in Form No. 23B about his accepting or
refusing the appointment within one month of the receipt of intimation of his
appointment. [Section 224(1A)].
9. No fee is required to be
paid for filing the above‑mentioned form.
10. File the Special Resolution
with the Explanatory Statement in Form No. 23 with the concerned Registrar of
Companies within thirty days of its passing after paying the requisite fee as
prescribed under Schedule X to the Companies Act, 1956, either in cash, or
treasury challan. [Rule 22].
11. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 2000 for every day during which the default continues. [Section
192(5)]
C. Appointment of an
auditor other than the retiring one
Complete the formalities as
per Topic 93.
D. Appointment of a branch
auditor other than that of the company's auditor:
1. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 to
fix up the date, time, place and agenda of a General Meeting to pass an Ordinary
Resolution to the effect that the accounts of a particular branch of the
company be audited by a particular auditor other than the company's auditor.
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/-. [Section 286(2)].
3. Before appointing the said
branch auditor, ensure that the person appointed as such does not hold any
security of the company of which he is going to be the branch auditor after a
period of one year from the date of commencement of the Companies (Amendment)
Act, 2000. [Section 226(3)(e) read with section 228(1)] ,
4. Keep in mind that for the
purposes of above securit T, means an instrument which carries voting rights
[Section 226(3)(e), Explanation]
5. Issue notices in writing at
least twenty‑one days before the General Meeting and hold the General
Meeting and pass the Ordinary Resolution by simple majority and appoint the
branch auditor or authorise the Board to appoint him in consultation with the
company's auditor. [Section 228(3)(a)]
6. Forward to the Stock
Exchange with which the shares of your company are listed, promptly three
copies of the notices and a copy of the proceedings of the General Meeting. [
Clause 31 (c) and (d) of the Standard Listing Agreement]
7. In
the case mentioned in item 3 consult the company's auditor for appointing the
branch auditor and then appoint him in a Board Meeting.
General Note :
1. In
all the above cases, an auditor should be a person who fulfils the qualifications
mentioned in Section 226.
2. In case of a foreign branch,
its auditor may also be an accountant duly qualified to act as an auditor of
the accounts of the branch office in accordance with law of the foreign country
concerned. [Section 226 and Section 228(1)].
3. The
auditor has to report on certain additional matters, as contained in the
Manufacturing and Other Companies (Auditor's Report) Order, 1988.
4. Note that for non‑compliance
of the provisions of sections 225 to 231 the company and every officer of the
company who is in default will be punishable with fine of upto Rs. 5000/-,
[Section 232]
Topic 91
DO
YOU WISH TO REVISE THE REMUNERATION OF A STATUTORY AUDITOR?
1. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 to
take the decision of increasing the remuneration of the statutory auditor and
to fix the date, time, place and agenda of the General Meeting. [Section
224(8)(b)].
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
3. Issue notice in writing at
least twenty‑one days before the date of the General Meeting proposing
the Ordinary Resolution with suitable Explanatory Statement for increase of the
remuneration of the statutory auditor. [Section 171(1) read with Section
173(2)]
4. Hold
the General Meeting and pass the Ordinary Resolution by simple majority.
[Section 189(1)]
5. Intimate the statutory auditor
regarding such increase of remuneration.
6. Forward promptly to the
Stock Exchange with which the shares of your company are listed, three copies
of the notices and a copy of the proceedings of the General Meeting. [Clause
31(c) and (d) of the Standard Listing Agreement].
Topic 92
DO
YOU WISH TO APPOINT OR RE‑APPOINT AN AUDITOR OF A GOVERNMENT COMPANY?
1. Auditor
of a Government company is appointed or re‑appointed by the Comptroller
and Auditor‑General of India. [Section 619(2)].
2. Obtain a certificate from
the auditor to be so appointed to the effect that such appointment, if made,
will be within the specified number as mentioned in the Explanation I of
Section 224(1C). [Section 224 (1B)].
3. Keep in mind that the
aforesaid certificate need not be obtained from the auditor to be so appointed
if the Government Company is a private company, on and after the commencement
of the company (Amendment) Act, 2000. [Section 224(lB) fourth proviso]
4. Obtain the name of the
person determined by the Comptroller and Auditor‑General of India, as
the auditor of the Government Company.
5. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 to
fix the date, time, place and agenda of the Annual General Meeting to appoint
the auditor by passing a Special Resolution. [Section 224A(1)]
6. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/-. [Section 286(2)]
7. Issue notices in writing at
least twenty‑one days before the date of the meeting and hold the Annual
General Meeting and pass the Special Resolution by three‑fourths
majority. [Section 171(1) read with section 189(2)]
8. if the shares of the
Government company are listed on a recognised Stock Exchange, forward promptly
to the Stock Exchange three copies of the notice and a copy of the proceedings
of the General Meeting. [Clause 31(c) and (it) of the Standard Listing
Agreement.
9. File a copy of the Special
Resolution along with the Explanatory Statement with the concerned Registrar of
Companies within thirty days of its passing in Form No. 23 after paying
requisite fee [Section 192(1) & (4)(a)] prescribed under Schedule X to the
Companies Act, 1956, either in cash, or treasury Charlene [Rule 22].
10. Please also keep in mind
that if default is made in complying with the aforesaid requirements, the
company and every officer of the company who is in default will be punishable
with fine upto Rs. 200/- for every day during which the default continues.
[Section 192(5)]
11. Within seven'days of the
appointment, give intimation to the auditor so appointed by the Comptroller and
Auditor‑General of India. [Section 619 read with section 224(1)].
12. See that the auditor, within
thirty days of such receipt of intimation, gives notice to the concerned
Registrar of Companies in Form No. 23B stating whether he has accepted or
refused the appointment. [Section 224(1A)].
13. No filing fee is required to
be paid for giving the above‑mentioned notice.
14. Further keep in mind that,
the remuneration of the auditor appointed under section 619 by the Comptroller,
and Auditor‑General of India will be fixed by the company in General
Meeting or in such manner as the company in General Meeting may determine.
[Section 224(8)(aa)]
Topic 93
DO YOU WISH TO CHANGE THE AUDITOR OF YOUR COMPANY?
1. Receive special notice from
member of your company, indicating intention to move a resolution for changing
the existing auditor of the company and for appointing another auditor in his
place in the ensuing Annual General Meeting. [Section 225(1) read with section
190].
2. See that this special notice
is received by the company not less than fourteen days before the Annual
General Meeting, exclusive of the day on which the notice is served or deemed
to be served and the day of the meeting. [Section 190(1)].
3. Also see that this special
notice complies with the requirements of Section 188 of the Act. Pedley v.
Inland Waterways Association Ltd., (1977) 1 All ER 209 (ChD).
4. Send forthwith a copy of the
aforesaid notice to the existing auditor of
your company. [Section 225(2)].
5. Get a written certificate
from the proposed auditor to the effect that the appointment, if made, will be
in accordance with the limits specified in Section 224(1B). [Section 224(1),
Proviso].
6. Keep in mind that the
aforesaid certificate need not be obtained from the proposed auditor if your
company is a private company on and after the commencement of the Companies
(Amendment) Act, 2000. [Section 224(1B) fourth Proviso].
7. Issue noticest in writing at least
twenty‑one days before the date of the Annual General Meeting stating
about the special notice and proposing the Ordinary Resolution for change
along with relevant Explanatory Statement. [Section 171(1) read with section
190].
8. State in the notice the fact
about representations, if any, made by the auditor concerned and enclose the
copy of the representation.
9. If the representations could
not be sent along with the notice for being received late, send the same later
on. [Section 171(1) read with sections 173(2) and 225(3)].
10. In case it is not possible
to state about the special notice in the notice of the Annual General Meeting,
then inform the members either by advertisement in a newspaper having an
appropriate circulation or in any other mode allowed by the Articles of
Association of the company not less than seven days before the meeting.
[Section 190(2)].
11. Forward three copies of the
notice to the Stock Exchange with which the shares of your company are listed
[Clause 31(c) and (e) of the Standard Listing Agreement].
12. Hold the General Meeting and
pass the Ordinary Resolutionj by simple majority. [Section 189(1)].
13. The resolution required is
Ordinary Resolution except as provided in Section 224A.
14. If the representations were
not sent to members earlier for the reason that they were received too late or
because of default of the company, read out the same in the meeting if the
auditor concerned so requires.
15. The auditor concerned has
also the right to be heard at the meeting. But in certain circumstances, the
Company Law Board can exempt the company from sending or reading out the
representations on the application either of the company or of any of the
persons who claims to be aggreived. [Section 225(3), Proviso].
16. Forward a copy of the
proceedings of the General Meeting to the Stock Exchange with which the shares
of your company are listed [Clause 31(d) of the Standard Listing Agreement].
17. Promptly notify to the Stock
Exchange with which the shares of your company are listed of the change of
auditors [Clause 30(c) of the Standard Listing Agreement].
