Thursday, July 6, 2023

Meetings of Creditors, Debenture holders and Contributories

Meetings of Creditors, Debenture holders and Contributories:

Key Points:

1. Meetings of Creditors.
2. Notice of Meeting of Creditors.
3. Procedure of Meeting of Creditors.
4. Meeting of Debenture holders.
5. Notice of Meeting Under Section (101).
6. Who can send the Notice?
7. Period of Notice.
8. Contents of notice Under Section 100 (2).
9. Persons to whom Notice must be given Under Section 101 (3).
10. Method of Service (giving) of Notice.
11. Duties of Secretary regarding Notice.
12. Statement to be Annexed with Notice Under Section (102).

 

Link : https://smckk14.blogspot.com/2023/07/company-meetings-meetings-of-directors.html

1. Meetings of Creditors:

This meeting is meant by a meeting arranged by the company to discuss any plan / scheme for arrangement with its creditors.

Creditors Meetings are also organised in case of Creditors Voluntary Winding up. In such a case, the company calls meeting on the day at which the resolution for voluntary winding up is to be proposed. The notice is sent by the post to the creditors and published in at least two newspapers informing where the meeting to be conducted.

(i) Meeting of Creditors is conducted according to provision under section 108, 109, 110 and 111. (Voting)

(ii) In this meeting, the creditors may decide to approve, modify or reject the plan of repayment.

(iii) If modifications are suggested by the creditors, consent of the debtor is obtained for each modification.

(iv) On sufficient reason, the creators meeting may be adjourned for a period of not more than 7 days at a time.

2. Notice of Meeting of Creditors:

Notice is hereby given that, a meeting of the creditors (name of company) will be held at (address) on (date and time).

The winding up of the company commenced on (date) and I was appointed liquidator by resolution of the members of the company. As the directors declared that the company would be able to pay its debts in full within a period of (period) offer commerce winding up, the liquidation is proceeding as a member’s voluntary winding up.

I have formed the opinion that the company will not be able to pay its debts in full within that period and this meeting is summoned in order that the creditors may, if they so wish, exercise their right, the appoint some person other than myself to be liquidators of the company for the purpose of winding up the affairs and distributing the assets of the company.

A statement of the assets and liabilities of the company will be laid before the meeting.

3. Procedure of Meeting of Creditors:

In the meeting, the Board of Director (s) must present a statement of the financial position of the company along with a list of creditors and the projected payment of creditors.

Following steps may be taken with 2/3rd majority

(i) If it is in the interest of all parties that the company wound up on the voluntary basis, the company would wound up voluntarily.

(ii) If the company may not be able to pay in full, then a resolution can be passed for winding up of the company by a Tribunal.

The notice of any resolution passed in meeting of the creditors must be filed with the registrar within a period of 10 days.

In case of violation by the company, it will be punished with fine of minimum ₹ 50,000 and maximum ₹ 2 lakh and director who is in default with 6 months of Jail along with minimum ₹ 50000 and maximum ₹ 2 lakhs or with both.

4. Meeting of Debenture holders:

Companies have the right to issue debentures and to implement the process of Meeting of Debenture holders. It is between Board of Directors and debenture holders to discuss rights and responsibilities related to debentures. This meeting is conducted as per provisions mentioned in ‘Debenture Trust Deed’. This meeting is called from time to time when the interest of debenture holders are involved at the time of reorganisation, amalgamation, reconstruction or winding up of the company. The rules and regulations mentioned in the deed are related to the notice of meeting, appointment of chairman of the meeting, passing resolution, quorum signing and minutes of the meeting.

5. Notice of Meeting under section (101):

Meaning –

It is necessary for a meeting to be valid that its notice must be sent through appropriate authority in proper format. Notice must be given to the persons who are eligible to attend meeting. In the notice, the concerned persons are informed about date, time, place and agenda of the meeting.

6. Who can send the Notice?  

Normally, the Board of Director sends the notice of meeting but this may be delegated by the Board to the Secretary. If the secretary sends the notice on the basis of order of board, he /she must mention ‘By order of Board’ or ‘On behalf of Board’ before signing the notice. If the Board makes any default in calling AGM, the central government may call it or Central government may direct the Board to conduct the meeting.

In such condition, The Central Government, at its own, may send the notice or any official of the company may send the notice obeying the order of government.

The members may also call the meeting, if the Board, does not call the meeting within 45 days after submitting the requisition of the Board.

In certain circumstances, the Government of India may call the meeting directly.

7. Period of Notice:

Notice of General Meeting must be sent at least before 21 days of meeting. In the period of 21 days, the day of receipt of notice and day of meeting are not included i.e. the company should send the notice before 23 days.

