Registration of charges (Ss. 123/124)
The Companies (Amendment)
Act, 1988, has added a new proviso to sub-section (1) of section 125 of
the Act whereby the Registrar has been empowered to allow the particulars and
instrument or a copy thereof to be filed within thirty days next following the
expiry of the said period of thirty days on payment of such additional fee not
exceeding ten times the amount of fee as the Registrar may determine if the
company satisfied the Registrar that it had sufficient cause for not filing the
particulars and instrument or copy within that period. Any extension of this
period must be sought by making an application to the Company Law Board under
section 141 of the Companies Act, 1956.
Registration of charges (S. 125)
By the Companies (Amendment)
Act, 1988, section 125 requiring registration of charges with the Registrar of
Companies has been amended to empower the Registrar of Companies to condone
delay up to a maximum period of 30 days (as against seven days at present) for sufficient
causes on payment of additional fees. Further the register of charges required
to be kept under section 130 has been simplified. The amendment of section 130
has been intended to dispense with the time consuming procedure of entering by
hand the particulars of charges. The amendment also provides the signing or
initialling of each page of the register by the Registrar of Companies.
"RESOLVED that in order to finance the company's expansion project, the company do raise money (or borrow money) by the issue of 30,000 debentures of Rs. 1,000 each bearing interest at the rate of eleven per cent per annum payable half-yearly as on 30th September and 31st March every year secured by way of a floating charge on the company's undertaking, redeemable at par after a period of ten years from the date of issue hereof, so however, that the company will have power to redeem such debentures in lots of 1,000 debentures every year to be selected by the trustees for the debenture-holders in the presence of the Auditors of the company and that such redemption at par be made by giving six months' previous notice to such holders selected by lots.
RESOLVED FURTHER that the
said debentures be and are hereby issued subject to the terms and conditions
incorporated in the draft rules submitted to this meeting an that 30,000 ten
per cent debentures of Rs. 1,000/- each be offered to the General
Insurance Corporation of India, Life Insurance Corporation of India, the Unit
Trust of India and other public financial institutions or nationalised banks
for subscription at par, Rs. 500/- per debenture being payable on
application and Rs. 500/- per debenture being payable on allotment
thereof and that such offer be made by a prospectus as per the draft submitted
to this meeting.
RESOLVED FURTHER that M/s.
PSG Private Limited Company, be and is hereby appointed as the Manager to the
issue and be given a copy of the scheme of advertisement and scheme of
circulation of the prospectus.
RESOLVED FURTHER that Bank, the bankers to the said issue of debentures, be requested to receive the subscriptions from the applicants at par at all its branches in India and send the company a pro forma of the receipt of money payable on application with the relevant application forms."
1. Creation of floating charge.-Creation of charges is
covered by Part V of the Companies Act, 1956. Borrowing through debentures may
be done by creating floating
charge on the undertaking of the company. When the charge is floating the company may, in the ordinary course of business, deal with the property in any manner until the charge gets fixed. Floating charge is an equitable charge which does not crystallise on any specific property but covers the whole of the company's property whether it is subject to a fixed charge or not. Upon the happening of any of the events set out in the documents in connection with the issue of debentures, it crystallises or becomes fixed and thereafter the assets are to be treated as having a specific charge.
2. Filing of charge with Registrar.-Particulars of such a charge
must be filed with the Registrar of Companies for registration in Form No. 8
and Form No. 13 within thirty days after the date of its creation with the
requisite filing as per Schedule X of the Act.
3. Payment of late fee.-Filing of Forms 8 and 13 should be filed along with
fees and mere submission of these forms without filing fee though within time
does not amount to a proper compliance of the requirements of registration
within the meaning of section 125. State Batik of Mysore v. City Hospital and
Diagonistic Centre (P.) Ltd., (2001) 3 Comp LJ 241 (CLB).
4. Power of Registrar to extend time.-The Registrar empowered to
allow the particulars and instrument or a copy thereof to be filed within
thirty days next following the expiry of the said period of thirty days on
payment of such additional fee not exceeding ten times the amount of fee as the
Registrar may determine if the company satisfies the Registrar that it has
sufficient cause for not filing the particulars and instrument or copy within
that period.
5. Petition to Company Law Board for extension of time.-The petition for extension of
time can be made to the Company Law Board as per Company Law Board Regulations,
1991. The petition to accompany the following documents:
(1) Certified true copy of
the agreement creating, modifying the charge, as the case may be.
(2) Certified true copy of
the resolution envisaged by section 292(l)(b) or (c) and section 293(l)(a), as
may be applicable.
(3) Affidavit verifying the
petition.
(4) Bank Draft evidencing
payment of application fee.
(5) Memorandum of appearance
with copy of Board Resolution or the executed Vakalatnama, as the case may be.
The fee payable on the
petition is Rs. 200/-.
6. Penalty for default.-If default is made in filing with the Registrar of
Companies (ROC) for registration the particulars of any charge created by the
company requiring registration with the ROC then unless the registration has
been effected on the application of some other person, the company and every
officer of the company or other person who is in default will be punishable
with fine of up to Rs. 5,0001- for every day during which the default
continues. [Section 142(l)]
Unless there is an express
power given in the memorandum or articles, there cannot be a mortgage or charge
of unpaid capital. Batik of Sough Australia v. Abrahams, (1875) LIZ 6 PC 265.
Capital uncalled is in no sense property of the company. It is more in the
nature of a power than property and for such a power to be charged, there must
be express authority. Re: Johnson v. Russian Spratts Patent Ltd., (1898) 2 Ch 149.
A charge on book debts and other debts even if called a first specific charge
does not cover the balance in a bank account as this in commercial practice is
not a book debt. Re: Brightlife Ltd., 1986 BCLC 418. An assignment of a book
debt also comes within the section if it is intended to be security for a debt.
Ladenburg & Co. v. Goodwin, (1912) 3 KB 275. A charge on the entire assets
of a company does not include the books, registers and papers which are
required by the statute to be kept at company's registered office and pertain
to company's management as distinct from the title deeds which relate to the
ownership of assets. Re: Clyne Tin Plate Co., (1882) 47 LT 439.
The thirty days have to be
calculated from the date when the instruction of charge is executed though it
may be stipulated to take effect on a later date on the happening of a later
event. Dublin City Distillery v. Oberty, 1914 AC 823. Where for any reason any
debentures which have been issued are omitted to be registered, the company may
cancel them and issue a new series and register the latter within thirty days.
Re: Renshaw & Co., 1908 WN 210,
"RESOLVED that the company
do borrow from time to time as may be required, from ____________ Bank by way
of cash credit, loan, overdraft, discounting of bills, operating of letters of
credit, for standing guarantee or counter-guarantee and enter any other
type of credit line or facility up to an amount of Rs. 5,00,00,000 in the
aggregate.
RESOLVED
FURTHER that Mr ____________________ and Mr ____________________ the Directors
of the company, be and are hereby authorised to sign, get registered and
deliver on behalf of the company all documents and forms relating to the above
credit lines and facilities to be secured by hypothecation of present and
future raw materials belonging to the company and lying in any godown, factory
or anywhere in India, stock of stores, work-in-progress and
finished goods and book debts, and that the company do create an equitable mortgage on the fixed assets of
the company in favour of the bank by depositing with such bank the title deeds
in relation thereto, as collateral security for the credit facility made
available to the company."
1. Filing of charge with Registrar for registration.-Sections 124 and 145 of the
Companies Act, 1956, deal with creation of 'charge' (including mortgage) on the
assets of the company. Pursuant to section 125, any charge created on or after
the 1st day of April, 1914 by the company on its property or undertaking shall
be considered as void against the liquidator and any creditor of the company,
unless the particulars of charge, together with the instrument, if any, by
which the charge is created are filed with the Registrar for registration
within thirty days after the date of its creation.
2. Power of Registrar to extend time.-The Registrar empowered to
allow the particulars and instrument or a copy thereof to be filed within
thirty days next following the expiry of the said period of thirty days on
payment of such additional fee not exceeding ten times the amount of fee as the
Registrar may determine if the company satisfies the Registrar that it had sufficient
cause for not filing the particulars and instrument or copy within that period.
Any extension of this period must be sought by making an application to the
Company Law Board under section 141 of the Companies Act, 1956.
3. Petition to Company Law Board for extension of time.-The petition for extension
of time can be made to the Company Law Board as per Company Law Board
Regulations, 1991. The petition to accompany the following documents:-
(1) Certified true copy of
the agreement creating, modifying the charge, as the case may be.
(2) Certified true copy of
the resolution envisaged by section 292(l)(b) or (c) and section 293(l)(a), as
may be applicable.
(3) Affidavit verifying the
petition.
(4) Bank Draft evidencing
payment of application fee.
(5) Memorandum of appearance
with copy of or the executed Vakala,nama, as the case may be.
The fee payable on the
petition is Rs. 200/-.
4. Filing.-A certified copy of the order passed by the CLB extending the time
shall be filed by the company with Registrar of Companies concerned as an
annexure to Form No. 21 of the
Companies (Central Government's) General Rules and Forms, 1956.
5. Duty cast on company to rile with Registrar particulars of charge.-There is no legal obligation
on the part of the company to register the charge. Consequently, in the
interest of the creditors, very often the charge is registered either by the
creditors themselves or by their solicitors. Under section 134, however, it is
the duty of the company to file with the Registrar the particulars of every
charge created by the company.
6. Power to borrow/mortgage assets depends on Memorandum.-In the case of a company,
the power to borrow and mortgage or charge its property or asset depends on the
Memorandum of Association, but such a power whether expressly provided in the
Memorandum of Association or not, is implicitly present in the case of a
trading company, where borrowing is incidental to the carrying on of its
business.
7. Registration when necessary.-An equitable mortgage or
charge created by deposit of title deeds, also requires registration under the
section. A charge on the company's properties which was unregistered, was void
ipso facto upon the company being ordered to be wound up. Such a charge had no
effect upon the company's properties once the order if winding up was made.
ICICI v. Official Liquidator, Usha Automobiles and Engineering Company Ltd. (in
liquidation) & Other, (2000) 100 Com. Cases 150 (CLB-ER).
8. Debenture-holders not to have an interest in property charged.-Debenture holders entitled
to a charge on immovable property are not deemed to be an interest in immovable
property.
Borrowing by pledge of shares etc.
S.
125- Borrowing by pledge of shares etc.-Board Resolution
"RESOLVED that the company do borrow from time to time, as may be required, from ____________________ Bank by way of cash credit, loan, overdraft, for standing guarantee or counter-guarantee and under any other credit line or facility up to an amount of Rs. 50,00,000 to be secured by the pledge of company's marketable shares and debentures and that it is hereby agreed that such shares and securities shall be transferred in the name of the aforesaid bank while reserving the beneficial interest therein with the company."
1. Pledge explained.-A pledge constitutes actual or constructive delivery
or possession of the assets. If the person entitled to the security is in
possession of the property or assets forming security, it is a pledge carrying
with it a power of sale on default of payment of loan in due time or any
interest accrued on such loan within due date or within such specified date as
may be fixed therefor by notice.
2. Pledge of movables excluded from the section.-A pledge on movable assets
of the company is not a charge within the meaning of section 125. It is
doubtful if pledge on movable assets not being charged should be entered in the
register of charges to be maintained by a company pursuant to section 143.
According to the Department of Company Affairs, a charge created by pledge on
movable property should come under the purview of this section, and should be
recorded in the register of charges and should also be registered with the
Registrar in Form No. 8 and Form No. 13.
3. Registration permitted by Registrar at instance of other party.-The registration
is not required under the
statute but may be permitted by the Registrar at the instance of
the other party. The company
should also intimate to the Registrar any subsequent modification or
satisfaction of such charge. (Circular No. 8/6(125) 60-PR, dated 7-7-1960).
Delay in registration of charge within next 30 days
"WHEREAS the Company
had mortgaged its immoveable properties by creating a charge in favour of Asian
Developers Ltd.;
AND WHEREAS the said charge
could not be registered with the Register of Companies, West Bengal, within 30
days of the creation of the said charge by reason of the fact that the Secretary
of the Company had resigned and left the job;
NOW THEREFORE IT IS RESOLVED
that the particulars of the said charge including the documents creating the
charge be filed with the Registrar and Mr. X, a Director of the Company be
authorised to file the necessary documents and sign the necessary papers;
RESOLVED FURTHER that an
application be made to the Registrar for taking a lenient view in the matter
and charge not more than double the amount of the fee for registration of the
charge, the delay in filing the charge being only for seven days after the
expiry of the 30 days mentioned in sub-section (1)."
1. Additional fees.-Proviso to section 125(l) of the Act allows filing
of charges with the concerned Registrar of Companies within thirty days next
following the expiry of the thirty days as required under sub-section (1)
on payment of such additional fees not exceeding ten times the amount of fee
specified in Schedule X to the Act. The amount of additional fee to be paid on
late filing of document is now standardised by Press Note No. 2/95/14/3/87-CL-V,
dated 21st March, 1995 and is one time of normal fee as per Schedule X.
2. Sufficient cause.-The Registrar of companies should be satisfied
properly on the ground that there was sufficient cause for not filing the
particulars of instrument of charge or copy thereof within the said period of
thirty days.
3. Void charge.-Any charge will become void against the liquidator
or any creditor of the company unless the prescribed particulars of the charge
together with the instrument by which the charge is created or evidenced or a
copy thereof verified in the prescribed manner, is filed within thirty days
after the date of its creation.
4. Register of charges.-Company should keep at its registered office a
Register of Charges and enter therein all charges specifically affecting
properties of the company giving in each case a short description of the
property charge, the amount of the charge and the names of the persons entitled
to the charge. This register should be open to inspection by any person on
payment Rs. 10/- on each inspection.
5. Procedure.-The prescribed particulars together with a copy of
the instrument creating the charge should be filed in Form No. 8 and 13 in
triplicate with the Registrar of Companies. Both these two forms should be
signed on behalf of the company and the charge-holder. The Registrar,
will affix on all the three copies of the Forms and accompanying instruments
with the words "Certified that the charge above is registered" by way
of a rubber stamp under his signature with date and a copy will be given back
to the company and the charge-holder.
6. Penalty.-If any officer of the company knowingly omits or willfully authorises
or permits any entry required to be made in the Register of Charges, he shall
be punishable with fine which may extend to rupees five thousand. In default of
filing the prescribed details of the charge with the concerned Registrar of
Companies within prescribed time, the company and every officer of the company
or any other person who is in default will be punishable with fine which may
extend to rupees five hundred for every day during which the default continues.
[Section 143(2)]
7. Compounding of offence.-For compounding of offence committed for not
making required entries in the Register of Charges, the application will lie
before the concerned Regional Director under section 621A(l)(b). In case of
default committed for not filing within the time the particulars of charge with
the concerned Registrar of Companies, the application will lie before the
concerned Regional Director if the fine does not exceed rupees five thousand
under section 621A(l)(b). The application for compounding of offence will lie
before the concerned Regional Bench of the Company Law Board if the fine
exceeds rupees fifty thousand under section 621A(l)(a).
Execution of inter se pari passu agreement
"RESOLVED that the
Company do execute an inter se pari passu agreement along with four
counterparts thereof with the Industrial Development Bank of India (IDBI),
Industrial Finance Corporation of, India (IFCI), Indian Overseas Bank (IOB) and
State Bank of India (SBI) as the Debenture Trustees (the Trustees) providing,
inter alia, that the charges created/to be created by the Company in favour of
IDBI, IFCL IOB and the Trustees shall rank pari passu without any preference or
priority of one over the other or others and for all purpose and to all intents
and to provide for certain other matters incidental thereto.
RESOLVED FURTHER that the
draft of the inter se pari passu agreement received along with letter No.
IDBI/LD No. 1046/02, dated 26th July, 2002 from Industrial Development Bank of
India, as duly approved by all the institutions, copies whereof duly
authenticated by the Chairman for the purpose of identification have been
circulated to the Board, be and the same is hereby approved.
RESOLVED FURTHER that Shri
SKM, Managing Director and Shri AKM, Director be and are hereby authorised
severally to accept on behalf of the Company such amendments, modifications
and/or alterations thereto as may be suggested by any of the institutions.
RESOLVED FURTHER that the
Common Seal of the company be affixed to the fair stamped engrossment of the
inter se pari passu agreement and its counterparts (with such modifications as
may be acceptable and agreed to by the Company and the financial institutions)
in the presence of Shri SKM, Managing Director and Shri AKM, Director and Shri
OPM, Secretary of the Company who shall sign the same in token thereof.
RESOLVED FURTHER that the
requisite particulars modifying respective charges in favour of the
institutions (consequent on execution of the said inter se pari passu agreement)
may be filed by the Company with the Registrar of Companies within the time
prescribed and that the said inter se pari passu agreement and the counterparts
thereof be duly registered with the Registrar of Assurances in such manner and
at such place as may be mutually agreed to and accepted by the Company and the
institutions."
1. Board Resolution.-Pass a Board resolution authorising the Directors
and Secretary, to execute the agreement. In case the financial institutions
insist on a resolution under Section 293(l)(a), then get the resolution passed
by the shareholders in the general meeting.
2. Registration when necessary.-An equitable mortgage or
charge by deposit of title deeds require registration. When the Board executes
trust deed then only the charge is created.
3. Filing of forms.-File Forms 8 and 13 with the Registrar of Companies
within thirty days of creating charge on payment of requisite filing fee as per
Schedule X of the Act.
4. Compliance Certificate.-A company whose paid-up share capital
is less than Rs.2 crores but is equal to or more than Rs. 10 lakhs must 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 filed all forms as stated in Annexure B to the said Compliance
Certificate with the Registrar of Companies within the time prescribed under
the Act and the Rules made thereunder as per paragraph 2 of the Form of
Compliance Certificate appended to the Companies (Compliance Certificate)
Rules, 2001 prescribed under section 383-A(l) proviso.
Endorsement of certificate of registration on debenture
"RESOLVED that the certificate of registration of charge in respect of the debentures issued by the Company received from the Registrar of Companies under section 132 of the Act be and is hereby endorsed on every debenture issued by the Company payment of which is secured by charge so registered."
1. Debenture certificate.-Once the charge on the property is created securing
the payment of debentures and such charge is registered with the concerned
Registrar of Companies and the said Registrar gives the registration certificate
for the charge so created, it becomes obligatory on the part of the company to
permit/endorse that registration certificate on the back side of each and every
debenture certificate issued to the debenture holder as required under section
133(l).
2. Penalty.-Non compliance of provision of section 133(l) is punishable with fine
which may extend to rupees tent thousand, under section 133(2).
3. Compounding of offence.-The fine of rupees tent thousand for
contravention of provisions of section 133(l) is compoundable by the Regional
Director as per section 621A.
"WHEREAS it was the
duty of the Company, M/s. ABC Ltd. to file the charge with the Registrar for
registration;
AND WHEREAS the said company
had failed to register the charge;
NOW THEREFORE IT IS RESOLVED
that the company, being the charge, shall file the charge for registration with
the Registrar and pay the necessary filing fees.
RESOLVED FURTHER that a
notice be served on M/s. ABC Ltd. for reimbursement of the fees paid by the
company for registration of the charge."
1. Safeguarding interest.-A I though it is the duty of the concerned company
who is charger to file the necessary particulars of the charge with the
concerned Registrar of Companies, but for the purposes of safeguarding the
interest of charge, the charge on his own can apply for registration of Charge
to the concerned Registrar of Companies after filing of the necessary documents
with the said Registrar along with requisite fees as per Schedule X of the Act.
2. Recovery of fee.-The charge is entitled to reimbursement of the
filing fee so paid to the concerned Registrar of Companies for filing and
registration of the Charge.
3. Registration of Charge.-Section 125 deals with consequences of non-registration
of charges, and it does not deal with registration of charge. The duty of
registration of charge is enjoined by section 134 according to which it is the
duty of a company to file with the Registrar of Companies for registration
particulars of every charge created by the company. Section 134 read with
section 142 clearly shows that a company has the primary responsibility to file
the particulars of every charge created on its property in favour of any
creditor. Saradha Finance v. Alsa Investments Private Ltd., (2002) 110 Com
Cases 713 (CLB).
"WHEREAS the Company
had created a charge in favour of XYZ Ltd. on ______________ which had advanced
a sum of Rs. 30 lacs @ 22% interest per annum. against mortgage of plant and
machinery of the Company lying at its factory at ____________________;
AND WHEREAS the said charge was modified on __________________ by way of enhancement of the sum so advanced from Rs. 30 lacs to Rs. 50 lacs @ 23% interest per annum against mortgage of plant and machinery of the company lying at its factory at and also at its factory at ________________ ;
NOW THEREFORE IT IS RESOLVED
that intimation be given to the Registrar of Companies, West Bengal of the
payment and modification of the earlier charge."
1. Change in terms and conditions.-As per section 135, whenever
there is a change in the terms and conditions or in the extent or operation of
any charge registered with any Registrar of Companies, it is the duty of the
company to send to the concerned Registrar of Companies, the particulars of
such modification in Form No. 10 and within thirty days from the date of making
of such modification along with Form No. 13.
2. Procedure.-The prescribed particulars together with a copy of
the instrument modifying the charge should be filed in Form No. 10 and 13 in
triplicate with the concerned Registrar of Companies. Both these two Forms
should be signed on behalf of the company and the charge holder. The Registrar,
will affix on all the three copies of the Forms and accompanying instruments
with the words "Certified that the charge above is registered" by way
of a rubber stamp under his signature and date and a copy will be given back to
the company and the charge holder.
3. Compliance Certificate.-A company whose paid-up share capital
is less than Rs. 2 crores but is equal to or more than Rs. 10 lakhs must obtain
a Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning inter alia that the company
has duly filed the forms as stated in Annexure B to said Compliance Certificate
with the Registrar of Companies within the time prescribed under the Act and
the Rules made thereunder as per paragraphs 2 of the Form of Compliance
Certificate appended to the Companies (Compliance Certificate) Rules, 2001
prescribed under section 383-A(l) proviso.
Filing of satisfaction of charge
S.
138- Filing of satisfaction of charge-Board Resolution
"WHEREAS the Company
had created a charge in favour of ABC Ltd. which had advanced a sum of Rs. 50
lacs with interest @ 11% p.a. against mortgage of plant and machinery of the
Company;
AND WHEREAS the said sum of
Rs. 50 lacs with interest due thereon have been fully paid;
NOW THEREFORE IT IS RESOLVED
that intimation be given to the Registrar of the payment and satisfaction of
the charge."
1. Full payment.-Intimation should be given to the concerned
Registrar of Companies only when payment or satisfaction of the charge is made
in full. Such intimation should be made in Form No. 17 within thirty days from
the date of such payment or satisfaction along with Form No. 13.