18. Send intimations thereof to
the newly appointed auditor within seven days. [Section 224(1)].
19. The new auditor has to
inform the concerned Registrar of Companies in Form No. 23B about his accepting
or not accepting the appointment within a month from the receipt by him of
intimation of his appointment.
20. No fee is required to be
paid for filing the above mentioned form. [Section 224(1A)].
21. Note that for non‑compliance
of the provisions of section 225, the company and every officer of the company
who is in default will be punishable by way of fine of upto Rs. 5000/‑.
[Section 232].
Topic 94
DO
YOU WISH TO REMOVE THE AUDITOR OF YOUR COMPANY BEFORE THE EXPIRY OF HIS TERM OF
OFFICE?
1. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 to
approve the draft of the application to be sent to the Central Government for
sanctioning the removal of the auditor. [Section 224(7)].
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
3. Make an applicationf to the
Regional Director of the concerned region seeking approval of the removal of
the auditor before the expiry of his term, as the aforesaid power has been
delegated to the Regional Director.
4. There is no prescribed form
of the aforesaid application,f and therefore should be made in the letter head
of the company.
5. The application must be
addressed to the concerned Regional Director, Kanpur or Calcutta or Mumbai or
Chennai, as the case may be, depending on its jurisdiction on the particular
region in which the company's registered office is situated, and must state the
reasons in detail for the removal of the auditor and it must be accompanied by
the following documents:
(i) A certified true copy of your
company's Memorandum and Articles of Association.
(ii) A treasury challan or demand draft
evidencing the payment of the requisite fee prescribed under the Companies
(Fees on Applications) Rules, 1999.
(iii) Reasons for removal of the auditor before the expiry of the
term.
6. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs.
500/‑ and maximum Rs. 2000/‑, as the case may be, and as prescribed
by the Companies (Fees on Applications) Rules, 1999,3 by way of treasury
challan prepared in triplicate and paid in cash into any of the specified
branches of the Punjab National Bank for credit.
7. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.e.f 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
8. Two copies of the treasury
challan will be given back to the depositor by the said branch of the bank and
the original copy should be filed along with the application made to the
concerned Regional Director.
9. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, Mumbai/ Calcutta/Chennai
as the case may be and payable at city where the concerned Regional Director is
situated and the said demand draft should be attached to the application made
to the concerned Regional Director. For payment of application fee by way of
demand draft to the Regional Director, Northern Region, Kanpur, draw the demand
draft in favour of "Regional Director, N.R., Department of Company
Affairs, Kanpur", and payable at Kanpur.
10. Deliver
a copy of the application to the concerned Registrar of Companies, for
information.
11. On receipt of approval,
convene a Board Meeting after giving notice to all the directors of the company
as per Section 286 to fix the date, time, place and agenda of the General
Meeting where the auditor will be removed, and also another auditor will be
appointed in his place.
12. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
13. Issue noticest in writing at
least twenty‑one days before the date of the General Meeting along with
the relevant explanatory statement and hold the General Meeting and remove the
auditor by passing an Ordinary Resolutionj by simple majority, and appoint new
auditor in his place. [Section 171(1) read with section 173(2) and section
189(1)].
14. If the shares of your company are listed
on a recognised Stock Exchange, then do the following:
(i) Forward to the Stock Exchange three
copies of the notice of the meeting issued to the shareholders;
(ii) Forward to the Stock Exchange a copy of
the proceedings of the General Meeting;
(iii) Notify promptly to the Stock Exchange the removal of the
auditor.
[Clauses 31(c)
& (d) and 30(c) of the Standard Listing Agreement].
15. Deliver to the concerned Registrar
of Companies a copy of the approval, letter obtained by the company from the
Regional Director.
16. Note that as per the
Citizen's Charter of the Department of Company Affairs, Schedule II, Serial No.
3, the application made to the Regional Director will be processed within 45
days. [No. 5/25/99‑CL‑V, Press Note No. 9/99, dated 9‑8‑1999].
Topic 95
DO
YOU WISH TO APPOINT AN AUDITOR ALREADY HAVING MORE THAN TWENTY AUDITS?
1. Please note that the
requirement of section 224, after its amendment by the Companies (Amendment)
Act, 1988, is not to appoint a person as auditor who is in full‑time
employment elsewhere and who is already holding appointment as auditor of the
specified number of companies. [Section 224(1‑B)].
2. In
case, the person is in part‑time employment, the restrictions on the
number of audits do not apply to him.
3. Again,
if the person is in full‑time practice and is not in full‑time
employment elsewhere, these restrictions on the number of audits do not apply
to him.
4. If the person proposed to be
appointed is practising in his individual capacity, he can be appointed as
auditor of any number of companies and his appointment need not be confined to
twenty companies of which not more than ten shall be companies having a paid‑up
share capital of Rs. 25 lakhs or more. [Section 224(1‑C) Explanation]
5. Please note that the
provisions of sub‑section (1‑B) of section 224 will not be
applicable to a private company on and after the commencement of the Companies
(Amendment) Act, 2000. [Section 224(1B) fourth proviso]
6. Further note that if your
company is a private company which is a subsidiary of a public company, it will
be treated as a public company. [Section 3(1)(iv)(c)]
Topic 96
DO
YOU WISH TO APPOINT OR RE‑APPOINT A COST AUDITOR? [SECTION 233B]
1. Upon receipt of the order of
the Central Government under Section 233B(1) determine the name of the Cost
Auditor at a Board Meeting convened after giving notice to all the directors of
the company as per Section 286 and pass a resolution sanctioning the proposal
for making the application to the Central Government to appoint a cost auditor.
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine.of upto Rs.
1000/‑. [Section 286(2)]
3. Obtain a written certificate
from the cost auditor to the effect that the appointment, if made, will be in
accordance with the provisions of Section 224(lB). [Section 233B(2), Proviso].
4. Note that the aforesaid
certificate need not be obtained from the cost auditor if your company is a
private company, on and after the commencement of the Companies (Second
Amendment) Act, 1999. [Section 224(1B)fourth proviso]
5. Note that the cost auditor
so appointed should not hold any security of your company after a period of one
year from the date of commencement of the Companies (Amendment) Act, 2000.
[Section 226(3)(e)]
6. Obtain the approval of the
Central Government for appointing the Cost Auditor as determined in item 1
above, by making an application to it in Form No. 23C [Section 233B(2)]
7. Get the application signed
by any director, managing or whole‑time director, manager or the
secretary of your company.
8. Send along with the application
a receipted treasury challan or demand draft evidencing the payment of
requisite fees, prescribed under the Companies (Fees on Applications) Rules,
1999.
9. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑, as the case may be, and as prescribed by the
Companies (Fees on Applications) Rules, 1999, by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National BanO for credit.
10. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Govemment's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w. ef 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
11. Two copies of the treasury
challan will be given back to the depositor and the original copy of the
treasury challan. should be attached to the application made to the Central
Government mentioned in item 6.
12. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi, and the said demand draft should be
attached to the application made to the Central Government mentioned in item 6.
13. Deliver to the concerned
Registrar of Companies' a copy of the application together with a copy of all
the documents attached to it.
14. Hold another Board Meeting
after giving notice to all the directors of the company as per Section 286 to
pass a Resolution and to appoint the Cost Auditor.
15. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/-. [Section 286(2)]
16. Give intimation to the
Auditor about the appointment.
17. Deliver a certified true
copy of the Central Government's approval to the concerned Registrar of
Companies.
18. See that the cost auditor so
appointed/re‑appointed is not the statutory auditor of the company as
appointed under Section 224(3) and he should also not be a person falling under
sub‑sections (3) and (4) of Section 226. [Section 233B(5)]
19. This appointment of Cost
Auditor applies only where the Central Government has prescribed maintenance of
cost records under Section 209(1)(d) and directed under Section 233B that the
audit of the cost accounts be conducted. [Section 233B(1)].
20. Note that if a company fails
to appoint a Cost Auditor that company will be punishable with fine of upto Rs.
50,000/- and every officer of that company who is in default will be punishable
with imprisonment for term of three years or with fine of upto Rs. 50,000/- or
with both. [Section 233B(11)]
21. Further note that as per the
Citizen's Charter of the Department of Company Affairs, Schedule I, Serial No.
20, the application made to the Central Government will be processed within 30
days. [No. 5/25/99‑CL‑V, Press Note No. 9/99, dated 9‑8‑1999.]
Topic 97
DO
YOU WISH TO HAVE THE AUDITOR APPOINTED BY THE CENTRAL GOVERNMENT?
1. If in your Annual General
Meeting neither the retiring auditor nor any other auditor is re‑appointed
or appointed, the Central Government may appoint a person to fill the vacancy.
