BOARD RESOLUTIONS OF A RUNNING COMPANY
As stated in the preceding
Chapter, Board resolutions may be of the following categories:
(a) Resolutions which are
connected purely with internal management of the company or deal with internal
administration and regulation of the affairs of the company;
(b) Resolutions affecting
the interest of the members or outsiders, such as, making calls on partly paid
shares/buying back of securities, issue debentures, borrow moneys otherwise
than on debentures, investing funds of the company power to make loans and
issue of right shares, etc.;
(c) Resolutions which are
required to be passed by the Board under the companies Act, 1956 and/or other
statutes.
Resolutions which are purely
for facilitating internal management are not limited in their scope by the
provisions of the statute and it is only in rare cases that the Articles of
Association provide that certain businesses can be transacted only at a Board
Meeting. These resolutions should, however, ensure that:
(i) all matters have been
considered from all angles, discussed thoroughly differing viewpoints and
experiences of the Directors have been applied to the problems;
(ii) policy and other
important decisions are recorded, where necessary, in a precise form, in the
body of the resolution, thus facilitating historical consideration and future
guidance and directions;
(iii) policy matters are considered only in a Board
Meeting;
(iv) difference of opinions
among Board members is ironed out as far as possible, paving preferably the way
for a unanimous decision;
(v) decisions which cast
duties or obligations, or confer rights on executives and other staff are
stated in specific and clear terms.
Whether required to be
passed by the statute or not, once passed, any resolution, falling in any of
the categories, has a legal force, either under the Companies Act, 1956 or some
other Act. Thus approval of the Board of Directors regarding some expenses may
be considered as authentic proof by the Income-tax Officer assessing the
income of the company, that the expense was wholly and necessarily incurred for
the purpose of the business. The resolution failing in category (b) above may
be a valuable piece of evidence in any legal action taken by aggrieved members
and on the other hand, absence of a resolution falling under category (c) may
be taken as a proof that there was no requisite authority for doing any act
which might have been done without a resolution having been passed.
Operation of Bank Account
Regn. 70. Operation of Bank Account-Change therein-supersession of all resolution-Board Resolution
"RESOLVED that in supersession of all resolutions passed in this behalf, the following Officers of the Company be and are hereby authorised to operate singly the Company's Current Accounts with Bank of Baroda, Parliament Street, New Delhi and the Oriental Bank of Commerce Ltd., Connaught Circus, New Delhi-
1. Shri SPM, Director
2. Shri SKM, Chief Executive
3. Shri RSR, Manager Works
RESOLVED FURTHER that the
said Shri RSR is authorised to operate the aforesaid accounts to the extent of
Rs. 50,000/- (Rupees fifty thousand only) at a time.
RESOLVED FURTHER that the
aforesaid Banks be and are hereby authorised to honour all cheques, drafts,
bills of exchange, promissory notes and other negotiable instruments signe,
drawn, accepted or made on behalf of the Company by the aforesaid officers and
to act on any instructions so given relating to the said Banking Accounts of the
Company whether the same be overdrawn or not or relating to any transactions of
the Company."
1. Authority to operate Bank Accounts.-The Board may authorise any
officer of the Company to operate the Bank Accounts of the Company either singly
or jointly.
2. Copy of resolution given to the Bank.-The certified true copy of
the board resolution should be forwarded to the concerned Bank or Banks along
with a forwarding letter stating therein the company's decision to make a
change in the signatories of operation of bank accounts of the company.
3. Bills of Exchange and Promissory notes.-A bill of exchange, hundi or
promissory note shall be deemed to have been made, accepted, drawn or endorsed
on behalf of a company if drawn, accepted, made, or endorsed in the name of, or
on behalf of or on account of, the company by any person acting under its
authority, express or implied (Section 47).
4. Notice of Board Meeting.-Notice of a Board Meeting should be given in
writing to every director of the company for the time being in India and at his
usual address in India to every other director. Penalty for failing to giving
notice as aforesaid will make every officer of the company whose duty it is to
give notice punishable with fine of Rs. 1,000/-.
Change in authorisation in Bank Account
(Another format)
Miscellaneous-Bank Account-Change in authorisation-supersession of all resolutions-Board Resolution
"RESOLVED that in supersession of the resolution passed by the Board of Directors at their Meeting held on 3rd November, 2000, Bank of Baroda, Parliament Street, New Delhi be and is hereby authorised to honour all cheques, bills of exchange, promissory notes drawn, accepted and all negotiable instruments whatsoever made on behalf of the Company by Ms. SJ, the Managing Director of the Company and to act on any instructions so given relating to the account whether the same be overdrawn or not or relating to the transactions of the company.
RESOLVED FURTHER that the
Secretary of the company be directed to send a copy of this Resolution to Bank
of Baroda, Parliament Street, New Delhi for their information and record."
1. General Powers of the Board.-Since a company cannot
operate on its own being an artificial juristic person, section 291 of the Act
has provided that the Board of Directors will exercise all powers and do all
acts and things as the company is authorised to exercise and do.
2. Passed by circulation.-For change in operation or authorisation of bank
account also a resolution passed by circulation under section 289 is valid and
can be so done as per the provisions of section 289.
Bank Account-Revision of credit facility
"RESOLVED THAT the company do avail of the following credit facilities from Indian Overseas Bank and State Bank of India as per limits set out against each credit facility:
|
|
Indian
Overseas Bank |
State
Bank of India |
|
|
(a)
Letters of Credit (Foreign) |
Rs.
600 lakhs |
- |
|
|
(b)
Letters of Credit (Inland) |
Rs.
400 lakhs |
Rs.
350 lakhs |
|
|
(c)
Letters of Guarantee |
Rs.
300 lakhs |
Rs.
200 lakhs |
|
|
(d) Bridging loan for balancing equipment |
- |
Rs.
170 lakhs |
|
|
(e)
Cash Credit facilities for other projects |
- |
Rs.
410 lakhs |
|
|
(f)
Cash Credit limit |
- |
Rs.
510 lakhs |
|
RESOLVED FURTHER that Shri SKM, Managing Director of
the company be and is hereby authorised to sign singly all documents and papers
which may be required in this connection under the Common Seal of the
Company."
1. General Powers of the Board.-Since a company cannot
operate on its own being an artificial juristic person, section 291 of the Act
has provided that the Board of Directors will exercise all powers and do all
acts and things as the company is authorised to exercise and do.
2. Board Resolution passed by circulation.-Increase in credit
facilities is a major issue and it should not be passed by circulation of the
resolution among the directors under section 289 and usually Banks insist that
such a resolution should be passed at a duly convened Board Meeting under
section 292(l)(c) although there is no restriction imposed by the Act to do so.
3. Ensuring that credit limits are within the overall limits of
borrowing.-While increasing the credit limits the company should also adhere to
the limits set under section 293(l)(d) and ensure that the total borrowing does
not exceed the maximum limit approved by the general meeting.
Bank Overdraft/Cash/Credit facility
"RESOLVED that the
company do request the State Bank of India, Parliament Street, New Delhi, for
allowing the company the overdraft/cash credit facility to the extent of Rs.
10,00,000 (Rupees ten lakh only) for meeting the working capital needs of the
company.
RESOLVED FURTHER that the
Managing Director of the company be and is hereby authorised to secure the said
facilities against the hypothecation of furnished goods, raw-materials,
etc., of the company and to execute all documents and papers as required by the
said Bank and to do all such acts, deeds and things as may be necessary to
secure the above facilities.
RESOLVED FURTHER that the
General Manager (Finance) be and is hereby authorised to operate the said
account and to deal with all matters connected therewith."
1. Delegated to a Committee.-For obtaining overdraft or cash credit
facilities from any bank, Board of Directors can delegate its power to any
committee under section 292(l)(c) of the Act by passing a resolution at a
meeting of the Board and then the resolution should be passed by the said
committee so constituted to deal with overdraft or cash credit facilities of
the company.
2. Overdraft/cash credit whether temporary loans.-Section 293(l)(d) will not
be applicable to a company's obtaining overdraft or cash credit facilities from
any bank as such borrowing will be in the nature of temporary loans obtained
from company's bankers in the ordinary course of business.
Miscellaneous-Bank Account-Opening of-For Public Issue-Board Resolution
RESOLVED that the Company do open a Bank Account styled as "ABC Limited Public Issue Account" with the banks hereinbelow mentioned and that the said Banks be and are hereby authorised to receive applications as well as money for __________ Equity shares in accordance with the instructions as may be issued by the Company from time to time.
RESOLVED FURTHER that the
said banks be and are hereby authorised to honour all cheques, refund and/or
pay order drawn on behalf of the Company severally by Shri ______________ and
Shri ______________ and to act on instructions so given by any of them relating
to the said banking account of the Company.
Name of Banker Address
1
2
3
1. General Powers of the Board.-Since a company cannot
operate on its own being an artificial juristic person, section 291 of the Act
has provided that the Board of Directors will exercise all powers and do all
acts and things as the company is authorised to exercise and do.
2. Whether can be passed by circulation.-There is no bar for such a
resolution to be passed by circulation under section 289 as this matter is
outside the items mentioned under section 292(l) but anything to be done in
connection with a public issue should be through a properly convened Board
Meeting to avoid subsequent complications.
"RESOLVED that the Bankers hereinbelow mentioned be and are hereby appointed as bankers to the Company's Public issue of ______________Equity shares of Rs. 7/- each for cash at par:-
Name of Banker Address
1
2
3
4
5
1. Selection of Banker's name.-Select a few names of the leading Scheduled Banks
before passing this resolution and allow preferences to be viewed at the
meeting of the Board where discussion on this subject matter takes place.
2. Board Meeting.-Hold a Board Meeting including the details of the
different Banks in the agenda for the Board Meeting and get them approved by
the Board by passing a resolution.
3. Information to Stock Exchange, etc.-Inform the Stock Exchanges
concerned on which the shares of the company are to be listed. Also send
intimation to the brokers to the issue etc.
4. Freedom to determine the denomination.-A company is free to issue
shares in any denomination determined by it in accordance with section 13(4) of
the Act and in compliance with norms as already specified and as may be
specified by SEBI from time to time. [Clause 3. 7 of SEBI (Disclosure &
Investor Protection) Guidelines, 2000].
Adoption of common seal (S. 34(2))
The possession of a common
seal with its name engraved on it in legible characters is a statutory
requirement of an incorporated body, having a legal personality of its own.' A
company registered under the Companies Act, 1956, should have only one common
seal for use within India. The general practice is to use a metallic common
seal. A company can have an official seal for use outside India which is a
facsimile of the common seat of the company, with the addition on its face of
the name of the territory, district or place where it is to be used under
section 50. The common seal of the company being the signature of the company
should be adopted at its first Board Meeting and its impression should be taken
in the minutes book of the Board.
Opening of a branch office
"RESOLVED that the company's sales depot situated at ________, be and is hereby declared as a 'branch office' within the meaning of section 2(9) of the Companies Act, 1956 and not a 'sales depot' and Mr __________ be authorised to take all such actions as may be necessary for the establishment of this branch office."
