"Prevention of Oppression and Mismanagement": Under Section (241 to 246)

Key Points:

1. Introduction.
2. Meaning of Oppression.
3. Meaning of Mismanagement.
4. Who can apply to Tribunal?
5. Powers of Tribunal: Under Section (242)
6. Effects of the order of Tribunal.
7. Class Action: Under Section (245)
8. Reasons / Bases to File Application.

• Rights of Tribunal regarding Prevention of Oppression and Mismanagement Section (241)
• Consequence of Termination /Modification of Certain Agreement: Under Section (243)

 

Link : https://smckk14.blogspot.com/2023/07/winding-up-of-company-detailed.html

1. Introduction:

Members of a company control the management and its policies. It is done by majority. Directors are appointed by members to manage the affairs of the company and directors manage the company with consent of the members. Thus the majority succeed in doing those works what they want.

It creates oppression against the minority and this evil gradually spreads to the entire company which severely affect the interest of minority.

To curb this oppression /evil, there are some provisions in Companies Act, 2013 which prohibit the misuse of oppressions committed by majority and gives rights to minority to present their plea before the Tribunal to get remedy.

These provisions are given from section (241 to 246).

2. Meaning of Oppression:

Oppression is a social act of inflicting severe reactions on an individual group or institution.

Cambridge dictionary - A feeling of being very uncomfortable and worried.

Oppression is not defined in company law 2013. But the court defines it as a conduct that includes a visible departure from the standards of fair dealing and violation of conditions that require fair practice for rights of shareholders.

Oppression involves fraud, breach of duty and misconduct.

3. Meaning of Mismanagement:

Mismanagement is also not defined in company law 2013. It may be described as a control on matters of the company in unjust and dishonest matter.

It also refers the process of managing incompetently, wrongly or badly.

4. Rights of Tribunal regarding Prevention of Oppression and Mismanagement Section (241):

On submitting the application before the Tribunal, the Tribunal can exercise its powers in two conditions -

(i) In case of oppression. (ii) In case of Mismanagement.

5.. Who can apply to Tribunal?

In case of oppression and mismanagement, following members may apply to Tribunal for remedies -

(i) In case of Company with a Share Capital -

Not less than 100 members or not less than 1/10^th of the total number of its members whichever is less, or

Any member or members holding not less than 1/10^th of the issued share capital of the company.

Note - The applicant should have paid all the calls and other sums payable on shares.

(ii) In case of a company with no share capital -

Not less than 1/5^th of the total number of its members. Section (244)

Anyone or more than one members, after obtaining consent of other members, may apply on behalf of all of them. The Central Government may allow less number of applicants, if deems think appropriate under section (241)

(1) Application in Tribunal in case of Injustice -

If members complain about Injustice and the Tribunal is of the opinion that (a) The management of the company is being performed which is against public policy or unjust against anyone or more members and (b) The Order of winding up of the company shall be harmful to the interest of such members,

The Tribunal may order to rectify the related matters as it thinks fit.

Such an order is an alternative to order of winding up.

Case Laws - (i) N R Murthy Vs ID corporation of Odisha.

(ii) Elder Vs Elder and Watson Limited.

(2). Application in Tribunal in case of Mismanagement -

If members of the company, feel that -

(i) The functions of the company are against Public Interest or companies interest, or

(ii) Due to any substantial change in control of management of the company, it is possible that such change may go against Public Interest or company’s interest,

The members may apply to Tribunal for prohibiting this mismanagement.

If on the basis of such application, the Tribunal believes that there is Mismanagement in the company which may cause harm to interest of public or company, that Tribunal may pass such an order as it thinks appropriate.

Note - As provided in section (241), change made in management or control of the company, which negatively affects the interest of company, is called 'Mismanagement'. e.g. (i) Change in Board of Directors or Management, (ii) Change in ownership of shares, (iii) In case of company with no share capital, any change occurred in membership of company etc.

Case Laws - (i) V J Thomas Vs Kuttanav Rubber Company Limited.

(ii) Kumar Exporters Private Limited and Others Vs Naini Oxygen and Acetylene Gas Company Limited and Others.