[Section 224(3)]
2. Give notice to the Regional
Director, Kanpur or Calcutta or Mumbai or Chennai, as the case may be,
depending on its jurisdiction on the particular region in which the company's
registered office is situated within seven days from the date of the Annual
General Meeting stating that no auditor has been appointed or re‑appointed
in that meeting. [Section 224(4)]
3. Prepare the aforesaid notice
on plain paper, preferably on the letter head of your company as there is no
prescribed form of the said notice.
4. State
in the notice the reasons for which no auditor could be appointed or re‑appointed.
5. Attach the following
documents along with the notice:
(i) A certified true copy of the proceedings of the General
Meeting;
(ii) A certified true copy of the Memorandum
and Articles of Association of your company;
(iii) A certified true copy of the Annual Report.
(iv) A treasury challan or demand draft
evidencing the payment of the requisite fee of minimum Rs. 500/‑ and
maximum Rs. 2000/- as the case may be and as rescribed by the Companies (Fees
on Applications) Rules, 1999.
6. Deliver simultaneously to
the concerned Registrar of Companies' a copy of the notice along with a copy of
each of the documents annexed to it.
7. On receipt of the Regional
Director' order, the person whom the Central Government has directed to be
appointed as the auditor of the Company will be the auditor of your company and
will hold office till the conclusion of the next Annual General Meeting.
8. Such an auditor will be paid
remuneration as fixed by the Central Government.
9. Give intimation within seven
days from the date of receipt of the Central Government's order to the person
appointed as auditor of your company by the Central Government [Section 224(1)]
10. See that auditor informs the
concerned Registrar of CornpanieS by giving a notice in Form No. 23B within
thirty days from the receipt by him of intimation of his appointment.
11. No filing fee is required to
be paid for giving the above‑mentioned notice.
12. Since the Auditor is
appointed by the Regional Director, it is presumed that the certificate under
Section 24(1B) must already have been given by him, otherwise such a
certificate should be obtained from the said auditor before his appointment.
13. Keep in mind that if your
company is a private company the, provisions of sub‑section (1B) of
section 224 will not be applicable to your company on and after the
commencement of the Companies (Section Amendment) Act, 1999. [Section 224 (1B)
fourth proviso]
14. Note
that if a company fails to give notice within seven days to the Central
Government, the company and every officer of the company who is in default will
be punishable with fine of upto Rs. 5000/‑. [Section 224(4)].
Topic 98
1. Auditor of such a company is
appointed or re‑appointed by the Comptroller and Auditor‑General of
India. [Section 619(2) read with Section 619B].
2. Obtain a certificate from
the auditor to be so appointed to the effect that such appointment, if made,
will be within the specified number as mentioned in the Explanation I of
Section 224(1C). [Section 224(1B)]
3. Keep in mind that the
aforesaid certificate need not be obtained from the auditor to be so appointed
on and after the commencement of the companies (Amendment) Act, 2000, if the
company is a private company. [Section 224(1B) fourth proviso]
4. Obtain the name of the
person determined by the 'Comptroller and Auditor‑General of India as
the auditor of the company.
5. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 to
fix the date, time, place and agenda of the Annual General Meeting to appoint
the auditor by passing a Special Resolution. [Section 224A(1)]
6. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/-. [Section 286(2)]
7. Issue notices in writing at
least twenty‑one days before the date of the meeting along with relevant
explanatory statement. [Section 171(1) read with section 173(2)]
8. Hold the Annual General
Meeting and pass the Special Resolution by
three‑fourths majority. [Section 189(2)]
9. If the shares of the
Government company are listed on a recognised Stock Exchange, forward promptly
to the Stock Exchange three copies of the notice and a copy of the proceedings
of the General Meeting. [Clause 31(c) and (d) of the Standard Listing
Agreement]
10. File a copy of the Special
Resolution along with the Explanatory Statement with the concerned Registrar of
Companiess within thirty days of its passing in Form No. 23 after paying
requisite fee [192(1) & (4)(a)] prescribed under Schedule X to the
Companies Act, 1956, either in cash, or treasury challan. [Rule 22].
11. Please also keep in mind
that if default is made in complying with the aforesaid requirements, the
company and every officer of the company who is in ,default will be punishable
with fine upto Rs. 200/‑ for every day during which the default
continues. [Section 192(5)]
12. Within seven days of the
appointment, give intimation to the auditor so appointed by the Comptroller and
Auditor‑General of India. [Section 619 read with Section 224(1) and
(8)(aa)].
13. See that the auditor within
thirty days of such receipt of intimation, gives notice to the concerned
Registrar of Companies in Form No. 23B stating whether he has accepted or
refused the appointment. [Section 224(1A)].
14. No filing fee is required to
be paid for giving the above‑mentioned notice.
Topic 99
DO
YOU WISH TO APPOINT AN INTERNAL AUDITOR UNDER SECTION 227(4A)?.
1. Verify the following before
taking the decision of appointing an internal auditor:
(i) Whether your company is engaged in one
or more of the following activities mentioned in clause 1(2) of the
Manufacturing and Other Companies (Auditor's Report) Order, 1988, namely:
(a) manufacturing, mining or processing;
(b) supplying and rendering services;
(c) trading; and
(d) the business of financing, investment,
chit fund, nidhi or mutual benefit societies.
(ii) Whether your company being engaged in
any of the abovementioned activities comes within the scope of the definitions
given in clause (2)(a) to (h) of the same order.
2. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
appoint the internal auditor and fix his remuneration by passing a resolution.
3. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of Rs. 1000/‑.
[Section 286(2)]
4. Intimate the internal auditor so
appointed.
5. Note that if a company fails
to appoint an internal auditor under section 227(4‑A) read with the
Manufacturing and Other Companies (Auditor's Report) Order, 1988 then the
company and every officer of the company who is in default will be punishable
with fine of upto Rs. 5000/‑. [Section 232]
Topic 100
DO
YOU HAVE A CASE WHERE A SPECIAL AUDITOR IS APPOINTED UNDER SECTION 233A?
1. See whether you have
received an order of the Central Government directing a special audit of the
company's accounts for such period or periods as may be specified in the order.
2. The Central Government may
also by a separate or the same order appoint a Chartered Accountant or the
company's Statutory Auditor as the Special Auditor. [Section 233A(1) & (2)]
3. See that the special auditor
holds office for such period or periods as may be specified in the Central
Government's order and has same powers and duties in relation to the special audit
as an auditor of the company under Section 227. [Section 233A(3)]
4. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
pass a resolution to pay as determined by the Central Government the expenses of
and incidental to any such special audit conducted by the special auditor
appointed under the order of the Central Government. [Section 233A(7)]
5. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting as
aforesaid and who fails to do so will be punishable with fine of upto Rs. 1000/‑.
[Section 286(2)]
6. Intimate the statutory
auditor regarding his appointment as a special auditor if the Central
Government by order under section 233A(1) appoints him as the special auditor.
7. Please also keep in mind
that the Central Government may by order direct any person specified in its
order to furnish to the special auditor within such time as may be specified
therein such information or additional information as may be required by the
special auditor in connection with the special audit and if such person fails
to comply with such order, he will be punishable with fine upto Rs.
5,000/-.[Section 233A(5)]
8. On receipt of the report
from the special auditor, the Central Government shall send to the company
after four months of such receipt either a copy of or relevant extracts from
the report with its comments thereon and require the company either to
circulate it to the members or have it read at the immediately next General
Meeting. [Section 233A(6)].
9. On
receipt of such comments, circulate it among all the members of the company
after getting it printed.
10. See that such comments are
also read at the next General Meeting.
11. Note that if default is made
in the payment of the expenses of and incidental to any special audit as
determined by the Central Government, such payment will be recoverable from the
company as an arrear of land revenue. [Section 233A(7)]
Topic 101
DO
YOU WISH TO APPOINT AN AUDITOR IN CASUAL VACANCY UNDER SECTION 224(6)(a) ?
1. Verify whether the vacancy
in the office of the auditor is caused by the resignation of the auditor, or
not.
2. If not, then hold a Board
Meeting after giving notice to all the directors of the company as per Section
286 and pass a resolution appointing an auditor to fill the casual vacancy and
fix his remuneration. [Section 224(8)(a)]
3. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑.[Section 286(2)]
4. Obtain a written certificate
from the auditor to the effect that the appointment, if made, will be in
accordance with the limits specified in Section 224(1B).
5. Note that the aforesaid
written certificate is not required to be obtained from the auditor if your
company is a public company. [Section 224(1B) fourth proviso]
6. See that the auditor so
appointed in casual vacancy holds office until the conclusion of the company’s
next Annual General Meeting. [Section 224(6)(b)]
7. Intimate the auditor so
appointed in casual vacancy immediately.
8. See that till the Board
fills up the casual vacancy, the remaining auditor or auditors of the company,
if any, continues or continue to act. [Section 224(6)(a)]
9. If the shares of your
company are listed on a recognised Stock Exchange promptly notify the exchange
about the change in the auditor. [Clause 30(c) of the Standard Listing
Agreement]
10. Further note that the
auditor so appointed does not suffer from any of the disqualifications
mentioned in section 226(3).