1. Meaning of Branch Office.-Section 2(9)(a) defines 'branch office' in
relation to a company to mean (i) any establishment described as a branch
office by the company, or (ii) any establishment carrying on similar or
identical activity in relation to the head office of a company, or (iii) any
establishment engaged in any production, processing or manufacture. It also
says that this does not include any establishment specified in any order made
by the Central Government under section 8.
2. Declaration of an establishment as branch office.-The Board may, by passing a
resolution, describe any establishment other than the registered office or have
any establishment which may be prevented by the Central Government under
section 8 from being declared as the branch office not to be a branch office.
Declaring any establishment of a company to be a branch office can be done by
passing a Board Resolution but declaring any establishment not to be a branch
can be done only under the order of the Central Government under section 8.
3. Advantage of declaring an establishment as branch office.-Considering the purport of
sub-clauses (a), (b) and (c) of clause (9) of section 2, any factory
located in any town or village, any establishment carrying on either the same
or substantially the same activity as that carried on by the head office of the
company may be treated as a 'branch office'.
There is a definite
advantage of declaring an establishment not covered by the definition contained
in sub-clauses (b) and (c) of the section to be a branch office because
in the case of a branch office, only summarised quarterly returns or returns at
shorter intervals may be sent to the registered office pursuant to the
provisions of section 209(2) of the Companies Act. Pursuant to section 228, the
audit of the accounts of a branch office need not be done by the company's
Auditor, but may be done by another qualified Auditor appointed by the company
in a General Meeting. If the branch office is situated outside India, then the accounts
of such branch office may be audited either by the company's Auditor or by the
other person appointed in a General Meeting to be a branch Auditor or by an
Accountant duly qualified to act as an Auditor of the branch office in
accordance with the laws of that other country.
4. Exemption from Branch Audit.-Under the provisions of
section 228(4) a company may be entitled to exemption from the audit of a
branch office under the Companies (Branch Audit Exemption) Rules, 1961, either
automatically or by obtaining Central Government's approval by making an
application in the form prescribed under the said Rules.
5. Power of Central Government to declare an establishment not to be
branch office.-To prevent the abuse of the aforesaid provisions, section 8 gives power
to the Central Government to declare by order an establishment not to be a
branch office, so that the concessions granted under sections 209(2), 228 or
229 to a 'Branch Office' are not available in every case.
WHEREAS the company has been engaged in business of heavy engineering consisting of a forgeshop and graded steel casting foundry since July, 2000, and have so far concentrated mainly on the western region.
AND WHEREAS the company has
now assessed that substantial demand of the company's products comes mainly
from the south and central region of the country.
AND WHEREAS there is no
sophisticated unit producing such products in any region which may cater to the
needs of the south and central region of the country.
AND WHEREAS the contemplated region is in close proximity to the sources of raw materials and cheap labour from the eastern and the southern regions.
AND WHEREAS the cost of
freight on procurement of raw materials and cost of freight on distribution of
the finished products to such south and central market areas will be most
economical, compared to cost of distribution from the existing manufacturing
unit of the company at Thana.
AND WHEREAS expert technical
consultant has completely studied the technical and feasibility of setting up a
new factory at such site as per the report of such consultant which is hereby
tabled and it appears from such report that the recommendations made therein
are quite logical and economical.
AND WHEREAS the company by
making an application under the Industries (Development and Regulation) Act,
1951, have obtained necessary licence for the establishment of a factory at
_________ (near Bangalore) with a capacity of 10,000 tones per year.
NOW THEREFORE, IT IS-"RESOLVED
that the company may take immediate action for the establishment of
manufacturing unit at __________ (near Bangalore), and that the project
division of the company be advised to complete all technical and mechanical
drawings forthwith and place orders for the construction and fabrication of the
workshop buildings and equipments for the setting up of the manufacturing
facilities as licensed for a capital outlay of Rs. 320 lakhs and to do all such
things as may be deemed necessary and incidental to the establishment of a
manufacturing unit in the village __________ in the vicinity of the Bangalore
city in the State of Karnataka and for the purpose of setting up the factory,
the Managing Director of the company be and is hereby authorised and directed
to initiate immediately negotiation to buy a suitable plot of land near about
the said location, and submit his recommendation to the Board of Directors for
the latter to consider the suitability of the proposed purchase of land, terms
and conditions of such purchase and the consideration of such plot of land.
RESOLVED FURTHER that the
company prefer a land on outright purchase basis as, lease-hold property
will not be suitable, for the company.
RESOLVED FURTHER that the
Managing Director and Mr. PKW a director of the company be entrusted with the
overall responsibility and authority of implementation and completion of the
project preferably within the amount budgeted therefor, and that Mr. PKW be and
is hereby advised to submit his progress report to the Board of Directors
beginning with negotiation for the purchase of land to the completion of the
setting up of the factory, plant and machinery."
PRACTICE NOTES
1. Place of manufacture treated as Branch Office.-Pursuant to the provisions
of section 2(9)(b), any establishment carrying on either the same or
substantially the same activity as that carried on by the head office of the
company, shall be termed as a branch of the company.
It is construed that under
the definition of a branch, as covered by the aforesaid provisions, a factory
or manufacturing facility located in any town or village, other than the place
where the registered office is situated will be identified as a 'branch
office'.
2. Part of Head Office.-If an establishment is not a branch office of the
company, it will form part of the head office and will be dealt with as such
for audit and other purposes [Letter No. 8/16(1)/61-PR, dated 9-5-1961].
Establishment of company not treated as branch office
S. 2(9) read with S. 8-Establishment of company not
treated as branch office-Board Resolution
"RESOLVED that the
sales office of the company situated at 124 Panchkuian Road, New Delhi, which
performs the same activity as the head office of the company situated at 123
Panchukuian Road, New Delhi be not treated as the branch office of the company
and that the order of the Central Government issued vide letter No . ________
dated _________ be and is hereby noted."
PRACTICE NOTES
1. Branch Office-meaning.-An office is different from
a shop of the company and a branch office must at least possess the character
of an office of the company. Eastern Distillary Sugar Factory v. Municipal
Council, (1933) 3 Corn Cases 310, 313 Mad.
2. Head office and branch office.-Section 8 empowers the
Central Government to declare that an office shall not be treated as a branch
office. The term 'head office', though it may be the registered office, need
not necessarily be so. It is usually the place where the substantial business
of the company is carried and its negotiations conducted.
3. Audit.-An establishment which is not branch office of a company will form part
of the head office for audit purposes. See letter No. 8/16(1)/61-PR,
dated 9-5-1961.
4. Application to Central Government.-For making the application
to the Central Government, necessary authorisation should be obtained from the
Board. There is no prescribed form of the said application to be made to the
Central Government and therefore, application should be made on a plain paper
giving full details and adequate justification for the order prayed for
declaring the branch office not to be treated as a branch office. Application
fee should be accompanied by way of treasury challan or demand draft as required
by Companies (Fees on Applications) Rules, 1999.
5. Limitation.-Central Government will not declare the branch
office as part of the head office if the company itself has already declared it
as a branch office.
6. Foreign branch is also a branch office.-Anything done by a company's
branch office outside India cannot be said to be done by foreign concern and
such a branch office is a part and parcel of the company's life and anything
done by it will be deemed to be done by the company itself. Union of India v.
G.A. Randarian Ltd., (1992) 75 Com Cases 486 (Cal).
Issue of Derivative
S.
2(12B)-Issue of Derivatives-Board Resolution
"RESOLVED that the
Board of Directors be and is hereby authorised to issue derivatives from time
to time to such persons or authorities as it deems fit subject to such
approvals from such authorities and as per such guidelines as may be required.
RESOLVED FURTHER that Mr _________ the director and Mr _________ the Secretary of the Company be and are jointly authorised to obtain the required approvals and permissions on behalf of the company and to do every deed and act in connection therewith and incidental or ancillary thereto.
PRACTICE NOTES
1. Definition of Derivative.-Definition of derivative given in section
2(12B) refers to the definition given in section 2(aa) of the Securities
Contracts (Regulation) Act, 1956. It gives an inclusive definition saying that
a security derived from a debt instrument, share loan whether secured or
unsecured, risk instrument or contract for differences or any form of security
and a contract which derives its value from the prices or index of prices .of
underlying securities will be included in the definition of derivative.
2. Inserted by the Companies (Amendment) Act, 2000.-Section 2(12B) was inserted
by the Companies (Amendment) Act, 2000, to allow companies to have alternative
form of securities to meet their financing needs other than simply by three
types of securities namely, pure debt instruments, ordinary shares and
preference shares and also to make financial market more flexible in terms of
choice of instruments.
3. Value of Derivative.-A derivative is a product whose value is derived
from the value of underlying asset, index a reference rate. The underlying
asset can be equity, forex commodity, or any other asset. The definition of
derivative given in the Securities Contracts (Regulation) Act, 1956 is in the
nature of a financial derivate.
Payment of Interim Dividend
S.
2(14A) -Payment of Interim Dividend-Board Resolution
“RESOLVED that an interim dividend at the rate of 10 per cent. accounting for Rs _________ be paid out of the distributable profits of the company for the interim period ending __________ on all the equity shareholders of the company whose names appear on the register of members of the company on __________”
RESOLVED FURTHER that the
register of members of the company and the share transfer books be closed for
__________ day from _________ to __________
PRACTICE NOTES
1. Dividend includes interim dividend.-Sub-section (14A) is
added to section 2 of the Act by the Companies (Amendment) Act, 2000, so that
all interim dividend may also be treated as dividend as per section 205, 205A,
205B, 206, 206A and 207. Requirements of these sections are to be complied with
now as regards payment of interim dividend also.
2. Restriction on disbursement of interim dividend.-Period of disbursement of
interim dividend to shareholders is now fixed at 30 days just like final
dividend. Earlier there was no period fixed for disbursement of interim
dividend but period of disbursement of final dividend was only fixed to 42
days. Companies (Amendment) Act, 2000 has reduced the period of disbursement of
final dividend from 42 days to 30 days and since by definition dividend
includes interim dividend, payment of interim dividend should also be made
within 30 days. Other provisions of the Act applicable to final dividend are
also applicable to the payment of interim dividend.
3. Companies (Compliance Certificate) Rules, 2001.-If the company's paid-up
share capital is less than Rs. 2 crores but is equal to or more than Rs. 10
lakhs, the company has to obtain a compliance certificate from a secretary in
whole-time practice to be filed with the Registrar of Companies
mentioning therein inter alia that the due compliance of the provisions of the
Act as per paragraph 13(ii), 13(iii) and 13(iv) of the Form of Compliance
Certificate appended to the said Rules.
Employees Stock Option
S.
2(15A)-Giving Stock Options to employees-Board Resolution
"RESOLVED that
Employees Stock Option be given to all the employees of the company earning a
gross salary of Rs ________ per month and above as on ___________ subject to
such terms and conditions as may be decided and imposed from time to time by
the Board and approved by the members of the company by passing a Special Resolution
under section 81(1A).
RESOLVED FURTHER that the
Secretary of the Company be and is hereby authorised to carry out the
modalities of giving of such options to employees.
PRACTICE NOTES
1. Definition.-As per the definition given in clause (15A) of
section 2, employees stock option means the option given to the whole-time
directors, officers or employees of a company, which gives such directors,
officers or employees the benefit or right to purchase or subscribe at a future
date, the securities offered by the company at a predetermined price.