In the following cases, notice days may be less than 21 days

(i) In case of AGM, if all the members entitled to present and to vote give their consent.

(ii) In case of other General Meeting, (a) If company has share capital at least 95% of members of paid up share capital who have voting rights. or (b) If company has not share capital, on the consent of the members who have 95% voting rights in total votes.

8. Contents of Notice Under Section 100 (2):

The notice should contain following information –

(i). Date, Time and Place,

(ii) Nature and Type,

(iii) Objective,

(iv) Agenda,

(v) Resolution to be passed, (if any)

(vi) Information of important contracts, (if any)

(vii) Right to appoint proxy with proxy form,

(ix) Section under which the meeting is being called.

9. Persons to whom notice must be given under section 101 (3):

(i) Every member, legal representative of deceased member or to liquidator of insolvent member,

(ii) Auditor (s),

(iii) Every Director,

In case of joint members, notice is sent to that person whose name is entered first in the register of members.

10. Method of Service (giving) of Notice:

Notice maybe sent on registered address or in person by post. When the company send notice of registered address through post by affixing stamp of proper value, it is considered as the notice has been delivered.

If the notice has been sent to the entitled person through registered post or UCP, on his request and he has paid the charge of post, it will be compulsory for the company to send the notice according to his request otherwise the notice could not be considered as delivered.

If companies sends notice through registered post, it is considered that the notice could have been delivered to the concerned person. If same member have no permanent address or registered address, they are informed through newspapers. In such a case, it is considered that the concerned person (s) has received the notice on the date at which the information of meeting has been published.

If, by any reason, the secretary forgets to send the notice or notice has been sent but not received, the meeting would not be invalid. U/s 104

11. Duties of Secretary regarding Notice:

(i) The draft of General Meeting is prepared as per instruction of Board of Directors and draft of Board meeting is prepared in consultation with chairman.

(ii) For all types of meetings, the notice must contain date, place, time and agenda.

(iii) Printing and Issue of Notice.

(iv) Attachment of essential document with notice e.g. Proxy form, Balance Sheet, Reports of Auditors and Directors and Auditor financial statement etc.

(v) Notice of GM to members, legal representative and liquidator to registered address. Notice of board of directors meeting to each director, who are in India and at the usual Indian address of directors who are not in India.

12. Statement to be Annexed with Notice Under Section (102):

(i) Description of Facts - It is mandatory to annex the statement of facts with the notice of meeting in request to special matters going to be transacted in any General Meeting.

(ii) Special Business - In case of any AGM, following matter other than under mentioned shall be treated as special business –

(a) Discussion on financial statement.

(b) Declaration of dividend.

(c) Appointment of new directors in place of retiring directors.

(d) Appointment of auditor (s) and deciding remunerations.

(iii) In case of Non-Disclosure or Insufficient Disclosure – Where, due to non-disclosure or insufficient disclosure of any statement by a promoter, director, manager or any other key managerial personnel, these happens any direct or indirect benefit to them or their relatives the company shall be liable to reimburse the amount of such benefit.

(iv) Penalty - In case of any default, every such promoter, director, manager or managerial personnel shall be liable for penalty of rupees 50,000 for self-benefits and in case of relatives, five times more.

Tuesday, July 4, 2023

Company Meetings: Meetings of Directors: Board of Directors Meeting, Meetings of Committees of Directors

Meetings of Directors: Board of Directors Meeting, Meetings of Committees of Directors,

Key Points:

1.Introduction of Meetings of Directors.
2. Types of Meetings of Directors.
     (a) Board of Directors Meeting
     (b) Meetings of Committees of Directors
3. Powers of Directors.
4. Statutory Provisions regarding Board Meetings.

 

Link : https://smckk14.blogspot.com/2023/07/company-meeting-extra-ordinary-general.html

1.Introduction of Meetings of Directors:

Shareholder are the real owners of a company but they do not actively participate in management and administration of the company. For this purpose, they elect directors as their representatives. These directors handle and control the systems of Management. Directors conduct meeting on time to time.

2. Types of Meetings of Directors:

Meeting of directors may be divided into two parts –

(I) Board of Directors Meeting.

(II) Meeting of Committees of Directors.

(I) Board of Director Meeting – Board meeting are very much essential in a company. All the important decisions regarding companies are taken in Board meetings. Even, the decisions, which need consent of shareholder under Companies Act, are taken in such meetings.

This is a fact that, in General Meeting, only formal consent of shareholders is taken but in real, the majority belongs to directors, their relatives and friends. So the status of General Meeting becomes like ‘Rubber Stamp’ of the directors and the almost all the matters, the decisions taken by the directors are accepted by General Meeting.

