RESOLUTIONS
The members collectively
control the affairs of the company. Subject to the fact that certain actions
are to be approved by the Central Government or that the day-to-day
conduct of the affairs of the company are cast upon the Directors, the members
have the ult1inate say in the management of the company including ratification
of actions of the Directors where they are ultra i4res of their authorities. A
good corporate framework is one that provides adequate avenues to the members
for effective contribution in the governance of the company while insisting on
a high standard of corporate behaviour without getting involved in the day to
day functioning of the company.
Who is a member
Section 2(27) of the
Companies Act, 1956, defines that the term 'member' in relation to a company
does not include a bearer of a share warrant issued by a company pursuant to
section 114 of the Act. In section 41 of the Act, a comprehensive definition of
a member has been given. In terms of the said section the following persons
would come within the definition of a member:
-Subscribers to the
memorandum;
-Persons who have
agreed in writing to become members and whose names are entered in the register
of members;
-Persons holding
equity share capital of a company whose names are entered as beneficial owner
in the records of the depository.
In relation to a company
limited by shares apart from the above persons all those persons who have been
named as Directors or proposed Directors in the articles or in the prospectus,
as the case may be, who have signed and filed with the Registrar of Companies
an undertaking to take and pay for his qualification shares would Linder
section 266(2) of the Act be deemed to be members of that company.
Although in terms of section
41(2) a minor cannot agree in writing to become a member, the settled law is
that the natural guardian of a minor could enter into contracts on behalf of
the minor for the latters benefit and in such cases such contracts are binding
on the minor. A guardian could agree in writing on behalf of a minor to become
a member of a company. Master Gautam R. Padival (minor) v. Karnataka Theatres
Ltd., (2000) 100 Com Cases 124 (CLB-SR).
The expressions 'member',
'shareholder' and 'holder of shares' are inter-changeable terms in the
case of a company having a share capital. Howrah Trading Co. Ltd. v.
Commissioner of Income-tax, AIR 1959 SC 775. In general, the term means
the shareholder, whose name has been entered in the register of members of a
company having share capital. In a wider sense, 'member' is wider than
shareholder. In the case of companies limited by shares, 'member' includes
shareholders of both classes, i.e., preference as well as equity shares.
Kinds of share
capital and nature of shares
Pursuant to the provisions
of section 86, the share capital of a company limited by shares after 1st
April, 1956, should be of two kinds only, namely,
(a) Equity share capital.
(b) Preference share capital.
Preference share capital has the following
characteristics:
(i) It carries a
preferential right in respect of dividend to be paid at a fixed rate or an
amount calculated at a fixed rate of dividend subject, however, to the
deduction of income-tax;
(ii) It carries a
preferential right in respect of capital to be repaid and the amount of
dividend on capital paid-up or deemed to have been paid-up, along
with any arrear of dividend up to the date of winding up.
In the absence of any
condition of issue the preference share capital carries no right in
participation over the fixed amount contracted for either as regards dividend
or repayment of capital. Thus, on a winding up, there is no presumption that
the preference shareholder is entitled to share in the surplus assets. The onus
is on such shareholder to prove that the rights of preference shareholder were
not exhaustively defined in the articles and that such shareholder was entitled
to share in the surplus assets after the equity share capital has been paid.
John Smith's Tadcaster Brewery Co. Ltd., In re: (1952) 2 All ER 751 and (1953)
1 All ER 518.
The Companies (Amendment)
Act 1999 with effect from 31st October, 1998 has introduced a new type of
shares by insertion of new section 79A in the Companies Act, 1956. Issue of
such shares should be authorised by a special resolution which must specify the
member of shares, their value and the class or classes of directors or
employees to whom such equity shares are to be issued. Sweat equity shares
should be issued in accordance with the regulations made by the Securities and
Exchange Board of India (SEBI) in this behalf. SEBI has made SEBI (Issue of
Sweat Equity) Regulations, 2002 issued vide Notfn. S. O. 103 1 (E), dt. 24-9-2002.
Sweat equity shares can be
either issued at a discount or for consideration other than cash for providing
know-how or making available rights in the nature of intellectual
property rights or value additions by whatever name called.
Sweat equity shares can only
be issued after one year since the date on which the company was entitled to
commence business.
Sweat Equity shares vis a
vis ESOPs
Sweat equity shares and,
employees stock option are the two options permissible under law now which can
be issued to employees. These are issued to employees according to the
requirements best suited to the concerned company. Most companies have favoured
issue of stock option rather Than issue of sweat equity shares. Issue of sweat
equity shares creates ownership whereas issue of employees stock option is only
a perquisite in the hands of the employees. Issue of sweat equity shares to
employees amounts to fair reward for the knowledge and expertise brought in by
employees into a venture on the other hand issue of stock options to employees
is just a tool to check employee turnover. The concept of issue of sweat equity
shares is much larger than the issue of stock options which is limited in scope
compared sweat equity shares. An entrepreneurial community can be gradually
created by the issue of sweat equity shares but issue of stock options can
create only a regime of good employees.
Voting right usually is
spelt out in the articles of the company which is drawn up within the framework
of the provisions of section 87 of the Companies Act, 1956, section 87, inter
alia, provides as follows:
(a) (i) every member of a company limited by
shares and holding any equity share capital therein shall have a right of one
vote in respect of such capital, on every resolution placed before the company;
and
(ii) his voting right on a
poll shall be in proportion to his share of the paid up equity capital of the
company;
(b) Subject to the above,
preference shareholders shall have usually no right to vote but any member holding
preference share capital of a company shall have a right to vote only on such
resolutions placed before the company at any meeting, if the dividend due on
such capital or any part of such dividend has remained unpaid-
(i) in the case of
cumulative preference shares, in respect of an aggregate period of not less
than two years preceding the date of commencement of the meeting; and
(ii) in the case of non-
cumulative preference shares, either in respect of a period of not less than
two years ending with the expiry of the financial year immediately preceding
the commencement of the meeting or in respect of an aggregate period of not
less than three years out of six financial years.
A preference shareholder has
also a right to vote on resolution placed before the company which directly
affect the rights attached to the preference shares. Thus, where the Directors
proposed to increase the share capital of the company by the issue of further
equity shares by capitalisation of an amount standing to the credit of the
company's reserve account and applying the same in paying up the new equity
shares, and distributing the same as fully paid among the equity shareholders,
the proposed resolution was held to affect the right of preference shareholders
and could, therefore, be only carried out with their sanction. Smith's
Tadcaster Brewery Co. Ltd., In re: (1952) 2 All ER 751 and (1953) 1 All ER 518.
Rights of preference shareholders were considered as not 'affected' by the
issue of additional ordinary shares though their voting rights are thereby
diluted. White v. Briston Aeroplane Co. Ltd., (1953) 1 All ER 40.
Where the face value of
preference shares is reduced by paying out the shareholders. The share capital
is reduced and voting rights and right to dividend of preference shareholders
would be proportionatily reduced and this would in essence be a transfer of
property rights making them liable to pay tax on capital gain, if any.
Kartikeya V. Sarabhai v. CIT, (1997) 26 Corpt LA 328 (SC).
The foregoing will not apply
to a private company which is not a subsidiary of a public company. (S.90 (2))
Pursuant to section 153 of
the Companies Act, 1956, the company is prohibited from taking or entering in
the register of members any notice of trust, express, implied or constructive.
The reason for such provision is that if the company is to find out a
beneficiary of shares, there will be no end to the process. Of course, this
also means that the real beneficial holder whose name has not been entered as a
holder has no connection with or right in the company in which any shares are
held in trust for him. Besides, in certain cases of charitable trust the
beneficial owners are variable and may be comprised of large number of persons.
In such cases, the only remedy for a company is to register the shares in the
names of the trustees who are the ostensible owners of the shares, recognising
them as individuals only.
The provision of this
section, however, does not prevent entering the name of any person under
disability such as minor acting through a guardian. Such an entry will only
intimate the fact of the member being under disability. The shares must
however, be fully paid.