6. Powers of Tribunal: Under Section (242):

(I) Power to Prevent Oppression and Mismanagement -

The Tribunal may issue orders for followings -

(i) To regularize the affairs of the company in future.

(ii) To purchase the interest or shares of the members of the company by other members or company itself.

(iii) To reduce the share capital of the company in case of purchase of shares by the company.

(iv) On termination or correction of any agreement done between the company and the following persons - (a) Managing Director, (b) Any other Director, (c) Managing Agent, (d) Secretary, (e) Treasurer and (f) Manager

(v) Agreement between company and the members who have not be mentioned in (iv) cannot be terminated or corrected as long as not informed to the concerned parties.

(vi) For cancellation of any transfer, delivery or payment of any property by the company.

(vii) For any other matter, which the Tribunal thinks justifiable under section (242).

(II) Power to Issue Interim Order -

On any application given by any person, before giving any Final Decision, the Tribunal may issue any such interim order to control the affairs, which it thinks appropriate and justifiable section (242).

7. Effects of the Order of Tribunal:

(i) Effects on MOA and AOA -

If subject to any order of the company, any changes have been made in AOA or MOA no company can make such a change which has been made in the contrary to the change made by Tribunal or the change made does not match with the change made by the company.

If the company makes any change in MOA or AOA, its information should be given by the company to the ROC within 30 days.

(ii) Effects on Managers /Officers -

If, as a result of the order of the Tribunal, agreements made with manager /officers (Managing Director, Director, Manager etc.) get cancelled or any amendments are made in the agreements and due to this amendment, any person is removed from his post, then - (a) No compensation shall be given to him and (b) He will not be appointed on same post till next 5 years.

(iii) Penalty – Under Section 242 (8)

If any company violates the provisions of section 242 (5), the company will be imposed with the penalty of minimum ₹ 1 lakh to maximum ₹ 25 lakhs and every defaulting officer of the company shall be punished with imprisonment of maximum 6 month or with fine of minimum ₹ 25000 and maximum ₹ 1 lakh or with both.

8. Consequence of Termination /Modification of Certain Agreement: Under Section (243)

(i) Where an order issued under section (242); terminates, sets aside or modified an agreement such as is referred to in sub - section (2) in that section -

(a) Such order shall not give rise to any claims whatever against the company by any person for damages or for compensation for loss of office or in any other respect either in pursuance of the agreement or otherwise.

(b) No managing director or other director or manager whose agreement is so terminated or set aside shall, for a period of 5 years from the date of order terminating or setting aside the agreement, without the leave of the Tribunal, be appointed, or act, as the managing director or other director or manager of the company.

Provided that the Tribunal shall not grant leave under this clause unless notice of the intention to apply for leave as been served on the central government and that government has been given a reasonable opportunity of being heard in the matter.

(ii) The person who knowingly violated the clause (b) of sub-section (1) and acts as a managing director or other director or manager of the company and such every director who knowingly becomes a part of such violation, shall be punishable with imprisonment for the term which may extend to 6 months of with fine which may extend to ₹ 5 Lakhs or with both.

9. Class Action: Under Section (245)

(i) If Member (s) or Depositor (s) of the company feel that the business of the company is carrying out against the interest of them, they can file an application before the Tribunal in this regard.

(ii) The Member (s) or Depositor (s) rise the demand for action against the auditor or firm of the auditor, the concerned audit firm and every defaulting partner shall be declared as responsible.

(iii) (a) In case of a company with share capital minimum 100 members of the company or any specified number of total members of company whichever is less or any member (s) who have specified person of issued share capital of the company, may make demand.

(b) In case of company with no share capital 1/5^th of number of total members.

(iv) Order issued by Tribunal shall be applicable to the company, all the members, depositors and auditor (including firm of Auditor, Expert, Consultant and Advisor) or any person of the company.

(v) Any company, who under this section fails to implement the order issued by Tribunal, it will be fined with minimum ₹ 5 lakhs and maximum ₹ 25 lakhs, and every defaulting officer of the company shall be punished with imprisonment of a term of up to 3 years, and with fine of ₹ 25000 and maximum ₹ 1 lakh or with both.