3. Powers of Directors:

Generally, the Directors have following Powers –

(i) To make call money on partly paid up shares.
(ii) Issue of debentures.
(iii) Borrowing powers.
(iv) Investment of money of the company.
(v) Giving loans.
(vi) Filling casual vacancy of any director.
(vii) Allotment of shares.
(viii) Forfeiture and re-issue of shares.
(ix) Recommendation of rate of dividend.
(x) Appointment of officers.
(xi) To manage and control the business.
(xii) All such works which the company have the power to do.

But a board of director cannot perform those works which are necessarily to be performed under the provisions of AOA and Companies Act.

4. Statutory Provisions regarding Board Meetings:

(i). According to Company Law and AOA - If the meeting is called illegally and acceptance for any contract is given in the meeting, the second party cannot be held liable. i.e. the second party can force the company to perform the contract. In such cases, Board of Director is held liable.

(ii) Frequency of Meeting – A Board meeting may be called as and when required. According to Section (173), every company has to conduct first meeting of directors within 30 days of registration and will hold at least four meeting in subsequent years. There should not be gap of more than 120 days within two meetings.

(iii) Right to Call the Meeting - Any director of the Board may call the meeting on demand of meeting by a director, the Managing Director, Management or Company Secretary may also call for Board of Director meeting.

(iv) Place of Meeting - At any reasonable place.

(v) Notice of Meeting - The notice of every meeting of Board of Director should be given to every director of the company, who is in India. The director (s) who is out of India, the notice should be sent to his usual address in India. If the person who is liable to give notice, makes any default, maybe punished with a penalty of up to ₹ 25000 under section (173).

(vi) Period of Notice - At least 7 days’ notice. In case of emergency, maybe of less days but in such case, one independent director, must be present in meeting.

(vii) Contents of Notice - In notice, date, place and time are to be mentioned. Meeting should be called on any working day during office hours unless and until all the directors are ready for any Contra situation. It is not compulsory to send agenda with notice until necessary according to provisions of Act AOA.

In following cases, agenda must be sent –

(a) Appointment of CEO Under Section (203).

(b) Investment in Shares and Debentures of other incorporated organisations under section (186).

(viii) Agenda of Meeting - Agenda means list of matters to be discussed and decided. Meeting is conducted according to Serial Number of agenda. Though it is not compulsory to send agenda with the notice, according to Companies Act, but in practice agenda is sent to directors with notice. Generally, routine matters are discussed first and important /disputed matters thereafter.

(ix) Quorum – Quorum means the specific numbers of directors which must be present in the meeting to make the meeting valid. According to Section 174 (1), Quorum for Board meeting shall be 1/3rd of total directors or two directors, whichever is more. While calculating 1/3rd of total directors, any part (fraction) is rounded off.

During calculation of total directors, vacancies are not computed. The directors who have interest in any matter, they are considered for Quorum for that matter.

If number of directors who have interest in the matter, is more than or equal to 2/3rd of total directors, the remaining directors (who have not any interest in the matter) shall be the considered the quorum for meeting, if their number is not less than two.

Quorum should be present during entire meeting. If at any specific time, the quorum is not present, the discussion made on the matter at that specific time, shall be void. Directors may decide the requisite number of quorum if authority of AOA and this number maybe changed from time to time but cannot be less than the quorum as prescribed in under section 174 (2).

If the meeting could not be held for want of quorum, then, unless the AOA otherwise provide, the meeting shall automatically get adjourned to the same day at the same time and place in next week or if that day is a national holiday, till next succeeding day, which is not a national holiday, at the same time and place.

If the meeting, due to any reason, discussion on agenda could not conclude in one day, the chairman, with consent of directors present may adjourn for next day. This adjournment must be informed to absent directors.

(x) Chairman - For every Board meeting, appointment of Chairman is compulsory. AOA of the company has provisions regarding Chairman. Following provision have been given in Rule 76, Table ‘F’ in this regard –

(a) Board of Director may elect Chairman for its meetings and can also determine the tenure.

(b) If Chairman is not elected or the elected Chairman does not present himself in the meeting within 5 minutes of prescribed time, the directors present may elect any person as Chairman among themselves to conduct the meeting.

So, the Chairman of Board of Director maybe appointed by AOA or maybe elected by the directors. Such appointed or elected Chairman presides over the meeting. If the director desire to remove the Chairman, they can do so by passing resolution and may appoint any other directors as Chairman.

(xi) Voting - Each director has the right to give one vote for every resolution presented in the meeting. But if any director has any interest in any resolution, he is barred to cast his vote on that resolution. If authorised by AOA, the Chairman has the authority to cast his vote if the resolution has similar number of votes in favouring and against. He, casts his vote, in the capacity of a director.

In Board of Director, voting is done by showing of hands and all the resolution are passed by simple majority as long as, according to the Act, a resolution needs unanimous decision.