The provisions of section
153B deviate to some extent from the general principle laid down is section 153
in regard to notice of trust. The Companies (Amendment) Act, 1996 with effect
from 1st March 1997 inserted clause (C) in sub-section (4) of section
153B to the effect that the requirements of declaration as to shares and
debentures held in trust do not apply to cases where the trust is created to
set up a Mutual Fund or Venture Capital Fund or any other fund which may be
approved for this purpose by SEBI. If a trustee buys for a trust, either shares
or debentures in a company worth Rs. 5 lakhs (market value or value of
acquiring such shares/debentures), or more than 25% of the paid-up share
capital which ever is less such trustee must give notice to the company. The
company, on receipt of the notice, should make a proper note in the register of
members to send notices of each and every General Meeting to the 'Public
Trustee' who assumes the right of the trustees in such cases to exercise the
voting right which is otherwise available to trustees of such trust.
Yet another new concept for
recognition of trust was introduced in section 187C by the Companies
(Amendment) Act, 1974. By this section, it is now obligatory that all benami
holdings of shares must be declared by the benamidar and the beneficial owner
and failure to do so is punishable.
A person who holds
beneficial interest in shares of a company must, within thirty days of his
becoming such beneficial owner, make a declaration to the company specifying
the nature of his interest, particulars of the person in whose name the shares
stand registered in the books of the company and other prescribed particulars.
The company should make a note in the register of members of the details
furnished. Besides benamidars all trustees who hold shares on behalf of
beneficiaries must also comply with the requirements of declaration. The
company must in turn file a return to the Registrar of Companies after
receiving respective declarations from the beneficial owner and the ostensible
owner and should note the particulars of the beneficial owners in the
respective folios of the register of members along with the registered owner.
The sub-section confers no further right or privilege to the beneficial
owner and the company's obligation to pay dividend will be duly fulfilled if
paid to the registered holder thereof.
Pursuant to section 187B,
the Central Government, through Public Trustee, reserves the right of
exercising votes otherwise available to the trustees of the trust where a
declaration is filed with the Public Trustee. The Public Trustee has absolute
discretion to vote at any General Meeting of the members in any way he chooses
and he has no reason to seek advice either of the trustees of the trust or the
beneficiaries thereof.
The Public Trustee may,
instead of himself attending the meeting and exercising the rights and powers,
as aforesaid, appoint as his proxy an officer of the Government or the trustee
himself to attend such meeting and to exercise such rights and powers in
accordance with the directions of the Public Trustee. There is, however, a
fundamental difference in the event of appointment of a proxy by the Public
Trustee and by a member in the ordinary course. Thus, where the trustee is
appointed by the Public Trustee as his proxy, the trustee shall be entitled,
notwithstanding anything contained in any other provisions of this Act, to
exercise such rights and powers in the same manner as the Public Trustee would
be entitled to exercise under section 187B.
If for any reason, the
trustee(s) considers that the Public Trustee should not abstain from exercising
the rights and powers conferred on him by this section and the exercise of such
rights and powers is necessary in order to safeguard tile object of the trust
or the interest of the beneficiaries of the trust, he may, by writing,
communicate his views in this behalf to the Public Trustee but the Public
Trustee may, in his discretion, either accept such views or reject the same.
Pursuant to section 173 of
the Companies Act, 1956, the following businesses which are to be transacted
only at an Annual General Meeting are termed as ordinary business:
(i) the consideration of the
accounts, balance-sheet and the reports of the Board of Directors and
Auditors;
(ii) the declaration of a
dividend;
(iii) the appointment of Directors in place of those
retiring; and
(iv) the appointment of, and the fixing of the
remuneration of, the Auditors.
The aforesaid four items of
business cannot ordinarily be transacted at any meeting other than at an Annual
General Meeting and when transacted, shall be special business. Also other
businesses apart from the above can be transacted at an Annual General Meeting,
but then, they shall be deemed to be special business.
In the case of any other
business to be transacted at an Annual General Meeting or for that matter, any
business whatsoever transacted at any other General Meeting shall be termed as
special business. In other words, any transaction of business either under a
'special' or 'ordinary' resolution shall be treated as special business if the
same does not fall under any of the four items specified above and/or
transacted at other than an Annual General Meeting.
Where any item of the
business to be transacted at the meeting is deemed to be special, as aforesaid,
there shall be annexed to the notice of the meeting a statement setting out all
material facts concerning each such item of business, including, in particular,
the nature of the concern or interest, if any, therein, of every Director and
the Manager, if any. Provision of section 173 is intended to allow time and
place sufficient material in the hands of the shareholders so that they can
come to judgment as to whether or not to go in favour or against resolution.
This is possible if the management puts before them the entire facts with their
recommendations, if any, completely apprising them of the interest of the
persons concerned. Provisions of this section are mandatory and not directory
and any noncompliance with its requirements will lead to the nullification of
the action taken. Ganpatram v. Sayaji Julilee C. and J. Mills Co., (1964) Comp
LJ 326 (Approvingly referred into Fires-tone Tyre & Rubber Co. v.
Synthetic and Chemicals Ltd., (1970) 2 Comp LJ 200: (1971) 41 Com Cases 377.
YS. Spinners Ltd. v. Official Liquidator, Ambica Mills Ltd., (2000) 100 Com
Cases 547 (GUJ).
'Material facts' are facts
which, by reason of their relevance and bearing, influence shareholders in
making up their minds one way or the other as regards approving or not
approving the motion proposed at the meeting and in respect of which the
Explanatory Statement is annexed. The facts should be disclosed fairly and in a
manner which would not mislead the shareholders. As to whether or not a notice
is tricky and misleading, the question is one of fact depending on the facts of
each case. Shaligram Jhajharia v. National Co. Ltd., (1965) 1 Comp LJ 112 :
(1965) 35 Com Cases 706 and (1967) 1 Comp LJ 29. The object of the notice is to
enable the members to understand and appreciate the nature of the business or
items of business proposed to be considered at the meeting and to enable them
to make up their minds whether or not to attend and cast vote at the meeting or
abstain there from. Bimal Singh Kothari v. Muir Mills Co. Ltd., AIR 1952 Cal
645: 56 Cal WN 361: ILR (1954) 1 Cal 185. Explanatory Statement for any special
item is a part of the notice itself and mention of full relevant particulars in
such statement would be sufficient compliance with the law. Notice of
Extraordinary General Meeting and Explanatory Statement attached to it are
tricky if they are likely to mislead shareholders or if there is suppression of
material facts. Explanatory statement should not prima facie lack in requisite
particulars. Goyal (M.R.) v. Usha International Ltd., (1998) 1 Comp LJ 58.
Ordinary and Special
Resolution
Section 189 of the Companies
Act, 1956, defines the different kinds of resolutions which can be moved for
transaction of business in a General Meeting of the members. A resolution is
called or termed as an Ordinary Resolution when at a General Meeting, notice
required under the Companies Act, 1956, has been duly given to the effect that
the resolution is proposed to be passed as an Ordinary Resolution and the
resolution put for voting before the members is passed by a simple majority
either by show of hands or on a poll, as the case may be.
A resolution shall be
Special Resolution when-
(a) the intention to propose the resolution as a Special Resolution has been duly specified in the notice calling the General Meeting or other intimation given to the members of the resolution;
(b) the notice, as mentioned above, has been served in relation
to a forthcoming General Meeting; and
(c) the votes cast in favour of the resolution (whether on a show of' hands, or on a poll, as the case may be) by members who being entitled so to do, vote in person, or where proxies are allowed, by proxy, are not less than three times the number of the votes, if any cast against the resolution by members so entitled and voting.
Special Resolution
consequently deals with matters more vital and important from the point of view
of the company and, therefore, the purport and the contents of the resolution
should be clear enough to be understood by the members of the company. The
Department of Company Affairs have issued instructions in this regard saying
that where Special Resolution does not, on the face of it, disclose all
material facts relating thereto, the Registrars have been instructed to obtain,
in exercise of the powers conferred on them by section 234 of the Act, copies
of the statement prescribed by section 173(2) and any other information
necessary to see that the resolution is in accordance with law.