2. Notice of Registrar.-On receipt of intimation from the charger the
Registrar of Companies will issue a notice to the charge calling upon him to
show cause within a time not exceeding fourteen days specified in such notice
as to why payment or satisfaction should not be recorded as intimated to the
Registrar by the charger. The Registrar of Companies will issue such notice
ususally within a week after receipt of the intimation from the charger.
(Circular Letter No. 2/4/ 60-PR, dated 15-2-1960).
3. Entry in the Register of Charge.-The Registrar of Companies
will order for recording of satisfaction of charge in the Register of Charges
if no cause is shown to him by the charge within fourteen days. The Registrar
of Companies can on his own make an entry of satisfaction of charge in the
Register of Charges otherwise than on receipt of an intimation from the charger
if sufficient evidence is given to his satisfaction with respect to any Charge
that the debt for which the charge was given has been paid or satisfied or that
part of the property or undertaking charged has been released from the charge
or has ceased to be part of the charger's property or undertaking.
4. Procedure.-The prescribed particulars together with a copy of
the instrument satisfying the charge should be filed in Form No. 17 and 13 in
triplicate with the Registrar of Companies. Both these two forms should be
signed on behalf of the company and the charge holder. The Registrar, will
affix on all the three copies of the form accompanying instruments with the
words "Certified that the charge above is registered" under his
signature with date and the copy will be given back to the company and also to
the charge holder.
5. Compliance Certificate.-A company whose paid-up share capital
is less than Rs. 2 crores but is equal to or more than Rs. 10 lakhs must obtain
a Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning inter alia that the company
has duly filed the forms as stated in Annexure B to said Compliance Certificate
with the Registrar of Companies within the time prescribed under the Act and
the Rules made thereunder as per paragraphs 2 of the Form of Compliance
Certificate appended to the Companies (Compliance Certificate) Rules, 2001
prescribed under section 383-A(l) proviso.
"WHEREAS the Company
had filed with the Registrar necessary intimation for satisfaction of charge;
AND WHEREAS the Registrar
has now furnished the Company with a copy of the memorandum of satisfaction;
NOW THEREFORE IT IS RESOLVED
that the said memorandum of satisfaction furnished by the Registrar be taken on
record."
1. Memorandum of satisfaction of charge.-When the charger has given
an intimation to the Registrar of Companies of the full payment or satisfaction
of the charge under section 138 of the Act and the said Registrar has entered
in the Register of Charge a memorandum of satisfaction of charge, the charger,
being the company, is entitled to have a copy of such memorandum of
satisfaction of charge and the said Registrar must furnish a copy to the
company.
2. Company's Register of Charge.-On receipt of the copy of
the memorandum of satisfaction of charge from the Registrar of Companies, the
company should make necessary entries in the Register of Charges kept by it at
its registered office under section 143 of the Act.
Rectification of the register of charges
"WHEREAS the Company
had created a charge in favour of ABC Ltd. by mortgage of plant and machinery
for borrowing a sum of Rs. 90 lacs with interest of 12% p.a.;
AND WHEREAS the said charge
had not been filed with the Registrar within 60 days as laid down in section
125;
NOW THEREFORE IT IS RESOLVED
that an application be made to the Company Law Board for condo nation of delay;
RESOLVED FURTHER that Mr. H.
Chakraborti, an Advocate be engaged for making the application to the Company
Law Board and for necessary appearance before the Company Law Board for
condonation of delay in filing the charge."
1. Delayed beyond sixty days.-Concerned Regional Bench of Company Law Board
should be approached only when the delay in filing the particulars of charge is
beyond sixty days from the date of creation of the charge.
2. Grounds of delay.-Delay in filing particulars of charge should be
shown to be either accidental or due to inadvertence or to some other
sufficient cause or is of a nature to prejudice the position of the creditor or
shareholders of the company or on any other ground which is just an equitable
to grant relief.
3. Procedure.-Application should be made to the concerned Regional
Bench of the Company Law Board by way of a petition in Form No. 1 with a fee of
rupees two hundred.
4. Right acquired is not prejudiced.-In case the Company Law
Board orders the extension of time for the registration of the charge such
order will not prejudice any rights acquired in respect of the property
concerned before the charge is actually registered.
Authority for filing petitions before CLB
S.
141-Authorisation for filing of petitions before Company Law Board/Bench-Board
Resolution
"RESOLVED that Shri OPM and Shri SKP, Directors of the Company be and are hereby jointly and severally authorised to file a petition as required under section 141 of the Companies Act, 1956 before the Northern Region Bench of the Company Law Board under the provisions of the Company Law Board Regulations, 1991 for seeking extension of time and/or condonation of delay in filing the particulars of charges with the Registrar of Companies, NCT of Delhi and Haryana created on the assets of the Company by way of second charge in favour of Punjab National Bank for Rs. 2002,050/- towards interest free loan obtained by the Company vide agreement, dated 20-7-2002.
RESOLVED FURTHER that Shri
OPM and Shri SKP, Directors of the Company be and are hereby jointly and
severally authorised to sign necessary documents, affirm execute and file
affidavits, applications or any other documents or paper in connection
therewith and to do all such acts, deeds, or things as may be considered
necessary for the purposes of filing of the aforesaid petition and disposal
thereof, including make corrections and alterations in the petition and
application."
1. Memorandum of Appearance.-Once the board resolution is passed a Memorandum
of Appearance in Form No. 5 of the Company Law Board Regulations, 1991 should
be filed with the Bench Office, along with a certified true copy of the Board
Resolution.
2. Jurisdiction of the Company Law Board.-The application for
rectification of register of charges should be made to the concerned regional
bench of the Company Law Board, depending on the situation of the registered
office of the company. There are four regional benches at Calcutta, Mumbai,
Chennai and New Delhi.
3. Extension not granted.-Extension of time for filing particulars of charge
not to be granted when winding up of the company was imminent. If the delay was
condoned it would defeat the interests of other creditors. Ravi Constructions
v. ROC & Another, (2000) 100 Com Cases 509 (CLB-SR).
Extension of time for filing particulars of charge with ROC
"RESOLVED that the
charge created by the company in favour of _________________ its Bankers having
not been registered by the Registrar of Companies __________________ on
account of delay in filing the particulars of charge, the Board hereby accords
its approval to the making of an application to the Company Law Board for grant
of extension for filing the said charge.
RESOLVED FURTHER that Shri
____________________ Secretary of the company be and is hereby
authorised to present, sign and verify the application in terms of Company Law
Board Regulations, 1991 and to appoint an Advocate for representing the Company before the Company
Law Board and to do all such acts and things as may be considered necessary or
expedient in this regard."
1. Remedies available under section 141.-The application under
section 141 of the Act can be made in respect of omission to register, to give
intimation and omission or mis-statement of any particulars and not for
validity of any charge and the Company Law Board is not empowered to go into
the validity of a charge in section 141 proceedings. Times Bank Ltd. v. Shri
Sharda Parlneshwari Textiles Ltd., [2000] 101 Com. Cases 412 (CLB).
2. Delay contemplated by section is delay due to omission to rile
particulars of charge in time.-The delay contemplated by the section is delay due
to the omission to file the particulars of the charge in time and not the delay
on the part of Registrar in registering the charge. (Siva Sankara Panicker (CX)
v. Kerala Financial Corpn., (1980), 50 Com Cases 817 (Ker)).
3. Application to Company Law Board.-The application under
section 141(1)/(3) of the Act is to be filed before the Company Law Board as in
Form No. 1 of Annexure II to the Company Law Board Regulations, 1991 along with
a fee of Rs. 200/-and accompanied by the following documents.
(1) Certified true copy of
the agreement creating, modifying the charge as the case may be.
(2) Certified true copy of
the resolution envisaged by section 292(l)(b) or (c) and section 293(l)(d), as
may be applicable.
(3) Affidavit verifying the
petition.
(4) Bank draft evidencing
payment of application fee.
(5) Memorandum of appearance
with copy of Board Resolution or the executed Vakalatnama as the case may be.
Company's register of charges
WHEREAS the Company is a
creditor of M/s. ABC Ltd., and a sum of Rs. 30 lacs is due from the said
Company;
AND WHEREAS it is reportedly
understood that the said Company had created a charge in favour of XYZ Ltd. by
mortgaging its plant and machinery to the tune of Rs. 40 lacs.;
NOW THEREFORE IT IS RESOLVED
that Mr. A, Secretary of the Company be directed to make inspection of the
copies of the instruments creating charge as also the register of charges kept
by the Company during business hours within the reasonable restrictions as the
said Company may impose, at the registered office of the Company;
RESOLVED FURTHER that an
application be made to the Company Law Board compelling immediate inspection of
the copies of the instruments as also the register of charges in case the
Company does not co-operate in making available the same to the Secretary
of the Company deputed for inspection."
1. Inspection fee.-No inspection fee can be charged by any company if
the application is made by creditor or by member of the company. But if the
inspection is done by any person other than a creditor or a member of the
company, then inspection fee of rupees ten per inspection will be charged.
2. Time of inspection.-Inspection should be allowed by the company during
business hours, but subject to such reasonable restriction as the company in
general meeting may impose, so that not less than two hours in each day are
allowed for inspection.
3. Procedure.-Application should be made to the concerned Regional
Bench of the Company Law Board to compel an immediate inspection. This
application should be made by way of a petition in writing and should be in
Form No. 1 of the Company Law Board Regulations, 1991 along with a fee of
rupees two hundred.
4. Penalty.-If inspection is refused by any company, then every officer of the
company who is in default will be liable to be punished with fine which may
extend to rupees fifty and with a further fine which may extend to rupees two
hundred for every day during which the refusal continues. [Section 144(3)]
5. Compounding of offence.-The fine of rupees fifty for contravention of
provisions of section 144(3) is compoundable by the Regional Director concerned
as per section 621A(l)(b). If the fine for continuing offence exceeds beyond
rupees five thousand then application for compounding of offence will lie
before the concerned Regional Bench of Company Law Board under section
621A(l)(a).
Registered office of the company (S. 146)
The situation of registered
office of a company determines its domicile for all purposes. Dalmer Co. v.
Continental Tyre etc. Co., (1916) 2 AC 307. The expression 'local limits' in
section 146 of the Companies Act, 1956, shall be taken to mean both the local
body limits and the postal limits and where two do not coincide, the wider of
the two. Department's Circular No. 19/72, dated 26th June, 1972.
"RESOLVED that the
registered office of the company be situated at Dhantoli, Nagpur-440 012,
and that the Secretary of the Company be instructed to sign and file in Form
No. 18 notice of situation of registered office with the Registrar of
Companies, Maharashtra, pursuant to section 146 of the Companies Act, 1956.
RESOLVED FURTHER that a name
plate or board be affixed at the registered office and that the company's name
and address of the registered office be used or mentioned in legible character
in all business letters, in all its bill heads and letter paper and in all its
notices and other official publications, etc. pursuant to section 147 of the
Companies Act, 1956."
1. Publication of name without the word "Limited" and non-indication
of address an offence.-Under S. 147, it is an offence to hold out to the
public the name of the company without mentioning the word "Limited"
or without indicating the registered office.
2. Section 631 provides penalty for improper use of word
"Limited".-Under S. 631, it is an offence to represent any trade or business as
"Limited" while in fact, it is not so.
3. Penalty for default.-If default is made in complying with the
requirements of section 146, 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.
Registered office of the company
(Another format)
"RESOLVED that w.e.f.
31st July, 2002, the registered office of the company be situated at No. 20,
Industrial Area, Kirti Nagar, New Delhi- 110015.
RESOLVED FURTHER that the
Secretary of the company be and is hereby authorised to file necessary return
in Form No. 18 with the Registrar of Companies, Delhi and Haryana pursuant to
section 146 of the Companies Act, 1956.
RESOLVED FURTHER that the
sign/name board be affixed at the registered office with the name of the
company and address in letters easily legible both in English and Hindi and
that the address of the registered office be mentioned in all letter heads,
notices, and other official publications, as also all other documents pursuant
to the provisions contained in section 147 of the Companies Act, 1956."
1. Passing of
Board Resolution.-Ensure to pass the above resolutions at the first meeting of the Board
of Directors.
2. Affixation of Board showing name and address of registered office.-The Board showing the name
of the company with the address of the registered office of the company has to
be affixed at all the places wherever the company carries on business.
3. Personal liability of officers in default.-The provisions contained in
section 147 of the Act are to be strictly complied with. In case of default in
complying with the provisions of this section, the officer in default shall be
punishable with fine which may extend to Rs. 5,000/- and shall also be
personally liable to the holders of bills of exchange, hundis, promissory notes
etc. unless it is duly paid by the company.
4. Filing of Form No. 18 with Registrar.-Ensure to file return in
Form No. 18 with the Registrar of Companies concerned within thirty days.
5. Domicile.-The situation of registered office of a company determines its domicile
for all purposes. Dalmer Co. v. Continental Tyre etc. Co., (1916) 2 AC 307.
6. Expression "Local Limits"-Meaning.-The expression "local
limits" in section 146 of the Companies Act, 1956, shall be taken to mean
both the local body limits and the postal limits and where two do not coincide,
the wider of the two. Department's Circular No. 19/72, dated 26th June, 1972.
Change of registered office
"RESOLVED that the registered office of the company be shifted from ________ to ________ and that the days and hours during which the registered office is accessible to the public shall be 10.30 a.m. to 3.30 p.m. except Saturdays, Sundays and public holidays, and that the Secretary be instructed to file a notice of the change of the registered office with the Registrar of Companies within thirty days."
1. Removal of registered office from one place to another within same
city and filing of return with Registrar.-Removal of the registered
office from one place to another in the same city, town or village does not
require consent of the members of the company at a General Meeting. A notice of
such change, after the Board Resolution should be filed with the Registrar of
Companies within thirty days of the change.
No company shall change the
place of its registered office from one place to another within a state unless
it is confirmed by the Regional Director. (Section 17A)
2. Change of registered office outside local limits & filing of
return with Registrar.-A company, if it desires to change the registered
office outside the local limits of any city, town or village, where the office
is situated, can do so on the authority of a Special Resolution. Notice of
change in the situation of the registered office should be given in Form No.
18.
3. Expression "Local Limits"-Meaning.-The expression 'local
limits' used in section 146(2)(a) must be understood to mean both the local
body limits and the postal limits and where they differ from one another, the
wider of the two limits will be taken. (Department’s Circular- No. 19/72,
dated 26th June, 1972).
4. Expression "Language in general use"-Meaning.-The expression 'languages in
general use' appearing in section 147(l)(a) means the local language of that
particular State where the registered office is situated and not English
language.
5. Words "Official publication" not applicable to issue of
share certificates.-The words 'official publication' used in section 147(l)(c) do not apply
to the issue of share certificates. (Circular No. 3/73 (8/ 10(147) 72-CL-V),
dated 3-2-1973).
"RESOLVED that the
registered office of the company be shifted from No. 20, Industrial Area, Kirti
Nagar, New Delhi- 110 015 to No. 506, Parliament street, New Delhi,
effective from 22nd July, 2002.
RESOLVED FURTHER that the
Secretary of the company be and is hereby authorised to file the necessary
return with the Registrar of Companies, Delhi and Haryana in Form No. 18
pursuant to Section 146(2) of the Companies Act, 1956.
RESOLVED FURTHER that change
in the place of registered office be made in the name plates or board affixed
at the registered office as also in the letter heads, official publications,
documents etc. pursuant to the provisions contained in section 147 of the
Companies Act, 1956."
1. Shifting of registered office in same city.-Where the registered office
is shifted from one place to another in the same city, town or village, only
Board Resolution is required and approval of the shareholders in the General
Meeting is not necessary. But new section 17A inserted by the Companies
(Amendment) Act, 2000, provides that no company shall change the place of its
registered office from one place to another within a state which also changes
the jurisdiction of one Registrar of Companies to another Registrar of
Companies unless it is confirmed by the Regional Director.
2. Removal of registered office from one State to another and
confirmation of Company Law Board.-When the registered office is removed from
one State to an other, approval of the shareholders and the confirmation of
the same by the Company Law Board is required in terms of section 17 of the
Act.
3. Filing of returns with Registrar.-Ensure that return in Form
No. 18 is filed with the Registrar of Companies concerned within thirty days of
the date of shifting of the registered office.
4. Change to be carried out by ROC.-1t is not sufficient just to
send a notice of change in Form No. 18 to the Registrar of Companies (ROC) but
the said ROC should also carry out the change in the register maintained by him
under sub-section (2) of section 146. It is not a mechanical act on the
part of the ROC to effect the change in the register but he must be satisfied
that the legal requirements have been complied with. Mukund Kaniyalal Patel v.
Swarup Shree Yaru (P.) Ltd., (2002) 109 Com Cases 413 (Bom).
5. Compliance Certificate.-A company whose paid-up share capital
is less than Rs. 2 crores but is equal to or more than Rs. 10 lakhs must obtain
a Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning inter alia that the company
has duly filed the forms as stated in Annexure B to said Compliance Certificate
with the Registrar of Companies within the time prescribed under the Act and
the Rules made thereunder as per paragraphs 2 of the Form of Compliance
Certificate appended to the Companies (Compliance Certificate) Rules, 2001
prescribed under section 383-A(l) proviso.
Publication of name by company
"RESOLVED that the name
of the Company including the address of its Registered Office at 14, Princes
Street, Calcutta-700001 be affixed after being painted outside the
Registered Office as also outside the Sales Office of the Company and the
Factory of the Company and kept in a conspicuous position, in letters easily
legible both in Bengali language and in English language.
RESOLVED FURTHER that the
name of the Company be engraved in legible character on Company's seal.
RESOLVED FURTHER that the
name of the Company and its Registered Office be mentioned in legible
characters in all business letters, bill heads and letter paper and in all
notices and other official publications including bills of exchange, hundies,
promissory notes, endorsements, cheques and orders for money or goods
purporting to be signed by or on behalf of the company and in all bills of
parcels, invoices, receipts and letters of credit of the Company.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby entrusted with the duty of carrying
out the aforesaid instructions of the Board."
1. Three requirements.-A company is required to paint or affix its name and
address of its registered office on the outside of every office or place in
which its business is carried on, in a conspicuous position, in letters easily
legible and in case the language is not one of the languages in general use in
that locality then it should also be in one of the languages in general use of
that locality. The company should have its name engraven in legible character
on its common seal. The company should also have its name and also its
registered office mentioned in legible characters in all its business letters,
bill heads, letter paper and in all its notices and other official publications
and should also have its name so mentioned in all bills of exchange, hundies,
promissory notes, endorsements, cheques and orders for money or goods
purporting to be signed by or on behalf of the company and in all bills and
parcels, invoices, receipts and letters of credit of the company.
2. Form of common seal.-The common seal of the company should only be in the
metallic form and should not be a rubber stamp. (Letter No. 8/70(147)/64-PR
dated 8-121969).
3. Penalty.-Non-compliance of the provisions of section 147(l)(a) is
punishable with fine which may extend to rupees five hundred for every day
during which its name and the address of the registered office is not so kept
painted or affixed. Non-compliance of the provisions of section 147(l)(b)
and (c) is punishable with fine which may extend to rupees five thousand. If
any officer of the company or any person on behalf of the company uses or
authorises the use of any seal to be a common seal of the company whereon its
name is not properly engraven or issues or authorises the issue of any business
letter paper, notice or other official publication of the company wherein name
and address of the registered office of the company are not mentioned or signs
or authorises to be signed on behalf of the company any bill of exchange, hundi
promissory note, endorsement, cheque, etc. wherein the name of the company is
not mentioned properly or issues or authorises to issue any bills or parcels,
invoices, receipts or letter of credit of the company wherein the name of the
company is not mentioned, then such officer or such person will be punishable
with fine which may extend to rupees five thousand" and such officer or
such person shall be further personally liable to the holder of the bill of
exchange, hundi, promissory note, cheque or order for money or goods for the
amount mentioned therein unless it is duly paid by the company.
4. Compounding of offence.-The fine up to rupees fifty thousand for
contravention of provisions of section 147(2)(3)(4) is compoundable by the
Regional Director concerned as per section 621A(l)(b).
Publication of subscribed and paid-up capital alongwith
authorised capital
S. 148-Publication of subscribed and paid-up
capital along with authorised capital-Board Resolution,
"RESOLVED that whenever
the authorised capital of the company is mentioned in any notice, advertisement
or other official publication, or any business letter, bill head or letter
paper, such notice, advertisement or other official publication, or such
letter, bill head or letter paper shall also contain a statement in an equally
prominent position and in equally conspicuous characters, of the amount of the
capital which has been subscribed and the amount paid-up."
1. Subscribed and paid-up share capital.-The company should mention
prominently the amount of the share capital which has been subscribed and also
the amount of the share capital which is paid-up wherever it mentions the
amount of the authorised share capital.
2. Authorised share capital.-Section 148 of the Act does not require a
copy to satisfy its authorised share capital on its share certificates
(Circular No. 8/35 (147)/ 66-CLV dated 13-1-1967).
3. Penalty.-For non-compliance of the requirement of section 148(l), the
company and every officer of the company who is in default will be punishable
with fine which may extend to rupees ten thousand.
4. Compounding of offence.-The fine of rupees ten thousand" for
contravention of provisions of section 148(2) is compoundable by the Regional
Director as per section 62 1 A(l)(b).
Certificate of commencement of
business
"WHEREAS the company
had filed with the Registrar a duly verified declaration in the prescribed
manner and in the prescribed form provided under Schedule III to the Companies
Act, 1956, stating that every Director of the company had paid to the company,
on each of the shares taken or contracted to be taken by him in cash;
AND WHEREAS the Registrar of Companies, Maharashtra, issued a certificate of commencement of business to the company under reference No ___________ dated the ___________.
NOW THEREFORE IT IS RESOLVED
that the same be taken on record."
1. Obtaining of Certificate of commencement of Business.-A public company cannot
pursue its object and assume borrowing power without obtaining certificate of
commencement of business.
2. Private company exempted.-This requirement is not applicable to private
companies whether they are subsidiaries of public companies or not. But under
section 3(iv)(c) a private company which is a subsidiary of a public company
will be treated as a public company.
3. Commencement of business significance.-Commencement of any business
encompasses not merely the business for which the company is formed but also
any transaction including sale, purchase, etc. Kishangarh Electric Supply Co.
Ltd. v. State of Rajasthan, AIR 1960 Raj 49. But such acts as filing of
prospectus or a statement in lieu of prospectus, making provisional contracts
or allotment of shares to the Directors, promoters, etc., immediately after the
formation of the company, are outside the scope of section 149.