Topic 102
DO
YOU WISH TO APPOINT AN AUDITOR IN A VACANCY CAUSED BY THE RESIGNATION OF AN
EXISTING AUDITOR?
1. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
fix the date, time, place and agenda for holding a General Meeting to pass an
Ordinary Resolution to appoint an auditor in a vacancy caused by resignation of
the existing auditor. [Section 224(6)(a), Proviso].
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
3. Obtain
a written certificate from the auditor to the effect that the appointment, if
made, will be in accordance with the limits specified in Section 224(1B).
4. Note that the aforesaid
written certificate is not required to be obtained from the auditor if your
company is a public company. [Section 224(1B) fourth proviso]
5.
(i) Issue notices in writing at least
twenty‑one days before the date of the General Meeting with suitable
Explanatory Statement. [Section 171(1) read with section 173(2)].
(ii) Hold the General Meeting and pass the Ordinary
Resolution by simple majority. [section 189(1)].
6. See that the auditor so
appointed holds office until the conclusion of the next Annual General Meeting
of the company.
7. Intimate the auditor so
appointed, in casual vacancy immediately.
8. See that till the auditor is
so appointed in the General Meeting remaining auditor or auditors of the
company, if any, acts or act during the continuation of such vacancy.
9. Promptly forward to the
Stock Exchange with which the shares of your company are listed, three copies
of the notices and a copy of the proceedings of the General Meeting. [Clause
31(c) and (d) of the Standard Listing Agreement]
10. Further
note that the auditor so appointed does not suffer from any of the
disqualifications mentioned in section 226(3).
Topic 103
1. If your company wants to
appoint an auditor in his individual capacity then see that the said auditor is
a chartered accountant in practice. [Section 226(1)]
2. If your company wants to
appoint a firm then see that all the partners of that firm are practising in
India and are chartered accountants. [Section 226(1), Proviso]
3. Where a firm is appointed as
the auditor of your company then see that the said firm is appointed by its
name to be the auditor of your company and in such case any partner of that
firrd may act in the name of the firm. [Section 226(1), Proviso]
4. While appointing an auditor
of your company whether in individual capacity or in the name of the firm
ensure that the said auditor is qualified to be so appointed and does not
suffer from the following disqualifications:
(i) the auditor is not a body corporate; [Section 226(3)(a)]
(ii) the auditor is not an officer or
employee of your company; [Section 226(3)(b)]
(iii) the auditor is not a person who is a
partner or who is in the employment of an officer or employee of your company;
[Section 226(3)(c)]
(iv) the auditor is not a person who is
indebted to your company for an amount exceeding Rs. 1,000/‑or who has
given any guarantee or provided any security in connection with the
indebtedness of any third person to your company for an amount exceeding Rs.
1,000/‑; [Section 226(3)(d)]
(v) the auditor is not a person holding any
security of the company after a period of one year from the date of
commencement of the Companies (Second Amendment) Act, 2000. [Section 226(3)(e)]
5. Remember that for the above
purpose security means an instrument which carries voting rights. [Section
226(3)(e) Explanation]
6. Keep in mind that while
appointing an auditor of your company whether in individual capacity or in the
name of the firm ensure that the said auditor. is also qualified to be
appointed and does not exceed the limits of specified member of companies
mentioned in section 224(1B) read with Explanations I and II to sub‑section
(1C) of section 224.
7. Note that if your company is
a private company the aforesaid disqualification will not be applicable to
your company. [Section 224(1B) Fourth Proviso]
8. Further note that if your
company is a private company which is also a subsidiary of a public company by
virtue of sub‑clause (c) of clause (vi) of subsection (1) of section 3.
9. Keep in mind your company
should not appoint an auditor who is disqualified as above for appointment as
an auditor in any body corporate which is your company's subsidiary company or
which is your company's holding company or which is the subsidiary company of
your company's holding company or in any other body corporate which is a
company. [Section 226(4)]
10. Note that if after the
appointment of the auditor of your company the said auditor is subject to any
of these disqualifications he will be deemed to have vacated office as your
company's auditor. [Section 226(5)]
11. Further
note that if default is made in coplying with the aforesaid requirements, the
company and every officer of the company who is in default will be punishable
with fine of upto Rs. 5000/-. [Section 232].
Topic 104
1. Give every auditor of your
company the right of access at all times to the books of account and vouchers
of your company whether kept at your company's head office or elsewhere.
[Section 227(1)]
2. Allow the auditor of your
company to get from the officers of your company such information or
explanation as that auditor may think necessary for the performance of his
duties as auditor. [Section 227(1)]
3. Allow the auditor of your
company to inquire whether loans and advances made by your company on the basis
of security have been properly secured and whether the terms on which they have
been made are not prejudicial to the interests of your company or its members.
[Section 227(1A)(a)]
4. Allow the auditor of your
company also to inquire whether transactions of your company which are
represented merely by book entries are not prejudicial to the interests of your
company. [Section 227(1A)(b)]
5. If your company is not an
investment company or a banking company then allow the uditor of your company
also to inquire whether so much of the assets of your company as consist of
securities, debentures and other securities have been sold at a price less than
that at which they were purchased by your company. [Section 227(1A)(c)]
6. Further allow the auditor of
your company to inquire whether loans and advances made by your company have
been shown as deposits. [Section 227(1A)(d)]
7. Also allow the auditor of
your company to inquire about personal expenses that have been charged to
revenue account. [Section 227(1A)(e)]
8. Where it is stated in the
books and papers of your company that any securities have been allotted for
cash then allow the auditor of your company to inquire whether cash has
actually been received in respect of such allotment and if no cash has actually
been so received, whether the position as stated in the account books and the
balance‑sheet is correct, regular and not misleading. [Section
227(1A)(f)]
9. See that the auditor of your
company makes a report to the members of your company on the account examined
by him and on every balance‑sheet and profit and loss account and on
every other document declared by the Act to be part of or annexed to the
balance‑sheet or profit and loss account which was laid before your
company in its annual general meeting during the auditors tenure of office.
[Section 227(2)]
10. Ensure that the aforesaid
report given by the auditor of your company states whether in your company's
auditor's opinion and to the best of his information and according to the
explanations given to him, the said accounts give the information required by
the Act in the manner so required and give a true and fair view [Section
227(2)] with regard to the following:
(i) the state of your company's affairs as
at the end of its financial year in the case of the balance‑sheet;
[Section 227(2)(i)]
(ii) the profit or loss for your company's
financial year in the case of the profit and loss accounts. [Section
227(2)(ii)]
11. Ensure that the auditor's
report also states the reasons for answering in the negative or with a qualification
with regard to the aforesaid two matters if they are answered in the negative
or with a qualification. [Section 227(4)]
12. Further ensure that the
auditor's report states whether the auditor of your company has obtained all
the information and explanations which to the best of his knowledge and belief
were necessary for the purposes of his audit. [Section 227(3)(a)]
13. Also ensure that the
auditor's report of your company states whether in the opinion of your
company's auditor proper books of account as required by law have been kept by
the company so far as appears from the auditor's exarnination of those books
and proper returns adequate for the purposes if his audit have been received
from branches not visited by the auditor. [Section 227(3)(b)]
14. Also ensure that the
auditor's report of your company states whether the report on the accounts of
any branch office audited by another auditor has been forwarded to your
company's auditor as required under section 184(3)(c) and how he has dealt with
the same in preparing the auditor's report. [Section 227(3)(bb)]
15. Also ensure that the
auditor's report of your company states whether your company's balance‑sheet
and profit and loss account dealt with by the said report are in agreement with
the books of account and returns. [Section 227(3)(c)].
16. Further ensure that the
auditor's report of your company states in thick type or in italics the
observations or comments of the auditor which have any adverse effect on the
functioning of the company. [Section 227(3)(d)]
17. Further ensure that the
auditor's report of your company states whether any director of your company
is, disqualified from being appointed as director under clause (g) of sub‑section
(1) of section 274. [Section 227(3)(e)]
18. Further ensure that the
auditor's report of your company states whether the profit and loss account and
balance‑sheet of your company comply with the Accounting Standards
referred to in sub‑section (3C) of section 211. [Section 227(3)(d)]
19. See that the auditor's
report of your company also gives the answers to the reasons as to why any
matters given under items 12,13,14 and 15 have been an$wered in the negative or
with a qualification if it is so given. [Section 227(4)]
20. Ensure that the auditor follows
the Standard. Auditing Practice (SAP) 16 for going concern for all audits
relating to accounting periods beginning on or after April, 1999.