In the following conditions, resolution are required to be passed unanimously

(a) Approval of Prospectus.

(b) Appointing a person as a Manager or Managing Director who is already appointed as Manager and Managing Director in any other company.

(c) Intercompany investment etc.

(xii) Resolution by Circulation – Generally, the resolution which are to be passed by Board of Director are to be presented and passed in Board of Director meeting. But, if due to any reason, the Board of Director meeting is not possible, the resolution may be passed in following conditions –

(a) Proforma of resolution has been sent to director in the usual address in India, if he / she is out of India.

(b) Such proforma must be with required document.

(c) Number of directors, to whom the information has been sent, should not be less than the required number of quorum.

(d) Such resolution must be accepted either by the directors present in India or must be accepted by majority of the directors of all the directors (directors present in India and outside India) of the company.

(xiii) Attendance Register of Directors - Every company maintains an attendance register to keep the records of the directors present in the board meetings. The company secretary has the responsibility to obtain the signatures of directors in register.

(II) Meetings of Committees of Directors - If provided in AOA, the board of director may constitute the committees of directors for different objectives. e.g. Share allotment committee, Share transfer committee, finance committee etc. 

Monday, July 3, 2023

Company Meeting : Extra - Ordinary General Meeting & Class Meeting

Extra - Ordinary General Meeting & Class Meeting:

Key Points:

1. Meaning of Extra - Ordinary General Meeting.
2. Objectives / Functions of EGM.
3. Who can call EGM?
4. Meaning of Class Meeting.
5. Objectives of Class Meeting.

Link : https://smckk14.blogspot.com/2023/06/debentures-detailed-information.html


1. Meaning of Extra - Ordinary General Meeting:

All the General Meetings other than Annual General Meeting are called as “EGM”.

A company may call EGM at any time. EGM, are called to transact such businesses for whom, it is not possible for the company to wait for next AGM. e.g. Alteration in MOA and AOA, Issue of debentures, Change in share capital, removal of any director till completion of his tenure etc.

2. Objectives / Functions of EGM:

In case of need, EGM can be called many times in a year. All the businesses transacted in EGM are called Special Business. Generally, an EGM is called to perform following works –

(i) Alteration in MOA and AOA.
(ii) Change in share capital.
(iii) Issue of share at discount.
(iv) Issue of debentures.
(v) Transfer of registered office from one state to other state.
(vi) Increase in remuneration of directors.
(vii) Deliberation on amalgamation, absorption and liquidation of company.
(viii) Sanction of loans to directors.
(ix) Any other work in which consent of members is necessary.


3. Who can call EGM?

(1) By Board of Directors:

(i) By Passing Motion and

(ii) By Directors, on demand (requisition) of members.

(2) By the members demanding for.

(3) By Tribunal (companies 2nd amendment) Act, 2002

Court word replaced by Tribunal.

(1) By Board of Directors:

(i) By Passing on Motion - The Board of Directors, under provisions of AOA, are entitled to call EGM at any time by passing necessary resolution /motion. So, it is essential for directors to call EGM to pass resolution in this regard in its meeting.

(ii) By Directors on Requisition of Members - Members of the company have right to call EGM. Directors are bound to call EGM on requisition of members. EGM maybe called by following members –

(a) In case of company having share capital, who have 1/10 th holding of paid up capital, has power to vote on the date when they demand for it.

(b) In case of company having no share capital, who have 1/10 of total voting rights, on the date when they demand for EGM.

Such requisition made by members must be in writing with the objective. The requisition should be signed by members and should be submitted in registered office. Board of Directors should invite the process to call EGM within 21 days receiving requisition and the EGM should be convened within 45 days.

(2) By the Requisitionist Members - If the Board of Director does not convene meeting within 45 days, the requisitionist members may call the meeting themselves within 3 month. The meeting will be called in such a manner as it would have been called by Board of Directors. Reasonable expenses made by members to convene the meeting, shall be paid by the company and the company will recover this amount of expenses from the amount payable to defaulting directors.

In case of joint shareholders, all the shareholders need not to sign. Anyone or some of them may sign.

(3) By Tribunal

If for any reason, it is impracticable to call a meeting of a company, other than AGM, in any manner in which meetings maybe called, or to hold or conduct the meeting in the manner prescribed by this Act or AOA, the Tribunal may, either suo moto or an application of any director or member of the company who would be entitled to vote at the meeting in the manner it thinks fit.

If the Board of Directors, under instructions of NCLT, may issue the directive that in such meeting. Only one member or his /her proxy may present, the meeting should be considered legal.

The EGM called by NCLT, shall be considered valid for all the objectives of the company.