2. Companies (Amendment) Act, 2000.-This was inserted by the
Companies (Amendment) Act, 2000 to secure greater employee participation giving
the right incentive signals and rewarding loyalty as well as years or service
through employees stock option.
3. SEBI Guidelines.-SEBI has issued SEBI (Employees Stock Option Scheme
and Employees Stock Purchase Scheme) Guidelines, 1999 and listed companies should
comply with the provisions of these Guidelines while giving stock options to
their employees.
4. Passing of Special Resolution.-After passing of the Board
Resolution a General Meeting is to be held to pass a Special Resolution thereat
approving the giving of such stock
options to employees.
Change of Financial year
S.
2(17)-Change of Financial year-Board Resolution
"RESOLVED that the financial year of the company be changed to the period from _________ 2002 _________ to _________ 2002 _________ both days inclusive, and that subsequent 'financial year' of the company be changed to a period of one calendar year beginning from _________ of one year and concluding on _________ of the subsequent year."
PRACTICE NOTES
1. Prior approval of Income-tax Officer required for change of
Financial year.-Changing of a financial year is subject to prior approval of the
concerned Income-tax Officer pursuant to sub-section (4) of section
3 of the Income-tax Act, 1961.
2. Importance of financial year.-'Financial year' in relation
to a body corporate is important as profit and loss account and the balance-sheet
are to be prepared in respect of a financial year (balance-sheet as on
the concluding date of such financial year) for the purpose of laying such
accounts before the Annual General Meeting of the company.
3. Financial year with reference to company's accounts.-Pursuant to sub-section
(4) of section 210, a financial year, with reference to which the accounts of
the company are prepared, may be less or more than a calendar year, but it is
not to exceed 15 months. The maximum period for which a company may prepare its
account in relation to a financial year may be extended to 18 months with
special permission having been granted in that behalf by the Registrar of Companies.
4. Definition.-Financial year means in relation to anybody
corporate, the period in respect of which any profit and loss account of the
body corporate laid before it in annual general meeting is made up, whether
that period is a year or not.
Issue of Hybrid
S.
2(19A)-Issuing of Hybrids-Board Resolution
"RESOLVED that the Board of Directors be and is hereby authorised to issue Hybrids from time to time to such persons or authorities as it deems fit subject to such approvals from such authorities as may be required.
RESOLVED FURTHER that Mr _________ the Secretary of the company be and is authorised to obtain the required approvals and permissions on behalf of the company and take any steps in connection therewith and incidental and ancillary thereto.
PRACTICE NOTES
1. Derinition.-Hybrid means any security which has the character of
more than one type of security, including their derivatives.
2. Companies (Amendment) Act, 2000 (w.e.f. 13-12-2000).-Clause (19A) of section 2
was inserted by the Companies (Amendment) Act, 2000 to introduce one of the
various forms of securities like debt-equity, hybrids, derivatives,
options and shares with differential rights to accompany corporate growth.
Hybrids is an omnibus term that allows for any combination of securities,
including their derivatives or options.
Information Memorandum
S. 2(19B) -Circulation of Information Memorandum for
issue of securities-Board Resolution
"RESOLVED that the
Information Memorandum containing particulars as per the draft placed before
the meeting and initialled by the Chairman for the purpose of identification be
approved to be circulated to the public for issue of securities of the company
prior to the filing of the prospectus with the Registrar of Companies to assess
the price and the terms of issue of securities.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby authorised to take every step that
may be necessary in connection therewith and incidental and ancillary
therewith.
PRACTICE NOTES
1. Definition.-Information memorandum means a process undertaken
prior to the filing of a prospectus by which a demand for the securities
proposed to be issued by a company is elicited and the price and the terms of
issue for such securities is assessed by means of a notice, circular,
advertisement or document.
2. Companies (Amendment) Act, 2000 (w.e.f. 13-12-2000).-Clause (19B) of section 2
was inserted by the Companies (Amendment) Act, 2000. This new expression is
relevant for the purposes of section 60A and 60B also inserted by the same
Amendment Act. In order to explore the demand for securities and also the price
at which securities may be offered to the public, a public company may before
issuing prospectus circulate information memorandum and red-herring prospectus
to the public. The information memorandum and the red-herring prospectus
must carry the same obligations as are applicable in the case of a prospectus
and any variation between the two must be highlighted as variations by the
issuing company.
Appointment of a Manager
S.
2(24)-Appointment of a Manager-Board Resolution
"RESOLVED that Mr. A,
who is working as a manager of the company be and is hereby appointed as a
manager within the meaning of section 2(24) of the Companies Act, 1956, on the
same terms and conditions as hitherto.
RESOLVED further that Mr. B,
secretary of the company be and is hereby directed to file the necessary
returns with the Registrar of Companies and, if necessary, make application to
the Central Government for approval of appointment of manager and payment of
remuneration to him for a period of five years from _________
PRACTICE NOTES
1. Shareholders' approval.-After the appointment by the Board of
Directors, the appointment of a Manager should be approved by the general meeting
by passing an ordinary resolution for the purpose of giving remuneration.
2. Central Government's approval.-The appointment of a Manager
also needs Central Government's approval in case the said appointment is not in
accordance with the conditions specified in parts (I), (II) and (III) of
Schedule XIII to the Act. The said application should be made in Form No. 25A
within 90 days from the appointment along with requisite application fees as
per Companies (Fees on Applications) Rules, 1999 by way of treasury challan or
demand draft.
3. Filing of Forms.-Form No. 32 in duplicate should be filed with the
concerned Registrar of Companies within 30 days of the appointment after paying
the prescribed fees as per Schedule X to the Act. File a return in Form No. 25C
within 90 days from the date of appointment with the concerned Registrar of
Companies with requisite fees only in cases where the Central Government's
approval is not required.
4. Manager in one Company only.-Unlike a managing director,
a manager can be appointed only in a single company because he is incharge of
whole of the affairs of the company.
This is despite enabling
provision in section 386(2). If he is to be appointed in more than one company,
a lot of explaining will be necessary. But if a person who is already a manager
or managing director of one and not more than one other company is appointed or
employed by a company, such appointment or employment is made or approved by a
resolution passed at a meeting of the Board with the consent of all the
directors present at the meeting and of which meeting and of the resolution to
be moved thereat, specific notice has been given to all the directors then in
India [Section 386(2) proviso].
5. Individuals to be appointed as Managers.-No firm or body corporate or
association can be appointed as a manager and only individuals can be appointed
as such as per section 384 of the Companies Act, 1956.
6. Government Company's exempted.-Provisions of section 386
and 388 of the Act relating to number of companies of which a person may be
appointed a manager and application of sections 269, 310, 311, 312 and 317 to
managers will not apply to government companies.
7. Companies (Compliance Certificate) Rules, 2001.-If the company's paid-up
share capital is less than Rs. 2 crores but is equal to or more than Rs. 10
lakhs, the company has to obtain a compliance certificate from a secretary in
whole-time practice to be filed with the Registrar of Companies
mentioning therein inter alia that the appointment of manager has been made in
compliance with the provisions of section 269 read with Schedule XIII to the
Act and approval of the Central Government has been obtained in respect of his
appointment not being in terms of Schedule XIII as per paragraph 15 of the Form
of Compliance Certificate appended to the said Rules.
Appointment of a Manager
"RESOLVED that Mr. B
who is already a Managing Director of XYZ Private Ltd., be and is hereby
appointed as a manager within the meaning of section 2(24) of the Companies
Act, 1956 read with section 386(2) of it on the terms and conditions as per the
agreement tabled at the meeting and initialled by the Chairman for the purpose
of identification.
RESOLVED FURTHER that, Mr.
C, the secretary of the company be and is hereby authorised to file the
necessary returns with the Registrar of Companies and if necessary make
application to the Central Government for approval of appointment of manager
and payment of remuneration to him for a period of five years from _________ to
_________
PRACTICE NOTES
Same as given under Resolution 65.
Holding general meeting on a public holiday
S. 2(38) proviso-Holding general meeting on public
holiday-Board Resolution
"RESOLVED that the ensuing Annual General Meeting convened to be held on _________ for which notice has already been issued prior to the declaration of that day as a public holiday be held as scheduled, in terms of the proviso to section 2(38) of the Companies Act, 1956."
PRACTICE NOTES
1. Meaning of public holiday.-According to section 2(38) of the Act, public
holiday means public holiday within the meaning of the Negotiable Instruments
Act, 1881. But a day declared by the Central Government to be a public holiday
after the issue of the notice convening the Annual General Meeting will not be
applicable as per proviso to section 2(38) of the Act.
2. Exemption given by the Central Government.-Central Government may exempt
any class of companies from the operation of the provisions prohibiting holding
of annual general meeting on a public holiday, as per proviso to section 166(2)
of the Act.
3. Other general meetings.-The prohibition against holding meeting on a
public holiday applies only to annual general meeting and not to any other
general meeting or class meeting.
Appointment of secretary in whole-time practice
S. 2(45A)-Appointment of secretary in whole-time
practice-Board Resolution
"RESOLVED that Mr ___________________________ who is a secretary in whole time practice within the meaning of sub-section (2) of section 2 of the Company Secretaries Act, 1980, and who is not in full time employment be and is hereby appointed to perform such functions as may be performed by a secretary in whole-time practice under the Companies Act, 1956, and under any other law for the time being in force until otherwise determined by the Board."
PRACTICE NOTES
1. Prohibition.-Under section 6 of the Company Secretaries Act,
1980, no member of the Institute of Company Secretaries shall be entitled to
practice unless he has obtained a certificate of practice from the Council of
the Institute under Company Secretaries Regulations, 1982.
2. Performing secretarial duties and functions.-In case the secretary in
whole-time practice is appointed as aforesaid to perform the duties and
functions of regular secretary of a company where the company's paid-up
share capital is less than Rs. 2 crores, Form No. 32 in duplicate in his favour
is to be filed with the concerned Registrar of Companies within 30 days of his
appointment as such.
3. Appointment compulsory in certain case.-Proviso to sub-section
(1) of section 383-A as inserted by the Companies (Second Amendment) Act,
1999, provides that a company having a paid-up share capital of less than
Rs. 2 crores but Rs. 10 lakhs and more must have a certificate obtained from a
secretary in whole-time practice to be filed with the Registrar of
Companies stating therein whether the company has complied with all provisions
of the Companies Act, 1956 or not. The said Certificate will be in such form
and should be filed within such time and also will be subject to such
conditions as prescribed by the Companies (Compliance) Certificate Rules, 2001.
4. No other business or profession.-Under Regulation 168 of the
Company Securities Regulations, 1982, a company secretary in practice is
prohibited from engaging himself in any other business or occupation.
5. Practising in firm name except with the approval of the Council of
the Institute.-A company secretary in practise cannot practise in a firm name unless
the Council of the Institute of Company Secretaries of India approves it on
application made to them.
Shares with differential rights
S.
2(46A)-Issue of shares with differential rights-Board Resolution
"RESOLVED that pursuant to section 86(a)(ii) of the Companies Act, 1956 and subject to the approval of the members in a general meeting _________ equity shares with differential voting rights as to dividend, voting or otherwise of Rs _________ each be and are hereby issued to _________ at par.