4. Registration with SEBI.-Certificate of commencement of business
issued to a public limited company by the Registrar of Companies does not
obviate the requirement
of registration under
section 12(113) of SEBI Act, 1992 because the purpose of issue of certificate
of commencement of business under the Companies Act, 1956 and the object of the
requirement of registration under the SEBI Act, 1992 are not same and one of
the aforesaid requirements cannot be considered to be a substitute for the
other. Phenomenal Plantations Ltd. i,. SEBI, (2002) 48 CLA 250 (SAT).
Certificate of commencement of
Business
(Another format)
"RESOLVED that the company having filed with the Registrar of Companies-the Statement in lieu of prospectus, Shri ____________________ Director and Shri ____________________ Secretary of the company be and are hereby jointly authorised to file with the Registrar of Companies a duly verified declaration in the prescribed form stating that every Director of the company had paid to the company on each of the shares taken or contracted to be taken by him and to request the Registrar of Companies to issue the Certificate of commencement of business to the company.
1. Restriction on commencement of business.-It has to be noted that the
language of the section is that the company shall not commence any business.
This will imply that the company shall not be bound by any transaction whatever
in the nature of business.
2. "Commence any business"-Meaning.-"Commence any business"
does not mean merely the business for which the company was started, but any
transaction including, sale, purchase, etc. [Kishangarh Electric Supply Co.
Ltd. v. United State of Rajasthan, AIR 1960 Raj 491.
3. Writ cannot be issued to cancel commencement certiricate.-A writ cannot be issued to
cancel the commencement certificate of a company under the Companies Act [Maluk
Mohamed v. Capital Stock Exchange Kerala Ltd., (1991) 72 Com Cases 333 (Ker)].
4. Penalty.-If a company commences any business in contravention of sub-section
(2A) every person who is responsible for the contravention is without prejudice
to any other liability, punishable with fine which may extend to five
thousand" rupees for every day during which the contravention continues.
The offence is compoundable under section 621A.
WHEREAS the company has
converted 30,000 preference of Rs.100/- each into _________ units of
stock on _________ 2002.
AND WHEREAS the company has
also given notice of such conversion of shares into stock to Registrar of
Companies, West Bengal;
AND WHEREAS pursuant to
proviso to sub-section (1) of section 150, the Register of Members of the
company should show the amount of stock held by each of the members concerned
instead of the shares so converted which were previously held by them;
NOW THEREFORE IT IS RESOLVED
that the Register of Members of the company in respect of the following members
be and is hereby show the amount of stock now held by each one of them in place
of the preference shares previously held by them in the company.
1. Prescribed form of Register of Members.-There is no prescribed form
of Register of Members but it should contain the details given in section
150(l). Where shares are converted into stock the details of units of stock and
the date on which the shares were converted into stock should be given apart
from other things.
2. Compliance Certificate.-A company whose paid-up share capital
is less than Rs. 2 crores but is equal to or more than Rs. 10 lakhs must 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 kept and maintained the registers as stated in Annexure A to the
said Compliance Certificate as per the provisions of the Act and the rules made
thereunder and all entries therein have been duly recorded as per paragraph 1
of the Form of Companies Certificate appended to the Companies (Compliance
Certificate) Rules, 2001 prescribed under section 383-A(l) proviso.
3. Penalty for default.-If default is made in complying with sub-section
(1) of section 150, 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.
"WHEREAS the number of
members of the company are more than fifty and in fact, at this moment, run to
not less than fifty thousand members;
AND WHEREAS it is difficult
to identify immediately a particular member in day to day correspondence;
NOW THEREFORE IT IS RESOLVED
that an index of members in the form of card index be kept of the members of
the Company and the Secretary of the Company be directed to make necessary
alterations in the index as soon as any alteration is made in the register of
members;
RESOLVED FURTHER that the
index of members be so kept that it is easy to identify the entries relating to
a particular member, the index containing sufficient indication to enable the
entries pertaining to that member being readily found;
RESOLVED FURTHER that the
index be kept in the custody of the Secretary of the Company who is responsible
for the custody of the register of members."
1. Index of register of members.-An index of the names of
members of the company should be prepared and entered in the register of
members within fourteen days after the date on which any alteration is required
to be made in the register of members. Such index is to be prepared only in
case the company is having number of members more than fifty. Such index is
also required unless the register of members itself is not in such a form as in
itself to constitute an index.
2. Sufficient indication.-The index as mentioned aforesaid should be prepared
and maintained in such a form so that it contains sufficient indication in
respect of each member to enable the entries relating to that member in the
register of members to be readily found. This index should be kept with the
register of members in the registered office of the company or in case the
register of members is kept at some place other than the registered office of
the company the index should also be kept along with it.
3. Penalty.-Non-compliance of the provisions of keeping and maintaining index
of register of members of companies having more than fifty members will make
the company and every officer of the company who is in default punishable with
fine which may extend to rupees five hundred.
4. Compoundable offence.-The fine of up to rupees fifty thousand" for
contravention of provisions of section 151(4) is compoundable by the Regional
Director concerned as per section 621A(l)(b).
Index of debenture-holders
"WHEREAS the number of
debenture-holders of the company are more than fifty thousand;
AND WHEREAS it is difficult
to locate the particulars of each debenture-holder without the help of an
index maintained in this behalf;
NOW THEREFORE IT IS RESOLVED
that an index of debenture holders be maintained in the form of card index and
that necessary alterations in the index be made as soon as any alteration is
made in the register of debenture-holders;
RESOLVED FURTHER that the
index of debenture-holders be maintained by the Secretary of the Company
who is responsible for the maintenance of the register of debenture-holders."
1. Index of register of debenture-holders.-An index of the name of the
debenture holders of the company should be prepared and entered in the register
of debenture holders within fourteen days after the date on which any
alteration is required to be made in the register of debenture-holders.
Such index is to be prepared only in case the company is having number of
debenture-holders more than fifty. Such index is also required unless the
register of debenture- holders itself is in such a form as it in itself
constitutes an index.
2. Sufficient indication.-The index as mentioned aforesaid should be prepared
and maintained in such a form that it contains sufficient indication in respect
of each debenture-holder, to enable the entries relating to that
debenture- holder in the register of debenture-holders to be
readily found. This index should be kept with the register of debenture-holders
in the registered office of the company. The index should also be kept along
with it.
3. Non-applicability.-Provisions of keeping register of debenture-holders
and making prescribed entries therein and of keeping index of the names of the
debenture-holders where their number is above fifty and the punishment of
fine in case of non-compliance of these provisions are not applicable to
debenture-holders whose money is payable to the bearers thereof.
4. Penalty.-Non-compliance of tile provisions of keeping and maintaining
index of register of debenture-holders of companies having more than five
hundred debenture holders will make the company and every officer of the
company who is in default punishable with fine which may extend to rupees
fifty.
5. Compounding of offence.-The fine of rupees five hundred for
contravention of provisions of section 152(3) is compoundable by the Regional
Director concerned as per section 621A(l)(b).
Register and Index of beneficial owners maintained by depository
WHEREAS the shares of the
company have dematerialised by order of the Securities and Exchange Board of
India dated ___________ 2002;
AND WHEREAS National
Securities Depository Ltd. has been appointed as the depository of the company
to hold the shares in the dematerialised form with effect from ___________
2002;
NOW, THEREFORE, IT IS
RESOLVED that the register and index of beneficial owners maintained by the
aforesaid depository under section 11 of the Depositories Act, 1996, be and is
hereby deemed to be an index of members for the purposes of the Companies Act,
1956.
1. Depositories Act, 1996-This section was inserted by the Depositories Act, 1996 with effect from 20-9-1995 (being the date of promulgation of the Ordinance) providing that the register and index of beneficial owners maintained by a depository under section 11 of the Depositories Act, 1996 shall be deemed to be a register of members or debenture holders, as the case may be, for the purposes of this Act. The amendment was considered necessary as securities held in a depository mode are fungible. Section 11 of the Depositories Act, 1996 provides that every depository shall maintain a register and an index of beneficial owners in the manner provided in sections 150, 151 and 152 of the Companies Act, 1956.
WHEREAS the Board of Directors has received a request from Mr. A to enter his name in the register of members of the company;
AND WHEREAS the said Mr. A
has sent the instrument of transfer with the share certificate to the company
for registration;
AND WHEREAS the shares in
question are subject matter of a perpetual trust authored by the deceased
member;
NOW THEREFORE IT IS RESOLVED
that the shares of the deceased member be and are hereby transmitted in the name
of Mr. A.
1. No notice of trust.-Section 153 provides that no notice any trust,
express or implied or constructive shall be entered on the register of members
or debenture holders.
2. Concern of the company.-A company should not be concerned as to
whether a person holds the shares as a beneficiary himself or for the benefit
of someone else and is also not concerned with the terms of the trust and if
the trustee had violated the provisons of the trust, it was for the
beneficiaries to challenge the same. Jose Paulikken v. Damien Subsidies &
Kuries Ltd., (2002) 109 Com Cases 699 (CLB).
"RESOLVED that the
Register of Members of the Company be closed from __________ 2002 __________ to
__________ 2002 __________ (both days inclusive) and that the proposed bonus
shares be allotted in the ratio of __________ Equity Shares for every
__________ Equity Shares held in the Company in accordance with the resolution
adopted by members at their meeting held on __________ to the members whose
names appear in it as on __________, 2002 __________.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby authorised to give notice by
advertisement in newspapers in the manner provided in section 154 of the
Companies Act, 1956."
1. Closure of Register of Members.-(a) A company may, after
giving not less than seven days' previous notice by advertisement in any
newspaper circulating in the district, close the Register of Members or the
register of debenture- holders for a total period of forty-five
days in each year but not exceeding thirty days at any one time.
(b) Notice should also
advise the members to inform the company about change of their address before
the record date.
(c) The notice should also
indicate that valid transfer deeds should be lodged with the company before the
record date to determine entitlement of the bonus/rights issue, dividend, etc.
2. Purpose of closure of Register of Members.-For the purpose of
ascertaining as to who are members on a particular date, entitled say, to the
allotment of bonus shares, rights shares, dividend, etc., it is necessary to
keep the share or debenture registers closed for some time so that, a buyer of
the shares or debenture has the opportunity to present his share or debenture
along with the transfer forms, to the company, for getting his name registered
in the Register of Members or debenture holders before the notified closing
date.
3. Closure of Register of Members for declaration of dividend notified
along with notice of Annual General Meeting.-Usually, closing of the
Register of Members, for the purpose of declaration of dividend, is notified
along with the notice of the Annual General Meeting of the company. If the
Stock Exchange on which the shares of the company are listed stipulates the
dates of closure of Register of Members as also the purposes for which it can
be so closed, then those stipulations are to be adhered to.
4. Notice of closure must refer to Register of Members or Debenture-holders
whether same or different from transfer books/share
transfer books.-Section 154 refers specifically to closure of
'Register of Members or Debenture- holders' and not to 'transfer books'
or 'share transfer books'. Thus, the notice issued by a company under this
section must have reference to the said registers only, whether they are the
same or different from 'transfer books' or 'share transfer books'. (Circular
No. 8/57(154)/64-PR, dated 30-3-1965).
5. Compliance Certificate.-A company whose paid-up share capital
is less than Rs. 2 crores but is equal to or more than Rs. 10 lakhs must 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 closed its register of members from a particular date to a
particular date and necessary compliance of section 154 of the Act has been
made as per paragraph 5 of the Form of Compliance Certificate appended to the
Companies (Compliance Certificate) Rules, 2001 prescribed under section 383-A(l)
proviso.
Closing of Register of Members/debenture-holders
"RESOLVED that the
Register of Members/Debenture-holders of the Company be closed effective
from 17th June, 2002 to 30th June, 2002 (both days inclusive) and that the
Secretary of the company be and is hereby directed to take necessary action in
this connection."
1. Convening of Board Meeting.-Convene a meeting of the Board of Directors
and pass a resolution for the closure of Register of Members/ Debenture-
holders.
2. Duration for closure of Register of Members.-The register can be closed
for a period not exceeding 45 days in each year and thirty days at any one
time.
3. Advertisement in newspapers.-Ensure to give notice to
this effect by advertisement in the newspapers circulating in the district in
which the registered office of the company is situated.
4. Penalty for default.-In case notice as provided by sub-section (2)
of section 154 is not given, the company and every officer of the company who
is in default shall be punishable with fine which may extend to Rs. 5,000/-
for every day during which the default continues.
5. Listed company to intimate Stock Exchange concerned.-Intimate the Stock Exchange
in case the company's shares are enlisted on the recognised Stock Exchange and
instructions, if any, given by them may also be complied with.
6. Period of Notice.-Seven clear days' previous notice" is required
to be given for closure of Register of Members and in case the company's shares
are registered on the recognised Stock Exchange, at least 21 days' notice is
required. Mumbai Stock Exchange requires a notice of 30 days.
Keeping of Register of Members outside India
"RESOLVED that pursuant to section 157 of the Companies Act, 1956, and as authorised by article __________ of the Articles of Association of the Company, a foreign Register of Members be kept in London for the members (debenture-holders) resident in United Kingdom and that the Secretary be authorised to file with the Registrar of Companies, Maharashtra, a notice of the situation of the office where the register is to be kept."
1. Filing of notice with Registrar about situation of office where the
register is kept.-Opening of foreign register, notifying the situation of the office
where such register is kept, any change in the situation of such office or of
its discontinuance should within thirty days of the relevant dates, be filed
with the Registrar of Companies.
2. Penalty for non-filing-If default is made in
complying with the aforesaid filing of notice 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.
3. Foreign register part of company's principal Register.-A foreign register is deemed
to be part of the company's principal register of members or of debenture-holders,
as the case may be.
4. Foreign register to be kept open to inspection.-A foreign register has to be
kept, be open to inspection, be closed and extracts and copies taken there from
in the same way and manner as the 'principal register' of members or debenture-holders
[Section 158(2)].
5. Compliance Certificate.-A company whose paid-up share capital
is less than Rs. 2 crores but is equal to or more than Rs. 10 lakhs must obtain
a Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning inter alia that the company
has duly filed the forms as stated in Annexure B to said Compliance Certificate
with the Registrar of Companies within the time prescribed under the Act and
the Rules made there under as per paragraphs 2 of the Form of Compliance
Certificate appended to the Companies (Compliance Certificate) Rules, 2001
prescribed under section 383-A(l) proviso.
Keeping of Register of Members/Debenture-holders outside
India (Another format)
"RESOLVED that pursuant to the provisions contained in section 157 of the Companies Act, 1956, the Board of Directors of the Company be and is hereby authorised to keep a foreign register of members and debenture holders at its Branch Office in USA with effect from 1st July, 2002.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby directed to notify the situation of
foreign register of Members/Debenture-holders to the Registrar of
Companies, NCT of Delhi and Haryana and keep duplicate copy thereof at the
registered office of the company."
1. Articles to empower company for keeping foreign register.-Ensure that power is given
in the Articles of Association of the company for keeping a foreign register of
Members[Debenture- holders. If not, amend the Articles of Association to
take the power.
2. Foreign register part of principal register.-Foreign register of
Members/Debenture-holders shall be deemed to be a part of the principal
register of the company and every duplicate of foreign register required to be
kept at the registered office of the company in India shall for all purposes of
the Companies Act, 1956 also be deemed to be part of the principal register.
[Section 158(l) & (5)]
3. Approval of Reserve Bank/Stock Exchange, if required, be obtained.-In case approval of the
Reserve Bank of India/Stock Exchange or under the local laws of the foreign
country where the register is kept is to be obtained, the same should be taken
before the register is kept there.
4. Filing of return with Registrar about situation of foreign register.-Ensure to file return about
the situation of foreign register with the Registrar of Companies or the
discontinuance thereof within thirty days of such a change.
5. Provisions relating to principal register apply to foreign register.-The provisions relating to
the company's principal Register of Members shall apply mutatis mutandis to the
foreign register also.
6. Penalty for default.-If default is made in complying with sub-section
(4) of section 158, the company and every officer of the company who is in
default will be punishable with fine of up to Rs. 500/-.
Certification of Annual Return
"RESOLVED that Shri XY, Secretary in whole time practice be and is hereby appointed at an annual retainer of Rs __________ to sign the annual returns of the company."
1. Signing of Annual Return.-The Companies Amendment Act, 1988, inserted a
proviso to section 161(l) making the signing of a copy of the annual return of a
listed company by a Secretary in whole-time practice mandatory.
2. Significance of such requirement.-Such signing by a Company
Secretary in practice is called for to ensure verification of the condition of
the company stated in annual return.
3. Mandatory ceiling on Certification of Annual Return.-It has been notified by the
Institute of Company Secretaries of India that such signing of Annual Return
should be limited to thirty companies per company secretary in practice.
4. Penalty for default.-If a company fails to comply with any of the
provisions contained in 161, 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.
Destruction of books, documents and other records
"RESOLVED that the
Company do destroy the books, documents and other records of the Company which
are __________ years old.
RESOLVED FURTHER that the
Secretary of the Company be directed to get a list prepared of the books,
documents and other records of the Company before they are destroyed and keep
the said list under his safe custody."
1. Board Meeting.-Hold a Board Meeting and take a decision about the
destruction of the books, documents and other records not required for
reference by the company.
2. Provisions of section 209(A-4) of the Act to be kept in view.-Section 209(4-A)
provides that the books of account of every company relating to a period of not
less than eight years immediately preceding the current year together with the
vouchers relevant to any entry in such books of account shall be preserved in
good order.
3. Provisions of Income-tax Act to be kept in view.-The provisions of section
149 of the Income-tax Act shall be kept in view before taking a decision
for destruction of documents, records etc.
4. Check the Companies (Preservation and Disposal of Records) Rules,
1966.-The
Companies (Preservation and Disposal of Records) Rules, 1966 should also be
checked up before taking a decision for destruction of records of the company.
Destruction of records
(Another format)
"RESOLVED that the following records of the
Company be and are hereby destroyed in accordance with the Companies
(Preservation and Disposal of Records) Rules, 1966.
|
SI.
NO.
Destruction of Records |
1.
_____________________________________________________
2.
_____________________________________________________
3.
_____________________________________________________
RESOLVED FURTHER that Shri
______________________ Secretary of the Company be authorised to take necessary
steps to implement the destruction of the aforesaid records and make the
necessary entries in the Register of Records destroyed."
1. Prescribed Provisions.-The Companies (Preservation and Disposal of Records)
Rules, 1966 provide for the destruction of the records of the company. A
register of records destroyed should also be maintained in the form prescribed.
2. Compliance Certificate.-A company whose paid-up share capital
is less than Rs. 2 crores but is equal to or more than Rs. 10 lakhs must obtain
a Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning inter alia that the company
has duly filed the forms as stated in Annexure B to said Compliance Certificate
with the Registrar of Companies within the time prescribed under the Act and the
Rules made thereunder as per paragraphs 2 of the Form of Compliance Certificate
appended to the Companies (Compliance Certificate) Rules, 2001 prescribed under
section 383-A(l) proviso.
Inspection of Register of Members/Debenture-holders (S.
163(2))
The right of inspection is a
statutory right given by the Act and cannot be objected to on the ground of any
mala fide motive on the part of the members seeking inspection.
A debenture- holder is
not entitled to a detailed inspection of the records, registers and books of
account of the company. Narotamdas T Toprani v. Mumbai Dyeing & Mfg.
Company Limited, (1986) 3 Comp LJ 179 at 189 (Bom).
inspection of Register of
Members/Debenture Holders
S. 163(2)-Inspection of Register of Members and
Debenture Holders Board Resolution
"RESOLVED that the
Register of Members and the Register of Debenture-Holders and their
indices, copies of all annual returns and copies of the certificates and
documents annexed to those returns be kept open for inspection at (Here give
the address at which these are kept), by the persons entitled thereto and in
the manner provided under section 163(2) of the Companies Act, 1956, between 10
a.m. and 4 p.m. on any working day unless they are closed under the provisions
of the Companies Act, 1956, or the Articles of Association of the
Company."
PRACTICE NOTES
1. Place of keeping and inspection of registers and returns.-Under section 163, Register
of Members and debenture- holders and copies of all annual returns with
their enclosures must be kept at the registered office of the company and must
also be accessible to members and debenture- holders without fee and to
any other person with a fee of one rupee, for every inspection. They are also
allowed to take extracts or copies from those registers and returns. If these
are to be kept at any place other than the registered office of the company,
then the place must be approved by a Special Resolution of the company and a
copy thereof filed with the concerned Registrar of Companies.
2. Penalty for default.-If any inspection or the making of any extract
required under section 163 is refused or if any copy required under it is not
sent within a period of 10 days exclusive of non-working days commencing
on the day next after the day on which the requirement is received by the
company, the company and every officer of the company who is in default will be
punishable in respect of each offence with fine of up to Rs. 500/- for
every day during which the refusal or default continues.
Inspection of Register of Members/Debenture-holders
(Another format)
S. 163(2)-Inspection of Register of Members/Debenture-holders-Board
Resolution
"RESOLVED that the Managing Director of the Company be and is hereby empowered to keep open for inspection the Register of Members/Debenture- holders, copies of annual returns as also the copies of certificates and documents annexed to the returns by members or debenture-holders entitled to inspect in pursuance of section 163(2) of the Companies Act, 1956, on all working days between 2. p.m. to 5 p.m. effective from lst January, 2002.
RESOLVED FURTHER that the
Managing Director of the Company be and is hereby also empowered to allow such
members to make extracts from any register, index etc. without charging any fee
and if copies of any such document is required by them furnish the same on
payment of the prescribed sum for every hundred words or fractional part
thereof."
1. Members' and debenture- holder's right of inspection.-The members and
debenture-holders are entitled to inspect the registers etc. or take
extract there from free of charge.
2. Power of Board to put restrictions on inspection.-The Board has the power to
put reasonable restriction on the right of inspection by members/debenture-
holders.
3. Any person allowed to inspect documents on payment of fee.-Any other person can also be
allowed to inspect the documents on payment of fee to be decided by the Board.
4. Right of inspection a statutory right.-The right of inspection is a
statutory right given by the Act and cannot be objected to on the ground of any
mala fide motive on the part of the members seeking inspection.
5. Debenture-holder not entitled to detailed inspection of
records.-A debenture holder is not entitled to a detailed inspection of the
records, registers and books of account of the company. Narotamdas T Toprani v.
Mumbai Dyeing & Mfg. Company Limited, (1986) 3 Comp LJ 179 at 189 (Bom).
Compelling immediate inspection by Company Law Board
WHEREAS the company is a member of ABC Co. Ltd. holding __________ equity shares of Rs. 10/- each in the share capital of that company;
AND WHEREAS a duly authorised official of the company went to that company's registered office on __________ 2002 to inspect its register of members, indexes, returns and copies of certificates and documents required to be annexed to its annual and to make extracts from them and also asked for a copy of some of them on payment of the prescribed fee;
AND WHEREAS that company
refused such inspection, and making of extracts and the copy asked for has not
been send within the required time provided in sub-section (4) of section
163;
NOW THEREFORE IT IS RESOLVED
that an application be made to the Company Law Board, Eastern Region Bench,
Calcutta for an order compelling an immediate inspection of the document and
for a direction that the extract required shall forthwith be allowed to be
taken by an authorised person of the company and also that copies required
shall forthwith be sent to the company.