Amendment to Special and
Ordinary Resolutions
A resolution is to be
proposed or placed before a meeting in the form in which it was circulated to
the members, especially in the case of 'Special Resolution' or in tile case of
Ordinary Resolution, relating to items of special business. A resolution placed
before a meeting which is duly proposed and seconded should be passed in the
same form in which it was proposed. At times, at the meeting, the proposal for
amendment of the resolution as originally notified comes up, and it is a matter
to be considered as to how far a proposed resolution can be amended or if it
could be amended at all. An amendment fairly arising on a resolution which is
specified in the notice of the meeting may be proposed and the Chairman has no
right to refuse to put it before the meeting. But, an amendment, which is not
germane to the motion under consideration or comprises matters unrelated to it,
or indirectly introduces matters already disposed of at the meeting, should be
disallowed.
In regard to Special
Resolution, because of the wording used in defining 'Special Resolution',
considered opinion is that a Special Resolution cannot be validly passed
otherwise than on the terms or wordings in which they were expressed or
explained in the notice convening the meeting. In other words, Special
Resolutions cannot be amended in variance with the text of the resolution
already circulated unless from the shareholders' point of view, the amendment,
in any case, only seeks to make the intention more explicit or to correct an
obvious mistake.
In Manekchowk &
Ahmedabad Manufacturing Co. Ltd., In re, (1970) 40 Comp Cases 819 : D.A., DESAI
J., (as he then was) of the Gujarat High Court has expressed the view that in
spite of the use of the words 'has been duly specified', the provisions of clause
(a) are only directory and not mandatory, but the other conditions of a Special
Resolution, that is, (1) notice of such resolution has been given in relation
to a General Meeting; and (11) the votes cast in favour of the resolution being
three times more than the votes cast against the resolution, are undoubtedly
mandatory. The reasons do not appear to be convincing as the object of the
provision requiring the notice of the meeting to specify the intention to
propose a resolution as a Special Resolution to inform all shareholders of the
nature of the resolution proposed, so that they may decide for themselves
whether to attend the meeting in person or by proxy, and approve or oppose the
resolution.
As regards Ordinary
Resolution, even where the notice under the law required to Specify exact terms
of the proposed resolution, as in the case of special business, it seems that
an amendment may be proposed and adopted at a meeting provided it comes within
the scope of the notice and does not commit the meeting to more than what is
contained in substance of the notice originally circulated and then proposed.
Registration of certain
resolutions and agreements-Resolutions required to be filed with
Registrar
Section 192 requires that
the following resolutions together with explanatory statement or agreement
shall be filed with Registrar of Companies concerned in Form No. 23 within
thirty days after passing or making thereof duly certified under the signature
of the officer of the company:
(1) Special Resolution.
(2) Resolutions agreed to by all the members of the company.
(3) Any resolution of the Board of Directors
of the company or agreement executed by the company relating to appointment, re-appointment
or renewal of the appointment or variation of the terms of appointment of a
managing director.
(4) Resolutions or agreements agreed to by
all the members or any class of shareholders and all resolutions or agreements
which effectively bind all the members or any class of shareholders though not
agreed to by all those members.
(5) Resolution according consent to the
exercise by its Board of Directors any of powers under Clause (a)-sale,
lease or otherwise dispose of the whole or substantially the whole of the
undertaking of the company-Clause (d)-borrow money where the money
to be borrowed together with moneys already borrowed (apart from temporary
loans obtained from the company's bankers in the ordinary course of business)
exceed the aggregate of the paid-up capital and its free reserves and
Clause (e)-contribute to charitable and other funds not directly relating
to the business of the company or the welfare of its employees any amount in
any financial year exceeding Rs. 50,000/- or 5% of' its average net
profits, (Sub-section (1) of Section 293).
(6) Resolutions approving the appointment of
sole selling agents under section 294 or section 294AA of the Act.
(7) Resolution requiring a company to be
wound Up Voluntarily passed in pursuance of sub-section (1) of section
484; and
(8) Copies of the terms and conditions of appointments
of a sole-selling agent appointed under Section 294 or of a sole selling
agent or other person appointed under Section 294AA.
Articles of Association when
registered
Where the articles of
association have been registered, a copy of the Special Resolution together
with explanatory statement which has the effect of altering the articles and a
copy of every agreement for the time being in force shall be embodied in or
annexed to every copy of the articles issued after the passing of the resolution
or the making of the agreement.
Articles of Association when
not registered
In case the articles of
association are not registered, then a printed copy of every resolution or
agreement shall be forwarded to any member at his request on payment of' Re.
one (Sub-sections (2) and (3)).
If default is made in
complying with sub-section (2) or (3), the company and every officer of
the company who is in fault shall be punishable with fine which may extend to
Rs. 100/- for each copy in respect of which default is made (sub-section
(6)).
In case of default in
complying with the provisions of sub-section (1), i.e. registration of
resolutions or agreements then the company and every officer of the company
shall be punishable with fine which may extend to Rs. 200/- per day
during which the default continues (Sub-section (5)).
Liquidator - an officer of a
company
For the purpose of sub-sections
(5) and (6) the liquidator of a company shall be deemed to be an officer of the
company.
Resolutions not required to
be filed
It is to be noted that
resolution in regard to appointment/re-appointment of whole-time
director or manager is not required to be filed. However, the contract of
appointment of manager or whole-time director is to be made available for
inspection by a member.
General conditions as to
validity of resolution
The following conditions are
essential for a resolution to be valid and legally enforceable:
(A) (i) It must be passed at a meeting properly convened and constituted or as the case may be, passed by circulation by appropriate majority.
(ii) A notice convening the meeting on proper
authority and in accordance with the company's Articles of Association or in
pursuance of the requirements of the Companies Act, 1956, has been served.
(iii) Proper quorum, as required either under
the articles of the company or the Companies Act, 1956, has been present.
(iv) The Chairman has been duly elected or
proper person has taken chair and he has conducted the meeting in accordance
with the articles of the company or in accordance with Table 'A' of Schedule 1,
if such regulation has been adopted by the company.
(B) (i) The meeting has been properly
conducted, i.e., in the manner and in accordance with the Articles of
Association of the company.
(ii) The proposed motion was one within the
competence of the members to move and within the competence of the company.
(iii) Amendment of motion and the ultimate
putting of the resolution to vote either by the show of hands or by poll has
been in accordance with law.
(iv) In the event of a poll, if the poll has
been demanded, ordered and taken in accordance with the provisions of section
179 and the provisions of the Articles of Association of the company.
(v) The vote in favour or against has been correctly ascertained
and recorded by the Chairman.
Quorum means the minimum
number of persons required to be present at a meeting for transacting the
business of a company in the absence of which the proceedings will be a nullity.
Few important points regarding quorum should be noted:
(a) Section 174 of the Companies Act, 1956,
deals with the requirements of quorum which should be present in a General
Meeting of the members of the company, and the articles of the company may provide
for a larger quorum but not a smaller one than provided in this section.
(b) Where the total number of members of a
company is reduced below the quorum fixed for a meeting, it would appear that
the rule as to quorum will be satisfied, if all the members of the company
though less than the quorum are present (Palmer's Company Law).
(c) If no quorum is present, there is no
meeting and the proceedings are invalid. Romford Canal Co., In re: (1883) 24 Ch
D 85.
(d) Regulation 49 of Table 'A' deals with quorum
which is quite often adopted as articles of a company. This regulation is
reproduced below:
"49. (1) No business
shall be transacted at any General Meeting unless a quorum of members is
present at the time when the meeting proceeds to business.
(2) Save as herein otherwise
provided, five members present in person, in the case of a public company, and
two members present in person, in the case of a private company, shall be a
quorum."
(e) A single member even though he may hold
many proxies does not constitute a inecting, except where otherwise provided in
the Act as in section 186(l). Daimler Co. Ltd. v. Continental Tyre & Rubber
Co. Ltd., (1916) 2 AC 307.
(f) Presence of non-members not
authorised by the Articles of Association at a meeting will not by itself
invalidate a meeting, unless they have taken part in the proceedings. Carruth
v. Imperial Chemical Industries, 1937 AC 707: (1937) 2 All ER 422.
(g) The condition as to quorum is fulfilled
it' the quorum is present when the meeting proceeds to consider the business
for which it is convened. The fact that at any later stage of the proceedings,
on account of certain members leaving the meeting, the number of members
present is reduced below the quorum, will not affect the validity of any
resolution, because of want of quorum at the time of taking the votes. Hartley
Baird Ltd., In re : (1954) 3 All ER 695. It has, however, been held in a recent
case that where an important resolution is passed without quorum being present,
the resolution is a nullity. London Flats Ltd., In re, (1969) 2 All ER 744:
(1970) 1 Comp U 28.