RESOLVED FURTHER that the
secretary of the company be and is hereby authorised to take every steps that
may be needed in connection therewith or incidental or ancillary thereto.
PRACTICE NOTES
1. Definition.-S hare with differential rights means a share that
is issued with differential rights in accordance with the provisions of section
86. This definition if read with section 86 would be shares issued with
differential rights as to dividend voting or otherwise and essentially refers
to equity shares that carry differential voting or dividend rights. The capital
raised by issue of such shares is equity share capital. Share with differential
rights, though termed as equity is a hybrid instrument which can carry the
features of participating preference shares in respect of dividend and right to
vote on other matters than their own interest.
2. Companies (Amendment) Act 2000 (w.e.f. 13-12-2000).-Clause (46A) of section 2
was inserted by the Companies (Amendment) Act, 2000 pursuant to the
recommendations of the Working Group to facilitate companies to mobilise funds
through new financial instruments. This clause should be read with the
provisions of section 86 which has the effect of enlarging the share categories
mentioned therein. As a result of this enlargement section 88 which prohibited
issue of shares with disproportionate voting rights had to be deleted by said
Amendment Act.
3. Companies (Issue of Share Capital with Differential Voting Rights)
Rules 2001.-These Rules have been prescribed under section 86(a)(ii) so that shares
with differential rights as to dividend, voting or otherwise may be issued in
accordance with these rules and subject to such conditions as thereby
prescribed. Rule 3 of the said rules give nine conditions subject to which such
shares can be issued. Rule 4 of the said rules provides for maintaining a
register as required under section 150 containing the particulars of
differential rights to which the holder is entitled to.
Revision in scales of pay with Employees
Miscellaneous-Revision of scales of pay pursuant to
agreement with employees-Board Resolution
"RESOLVED that approval be and is hereby accorded to the revision in the scales of pay of Class I Employees in terms of the agreement entered into between the company and the employees union, a copy of which is placed before the meeting, duly initialled by the Chairman."
PRACTICE NOTES
1. Internal Regulation.-Review and revision of scales of pay of employees is
absolutely an internal business of the company and can be delegates to any
Committee of the 3oard if the company is having huge number of employees.
2. Recommendation of expert.-Revision of pay scales of employees can be
also made after obtaining recommendation from an expert or a consultant or an
advisor.
Execution of agreement between Company and Employees
Miscellaneous-Agreement
with the employees' union-Board Resolution
"RESOLVED that approval be and i5 hereby accorded to the company for execution of the agreement between the company and the employees' union for a period of five years from the date of execution thereof, as per the draft of the agreement placed before the meeting and initialled by the Chairman for purposes of identification, codifying the conducts of employer-employee relationship the procedure for promotion, office hours and discipline and procedure and other related matters.
RESOLVED FURTHER that Shri _______________________ Secretary and Shri ________________________ Chief Personnel Manager of the company be and are hereby jointly authorised to sign the agreement with the employees' union with authority to vary, modify, correct or rectify the portions necessary in such agreement at their absolute discretion."
PRACTICE NOTES
1. Validity of Contracts.-An agreement signed on behalf of the company binds
the company but before it is so signed provisions of section 46 of the Act
relating to form of contracts should be adhered to.
Formation of a subsidiary
S. 4(2)-Formation of a subsidiary by amending the
articles-Board Resolution
"WHEREAS the Articles
of Association of the Company have been amended to provide for the appointment
of the majority of directors of this company by Rushabh Management &
Infosys
AND WHEREAS the said Rushabh
Management & Infosys is also entitled, by virtue of the amended Articles of
Association, to remove the majority of directors;
AND WHEREAS, out of the five
directors of the company, three directors must be appointed by the said Rushabh
Management & Infosys;
NOW THEREFORE IT IS RESOLVED
that the Annual Accounts and other reports of the company be presented along
with the Annual Accounts and other reports of the said Rushabh Management &
Infosys, pursuant to provisions of section 212(l) of the Companies Act,
1956."
PRACTICE NOTES
1. Inter corporate investments.-Although section 372A
exempts loans and investments by holding company in its subsidiary, this
exemption will be available where the subsidiary is a wholly owned subsidiary
and not otherwise, by virtue of the new provisions introduced in clause (c) of
sub-section (8) of section 372A, by the Companies (Amendment) Act, 1999
with effect from 31-10-1998.
2. Prohibition.-Section 42 of the Act prohibits investments by a
subsidiary in its holding company. A subsidiary's holding company's holding
company is also its holding company.
Formation of a new company as a subsidiary company
S.
4(2)-Formation of a new company as a subsidiary-Board Resolution
"RESOLVED that pursuant
to the Memorandum of Association of the company and section 4(l)(a) of the
Companies Act, 1956 approval of the Board be and is hereby recorded to the
formation of a new company under the name of _________ or _________ or
_________ as may be approved by the Registrar of Companies.
RESOLVED FURTHER that the
Memorandum of Association of the company and the Articles of Association of the
new company vesting in the company the power to control the composition of the
Board of Directors of the new company in the company, draft where-of
placed on the Table be and is hereby approved."
PRACTICE NOTES
1. Composition of Board of Directors.-Section 4 of the Act
provides that a company shall become the subsidiary of the other company where
the latter controls the composition of the Board of Directors of the former
company.
2. Exemption not available.-An investment that has the effect of making
other company the subsidiary of the former company shall not be exempted from
the provisions of section 372A of the Act.
3. Applicability of section 372A.-Section 372A is applicable
only in case the investment is made out of the funds of the company. [Navjivan
Mills Co. Ltd. Kelol in re: 1972(42) Com Cas 265 Guj].
4. Subsidiary not agent of holding company.-A company whose shares are
controlled by another company is not by mere existence of that control properly
to be described as agent. English Sewing Cotton Co. Ltd. v. I.R.C., (1947) 1
All ER 679 (CA).
5. Director of Holding Company against its subsidiary.-A director of a holding
company does not automatically become a director or a shareholder of its
subsidiary, nor can claim control of the management of the subsidiary nor has
any fiduciary duty in regard to it. BDA Breweries & Distilleries Ltd. v.
Cruickshank & Co. Ltd., (1997) 25 CLA 275 (Bom).
Incorporation of Subsidiary
S. 4-Resolution
for incorporation of a subsidiary-Board Resolution
"RESOLVED that Shri AB
and BC, directors of the Company, be and are hereby jointly and severally
authorised to incorporate a company as a subsidiary of the Company under the
provisions of the Companies Act, 1956 with (1) the name and style of XYZ Ltd.
or PQR Ltd. or LMU Ltd. or SPK Ltd. whichever is available; (2) an authorised
capital of Rs. 90,00,000/- divided into 9,00,000 equity shares of Rs. 10/-
each; and (3) having the following objects as its main objects viz. 1
__________________ 2 __________________ (4) The Articles of Association of the
subsidiary to be incorporated shall be in pari materia with those of the
company.
RESOLVED FURTUER that Shri
AB and BC be and are hereby authorised to do all acts and deeds necessary in
connection with and incidental and ancillary to the incorporation of the
subsidiary as aforesaid."
PRACTICE NOTES
1. Resolution under section 372A.-Subscription to the memorandum
of association of the subsidiary may attract section 372A and if so, the
necessary resolution under section 372A will have to be passed separately, by
the investing company.
2. Holding of shares-The existing company should hold at least more than
half in nominal value of the equity share capital of the new company as per
section 4(l)(b)(ii). More than half in nominal value of the equity share
capital means more than half of the total paid up value or amount on the entire
equity share capital issued and allotted by the new company.
Officer who is in default
S.
5(f)-Officer in default-Board Resolution
“RESOLVED that Shri. AB,
General Manager (Finance) be and is hereby charged with by the Board with the
responsibility of complying with the following provisions of the Companies Act,
1956 viz. _________ as mentioned in the consent given by him in Form 1AB placed
before this meeting and initialled by the Chairman for the purposes of
identification.
RESOLVED further that the Secretary Shri ________________________ be and is hereby directed to file Form lAA with the Registrar of Companies _________”
PRACTICE NOTES
1. Default by consent-Section 5(f) of the Companies Act, 1956 provides
that 'any person' may become an Officer in default if his consent is obtained
in Form No. 1AB of the Companies Central Government's General Rules and Forms,
1956 and the Board charges him with the responsibility of complying with
particular provisions of the Companies Act, 1956.
2. Filing return.-A return in Form No. 1AA should be filed with the
Registrar of Companies within 30 days under section 5(g) proviso.
3. Criminal liability of ordinary directors.-A reading of the relevant
provisions including the definitive of "officer who is in default as given
in section 5 of the Companies Act, 1956, would make it amply clear that the
criminal liability of ordinary directors would arise only in respect of a
company which has no managing director or a whole-time director or a manager
and where particular directors are not specified to be liable by the company.
Smt. G. Vijaylakshmi & Others v. Securities and Exchange Board of India
& Another, (2000) 100 Com Cases 726 (A.P.).
4. Averment necessary.-A director cannot be made liable without averment in
the plaint that he was responsible for the affairs of the company or that the
offence was committed with his consent or connivance. The consent or connivance
of the director must be clearly pleaded and cannot be inferred. Sunil Kumar
Chhaparia v. Dakka Eshwararaid, (2002) 108 Com Cases 687 (AP).
Officer who is in default-Charging with responsibility
(Another format)
"RESOLVED that Shri.
SPM, the Cost Accounts Officer, of the Company, be and is hereby charged with
the responsibility of complying with the provisions of the Companies Act, 1956
as per details set out in Form No. 1AB the consent letter, a copy of which was
placed before the meeting and initialled by the Chairman thereof for the
purposes of identification."
PRACTICE NOTES
1. Person charged.-Any person can be charged by the Board with the
responsibility of complying with any provisions of the Act. The person so
charged shall be deemed to be officer in default.
2. Different persons charged.-The Board may fix responsibility of different
persons for compliance with different provisions of the Act, while fixing such
responsibility, the Board has to apply its mind to ensure that a competent and
reliable person was charged with the duty and was in a position to discharge
that duty.
3. Prior consent required.-Prior consent of person so charged with the
responsibility of complying with the provisions of the Act has to be obtained
by the Board in Form 1AB.
4. Need not be officer.-The words used in the section are "any
person". Thus a person need not be an officer of the Company.
5. Filing return.-Rule 4BB of the Companies (Central Government's)
General Rules and Forms, 1956 provides that the Company shall within thirty
days of exercising its powers pursuant to the provisions of clause (f) file
with the Registrar of Companies concerned in a return Form No. 1AA duly signed
by Secretary or where there is no Secretary, by a director. Every return
relating to exercise of power under clause (f) shall be accompanied by the
consent given to the Board of Directors by the person concerned in Form 1AB.
6. Accountant Prosecuted.-Where the requirements of section 138 and 141 of the
Negotiable Instruments Act, 1881 are satisfied the accountants of the company
can be prosecuted. Dev. v. State o A.P., (2002) 108 Com Cases 607 (AP).
Officer who is in default-Charging with responsibility
(Another format)
S.