RESOLVED FURTHER that the
Secretary of the company be and is hereby authorised to make file of the said
application and to take all steps and actions that may be necessary in connection
therewith or ancillary or incidental thereto.
1. Application to CLB.-The application to the Company Law Board, should be
made by way of a petition in Form 1 given in Annexure II to the Company Law
Board Regulations, 1991. The said application should be accompanied by
documentary evidence if any showing the refusal of the other company along with
affidavit verifying the petition.
2. Application Fee.-Application fee of Rs. 100/- should be paid by
way of Bank Draft drawn in favour of Pay and Accounts officer, Department of
Company Affairs, New Delhi/Mumbai/Calcutta/Chennai as the case may be depending
on the region at which the petition is filed as per Company Law Board (Fees on
Applications of Petitions) Rules, 1991.
Registers to be Evidence (S. 164)
Section 164 provides that
the Register of Members, the Register of Debenture Holders and the Annual
Returns, Certificates and Statements referred to in sections 159, 160 and 161
shall be prima facie evidence of any matters directed or authorised to be
inserted therein by the Act. A company registering share certificates in favour
of the transfer trying to undo such registration for non-cancellation of
stamps subsequently was estopped by the Company Law Board from questioning the
validity of the transfer on the ground of non-cancellation of stamps.
Kshovnish Chowdhury v. Kero Rajendra Monolithics Ltd., (2002) 1 Comp LJ 552
(CLB).
The statutory meeting must
be held after one month or before the expiry of six months from the date on
which the company is entitled to commence business.
The notice calling the
meeting must specify the meeting as the 'Statutory Meeting. Gardner v. Iredale,
(1912) 1 Ch 700. The provisions of section 165 do not apply to a private
company. However, the exemption in sub-section (10) of section 165 of the
Act does not extend to any private company which is a banking company. See
section 49 of the Banking Companies Act, 1949. This section does not apply to a
Government company. Notification GSR 578(E), dated 16th July, 1985.
Statutory Report and Statutory Meeting
"RESOLVED that pursuant
to section 165 of the Companies Act, 1956, the draft statutory report produced
at this meeting under the signature of the Chairman thereof, be and is hereby
approved and that the statutory meeting of the Company be convened at __________
the registered office
of the Company, on __________ the __________, 2002 __________ at __________ a.m/p.m., and that the Secretary be instructed to circulate copies of
such report to all the members of the company, and deliver a certified copy of
the statutory report to the Registrar of Companies forthwith after sending
copies thereof to the members for registration.
RESOLVED FURTHER that the
Secretary of the Company be directed to prepare a list of members showing
therein the names, addresses and occupation of the members of the Company and
number of shares held by them respectively and produce such list before the
members at the statutory meeting, as convened, for the perusal of any member
during the continuance of such meeting pursuant to section 165(6) of the
Companies Act, 1956."
1. Time of Holding Statutory Meeting.-Every public company limited
by shares and every public company limited by guarantee and having share
capital must, within a period of not less than one month nor more than six
months from the date at which the company is entitled to commence business,
hold a General Meeting of the members of the company, called the statutory
meeting.
2. Statutory Report.-Pursuant to section 165(2), the Board should send the statutory report to the members at least twenty-one days before the meeting.
3. Contents of Statutory Report.-Statutory report must
contain the information referred to in sub-section (3) of that section.
4. Certification of Statutory Report.-The statutory report must be
certified as correct by not less than two Directors of the company, one of whom
must be the Managing Director, where there is one and be filed with the
Registrar in Form No. 22.
5. Requirements with Listed Companies.-Three copies of the notice
for holding the statutory meeting where the company is listed on a recognised
Stock Exchange, must be sent to the Stock Exchange.
6. Duty of Listed Companies.-If the company is listed on a recognised
Stock Exchange, six copies of the statutory report should be sent to the Stock
Exchange concerned and a copy each of the report must also be sent to all the
recognised Stock Exchanges in India as soon as it is issued.
7. Business to be transacted at Statutory Meeting.-The statutory meeting should
be held on the appointed date to transact the following business:
(a) Producing a list showing
the names, addresses and occupations of the members and the number of shares
held by each of them and keeping the list open and accessible to members during
the meeting (Section 165(6)).
(b) Discussing the
resolution for which any of the members has given notice. If no notice was
given, the members would still be at liberty to discuss any matter relating to
the formation of the company or arising out of the statutory report, but
without passing any resolution (Section 165(7)).
(c) Approving and adopting
the statutory report.
8. Adjournment.-The statutory meeting can also be adjourned under
Section 165(8) and the adjourned meeting will have the same powers of an
original meeting.
9. Penalty.-If any default is made in complying with the provisions of section 165,
every director or other officer of the company who is in default will be
punishable with fine of up to Rs. 5,000/-.
Statutory Report and Statutory Meeting
(Another format)
S.
165-Statutory report and statutory meeting-Board Resolution
"RESOLVED that subject to the approval of the shareholders pursuant to the provisions of section 165 of the Companies Act, 1956, the draft of the statutory report placed before the Board and duly initialled by the Chairman for the purposes of identification, be and is hereby approved.
RESOLVED FURTHER that the
statutory report be certified as correct on behalf of the Board by Shri XYZ,
Managing Director and Shri ABC, Director of the Company for submission to the
company's Auditors for their report thereon.
RESOLVED FURTHER that the
Statutory Meeting of the shareholders of the Company be convened on Wednesday,
the 10th July, 2002 at 11. 30 hours at the registered office of the company.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby authorised to issue notice calling
the Statutory Meeting of the shareholders of the Company and circulate the
statutory report along with the notice of the meeting to all the shareholders
of the Company and deliver a certified copy of the statutory report to the
Registrar of Companies, NCT of Delhi and Haryana, forthwith after sending
copies thereof to the shareholders of the company, for registration."
1. Statutory Report.-The statutory report shall be as per Form No. 22
prescribed under the Act.
2. Statutory Meeting.-The statutory meeting should
be held after one month or before the expiry of six months from the date on
which the company is entitled to commence business.
3. Notice of Statutory
Meeting.-Give 21 days clear notice for convening the Statutory Meeting of the
company to all the shareholders of the company including the company's
Auditors. The meeting can be convened on shorter notice when agreed to by all
members entitled to attend and vote.
4. Must specify Statutory
Meeting.-The notice calling the meeting must specify the meeting as the
'Statutory Meeting'. Gardner v. Iredale, (1912) 1 Ch 700. Ensure that the proxy
form is sent to every member along with the notice of the meeting.
5. List of Members.-Draw a list of members
showing their names, addresses and occupations and the number of shares held by
them respectively for perusal of the members during the continuance of the
meeting.
6. Matters discussed at the
meeting.-The members of the company present at the meeting shall be at liberty
to discuss any matter relating to the formation of the company or arising out
of the statutory report, whether previous notice of the same has been given or
not. However, they cannot pass any resolution of which notice has not been
given in accordance with the Act.
7. Default in giving Statutory
Report.-If
default is made in delivering the statutory report to the Registrar of
Companies or in holding the Statutory Meeting within the stipulated period, the
company can be wound up compulsorily (Section 433(b)).
8. Requirements of Listed
Companies.-Where the shares of the company are enlisted on any recognised Stock
Exchange, six copies of the notice for holding the Statutory Meeting along with
the statutory report be sent to the Stock Exchange concerned. The copies of the
statutory report should also be sent to all the recognised Stock Exchanges in
India.
9. Adjournment of Statutory
Meeting.-The Statutory Meeting can be adjourned and at any adjourned meeting any
resolution of which notice has been given in accordance with the provisions of
the Act can be passed and the adjourned meeting shall have the same power as
the original meeting.
10. Exemptions.-The provisions of section
165 do not apply to a private company. This section does not apply to a
Government company. Notification GSR 587(E), dated 16th July, 1956. The
exemption in sub-section (10) of section 165 of the Act does not extend
to any private company which is a banking company. See section 49 of the
Banking Companies Act, 1949.
11. Penalty for default.-If default is made in
complying with the provisions of section 165 every director or other officer of
the company who is in default will be punishable with fine of up to Rs. 5,000/-.
Annual General Meeting (S. 166)
On 30th June and 31st
December of each year banks do not transact business as these two days are
utilised for half yearly closing of accounts. These days will not be treated as
public holidays for the purposes of section 166 and an Annual General Meeting
may validly be held on either of these days. Department's letter No. 8/166/80-CL.
V, dated 2nd March, 1981. The dates for closing of accounts have now been
shifted to 31st March and 30th September.
There is a clear statutory
duty on the Directors to call the meeting whether or not the accounts, the
consideration of which is only one of the matters to be dealt with at an Annual
General Meeting are ready or not. Re, El Sombrero Ltd. (1958) 3 All ER 1 (Ch D)
at 6. The fact that the company did not function is also no excuse. Madan Gopal
Dey v. State of West Bengal, (1968) 2 Comp LJ 22. For the purposes of computing
time limit specified in Explanation to section 159, the time within which the
Annual General Meeting, is required to be held is governed solely by section
166 and section 210 is not relevant in such cases. Department's Circular No.
2/79 (F. No. 8/35(159)/(166) 78-CL.V) 24/38/79 CL. II, dated 15th
September, 1979. Each section 166 and 210 imposes independent obligations on
the company and the time fixed in section 210 cannot override the time limit
fixed in section 166 as is evident from the provisions of section 210 itslef.
Ador-samia Ltd. & Others, v. Indocan Engineering Systems Ltd. &
Others, (2000) 100 Com Cases 370 (CLB-PB). The adjourned Annual General
Meeting must, however, be held within the maximum time-limit allowed by
this section. Subai Dutta & Sons Pvt. Ltd. v. Asstt. Registrar of
Companies, W.B., (1986) 3 Comp LJ 73. The fact of not holding the Annual
General Meeting cannot be pleaded in defence to a prosecution , for failure to
file the balance-sheet etc. under section 220. Each of them is an
independent requirement and default to comply with either constitutes a
separate offence punishable separately. Registrar of Companies v. R.P. Nanda,
1977 Tax LR 1610 (Orissa-DB). The delay in the completion of the audit of
the annual accounts of a company should not ordinarily constitute a special
reason justifying the grant of extension of time for holding its Annual General
Meeting. (Press Note, dated 29th January, 1959). If the Board of Directors fix
another date for the adjourned General Meeting, a notice is to be given to the
members in accordance with the provisions of the Act governing notices of
General Meeting. (File No. 8/16(1)/61-PR).
"RESOLVED that the
Seventh Annual General Meeting of the members of the Company be held on Monday,
the 4th July 2002, at 11.00 hours at the registered office of the company at
46, Parliament Street, New Delhi- 110 001.
RESOLVED FURTHER that the
notice of calling the Annual General Meeting along with Explanatory Statements
pursuant to section 173(l) in respect of Special Business to be transacted
there at as placed before the meeting be and is hereby approved and the
Secretary of the company be and is hereby authorised to send the same to the
members of the Company as also to all others entitled to receive the
notice."
1. Holding of Annual General
Meeting each year in addition to other General Meeting.-Every company must hold each
year in addition to any other General Meeting, an Annual General Meeting and
specify as such in the notice calling the meeting.
2. Period within which first
Annual General Meeting to be held.-The company may convene its first Annual
General Meeting within eighteen months from the date of its incorporation.
However, there should not be a gap of more than fifteen months between one
Annual General Meeting and the next and one meeting should be held in each
calendar year. Where the first AGM of a company was postponed beyond the
prescribed period of 18 months under the mistaken notion that the meeting if
held, would be against the spirit of a judgement in some other case, and such
failure was held to be a continuing default as there was no justification for
the postponement of a statutory requirement. T V. Mathew v. Nadukkara Agro
Processing Co. (P.) Ltd., (2002) 108 Corn Cases 130 (Ker).
3. Power of Registrar to
allow extension of time.-The Registrar of Companies has power to allow
extension of time up to three months for holding the Annual General Meeting,.
In case of Government companies, the power to allow extension of time is vested
in the Central Government, the Department of Company Affairs. There is no
prescribed form for this application".
4. Meeting to be held on
working day and not on public holiday.-The meeting must be held on working days
during business hours. The meeting cannot be held on public holidays declared
under the Negotiable Instruments Act. The meeting held during business hours
can continue beyond business hours. In other words, the meeting has to be
convened during the business hours only.
5. 1st April and 30th
September not public holidays.-On 30th June and 31st December of each year (now
31st March and 30th September) banks do not transact business as these two days
are utilised for half yearly closing of accounts. These days will not be
treated as public holidays for the purpose of section 166 and an Annual General
Meeting may validly be held on either of these days. (Department's letter No.
8/166/80CL. V, dated 2nd March, 1981).
6. Statutory duty of
director to call Annual General Meeting whether Annual Accounts ready or not.-There is a clear statutory
duty on the Directors to call the meeting whether or not the accounts, the
consideration of which is only one of the matter to be dealt with at an Annual
General Meeting are ready or not. Re, El Sombrero Ltd., (1958) 3 All ER 1 (Ch
D) at 6.
7. Company functioned or not
is no excuse.-The fact that the company did not function is also not excuse. Madan
Gopal Dey v. State of West Bengal, (1968) 2 Comp LJ 22.
8. Time within which Annual
General Meeting to be held governed by section 166.-For the purposes of
computing time limit specified in Explanation to section 159, the time within
which the Annual General Meeting is required to be held is governed solely by
section 166 and section 210 is not relevant in such cases. (Department's
Circular No. 2/79 (F. No. 8/35(159)/(166) 78-CL.V) 24/38/78 CL. 11, dated
15th September, 1979).
9. Holding of adjourned
Annual General Meeting on holiday.-The adjourned Annual General Meeting must,
however, be held within the maximum time-limit allowed by this section.
Subai Dutta & Sons Pvt. Ltd. v. Asstt. Registrar of Companies, W.B., (1986)
3 Comp LJ 73.
10. Default in holding
Annual General Meeting and filing accounts separate offences.-The fact of not holding the
Annual General Meeting cannot be pleaded in defence to a prosecution for
failure to file the balance-sheet etc. under section 220. Each of them is
an independent requirement and default to comply with either constitutes a
separate offence punishable separately. Registrar of Companies v. R.P. Nanda,
1977 Tax LR 1610 (Orissa-DB).
11. Delay in completion of
audit not a justification for grant of extension of time.-The delay in the completion
of the audit of the annual accounts of a company should not ordinarily
constitute a special reason justifying the grant of extension of time for
holding its Annual General Meeting. (Press Note, dated 29th January, 1959).
12. Holding adjourned
meeting on holiday.-There is no contravention of section 166(2) if the adjourned meeting
comes to be accidentally held on a holiday.
13. Notice of adjourned
General Meeting.-If the Board of Directors fix another date for the adjourned General
Meeting, a notice is to be given to the members in accordance with the
provisions of the Act governing notices of General Meeting. (File No.
8/16(1)/61 -PR).
14. Penalty for default.-If default is made in holding a meeting of the company in accordance with section 166, the company, and every officer of the company who is in default will be punishable with fine of up to Rs. 50,000/- and in case of continuing default with a further fine of up to Rs. 2,500/- for every day after the first during which such default continues. (Section 168).
Notice of Annual General
Meeting and fixation of its date
"RESOLVED that draft
notice for convening the Annual General Meeting of the Company for the year
2001-2002 be and is hereby approved.
RESOLVED FURTHER that Shri
SKM, Managing Director of the Company, be and is hereby authorised to fix the
date, time and place of the meeting."
1. Notice of Meeting.-The notice calling the
meeting must specify the meeting as the Annual General Meeting.
2. Convening of Annual
General Meeting.-The General Meeting of the company can be called only on the authority
of a resolution of the Board of Directors.
3. Cancelling or postponing
of convened meeting.-Once a notice of the meeting is given it cannot be adjourned by a
subsequent notice. The Board of Directors does not have this power. The proper
course will be to hold a meeting and resolve the adjournment of it to any
future convenient date.
4. Voting Rights at AGM.-The right to vote at the
Annual General Meeting should be reckoned as on the last day for holding the
meeting and persons who become members thereafter by virtue of a Government
order were not entitled to vote at the postponed meeting. C. M. Varkeychan v.
TV Mathew, (2002) 108 Com Cases 159 (Ker-DB).
5. Compliance Certificate.-A company whose paid-up
share capital is less than Rs. 2 crores but is equal to or more than Rs. 10
lakhs must 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 annual general meeting for the financial year was held on a
specified date after giving due notice to the members of the company and the
resolutions passed thereat were duly recorded in the minutes book maintained
for the purpose as per paragraph 6 of the Form of Compliance Certificate
appended to the Companies (Compliance Certificate) Rules, 2001 prescribed under
section 383-A(l) proviso.
Convening of Annual General Meeting and approving draft
notice thereof
"RESOLVED that the
Annual General Meeting of the company be convened to take place at the
registered office of the company on _________ the _________ 2002 _________ at
_________ a.m./p.m. and that the draft notice in respect thereof placed at this
meeting be approved and that the Secretary be and is hereby authorised to issue
the notice of the Annual General Meeting, as per the draft placed below, to the
members of the company as also others entitled to receive the notice."
1. Holding of Annual General
Meeting in addition to other general meeting.-Pursuant to section 166
every company is required each year, to hold, in addition to any other General
Meeting, an Annual General Meeting and specify the meeting as such in the
notice convening such meeting. Although the first Annual General Meeting of the
company may be held within eighteen months from the date of incorporation,
normally, there should not be a gap of more than fifteen months between one
Annual General Meeting and the next and it should be held in each year.
2. Power of Registrar to
extend time.-The Registrar may allow extension of time for three months on an
application made to him by the company. This extension can be given only for
subsequent Annual General Meetings. There is no prescribed form for this
application".
3. Meeting to be held during
business hours not on public holiday.-Pursuant to section 166(2), an Annual General
Meeting is required to be held during the usual business hours of the company
other than on a public holiday (or Saturday where according to the standing
instruction of the company, Saturday has been declared as a non-working
day for usual business purposes), at the registered office of the company or
any other place within the city, town or village in which the registered office
is situated.
4. Fixing of date and time
of Annual General Meeting.-Although there is a provision in this section for
the companies for fixing the time of Annual General Meeting by their Articles
of Association, the companies as a matter of practice, fix the date and time of
the Annual General Meeting by Board resolutions is as per the specimen
resolution given above. Members, if thus so desire, can fix the date and time
for subsequent Annual General Meetings by passing a resolution in the Annual
General Meeting.
5. Power of Board to cancel
or postpone holding of Annual General Meeting.-On the question whether or
not the Board of Directors who usually and normally convene Annual General
Meeting can cancel or postpone the holding of such meeting once fixed, there is
a decision of the Allahabad High Court in Rajpal Singh v. State of U.P., (1968)
1 Comp LJ 22, wherein it has been held that the Board has power for such an
action though it cannot be exercised except for bona fide and proper reasons.
The more appropriate course would be for the Board not to insist on or assume
such power, but to hold the convened meeting and then have the meeting
adjourned, if necessary. In this connection see also Chandrakant Khaire v. Dr.
Shantaram Kale and others, (1989) 65 Com Cases 121: (1989) 1 CL A (SC) 142.
6. Non-completion of
audit no justification for grant of extension of time.-Non-completion of audit of
annual accounts of a company is not a 'special reason' for granting extension
of time for convening an Annual General Meeting of a company, especially in
view of the provisions of section 220.
7. Registrar's power to grant extension of time limited to three months.-The Registrar can grant extension of time for holding Annual General Meeting only for three months and not more than that and such extension should be given on account of special reasons, and such extension may be allowed even if it comes to the holding of the Annual General Meeting beyond the calendar year. (Letter No. 34/11/69-CL. III, dated 13-1-1972).
8. Section 166 govern time
for holding Annual General Meeting.-The time of holding Annual General Meeting
must be governed solely by section 166 and section 210 is not relevant.
(Circular No. 2/79 (F. No. 8/35(159/ 166)/78-CL.V 24/38/78-CL.II),
dated 15-9-1979).
9. Notice of adjourned
Annual General Meeting.-Notice of the adjourned General Meeting is not
required to be given to the members of the company unless that date is fixed
otherwise than at the original General Meeting.
10. Holding of adjourned
Annual General Meeting on holiday.-If the day of the adjourned meeting becomes a
holiday and it is held on that day, it would not amount to contravention of
section 166(2) for the prohibition is against calling and not against continuing
the meeting on a holiday.
11. Notice of adjourned
Annual General Meeting when given.-If the Board fixes another date for holding
the adjourned General Meeting, notice of that meeting must be given to all and
in the manner required under the provisions of the Companies Act, 1956. (Letter
No. 8/16(1) 61 -PR, dated 19-5-1961).
12. Annual General Meeting
can be held within postal limits.-Although postal limits are wider than municipal
limits, the Annual General meeting can be held at a place which is within the
postal limits of the city of the registered office of the company. (Circular
No. 1/1/ 80-CL.V, dated 16-2-1981).
13. Word "time"-Meaning.-The word 'time' appearing in
second proviso to section 166(2) means the hour and the date of the
commencement of the Annual General Meeting (Letter No. 8/16(1)61 -PR,
dated 9-5-196 1).
Convening of Annual General
Meeting and its cancellation
"RESOLVED that the
Managing Director be and is hereby authorised to have the notice finalised, to
fix time, date and venue for holding twenty-first Annual General
Meeting".
"RESOLVED FURTHER that
the Managing Director be and is hereby authorised to cancel the Meeting and fix
another date for holding the same, if so, considered necessary."
"RESOLVED FURTHER that
the Secretary of the Company be and is hereby authorised to issue notice and to
complete all other formalities required under the Companies Act, 1956, for
calling the Annual General Meeting of the shareholders of the Company."
1. Holding of Annual General
Meeting a statutory requirement.-Every company is required to hold in addition to any
other meeting a general meeting as its Annual General Meeting and shall specify
the meeting as such in the notice calling it.
2. Convening of Annual or
other General Meeting.-Subject to the provisions in the articles, any
general meeting of the company can be called only on the authority of a
resolution of the Board of Directors, and if the Managing Director, Manager,
Secretary or other officer calls a meeting without such authority, it will not
be effectual unless the Board ratifies the effect before the meeting is held.
3. Time within which Annual
General Meeting is to be held.-It will be noted that the first annual general meeting
is required to be held within eighteen months of a company's incorporation, and
there is no provision for granting an extension of time in this case, as in the
case of subsequent annual general meetings. Thereafter not more than fifteen
months shall elapse between the date of one Annual General Meeting of a company
and that of the next.