Class Meeting:

4. Meaning of Class Meeting:

"Class Meetings" are one of the types of General Meeting. “Class Meeting” is meant by the meeting of shareholders of a certain class. Such meeting are conducted by the company for certain class of shareholders.

5. Objectives of Class Meeting:

Generally, these meetings are called for following objectives

(i) Alteration in rights of shareholders.

(ii) Discussion on any planning or agreement between company and members.

In such meeting, only those members may present, for which class, the meeting has been called.

The fact to be noted that if company wants to change the rights of the shareholders of any specific class, ¾ th majority should approve supported by special resolution.

But, if at least 10% of shareholders, who opposed the change, may file a suit in the court to cancel such change. The application in the court must be filed within 21 days. Court may pass an order in favour of, or may cancel the change.

Tuesday, June 27, 2023

Debentures: Detailed information

Debentures: Meaning, Characteristics, Types, Rules for Issue of Debentures, Remedies for Debenture holders, Mortgage and Charges, Registration of Charges, Company Register of Charges, Punishment for Contravention, Rectification by Central Government in Register of Charges,

Key Points:

1. Meaning of Debenture.
2. Characteristics of Debentures.
3. Types of Debentures.
4. Rules for Issue of Debentures.
5. Remedies for Debenture holder’s u/s (71).
6. Mortgage and Charges.
7. Registration of Charges u/s (77).
8. Company Register of Charges.
9. Punishment for Contravention.
10. Rectification by Central Government in Register of Charges.

Link : https://smckk14.blogspot.com/2023/06/company-meeting-meaning-kinds-essential.html


Debentures:

1.Meaning of Debenture:

“Debentures” means security for a loan or acknowledgement of a loan.

U/S 2 (30) - "Debentures" includes debentures stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not.

Debenture is movable property and a document which is issued by a company under its common seal in acknowledgement of a loan to a debenture holder. It contains the terms and conditions under which the loan is taken by the company. These terms and conditions relate to the interest payable, redemption and securities.

2. Characteristics of Debentures:

(i) Movable property, (ii) Acceptance of loan, (iii) Issued under common seal, (iv) Contains terms and conditions, (v) Face value of each debenture is equal and of a certain series, (vi) It is a contract between company and borrowee, (vii) No right to vote, (viii) In registered office, a register of debentures is kept, (ix) Generally, it creates change on the assets of the company.

3. Types of Debentures:

(i) Registered Debentures:

All the details of such debentures are written in the books of the company. Such debentures cannot be transferred without permission of the company, are called “Registered Debentures”.

(ii) Redeemable Debentures:

The debentures the payment of which may be made with in a fixed time or after giving notice, are called “Redeemable Debentures”. Generally, the company makes payment of such debentures from profit or reserve fund or issue of new debentures.

(iii) Irredeemable Debentures:

The debentures the payment of which cannot be done during lifetime of the company are called “Irredeemable Debentures”. These debentures are of permanent nature. Such debentures may be paid off only on liquidation or insolvency of the company. According to Companies Act, 2013, these types of debentures cannot be issued.

(iv) Mortgaged Debentures:

Debentures issued against mortgage of some assets are called “Mortgaged Debentures”. In case of liquidation of company, such debenture holders have first right on assets of the company mortgaged.

(v) Convertible Debentures:

Debenture holders are given option to convert their debentures into shares or stock within specific time. It is called “Convertible Debentures”.

(vi) Simple Debentures:

If the company does not provide any security while issuing the debentures are called “Simple Debentures”.

(vii) Bearer Debentures:

The debentures which may be transferred mere by delivery, are called “Bearer Debentures”. Name of the holders of such debentures are not mentioned in the register of the company. The person who has such debentures, is the owner.

4. Rules for Issue of Debentures:

(i) Right to issue debentures vests with Board of Directors –

Under provisions of AOA, Board of Directors may pass resolution in general meeting u/s 179.

(ii) Application in Recognised Stock Exchange –

According to Companies (amendment) Act 1988, if the company wants to sale debentures to the public by issuing prospectus, the company is required to apply in recognised stock exchange (s) before issuing the prospectus u/s 40.

(iii) Passing Ordinary Resolution in General Meeting in Specified Case –

If total of amount of proposed debentures and other loans taken is more than the paid up capital and free resolution, in case of public company an ordinary resolution is to be passed in general meeting for issue of debentures.

(iv) Passing the Resolution by Board of Directors and Appointing a Committee - Thereafter, the Board of Directors passes an ordinary resolution in its meeting for issue of debentures and constitutes a committee which prepares prospectus, debenture deed and trust deed in consultation with the solicitor of the company.

(v) Presenting the Details of Guarantee with ROC –

If debentures create any charge or mortgage on assets of the company, a Trust deed must be prepared and has to be submitted to the office of the ROC within 30 days for its registration.