(h) Quorum should be present throughout the meeting as per
paragraph 3 of' Secretarial Standard-2.
The resolutions which are
void
The following resolutions
are void and ineffective if the subject matter of the resolution deals with
such thing or things as are outside the jurisdiction of the objects clause
contained in the Memorandum of Association or are not permitted by, or are
contrary to, the provisions of the Articles of Association of the company, such
as
(i) allotment of shares to someone when the
entire authorised capital of the company has already been allotted;
(ii) a resolution adopted by the members in
an Annual General Meeting to authorise distribution of dividend which is more
than the amount/ percentage as recommended by the Directors or as decided by
the Board of Directors of the company; or
(iii) if a company takes liberty to pass a
resolution at an Annual General Meeting declaring dividend when, in fact, there
is no profit or inadequate profit earned by the company.
Rectification of earlier resolutions
A resolution may be invalid
due to various reasons, e.g., faulty notice, absence of quorum or Chairman or
any other reason. In certain cases, it is possible to validate the resolution
by convening another meeting and passing the resolution like a fresh
resolution. Where this is done, there is strictly no need to rescind the
resolution which has been found to be invalid and cannot be acted upon. To keep
the records straight, it is suggested that the fresh resolution should also
rescind the earlier faulty resolution.
Resolution passed at
adjourned meeting
Where a resolution is passed
at an adjourned meeting of the members of the company or of the holders of any
class of shares in a company, the resolution shall, for all purposes, be
treated as having been passed on the date on which it was, in fact, passed and
shall not be deemed to have been passed on any earlier date. However, if the
item of business is itself adjourned, resolution passed at the adjourned
meeting will relate back to the original meeting.
Adoption and recording of
resolution
A resolution may be passed at the instance of
(i) the management of the
company, that is, by the Board of Directors;
(ii) the members either by
requisition or otherwise;
(iii) the Court of law in
the course of some proceedings or by an order therefore; or
(iv) The Company Law Board
in exercise of powers conferred by the Act.
While the proposal to
transact business through resolution has to be in the form of a notice pursuant
to the provisions of the Companies Act, 1956, the Court or the Company Law
Board may pass an order calling a meeting pursuant t6 the provisions of the Act
and as provided in the order itself.
Matters to be transacted at
a meeting come before it in the form of a motion. Time is allowed for seeking
clarification and for discussion of the merits and demerits, if any, and the
purpose of the motion. The motion up to this stage is only a proposition duly
made and seconded. The motion put to vote and accepted by the meeting is a
'resolution' and a ,resolution' when recorded in accordance with the provisions
of section 193, in proper register, is termed 'minutes' of the meeting. In
fact, 'minutes' contain something more than the resolution in the sense that
not only the 'resolution' in the form it was passed forms part of the minutes,
the rationale behind and the circumstances in which the resolution was passed,
and also often narrates it. If the Chairman considers it fit to include in the
minutes the foregoing then the minutes is called record of the proceedings of
the meeting.
Withdrawal, rescinding and
modification of Resolutions
Paragraphs 9, 10 and 11 of
the Secretarial Standard-2 provide for withdrawal, rescinding and
modification of resolutions.
Resolutions for items of
business which are likely to affect the market price of securities of the
company should not be withdrawn.
A resolution passed at a
meeting should not be rescinded other than a resolution passed at a subsequent
meeting.
Modifications to any
resolution which do not change the purpose of the resolution materially may be
proposed, seconded and adopted by the requisite majority at the meeting and
thereafter the amended resolution should be duly proposed, seconded and put to
vote.
Passing of Resolution by
postal ballot
Companies (Amendment) Act,
2000 has inserted a new section 192A with regard to provisions relating to
passing of resolution by postal ballot. This provision is applicable only to
listed public companies. As per this provision businesses prescribed by the
Companies (passing of the Resolution by Postal Ballot) Rules, 2001 to be
conducted only by postal ballot have the resolution passed by means of a postal
ballot, instead of transacting the business in general meeting of the company.
For this purpose a notice should be sent to all the shareholders of the company
along with a draft resolution explaining the reasons therefor with a request
that their asset or dissent to the said resolution should be sent to the
company in writing on a postal ballot within a period of 30 days from the date
of posting the notice. The said notice should be sent either by registered post
with acknowledgement due or by any other method as may be prescribed by the
Central Government. The said notice should accompany a postage pre-paid
envelop for facilitating the communication of the shareholders to the company.
Errors in the 'minutes'
which are immaterial, such as clerical errors, may be altered by the Chairman
and initialled. If in the 'minutes', a wrong recording of proceedings is
observed or detected or, according to the Chairman, what was recorded is
unnecessary, such minutes, may, at the instance of the Chairman be corrected.
But the Chairman must, in his own hand, make a record of this fact while
effecting the correction. In other words correction of an error in a minute
which is of a very minor nature and whose detection is easy, may be made by the
Chairman and initialled.
Maintenance of minutes of
proceedings
Section 193 provides that
every company shall properly maintain minutes of proceedings of every general
meeting and of all proceedings of every meeting of its Board of Directors or of
every committee thereof and be recorded in the respective minute books, within
thirty days of the conclusion of every such meeting with their pages
consecutively numbered. Further each page of every minute book shall be
initialled or signed and the last page of the record of proceedings of each
meeting shall be dated and signed
(1) in the case of minutes of proceedings of
a meeting of the Board or of a committee thereof by the Chairman of the said
meeting or the Chairman of the next succeeding meeting;
(2) in the case of minutes of proceedings of a general meeting by the Chairman of the same meeting within the period of thirty days or in the event of the death or inability of that Chairman within that period, by a director duly authorised by the Board for the purpose.
Paragraph 15.2 of
Secretarial Standard-2 also provides that minutes of general meetings
should be entered and signed within thirty days from the conclusion of the
meeting.
Minutes not to be attached
or pasted
The minutes of proceedings
are not to be attached or pasted in the minute book. In case the minute book is
maintained in loose-leaf form, the minute book should be kept in safe
custody and maintained properly. Paragraphs 15.5, 15.6 and 15.7 of Secretarial
Standard2 also provide that minutes should not be pasted or attached to the
minutes book, that minutes if maintained in loose-leaf form, should be
bound at reasonable interval and that minute books should be kept at the
registered office of the company.
For the sake of convenience,
the Department does not propose to take objection to minutes being kept in the
loose leaf form where they are already being so maintained. But, it is
necessary that the pages should be serially numbered and there should be proper
locking device to ensure security and proper control to prevent irregular
removal of the loose leaves. However, at regular intervals, say at six months
the loose leaf books should be bound up to the stage the minutes have been
entered (F. No. 8/16(1)/61-PR).
The Department's views in
the matter are that (i) section 193 (113) is against the pasting of the minute
book. Minutes of the general and Board meetings cannot be type- written
and then pasted in bound minute book or in loose leaves, and (11) entering of
minutes in the bound minute book by a chemical process which does not amount to
attachment to any book by pasting or otherwise is permissible provided on the
mechanical impression of the minutes the original signatures of the Chairman is
given on each page (Letter No. 10(41Y 70-CL.III, dated 27-5-1971).
Alterations in minutes only
by fresh Resolution
Where there is a practice of
presenting the minutes of a meeting for confirmation by the Board of Directors
at the next meeting, it should be noted that if such minutes have already been
signed by the Chairman of the meeting concerned, the minutes attract the
presumptions contained in Section 195 of the Act and as such it will be
possible to have alteration in the minutes only by way of fresh resolutions of
the Board meeting in which the minutes of the meeting in question are
discussed. If the minutes have not been signed but have been approved by the
Chairman of the meeting concerned, the same position as indicated above will
prevail. Consistent with the requirements of section 193, the Board of
Directors is competent to rectify the minutes of an earlier meeting.
Accordingly, the amended resolutions recorded in the minutes were taken to be
good evidence under section 194. The matter arose out of the directors' refusal
to accept a bulk transfer of' shares. Gordon Woodroffe Ltd. v. Trident
Investment and Portfolio Services P. Ltd., (1994) 79 Com Cases 764 (CLB-Mad).