4. Power of Registrar to
extend time.-The Registrar of Companies is empowered to grant extension of time for
any special reason for a period not exceeding three months and as per the
Citizen's Charter of the Department of Company Affairs, this application for
extension of time for holding annual general meeting should be processed within
10 days. [File No. 5/25/99-CL-V; Press Note No. 9/99, dated 9-8-1999].
5. Meeting on public
holiday.-No annual general meeting of any company shall be held on a public
holiday. The prohibition is, however, not extended to extraordinary general
meetings.
6. Place and time of holding
Annual General Meeting.-An annual general meeting can be held only in the
city, town or village where the registered office of the company is situated,
and not elsewhere or out of business hours.
7. Holding of AGM by Private
Company.-In the case of a private company, which is not subsidiary of a public
company, both the time and place of the meeting may be fixed either by the
articles or by a preceding annual general meeting or by resolution agreed to by
all the members.
8. Effect of adjournment on
riling accounts.-A company is required to file the balance sheet etc. with the Registrar
even if the Annual General Meeting is held in time and is adjourned for any
reason without adoption thereof.
Convening adjourned Annual General Meeting
S. 166/Reg. 53-Convening
adjourned Annual General Meeting-Board Resolution
"RESOLVED that the draft notice convening the adjourned Annual General Meeting of the Company proposed to be held on _________ the _________ 2002 _________ at _________ a.m./p.m., be and is hereby approved and the Secretary of the Company be directed to issue/circulate the same to the members."
Procedure for adjourning
Annual General Meeting.-The Companies Act, 1956, and the Articles of
Association of the company provide the manner in which and the circumstances
under which an Annual General Meeting or any other General Meeting may be
adjourned. The procedure is substantially laid down in Regulation 53 of Table
'A', which is as follows:
1. Chairman's powers to
adjourn meeting from time to time, place to place.-The Chairman may, with the
consent of any meeting at which quorum is present, and shall, if so directed by
the meeting, adjourn the meeting from time to time and from place to place.
2. Only unfinished business
to be transacted at adjourned meeting.-No business shall be transacted at any
adjourned meeting other than the business left unfinished at the meeting from
which the adjournment took place.
3. Notice to be given when
meeting adjourned for thirty days or more.-When a meeting is adjourned
sine-die or for thirty days or more, notice of the adjourned meeting
shall be given as in the case of an original meeting. [Paragraph 14.2 of
Secretarial Standard 2].
4. Notice of adjourned
meeting when not necessary.-Save as aforesaid, it shall not be necessary to give
any notice of an adjournment or of the business to be transacted at an
adjourned meeting.
Application to CLB for calling Annual General Meeting
"WHEREAS the Company is
a major shareholder of M/s. ABC Pvt. Ltd.;
AND WHEREAS there are only
two other members who are reported to have expired;
AND WHEREAS no application
has been made to the Company for mutation of the name of the legal
representative of such deceased members;
AND WHEREAS the Annual
General Meeting of M/s. ABC Pvt. Ltd. was due to be held latest by 31st March,
2002 which meeting could not be held;
NOW THEREFORE IT IS RESOLVED
that an application be made to the Company Law Board for calling or directing
the calling of a general meeting of the Company and for giving such ancillary
or consequential directions as the Company Law Board may think expedient in
relation to the calling, holding and conducting of the meeting;
RESOLVED FURTHER that in the
said application to the Company Law Board a prayer be made for calling and
conducting the meeting at the instance of a representative of this Company;
RESOLVED FURTHER that the
Secretary of this Company be directed to prepare the application giving all
material particulars and paying the necessary fees and complying with the
procedure laid down in the Company Law Board Regulations, 1991."
1. Annual General Meeting
called by Company Law Board.-In case a company. is unable to hold an Annual
General Meeting in accordance with the provisions of section 166 of the Act any
member of the company can make an application to the Company Law Board for
calling or directing the calling of an Annual General Meeting of the company. A
company cannot invoke the provisions of section 167 because a company cannot
seek directions against itself. Cannanore Whole Body CT Scan and Research
Centre (P.) Ltd. v. Saibunnisa S. V., (1998) 93 Com Cases 99 (CLB-SR).
2. Directions of Company Law
Board.-The
Company Law Board, while calling or directing the calling of an Annual General
Meeting of the company on the application of any member of the company, may
give such ancillary or consequential directions as the Company Law Board may
think expedient in relation to the calling, holding and conducting of the said
meeting. Such directions may also include a direction that a single member of a
company present in person or by proxy will be deemed to constitute the Annual
General Meeting. In normal case the quorum for Annual General Meeting is five
members personally present in the case of public company and two members
personally present in the case of any other company.
3. Deemed Annual General
Meeting.-The Annual General Meeting called or directed to be called by the
Company Law Board on the application of any member of the company will be
deemed to be an Annual General Meeting of the company, of course, subject to
any directions that may be given by the Company Law Board while calling such a
meeting.
4. Impartibility of holding.-The power under this cannot
be used to enable persons responsible for the omission to escape the
consequences of their default. The petition filed with the Company Law Board
pleading administrative difficulties and other factors which were beyond
control was rejected as the circumstances pleaded did not make it impracticable
for the company to a call a meeting without the intervention of the Company Law
Board. National Dairy Development Board v. Indian Immunologicals Ltd., (2002)
108 Com Cases 909 (CLB).
5. Directions to conduct
meeting.-The Company Law Board has power to give directions in respect of the
conduct of a meeting only when the meeting has been convened under its
directions but not where a meeting has been called by the company itself.
Shankar Sundaram v. Amalgamations (P.) Ltd., (2002) 108 Com Cases 885 (CLB).
6. Procedure.-An application by way of a
petition should be made before the concerned Regional Bench of the Company Law
Board in Form No. 1 with a fee of Rs. 500/-.
7. Penalty for default.-If default is made in
complying with any directions of the Company Law under sub-section (1) of
section 167, the company and every officer of the company who is in default
will be punishable with fine of up to Rs. 50,000/- and in case of
continuing default with a further fine of up to Rs. 2,500/- for every day
after the first during which such default continues.
Calling of Extraordinary
General Meeting
"RESOLVED that an
Extraordinary General Meeting of the Company be called and held at the
registered office of the Company on _________
the _________ 2002 _________ at _________ a.m./p.m. to consider the
resolution stated underneath and that the Secretary be authorised to give
notice of the meeting accordingly."
or
"RESOLVED that pursuant
to the requisition lodged at the registered office of the Company an
Extraordinary General Meeting of the Company be held at the registered office
of the Company on _________ the _________ 2002 _________ at _________ a.m./p.m.
and that the Secretary be authorised to issue notice to the members of the
company with regard to the holding of the said meeting."
1. Calling of Extraordinary
General Meeting on requisition.-Under sub-section (6) of section 169, the Board
has to take action for calling an Extraordinary General Meeting, on
requisition, within twenty-one days from the date of the deposit of a
valid requisition with regard to any matters for which requisition has been
made and must hold the meeting on a day not later than forty-five days
from the date of the deposit of the requisition.
2. Articles generally
empower calling of Extraordinary General Meeting.-A provision usually appears
in the Articles of Association of a company for calling an Extraordinary
General Meeting. Regulation 48 of Table 'A' lays down the following procedure:
"48. (1) The Board may,
whenever it thinks fit, call an Extraordinary General Meeting.
(2) If at any time there are not, within India,
Directors capable of acting who are sufficient in number to form a quorum, any
Director or any two members of the company may call an Extraordinary General
Meeting in the same manner, as nearly as possible, as that in which such a
meeting may be called by the Board."
3. Checking of names of requisitionists.-The requisition as well as
the names of the members placing the requisition should be carefully checked.
The word 'member' signifies that the name of the person concerned should appear
in the Register of Members. A requisitionist who has lodged to the company his
shares for transfer does not fulfil the definition of a member.
4. Requisition duly signed
setting out matters for consideration to be deposited at registered office.-The requisition should set
out the matter(s) for consideration for which the meeting is called and shall
be signed by the requisitionists and deposited at the registered office of the
company together with supporting documents signed in like manner.
5. Directors cannot postpone
Extraordinary Meeting of their own will.-The Extraordinary General
Meeting, to be held on a certain date, cannot be postponed by the Directors at
their own will and pleasure.
6. Notice of meeting to
contain statement that member entitled to appoint any person as his proxy.-In every notice calling a
meeting of a company which has a share capital, or whose articles provide for
voting by proxy at the meeting, there should appear with reasonable prominence
a statement that a member is entitled to appoint a proxy to attend such meeting
and vote instead of himself and that such a proxy need not be a member.
Convening of an
Extraordinary General Meeting
"RESOLVED that an
Extraordinary General Meeting of the members of the company be convened on
Monday, the 26th July, 2002, at I 100 hours at No. 16, Panchsheel Park, New
Delhi, the Registered Office of the company to consider the resolutions given
in the notice as per draft placed before the meeting and initialled by the Chairman
by way of identification.
RESOLVED FURTHER that the Secretary of the company be and is hereby authorised to issue notice of the meeting and to comply with all requirements of the Companies Act, 1956, in this regard."
1. Power of Board to call
Extraordinary General Meeting.-The Board may, whenever, it thinks fit, call an
Extraordinary General Meeting. An Extraordinary General Meeting can also be
called on the requisition of the members (S. 169).
2. Directors have no power
to postpone meeting after it is convened.-After convening a meeting
for a date, the Directors cannot postpone it at their own will and pleasure.
Smith v. Paringa Mines Ltd., (1906) 2 Ch 193.
3. Strong ground exists for
restraining shareholders' Meeting.-As regards restraining, a meeting of
shareholders, there must be a strong case which will justify the Court to do so
Isle of Wight Rail Co. v. Tahourdin, (1883) 25 Ch D 320. (now Company Law
Board)
4. Board only has power to
convene Extraordinary General Meeting.-The right to convene an Extraordinary General
Meeting is given only to a Board of Directors which is properly constituted or
by a circular resolution where it is allowed. Re Haycraft Gold Reduction &
Mining Co., (1900) 2 Ch 230.
5. Shareholders' right to requisition
Extraordinary General Meeting.-Every shareholder of the company has the right,
subject to compliance with the provisions of the Act, to requisition an
Extraordinary General Meeting (Section 169).
6. Compliance Certificate.-A company whose paid-up
share capital is less than Rs. 2 crores but is equal to or more than Rs. 10
lakhs must obtain a Compliance Certificate from a secretary in whole-time
practice to be filed with the Registrar of Companies mentioning therein inter
alia that Extraordinary General Meetings were held during the financial year
after giving due notice to the members of the company and the resolutions
passed thereat were duly recorded in the minutes book maintained for the
purpose as per paragraph 7 of the Form of Compliance Certificate appended to
the Companies (Compliance Certificate) Rules, 2001 prescribed under section 383-A(l)
proviso.
7. Secretarial Standard 2.-Paragraph 2.3 of the said
Secretarial Standard provides that items of business of an urgent nature which
need to be transacted before the next Annual General Meeting should be
considered at an Extraordinary General Meeting.
Adjournment of a General Meeting
"RESOLVED that with the
consent of all the members the Extraordinary General Meeting of the company be
and is hereby adjourned to Thursday, the 25th July, 2002, at 10.00 A.M to be
held at the registered office of the company, 35, Chitrajan Park, New
Delhi."
1. Power of Chairman to adjourn
General Meeting.-The Chairman may with the consent of any meeting at which a quorum is
present and shall if so directed by the meeting adjourn the meeting from time
to time and from place to place.
2. Chairman to adjourn
meeting when resolution in terms of Articles passed.-The Chairman must adjourn
the meeting, on passing of a resolution in terms of the provisions contained in
the Articles of the company.
3. No power of Chairman to
adjourn meeting of its own.-The Chairman cannot adjourn the meeting of his own
mere motion. Parsuram v. Tata Industrial Bank, ILR 47 Bom 915: AIR 1928 PC 180.
4. Notice of adjourned
Meeting.-The requirement of notice when a meeting is adjourned for thirty days
or more is mandatory and must be strictly complied with. Robert Batcheller
& Sons v. Batcheller, (1945) 1 All ER 522.
5. Adjourned Meeting is
continuance or original meeting.-An adjourned meeting is a mere continuance of the
original meeting and so the proxies appointed for the original meeting are
available for the adjourned meeting also. W.S. Subramania Iyer v. United India
Life Insurance Co., (1928) 55 MLJ 385: AIR 1928 Mad 1215.
6. No power of Chairman to
adjourn meeting.-The Chairman has no power to adjourn a meeting except as indicated in
clause (1) of Regn. 53. Adjournment for any other reason would be arbitrary.
The members present at the meeting are not bound by the arbitrary decision of
the chairman. Those still present, even if a minority, can continue the meeting
after electing a new chairman and conduct the business left unfinished by the
former chairman. Seth Sobhag Mal Lodha v. Edward Mills Co. Ltd., Beawar, 1971
Tax LR 178: (1972) 42 Com Cases 1 (Raj) (DB).
7. Right to adjourn meeting.-The right to adjourn is
inherent in a meeting, whether or not there is a Chairman of the meeting
(M.R.S. Rathna Velu Sand Chettiar v. M.R.S. Manickavelu Chettiar, AIR 1951 Mad
542: (1951) 21 Com Cases 93.
Requisitioning Extraordinary General Meeting by members
"WHEREAS this
requisitionist, being the shareholder of M/s. ABC Ltd., holding more than 10%
of the share capital is desirous of appointing Mr. X, as Director of M/ s. ABC
Ltd.;
AND WHEREAS the said M/s.
ABC Ltd. failed to appoint Mr. X, as Director of the Company at the last Annual
General Meeting despite a notice in this behalf given under section 257 of the
Companies Act, 1956;
NOW THEREFORE IT IS RESOLVED
to require M/s. ABC Ltd. forthwith to proceed to convene an Extraordinary General
Meeting of the Company for the purpose of passing a resolution for appointing
Mr. X, as Director of the Company and to pass the following resolution.
"RESOLUTION: RESOLVED
that Mr. X be and is hereby appointed a Director of the Company."
1. Extraordinary General
Meeting called by requisitionists.-The board of directors of a company should
call an Extraordinary General Meeting of the company on the requisition of
prescribed number of members of the company. Such prescribed number of members
will be, in the case of a company having a share capital, such number of them
as hold on the date of the deposit of the requisition, not less than one-tenth
of such of the paid up capital of the company which should carry the right of
voting in regard to the matter for which the requisition is sent. Such
prescribed number of members will be, in the case of a company not having share
capital, such number of them as have at the date of deposit of the requisition
not less than one-tenth of the total voting power of all the members
having on the date of giving the requisition a right to vote in regard to the
matter for which the requisition is sent.
2. Contents of the
requisition.-The requisitions given by the prescribed number of members should set
out the matters which are to be considered in the proposed meeting and should
be signed by all the requisitionists and should also be deposited at the registered
office of the company. The 'requisition as aforesaid may consist of several
documents which should be signed by one or more requisitionists.
3. Duty of the board.-The board of directors of
the concerned company must, within twenty-one days from the date of the
deposit of a valid requisition, call a meeting on a day not later than forty-five
days from the date of deposit of the requisition.
4. Meeting called by the
requisitionists themselves.-The Extraordinary General Meeting will be called by
the requisitionists themselves in case the board of directors of the company
fail to call a meeting within forty-five days from the date of the
deposit of the requisition. Such a meeting should be called by them in the same
manner as nearly as possible as that in which meetings are called by the board
of directors of the company and should be held before the expiration of three
months from the date of the deposit of the requisition.
5. Expenses of calling the
meeting by the requisitionists.-Expenses incurred by the requisitionists for calling
the meeting as a result of failure on the part of the board of directors to
call a meeting should be paid back to the requisitionists by the company.
6. Failure to convene
meeting.-Failure to convene meeting under the section cannot ordinarily be
construed as an offence. Huantha R. Hegde v. Capt. T.S. Gopala Krishna, (1996)
23 CLA 142 (Kar).
Calling an Annual General
Meeting at shorter notice
WHEREAS the company has four
shareholders who are also Directors of the Company;
AND WHEREAS the Annual General
Meeting of the company was scheduled to be held on or before 31st March, 2002;
AND WHEREAS an application
was made to the Registrar of Companies for extending the time for holding the
Annual General Meeting by three months;
AND WHEREAS the Registrar
had finally agreed to extend the time to 30th June, 2002;
NOW THEREFORE IT IS
RESOLVED, with the consent of all the shareholders of the company who are also
the Directors of the Company, to call the Annual General Meeting on 28th June,
2002;
RESOLVED FURTHER that the
Secretary of the Company shall issue notice of the Annual General Meeting
forthwith."
1. Twenty-one days'
notice.-A
company can call a general meeting by not giving less than twenty-one
days' notice in writing. A general meeting can also be called by giving a
notice shorter than twenty-one days. Business conducted in annual general
meeting will not be vitiated if members receive less than 21 days notice.
Shailesh Harilal Shah v. Matushree Textiles Ltd., (1994) 14 CLA 177 (Bom). The
requirement of section 171 is not mandatory if the conditions mentioned under
section 171(2) are fulfilled and in absence of any prejudice being made out
notwithstanding the fact whether section 171 is mandatory or not merely on the
technical ground that there was no clear notice of 21 days from the date of
service of the notice and the meeting, neither the meeting nor the proceedings
of the meeting could be invalidated. Somalingappa Shiva Putrappa Mugabasar v.
Shree Renuka Sugars Ltd., (2002) 110 Com Cases 371 (Kant).
2. Consent required.-For giving shorter notice
for calling a general meeting consent should be obtained from all the members
entitled to vote at the meeting if the said general meeting is an Annual
General Meeting. If the general meeting to be called is a meeting other than
the Annual General Meeting then consent should be obtained from members holding
ninety-five per cent of the shares of that company if the company has a
share capital and in case the company is not having share capital, the consent
should be obtained from members holding not less than ninety-five per
cent of the total voting power exercisable at the proposed meeting.
3. Inclusion of members.-Where any members of a
company are entitled to vote only on some resolutions to be moved at the
general meeting and not on other resolutions to be moved thereat, those members
shall be counted for obtaining a consent in respect of the resolutions on which
they can vote and not in respect of those resolutions on which they cannot
vote.
Adjournment of general
Meeting for want of quorum
"RESOLVED that the
Extraordinary General Meeting called for being held on _________ which could not transact any business for
want of quorum and stood adjourned pursuant to Article _________ of the Articles
of Association, be held on __________________ (day) the __________________
(date) at __________________ (time) at __________________ (place) to transact
the business as contained in original notice dated ________________.
RESOLVED FURTHER that the
Secretary of the company be and is hereby authorised to send the notice of the
holding of adjourned meeting to all the members of the Company."
1. Adjournment of General
Meeting for want of quorum.-If a General Meeting called by the Board could not
transact any business for want of quorum then the meeting shall stand adjourned
to the same day in the next week at the same time and place and a notice to
this effect be published in the newspaper.
2. Individual notices to
member when General Meeting adjourned to any other day.-Where the articles authorise
the Board to hold the adjourned General Meeting on any other day then
individual notices are to be given to the Members or have a general notice
published in the newspaper.
3. When provision as to
automatic adjournment of General Meeting takes force court has no power to
interfere.-Where the directors do not exercise their discretion and the provision
as to automatic adjournment to the next week takes force, the court cannot
interefere in the matter even in the exercise of its inherent powers. Ashok
Mathew Zacharia (Dr.) v. Magestic Kuries & Loans (P) Ltd., (1987) 62 Com
Cases 865.
4. When quorum not present
at reassembled meeting members actually present constitute quorum.-If at the reassembled
meeting- also the quorum is not present, then according to this sub-section
as many members as are actually present shall constitute the quorum. It is
sufficient if at the adjourned meeting one member is present in person and one
by proxy. It would appear, as a matter of construction, that under such a
provision two members present by proxy would constitute a meeting, and that
even one member may be sufficient for this purpose, since, the plural members
includes the singular member. Jarvis Motors (Harrow) Ltd. v. Carabott, (1964) 3
All ER 89; Daimler & Co. Ltd. v. Continental Tyre and Rubber Co. (Great
Britain), (1916) 2 AC 307.
5. Adjourned meeting
continuation of original meeting.-An adjourned meeting under sub-section (4) is
merely a continuation of the original meeting. Scadding v. Lorant, (1851) 3 HLC
418; Mclaren v. Thomson, (1917) 2 Ch 261. Therefore no notice is necessary. But
if the Board of Directors fix another date for the adjourned general meeting. A
notice is to be given to the members in accordance with the provisions of the
Act governing notices of general meetings.
6. Secretarial Standard.-As per paragraph 3 of
Secretarial Standard 2 quorum should be present through out the meeting.
Chairman of a General Meeting
"RESOLVED that pursuant
to the provisions of article 99 of the Articles of Association, of the company
Shri DRM be and is hereby elected as a Chairman of this meeting."
1. Provisions of Articles to
be complied with.-Ensure to comply with the provisions of the Articles of Association of
the company.
2. When a director unwilling
to act as Chairman or no director present member to elect one of its members as
Chairman.-If at any meeting, no Director is willing to act as Chairman or if no
Director is present within fifteen minutes after the time appointed for holding
the meeting, the members present shall choose one of their members to be
Chairman of the meeting.
3. Members present to elect
one of themselves as Chairman unless articles provide otherwise.-Un less the articles
otherwise provide the members personally present at the meeting shall elect one
of themselves to be the Chairman of the meeting.
4. No power of Chairman to
stop meeting.-The Chairman has no power to stop a meeting on his own will and
pleasure. If he does so, the meeting can by itself resolve to proceed with the
business for which it has been convened and elect another Chairman. Cates by v.
Burnett, (1916) 2 Ch 325.
5. When meeting convened by
Court any motion/amendment/ resolution outside purview of order may be
rejected.-When a meeting is convened and held under orders of Court, any motion,
amendment or resolution not coming within the terms of the Court's order may be
rejected by the Chairman. Re, Bello v. Co-operative Navigation Etc. Co.,
AIR 1925 Bom 105.
6. No power of Chairman to
adjourn meeting even on demand of majority.-In the absence of a special
provision, when once a meeting has been convened the Chairman is not bound to
adjourn it, though the majority may wish him to do so, even as he cannot
adjourn it of his own mere motion. Parsuram v. Tata Industrial Batik, ILR 47
Bom 915: AIR 1928 PC 180.
7. Removal of Chairman.-Board of directors has right
to remove a chairman of a meeting if he has lost its confidence. Kashinath
Tapuriah v. Incab Industries Ltd., (1996) 20 CLA 19 (Cal).