(vi) Presentment of Prospectus or Statement in lieu of Prospectus with Registrar –

Before issuing the prospectus to the public, the company should file a copy of prospectus to ROC and the statement of fact that "the one copy of prospectus has been submitted to the ROC" should be marked on the prospectus.

If the company has not issued prospectus, the statement of lieu of prospectus must be presented before ROC at least before 3 days of allotment of debentures. Before following this prospectus, the prospectus should be approved by SEBI.

(vii) Sending Application form with Prospectus u/s (26) –

Format of application form regarding issue of debentures must be submitted with prospectus.

(viii) Allotment of Debentures –

Provisions of under section 40 should be followed for allotment of debentures.

(ix) Preparing the Certificate –

Each company, if not restricted, must prepare certificate of allotment within 3 months of allotment to get issued.

(x) No right to vote.

(xi) Entry in register of Debenture holders –

After allotment entry is made in the register of debenture holder.

(xii) Index of Debenture holder –

If number of debenture holders is more than 50, a separate index of debenture holders to be prepared.

(xiii) Issue at Discount –

May be issued at discount if authorised by AOA.

(xiv) Rating of Debentures –

After 18 months of issue of redeemable debentures, company has to get its credit rating by CRISIL or CARE etc. Such ratings should be mentioned in prospectus as per rule of SEBI.

5. Remedies for Debenture holder’s u/s (71):  

If the company commits any error in giving interest or returning principal amount of debentures which had been mentioned in the debentures deed, the debenture holder will have following remedies -

(i) Using the rights contained in debentures deed - e.g. sale of mortgaged assets.

(ii) Application in Tribunal –

Debenture holders may apply before Tribunal to appoint an official receiver and to manage the business, he can apply to appoint a Manager. The Tribunal may declare mortgage on assets of the company and can order for sale of such assets.

(iii) Appointment of self-receiver –

If provided in terms and conditions of debentures, the debentures holder himself can appoint a receiver of the company.

(iv) Application for winding of the company –

If company become unable to pay the principal and interest of debentures, the debenture holder may apply in Tribunal for compulsory winding up of company according to Section 271.

(v) Suit for payment of principal amount and interest.

6. Mortgage and Charges:

Definition under section 2(16) – “Charge” means an interest or lien on the property or assets of a company or only of its undertakings both as security and includes a mortgage.

The words Mortgage and Charge are often used interchangeably.

Every company depends on share capital and borrowed capital for financing their projects. Borrowed capital is raised by issuing debentures (Secured or Unsecured) or from banks or financial institution. The banks or Financial institution give money only if they are sure about the repayment along with interest. To secure the loans, they resort to creating right in the assets of the borrowing companies, which is known as a Charge on Assets. This is done by creating loan agreement hypothecation, agreement mortgage deeds etc.

There are Two Types of Charge -

(i) Fixed / Specific Charge:

This charge is a charge against any specific fixed property/assets like building, land etc. The nature and identity cannot change during the period of charge. The company can transfer the property subject to that charge so that the charge holder must be paid first before transfer.

(ii) Floating Charge:

A floating charge does not attach to any specific property but on those properties which are circulating or fluctuating nature e.g. Stock, Debtors etc. A floating charge may cover all the assets of the company but it may be restricted to any specified property also. It may be on present or future property. In such a charge, the charge holder is not the owner of that property. The ownership of the property remains with the company. The charge may be converted into fixed charge.

7. Registration of Charges u/s (77):

According to Under Section 77, the following charges are to be registered necessarily -

(i) On Issue of Debentures.
(ii) On Uncalled up Share capital.
(iii) On any fixed assets or interest on it.
(iv) On Book Debts.
(v) On Current assets.
(vi) On Stock-in-trade.
(vii) On Ship or it's share.
(viii) On Goodwill, Patent, Licence subject to patent, trademark, copyright.
(ix) Charge in abroad on the assets situated in abroad.
(x) Charge in India for the assets situated in abroad.

(a) Notice of Registration - It is mandatory to register the charge within 30 days of their creation.

(b) Consequences of Non-registration of Charge -

Charge become void. It does not mean that the contract between the company and borrowee becomes void. In fact, the money lender can recover his loan even if the charge is not registered.

(i) This is to be noted that as long as the company is solvent, the charge can be implemented without registration but not if the company becomes insolvent.

(ii) When any charge becomes void in absence of registration, the secured money becomes payable at once.

(iii) The company remains liable for loan even if it has not been registered because no company can take benefits of its own mistake.

(iv) No right of lien can be exercised on document of ownership.

(v) Following information must be made available to the registrar for registration -

(a) Detail of any charge created by the company.