21. Note that the accounts of
your company will not be deemed as not having been properly drawn up and the auditor's
report of your company also should not state so merely on the ground that your
company has not disclosed certain matters which are not required to be
disclosed by your company by virtue of any provision of the Act or any other
Act and that those provisions are already specified in your company's balance‑sheet
and profit and loss account. [Section 227(5)]
22. Note that if your company
fails to comply with the provisions of section 227 then the company and every
officer of the company who is in default will be punishable with fine of upto
Rs. 5000/‑. [Section 232] .
23. Further ensure that your
Company's auditor follows the guidance note on auditor's duties in relation to
the year 2000 (Y2K) published in The Chartered Accountant issue of January, 1999.
24. Keep in mind that if an
auditor does not add a paragraph in his report about the requirement as
mentioned in item 16 above the Department of Company Affairs will be
constrained to take penal action against such an auditor as well as refer the
matter to the Institute of Chartered Accountants of India for initiating
disciplinary proceedings against him. [Press Note No. 7/99 (F.No. 2/9/99‑V),
dated 23‑ 7‑1999].
Topic 105
DO
YOU WISH TO VERIFY THE ENTITLEMENTS OF THE AUDITORS OF YOUR COMPANY?
1. Ensure that all notices of
any general meeting of your company and any other communications relating to
any general meeting of your company are sent to the auditors' of your company.
[Section 231]
2. Also ensure that the
auditors of your company attend all the general meetings of the company.
[Section 231]
3. Further ensure that the
auditors of your company are allowed to be heard at any general meeting of the
company which they attend on any part of the business which concerns them as
auditors. [Section 231]
4. Further ensure that the
auditors' report of your company is read before the company in the annual
general meeting by the secretary of the company. [Section 230]
5. Keep the auditors report of
your company open for inspection by any member of your company. [Section 230]
6. Keep in mind that if your
company defaults in complying with the provisions of sections 230 and 231 as
aforesaid, the company and every officer of the company who is in default will
be punishable with fine of upto Rs. 5000/‑. [Section 232]
(Topic 106 and Topic 107)
Topic 106
DO
YOU WISH TO APPOINT/RE‑APPOINT SOLE SELLING/ BUYING AGENTS?
A. In
the case of companies having a paid‑up share capital of less than Rs.50
lakhs:
1. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
pass a resolution appointing the sole selling agent fixing the terms and
conditions of appointment.
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑. [Section 286(2)]
3. In the same board meeting
also fix the date, time, place and agenda of the General Meeting to pass an
Ordinary Resolution. [Section 294(2)]
4. Disclose complete interests
of directors, if any. In the case of a public company or its subsidiary or a
holding company, no director who is interested or concerned in any way, whether
directly or indirectly, in the contract of appointment should take part in
discussion or voting nor his presence should be counted in the quorum for that
purpose. [Section 300]
5. Please also keep in mind
that every director who knowingly contravenes the provisions of section 300
will be punishable with fine upto Rs. 50,000/‑.
6. See that the terms and
conditions of appointment or re‑appointment do not contain the term
exceeding five years at a time. [Section 294(1)]
7. Issue notices in writing at
least twenty‑one days before the date of the General Meeting proposing
the Ordinary Resolution with suitable Explanatory Statement. [Section 294(2)
read with sections 171(1) and 173(2)]
8. Hold the General Meeting and
pass the Ordinary Resolution by simple majority to approve the appointment of a
sole selling agent. [Section 189(1)]
9. If the General Meeting does
not approve the same, the appointment will cease to be valid from the date of
the General Meeting. [Section 294(2A)]
10. Alternatively, without going
through the procedure as mentioned in items 1, 2, 3, 4 and 5 hold a General
Meeting straight away after fixing up the date, time, place and agenda in a
Board Meeting and pass an Ordinary Resolution by simple majority therein to
approve the appointment of the sole selling agent.
11. Forward three copies of the
notices and a copy of the proceedings of the General Meeting to the Stock
Exchange with which the shares of your company are listed. [Clause 31(c) and
(d) of the Standard Listing Agreement]
12. Where an individual, firm or
body corporate has substantial interest in the company, such individual, firm
or body corporate cannot be appointed sole selling agent or buying agent except
with the previous approval of the Central Government. [Section 294AA(2)]
13. Note that in case the
aforesaid provision is not attracted to the appointment of sole selling agent
or buying agent of your company at the time of entering of agreement with him,
it will not be obligatory on your company to comply with the aforesaid
requirement for the continuance of the said appointment for the re‑maining
duration of his current tenure but not during any extension thereof even if the
provisions of section 294AA(2) become applicable after the appointment due to
the sole selling agent or buying agent acquiring substantial interest. [Circular
No. 1/1/78‑CL‑ V, dated 7‑3‑1978]
14. In such cases apply in Form
I or Form II of the Companies (Appointment of Sole Agents) Rules, 1975, to the
Central Government. [Section 294AA (2) read with Explanation (b) to it]
15. In the above case also deliver
a copy of the application together with a copy of each of the documents
attached to it to the concerned Registrar of Companies.
16. Attach a treasury challan or
demand draft evidencing the payment of the requisite fees as per the Companies
(Fees on Application) Rules, 1999.
17. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑ as the case may be, and as prescribed by the
Companies (Fees on application) Rules, 1999, by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National Bank for credit.
18. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.ef 21‑6‑1996).
[Rule 22(2) of the Companies (Central Governments) General Rules and Forms,
1956 read with Rule 3 of the Companies (Appointment of Sole Agents) Rules,
1975]. For account head and code please see Rule 22(2) in Appendix 1.
19. Two copies of the treasury
challan will be given back to the depositor by the said branch of the bank and
the original copy should be attached to the application made to the Central
Government.
20. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi and said demand draft should be
attached to the aforesaid application to the Central Government.
21. File the Ordinary Resolution
of the General Meeting under item 7 with Explanatory Statement with the
concerned Registrar of Companies in Form No. 23 within thirty days of its
passing along with a certified true copy of the terms and conditions of
appointment [Section 192(4)(ee)(ii)(g)] after paying the requisite fee
prescribed under Schedule X to the Companies Act, 1956, either in cash, or
treasury challan. [Rule 22]
22. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 200/‑ for every day during which the default continues. [Section
192(5)]
23. If the case falls within the
purview of Section 314, complete, the formalities as mentioned in Topic 108.
24. Take note of the provisions
of Section 294 and Section 294AA(1) as regards disqualifications, disabilities
etc. of a person to be appointed as sole selling agent.
25. Note that if during the
continuance of the current tenure of the sole selling agent or buying agent of
your company there is increase in the paid‑up capital of your company to
make it Rs. 50 lakhs or more, it will not be obligatory on the part of the
company to comply with the provisions of section 294AA(3) during the remaining
duration if the sole selling agent's or buying agent's current tenure.
[Circular No. 11/77, dated 3‑11‑1977]
26. Further note that if your
company's paid‑up share capital is less than Rs. 50 lakhs but is equal to
or more than Rs. 10 lakhs, your company is required to obtain a compliance
certificate from a secretary in whole‑time practice to be filed with the
Registrar of Companies mentioning therein inter alia that the company has
appointed the sole selling agent in compliance with the provisions of the Act
as per paragraph 16 of the Form of Compliance Certificate appended to the
Companies (Compliance Certificate) Rules, 2001.[Section 383‑A(1) proviso]
B. In
the case of companies having a paid‑up share capital of Rs. 50 lakhs or
more:
1. Convene a Board Meeting
after giving noticel to all the directors of the company as per Section 286 and
determine the name of the sole selling or buying agent to be appointed and fix
up the date, time, place and agenda for calling a General Meeting and to pass a
special resolution subject to approval of the Central Government in this
regard. [Section 294AA(3)]
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑.[Section 286(2)]
3. Issue notices in writing
with suitable Explanatory Statement at least twenty one days before the date of
the General Meeting and hold the General Meeting and pass the Special
Resolution by three fourths majority. [Section 171(1) and 173(2) read with
section 189(2)]
4. Forward three copies of the
notices and a copy of the proceedings of the General Meeting to the Stock
Exchange with which the Shares of your company are listed. [Clause 31(c) and
(d) of the Standard Listing Agreement]
5. File the copy of the Special
Resolution with Explanatory Statement with the concerned Registrar of Companies
in Form No. 23 within thirty days of its passing along with certified true copy
of the terms and conditions of appointment [Section 192(4)(ee)(ii) and (g)]
after paying the requisite fee as prescribed under Schedule X to the Companies
Act, 1956, either in cash, demand draft or treasury challan (Rule 22]
6. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 200/‑ for every day during which the default continues. [Section
192(5)]
7. Apply for the approval of
the Central Government for appointing the sole selling or buying agent as
determined in item 1 above in Form I or Form II of the Companies (Appointment
of Sole Agents) Rules, 1975. [Section 294AA (3)]
8. Attach a treasury challan or
demand draft evidencing the payment of the requisite fees as per the Companies
(Fees on Application) Rules, 1999.
9. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑ as the case may be, and as prescribed by the
Companies (Fees on Application) Rules, 1999, by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National Bank for credit.
10. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Govemment's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.e.f. 21‑6‑1996).
[Rule 22(2) of the Companies (Central Government's) General Rules and Forms
1956 read with Rule 3 of the Companies (Appointment of Sole Agents) Rules,
1975]. For account head and code please see Rule 22(2) in Appendix 1.
11. Two copies of the treasury
challan will be given back to the depositor by the said branch of the bank and
the original copy should be attached to the application to the Central
Government.
12. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi, and the said demand draft should be
attached to the application made to the Central Government.
13. Take
note of the provisions of Section 294 and Section 294AA(1) as regards
disqualifications, disabilities etc. of a person to be appointed as sole
selling agent.
14. See that the appointment is
made for a period not exceeding five years at a time [Section 294(1)]
15. Also ensure that the
proposal to appoint sole selling agent is not in respect of an industry in
which no sole selling agent can be appointed. 17
16. Note that the appointment of
distribution would also fall within the ambit of section 294 depending on the
distributors contractual relationship between the parties and the terms and
conditions of the appointment, and if the true nature of the appointment, and
if the true nature of the functions performed by them shows that although a
person is described as a distributor, he performs in fact the functions of a
sole selling agent notwithstanding his description given in the deed of
contract. [6th Annual Report on the Workings and Administration of
the Companies Act, 1956 ‑Year ended March 31, 1962]
17. Further note that as per the
Citizen's Charter of the Department of company Affairs, Schedule I, Serial No.
12 the application made to the Central Government will be processed within 30
days. [No. 5/25/99 CL‑V, Press Note No. 9/99, dated 9‑8‑1999]
18. Also note that the
provisions of sub‑sections (2) and (3) of section 294AA do not apply to a
Government Company. [Notification GSR 578(E), dated 16‑7-1985]
Topic 107
DO
YOU WISH TO PAY COMPENSATION TO SOLE SELLING AGENTS FOR LOSS OF OFFICE?
[SECTION 294A]
1. Verify the following before
paying compensation to your sole selling agent:
(i) Whether the appointment of the sole
selling agent has become invalid as it is disapproved by the General Meeting as
required by Section 294(2A);
(ii) Whether the sole selling agent has
resigned his present office and has been appointed as such in the reconstructed
company or body corporate resulting from amalgamation;
(iii) Whether the sole selling agent
submitted his resignation for any other reason;
(iv) Whether he is guilty of fraud or breach
of trust or gross negligence as a sole selling agent;
(v) Whether he has instigated or has taken
part directly or indirectly in bringing about the termination of his office as
a sole selling agent. [Section 294A (1)].
2. If the sole selling agent
has ceased to hold office due to any of the reasons mentioned above, your
company need not pay compensation to the sole selling agent due to loss of
office.
3. Keep in mind that if the
appointment of the sole selling agent made by the Board of Directors of your
company is not placed before the immediate next general meeting of your company
under section 294(2) the said appointment being invalid will also disentitled
the sole selling agent from claiming any compensation.
4. In any other case, fix the
compensation to be paid to the sole selling agent in the following manner:-
(i) Calculate the average remuneration
actually earned by the sole selling agent during his tenure of office
immediately preceding the date of his termination or cesser of office;
(ii) Apply this average remuneration to unexpired residue of his
term of office;
(iii) See that the total amount of
remuneration so calculated does not exceed the remuneration which he would have
earned if he was in the office during his whole term or for three years,
whichever is shorter.
5. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
pass a Board Resolution approving the payment of compensation to the sole
selling agents for loss of office as fixed per item 4 above.
6. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑.[Section 286(2)]
7. Send a certified copy of the
Board Resolution along with a letter stating that the office of the sole
selling agent has been terminated to the concerned Registrar of Companies for
information.
8. Make the payment to the sole
selling agent and obtain an official receipt from him for such payment .
(Topic 108 to Topic 111)
1. Appointment of a firm or body
corporate to an office or place of profit
Topic 108
DO
YOU WISH TO APPOINT A FIRM OR BODY CORPORATE TO AN OFFICE OR PLACE OF PROFIT?
1. If the firm or body
corporate holds the office or place of profit carrying a total monthly
remuneration of Rs. 10,000/‑ or more, then the following procedure should
be undertaken:
(i) Take a declaration in writing on
behalf of the firm or body corporate stating that it is connected with a
director in any of the ways mentioned in section 314(1) and (1B). [Section
314(2A)];
(ii) Convene a Board Meeting after giving
noticel to all the directors of the Company as per Section 286 and fix the
date, time, place and agenda of the General Meeting to pass a Special
Resolution;
(iii) Issue notices in writing at least
twenty‑one days before the date of the General Meeting proposing the
Special Resolution with suitable Explanatory Statement. [Section 171(1) read
with section 173(2)];
(iv) Hold the General Meeting and pass the
Special Resolutionf by threefourths majority. [Section 189(2)];
(v) File the Special Resolution in Form No.
23 with the concerned Registrar of Companies within thirty days of the passing
thereof [Section 192(4)(a)], after paying the requisite fee as prescribed under
Schedule X to the Companies Act, 1956, either in cash, or treasury challan.
[Rule 22]
(vi) Forward three copies of notices of the
General Meeting to the Stock Exchange if your company is listed on it. [Clause
31(c) of the Standard Listing Agreement]
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/-. [Section 286(2)]
3. Please also keep in mind
that if default is made in complying with the filing of the Special Resolution
with the Registrar of Companies within thirty days of its passing, the company
and every officer of the company who is in default will be punishable with fine
upto Rs. 200/- for every day during which the default continues. [Section
192(5)]
4. If the firm or body
corporate holds the office or place of profit carrying a total monthly
remuneration of Rs. 20,000/‑, or more then undertake the following
procedure:
(i) Approve it by passing a Special
Resolutionj by three‑fourths majority by holding a General Meeting after
giving notice at least twenty one days before the date of the meeting prior to
the holding of such office and do all other things as mentioned under item 1
above.
(ii) Apply to the Central Government in Form
No. 24B along with a copy of the Special Resolution passed by the company and a
treasury challan or demand draft evidencing payment of the requisite fee as per
the Companies (Fees on Applications) Rules, 1999, along with the following:
(a) Certified true copy of audited annual
accounts together with directors and auditor's reports for the last three
financial years.
(b) Certified true copy of the Special
Resolution passed in the general meeting together with the explanatory
statement in regard thereto.
(c) Certified true copy of the resolution
passed by the board of directors, if any, relating to the proposed appointment.
5. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑, as the case may be, and as prescribed by the
Companies (Fees on Applications) Rules, 1999, by way of treasuv challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National Bank for credit.
6. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as amended
vide GSR 251(E), dated 21‑6‑1996 (w.e.f. 21‑6‑1996).
For account bead and code please see Rule 22(2) in Appendix 1.
7. Two copies of the treasury
challan will be given back to the depositor by the said branch of the bank and
the original copy should be attached to application made to the Central
Government.
8. If
the application fee is paid by way of demand draft, then draw the demand draft
in favour of "Pay and Accounts Officer, Department of Company Affairs, New
Delhi", and payable at any bank located in New Delhi and the said demand
draft should be attached to the application to the Central Government.
9. See that the firm or body
corporate so appointed holds such office or place of profit for a period not
exceeding five years at a time except in such cases as are exempted under
Section 204.
10. In case of initial
appointment, applyf to the Central Government for approving the appointment
for a period of ten years. [Section 204(1), Proviso]
11. There is no prescribed form
for the above applicatiorif mentioned in item 8 above. Make the application in
the form of a letter in the letter head of the company to the Central
Government along with the following documents:
(i) A signed copy of the agreement between
the firm or body corporate and your company;
(ii) A certified true copy of the latest audited Balance‑sheet;
(iii) A certified true copy of the Board's resolution;
(iv) A treasury challan or demand draft
evidencing the payment of the requisite fees as prescribed under the Companies
(Fees on Applications) Rules, 1999.
12. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑, as the case may be, and as prescribed by the
Companies (Fees on Applications) Rules, 1999 by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Punjab National Bank for credit.
13. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.ef 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1.
14. Two copies of the treasury
challan will be given back to the depositor.by the said branch of the bank and
the original copy should be attached to the application made to the Central
Government.
15. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs, New Delhi", and
payable at any bank located in New Delhi, and the said demand draft should be
attached to the application.
16. Note that appointment of any
firm or body corporate to an office or place of profit under a company by a
contract or arrangement terrninable at will and/or without the approval of
Central Government is in contravention of section 204(1) and prosecution for
the same will be under section 529A. [Circular No. 19 of 1975, dated 12‑9‑1975]
17. Further note that as per the
Citizen's Charter of the Department of Company Affairs, Schedule I, Serial No.
10, the application to the Central Government will be processed within 30 days.