8. Secretarial Standard.-Paragraphs 5.1.1, 5.1.2,
5.2, 5.3 and 5.4 of Secretarial Standard 2 should be adhered to in connection
with the appointment of a chairman.
Application to CLB for ordering an Extraordinary General
"WHEREAS the registered
office of the Company situated at 1, Harrington Street, Calcutta seems to have
been surrendered by the Managing Director who is untraceable;
AND WHEREAS the books and
papers of the Company are no longer available in the registered office and have
apparently been taken away by the said Managing Director;
NOW THEREFORE, in this
meeting of the Board of Directors of the Company, IT IS RESOLVED that an
application be made under the signature of Mr. X, a Director of the Company,
also present and voting at this meeting, to the Company Law Board for calling
an Extraordinary General Meeting of the Company to consider the business of
tracing the books and papers of the company and the funds of the Company
apparently misappropriated by the said Managing Director and also to initiate
police action for tracing the Managing Director and booking him for the
offences committed by him."
1. Impracticability
prevailing.-For ordering a general meeting by the Company Law Board
impracticability to convene a meeting is a condition precedent to the exercise
of jurisdiction under section 186 of the Act. Edward Ganj Public Welfare
Association Ltd., Re, (1977) 47 Com Case 283 (P&H). Demise of promoters/directors
of a company made the company without directors and was not in a position to
transact its normal business. Widow of one of the directors applied for relief
under section 186 and it was ordered to hold an extraordinary general meeting
to transact the company's normal business. Smt. Kaushalaya Atmarani
Manghiranietini v. Hotel Hirmani (P) Ltd., [2001] S&CL Vol. XXIX 109 (CLB).
2. Single member quorum.-Two general meeting ordered
by the Company Law Board on the application of director or member of the company
may be directed to be held with one member of the company present in person or
by proxy and will be deemed to constitute that meeting. Such direction is an
exception to the rule provided under Section 174 of the Act where it says that
unless the articles of the company provide for a larger number, five members
personally present in the case of a public company and two members personally
present in the case of any other company shall be the quorum for a meeting of
the company.
3. Who can apply.-The power under section 186
of the Act can be exercised by the Company Law Board on its own motion or on
the application of any director of the company or of any Such member of the
company who would be entitled to vote at that meeting and it is not necessary that
the said director or a member should apply in the name or on behalf of the
company. Smt. Jain v. Delhi Flour Mills Co. Ltd., (1974) 44 Com Cas 228 (Delh).
4. Procedure.-The application should be
made to the concerned Regional Bench of the Company Law Board by way of a
petition in Form No. 1 of the Company Law Board Regulations, 1991 along with
affidavit verifying the said petition and a fee of Rs. 500/-.
5. Two member, two director
company.-In the case of a company in which there are only two members both of
them are also the only directors of the company and they were at daggers drawn
and it was impossible for them to be able to sit together at a board meeting to
draw an agenda for the extraordinary general meeting that the Company Law Board
directed the calling of the meeting (1999) 95 Com Cases 566 (CLB-SR).
"RESOLVED that pursuant to section 187 of the Companies Act, 1956, and in supersession of all previous resolutions in that behalf or in connection therewith, Mr __________________ or failing him Mr __________________ or failing him Mr __________________ or failing him Mr __________________ be and is hereby authorised to act as the representative of this Company at any meeting of the members or at any meeting of any class of members/debenture-holders of the companies, named hereunder, of which the company is presently a member or debenture -holder and that a certified copy of this resolution signed by the Chairman be lodged with each of the following companies of which this company is a member/debenture-holder:
1. M/s. NK Cotton Mills Co. Ltd.
2. M/s. GB Transport Co. Ltd.
3. M/s. Bharat Trading Co. Ltd.
4. M/s. SB Petrochemical Co. Ltd."
1. Section applicable to
body corporate as defined in section 2(7).-The provisions of section
187 apply to a 'body corporate' whether a company within the meaning of the
Companies Act or not. Section 2(7), however, excludes from the definition of
the 'body corporate', any corporation sole, co-operative societies, and
other corporate bodies which the Central Government may, by notification,
specifically exclude, but corporate bodies as Municipal Corporation, Financial
and Investment Corporation, Life Insurance Corporation, etc., should be covered
by this section.
2. Power of appointment
vested in Board.-The provisions of section 187 require that the appointment of the
representative of the company must be made by a resolution of the Board of
Directors.
3. Certified copy of
resolution to be lodged with concerned company.-It is important that a
certified copy of the resolution of the Board of Directors is lodged with the
concerned company well in time.
4. Time-limit
prescribed for lodging of proxy not applicable.-The time limit of forty
eight hours as applicable to proxy is not to be applied for purpose of lodging
the certified copy of resolution of the appointment of the representative which
may be done any time before the meeting of the members or of the debenture-
holders.
5. Authorisation be given by
name or description.-Authority of the Board of Directors may be given to any person by name
or description and no one else claiming to represent the body corporate is
entitled to attend or otherwise take part in the meeting.
6. Resolution valid until
superseded.-A resolution under this section should remain valid until the previous
one is superseded by another resolution, and it is, therefore, convenient to
make provisions for authority to act as representative in favour of more than
one person who may act in the absence of the person(s) named earlier.
7. Resolution to specify
company and the meeting.-The resolution must specify the company and if the intention
of the Board is to authorise the representative to act as such only at a
specified meeting, then the resolution must also specify the meeting at which
such representative would act.
8. Position of
representative.-A person authorised to act as a representative can exercise the same
rights and powers including the right to vote by proxy on behalf of the body
corporate which he represents as if he is an individual member of that company.
9. Donee of General Power of
attorney.-The donee of a general power of attorney does not have the same status
as that of the representative appointed under section 187 but he can be
appointed as a proxy by the member concerned. He cannot be counted for the
purposes of quorum. Otherwise he can exercise all the rights of a member at a
meeting.
10. Power of appointing
representative not to be delegated.-The power of appointing a representative
being discretionary power of the Board, cannot be delegated to the Managing
Director, Manager or any other person.
Representation of the
company as a member in a company
"RESOLVED that pursuant to -the provisions of section 187 of the Companies Act, 1956, Shri ABC or failing him Shri XYZ or failing him Shri YRS be and is hereby authorised to act as its representative at any meeting of the members or at any meeting of any class of members or debenture- holders of Bharat Overseas Limited, Calcutta of which the company is a member/debenture-holder.
RESOLVED FURTHER that Shri
ABC or failing him Shri XYZ or failing him Shri YRS be and is hereby authorised
to give his consent pursuant to section 171 of the Companies Act, 1956.
RESOLVED FURTHER that a copy
of the resolution duly certified by the Chairman of the meeting be sent to
Bharat Overseas Limited, Calcutta."
1. Power of appointment
vested in Board.-The appointment of representative by the company to act as its
representative at any meeting of the company of which the company is a member
must be made by a resolution passed at the Board Meeting.
2. Position of
representative.-The person appointed as the representative of the company is entitled
to exercise the same rights and powers on behalf of the company which he
represents as that company could exercise if it were an individual member.
3. Representative has right
to speak and vote.-The person appointed as a representative of the company has the right
to speak and vote at the meeting and his presence can be counted for the
purpose of quorum of the meeting.
Investigation of beneficial
ownership of shares
"WHEREAS Mrs. D.
Kejriwal, is known to be a person of no substantial means;
AND WHEREAS the said Mrs. D.
Kejriwal has acquired Two Hundred Thousand shares of the Company when the
market price of each share of the Company is Rs. 500/-per share;
NOW THEREFORE IT IS RESOLVED
that an application be made to the Central Government for investigation into
the beneficial ownership of the shares in the Company;
RESOLVED FURTHER that a
mention be made of this application to the Central Government in the Company's
petition before the Company Law Board under section 250 of the Companies Act,
1956."
1. Appointment of
inspectors.-Inspectors may be appointed by the Central Government to investigate
and report whether prescribed declaration has been made by the person not
holding beneficial interest in any share of a company if there are good reasons
to do so.
2. Applicability of section
247.-Provisions
of section 247 of the Act will apply to the investigation made by the
inspectors appointed by the Central Government as if such an investigation is
ordered under that section itself. There is no prescribed form of this
application.
"RESOLVED by the
undersigned holding 25% of the paid-up share capital of XYZ Ltd., in
accordance with the provisions of section 188 of Companies Act, 1956, that
notice be given of the following resolution which is intended to be moved at
the next Annual General Meeting of the Company:
RESOLVED that the
negotiations under way for mortgaging Company's properties for obtaining a loan
of Rs. 50 lacs from Asian Developers Ltd. be not proceeded with any further.
Signature of
requisitionist.”
Asian Developers Ltd. is
understood to be charging 29% interest for the loan of Rs. 50 lacs proposed to
be given to the Company. Considering the present financial position of the
Company, obtaining loan at this high rate of interest will be prejudicial to
the interest of the Company. It is apprehended that Asian Developers Ltd. will
ultimately take over the Company. The aforesaid resolution is proposed in order
to prevent the Company from embarking on such a venture for raising money.
Signature of
requitionist."
1. Requisition of members.-At the requisition of
specified number of members a company should issue notice of any resolution
which is proposed to be moved at the next general meeting and also circulate to
the members of the company any statement of not more than one thousand words
with respect to the matter referred to in any proposed resolution given by the
requisitionists or any business to be dealt with at the next general meeting.
2. Requisite number of
members".-The requisite number of members necessary for giving the requisition is
such number of members as represent not less than one-twentieth of the total
voting power of all the members having at the date of submission of the
requisition right to vote on the resolution or business to which the
requisition relates or not less than one hundred members holding shares in the
company on which there has been paid up an aggregate sum of not less than
rupees one lakh.
3. Circulation of notice of
resolution/ statement.-Notice of resolution and statement which the
requisitionists have sent to the company should be circulated to all the
members of the company entitled to have notice of the meeting by serving a copy
on each member.
4. No notice required.-A company need not give any
notice of the resolution or circulate any statement unless a copy of the
requisition including such resolution or statement is signed by the
requisitionists and is deposited at the registered office of the company not
less than six weeks before the meeting in case such requisition requires a
notice of the resolution and not less than two weeks before the meeting in any
case. It is also necessary for the requisitionists to deposit a sum reasonably
sufficient to meet the company's expenses in sending the notice of the
resolution and also in circulating the statement deposited by the
requisitionists.
5. No circulation of
statement required.-An application should be made to the Company Law Board either by the
company or by any other person who claims to be aggrieved if any statement
deposited by the requisitionists is circulated on the ground that such
circulation will amount to abuse of rights conferred by section 188 of the Act
to secure needless publicity for defamatory matter. The Company Law Board can
give an order to the requisitionists to pay the costs of the company in whole
or in part in making the application.
6. Banking company.-In the case of a banking
company, it may refrain from circulating any statement if in the opinion of the
Board of Directors of the banking company the circulation of the statement will
injure the interests of the banking company.
7. Accidental omission.-In case there is accidental
omission in giving notice to the members of any resolution deposited by the
requisitionists the business of the meeting will not be affected and it will be
deemed that such notice has been given.
8. Penalty.-For non-compliance of
the requirements of section 188 of the Act, the company and every officer of
the company who is in default will be punishable with fine which may extend to
rupees fifty thousand.
9. Compounding of offence.-The fine of rupees fifty
thousand for contravention of provisions of section 188(8) is compoundable by
the Regional Director as per section 621-A(l)(a).
Application to Company Law
Board against circulation of
members' resolution
"WHEREAS the Company
has received a requisition for circulating a resolution opposing the proposal
for obtaining financial assistance from Asian Developers Ltd.;
AND WHEREAS the statement
proposed to be circulated with the proposed resolution is defamatory in so far
as the Company's financial standing is concerned;
NOW THEREFORE IT IS RESOLVED
that an application be made to the Company Law Board for an order preventing
the circulation of the proposed resolution and for payment of costs of this
application from the requisitionist;
RESOLVED FURTHER that
Secretary of the Company will prepare an application to be made to the Company
Law Board under subsection (5) of section 188, explaining in the said
application in detail the Company's financial position with turn over of more
than Rs. five crores and explaining how the aforesaid financial assistance will
be repaid by the Company without any unnecessary cost or burden. Secretary is
further directed to put in detail the progress made by the Company in obtaining
foreign currency loan through ICICI and EXIM Bank."
1. Company Law Board's
power.-The
Company Law Board has the power by an order to stop the company from
circulating any statement which will amount to giving needless publicity of any
defamatory matter on the application of either the company or any other person
who claims to be aggrieved.
2. Procedure.-An application by way of a
petition should be made to the concerned Regional Bench of the Company Law
Board in Form No. 1 of the Company Law Board Regulation, 1991 alongwith a fee
of rupees fifty.
Furnishing copy of the
resolution to member
"WHEREAS the Company
has adopted Table A of Schedule I of the Companies Act, 1956 as its articles;
AND WHEREAS an entry to the following effect will be made as a proviso to Regulation 64 of Table A, namely- "provided that 2/3rd of the Directors of the Board shall be appointed by XYZ' Ltd.;
AND WHEREAS Mr. X a member
of the Company has asked for a copy of the aforesaid resolution;
NOW THEREFORE IT IS RESOLVED that a copy of the aforesaid resolution be furnished to Mr. X, who has asked for the same.
1. Members' entitlement.-A member of a company is
entitled to obtain a printed copy of every resolution or agreement which has
been passed under sub-section (1) of section 192 of the Act on payment of
rupee one to the company in case the articles of that company have not been
registered.
2. Penalty.-For non-compliance of
the requirements of section 192 of the Act, the company and every officer of
the company who is in default will be punishable with fine which may extend to
rupees one hundred for each copy.
3. Compounding of offence.-If the fine is not more than
rupees five thousand for contravention of the provisions of section 192(6), the
application for compounding of offence will lie before the concerned Regional
Director under section 621-A(l)(b) and if the fine is more than rupees
five thousand, then the application will lie before the concerned Regional
Bench of the Company Law Board under section 621-A(l)(a).
Passing of Resolution by
postal ballot (S- 192A)
New section 192A has been
inserted by the Companies (Amendment) Act, 2000 to provide for voting through
postal ballot to in case of only important items which are to be notified by
the Central Government to ensure good corporate governance. This facility of
postal ballot is to be available to listed public company. Notice of any
resolution to be passed by postal ballot should be sent to all the shareholders
along with a draft resolution explaining the reasons therefore and requesting
them to send their assent or dissent in writing on a postal ballot within a
period 30 days from the date of posting of the letter. If the majority of
shareholders assent by means of postal ballot, the resolution will be deemed to
have been passed. If default is made in complying with sub-section (1) of
(4) of section 192A, the company and every officer of the company who is in
default will be punishable with fine of Rs. 50,000/- in respect of each
such default. Central Government has framed the Companies (Passing of
Resolution by Postal Ballot) Rules, 2001 which was enforced from 10th May,
2001.
Voting at the general
meetings of companies is the most valuable and fundamental mechanism by which
the shareholders accept or reject the proposals of the board of directors as
regards the structure, the strategy, the ownership and the management of the
corporation. Voting is the only mechanism available with the shareholders for
exercising an external check on the board and the management.
Under the present framework of
the Companies Act, 1956, a company is required to obtain the approval of its
shareholders for various important decisions such as increase in its authorised
capital, shifting of registered office, change in the name, amalgamation and
reconstitution, buy-back of shares, further issue of shares, etc. Since
the shareholders of any large public listed company are scattered throughout
the length and breadth of the country, they are unable to physically attend the
general meetings of the company to exercise their right to vote on matters of
vital importance. The system of voting by proxy has also not proved very
effective.
With a view to strengthening
shareholder democracy, it is felt that all the shareholders of a company should
be given the right to vote on certain critical matters through a postal ballot
system, which has also been envisaged in the Companies Bill, 1997.
Items requiring voting by postal ballot
Some of the critical matters which should be decided
by this system are-
1. Matters relating to alteration in the memorandum of association of the company like changes in name, objects, address of registered office etc.;
2. Sale of whole or
substantially the whole of the undertaking;
3. Sale of investments in
the companies, where the shareholding or the voting rights of the company
exceeds 25%;
4. Making a further issue of
shares through preferential allotment or private placement basis;
5. Corporate restructuring;
6. Entering a new business
area not germane to the existing business of the company.
7. Variation in the rights
attached to class of securities.
Where a resolution is to be
passed in relation to any of the aforesaid items through postal ballot.
1. The board of directors
shall appoint a Designated-Person to conduct, supervise and control the
exercise of postal ballot. This person may be the Company Secretary, a retired
judge or any person of repute who, in the opinion of the board, can conduct the
voting process in a fair & transparent manner.
2. All communications in
this regard shall be made by and addressed directly to the said Designated-Person.
3. A notice containing a
draft of the resolutions and the necessary explanatory statement shall be sent
to all members entitled to vote requesting them to send their assent or dissent
within a period of thirty days from the date of posting of the letter.
4. The notice shall be sent
under certificate of posting and shall include with the notice, a pre-paid
postage envelope for facilitating the communication of the assent or the
dissent of the shareholders to the resolutions within the said period.
5. The envelope by post will
be received directly by the Post Office through Box No. which will be obtained
by the Designated-Person in advance and will be indicated on each pre-paid
envelope to be used by the members for sending the resolution.
6. The Designated-Person
shall ascertain the will of the shareholders based on the response received and
the resolution shall be deemed to have been duly passed if approved by members
not less in number, than as prescribed by law.
7. The Designated-Person
shall thereafter give a report to the Chairman and on the basis of such report
the Chairman shall declare the results of the poll.
[Annexure 3 of the Report of
the Kumar Mangalam Birla Committee on Corporate Governance]
Passing of Resolution by
postal ballot
RESOLVED that the following resolution as per the
draft notice placed before the meeting and initialled by the Chairman for the
purpose of identification be and is hereby passed by postal ballot-
"RESOLVED that pursuant
to section 20 read with section 192A the name of the company be and is hereby
changed from ABC Co. Ltd. to XYZ Co. Ltd."
RESOLVED FURTHER that the
Secretary be directed to issue the notice to all the shareholders of the
company by registered post acknowledgement due along with a postage pre-paid
envelop and to do everything that is necessary in connection therewith.
1. Deemed to be duly passed.-If a resolution is assented
by a majority of the shareholders by means of postal ballot, it shall be deemed
to have been duly passed at a general meeting convened in that behalf.
2. Penalty for fraudulently
defacing or destroying ballot paper.-If a shareholder sends his assent or dissent
in writing on a postal ballot and thereafter any person fraudulently defaced or
destroys the ballot paper or declaration of identity of the shareholder, such
person shall be punishable with imprisonment for a term which may extend to 6
months or with fine or with both.
3. Listed Public Companies.-Provisions of passing
resolutions by postal ballot are applicable to only listed public companies.
Minutes of the General
Meeting
1. Section applicable to
both public and private companies.-This section applies equally to all the
public as well as private limited companies.
2. Keeping minutes in loose
leaf form.-The minutes can be maintained in a loose leaf form and in no case
pasting in the minutes book is allowed. (Extract from Fifth Annual Report on
the Working and Administration of the Companies Act, 1956 for the year ended
31st March, 1961).
3. Preparation of Minutes of
General Meeting.-The minutes of the General Meeting are to be prepared within thirty
days of the conclusion of every meeting. Each page of the minutes is to be
initialled or signed and the last page of the minutes is to be dated and signed
by the Chairman of the meeting, however, in case of death or inability of the
Chairman to sign the minutes within thirty days of the conclusion of the
meeting the same can be got signed from a Director duly authorised by a
resolution of the Board of Directors in that behalf.
4. Minutes to be fair and
correct summary of proceedings.-The minutes should be fair and correct summary of
the proceedings of the meeting.
5. Minutes not to be altered
without a fresh resolution.-Where there is a practice of placing the minutes
before the Board for confirmation the placing of minutes which have already
been signed will mean that these cannot be altered without a fresh resolution.
(Letter No. 8/2 (Misc.)/75-CL. V, dated 5th May, 1975).
6. Penalty for default.-If default is made in
complying with the provisions of section 193 in respect of any meeting, the
company and every officer of the company who is in default will be punishable
with fine of Rs. 500/-.
Minutes of the Board Meeting (S. 193(l))
The Department of Company
Affairs has permitted maintenance of loose leaf minute books provided the
company takes appropriate safeguards against interpolation of the leaves in the
books such as serial numbering of pages, authentication of each page of the
book, safe custody of the key, if any, to the loose leaf register. The loose
leaf minutes to be bounded into books at regular internals of say six months.
(Department's letter No. 16047/TA/VII, dated 16th December, 1972).
Where there is a practice of placing the minutes before the Board for confirmation the placing of minutes which have already been signed will mean that these cannot be altered without a fresh resolution. (Department's letter No. 8/2(Misc)/ 75 CL.V., dated 5th May, 1975.)
Signing of the minutes of
the General Meeting by a Director
(S. 193(1A))
The minutes must be got
signed by the Chairman of the meeting and in case of his inability to sign the
same, it should be got signed by the duly authorised Director within thirty
days of the conclusion of the General Meeting.
In order that any change in
such minutes may be effected, the only way open is to adopt fresh resolutions
in modification on the footing that the minutes as recorded on the approval of
the Chairman stand. (Letter No. 8/2(Misc)/75-CL.V., dated 5th May, 1975).
Confirmation of Minutes of
the Board Meeting
The Minutes of the Fifth
Meeting of the Board of Directors held on 7th January, 2001, were circulated to
the Directors on 15th January, 2001. No comments have been received on the
Minutes from any of the Directors.
The said minutes as are
enclosed for Directors' consideration are therefore confirmed.
1. Section applicable to
both public and private companies.-This section is applicable to all the public
as well as private limited companies.
2. Keeping minutes in loose
leaf form.-The Minutes can be maintained in a loose leaf form but pasting of the
minutes in the Minute Book is not allowed. (Fifth Annual Report on the Working
and Administration of the Companies Act, 1956, for the year ended 3 1 st March,
196 1).
3. Confirming minutes of
proceedings of prior Board Meeting.-It is a practice to have the minutes of the
previous Board Meeting confirmed at the next meeting though it is not provided
by law.
4. Preparation of Minutes of
Board Meeting.-The minutes of the Board Meeting are to be prepared within thirty days
of conclusion of the every meeting. Each page of the minute book is to be
initialled or signed and the last page of the minutes is to be dated and signed
by the Chairman of the meeting or the Chairman of the next succeeding meeting.
5. Minutes to be fair and
correct summary of proceedings.-The minutes of the meeting should contain a fair and
correct summary of the proceedings thereof.
6. Minutes to contain names
of Directors present.-The minutes of the Board Meeting or a Committee of
the Board should contain the names of the Directors present at the meeting.
7. Fresh resolution required
for any change in minutes.-Fresh resolution is required in case of any change
in the minutes of previous Board meeting.