(b) Detail of payment of that loan for which charge was created.

(c) Detail of series of issue of any type of debentures, the registration of which is compulsory.

8. Company Register of Charges:

Every company shall keep a register of charges at its registered office in such a manner as maybe prescribed, which shall include all charges affecting any assets of the company or any of its undertaking.

A copy of the instrument creating the charge shall also be kept at registered office along with the register of charges. The inspection of registers may be done by any member or creditors or any other person on payment of prescribed fees, subject to reasonable restrictions as the company may, by its AOA impose.

9. Punishment for Contravention:

The company shall be liable to a penalty of minimum ₹ 1,00,000 and maximum ₹ 10 lakhs and every officer of company who is in default shall be liable to a penalty of minimum ₹ 25,000 and maximum ₹ 1,00,000 with punishment of up to 6 months.

10. Rectification by Central Government in Register of Charges:

The central government on being satisfied that -

(i) The omission to give information to the ROC of the payment or satisfaction of a charge, within the time required under this chapter, or 

(ii) The omission or mistake of any particulars in the filing previously made to the ROC with respect to any such charge or modification there of or with respect to any memorandum of satisfaction or other entry made in presence of Section 82 or 83, was accidental or due to inadvertence or some other sufficient cause of it is not of nature to the prejudice of the position of creditors or shareholders of the company, it may, on the application of the company or any person in interested and on such terms and conditions as it deems just and expedient, direct that the time for the Giving of information of payment or satisfaction shall be rectified.

in a case, where the registration form mention only the movable property whereas charge was created on both the movable and immovable properties, the rectification of Register of charges was ordered by the government.

Friday, June 16, 2023

Company Meeting: Meaning, Kinds, Essential, Detail information about "AGM":

Company Meeting: Meaning, Kinds, Essential, Detail information about "AGM":

Key Points:

1.Introduction of Company Meeting.

2.Meaning of Company Meeting.

3. Type /Kinds of Company Meeting.

 (I) Meeting of Shareholders.

  (i) Annual Meeting,

  (ii) Extraordinary Meeting,

  (iii) Class Meeting,

 (II) Meeting of Directors.

  (i) Meetings of Board of Directors,

  (ii) Meetings of committee of Directors,

 (III) Meetings of Creditors, Debentures holder and Contributories.

  (i) Meeting of Creditors and Debentures holder otherwise than in winding up,

  (ii) Meetings of Creditors and Contributories in winding up

4. Characteristics /Essential /Features / Ingredients /Component /Requisites of Valid Meeting.

5. Meetings of Shareholders

 (i) AGM or GM or AM Section - 96

  (a) Meaning of AGM.

  (b) Rules regarding AGM (Statutory Provisions).

  (c) Business to be transacted at AGM.

Link : https://smckk14.blogspot.com/2023/03/cost-audit-meaning-objectives.html


1.Introduction of Company Meeting:

A company calls on the time to time the meeting of Directors, Debenture holders, Creditors, Shareholders etc. in which concerned decision relating to company are taken.

2.Meaning of Company Meeting:

Meeting means gathering of two or more persons at a certain place on the basis of pre - information to discuss on the some agenda. i. e. Gathering of two or more persons for legal purpose (s) is called “Meeting”.

3. Type /Kinds of Company Meeting:

(I) Meeting of Shareholders -

(i) Annual Meeting,
(ii) Extraordinary Meeting,
(iii) Class Meeting,

(II) Meeting of Directors -

(i).Meetings of Board of Directors,
(ii) Meetings of committee of Directors,

(III) Meetings of Creditors, Debentures holder and Contributories.

(i).Meeting of Creditors and Debentures holder otherwise than in winding up,
(ii) Meetings of Creditors and Contributories in winding up.


4. Characteristics /Essential /Features / Ingredients /Component /Requisites of Valid Meeting:

(1) Properly Convened:

It is essential that (a) All the persons i.e. members directors, auditors etc. who are eligible to present and participate, should be properly informed. (b) Meeting should be convened by those persons who are duly authorised to do so.

(2) Proper Authority:

(i) Board of Directors:

AOA of the company authorised Board of Directors to call the meeting. Even AOA has no clear provisions in this regard, the Board of Directors may call the meetings. Notice of meeting is given by secretary after permission of Board of Directors only otherwise invalid.

(ii) Members:

In special circumstances the members of the company may also demand to conduct EGM.

(iii) Central Government:

If due to any reason the company makes default in calling AGM or it is not possible for company to call the General Meeting, the Central Government itself may order to call the meeting or after obtaining application from members may order to call the meeting.

(3) Proper and Adequate Information: (Refer information of meeting under methods of meeting)

(4) Properly Constituted Meeting:

(i) Chairman, (ii) Quorum, (iii) Agenda.