Paragraph 15.4 of Secretarial Standard-2 also provides that minutes, once
entered in the minutes book should not be altered. However, minor errors may be
corrected and initialled by the Chairman even after the minutes have been
signed.
The minutes of each meeting
shall contain a fair and correct summary of the proceedings thereat.
Further all appointments of
officers made at any of the meetings aforesaid shall be included in the minutes
of the meeting. Paragraph 15.1 of Secretarial Standard-2 also provides
that minutes should contain a summary of the proceedings of the meeting,
recorded fairly, correctly, completely and in unambiguous terms and should be
written in third person and past tense.
Meeting of the Board of
directors/Committee of the Board
In the case of a meeting of
the Board of Directors or of a committee of the Board, the minutes shall
contain:
(1) the names of the Directors present at the meeting; and
(2) in the case of each resolution passed at
the meeting, the name of the Directors, if any, dissenting from or not
concurring in the resolution.
Irrelevant or immaterial
matters not to be included in minutes
Any matter which in the
opinion of the Chairman of the meeting is or could reasonably he regarded as
defamatory of any person, irrelevant or immaterial to the proceedings or is
detrimental to the interest of the company shall not be included in any such
minutes. The Chairman shall have an absolute discretion in regard to the
inclusion or non-inclusion of any matter in the minutes on the ground as
specified above.
In case default is made in
complying with the provisions contained in this section in respect of any
meeting, then the company and every officer of the company who is in default
shall be punishable with fine which may extend to Rs. 5001-.
Minutes to be conclusive
evidence
Section 194 provides that
the minutes of meeting kept in accordance with the provisions contained in
section 193 shall be conclusive evidence of the facts recorded therein.
There is no reason why
minutes recorded in loose leaves fastened together between two covers, though
they are not recorded in books kept as required by section 193 should not be
received in evidence on proper proof. (Hearts of Oak Assurance Co. Ltd. v.
Flower (James) & Sons, (1936) Ch 76.)
Presumptions to be drawn
where minutes duly drawn and signed
Section 195 states that
where the minutes of proceedings of any general meeting of the company or of a
meeting of Board of Directors or of a committee of the Board of the company
have been kept as per the provisions contained in section 193 of the Act, it
shall be presumed that the meeting shall be deemed to have been duly called and
held and that all proceedings recorded in the minutes of proceedings have duly
taken place and in particular all appointments of directors or liquidators made
at such a meeting shall be deemed to be valid. In Edward Keventer Successors
Pvt. Ltd. v. Krishna Kumar Sud, (1968) 3 Comp Cases, the presumption was drawn
and the minutes were received in evidence without proof. The presumption under
section 195 is not available to the minutes of an extraordinary general meeting
held on requisition. Bhankerpur Beverages (P.) Ltd. v. Sarabhjit Singh, (1996)
86 Com Cases 842 (P&H). The presumption under this section being
rebuttable, where a controversy is raised, evidence of conclusive nature to
establish the points stated in the minutes in question would become necessary.
BDA Brewones v. Cruickshank & Co., (1996) 85 Com Cases 325 at p. 374 (Bom).
The proposals in the form of
motions placed before the General Meeting are to be decided upon by putting
them to vote, in the first instance, by a show of hands. This is the common
rule unless excluded by the Articles of Association. If the articles are silent
on this point, it is to be presumed that it permits of ascertaining the sense
of the meeting by show of hands of members present at the meeting. In taking a
vote by show of hands, the duty of the Chairman, unless articles otherwise
provide, is to count the hands raised and to declare the results accordingly,
without regard to the number of votes exercisable by a member on the basis of
his shareholding and without regard to proxies, whether held by members or by
non-members for other members. In a voting by show of hands, the proxies
are not counted because section 176(l)(c) provides that a proxy is not entitled
to vote except on a poll.
The usual procedure for
adoption of a resolution in a meeting is for the resolution to be proposed
either by the Chairman or by a member present at the meeting and seconded by
some one who is a member (including the Chairman if he had not proposed the
resolution). In the absence of any provision in the articles of the company to
the contrary, seconding of resolution is not essential. A proposal put to the meeting
is open to discussion and after the discussion is closed, the Chairman puts the
resolution to vote and after counting the number for and against, declares the
result. In the meantime, if a poll is properly demanded, the Chairman orders
that a poll be taken.
The Chairman of the General Meeting
Pursuant to section 175 of
the Act, unless, otherwise, provided in the Articles of Association the members
personally present at the meeting should select one of themselves to be the
Chairman thereof on a show of hands but if a poll is demanded on the election
of the Chairman, it should be taken forthwith and if as a result of such poll,
some other person is elected as the Chairman, then he shall be the Chairman for
the rest of the meeting. Regulation 50 of Table 'A' simply provides that the
Chairman, if any, of the Board shall preside as Chairman at every General
Meeting of the company. If there is no such Chairman, or if he is not present
within fifteen minutes after the time appointed for holding the meeting or is
unwilling to act as a Chairman of the meeting, 2 the Directors present shall
elect one of their number to be the Chairman of the meeting. If at any meeting,
no Director is willing to act as a Chairman or if no Director is present
within fifteen minutes after the time appointed for holding the meeting, the
members present have to choose one of their number to be the Chairman of the
meeting.
A Director need not hold any
qualification share and as such, the Chairman of the Board of Directors also
need not be a member of the company.
By virtue of the provisions
of Regulations 50 to 53 of Table 'A', a Chairman, who usually conducts the
Board Meeting has the first right to take the chair in General Meeting although
he is not a shareholder. The extent of authority a non- member Chairman
can exercise in a meeting is to be kept in mind. He cannot and should not move
or propose any resolution nor second any resolution proposed by another member.
His function as a Chairman of the meeting and his function as a member of the
company should be segregated. It appears, however, that where the Articles of
Association of the company reserves Chairman's veto power, such right will be
available to the Chairman even if he is not a member of the company because
such power is reserved in the articles, by a covenant among members, so to say,
to the Chairman of the meeting. If the articles so provide, a non-member
Chairman can exercise casting vote. Whether the Chairman is a member of the
company or not is immaterial in assessing his other functions and duties in
regard to the conduct of a General Meeting of the members. If the articles of a
company so provide, the Chairman's decision as to the validity of a vote may be
conclusive. Wall v. Exchange Investment Corporation, 1926 Ch 13.
Results declared by Chairman
of votings, by show of hands
A declaration by the
Chairman in pursuance of section 177 that on show of hands a resolution has or
has not been carried or has or has not been carried either unanimously or by a
particular majority, and an entry to that effect in the books containing the
minutes of the proceedings of the company, shall be conclusive evidence of the
fact, without proof of the number or proportion of the votes cast in favour of
or against such resolution, Chairman's declaration in this behalf shall be
conclusive evidence but no fraud should have been perpetrated in such
declaration. Further, the Chairman's declaration in a voting on a show of hands
is conclusive evidence of the fact only of the passing, etc., of the
resolution. It does not debar the legality or validity of the resolution being
questioned.
Chairman's duty where poll
is taken
The Chairman should be
impartial in his attitude. If the poll is validly demanded pursuant to the
provisions of the Companies Act, 1956, or in the manner provided in the
articles of the company, he should allow the poll to be taken either
immediately or within 48 hours of the demand for poll. The Chairman has the
power to regulate the manner of taking poll, subject to the provisions of the
Articles of Association, and to record the findings or the result of a poll. An
important consideration is that his decision and conduct should be such as can
be said to be fair and as does not give room for any injustice or foul play in the
manner of taking poll. A very important point to remember in a poll is that a
member may not be present or may remain neutral at the time of voting by show
of hands or may not be present at the time when the poll is demanded, and yet
he may participate and vote at the time of taking poll Scrutineers.
On ordering a poll the
Chairman will have to appoint two scrutineers to scrutinise the votes given on
the poll and to report thereon to him. Of the two scrutineers one should be a
member, who should neither be an officer nor employee of the company, present
at the meeting. He has, however, the power to vary the appointee before the
result of the poll is declared.
Circulation of Members'
Resolution
Section 188 confers on a
specified number of shareholders a right to give through the machinery of the
company publicity among all the members of the company for resolution which
they intend to propose or for statements which they want to make at an annual
general meeting.