5(f)-Charging any person with responsibility-Board Resolution
"RESOLVED that pursuant
to the provisions contained in clause (f) of section 5 of the Companies Act,
1956, Shri. SPM, Cost Accounts Officer, who has given his consent in Form IAB,
a copy of which was placed before the meeting and initialled by the Chairman
thereof for the purposes of identification, be and is hereby charged with the
responsibility of complying with the undernoted provisions of the Companies
Act, 1956 "Section _________ of the Companies Act, 1956."
PRACTICE NOTES
1. Different persons charged.-Responsibility of different persons for
compliance with different provisions of the Companies Act, 1956 can be fixed by
the Board.
2. Mens rea not essential.-It is not necessary to prove that the default
has been committed by the officer knowingly or wilfully. Thus mens rea is not
an essential ingredient for establishing the offence in question. In Sukhbir
Saran Bhatnagar v. Registrar of Companies, (1972) 42 Comp Cases 408, it was
held that where there is failure to comply with a statutory provisions and the
mere failure is made punishable, it is clear that mens rea is ruled out.
3. Prior consent required.-The Company has to obtain prior consent from
the person so charged with the responsibility of complying with the provisions
of the Act.
4. Filing return.-The Company shall within thirty days of exercising
its powers pursuant to provisions of clause (f), file with the Registrar of
Companies a return in Form IAA accompanied by the consent given to the Board of
Directors by the person concerned in Form IAB'.
5. Accused not specified as officers in default.-If a complaint is silent
about the fact whether the accused are "officers in default" or not
they cannot be held answerable for the alleged offences committed by the
Company under the Act merely because they are directors of the company.
Rameshchandra Manial Kotla v. State of Gujarat, (1998) 30 CLA 313 (Guj).
Officer who is in default-Withdrawal of consent
S. 5(f)-Officer who is in default- Withdrawal of
Consent-Board Resolution
"RESOLVED that the
withdrawal of consent by Shri. SPM, the Cost Accounts Officer of the Company,
who had been charged with the responsibility of complying with the provisions
of the Companies Act, 1956 as mentioned in his consent letter, dated 5th
December 1996, be and is hereby noted.
RESOLVED FURTHER that
Secretary of the Company be and is hereby directed to file Form No. 1AC with
the Registrar of Companies, Kanpur."
PRACTICE NOTES
1. Revocation of consent.-Where, the consent given pursuant to the proviso to
clause (f) of section 5 of the Act has been revoked or withdrawn, the Company
shall within thirty days of such revocation or withdrawal file with the
Registrar of Companies a return in Form No. IAC.
Officer who is in default-Withdrawal of consent by officer
(Another format)
S.
5(g) and (f)-Withdrawal of consent-Board Resolution
"RESOLVED that the letter received from Shri._________________________ (Officer) Director wholly (or partially) withdrawing his consent earlier given under section 5(g)/(f), (such partial withdrawal relates to section) placed before the meeting and initialled by the Chairman for the purposes of identification be and is hereby taken on record.
RESOLVED FURTHER that the Secretary, Shri ______________________ be and is hereby directed to file Form IAC in this regard with the Registrar of Companies."
PRACTICE NOTES
1. Time for riling of Form IAC.-Form IAC should be filed
within thirty days from the day of revocation or withdrawal of the consent with
the concerned Registrar of Companies with requisite filing fee as prescribed
under Schedule X.
2. Interpretation of officer who is in default.-If no person is charged by
the Board to be officer in default with the consent of that person in the
prescribed Form No. 1AB, then managing directors, whole-time directors
and manager apart from the secretary, if any and if the company does not have
such managerial personnel, prosecution will be filed against all ordinary
directors apart from the secretary [Circular No. 6/94, dated 24-6-1994].
3. Automatically cannot made liable.-From the mere fact that a
person was a director at the time when the offence was committed by the
company, he cannot be automatically roped in. It has to be shown that he played
some part in the commission of the offence. K. Janaki Manollaran v. Gayatri Sugar
Complex Ltd., (2000) 108 Com Cases 899 (AP).
Specifying one or more members as “Officer in default”
S. 5(g)-Specifying one or more members as Officer in
default-Board Resolution
"RESOLVED that Shri. AB
and CD be specified as Officers in default as required under section 5(g) of
the Companies Act as mentioned in the letter of consent received from the above
directions placed before this meeting and initialled by the Chairman for
purposes of identification.
RESOLVED FURTHER that Shri
X, Secretary be and is hereby authorised to file the necessary Form No. lAA
with the Registrar of Companies."
PRACTICE NOTES
1. Officer in default.-Where the company does not have a managing director(s), whole-time director(s) or manager the Board can specify one or more of its members as officers in default.
2. Letter of consent.-It is advisable to obtain a letter of consent from
the Directors concerned although it is not obligatory.
3. Filing return.-A return of Form No. 1AA must be filed in 30 days,
with the Registrar of Companies concerned.
Officer in default specified
(Another format)
S.
5(g)-Officer in default specified-Board Resolution
"RESOLVED that in
pursuance to the provisions contained in clause (g) of section 5 of the
Companies Act, 1956, Shri. UKR and SPM, the Directors of the Company be and are
hereby specified as officers who are in default for the purposes of complying
with the provisions of the Companies Act, 1956."
PRACTICE NOTES
1. Public and Private.-The provisions of this Section apply to both public
and private Companies.
2. Officer in default.-As per section 269, a public company or a Private
Company which is a subsidiary of a public company having paid-up capital
of Rs. Five crores is required to appoint a Managing Director, whole-time
director or manager and the officers so appointed will be officers in default.
Under section 383-A, a company having a paid-up capital of Rs. 2 crores
or more is required to appoint a whole-time Secretary and he will be an
officer in default.
3. Director in default, when.-A Board managed Company will be required to
pass necessary resolution under clause (g) so as to name the director or
directors who will be Officer(s) in default for purposes of section 5.
4. Board can specify.-In the absence of any Managing Director, whole-time
director or manager, the Board can specify any director or directors as officer
who is in default for purposes of this section. In case no action is taken by
the Board under this clause, all the directors of the Company have to be
treated as officers in default. It may be noted that no time has been
prescribed for specifying the name of directors by the Board which has the
option to identify any director, failing which all the directors will be deemed
to be officers in default.
5. Prior consent not necessary.-It is not necessary to
obtain prior consent of the directors so charged.
6. Filing return.-The company may charge different directors for
different provisions of the Act. A return in Form No. IAA is to be filed by the
Company with the Registrar of Companies concerned within thirty days of
exercising its powers.
7. Default in filing annual returns, balance-sheet etc.-A reading of section 220(3)
which deals with 'officer who is in default', shows that even after retirement
from the company, a director can come under the definition of an 'officer in
default' Anita Chadha v. ROC, (1998) 31 CLA 60 (Delhi).
8. Director's resignation.-Where the complaint contained the averment
that the person in questions were directors on the date of the cheque and were
also in charge of the day-to-day affairs of the company, merely on
the fact that they had resigned before the notice of complaint was issued by
the payee of the cheque, the court refused to quash the prosecution. Ashvin C
Muthiah v. Multipack, (2002) 108 Corn Cases 563 (Mad).
Establishment declared by Central Government not to be a Branch Office
S. 8-Establishment declared by Central Government not
to be a Branch Office-Board Resolution
WHEREAS the company had made
an application" to the Central Government under section 8 of the Companies
Act, 1956 for obtaining an order to declare the company's establishment at place which is carrying on the same
activity as that carried on by the head office of the company is not to be
treated as a branch office of the company;
AND WHEREAS the company has
received an order dated _________ from the Central Government approving the
company's application and declaring the establishment of the company situated
at _________ place is not to be treated as branch office of the company under
section 8 of the said Act;
NOW THEREFORE IT IS RESOLVED that the establishment of the company situated at _________ place will not be treated as a branch office of the company for all or any of the purposes of the said Act.
PRACTICE NOTE
1. Application to the Central Government-Under section 8 of the
Companies Act 1956, any establishment of a company which either carries the
same or substantially the same activity as that carried on by the head office
of the company or any establishment of the company situated at any place
outside the head office and engaged in any production, processing or
manufacture will be treated as a branch office of the company unless and until
the Central Government by order declare that establishment not to be treated as
a branch office.
There is no prescribed form
of application to be made to the Central Government and therefore, the said
application should be made on the letter head of the company along with a
demand draft of the amount of application fee on the basis of the authorised
share capital of the company as per Companies (Fees on Application) Rules,
1999. The said application should be accompanied by documents and papers
showing that the said establishment cannot be called a branch office of the
company in the true sense of the term.
2. Necessity of treating an establishment as a branch office.-The requirement of treating
any establishment of a company as its branch office means maintaining proper
records and accounts of that establishment required under different sections of
the Companies Act, 1956, specially section 228 and the Companies (Branch Audit
Exemption) Rules, 1961 prescribed under sub-section (4) of that section.
Appeal against order of Company Law Board to issue right shares to the
transferee
S. 10F-Appeal against order of Company Law Board-Board
Resolution
"WHEREAS the company filed a petition under section 111(4)(a)(i) of the Companies Act, 1956, the company having entered in the register of the members, the name of the transferee when the instruments of transfers were unstamped;
AND WHEREAS, on application
by the transferee, the Company Law Board had ordered the company to issue right
shares against the shares which were lodged unstamped;
AND WHEREAS, the company is
aggrieved by the said order dated 15-12-2001 of the Company Law
Board;
NOW THEREFORE IT IS RESOLVED
that an appeal be filed before the Madras High Court against the said order of
the Company Law Board, under section 1017 of the Companies Act, 1956."
PRACTICE NOTES
1. Jurisdiction.-Jurisdiction is with that High Court under which
registered office of the company falls.
2. When appeal lies.-Appeal lies on a point of law and also on a mixed
question of fact and law, and should be filed within 60 days from the date of
communication of the decision or order of Company Law Board.
3. Power of High Court under section 10f.-Under section 10F, a court
cannot ordinarily go into a pure question of fact as found by CLB except where
the finding is erroneous or perverse. The power of the High Court under 10F is
similar to its power under section 100 of the Code of Civil Procedure. As held
by the Supreme Court in Mattulal v. Radhe Lal, AIR 1974 SC 1596, the Court's
jurisdiction would undoubtedly be barred in dealing with question of fact,
unless it could be shown that there was an error of law in arriving at it or
that it was based on no evidence at all or was arbitrary, unreasonable or
perverse. Rajendra Kumar Malhotra v. Harbans Malhotra & Sons Ltd., (1999)
34 CLA 360 (Cal.)
4. What constitutes question of law.-Where the High Court found
that the Company Law Board passed the order in a manner unknown to law and in
an arbitrary manner apart from the fact that the findings recorded by it on the
merits of the case were not only perverse but unknown to adjudicatory process
of land and there being an error apparent on the face of the order of the
Company Law Board, a question of law definitely had arisen from out of the
order of the Company Law Board to be decided by the court under section 10F.
Shri Ramdas Motor Transport Ltd. v. Karedla Suryanarayana, (2002) 110 Com Cases
193 (AP).
5. Application of the provisions of CPC 1908 and Court Rules.-The Companies (Court) Rules,
1959 apply to all proceedings in the High Court as defined in the said Rules.