[No. 5/25/99‑CL‑V, Press Note No. 9/99, dated 9‑8‑1999]
18. Also note that if your
company's paid‑up share capital is less than Rs. 50 lakhs but is equal to
or more than Rs. 10 lakhs, your company is required to obtain a Compliance
Certificate from a secretary in whole‑time practice to be filed with the
Registrar of Companies mentioning therein inter alia that the company has
obtained necessary approvals from the Board of Directors, members and previous
approval of the Central Government pursuant to section 314 as per paragraph 11
of the Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001.[Section 383‑A(1) proviso].
2. Waiver of refund of money paid
under section 314
Topic 109
1. You have to obtain the
permission of the Central Government to waive refund of money by the person to
whom the company has paid Rs. 10,000/‑, Rs. 20,000/‑ or more per
month for holding any office or place of profit. [Section 314(2‑B) and
(2D) read with Rule 10C].
2. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
take the decision of such waiver by passing a Resolution.
3. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑.[Section 286(2)]
4. Make an applicationE to the
Central Government on a plain paper preferably on the letter head of the
company stating the reasons of such waiver as there is no prescribed form for
making this application.
5. The application will be
addressed to "The Secretary to the Government of India, Department of
Company Affairs, Ministry of Law, Justice and Company Affairs, Shastri Bhavan,
5th Floor, 'A' Wing, Dr. Rajendra Prasad Road, New Delhi‑ 110 001".
6. Enclose the following
documents along with the application:-
(i) A certified true copy of the latest
balance‑sheet and profit and loss account of the company;
(ii) A certified true copy of the Board's resolution;
(iii) A treasury challan or demand draft
evidencing the payment of the requisite feeas prescribed under the Companies
(Fees on Applications) Rules, 1999.
7. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs.
500/‑ and maximum Rs. 2000/‑, as the case may be, and as prescribed
by the Companies (Fees on Applications) Rules, 1999, by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches' of
the Punjab National Bank for credit.
8. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.e.f. 21‑6‑1996).
For account head and code please see Rule 22(2) in Appendix 1. Two copies of
the challan will be given back to the depositor by the said branch of the said
bank and the original copy should be attached to the application.
9. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of Pay and
Accounts Officer, Department of Company Affairs, New Delhi, and payable at any
bank located in New Delhi, and the said demand draft should be attached to the
application.
10. Deliver a copy of the
application together with a copy of each of the documents enclosed to the
concerned Registrar of Companies, simultaneously.
11. Note that as per the
Citizen's Charter of the Department of the Company Affairs, Schedule I Serial
No. 10, the application to the Central Government will be processed within 30
days. [No. 5/25/99‑CL‑V, Press Note No. 9/99, dated 9‑8-1999]
3.
Appointment of Constituted Attorney
Topic 110
DO YOU WISH TO APPOINT A CONSTITUTED ATTORNEY?
1. Get a draft prepared for
power of attorney incorporating the powers you wish to invest in him.
2. Convene a Board Meeting
after giving notice to all the directors of the company as per Section 286 and
approve the same authorising one or more of your directors to execute the same
and to affix the company's common seal thereon as per the terms of your
Articles of Association.
3. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/‑.[Section 286(2)]
4. Execute the same on duly
stamped paper as required under the Indian Stamp Act or the State Act, as
applied to the concerned State or Union Territory, and get it registered with
the appropriate registration authorities or have it notarised by a Notary
Public after affixing proper notarial stamps.
5. Also note that where
substantial managerial powers in any area of management is conferred, the
constituted attorney will be in the position of a deemed managing or whole‑time
director.
6. Keep in mind that for the
appointment of such a person Ordinary Resolution of the General Meeting or the
Central Government's approval will be required under Section 269, as the case
may be.
4. Appointment of Inspector to
Investigate
Topic 111
DO
YOU WISH TO HAVE AN INSPECTOR APPOINTED TO INVESTIGATE THE AFFAIRS OF YOUR
COMPANY?
A. Application by members
[Section 235(2)].
1. Make your application to the
Company Law Board, Principal Bench, New Delhi, or to the Additional Principal
Bench, Chennai, as the case may, by way of a petition to be prepared in Form
No. 1 in Annexure II to the Company Law Board Regulations, 1991 and annex
thereto the following:
(i) Documentary and/or other evidence in
support of the statements made in the petition, as are reasonably open to the
petitioner.
(ii) Documentary evidence in proof of the
eligibility and status of the petitioner with the voting power held by each of
them.
(iii) Affidavit verifying the aforesaid petition.
(iv) Demand draft evidencing payment of the fee of Rs. 2,500/-.
(v) Certified true copy of the Memorandum
and Articles of Association of the company.
(vi) Certified true copy of the latest
audited balance‑sheet and profit and loss account with the Directors' and
Auditors' Reports.
(vii) Memorandum of Appearance in Form No. 5
of the Company Law Board Regulations, 1991 with a certified true copy of the
Board Resolution or the executed Vakalatnama, as the case may be.
(viii) Original acknowledgement of the concerned
Registrar of Companies.
(ix) Original acknowledgement of the Central Government.
2. The affidavit should be
prepared on a non‑judicial stamp paper of the requisite value prevalent
in the State and should be either notarised by the Notary Public or sworn
before the Oath Commissioner.
3. The said affidavit should be
drawn up in first person and shall give the full name, age, occupation and
complete residential address of the deponent and shall be signed by the
deponent. [Regulation 14(5) of the Company Law Board Regulations, 1991]
4. If in the said affidavit the
deponent is not personally known to the person before whom the affidavit is
sworn, he should be identified by a person who is known to the person before
whom the affidavit is sworn. [Regulation 14(6) of the Company Law Board
Regulations, 1991]
5. The said affidavit should
clearly and separately indicate statements which are true to the knowledge of
the deponent, information received by the deponent, belief of the deponent and
information based on legal advice. [Regulation 14(7) of the Company Law Board
Regulations 1991]
6. Where any statement is
stated to be true to the information received by the deponent, the affidavit
shall also include the name and complete residential address of the person from
whom the information has been received by the deponent and declare that the
deponent believes that infori‑nation to be true. [Regulation 14(8) of the
Company Law Board Regulations, 1991]
7. Please ensure that the
aforesaid petition is written, type‑written, cyclostyled or printed,
neatly and legibly on one side of the substantial paper of foolscap size in
double space and separate sheets shall be stiched together and every page
consecutively numbered. [Regulation 11 of the Company Law Board Regulations,
1991]
8. Numbers and dates specified
therein should be expressed in figures as well as in words. The petition should
be divided into separate paragraphs which should be numbered serially and shall
state thereon the matter and the name of the company to which it relates.
[Regulation 12 of the Company Law Board Regulations, 1991]
9. Please also ensure that the
aforesaid petition is presented by the petitioner in original and four extra
copies thereof in person or through authorised representative to the office of
the Bench or to be sent by registered post with acknowledgement due addressed
to the Secretary or Bench Officer of the Bench concemed as the case may be.
[Regulation 14(1) of the Company Law Board Regulations, 1991]
10. Affix Court fee stamps of
the requisite value' on the original petition before submission.
11. Please furnish a copy of the
complete set of the petition to the concerned Registrar of Companies before
filing it with the Company Law Board [Regulation 14(3) of the Company Law Board
Regulations, 1991]
12. Please furnish a copy of the
complete set of the petition to the 'Regional Director of the concerned region,
before filing it with the Company Law Board. [Regulation 14(3) second proviso
of the Company Law Board Regulations, 1991]
13. Pay the filing fee of Rs.
2,500/- as per Rule 3 read with Rules 4 and
5 of the Company Law Board (Fees on Applications & Petitions) Rules, 1991,
by way of demand draft drawn in favour of "Pay and Accounts Officer,
Department of Company Affairs, New Delhi" and payable at New Delhi.
14. Ensure that the petition is
made by not less than two hundred members or from members holding not less than
one‑tenth of the total voting power therein, where the company is having
a share capital [Section 235(2)(a)]
15. Where the company does not
have a share capital, then the petition should be made by not less than one‑fifth
of the persons on the company's register of members. [Section 235(2)(b)]
16. Also ensure that the
petition explains the facts and circumstances under which the affairs of the
company need to be investigated by an inspector or inspectors.
B. Application
by a contributory, creditor or any person interested (Through Registrar of
Companies)
1. Make a representation to the
concerned Registrar of Companies with particulars and materials that the
business of the company is being carried on in fraud of its creditors or of
persons dealing with the company or otherwise for a fraudulent or unlawful
purpose.
2. If the Registrar of Companies
is satisfied, he may submit a report to the Central Government to give an order
for investigation of the affairs of the company. [Section 235(1) read with
Section 234(7)]
C. Application by Company
[Section 237(a)(i)]
1. Convene a Board Meeting after
giving notice to all the directors of the company as per Section 286 and take
the decision of having an investigation of your company by an Inspector
appointed by the Central Government and also fix the date, time, place and
agenda of the General Meeting to pass a Special Resolution. [Section 237(a)(i)]
2. Please keep in mind that
every officer of the company whose duty is to give notice of the Board Meeting
as aforesaid and who fails to do so will be punishable with fine of upto Rs.