Members necessary for a
requisition
The number of members
necessary for a requisition under the above section is (a) a number
representing not less than one- twentieth of the total voting rights of
all the members having a right to vote at the meeting to be requisitioned, or
(b) not less than 100 persons holding shares in the company on which there has
been paid up an aggregate sum of not less than one lakh of rupees in all.
The requisition must be in
writing and duly signed by the required number of members. The resolution to be
proposed should be set out in the requisition.
The requisition shall be
deposited at the registered office of the Company (1) where notice of a
resolution is required six weeks before the meeting, and (ii) in any other
case, at least two weeks before the meeting. There shall also be deposited a
reasonably sufficient amount to meet the company I s expenses in giving effect
to the requisition.
Company when not bound to
circulate any statement in respect of resolution
Sub-section (5) of
section 188 provides that the company shall not be bound to circulate any
statement if on the application either of the company or of any other aggrieved
person, the Company Law Board is satisfied that the rights conferred by the
section are being abused to secure needless publicity for defamatory matter.
The Company Law Board may
also order that cost incurred by the company on the application be paid in
whole or in part by the requisitionists notwithstanding that they are not
parties to the application.
In case a default is
committed in complying with the provisions of this section then every officer
of the company who is in default shall be punishable with fine which may extend
to Rs. 50,000/-.
Application to Company Law
Board for intervention
The company or other
aggrieved person may make an application to the Company Law Board alleging
therein that the requisitionists by circulating the statement are abusing their
rights conferred in order to secure needless publicity for defamatory matters.
The Company Law Board may by an order direct that the statement need not be
circulated to the members of the company. The Company Law Board may also award
costs to be paid in whole or in part by the requisitionists though they are not
parties to the petition.
Documents to be attached with the application
1. Affidavit verifying the
petition.
2. Bank draft evidencing
payment of application fee.
3. Memorandum of appearance
or duly executed Vakalatnama. Fee payable.-The fee for application is Rs.
50/- .
Where it can be shown that
all shareholders who have a right to attend and vote at a General Meeting,
assent to some matter which a General Meeting could carry into effect, that
assent is as good and binding as a resolution. In re.- Dhomatic Ltd.,
(1969) 1 All ER 161 : (1969) 2 Comp LJ 81.
This provision which is
applicable in the matter of calling a General Meeting of the company is a
special dispensation as to the requirement of notice pursuant to section 191 of
the Companies Act, 1956, which provides that
(1) A General Meeting of a company may be
called by giving not less than twenty one days' notice in writing.
(2) A General Meeting may be called after
giving shorter notice than that specified above provided the consent of the
members is given in writing
(i) in the case of an Annual General
Meeting, by all the members entitled to vote thereat; and
(ii) in the case of any other General
Meeting, other than Annual General Meeting, by not less than the number of
members holding ninety-five per cent of the total voting power
exercisable at the meeting.
Broad classification of
resolution
Resolutions of members passed at a General Meeting
can be broadly classified as under:
(a) resolutions which are in the nature of
directives in regard to internal management of the company pursuant to the
Companies Act, 1956, or the articles of the company;
(b) resolutions which affect the rights of
the members having been passed in compliance with the provisions of the Companies
Act, 1956;
(c) resolutions passed by the members at a
meeting of the company to ascertain the consensus of the members, being a
prerequisite for obtaining any approval or consent (such as issue of bonus
shares) of the Central Government, Company Law Board or the Court. But in such
cases the members' resolution is binding or effective only when the required
consent as asked for or the approval as sought for is granted by the applicable
authority.
Each resolution for
transacting a special business must be notified in the exact form which the
resolution is proposed to be passed at the General Meeting, with Explanatory
Statement annexed to such notice.
In case the resolution is an
ordinary business, the notice need give only an outline of the resolution
sought to be passed and need give the resolution in the form in which it is to
be placed before the members, as the ordinary business in an Annual General
Meeting deals with such items as passing of accounts, declaration of dividend,
etc., which require discussion before the motion for the resolution is
proposed. In case of any resolution required to be passed by postal ballot by a
listed public company under section 192A it will be deemed to have been duly
passed at a general meeting convened in that behalf if such resolution is
assented by a majority of the shareholders.
A good draft of a resolution should have the
following characteristics:
(a) all essential facts are included in the resolution;
(b) there are no superfluous or meaningless
words or phrases which neither help clarity nor brine,, out the purpose for
which the resolution is proposed to be passed;
(c) there should be no ambiguous words or
phrases or statements which are inconsistent with other parts of the
resolution;
(d) it is to be observed that the documents,
persons, place or things referred to in a resolution are properly described
with identification;
(e) if the resolution is intended to be made
effective immediately, such expression, as, 'be and is hereby', is used in the
body of the resolution; similarly, if the resolution is to confirm or ratify
any action taken previously, the sequences should be clearly stated;
(f) unless a single resolution is passed for
different matters, each resolution should confine to one matter only;
(g) if the resolution requires any approval
from the Central Government or any confirmation from the Court, then it should
state so;
(h) if the resolution is passed under some
section of the Companies Act, 1956, or any other Act, it is advisable to
mention the section;
(i) it should be clear cut and at the same time flexible so as
to take care of all contingencies.
The sequences culminating to
the adoption of a resolution should be logical and in the case of special business
(whether Ordinary or Special Resolution) requiring Explanatory Statement,
necessary background for proposing the resolution should be given. When a
resolution is lengthy, the sequences should be paragraphed as far as possible,
having regard to the ideas involved.
Glossary of terms used in
drafting of resolution
'Be and is hereby' is a very
common phrase widely used in drafting of resolutions. It indicates that the
resolution is to be effective from the moment of its adoption notwithstanding
the fact that the resolution may be minuted later.
Both 'till' and 'until' are
used to indicate the day up to which the action is to be effective or the
period from which the resolution becomes effective. The expression 'until
conclusion of the General Meeting' is frequently used in resolutions. Some
ambiguity creeps in the use of either of the expressions as it is not certain
as to whether the effective date should include the day of the meeting or
should exclude such day. This gives rise to dispute not frequently taken to
Court of law. Thus, where a policy was issued to cover fire hazards in respect
of goods from the 14th day of February, 1868, until the 14th day of August,
1868, the Court observed that the protection of goods under such fire policy
continued through the whole day of 14th August and not the day before i.e.,
13th August. Isacs v. Royal Insurance Co., (1870) LRS Exce 296. To avoid this
situation it is recommended that specific effective date should be indicated
with certainty such as 'until and including 5th March, 1983'. Here the date
being specific, scope of controversy is eliminated.
'Not less than 21 days'
means an interval of at least twenty-one clear days as the phrase is
equivalent to saying that twenty-one days must intervene or elapse between
two dates. Thus, 'clear twenty-one days' has been construed as meaning
twenty-one clear days, that is, excluding both the dates on which the
notice is served and the date of the meeting. Nagappa Chettlar v. Madras Race
Club, ILR (1949) Mad 808 : (1949) 1 Mad LJ 662. Thus, where there is a
requirement in the trust deed that a notice is to be given 'at least fourteen
days before a meeting of debenture- holders', this would be construed as
meaning that at least fourteen clear days must elapse between the issue of the
circular and the day of the meeting. Sineath v. Valley Gold Ltd., (1893) 1 Ch
477 : 9 TLR 137. Courts have often held that a period of time must be
calculated inclusive of one of the days and exclusive of the other in the
absence of the term 'clear days'. But then, whenever 'clear days' have to be
ascertained, the courts have always taken out the day of commencement and the
day of conclusion from the counting of the number of clear days. It is
advisable, therefore, to draft a resolution mentioning 'clear days'. Thus,
after seven clear days after the 8th March would mean 'within seven clear days
after the 8th March' so that period ends at midnight of the 15th/16th.
References are often made in
contracts, resolutions or other documents, to a month without any commencing
date. Reference to 'month' without any reference to date is always construed as
'calendar month'. It is, therefore, safe to indicate 'calendar month' if that
is what is intended. Similarly, reference to 'year' means a calendar year and
unless contrary is intended, it is to be calculated either from 1st January or
some other named day in the document or in the resolution and would consist of
365 days in an ordinary year and 366 days in a leap year.