Therefore, the said Rules would apply to all appeals under section 10F. Rule 6
of the said Rules makes the procedural provisions of the Code of Civil
Procedure, 1908, applicable to appeals filed under section 10F. So it is clear
that only procedural and not the substantive provisions of the Code of Civil
Procedure alone would apply and the Rules of the Original Side of the High
Court will have no application to an appeal under section 10F. Manohar Rajaram
Chhabria v. Union of India, (2002) 110 Com Cases 162 (Cal).
6. Appeal in the Form of a Memorandum.-Order 41, rule 1 of the Code
of Civil Procedure is a procedural provision and would, therefore, apply to all
appeals under section 10F, under the said Rule, every appeal has to be preferred
in the form of a memorandum signed by the appellant or his pleader and has to
be accompanied by a copy of the decree appealed from and of the judgement on
which it is founded.
Appeal against order of Company Law Board to rectify register of
members
S. 10E-Appeal against order of Company Law Board-Board
Resolution
"WHEREAS the company is
aggrieved by the order of the Company Law Board, dated 15th May, 2002, passed
under sub-section (5) of section 111 of the Companies Act, 1956,
directing rectification of the register of the members of the company;
AND WHEREAS consultation
with lawyers about the appeal to be filed had taken some time by reason of the
sudden death of Mr ________________, senior advocate who was proposed to be
engaged for filing the appeal before the High Court;
AND WHEREAS, engagement of
new counsel and consultation with him may take the period of permissible time
for appeal beyond sixty days;
NOW THEREFORE IT IS RESOLVED
that an application be made to the High Court, while filing the appeal for
condonation of delay in filing the said appeal within the further period of
sixty days;
RESOLVED FURTHER that this
appeal be filed before the Madras High Court, the registered office of the
company being situated in the State of Tamil Nadu."
PRACTICE NOTES
1. Appeal within the further period of 60 days.-Proviso to section 10F lays-down
that the High Court may, if it is satisfied that the appellant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be
filed within a further period not exceeding sixty days.
2. Appeal on question of law.-When the finding of the CLB is based upon no
evidence or upon surmises, conjectures and assumptions, it tantamounts to a
finding on as evidence and consequently, it becomes a question of law
appealable under section 10F. Scientific Instruments Co. Ltd. v. Rajendra
Prasad Gupta, (1999) 34 CLA 36 (All). A company appealed against the directions
of the Company Law Board for refund of deposits contending that the directions
were workable. This was held to be not a question of Law and therefore, the
appeal was not maintainable. United Western Batik Ltd. v. CLB, (2001) 107 Com
Cases 63 (Kant).
3. Appeal before Single Judge.-Appeals from orders of the Company Law Board
should be heard by the Company Judge of the concerned High Court sitting singly
and not by a Division Bench. Tin Plates Dealers Association (P.) Ltd. v. Satish
Chandra Samwalka, (2002) 108 Com Cases 295 (Cal).
Association registered under the Companies Act, 1956
"WHEREAS an association
by the name and style, Tobacco Association of India had been formed to promote,
protect and safeguard the trade, commerce, interests and future of the Tobacco
Industry in India particularly those of the cigarette manufacturers in India
with twenty tobacco growers;
AND WHEREAS two hundred more tobacco growers have expressed their intention to join the association as members;
AND WHEREAS no association
consisting of more than twenty persons can be formed for any business for
acquisition of gain, unless it is registered as a company under the Companies
Act, 1956;
NOW THEREFORE IT IS RESOLVED
that the association be formed as a company under the Companies Act, 1956 with
the Company as one of the subscribers to the memorandum of association.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby authorised to take every step and
action that may be necessary in connection therewith and incidental and
ancillary therewith."
PRACTICE NOTES
1. Licence Company.-Such an Association when registered as a Company is
usually formed as a guarantee company under section 25 of the Act after
obtaining Licence from the concerned Regional Director.
2. Application to Regional Director.-For obtaining Licence, an
application on plain paper should be made to the concerned Regional Director
and steps should be taken as given in Companies Regulations, 1956.
3. Availability of name.-Before applying to the Regional Director for a
Licence, an application should be made to the concerned Registrar of Companies
for availability of the name of the proposed guarantee company in Form No. lA.
4. Penalty for default.-Every person who is a member of a company,
association or partnership formed in contravention of section 11 will be
punishable with fine of Rs. 10,000/-
[Section 11(5)].
Association registered under the Companies Act, 1956
S. 11(l)-Association with more than ten persons to be
registered-Board Resolution
RESOLVED that a company be
and is hereby registered under the Companies Act, 1956 to carry on the business
of banking with more than ten persons with the company being one of the
subscribers.
RESOLVED FURTHER that an
application be made to the Registrar of Companies, N.C.T. of Delhi and Haryana
for availability of name of such proposed company.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby authorised to do the needful in
connection with the formation and registration of the proposed company.
PRACTICE NOTES
1. Prohibition of forming a company association or partnership.-Section 11 (1) provides that
no company, association or partnership consisting of more than 10 persons shall
be formed for the purpose of carrying on the business of banking unless it is
registered as a company or is formed in pursuance of some Indian law.
2. Licence Company.-Such an Association when registered as a Company is
usually formed as a guarantee company under section 25 of the Act after
obtaining Licence from the concerned Regional Director.
3. Application to Regional Director.-For obtaining Licence, an
application on plain paper should be made to the concerned Regional Director
and steps should be taken as given in Companies Regulations, 1956.
4. Availability of name.-Before applying to the Regional Director for a
Licence, an application should be made to the concerned Registrar of Companies
for availability of the name of the proposed guarantee company in Form No. lA.
5. Penalty for default.-Every person who is a member of a company,
association or partnership formed in contravention of section 11 will be
punishable with fine of Rs. 10,000/-
[Section 11(5)].
Formation agreement for incorporating a company
S. 12-Formation agreement" for incorporating a
company-Board Resolution
"WHEREAS Mr. X of Dhantoli, Nagpur-440012, being one of the promoters and Mr. Y of 22, Panch Sheel Enclave, New Delhi- 110020 have agreed to form a private limited company for the purpose of carrying on the business of exporting readymade garment;
NOW THEREFORE it is hereby agreed that Mr. X will forthwith take steps to incorporate a private limited company with its registered office at Dhantoli, Nagpur-440012 with the name "Oriental Garment Exports Private Ltd." or some such name made available by the Registrar of Companies, Maharashtra, at Mumbai;
AGREED FURTHER that parties
hereinbefore mentioned shall make provisions in the Memorandum of Association
for reimbursement of expenses for procuring the incorporation of the company
including the cost and expenses for preparation of this agreement."
PRACTICE NOTES
1. Application for name.-An application should be made for the proposed name
to the Registrar of Companies, Bombay in prescribed Form No. 1A.
2. Incorporation.-After name is made available by the Registrar of
Companies, steps should be taken to incorporate the company.
3. Partnership converted into private company.-When a partnership is
converted into a private limited company it does not any longer retain the
character of a partnership. Official Liquidator v. Rain Swarup, (1997) 26 CLA
90 (All).
Existing company incorporating a new company
S. 13-Existing company incorporating a new company-Board
Resolution
"RESOLVED that a new company with the name and style Rushabh Management & Infosys, or some similar name as may be made available by the Registrar of Companies, West Bengal at Kolkata be incorporated with the following officers of the company as subscribers to the memorandum of association:
1. Mr. A. Accounts Manager
2. Mr. B. Finance Manager
3. Mr. C. Personnel Manager
4. Mr. D. Company Secretary
5. Mr. E. Administrative
Manager
6. Mr. F. Legal Manager
7. Mr. G. Marketing Manager
RESOLVED FURTHER that M/s.
Mukheriee & Chakraborti, Solicitors be and are hereby appointed to draft
the Memorandum of Association in consultation with the Secretary and Legal
Manager of the company, keeping in mind that the main object of the company
will be to process and export marine food products, that the registered office
of the company will be situated in Calcutta, that the new company will be
limited by shares, that the authorised share capital of the company shall be
Rs. 5 crores divided into 50,00,000/- equity shares of Rs. 10/- each and
that the subscribers to the memorandum shall take minimum 1500 shares
each."
PRACTICE NOTES
1. Application for name.-An application should be made for the proposed name
to the concerned Registrar of Companies, in prescribed Form No. 1A.
2. Incorporation.-After name is made available by the Registrar of
Companies, steps should be taken to incorporate the company.
3. Minimum paid-up share capital.-Under section 3(l)(iii) the
minimum paid up share capital of a private company should be Rs. 1 lakh.
4. Objects clause of memorandum of Association.-The object clause of the
Memorandum of Association of a company permitting the company inter alia to
enter into partnership for any purpose which may seem calculated directly or
indirectly to benefit the company does enable the company to form a
partnership. S. Sivashanmugham v. Butterfly Marketing Private Ltd., (2001) 105
Com Cases 763.
Authorisation to Company Secretary to appear before CLB
"RESOLVED that Shri
SPM, Company Secretary be and is hereby authorised to appear before the Hon'ble
Company Law Board and/or any of its Benches to pursue the proceedings relating
to petition filed by the company under section 17 of the Companies Act, 1956
for transfer of the Registered Office of the company from the State of Uttar
Pradesh to the National Capital Territory of Delhi.
RESOLVED FURTHER that Shri.
SPM, Company Secretary is also authorised to file petition, make corrections,
additions, modifications, alterations etc. in various documents/papers filed
with Company Law Board and to authenticate under his signatures all such
corrections, additions, modifications, alterations etc., on behalf of the
company and also to do all such acts, deeds or things as may be considered
necessary or expedient or incidental thereto. He is also authorised to file,
inspect and to take copies of the documents on behalf of the company."
PRACTICE NOTES
1. Memorandum of Appearance.-A certified true copy of the aforesaid
resolution is required to be filed with the concerned Bench Office along with
Memorandum of Appearance prepared in Form No. 5 given in Annexure II of the
Company Law Board Regulations, 1991 with petition under section 17 and other
relevant documents and papers as provided by Regulation 36 of the said
Regulations.
2. Authorised Representative.-As per Regulation 18(3) of the Company Law
Board Regulations, 1991, read with Regulation 19(l) a company should have an
authorised representative as it cannot appear in person and an authorised
representative other than an advocate should file a memorandum of appearance
along with the petition. Advocates should file duly executed Vakalatnama.
Resolution of Board authorising Secretary and Managing Director to sign
and present petition to Company Law Board
S. 17-Authorisation regarding Company Law Board
proceeding-Board Resolution
"RESOLVED that Shri ___________, Secretary of the company and Shri __________ Managing Director be and are hereby jointly and severally authorised to verify, sign, affirm and/or present the petition, affidavits and other statements forming part of the petition on behalf of the company to the Company Law Board Bench for confirmation of the alterations of the Memorandum of Association of the company as required under section 17 of the Companies Act, 1956."
PRACTICE NOTES
See under Resolution No. 89.