8. Loose leaf minutes to be
bounded at regular intervals.-The Department of Company Affairs has permitted
maintenance of loose leaf minute books provided the company takes appropriate
safeguards against interpolation of the leaves in the books such as serial
numbering of pages, authentication of each page of the book, safe custody of
the key, if any, to the loose leaf register. The loose leaf minutes to be bounded
into books at regular intervals of six months. (Department's letter No. 16047/
TA/VII, dated 16th December, 1972).
9. Minutes not to be altered
without a fresh resolution.-Where there is a practice of placing the minutes
before the Board for confirmation, the placing of minutes which have already
been signed will mean that these cannot be altered without a fresh resolution.
(Department's letter No. 8/2 (Misc)/75-CL. V., dated 5th May, 1975).
Signing of minutes of Extraordinary General Meeting
by Director
"RESOLVED that Mr __________________, a Director of the company be and is hereby authorised to sign the minutes of the Extraordinary General Meeting held on _________, _________, the _________ , 2002 _________, in place of Mr __________________ , the Chairman of that meeting who died on _________, 2002 _________”
1. Board authorised by a
Director for signing the minutes.-Section 193(1A)(b) provides for the contingency
arising out of death or inability of the Chairman of the meeting which prevents
the minutes from being signed by the same Chairman within thirty days under an
authority given by means of a Board resolution Director may sign the minutes in
such a case.
Signing of minutes of the Annual General Meeting by Director
S. 193(1A)-Signing
of the minutes of the Annual General Meeting by a Director-Board
Resolution
"RESOLVED that Shri XYZ, Director of the Company be and is
hereby authorised to sign the minutes of the 5th Annual General Meeting of the
company held on 5th July, 2002, in place of Shri ABC, Chairman of the meeting
who has since expired."
1. Director only be
authorised for signing minutes.-A Director of the company can only be authorised to
sign the minutes. Only in the case of death or inability of the Chairman of the
meeting, the minutes of the General Meeting can be signed by a Director duly
authorised by a Board's resolution.
2. Signing of Minutes.-All the pages of the minutes
book are to be initialled or signed and the last page of the minutes is to be
signed and dated by the Chairman.
3. Minutes to be signed by
Chairman.-The minutes must be got signed by the Chairman of the meeting and in
case of his inability to sign the same, it should be got signed by the duly
authorised Director within thirty days of the conclusion of the General
Meeting.
4. Fresh resolution required
for change in minutes.-In order that any change in such minutes may be
effected, the only way open is to adopt fresh resolutions in modification on
the footing that the minutes as recorded on the approval of the Chairman stand.
(Letter No. 8/2(Misc.)/75-CL.V., dated 5th May, 1975).
"RESOLVED that Mr. __________________, a
Director of the Company, be and is hereby elected Chairman of the Board of
Directors of the Company for a period of two years from this date or until
otherwise decided by the Directors at a Board Meeting whichever is
earlier."
1. Election of Chairman and
determination of his period of office.-The Board may elect a Chairman of its meeting
and determine the period for which he is to hold office.
2. Meeting to be presided by
Chairman.-Appointment of a Chairman of the Board is necessitated by section 193
which requires minutes to be signed by the Chairman. Besides, there is the
common law requirement that every meeting must have a presiding officer who is
called the Chairman of the meeting. Board must have a Chairman for the Board
can transact business only through meetings. Section 193 casts an obligation on
the Chairman of the Board of Directors to authenticate the minutes of the
meeting of the Board. Nazir Hoosein & Another v. Darayus Bhattena and
Others, (2000) 37 CLA 414 (SC).
3. Director present to
choose Chairman when Chairman not present.-If no Chairman is elected or
if at any meeting the Chairman is not present within certain time after the
time appointed for holding the meeting, the Directors present may choose one of
their number to be the Chairman of the meeting. The time is usually prescribed
by articles.
4. Chairman of Board usually
Chairman of general meeting.-Usually the Chairman of the Board of Directors also
takes the chair in any general meeting of the company.
Election of a Chairman
"RESOLVED that Shri XYZ, a Director of the company be and is hereby elected as the Chairman of this meeting/meetings of the Board of Directors for a term not exceeding three years effective from 1st June, 2002."
1. Provisions of articles to
be checked up.-To check up the provisions of Articles of Association in this regard.
2. Director presiding over
Meeting to have status of Chairman if articles provide otherwise.-In the absence of any
provision to the contrary, a Director who presides over the meeting has the
status of the Chairman.
3. Chairman can be elected
for a Meeting or for specified period.-The Chairman can be elected at the meeting or
for any specified period.
4. Where article contains no
provision for appointment of Chairman Director presiding will not have status
of Chairman.-Where the articles of a company make no provision for the appointment
of a Chairman, no Director presiding over any meeting of the Directors has the
legal status of a Chairman. Foster v. Foster, (1916) 1 Ch 532.
Election of Chairman under Articles of Association
RESOLVED that pursuant to Article 110 of the Articles of Association of the Company, in the absence of the Chairman, Shri AKM, Director of the Company, be and is hereby elected to take the Chair.
1. Election of Chairman and
determination of period of his office.-The Board may elect a Chairman at every
meeting for the Meeting and determine the period for which he is to hold
office.
2. Where Articles contain no
provision for appointment of Chairman, no director presiding has legal status
of Chairman.-Where the Articles of Association of a Company make no provision for
the appointment of a Chairman, no director presiding over any meeting of the
directors has the legal status of a Chairman (Foster v. Foster, 1 Ch. 532).
Inspection of minute books
"RESOLVED that the minutes books of all the General Meetings of the Company be kept at the registered office of the Company and be opened for inspection by any member between 10-30 hrs. and 12-30 hrs. on every working day."
1. Reasonable Restriction on
Inspection.-The minutes book of the general meeting of a company should be open for
inspection to any member without charge and to nonmembers with charge subject
to such restrictions as the company may by its articles of association or in
general meeting may impose so that not less than two hours in each day are
allowed.
2. Copy of minutes.-A copy of any such minutes
should be furnished to any member within seven days of his request on payment
of rupee one for every hundred words or fractional part thereof required to be
copied.
3. Penalty for default.-If any inspection is refused
under sub-section (1) of section 196 or if any copy required under sub-section
(2) of section 196 is not furnished within the time specified therein, the
company and every officer of the company who is in default will be punishable
with fine of up to Rs. 5,000/- in respect of each offence.
Application to the Company
Law Board compelling immediate
inspection of the Minutes
Books
WHEREAS the company is a
member of ABC Co. Ltd. holding _________ equity shares of Rs. _________ each in
the paid-up share capital of that company;
AND WHEREAS the company as a
member was refused inspection of minutes books of general meetings of that
company and a copy of particular minutes were also not furnished to the company
by that company within seven days of making the request in that behalf to that
company on payment of the prescribed sum;
NOW THEREFORE IT IS RESOLVED
that an application be and is hereby made to the Company Law Board, Northern
Region Bench, New Delhi by way of a petition for an order directing immediate
inspection of minutes books of general meetings of that company and also
directing a copy thereof to be sent forthwith to the company.
RESOLVED FURTHER that the
Secretary of the company be authorised to prepare, sign and file the said
petition with the Company Law Board and to do everything that is necessary in
connection therewith or ancillary or incidental thereto.
1. Format of the petition.-The petition to the Company
Law Board should be prepared in Form No. 1 of Annexure II of the Company Law
Board Regulations, 1991 along with fee of Rs. 50/- to be paid by way of
demand draft.
2. Jurisdiction of the
Company Law Board.-The petition should be filed with that regional bench of the Company
Law Board where the registered office of the Company is situated. The said
petition will be heard by a single member of the Bench.
Publication of reports of proceedings of General Meetings
"RESOLVED that the Chairman's speech to be given in the 45th Annual General Meeting of the Company to be held on _________ 2002 at _________ at _________ A.M. be and is hereby circulated and advertised at the expense of the company in a daily English Newspaper having wide circulation all over the country and also in the regional language newspaper in the district in which the registered office of the company is situated with a footnote that it does not purport to be are port of the proceedings of the said annual general meeting.
1. Prohibition of
publication and advertisement.-Where any reports of general meetings are published
at the expense of the company, all matters required by section 193 relating to
minutes should be included in the publication and without that no document
purporting to be a report of the proceedings of any general meeting should be
circulated or advertised at the expense of the company. The penalty provided in
section 197 will only be attracted when such circulation or advertisement
purports to be proceedings of any general meeting and otherwise. That is the
reason why when a Chairman's speech is circulated or advertised the note as
aforesaid is always added that it does not purport to be so as a matter of
abundant caution.
2. Penalty for default.-If any report is circulated
or advertised in contravention of sub-section (1) of section 197, the
company and every officer of the company who is in default will be punishable
in respect of each offence with fine of up to Rs. 5,000/-.
"RESOLVED that in addition to the monthly salary and perquisites as per terms of the letter of appointment, Mr. __________________ the Chief Executive of the Company, shall be entitled to half a per cent of the yearly net profits of the Company as commission, and that such profit shall be calculated in the manner set out in section 349, section 350 and section 351 of the Companies Act, 1956."
1. Manner of calculation of
profits for payment of commission.-Where any commission or other remuneration
payable to any officer or employee of a company, not being a Director or a
Manager, is fixed on percentage basis or otherwise based on the net profits of
the company, such profits must be calculated in the manner as set out in
sections 349, 350 and 351. (Section 199(l)).
2. Section when not
applicable.-This section applies only where the remuneration or commission is
payable to an employee with reference to 'net profit' of the company and,
therefore, in cases where such commission is payable with reference to the
volume of sale, purchase or turn-over, etc., this section would not
apply.
3. Chief Executive not to
exercise substantial power of management.-The Chief Executive should
not exercise substantial power of management for otherwise, the entire
remuneration including commission would be treated as managerial remuneration.
"RESOLVED that subject to the approval of the Reserve Bank of India and other appropriate authorities, if any Mr. __________________, a technician having US nationality, being recommended by foreign collaborators of the Company in this behalf be and is hereby appointed as the technical consultant to the Company for a period of two years from in connection with the commissioning of plant and equipment at the Company's works and that such foreign technician be paid a consolidated remuneration of Rs. 1,20,000/- per month free of tax."
1. Prohibition on tax free
remuneration.-According to section 200 of the Act a company cannot pay to any officer
or employee, remuneration, free of tax if such remuneration attracts tax.
Notwithstanding anything contained in this section, it is provided by section
10(6)(vii)(a)(ii) of the Income-tax Act, 1961, that in the case of a
foreign technician of the class specified therein and employed by a company,
the tax on his income chargeable under the head "Salaries" may be
paid by the company for a period of twenty four months following the expiry of
a tax-free period of thirty-six months from the date of his arrival
in India.
"WHEREAS Mr. A, a
shareholder of the Company had filed a case against the officers of the Company
as well as the auditors alleging negligence, default, misfeasance and breach of
duty;
AND WHEREAS the court had
acquitted these officers and auditors, holding that these charges are
frivolous;
NOW THEREFORE, IT IS
RESOLVED, pursuant to the provisions made in Regulation 45 of Companies
Articles of Association, to file a suit against Mr. A for recovery of damages
of Rs. 1 lac spent by these officers and the auditors of the Company."
1. Exemption/indemnification
from liability void.-Any provisions in the article of association of the company or in any
agreement with a company or in any other instrument which exempts any officer
of the company or any person employed by the company as auditor from any
liability which would otherwise be attached to him in respect of any negligence,
default, breach of duty, misfeasance or breach of trust of which he may be
guilty in relation to the company will be void. Any provision as aforesaid
which indemnifies any of the persons mentioned above against any liability in
respect of the said negligence, default, breach of duty, misfeasance or breach
of trust will also be void.
2. When allowed.-A company may indemnify any
officer of the company or the auditor against any liability incurred by him for
defending any proceedings either civil or criminal in which judgment is given
in his favour or in which such officer or auditor is acquitted or discharged or
in case an application is made before the High Court under section 633 of the
Act and relief is granted to him by that court.
Un discharged insolvent not
to manage companies
"WHEREAS Mr. PQR became
an undischarged insolvent with effect from _________ 2002;
AND WHEREAS he was
prohibited from being a director of the company and to attend Board Meetings;
AND WHEREAS the said Mr. PQR
was discharged by _________ court on _________
AND WHEREAS the said Mr. PQR
is again qualified to hold the office of the director of the company;
NOW THEREFORE IT IS RESOLVED that Mr. PQR be and is
hereby inducted in the Board as a director of the company again.
1. Meaning of company.-In section 202 a company
includes an unregistered company and also a body corporate incorporated outside
India which has an established place of business within India.
2. Extent of prohibition.-The prohibition of an
undischarged insolvent is from discharging any of the functions of a director
or from acting or discharging any of the functions of the manager of any
company. Such prohibition is also from directly or indirectly taking part or
being concerned in the promotion, formation or management of any company.
3. Penalty for default.-If any person being an
undischarged insolvent discharges any functions of a director or manager in any
company or takes part in the promotion, formation or management in any company
he will be punishable with imprisonment of 2 years or with fine of upto Rs.
50,000/- or with both.
Appointment of body corporate to office or place of profit (S. 204)
The appointment cannot be
made for a period exceeding five years at a time. However, there is no
prohibition for the re-appointment after the term of five years expires.
Where the original
appointment itself makes provisions for re-appointment after five years,
it contravenes the provisions of sub-section (4) of section 204.
Shalagrain Jhajharia i,. National Co. Ltd., (1965) 1 Comp LJ 112.
Consultant is an expression
apparently meaning that the person consulted is to give to the company the
benefit of his knowledge and experience. Pocock v. A.D.A.C. Ltd., (1952) 1 All
ER 294 (KBD).
"RESOLVED that M/s. ABC
Limited, be and is hereby appointed as the Technical Adviser of the Company
pursuant to the terms and conditions, responsibilities, remuneration, etc., as
embodied in the draft agreement, as tabled and initialled by the Chairman
hereof, for a period of five years beginning from _________, 2002 _________ and
ending on _________, 2007 _________”
1. Company not to appoint or
employ any firm or body corporate.-As provided in section 204 of the Companies
Act, 1956, no company can appoint or employ any firm or body corporate to or in
any office or place of profit under the company other than the office of
trustee for the holders of debentures of the company for a term exceeding five
years at a time, but its initial appointment may be made for a term not
exceeding ten years with the approval of the Central Government.
"RESOLVED that consent
of the Board of Directors be and is hereby given to the appointment of M/s.
A.C.B. Private Ltd., as Corporate Advisers to the Company for a period of five
years commencing from 1st July, 2002, and ending on 30th June, 2007 at an
annual fee of Rs. 3,00,000/- on the terms and conditions contained in the
draft agreement tabled before the Board, duly initialled by the Chairman for
purpose of identification.
RESOLVED FURTHER that the
Managing Director of the Company be and is hereby authorised to execute the
said agreement with M/s. ACB Private Ltd., and to affix the common seal of the
company thereon."
1. Appointment not to exceed
five years.-The appointment cannot be made for a period exceeding five years at a
time. However, there is no prohibition for the reappointment after the term of
five years expires.
2. Approval of Central
Government.-The appointment can also be made for a term exceeding five years but
not exceeding ten years with the approval of the Central Government. There is
no prescribed form of application" to be made to the Central Government.
3. Appointment not to
contain provision for reappointment.-Where the original appointment itself makes
provision for re-appointment after five years, it contravenes the
provisions of sub-section (4) of section 204. Shalagram Jhajharia v.
National Co. Ltd., (1965) 1 Comp U 112.
4. Expression
"consultant"-Meaning.-Con s u I tan t is an expression apparently
meaning that the person consulted is to give to the company the benefit of his
knowledge and experience. Pocock v. A.D.A.C. Ltd., (1952) 1 All ER 294 (KBD).
Appointment of Technical
Advisor with Government Approval
"RESOLVED that, subject
to the approval of the Central Government, M/s. ABC Ltd., be and is hereby
appointed as the Technical Advisor of the Company pursuant to the terms and
conditions, responsibility, remuneration etc. as embodied in the draft
agreement, as tabled and initialled by the Chairman hereof, for a period of 10
years beginning from _________, 2002 _________, and ending _________, 2012
_________”
1. Appointment for five
years.-A
company cannot appoint or employ any firm or body-corporate to or in any
office or place of profit in that company other than office of trustee for the
holders of the debentures of the company for more than five years at a time.
But in the case of first such appointment or employment with the approval of
the Central Government, a company can do so for a term of not more than ten
years.
2. Appointment of
technician/consultant.-For appointment or employment of a firm or body-corporate
as a technician or a consultant of the company, for the first time no such
requirement of five years is needed if the Central Government approval is
obtained and then the appointment can be made for ten years. There is no
prescribed form of this application".
3. Vacation of office.-Any firm or body-corporate
which is appointed in violation of the aforesaid provision should vacate office
immediately on the expiry of five years from the date of appointment unless its
term of office expires earlier.
4. Extension of term.-The term of appointment or
employment can be extended by not more than five years on each occasion. Such
extension of term should not be sanctioned earlier than two years from the date
on which it is to come into force. Such extension includes re-appointment
and re-employment.
5. Meaning of office or
place of profit.-An office or place of profit under a company will mean any office or
place which a person holding it obtains from the company anything by way
remuneration whether as salary, fees, commission, perquisites, the right to
occupy free of rent any premises as a place of residence, or otherwise.
6. Exemption.-Private companies which are
not subsidiaries of public companies are exempted from the provisions of
section 204 of the Act.
Payment of interim dividend (S. 205)
A reserve fund resulting
from revaluation of unrealised fixed assets, made in good faith and unlikely to
be liable to short term fluctuation can be legally capitalised or may be
distributed as dividend where the regulations of the company so provide.
Dimbula Valley (Ceylon) Tea Co. Ltd v. Laurie, (1961) 1 All ER 769 (Ch D).
Dividend may be paid out of
divisible profits which might not be profits in the business sense. Palmer's
Company Law, 23rd Edition Para 76.03 at p. 991. Right to claim dividend will
only arise after a dividend is declared by the company in General Meeting.
Until and unless it is so declared, no shareholder has any claim against the
company in respect of it. Mathai Chandy v. Hill Land Motor Union Ltd., ILR
(1955) Trav. Co. 73.
A dividend when declared becomes a debt and a shareholder is entitled to sue at law for recovery of the same after expiry of the period prescribed by section 207. In re Severn and Wye & Severn Bridge Ry Co., (1896) 1 Ch 559.
The approval of dividend is
the privilege of the General Meeting and the Board can pay interim dividend if
so authorised by the Articles of Association subject to the regularisation of
the interim dividend by the company in General Meeting. (Department's letter
No. 8/13/(205)/79-CL.V., dated 19th July 198 1). Where a company had
declared a dividend at a General Meeting neither the company nor its Directors
can declare a further dividend for the same year. (Department's circular No.
22/7/9/74-CL.II, dated 25th September, 1975).
Shareholders do not get any
vested right under a directors' resolution for payment of interim dividend an
therefore such resolution is revocable. A vested right to dividend arises on
declaration of dividend under a general meeting of shareholders. CIT v. Express
Newspapers Ltd., (1998) 3 Comp LJ 23 (SC).
If authorised by the
Articles of Association, the Board may declare an interim dividend. A mere
resolution declaring an interim dividend does not create any liability and may
be rescinded at any time before actual payment. Lagunas Nitrate Co. Ltd. v.
Schroeder & Co. and Schmidt, (1901) 85 LT 22. The distinction between
interim and final dividend is that unlike interim dividend, a final dividend
once declared by the company in General Meeting is a debt and creates an
enforceable obligation. Punjab National Bank v. Union of India, (1986) 59 Comp
Cases 35 (Del) (DB).
Declaration of a further
dividend for the second time out of the past year's profits has been held to be
illegal and ultra vires of the Articles of Association and the Companies Act,
1956. (Extract from Fourth Annual Report on the Working and Administration of
the Companies Act, 1956 for the year ended 31st March, 1960).
Declaration of dividends by
companies should be unconditional and that they should not declare dividends
subject to any conditions such as prior approval of Financial Institution or
Bank. Such conditional declaration of dividends has led to companies not making
payment of dividends within the statutory period. [General Circular No. 2/98,
dated 13-4-1998 of the Department of Company Affairs].
Where the shares of a company held by its earlier managing director had been sold by his family to a third party after his death, the amounts payable as dividends in respect of those shares could not be legally appropriated by the company against any amounts that might be due from him to the company. Ferrom Electronics (P.) Ltd. v. Vijaya Leasing Ltd., (2000) 36 CLA 327 (Kar).
Non-declaration of
dividend
S. 205/Regn. 85-Non
-declaration of dividend-Board Resolution
"RESOLVED that as the
company is in urgent need of funds for erection of company's plant at
Ghaziabad, no dividend, be recommended for the financial year for payment to
the equity shareholders of the company and that the surplus funds be utilised
for erection of company's plant at Ghaziabad."
1. Information to Stock
Exchange for non-declaration of dividend.-Inform the Stock Exchange
concerned in case the company's shares are enlisted on any recognised Stock
Exchange.
2. Dividend cannot be
declared by General Meeting unless recommended by Board.-The General Meeting cannot
declare a dividend unless it is recommended by the Board of Directors.
3. Companies (Transfer of
Profits to Reserves) Rules, 1975 not to be contravened.-Ensure that the Companies
(Transfer of Profits to Reserves) Rules, 1975, are not contravened.
4. Court cannot compel
Directors to declare dividend.-No court can compel Directors to declare a dividend.
5. Shareholders cannot
compel Board to declare dividend.-The share-holders cannot compel the Board of
Directors for payment of dividend even though there are profits.
"RESOLVED that approval
of the Board of Directors be and is hereby given to the Company to the payment
of interim dividend @ _________ % out of
the profits of the Company for the half year ended on _________ on equity
shares subject, however, to the deduction of income-tax at source, to all
the equity shareholders whose names appear in the Register of Members of the
Company on _________
RESOLVED FURTHER that the
Register of Members Share Transfer Books be and are hereby closed effective
from _________ to _________ both days inclusive."
1. No provision in the Act -The Act does not provide for
payment of interim dividend. However, if authorised by the articles of
association, the Board may declare an interim dividend. A mere resolution
declaring an interim dividend does not create any liability and may be
rescinded at any time before actual payment. This is so even if the cash to
cover the proposed dividend has been placed into a separate account.
2. Regularisation of interim
dividend by AGM-The Department is of the view that approval of dividend is the
privilege of the general meeting and the board can pay interim dividend if so
authorised by the articles of association subject to the regularisation of the
interim dividend by the company in general meeting. (Letter No.
8/13/(205A)/79CL-V, dated 18-7-1981).