10. Reasons / Bases to File Application:

For following purposes, application may be submitted before the Tribunal -

(i) Prohibiting of the company from ultra-virus Acts of MOA and AOA.

(ii) Prohibiting of the company from violating provisions of MOA and AOA.

(iii) If any resolution have been passed by winding the important facts or by misstatements which alter the MOA and AOA, declaring such resolution void and null.

(iv) Prohibiting the company and directors to work on resolution.

(v) Prohibiting the company to do such acts which are against the provisions of Companies Act or other laws.

(vi) Any other remedy with which the Tribunal may think appropriate. 

Winding - up of a Company : Detailed Information

"Winding - up" of a Company

Key Points:

1. Meaning of Winding up of a Company.
2. Definition of Winding up of a Company.
3. Characteristics of Winding up.
4. Methods of Winding – up.
5. Petition for Winding up.
6. Commencement of Winding up by Tribunal.
7. Procedure of Compulsory Winding up /Winding up by the Tribunal.

Case Law - The New Swadeshi Mills Ahmedabad Limited vs Dye Chemicals Corporation (1985)

 

Link : https://smckk14.blogspot.com/2023/07/minutes-under-section-118-to-122.html

"Winding - up of a Company"

1. Meaning of Winding - up of a Company:

Winding up of a company is meant by a process through which the company is liquidated /ends by following the legal process. A company is an artificial person. It is created by the law and liquidates by law.

The main objective of the winding up is to distribute the surplus amount among its shareholders after the making payments of loans and liabilities from the amount received by sale of assets.

2. Definition of Winding - up of a Company:

According to M. C. Kuchhal - "The winding up or liquidation of a company is process to bring about an end to the life of a company".

3. Characteristics of Winding - up:

(i) It is a Process.

(ii) It is different from Dissolution.

(iii) Winding up is not for Insolvency of Company. A company maybe wound up, in case of sound financial position also.

(iv) This process start from sale of assets and ends with payment to creditors, loans, Government dues and at last payment to shareholders.

(v) Creditors are paid in sequential order.

(vi) The amount remaining after all payments, is distributed among in the ratio of their rights.

4. Methods of Winding - up:

According to Under Section 270, the winding up of a company may be done in any two of the following Methods /Ways -

(I) By Tribunal /Compulsory Winding - up:

When the winding up of a company is done by the Tribunal, it is known as “Winding up by Tribunal or Compulsory Winding – up” .

In following cases, the winding up of a company is done by Tribunal -

(1) By Special Resolution -

When company has passed a special resolution that the winding up of a company shall be done by Tribunal, then after passing such resolution, the winding up maybe performed due to any reason.

This is to be noted that the Tribunal considers the application of the company and passes the order of winding up only if the winding up is in the interest of the public or the company.

(2) Not filing Annual Returns /Statements -

If the company fails to submit the financial statement or annual returns of last five consecutive years, the Tribunal may be winding up the company.

(3) Business acts against Public Policy -

If the company has acted against the interest of the sovereignty and integrity of India, the security of the state, friendly relations with foreign States, public order, decency and morality.

(4) If on an application made by Registrar or any other person authorised by the central government by notification under this Act, the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner of the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation of management of its affairs have been guilty of fraud, misfeasance and misconduct in connection therewith and that is proper that of company be wound up.

(5) Under the Chapter XIX -

If the Tribunal has ordered the winding up of the company under the chapter XIX.

(6) Inability to Pay Debts -

The Tribunal may order for winding up, if the company is unable to pay its debts.

Under following conditions, the company is deemed to unable to pay its debts -

(i). When the creditor of ₹1,00,000 or more, demands for return of loan and the company deposit pay within 21 days from the date of demand or could not convince the creditor.

(ii) When the company becomes unable to pay the Decree either fully or partially issued by Tribunal in favour of company.

(iii) Upon seeing all the circumstances, the Tribunal gets satisfied that the company is unable to pay its debts, the Tribunal passes the order of winding up.

Case Law - The New Swadeshi Mills Ahmedabad Limited vs Dye Chemicals Corporation (1985).