Whenever time is fixed to do
or complete any job, the use of the expression 'within a reasonable time' may
lead to dispute and considerable controversy. What is, however, certain is that
the work should be done in a reasonable time, considering the circumstances and
the time that may, in the usual course, be taken to do the particular kind of
work.
Transactions to be done by
special and ordinary resolutions
The Companies Act, 1956,
requires that certain matters of vital interest to the shareholders, should be
passed by three- fourths majority of the members present because of their
importance and implications of the resolutions proposed to be passed. Members
present would also include those represented through proxy. Cases in which
Ordinary Resolution is required to be passed are indicated in Annexure 1.
Similarly, businesses which can be transacted by passing Special Resolution are
indicated in Annexure 2.
The ordinary Resolution is
one when the votes cast at the General Meeting by the members present in person
or by proxies including the casting vote of Chairman, if any, are more than
fifty per cent. It may be either on a show of hands or on a poll by members
present in person or by proxy and having right to vote.
Ordinary Resolution when can
be amended
The ordinary resolution can
be amended only when in the notice calling the general meeting it is mentioned
that the resolution would be moved "with or without amendment".
A company is permitted to
transact the following business by ordinary resolution at the general meeting:
22(l)(a) Change of Name.-A
Company may by ordinary resolution and with the previous approval of the
Central Government change its name where, through inadvertence, it had been registered
with a name identical with or similar to the name of any other registered
company.
61 Changing of
terms of contracts referred to in prospectus. Subject to the approval of or an
authority given by the company in general meeting, a company may vary the
terms of a contract referred to in the prospectus or statement in lieu of
prospectus.
79(2)(1) To issue share at a
discount. -Authorised by a resolution passed in its general meeting and
sanctioned by the Company Law Board, a company may issue shares at a discount.
8 1 (1A)(b) Further issue of capital.-Issue
of further shares can be made by a resolution passed by simple majority if the
Central Government is satisfied on an application made to it by the Board of
Directors in this behalf, that the proposal is most beneficial to the company.
94(2) Alteration of share
capital.-A company in general meeting can alter its share capital which
includes
(i) increasing
of its share capital by such amount as it thinks fit;
(ii) consolidating and
dividing all or any of its share capital into shares of larger amount than its
existing shares;
(iii) converting all or any
of its fully paid-up shares into stock and reconverting that stock into
fully paid-up shares of any denomination;
(iv) sub-dividing its shares into shares of smaller
amount;
(v) cancelling shares not taken up by any person.
98 Provision for
reserve share capital on re- registration. –An unlimited company having
share capital may increase the nominal amount of its capital and can create
reserved capital on registration.
121 (1)(b) Re-issue of
Debentures.-A company is deemed to have reissued redeemed debentures if
the company has passed a resolution intending not to cancel such redeemed
debentures.
165 Statutory Report.-The
statutory report should be adopted by passing an ordinary resolution in the
statutory meeting.
210 read with 173 & Balance-sheet and Accounts of'
Company.-The following should he passed as an ordinary
225 resolution
at every Annual Meeting of a company:
(i) consideration of the
accounts, balance-sheets and reports of the Board of Directors and auditors;
(ii) the declaration of a dividend;
(iii) the appointment of directors in place of those
retiring; and
(iv) the appointment of and the fixing of the
remuneration of the auditors.
214(l) Inspection of Books
of Accounts of Subsidiary Company. Authorising representative(s) named in the
resolution adopted to inspect the books of accounts kept by any of its
subsidiaries.
224(l) Appointment of
statutory auditors. -Statutory auditors of the company shall be appointed
at each annual general meeting by passing an ordinary resolution.
224(2) For appointment of
some person or persons in the place of a retiring auditor (to be moved only at
an annual general meeting.)
224(5) Removal
of the first statutory auditor.
224(6) To fill casual
vacancy of an auditor caused by resignation but the vacancy shall only be
filled by the company in general meeting.
255 Director's
Appointment. -Appointment of directors retiring by rotation of not less
than two-thirds of the total number who shall be retiring by rotation, at
least one- third must be appointed by the company in general meeting.
256 read with
255 Directors retiring by
rotation and filling of vacancy.-Reappointment of directors retiring by
rotation at an annual general meeting.
257(l) Appointment of
directors other than retiring directors.-Person other than a retiring
director can be appointed as a director of the company by passing an ordinary
resolution at a general meeting, provided a notice of not less than fourteen
days before the meeting has been given by him or a member intending to propose
him as a candidate for that office.
258 Increase or
decrease in number of Directors.-A company may increase or reduce the
number of its directors within the limits fixed in that behalf by the articles
of the company.
268 read with
269 Central Government's approval
required on appointment or re-appointment.- Appointment or re-appointment
of a managing or whole-time director or a director not liable to retire
by rotation may be made, inter alia, by resolution passed by the company in
general meeting subject to the approval of the Central Government.
284 Removal of
directors.-A company may by ordinary resolution remove a director (not
being a director appointed by the Central Government in pursuance of section
408) before the expiry of his period of office. Pursuant to sub-section
(2) of this section, the company can appoint another person as director if
special notice is given to that effect.
292(5) Powers to be
exercised by Board.-A company in general meeting may impose restrictions
and conditions on the exercise by the Board of any of the powers specified in
sub-section (1) of section 292.
293 Restrictions on
powers of Board.-Except with the consent of the members at a general
meeting, the Board cannot exercise any of the following functions:
(i) sell, lease, or dispose of any or whole of the under
taking of the company;
(ii) remit or allow time for the repayment of debt due by
a director;
(iii) invest the amount of
compensation received by the company in respect of compulsory acquisition;
(iv) borrow money (except
temporary loan) exceeding in the aggregate of the paid-up capital of the
company and its free reserves;
(v) contribute to charitable
and other funds not directly relating to the business of the company in excess
of rupees fifty thousand or five percent of its average net profits, whichever
is greater.
294(2) &
(2A) Appointment of sole
selling agent. -Appointment of sole selling agent for any area shall
cease to be valid if it is not approved by the company in the first general
meeting held after such appointment. If the company in the general meeting
disapproves the appointment, it shall cease to be valid with effect from the
date of that general meeting.
309(l) Remuneration of
directors.-A company in general meeting by an ordinary resolution (except
where the articles provide for a special resolution) may pay remuneration to
the directors including whole-time director or managing director at the
percentage envisaged in section 198 read with this section.
313(l) Appointment of
alternate director.-The company in general meeting may appoint a person
as an alternate director, to act for a director (original) during his absence
for a period of not less than three months if such appointment is not
authorised by the articles of the company.
391(2) Compromise or
Arrangement. -Arrangement or compromise has to be approved in a general
meeting subject to the approval of the court.
484(l)(a) Voluntary winding up.-When
the company is wound up voluntarily when the time fixed by the articles for
the continuance of the company has expired or when the event depending on which
the company is to be dissolved has occurred, a resolution of the general body
is required to be passed.
490 Appointment o
Liquidator.-A company in general meeting shall appoint one or more
liquidators for the purposes of winding up and fix the remuneration, if any, to
be paid to the liquidator or liquidators in a members' voluntary winding up.
491 Powers that can
be exercised by directors after appointment of liquidator.-In a members'
voluntary liquidation, the Board of Directors' power shall cease except in so
far as the company in general meeting or the liquidator may sanction the
continuance thereof.
492(l) Filling of vacancy
in office o Liquidator.-The company in general meeting may, subject to
any arrangement with its creditors (in a voluntary winding up) fill any vacancy
in the office of liquidator.
496 & 497 To consider and pass the
accounts of the winding up placed by liquidator before the general meeting in a
members' voluntary winding-up.
502 Liquidator in
creditors winding up.-General meeting resolution of the company to
nominate a person to be liquidator for the purpose of winding up of the affairs
and distribution of the assets of the company.
503 read with
500 Committee of Inspections. -Appointment
of committee of inspection in a creditors' voluntary winding-up requires
an ordinary resolution to be passed.
508 & 509 To consider and pass the
accounts of the winding up laid by the liquidator before the general meeting in
creditors' voluntary winding-up.
565(l) proviso
(v) Companies being registered. -Assent
of the members of the company in a general meeting should be obtained for registering
an "existing company" under the Companies Act, 1956.