1000/-. [Section 286(2)]
3. Issue notices at least
twenty‑one days before the date of the General Meeting proposing the
Special Resolution with suitable explanatory statement. [Section 171(1) read
with section 173(2)]
4. Hold the General Meeting and
pass the Special Resolution by three fourths majority declaring that the
affairs of the company ought to be investigated by an Inspector appointed by
the Central Government. [Section 189(2)]
5. Forward to the Stock
Exchange with which the shares of your company are listed, three copies of the
notice and a copy of the proceedings of the General Meeting. [Clause 31(c) and
(d) of the Standard Listing Agreement]
6. Make an applicationE to the
Central Government enclosing certified true copies of the following:
(i) Special resolution passed by the
company declaring that the affairs of the company ought to be investigated by
an inspector appointed by the Central Government;
(ii) Notice of the general meeting in which
the aforesaid special resolution was passed and the explanatory statement;
(iii) Memorandum and Articles of Association of the company;
(iv) Latest audited balance‑sheet and
profit and loss account and the Directors' and Auditors' Reports.
7. Enclose
a treasury challin or demand draft evidencing payment of the requisite fees as
prescribed under the Companies (Fees on Applications) Rules, 1999.
8. If the application fee is
paid by way of treasury challan, then pay the requisite fee of minimum Rs. 500/‑
and maximum Rs. 2000/‑, as the case may be, and as prescribed by the
Companies (Fees on Applications) Rules, 1999, by way of treasury challan
prepared in triplicate and paid in cash into any of the specified branches of
the Pun ab National Bank for credit.
9. The description of the Head
of account of the treasury challan should be as prescribed under Rule 22(2) of
the Companies (Central Government's) General Rules and Forms, 1956 and as
amended vide GSR 251(E), dated 21‑6‑1996 (w.ef 21‑6‑1996).
For accobnt head and code please see Rule 22(2) in Appendix 1.
10. Two copies of the treasury
challan will be given back to the depositor by the said banch of the bank and
the original copy should be attached to the application made to the Central
Government.
11. If the application fee is
paid by way of demand draft, then draw the demand draft in favour of "Pay
and Accounts Officer, Department of Company Affairs", New Delhi, and
payable at any bank located in New Delhi, and the said demand draft should be
attached to the application made to the Central Government.
12. File the Special Resolution
with the Explanatory Statement in Form No. 23 within thirty days of its passing
with the concerned Registrar of Companies [Section 192(1) & (4)(a)] after
paying the requisite fee prescribed under Schedule X to the Companies Act, 1956,
either in cash, demand draft or treasury challan. [Rule 22]
13. Please keep in mind that if
default is made in complying with the aforesaid requirements, the company and
every officer of the company who is in default will be punishable with fine
upto Rs. 200/‑. For every day during which the default continues.
[Section 192(5)]
14. Deliver a copy of the
application together with a copy of each of the documents enclosed to the
concerned Registrar of Companies, simultaneously.
15. Note that as per the Citizen's
Charter of the Department of Company Affairs, Schedule I, Serial No. 6, the
application will be processed within 60 days. [No. 5/25/99‑CL‑V,
Press Note no. 9/99, dated 9‑8‑1999]
D. Application
by any member after obtaining the High Court's order [Section 237(a)(ii)]
1. The Central Government,
Department of Company Affairs, will automatically appoint one or more competent
persons as inspectors to investigate the affairs of a company and to report
thereon in such manner as the Central Government may direct where the concerned
High Court in whose jurisdiction the registered office of the company falls, by
order declares that the affairs of the company ought to be investigated by an
inspector appointed by the Central Government.
2. For obtaining the aforesaid
order from the concerned High Court, an application by way of a petition is to
be made to the said Court along with a true copy of the Memorandum and Articles
of Association. [Rule 11(9) of the Companies (Court) Rules, 1959 read with its
Annexure II and Rule 22].
E. Application
to the Company Law Board for appointment of Inspectors by the Central
Government under section 237(b).
1. Make your application to the
Company Law Board, Principal Bench, New Delhi, or to the Additional Principal
Bench, Chennai, as the case may be, by way of a petition to be prepared in Form
No. 1 in Annexure II to the Company Law Board Regulations, 1991 and annex
thereto the following:
(i) Documentary and/or other evidence in
support of the statements made in the petition, as are reasonably open to the
petitioner;
(ii) Documentary evidence in proof of the
eligibility and status of the petitioner with the voting power held by each of
them;
(iii) Affidavit verifying the aforesaid petition;
(iv) Demand draft evidencing payment of the fee of Rs. 2,500/‑
15;
(v) Certified true copy of the Memorandum
and Articles of Association of the company;
(vi) Certified true copy of the latest
audited balance‑sheet and profit and loss account with the Directors' and
Auditors' Reports;
(vii) Memorandum of Appearance in Form No. 5
of the Company Law Board Regulations, 1991 with a certified true copy of the
Board Resolution or the executed Vakalatnama, as the case may be;
(viii) Original acknowledgement of the concerned
Registrar of Companies;
(ix) Original acknowledgement of the Central Government.
2. The affidavit, should be
prepared on a non‑judicial stamp paper of the requisite value prevalent
in the State and should be either notarised by the Notary Public or sworn
before the Oath Commissioner.
3. The said affidavit should be
drawn up in first person and shall give the full name, age, occupation and complete residential address of the
deponent and shall be signed by the deponent. [Regulation 14(5) of the Company
Law Board Regulations, 1991]
4. If in the said affidavit the
deponent is not personally known to the person before whom the affidavit is
sworn, he should be identified by a person who is known to the person before
whom the affidavit is sworn. [Regulation 14(6) of the Company Law Board
Regulations, 1991]
5. The said affidavit should
clearly and separately indicate statements which are true to the knowledge of
the deponent, information received by the deponent, belief of the deponent and
information based on legal advice. [Regulation 14(7) of the Company Law Board
Regulations, 1991]
6. Where any statement is
stated to be true to the information received by the deponent, the affidavit
shall also include the name and complete residential address of the person from
whom the information has been received by the deponent and declare that the
deponent believes that information to be true. [Regulation 14(8) of the Company
Law Board Regulations, 1991]
7. Please ensure that the
aforesaid petition is written, type‑written, cyclostyled or printed,
neatly and legibly on one side of the substantial paper of foolscap size in
double space and separate sheets shall be stiched together and every page
consecutively numbered. [Regulation 11 of the Company Law Board Regulations,
1991]
8. Numbers and dates specified
therein should be expressed in figures as well as in words. The petition should
be divided into separate paragraphs which should be numbered serially and shall
state thereon, the matter and the name of the company to which it relates. [Regulation
12 of the Company Law Board Regulations, 1991]
9. Please also ensure that the
aforesaid petition is presented by the petitioner in original and four extra
copies thereof in person or through authorised representative to the office of
the Bench or to be sent by registered post with acknowledgement due addressed
to the Secretary or Bench Officer of the Bench concemed, as the case may be.
[Regulation 14(1) of the Company Law Board Regulations, 1991]
10. Affix Court fee stamps of
the requisite value 16 on the original petition before submission.
11. Please furnish a copy of the
complete set of the petition to the concerned Registrar of Companies before
filing it with the Company Law Board. [Regulation 14(3) of the Company Law
Board Regulations, 1991]
12. Please also furnish a copy
of the complete set of the petition to the Regional Director of the concerned
region, before filing it with the Company Law Board. [Regulation 14(3), second
proviso of the Company Law Board Regulations, 1991]
13. Pay the filing fee of Rs.
2,500/‑ as per Rules 3 read with Rules 4 and 5 of the Company Law Board
(Fees on Applications & Petitions) Rules, 1991, by way of demand draft drawn in favour of Pay and Accounts
Officer, Department of Company Affairs, New Delhi and payable at New Delhi.
14. Also ensure that the
petition explains the facts and circumstances suggesting the following:
(i) that the business of the company is
being conducted with intent to defraud its creditors, members or any other
persons, or otherwise for a fraudulent or unlawful purpose, or in a manner
oppressive of any of its members, or that the company was formed for any
fraudulent or unlawful purpose. [Section 237(b)(i)];
(ii) that persons concerned in the formation
of the company or the management of its affairs have in connection therewith
been guilty of fraud, misfeasance or other misconduct towards the company or
towards any of its members; [Section 237(b)(ii)]; or
(iii) that the members of the company have not been given all the
information with respect to its affairs which they might reasonably expect,
including information relating to the calculation of the commission payable to
a managing or other director or the manager, of the company. [Section
237(b)(iii)].