(7) If winding up is just and equitable in the opinion of Tribunal -

Generally, the Tribunal considers the following conditions as just and equitable -

(i). When the attainment of main objective, for which the company was formed, becomes impossible or impractical.

(ii) When the company has lost its substratum.

(iii) If the company is running in loss for several years and there is no hope for profit in future.

(iv) If the company has been formed for illegal or fraudulent purposes.

(v) When it becomes impossible to run the company due to lock down, Strike etc.

(vi) If minority shareholders are facing oppression.

(vii) If company is a shell company.

(viii) If the company has lost all its capital.

(ix) If AOA provides the provisions happening upon which the company may be compulsory wound up, and anyone or more of the such provisions have already happened.

(x) If overall inspection of the company becomes necessary.

(xi) On fear of incidents against Public Interest.

(xii) If there is mismanagement in the company and the members have lost their confidence on each other.

5. Petition for Winding - up:

According to Under Section 272, the following persons may be file petition in the court for winding up by Tribunal or for compulsory winding up -

(i) By Company Itself -

A company may file petition for compulsory winding up by passing special resolution in general meeting, in this regard.

(ii) By Creditor (s) of the Company -

Creditors is a comprehensive word which includes present, future or contingent creditors also. A secured creditor, debenture holders and Trustee of debenture holders are also included in this category.

(iii) By Contributory (ies) -

Contributories of the company may also file petition for compulsory winding up of the company. But they can do so only when - (i) They are the owner of fully paid up shares, or (ii) Company has zero assets, or (iii) There is no assets remaining to be distributed among shareholders, after payment of liabilities.

A contributory may file petition for compulsory winding up in following circumstances only -

(a) If company has ownership of shares less than required as minimum, or

(b) If he is the original allottee of shares or the shares have been required at least up to before 6 months before the 18 months of starting the process of winding up, or

(c) If he has received the shares on the basis of succession after the death of the original shareholder.

(iv) By ROC -

ROC may file petition in the situation when the company is not able to pay its debts and as long as it is not clear to him on the basis of report of an investigator regarding the investigation of financial position of the company.

The ROC must have to take permission of Central government to file petition and the central government shall not give permission until the company was not allowed to present its stake.

(v) By Central Government -

If the Central Government on the basis of report of investigators believes that -

(a) Business of the company is being carried out to form the creditors or members.

(b) Company is being managed for illegal or fraudulent matters, the central government may direct any person (include ROC) to file the petition.

(vi) By Liquidator -

If company is going under voluntary winding up, the liquidator may file petition. The Tribunal will order for compulsory liquidation when it becomes satisfied that keeping the interest in mind, the interest of creditors or members or both the voluntary liquidation is not possible.

6. Commencement of Winding - up by Tribunal:

(i) From the date of passing the resolution by the company -

If the company passes the resolution regarding voluntary liquidation in General Meeting before filing the petition in the Tribunal, the commencement of liquidation is deemed to have been started from the date of passing the resolution.

As long as, the Tribunal, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.

(ii) From the date of representing the application form -

In all other cases, the winding up of a company by the Tribunal shall be deemed to commence at the time of present presentations of the petition for the winding up.

7. Procedure of Compulsory Winding up /Winding up by the Tribunal:

(i)  Application -

By the company itself, creditors, contributories, members /shareholders, Registrar or liquidator to Tribunal.

(ii) Considering of Application by Tribunal -

It is a solely on Tribunal whether it accepts the application for consider or not. If accepted, further process starts and if rejected, no process is initiated.

(iii) Publication in Gazette -

Application is published in gazette which contains the date of hearing.

(iv) Advertisement in Newspapers -

At least before 14 days before the hearing date.

(v) Application for Cessation of Winding up -

After submission of application for compulsory winding up but before issue of order of winding up, an application by the company or creditor, member may be submitted in Tribunal at any time.

(vi) Hearing on Application - 

The Tribunal hears the presentations of directors, creditors or members.

(vii) Order after Hearing -

After hearing, the Tribunal may issue any of the following orders -

(a) May accept the application with or without expenses.