Miscellaneous Miscellaneous.-The articles
of a company in certain matters require some matters to be taken by the members
in a general meeting.
A Special Resolution has to
fulfill the following conditions:
(1) The intention to propose
the Resolution must be specified in the notice calling the general meeting.
(2) The notice convening the
general meeting has been duly given to the members of the company.
(3) The votes cast in favour
of the Resolution by members entitled to vote either in person or by proxy are
not less than three times the number of votes, if any, cast against the
Resolution by the members of the company. The votes may be cast either on a show
of hands or on a poll by the members present in person or proxy and having
right to vote. In other words the votes cast in favour of the Special
Resolution must be more than seventy-five per cent.
A company has to transact
the following business only by passing a Special Resolution at the General
Meeting:
17(l) Power to change the
place of registered office or to alter objects. -Alteration of
memorandum of association so as to change the place of its registered office
from one State to an other or with respect to the objects of the company.
21 Change of'
Name.-Changing of name of company. The change also requires approval of
the Central Government.
No approval, however, is
necessary where the only change in the name of company is the addition thereto
or, as the case may be, the deletion there from, of the word 'Private', consequent
to the conversion in accordance with the provisions of the Companies Act, 1956,
of a public company into private company or a private company into a public
company, and this could be done by adopting only special resolution.
25(3) Omitting the word
'Limited' or the words 'Pvt. Ltd.'.- Where the objects of a company
registered under the Companies Act, 1956, as a limited company have the effect
of restricting payment of dividend to the members and requiring that such in
come is applied in promoting its objects, etc., the Central Government may
authorise such company to change its name by a special resolution for omitting
the word 'Limited' or the words 'Private Limited'.
31(l) Alteration of
Articles of Association. -Subject to the provisions of the Companies
Act, 1956, and to the conditions contained in its memorandum, a company may,
by special resolution, alter its articles.
In the event of alteration
of article which has the effect of converting a public company into a private
company, such special resolution shall have no effect unless such alteration
has been approved by the Central Government.
77A Power of company
to purchase its own securities.-A company may purchase its own shares or
other specified securities from out of its free reserves or out of the
securities premium account or out of the proceeds of any shares or other
specified securities by passing a special resolution in general meeting of the
company which must be authorised by its articles of association.
79A Issue of sweat
equity shares. -Authorised by a special resolution passed by a company
in the general meeting, a company may issue sweat equity shares of a class of
shares already is sued subject to complying with certain conditions.
81 (1A)(a) Issue of further Shares.-Issue
of further capital or issue of further shares as rights to any person whether
or not those per sons include the persons as existing shareholders.
81(3)(b) The taking of loans from
or issue of debentures containing either a conversion option or option to
subscribe to further shares to anyone other than the Government or any
institution specified by the Government in this behalf needs the consent of the
company by a special resolution and (1) Central Government consent or (11)
terms of such issue being in conformity with Public Companies (Terms of Issue
of Debentures and Raising of Loans with Option to Convert such Debentures into
Shares) Rules, 1977. If such special resolution was not passed or the other
condition not complied the issue of further shares on exercise of the option
shall need the consent of the company by a special resolution.
99 Creation of
reserve liability.-A limited company may, by special resolution,
determine that any portion of its share capital which has not been issued or
called up will not be is sued except for the purposes of the company being
wound up.
100(l) Reduction of share
capital.-A company, limited by shares or guarantee, may, under this
section, pass a special resolution called a resolution for reducing share
capital' which will be effective only after confirmation by the court under
petition made to the court for that purpose.
106 Alteration of
rights of holders of special classes of shares.- The right attached to the
shares of any class may be varied with the sanction of a special resolution
passed at a separate meeting of the holders of the issued shares of that class.
146(2) Proviso Transfer of
registered office of the company.-Except on the authority of a special
resolution, the registered office of the company cannot be removed outside the
local limits of any city, etc. Removal of the registered office from one place
to another within the same city, town or village does not, however, require
any special resolution, though notice of such change should be given to the
Registrar of Companies.
149(2A)(b) Commencement of Business. -Commencement
of any new business by a company in existence immediately before the commencement
of the Companies (Amendment) Act, 1965, or the commencement of any business
contained in the Other Objects Clause of the Memorandum of Association of any
other company.
163(l) Proviso
(i) Place of keeping, and
inspection of registers and returns.- Special resolution to approve the
keeping of statutory registers, etc., in some place other than the registered
office by giving in advance a copy of the proposed special resolution to the
Registrar of Companies.
208(2),(3) Payment of interest out of
capital.-Where a company issued shares for the purpose of raising money
to defray the expenses of construction (which is expected to be not profitable
for a long period) the company may pay interest on the paid-up share
capital provided such payment is either authorised by the articles of the
company or by a special resolution. Besides the provision in the articles of
the company or approval by special resolution, such payment must be
authorised/sanctioned by the Central Government.
224A(l) Appointment of auditor
with the approval of the company by special resolution in certain cases.-In
the case of a company in which not less than twenty-five per cent of the
subscribed share capital is held singly in any combination by public financial
institution and Government company and the Central Government and any State
Government.
237(a)(1) Investigation of company's
affairs by Inspectors. -Investigation of the affairs of the company by
the Central Government if by special resolution the company declares that the
affairs of the company ought to be investigated by an inspector appointed by
the Central Government.
294AA(3) Sole-Selling Agents. -Appointment
of sole-selling agents by a company having a paid-up capital of
rupees fifty lakhs or more with the consent of the company accorded by a
special resolution and the approval of the Central Government.
309(l) To fix remuneration
of directors where the articles require such resolution to be passed as special
resolution.
309(4)(b) Remuneration to Directors.
-Remuneration to directors who are neither whole-time or managing
directors, to be paid by way of a monthly, quarterly or annual payment with the
approval of the Central Government or by way of commission if the company by
special resolution authorises such payment.
314(1)&IB Consent of Directors for
office or place of profit.-To authorise a director to holding office or
place of profit, or a partner of a director, or a relative of such director or
a private company in which such director is a member or director to hold any
office or place of profit carrying not less than the pre scribed remuneration
except that of managing director or manager, banker or trustee for debenture-
holders of the company.
323(l) For making liability
of directors unlimited.-A limited company may, if so authorised by its
articles, by special resolution, alter its memorandum so as to render unlimited
the liability of its directors or of any director or manager.
372A Inter-corporate
loans and in vestments. -Company making any loan to any body corporate,
giving any guarantee or providing security in connection with a loan made by
any other person to, or to any other person by, any body corporate and
acquiring by way of subscription, purchase or otherwise the securities of any
body corporate exceeding 60% of its paid up share capital and free reserves or
100% of its free reserves, whichever is more, must do so by previous authority
of a special resolution passed in a general meeting.
433(a) Winding up of
Company.-By passing a special resolution to that effect, a company may
render itself for compulsory winding up by the court.
484(l)(b) Voluntary winding up.-One
of the circumstances in which company may be wound up voluntarily is when the
company passes a special resolution that the company be wound up voluntarily.
494(l) Liquidator: Power to
sell Company's property for shares With the sanction of a special resolution
of the transferor company, the liquidator can accept shares etc. as
consideration for sale of property of the transferor company.
512(l)(a) Power of liquidator in
voluntary winding up.-The liquidator may act or operate within the limit
granted by a special resolution of the company.
517(l) Arrangement binding
on company and creditors.-Any arrangement entered into between a company
being wound up and its creditors shall be binding (under normal circumstances)
on the company and on the creditors if it is sanctioned by a special resolution
of the company and acceded to by three fourths in number and value of the
creditors.
546(l)(b) Liquidator: Exercise of
power under Sec. 546(l).-With the sanction of the court and with the
sanction of a special resolution of the company in the case of a voluntary
winding up, the liquidator may pay any class of creditors in full and do certain
other things.
550(l)(b) Disposal of Books and
Papers. -Disposal of books and papers by the liquidator-after
complete dissolution and winding up of the company in the case of a member's
voluntary winding up, in such manner as the company may, by special resolution,
direct.
579(l) Deed of settlement
by company registered under Part IX. - Special resolution for alteration of
the form of the const1tutl on of a company by substituting a memorandum and
articles for a deed of settlement.