Authorising Counsel to appear before Company Law Board
S. 17- Authorising
Counsel to appear before Company Law Board-Board Resolution
"RESOLVED that Shri _________ Secretary of the Company and Shri _________ Advocate failing which such other persons eligible to appear before the Company Law Board Bench, be and are hereby authorised to appear on behalf of the Company before the Company Law Board. Shri _________ Managing Director be and is hereby authorised to appear before the Bench and/or the Bench Officer, Company Law Board along with the Secretary/Advocate as aforesaid and to take part in the hearing of the said petition under section 17 and other applicable provisions of the Companies Act, 1956."
PRACTICE NOTES
1. Vakalatnama should be riled.-Where petition before the
Company Law Board is filed by an advocate, the said petition should be
accompanied by a duly executed Vakalatnama of the said advocate [Regulation
18(3), proviso of the Company Law Board Regulations, 1991].
2. Certified copy of the Board Resolution attached.-A certified true copy of the
board resolution should also be attached to the petition authorising the advocate
to appear before the Bench of the Company Law Board on behalf of the Company.
Authorisation for Petition to be filed with the Company Law Board
S. 17-Petition to be filed with the Company Law Board-Board
Resolution
"RESOLVED that the
Managing Director/Secretary of the company be and is hereby authorised to file
the petition before the Company Law Board _________ Bench under section 17 of
the Companies Act, 1956, for confirmation of alteration in the situation clause
of the Memorandum of Association of the company.
RESOLVED FURTHER that the
Managing Director/Secretary of the company be and is hereby authorised to
accept such modifications/alteration in the resolution as may be deemed
necessary by the Company Law Board while giving their approval to the
same."
"RESOLVED that Shri _________ be and is hereby authorised to enter appearance before the Company Law Board _________ Bench in the petition under section 17 of the Companies Act, 1956, filed before the Bench seeking their approval to the confirmation of the alteration in the situation clause of the Memorandum of Association pursuant to the Special Resolution passed at the Annual General Meeting/Extraordinary General Meeting of the company on _________
RESOLVED FURTHER that Shri _________ be and is hereby authorised to accept such modification s/alterations in the Special Resolution as may be deemed necessary by the Company Law Board _________ Bench while according their approval."
PRACTICE NOTES
See under Resolution 89.
Authorisation for Shifting of Registered Office
Shifting of
Registered Office-Board Resolution
"RESOLVED that the Managing Director/Secretary of the company be and is hereby authorised to file the petition before the Company Law Board _________ Bench under section 17 of the Companies Act, 1956, for confirmation of the change in the Registered Office of the company from the Union Territory of Delhi to the State of Haryana.
RESOLVED FURTHER that the
Managing Director/Secretary of the company be and is hereby authorised to accept
such modifications/alterations in the resolution as may be deemed necessary by
the Company Law Board while giving their approval to the same."
"RESOLVED that Shri _________ be and is hereby authorised to enter appearance before the Company Law Board _________ Bench in the petition under section 17 of the Companies Act, 1956, filed before the Bench seeking their approval to the change in the Registered Office of the company from the Union Territory of Delhi to the State of Haryana pursuant to the Special Resolution passed at the Annual General Meeting/Extraordi nary General Meeting of the company on _________
RESOLVED FURTHER that Shri _________ be and is hereby authorised to accept such modifications/alterations variation in the Special Resolution as may be deemed necessary by the Company Law Board _________ Bench while giving their approval."
PRACTICE NOTES
See under Resolution 89.
Alteration to the Memorandum of Association as to change of the
Registered Office from one State to another
S. 17-Alteration
to the Memorandum of Association as to change of the Registered Office from one
State to another-Board Resolution
"RESOLVED that pursuant
to the provisions of section 17 of the Companies Act, 1956 and subject to the
approval of the Company in General Meeting and further subject to the
confirmation of the Company Law Board, the Registered Office of the company be
shifted from the "State of Karnataka" to the "State of Tamil
Nadu".
RESOLVED FURTHER that an
Extraordinary General Meeting of the Company be called and held on _________
(day) the _________ (date) at _________ (place) at _________ (time) to pass the
following resolutions as a Special Resolutions."
"RESOLVED that subject
to the confirmation of the Company Law Board the Registered Office of the
company be shifted from the "State of Karnataka" to the "State
of Tamil Nadu" and that clause II of the Memorandum of Association be
altered by substituting the word "Karnataka" by the words "Tamil
Nadu".
RESOLVED FURTHER that the
Secretary of the Company be and is hereby authorised to file a petition along
with other required documents and papers before the Company Law Board and to
appoint Authorised Representative to appear for and represent the company
before the Board and to do all such acts and things as may be deemed necessary
in connection therewith and incidental and ancillary thereto".
"RESOLVED FURTHER that
the draft of the notice of the Extraordinary General Meeting along with the
explanatory statement placed on the Table and initialled by the Chairman for
the purpose of identification be and is hereby approved and the Secretary of
the company be and is hereby authorised to issue the notice to the member of
the company 23 days in advance of the said General Meeting and to take such
further actions and steps as may be necessary in this regard."
PRACTICE NOTES
1. Loss of Revenue to State.-The objection that the State is deprived of
its revenue, since a new company could have been floated instead of altering
the objects, is misconceived. New Asarwa Mfg. Co. Ltd. Re, (1975) 45 Com Cases
151, 156 (Guj). A State Government Cannot intervene in applications by a
Company to the Company Law Board for confirmation of its special resolution for
changing the place of its registered office from one State to another on
objection on the ground of loss of revenue to the State or of employment to
those belonging to the State. It is for the members of the company and for the
State to decide where the registered office of the company should be
transferred in the company's interests. Metal Box India Ltd., In re, (2000) 36
CLA 15 (CLB-EB).
2. Objection by the State Government.-Where a registered office is
changed from one State to another, the State has no right to object on the
ground of loss of possible future revenue, though it may do so as a creditor in
respect of arrears of revenue due to it. The shifting of the registered office
is purely a domestic matter for the shareholders of the company (In re
Mackinnon Mackenzie & Co. Private Ltd., (1967) 37 Corn Cases 516 (Cal)).
3. Conditional Order of CLB.-While confirming a petition under section 17
for change of registered office from one State to another, the Company Law
Board imposed suitable conditions safeguarding the interest of the objectors so
that their claims are not be adversely affected. [In re Seaways Maritime (P.)
Ltd., (2001) 1 Comp LJ 141 (CLB)]. EEC (India) Software Centre Ltd. Re, (2001)
32 SCL 298 (CLB).
Change of Registered Office within a State
S. 17A-Change of Registered Office within a state-Board
Resolution
"RESOLVED that subject
to the confirmation of the Regional Director Northern Region, the Registered
Office of the Company be shifted from _________ to _________ within the State
of Tamil Nadu.
RESOLVED FURTHER that the
Secretary of the Company be-and is hereby authorised to file an
application with the Regional Director, Southern Region for the said
confirmation and to do all such acts and things as may be necessary in
connection therewith or incidental or ancillary thereto."
PRACTICE NOTES
1. Regional Director's approval necessary.-Companies (Amendment) Act,
2000 has inserted a new provision to the effect that no company can change the
place of its registered office from the jurisdiction of one Registrar of
Companies to the jurisdiction of another Registrar of Companies within a State
unless it is confirmed by the Regional Director.
2. Form of Application.-The form of application is to be in Form No. 1-AD
for this purpose. This application should be accompanied by a demand draft
evidencing payment of the requisite application fee as prescribed under the
Companies (Fees on Application) Rules, 1999.
3. Filing with ROC.-A certified copy of the confirmation of the Regional
Director for change of registered office should be filed with the Registrar of
Companies within 2 months from the date of confirmation together with a printed
copy of the memorandum of association as altered.
Extension of time of filing (S. 18)
Hold a Board Meeting and
approve the proposal setting out therein the reasons for seeking extension of
time to file the order of the Company Law Board under section 18 by such period
as the Company Law Board thinks proper.
Time-limit for riling the application
The application for
extension of time of filing the order can be filed before the concerned Bench
within three months from the date of the order. (National Industrial
Corporation Ltd. v. Registrar of Companies, Punjab, (1963) 33 Corn Cases 265
(Punj)).
Documents to be attached with the applications
The application should accompany the following
document:
(i) Application in Form No.
2 of the Company Law Board Regulations 1991 supported by affidavit verifying
the petition.
(ii) Bank draft evidencing
payment of application fee. Fee payable on the application is Rs. 100/-
(iii) A certified true copy
of the Board Resolution authorising the filing of such application.
(iv) A duly executed Memorandum of Appearance or
Vakalatnama.
Power of Company Law Board to extend time
The Company Law Board has
been given powers under sub-section (4) of section 18 to extend the time
for filing of documents or for registration beyond three months by such period
as it thinks proper.
In the case of extension of
time for filing of documents with the Company Law Board sought after 60 days
after the expiry of 30 days from the date of the special resolution, it was
held that the said resolution was void and there was no question of granting
extension of time. Ganga Textiles Ltd. v. ROC, (1998) 94 Com Cases 36 (CLB-SR).
Prayer to be made in application for extension of time
The Punjab High Court in
Shiv Prakash Janakraj & Co. Pvt. Ltd. v. Registrar of Companies, (1963) 2
Comp LJ 228 (Pb) has explained the kind of prayer which has to be made under
the sub-section. The Court said that an application under sub-section
(4) should pray: (1) that the delay in filing the certified copy of the order
may please be condoned and the documents already filed may please be ordered to
be taken on record; (2) that the alteration of the memorandum as sanctioned may
please be ordered to be registered by the Registrar; and (3) that the Court
(now Company Law Board) may pass any other order that it considers necessary.
Time taken in drawing
up order excluded
The time taken for drawing
an order and for furnishing copy of the order will be excluded (Beauty Art
Dyers & Cleaners (P) Ltd. v. Registrar of Companies, (1974) 44 Comp Cases
460 (Bom)). Section 640-A of the Act also provides so.
Action to be taken on receipt of order of extension of the
Company Law Board
approving extension of time
I. Filing.-(1) File a certified copy of the order together with a certified copy
of the order approving the alteration as also printed copy of the Memorandum of
Association with the Registrar of Companies concerned along with Form No. 21
after paying the requisite filing fee.
(2) Where alteration
involves transfer of registered office from one State to another, then file a
certified copy each of the orders with the Registrar of Companies of both the
States. The Registrar of Companies of both the States will register and certify
the same.
II. Alteration to be noted.-Make necessary changes in every copy of the
Memorandum of Association. Where the transfer of registered office is involved,
then notify the Registrar of Companies in Form No. 18 and also note change in
letter heads, vouchers bills, invoices, etc.
III. Information to Stock Exchange.-If the shares of the company
are listed with any recognised stock exchange then forward to it a copy of the
Memorandum of Association as altered.
An appeal will lie to the High Court of the State in which the registered office of the company is situated under section 10F against the unfavourable order of the Company Law Board passed under the section.
Application for extension of time to register
Company Law Board's Order
S. 18-Application
for extension of time to register Company Law Board's Order-Board
Resolution
"RESOLVED that a
petition under section 18(4) of the Companies Act, 1956, for extension of time
by one month beyond the statutory period of 3 months, for filing the certified
copy of the order dated _________ of the Company Law Board under section 17 of
the Companies Act, together with the amended Memorandum of Association of the
company with the Registrar of Companies be made to be Company Law Board and the
Secretary of the company be directed to take all steps for the purpose of
giving effect to this resolution."