3. Payment is essential-In the case of Punjab
National Bank's case ROHTAGI J, said "that the proposition that a
declaration by the directors of an intended dividend to be paid at some future
date may be rescinded by a resolution of the directors before that date arrives
is now firmly established. The decisive act is the payment and not the
declaration. A mere declaration without payment has no value. The essential
thing is payment. If the directors declare but do not pay, there is no
liability. A declaration is a mere intention. The declaration can be reviewed.
It can be varied. It can be rescinded. Before declaring an interim dividend, the
directors must satisfy themselves that the financial position of the company
warrants the payment of such dividend out of profits available for
distribution.
4. Dividend includes interim
dividend.-The companies (Amendment) Act, 2000, w.e.f. 13-12-2000 has
inserted a new clause (14A) after clause (14) in section 2 to provide that
dividend includes interim dividend. This provision is significant in the light
of period of time distribution of interim dividend which has to be done within
the statutory period fixed for final dividend by the Companies Act, 1956 and
that is 30 days.
"RESOLVED that the
Board of Directors of the company hereby recommend that a dividend at the rate
of Rs. _________ per share on the equity capital of the company be paid for the
year ended on _________
RESOLVED FURTHER that the
consent of the shareholders of the company at their Annual General Meeting be
obtained to the payment of the aforesaid dividend to the equity shareholders of
the company."
1. Members cannot increase
the rate of dividend-It is the right of the members at the annual general meeting to approve
the recommended rate of dividend or lower the same, but in no case they can
increase the amount. Though it is usual to declare the dividend at the annual
general meeting there is nothing in the Act prohibiting the declaration of the
dividend at a subsequent general meeting, if, for any reason, it could not be
declared at the annual general meeting.
2. Increase of rate of
dividend-Regulation 85 of Table A of Schedule I says that dividends may be
declared at general meetings and not necessarily, annual general meetings.
Where the shareholders of a company desire to increase the rate of dividend,
the proper course of action would be to adjourn the annual general meeting,
hold a Board meeting for increasing the rate of dividend and adoption of
revised accounts and then hold the adjourned annual general meeting for
declaration of dividend.
Dividend to preference shareholders
"RESOLVED that a
dividend at the rate of _________ per cent per preference share to the
preference shareholders of the company be and is hereby declared for the year
ended on _________ subject, however, to the deduction of Income-tax at
source.
RESOLVED FURTHER that
dividend warrants be posted to all the preference shareholders whose names
appear on the Register of Members as on _________”
1. Article to empower
company.-Interim dividend can be declared if so authorised by the Articles of
Association of the company.
2. Dividend to be declared
out of profits.-No dividend shall be declared or paid except out of profits of the
company.
3. No dividend to be declared when company fails to comply with section 80A.-A company which fails to comply with the provisions of section 80A shall not declare any dividend on its equity shares so long as the default continues.
4. Dividend not to be
declared unless recommended by Directors.-Even though profits are
available for payment of dividend, no dividend can be declared by the
shareholders unless and until it is recommended by the Directors.
5. Revocation of declared
dividend.-A dividend once declared cannot be revoked except with the consent of
the shareholders as declaration of dividend creates a debt in favour of the
shareholders.
6. Reserve fund resulting
from revaluation of unrealised fixed assets can be capitalised or distributed
as dividend.-A reserve fund resulting from revaluation of unrealised fixed assets,
made in good faith and unlikely to be liable to short term fluctuation can be
legally capitalised or may be distributed as dividend where the regulations of
the company so provide. Dimbula Valley (Ceylon) Tea Co. Ltd. v. Laurie, (1961)
1 All ER 769 (Ch D).
7. Dividend be paid out of
divisible profits.-Dividend may be paid out of divisible profits though there might not be
profits in the business sense. Plamer's Company Law 23rd Edition Para 76.03 at
p. 991.
8. Right to dividend accrues
when declared by company in General Meeting. - Right to claim dividend
will only arise after a dividend is declared by the company in General Meeting.
Until and unless it is so declared, no shareholder has any claim against the
company in respect of it. Mathai Chandy v. Hill Land Motor Union Ltd., ILR
(1955) Trav. Co. 73.
9. Dividend when declared
becomes debt.-A dividend when declared becomes a debt and a shareholder is entitled
to sue at law for recovery of the same after expiry of the period prescribed by
section 207. In re Severn and Wye & Severn Bridge Ry Co., (1896) 1 Ch 559.
Dividend including an interim dividend should be paid within 30 days from the
date of declaration. [Section 205A(l)]
10. Approval of dividend
privilege of general meeting.-The approval of dividend is the privilege of the
General Meeting and the Board can pay interim dividend if so authorised by the
Articles of Association subject to the regularisation of the interim dividend
by the company in General Meeting. (Department's letter No. 8/13/(205)/79-CL.V.,
dated 19th July 1981).
11. Declaration of further
dividend.-Where a company had declared a dividend at a General Meeting neither
the company nor its Directors can declare a further dividend for the same year.
(Department's circular No. 22/7/9/74-CL. II, dated 25th September, 1975).
12. Board if authorised by
Articles can declare interim dividend.-If authorised by the Articles of Association,
the Board may declare an interim dividend. A mere resolution declaring an
interim dividend does not create any liability and may be rescinded at any time
before actual payment. Lagunas Nitrate Co. Ltd v. Schroeder & Co. and
Schmidt, (1901) 85 LT 22.
13. Distinction between
interim and final dividend.-The distinction between interim and final dividend
is that unlike interim dividend, a final dividend once declared by the company
in General Meeting is a debt and creates an enforceable obligation. Punjab
National Bank v. Union of India, (1986) 59 Comp Cases 35 (Del) (DB). This view
is changed after the Companies (Amendment) Act, 2000 with the insertion of new
clause (14A) in section 2 whereby dividend includes interim dividend.
14. Declaration of further
dividend out of past year's profit illegal.-Declaration of a further
dividend for the second time out of the past year's profit has been held to be
illegal and ultra vires of the Articles of Association and the Companies Act,
1956. (Extract from Fourth Annual Report on the Working and Administration of
the Companies Act, 1956 for the year ended 31st March, 1960).
Payment of Interim dividend
(Another format)
" RESOLVED that an
interim dividend of ten per cent on the paid-up equity capital of the Company
be declared and paid out of six months' profits as disclosed by the pro forma
accounts, as submitted to this meeting, subject to deduction of income-tax
under section 192 of the Income-tax Act, 1961, and that such dividend be
paid to those members whose names appear in the Register of Members as on
_________ 2002 _________
RESOLVED FURTHER that the
Register of Members be closed from _________ 2002 _________ to _________ 2002
_________ both days inclusive.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby authorised to circulate the notice of
payment of interim dividend as well as closing of the Register of Members by
suitable advertisement in newspaper and to the _________ Stock Exchange Association
1. Power of Board to declare
interim dividend.-An interim dividend is a dividend declared by the Directors at any time
between two Annual General Meetings, Usually the Articles of Association of a
company provide authority to the Board of Directors to pay interim dividend
subject to availability of profit of the company on the basis of interim
accounts prepared (not necessarily audited). Regulation 86 of Table 'A' states
that the Board may from time to time pay to the members such interim dividends
as appear to it to be justified by the profits of the company after provision
being made for taxation. But such authorisation of Articles of Association of a
company to pay interim dividend by the Board is subject to the regularisation
by the company in General Meeting. This General Meeting must be Annual General
Meeting only as the profit of the company would not otherwise be known. (Letter
No. 8/13(205A) 79-CL.V., dt. 18-7-1981). Companies
(Amendment) Act, 2000 w.e.f. 13-12-2000 has inserted new sub-section
(1A) to section 205 by which the Board of Directors is required to deposit the
amount of dividend including interim dividend in a separate bank account within
5 days from the date of declaration of such dividend.
2. Resolution declaring
interim dividend be rescinded by Board.-A resolution passed at a
Board Meeting may subsequently be rescinded by the Board especially when the
Board is in doubt about the adequacy of the profit justifying interim dividend.
3. Interim dividend does not
create debt.-A mere resolution of the Directors resolving to pay a certain amount as
interim dividend, does not create a debt enforceable against the company, for
it is always open to the Directors to rescind the resolution before payment of
dividend. Dalmia v. Commissioner of Income-tax, (1964) 2 Comp LJ 69 :
(1964) 34 Comp Cases 668.
Payment of interim dividend
(Another format)
"RESOLVED that the
approval of the Board of Directors be and is hereby accorded to the Company for
payment of interim dividend @ _________
% out of the profits of the Company for the year ended
__________________ subject to deduction of tax at source.
RESOLVED FURTHER that _________ be fixed as the record date for payment of dividend and that the said dividend be paid to those shareholders whose names appear on the register of members on the record date fixed as aforesaid."
1. Payment of interim
dividend prohibited.-A Company which has failed to redeem preference shares as per the
provisions of section 80A of the Act is prohibited to make payment of dividend.
2. Final dividend a must.-Once interim dividend is
paid, final dividend must be declared at the immediately next annual general
meeting.
"RESOLVED that the
approval of the Board of Directors of the company be and is hereby accorded to
the company to the payment of interim dividend @ _________ for half year ended
30th June, 2002, on equity shares and that the dividend so declared to be paid
to those members whose names appear in the Register of Members as on 15th June,
2002.
"RESOLVED FURTHER that the Register of Members and the Share Transfer be closed effective from _________ to _________ (both days inclusive).
1. Intimation by a listed
company to Stock Exchange.-In case the company's shares are enlisted on any
recognised Stock Exchange, intimation has to be given to the Stock Exchange
concerned two days before the meeting as also passing of the resolution.
2. Mere declaration by
directors to pay interim dividend does not create enforceable debt.-A mere resolution of the
Directors resolving to pay a certain amount as interim dividend does not create
a debt enforceable against the company as it is always open to Directors to
rescind the resolution before payment of the dividend. J. Dalmia v.
Commissioner of Income-tax, (1964) 2 Comp LJ 69 : (1964) 34 Comp Cases
668.
3. Articles must authorise
directors to declare interim dividend.-The Board of Directors must be authorised by
the Articles of Association for declaration of interim dividend.
4. Half-yearly results
to be considered before declaring interim dividend.-Half year results has to be
considered by the Board before any interim dividend is declared by them.
5. Payment of interim
dividend.-An interim dividend is a dividend paid by the Directors at any time
between two Annual General Meetings. Re, Jowitt, (1922) 2 Ch. 442.
6. Interim dividends do not
create a debt as Board can rescind resolution.-An interim dividend
announced by the Board of Directors will not unlike a final dividend declared
by the company at the Annual General Meeting, create a debt as the Board may
subsequently rescind the resolution and cancel the announcement. Jhimi Bajoria
v. Commissioner of Income-tax, (1970) 40 Comp Cases 750; Punjab National
Bank Ltd. v. Union of India, (1986) 59 Comp Cases 35 (Del-DB).
"RESOLVED that the Directors do hereby recommend a final dividend of five per cent on equity shares out of the net available balance of Rs. _________ after provision for taxation of Rs. _________ absorbing Rs. _________ and that such dividend be paid subject to the members' approval in Annual General Meeting after deduction of tax at source to those equity shareholders whose names appear in the Register of Members as on _________ 2002 _________
RESOLVED FURTHER that the
Directors do hereby recommend a final dividend of five per cent on equity
shares out of the reserves standing in the books of the Company as on _________
2002 _________ and absorbing Rs _________ and that such dividend be paid
subject to the members' approval in Annual General Meeting after deduction of
tax at source to those equity shareholders whose names appear in the Register
of Members as on _________ 2002 _________”
1. When no dividend declared
by Board, shareholders in general meeting cannot themselves declare.-The Articles of Association
of companies invariably provide for the payment of dividend within, of course,
the limit laid down by section 205 of the Companies Act, 1956. Regulation 85 of
Table 'A' states that the company in General Meeting may declare dividends but
no dividend shall exceed the amount recommended by the Board. It follows that
although the members of the company in the General Meeting are empowered to
declare dividend, such power is limited to the maximum percentage or amount recommended
by the Directors. Thus, even though the profit as per section 205 is available,
the Directors, for any reason whatsoever may consider that no dividend should
be declared, and may not recommend any dividend, and in that event, the
shareholders in general meeting cannot themselves declare it.
2. Percentage of profits to
be transferred to reserves.-(a) Rule 2 of the Companies (Transfer of Profits to
Reserves) Rules, 1975, provides for certain percentage of profits to be
transferred to the reserves of the company and for arriving at such profits
arrears of depreciation mentioned in section 205(l) must also be provided.
(b) The term 'current
profits' used in the said rule means profits after tax and after making
statutory transfer to the development rebate reserve.
(c) The reference to
dividend in the Rules is only to equity dividend and to that portion of
dividend relating to participating preference shares which is payable over and
above the fixed rate paid to preference shareholders.
(d) Transfer to reserves, in
the said Rules, does not mean transfer to development rebate reserve or capital
reserve or special reserve but transfer to free reserves.
3. Voluntary transfer of
higher percentage.-A company can transfer to reserve a higher percentage of profits than
prescribed under Rule 2 to the said Rules. (Circular No.8/76(1/1/76-CL.
V), dated 18-5-1976, read with 12/76 (1/l/76-CL. V), dated 10-6-1976
and 21/76 (8/30(205A)/75-CL.V), dated 19-7-1976).
4. Declaration of further
dividend.-After a final dividend has been declared by the shareholders in Annual
General Meeting in respect of a particular year, there is no power available to
the members of the company or its Directors to reconsider and pay further
dividend for the same year. Biswanath Prasad Khaitan v. New Central Jute Mills
Co. Ltd., (1961) 31 Comp. Cas 125.
5. Declaration of further
dividend out of past years' profits of company for second time illegal.-It has been further held by
the Calcutta High Court in the case cited above that declaration of further
dividend out of the past years' profits of a company for the second time is
illegal and ultra vires the Articles of Association (in the particular case)
and the Companies Act. Declaration of dividend out of the excess amount
resulting from recomputation of depreciation does not amount to sound company
practice and it should not be shown in the books and in the balance sheet, as
is ordinarily done, as 'reserve not available for distribution'. (Company News
& Notes, July, 1963).
6. Profits of the year to be
transferred to reserves.-Profits to be transferred to reserves must be
profits of the year in question and not profits of past years. (Letter No. 8/2
(Misc)/75-CL.V, dated 6-6-1975).
7. Newly incorporated
company prohibited from transferring more than ten per cent of profit to
reserves.-In the case of newly incorporated companies where no dividend could be
declared over the three years immediately preceding the financial year in
question, the Department's view is that Rule 3 will not apply, and the case
will be governed by the provisions of Rule 2. That is to say, the company is
prohibited from transferring more than 10% of its profits to the reserves.
(Circular No.20/76(5/10/76-CL-XIV and 1/l/76-CL-V),
dated 26-7-1976). Newly incorporated companies cannot transfer more
than ten per cent of its profits to its reserves as Rule 3 of the Companies
(Transfer of Profits to Reserves) Rules, 1975 cannot be applied to them.
(Circular No.20/76(5/10/76-CL.XIV and I/l/76-CL.V), dated 26-7-1976).
Recommendation of final
dividend
(Another format)
"RESOLVED that the
Board of Directors hereby recommend a dividend at the rate of _________ per
share on the equity capital of the Company for the year ended _________ and
that the said dividend be paid subject to the approval of the shareholders to
those shareholders whose names appear on the register of members on _________
RESOLVED FURTHER that the
dividend warrants be posted to the respective shareholders within 30 days of
such approval to the shareholders whose names appear on the register of members
on _________
1. Provision in the Articles
of Association.-For payment of final dividend provisions given in the articles of
association should be followed if any. If the company is a public company and
there are no provision in the articles then regulation 85 to 94 should be
followed of Table A of Schedule I to the Act.
2. Depreciation should be
provided.-No dividend can be declared or paid by a company for any financial
years unless and until appropriate provision for depreciation has been made as
per Schedule XIV to the Act.
"RESOLVED that pursuant
to the provisions contained in sub-section (2A) of section 205 of the
Companies Act, 1956 read with Companies (Transfer of Profits to Reserves)
Rules, 1975, a sum of Rs. 5,50,000/- representing 10% of the current profits of
the year be and is hereby transferred to General Reserves."
1. Meaning of Reserves.-The expression 'reserves'
used in sub-section (2) means 'free reserves'. (Deptt. Circular No. 21 of
1976, dated 19-7-1976). The expression 'free reserves' denotes that
the reserves are not created or set apart or intended for any special purpose
or purposes.
2. Transfer of profits to
Reserves.-Section 205(2A) requires a company before distributing dividend
exceeding 10% of distributable profit of the company to transfer a specified
percentage of the distributable income to reserves.
3. Distribution of minimum
amount of dividend.-In the case of companies in which public are not substantially
interested within the meaning of section 2(18) of the Income-tax Act,
1961, a certain minimum amount of dividend has to be distributed to avoid the
levy of the additional tax on undistributed profits under section 104 of the
Income-tax Act.
4. Investment Company and
Dividend.-In the case of an investment company, this compulsory distribution of
dividend is 90% of the distributable income. This means that such investment
company must distribute 90% dividend and carry into reserve 10% of its
distributable profits. An investment company must distribute 90% of its
distributable in allowed deduction for purposes of income-tax. This
results in great hardship being caused to investment companies.
5. Transfer to Reserve.-The current profits mean
profits after statutory transfer to the Development Rebate Reserve. Transfer to
Development Rebate Reserve, Capital Reserve or Special Reserve will not meet
the requirement of transfer to Reserves under the rules. No amount is required
to be transferred to reserves in case the proposed dividend is less than 10%.
6. New Companies and
Dividend.-In the case of newly incorporated companies where no dividend could be
declared over the three years immediately preceding the financial year in
question, the Department's view is that Rule 3 will not apply, and the case
will be governed by the provisions of Rule 2. That is to say, the' company is
prohibited from transferring more than 10% of its profits to the reserves.
(Circular No.20/76(5)/10/76-CL-XIV and 1/l/76-CL-V,
dated 26-7-1976).
7. Profits of current year
only.-The
amount to be transferred to the General Reserves would be worked out in respect
of the profits of the year in question and without bringing in the profits of
the past years. (Letter No. 8/ 2(Misc.) 75-CL. V, dated 6th June, 1975.)
Dividend deposited in bank [Section 205(1A) (1B) & (1C)]
Companies (Amendment) Act,
2000 has w.e.f. 13-12-2000 inserted three new sub-sections
(1A) (1B) and (1C) in section 205. Sub-section (1A) provides for the
Board of Directors to deposit the dividend amount in a separate bank account
within 5 days of declaration subsection (IB) requires the said amount so
deposited to be used only for payment of dividend.
Unpaid and unclaimed
dividend. (S. 205A)
Section 205A has been
amended by the Companies (Amendment) Act, 1988, to provide that all dividends
remaining unpaid/unclaimed whether dividend warrants have been posted or not
must be deposited in the Unpaid Dividend Account. It is now made clear that any
dividend warrant which has not been encashed within 30 days from the date of
declaration of dividend or has not been paid or remained unclaimed within the
aforesaid period, for whatever reasons, has to be transferred to the special
account in any scheduled bank.
Transfer of unpaid/unclaimed dividend to Investor Education &
Protection Fund. (205A)
The Companies (Amendment) Act 1999 with retrospective effect from 31st October, 1998 has made amendments in sub-section (5) and sub-section (6) of section 205A. From now on any money transferred to the unpaid dividend account of a company after the expiry of seven days from the period of 30 days from the date of declaration of final dividend which remains unpaid or unclaimed for a period of 7 years from the date of such transfer should be transferred by the company to the Investor Education and Protection Fund instead of General Revenue Account of the Central Government. Sub-section (7) of section 205A has also been changed by the said Amendment Act to the effect that the company will be entitled to a receipt from the authority or committee appointed by the Central Government to administer the aforesaid Fund instead of from the Reserve Bank of India and such receipt will be an effectual discharge of the company in respect of the said transfer to the said Fund".
Transfer of Unpaid Dividend to Investor Education
and Protection Fund (S. 205C)
General Circular No.
22/2002, dated 23-9-2002.-Department of Company Affairs has clarified
the correct legal position of the provisions of section 205C inserted into the
Companies Act, 1956 on 31-10-1998.
Prior to the amendment of
Section 205A and the enactment of Section 205C by the Companies (Amendment)
Act, 1999 with effect from 31st October, 1998, companies were required to
transfer to the general revenue account of the Central Government any moneys
transferred to the 'unpaid dividend account' which remained unpaid or unclaimed
for a period of three years from the date of such transfer.
Therefore, all amounts
transferred to the 'unpaid dividend account' of a company on or before 30th
October, 1995 and which had remained unpaid or unclaimed on 30th October, 1998
should have been transferred to the general revenue account of the Central
Government.
With the amendment of
Section 205A and the enactment of Section 205C by the Companies (Amendment)
Act, 1999, it is now provided with effect from 31st October, 1998 that any
moneys transferred to the 'unpaid dividend account' of the company and
remaining unpaid or unclaimed for a period of seven years from the date of such
transfer shall be transferred to the Investor Education and Protection Fund.
Therefore, all amounts
transferred to the 'unpaid dividend account' of a company on or after 30th
October, 1995 or which have remained unpaid or unclaimed for a period of seven
years from the date of such transfer should be transferred to the Investor Education
and Protection Fund together with interest accrued thereon, unless they have
already been transferred to the general revenue account of the Central
Government prior to the enactment of the Companies (Amendment) Act, 1999.
With regard to other unclaimed
amounts, section 205C enacted by the Companies (Amendment) Act, 1999 with
effect from 31st October, 1998 also requires the following amounts to be
credited to the Investor Education and Protection Fund (the Fund):
(a) The application moneys
received by companies for allotment of any securities and due for refund;
(b) Matured deposits with
companies;
(c) Matured debentures with
companies;
(d) The interest accrued on
the amounts referred to in clauses (a) to (c).
The above amounts have to be
transferred to the Fund when they have remained unclaimed or unpaid for a
period of seven years from the date they became due for payment.
Accordingly, all amounts
which had remained unclaimed or unpaid as on 30th October, 1991 (irrespective
of the number of years they had remained unclaimed or unpaid as on that date)
and which remained unclaimed or unpaid as on 31st October, 1998 should be
transferred to the Fund unless such amounts have been paid to the parties
before the enactment of the Companies (Amendment) Act, 1999.
In respect of such amounts,
which have become due for payment after 30th October, 199 1, the amounts should
be transferred to the Fund if they remain unclaimed and unpaid for a period of
seven years from the dates they first became due for payment.
With regard to
operationalisation of the said Fund it has been clarified that since the Fund
became operational only on 1st October, 2001 all amounts due for transfer
between 1st November, 1998 and 30th September, 2001 should have been
transferred within the grace period of 30 days, i.e., by 31st October, 2001.