(5) Properly Conducted:

(i) According to provisions of AOA and rules of Companies Act, 
(ii) Discussion in proper way, 
(iii) Decision according to proper voting, 
(iv) Resolution must be properly passed, 
(v) Minutes must be properly made.

(I) Meetings of Shareholders

(i) AGM or GM or AM Section - 96

(a) Meaning of AGM:

AGM means the meeting of members which is conducted every year under the provisions of company law.

Definition 96(1) - Every company other than and a OPC (One-person company) shall hold a General Meeting as its AGM in each year in addition to any other meetings.

The notice of such meeting must contain that this is the AGM of the company.

(b) Rules regarding AGM (Statutory Provisions):

(i) AGM must be convened once in a year.

(ii) In case of first AGM, it shall be held within 9 months from the date of closing of the first financial year and in any other case, within 6 months from the date of closing of the financial year.

(iii) If the company holds its first AGM as mentioned under (ii), its shall not be necessary to hold any AGM in the year of incorporation.

(iv) The registrar may, for any special reason, extend the time within which any AGM, other than the first AGM, shall be held, by a period not exceeding three months.

(v) Every AGM shall be called during office hours i.e. between 9 a.m. to 6 p.m. except on the national holiday and shall be held either at the registered office.

In case of unlisted company of the AGM may be held at any place in India on the basis of written consent or electronic consent by all the members.

(vi) Central government may exempt any company from this provisions subject to such condition as it may impose.

(vii) Time, date and place are to be decided by board of directors beforehand.

(viii) If company makes any error in calling AGM, the NCLT (National Company Law Tribunal) on application for any member, may call meeting itself, if it things appropriate or may order the company to call the meeting.

In such case, the NCLT, may issue necessary instruction including the instruction that in such meeting, if only one member or his /her proxy is present the meeting will be valid.

(ix) Chairman:

Generally in AOA, it is provided that the chairman of board of directors shall be the chairman of AGM. If not provided, chairman will be elected by the members present.

(x) Absence of chairman:

If the chairman does not register his presence in the meeting within 15 minutes or despite presence does not want to accept the post of chairman, the members will elect any member to act as chairman. If any director who is present but does not want to be chairman, the members present shall select any member out of them.

(xi) Notice:

At least before 21 days of AGM but if all the members having voting rights give consent for less days, AGM may be called.

(xii) Contents of Notice (101):

(a)Serial number (43/56) of meeting, (b) Information that meeting is going the be conducted, (c) Date, Place & Time,(d) Printed financial accounts and Balance Sheets, (e) Directors report, (f) Auditors report.

(xiii) Person entitled to receive Notice:

(a). Every member whose name is registered in the register of Companies,

(b) Successor of deceased member,

(c) Liquidator of insolvent member,

(d) Auditors of company

(xiv) Quorum:

Generally AOA contains the number of quorum. It cannot be less than minimum prescribed number of members provided in Companies Act. If AOA does not contain quorum, then in case of public company minimum 5, if number of members at the day of meeting is 1000 and in case of private company minimum 2.

(xv) Adjournment:

If any AGM is adjourned, only those agenda shall be considered which would not be considered in previous meeting. Such meeting must be conducted within prescribed time.

(xvi) Notice of Adjourned Meeting:

If a meeting is adjourned for twenty or more days, the members shall be informed in such a manner as in original AGM.

(xvii) Penalty:

Company and defaulting officers, Directors will be punished with up to rupees 1,00,000 and if error continuous, 5,000 per day additional.

(c) Business to be transacted at AGM:

(a) Ordinary Business (102):

(i) Considering and adopting annual accounts and balance sheet and reports of directors & auditors.

(ii) Declaration of dividend (if any)

(iii) Appointment of new directors in place of retiring directors on rotation basis.

(iv) Determining remuneration of auditor and appointment.

These business need passing of ordinary resolution.

(b) Special Business:

Any business other than ordinary business. Such special business may be transacted only if provided in AOA and members have been duly informed according to provisions of Companies Act. While informing, special business must be included in agenda.

Special business may be passed by ordinary or special resolution according to Companies Act. E.g. (i) Increase in authorised capital is special business but may be passed through ordinary resolution, (ii) Alteration in AOA is special business but may be passed through special resolution. For special business, members have to be informed according to act and resolution is passed by 3/4th or more voting.

Following are Special Business -

(i) Alteration in AOA,
(ii) Increase in authorised capital,
(iii) Appointment of Manager or Managing Director,
(iv) Alteration in MOA,
(v) Appointment of New Directors,

For ordinary business, ordinary resolution

For special business ordinary or special resolution

In addition, with regards to special business detailed note regarding the special business is to be sent. 

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