PRACTICE NOTES
1. Period of extension discretion of Company Law Board.-The extension of time beyond
the period of three months may be of such period as the Company Law Board
thinks proper and such extension may more or less than one month.
2. Procedure.-The application for extension of time for filing
certified copy of the order of the Company Law Board for registration of
alteration of Memorandum of Association should be made in Form No. 2 of
Annexure II of the Company Law Board Regulations, 1991 along with prescribed
fee of rupees one hundred and an affidavit verifying the said application. The
said application should be made to the concerned regional bench of the Company
Law Board."
3. Extension of time for registration of alteration of Memorandum of
Association-Board Meeting.-Hold a Board Meeting and approve the proposal for
making an application to the Company Law Board for revival of the order.
4. Time-limit for riling the application.-The application can be filed
within one month from the date of expiry of three months after the date of the
order as per section 19(2) proviso.
5. Documents to be attached to the application.-The application should
accompany the following documents:
(i) Application duly supported by an affidavit.
(ii) Bank draft evidencing payment of application
fee of Rs. 100/-
6. Time taken for obtaining copy excluded.-In calculating the time, the
time taken for obtaining a copy of the order will have to be excluded. (S.
640A) (Saroja Mills Ltd. v. Registrar of Companies, (1964) 34 Comp Cases 336
(Mad)). Section 640-A of the Act also provides so.
7. Time can be extended so long as order alive-The Company Law Board can
extend the time only so long as the order is alive i.e., before it becomes void
and inoperative. (Janardhana Mills Ltd. v. Registrar of Companies, (1964) 34
Comp Cases 333 (Mad)).
8. Whole proceedings becomes void once three months period runs out-It has been held by the
Punjab High Court in Shiv Parkash Janakraj & Co. (P) Ltd. v. Registrar of
Companies, (1963) 2 Comp LJ 228 (PB) that once the three months period
prescribed by section 18 has run out, the whole proceedings of alteration and
order of confirmation become void and inoperative. The only course open to the
company is to apply to the Company Law Board under section 19(2) for revival of
the order.
9. Application can be made after the order becomes void-An application under the
proviso to sub-section can be made even after the expiry of the period of
three months i.e., after the order becomes void. (Project Engineering (P) Ltd.
v. Registrar of Companies, (1967) 37 Comp Cases 566 (Mad)).
10. Revival of order on sufficient cause being shown-The Company Law Board may
revive the order on sufficient cause being shown if the application has been
made within a month. The period of one month commenced from the date of the
order becoming void and inoperative. This is a further period which is added to
the three months allowed under section (1). (National Industrial Corporation
Ltd. v. Registrar of Companies, Punjab, (1963) 33 Comp Cases 265 (Punj)).
11. Action to be taken on receipt of order of revival of the Company Law Board1. Filing.-(a) File a certified copy of the revival order together with a certified copy of the order approving the alteration with the Registrar of Companies concerned along with Form No. 21 after payment of the requisite filing fee. Affix court fee stamp of the requisite value on the Form.
(b)
Where alteration involves transfer of registered office from one State to
another, then file a certified copy of the revival order along with the order
approving the transfer with the Registrar of both the States. The Registrar of
Companies of both the States will register and certify the same.
(c) Alteration to be noted.-Make necessary changes in every copy of the
Memorandum of Association. Where the transfer of registered office is involved,
then notify the Registrar of Companies in Form No. 18 and also note the changes
in letter heads, vouchers, bills invoices, etc.
(d) Information to Stock Exchange.-If the shares of the company
are listed with any recognised stock exchange then forward to it a copy of the
Memorandum of Association as altered.
12. Appeals-An appeal will lie to the High Court under section 10F, against the
order of the Company Law Board passed under this section. Such appeal should be
made within 60 days from the date of communication of the decision or order of
the Company Law Board.
Extension of time for registration of alteration of Memorandum
of Association
"RESOLVED that approval
of the Board of Directors be and is hereby given to the filing of a petition
before the Company Law Board pursuant to sub-section (4) of section 18 of
the Companies Act, 1956, seeking Company Law Board's approval to the extension
of time for filing the certified copy of the order of the Company Law Board
_________ Bench dated _________ passed under section 17 of the Companies Act,
1956, along with documents before the Registrar of Companies by _________
days/month(s).
RESOLVED FURTHER that the
Managing Director/Secretary of the company be and is hereby authorised to take
all steps necessary in this connection including drawing up and verifying of
the petition and appointment of Advocate/Company Secretary/Chartered Accountant
to appear before the Company Law Board Bench
for the purpose."
PRACTICE NOTES
1. Vakalatnama should be filed.-Where petition before the
Company Law Board is filed by an advocate, the said petition should be
accompanied by a duly executed Vakalatnama of the said advocate [Regulation
18(3) proviso of the Company Law Board. Regulations, 1991].
2. Certified copy of the
Board Resolution attached.-A certified true copy of the board resolution
should also be attached to the petition authorising the advocate to appear
before the Bench of the Company Law Board on behalf of the company.
Application to the CLB for extension of time for filing order of
the CLB with ROC
"RESOLVED that the
Board hereby accords its approval to the making of an application to the
Company Law Board under section 19(2) of the Companies Act, 1956 for revival of
the order dated _________ passed by the Company Law Board and for grant of
extension of time upto two months to the Company for filing the order of the
Board and an other documents with the Registrar of Companies.
RESOLVED FURTHER that the
Secretary of the Company be and is hereby authorised to file an application to
the Company Law Board and to appoint Advocate to appear for and represent the
Company before the Board and to do all such acts and things as may bc deemed
necessary in the matter.
PRACTICE NOTES
1. Filing of a certified copy of order of Company Law Board with
Registrar.-As per section 18 of the Act a certified copy of the order of the
Company Law Board is to be filed with the Registrar of Companies concerned
within three months from the date of the order together with printed copy of
the Memorandum of Association so altered.
2. Company Law Board to be moved within three months before order
becomes void.-If extension of time for filing of the document is sought then the
Company Law Board must be moved within three months before the order becomes
void and inoperative under section 18.
3. Company Law Board can extend time so long as order is alive.-The Company Law Board can
extend the time only so long as the order is alive, i.e., before it becomes
void and inoperative. Janardhana Mills Ltd. v. Registrar of Companies, (1964)
34 Com Cases 333 : (1964) 2 Comp LJ 34 (Mad).
4. Application even after expiry of period of three months.-The application under the
proviso to sub-section (2) of section 19 can be made even after the
expiry of the period of three months, i.e., after the order becomes void,
provided the said application is made within a further period of one month
after the said three months. Project Engineering (P) Ltd. v. Registrar of
Companies, (1967) 37 Comp Cas 566 (Mad); Webfil Ltd. Re, (1990) 4 CLA 264
(CLB).
5. Extension of time for obtaining copy of order.-In calculating the time, the
time taken for obtaining a copy of the order will have to be excluded. (Section
640-A) Saroja Mills Ltd. v. Registrar of Companies, (1964) 34 Com Cases
336 : (1964) 1 Comp LJ 103 (Mad); Shri Amba Motor Agencies (P) Ltd. v.
Registrar of Companies, (1978) 48 Com Cases 89 (Delhi).
There are two occasions when
availability of a name has to be ascertained from the Registrar of Companies:
(i) registration of a new
company;
(ii) change of name of an
existing company.
(2) No company can be
registered by a name which in the opinion of the Central Government is
undesirable (Section 20 of the Act). Some emblems and names specified in the
Schedule to be Emblems and Names (Prevention of Improper Use) Act, 1950 are not
permitted.
The provisions of the said
Act will be strictly taken into account lay all ROC's while making names
available to companies [General Circular No. 24 of 2001 dated 21-11-2001].
(3) Where the name is
coined, the significance has to be indicated.
(4) Where a registered trade
mark or trade name forms part of the name, this can be indicated as it will
strengthen the case.
(5) Where a group name,
e.g., JK is being adopted, a letter of no objection from the parent/main
company should be attached.
(6) Registration of a
proposed name is not allowed for a period of at least 5 years if it is
identical with or too nearly resembles the name of a company dissolved (Under
section 560.).
(7) In order that the name
of the proposed company is not identical with or too nearly resembles the name
of an existing company, it is advisable to go through the guidelines issued in
this regard.
(8) Main objects which the
proposed company is to pursue on its incorporation should be clearly mentioned.
(9) Also mention whether the
proposed company will be a 'Private' or 'Public' company.
(10) Besides proposed name,
three alternative names in order of preference are also be given in the
application form.
(11) The place where the
proposed company is to have its registered office should be mentioned.
(12) The name of the
respective promoters/directors given in the application should tally with the
names of subscribers to the Memorandum and Articles of Association.
(13) In the case of an
existing company the name made available for adoption by the Registrar will be
valid for a period of six months from the date of intimation by the Registrar,
and in the case of a new company it will be available for adoption for a period
of three months from the date of intimation by the Registrar. Fresh application
has to be made where it has been sought. The Registrar of Companies usually
grants one extension.
(14) A company has no
copyright in any of the words forming part of its name even if one of those
words was invented as a result of research and labour being expended in the
invention. (Re Exxon Corporation v. Exxon Insurance Consultants International
Ltd., (1981) All ER 495 (Ch D). But, where a company has carried on business
under a particular name for a considerable time, it cannot be objected to
(Jay's Ltd. v. Jacobe, (1933) 1 Ch 411.).
(15) Where a company
attempts to get registered or is registered by a name so similar to that of any
other company, firm or individual, as is likely to deceive or cause confusion,
the aggrieved party may file a suit for injunction or other appropriate relief.
The remedy by application to Central Government does not exclude such civil
remedy. (British Bata Shoe Co. Ltd. v. Czechoslovakia Bata Co. Ltd., (1946) 64
Report of Patent Cases 72).
(16) The word
"Hindustan" is kept reserved for Public Sector companies but can be
allowed to be used in the names of Private Sector companies in a large way of
business. The word "Corporation" may be allowed in the name of the
company in case the authorised capital is more than Rs. five crores (Circular
No. 16174-F.No. 271 9174-CL.Ill, dated 27th August, 1974).
(17) The Court under the
general law has power to retrain the registration of a company under a name so
similar to that of an existing company as to be calculated to deceive. [Ewing
v. Buttercup Margarine Co. Ltd., (1971) 2 Ch 1].
(18) Avoid names with the
words "Stock Exchange" as part of the name of a company without
obtaining in principle approval or no objection from SEBI. (Circular No. 3196
[F. No. 3/4/96-CL-V] dated 12-4-1996).
(19) Where the existing
companies are stated and found to be well-known in their respective
fields by their abbreviated names, these companies may be allowed to change
their names, by way of abbreviation with the prior approval of the Regional
Director concerned. The abbreviated name will be considered only in case of
change of name under section 21 of the Companies Act, 1956, with the prior
approval of the Regional Director concerned and should not be allowed for
adoption by new companies." (Circular No. 4/93; F. No. 3/14/93-CL.V,
dated 31-3-1993).
(20) The Central Government
may before deeming a name as undesirable under clause (ii) of sub-section
(2) consult the Registrar of Trade Marks. [Section 20(3)].