(b) May adjourn the hearing with or without imposing any condition.

(c) If thinks appropriate, may issue interim order.

(d) If thinks appropriate, may issue the order of compulsory winding up with or without cost.

(viii) Not Issuing the order of Winding up -

If the application is submitted before Tribunal on the basis of 'Just and Equitable' approach, the Tribunal shall reject the issue of order of winding up, if it thinks that the company maybe compulsorily wound up on any other grounds.

(ix) Other Order to Call Statutory Meeting or giving Report -

If application for winding up is made on the ground that the company has been failed to call statutory meeting or submitting statutory report, the Tribunal may order to call the statutory meeting or to present statutory report.

Any defaulting person shall be ordered to pay the expenses incurred.

(x) Appointment of Liquidator -

When Tribunal passes order of winding up, it also appoints a liquidator and this information is sent to the person so appointed as liquidator and ROC both. 

Minutes Under Section (118 to 122): Detailed Information

"Minutes" Under Section (118 to 122)

Key Points:

1.Meaning of Minutes of Meeting.
2. Statutory Provisions Regarding Minutes.
3. Contents of Minutes.

 

Link : https://smckk14.blogspot.com/2023/07/voting-us-47-proxy-us-105.html

Minutes Under Section (118 to 122):

1.Meaning of Minutes of Meeting:

Minutes of meeting have nothing to do with time. It has come from Latin word ‘minuta scriptura’ that means ‘Small Notes’. i.e. Minutes are notes which are recorded in any meeting.

The details recorded in the form of notes contain discussions and decisions taken in the meeting. Minutes work as a base for future reference. It is a legal document.

This is separate register to take notes which is known as 'Minute Book'.

Every meeting like shareholders meeting, Board meeting, Creditors meeting etc. should have different Minutes Books.

2. Statutory Provisions Regarding Minutes:

(i) Compulsory - Within 30 days. Register should be serially numbered.

(ii) Signature – (a) Sign on every page and at last page, signature with date.

(b) In board meeting or committee of board meeting, signed by Chairman.

(c) In case of AGM, within 30 days by Chairman. But if Chairman becomes physically disabled or in case of death, any person authorized by board may sign.

(iii) Not to attach /paste /annex /staple the minutes in register.

(iv) Correct and suitable summary.

(v) Mention of appointment of officers.

(vi) Inappropriate details not to be written.

(vii) Attendance - Information about absent members.

(viii) Legal Proof.

(ix) Penalty - Up to ₹ 5000 on company and every officer.

(x) Publication of ATR.

(xi) Inspection of Minutes book of General Meeting –

(a) Keep in registered office.

(b) Open for inspection of member for at least 2 hours daily free of cost.

(c) Any member, by submitting application, copy of minutes may receive subject to prescribe charge. Copy must be given within 7 days.

(d) If any member is prohibited to inspect the minute book or does not receive copy within 7 days, the company and every defaulting officer may be punished with penalty.

(e) If company prohibits any member or does not provide minutes copy within 7 days, the member may file a suit in court.

3. Contents of Minutes:

(i) Type of minutes e.g. AGM, EGM, Board of Directors meeting etc. along with date, time and place.

(ii) Names of Chairman, Directors present, Secretary, Auditors etc. in case of AGM, number of members present.

(iii) Resolution passed.

(iv) Names of directors against the resolution in case of Board meeting.

(v) Decisions in order as given in Agenda.

(vi) Resolution which could not be passed.

(vii) Objectives raised by members and decision of chairman in this respect.

(viii) Names of members boycotted the meeting.

(ix) Names of members who were given permission to go out of meeting room.

(x) Names of members forcibly expelled.

(xi) Names of appointed officers and employees.

(xii) Number of votes in favour and against the resolution.

(xiii) Instructions given by the members to directors and secretary etc.

(xiv) Signature of Chairman with date. 

Voting: U/s (47) & Proxy: U/s (105)

Key Points:

1. Voting Rights
2. Polling Methods.
3. Demand for Poll Counting Under Section (109).
4. Time of Poll.
5. Postal Ballot: Under Section (110).
6. Meaning of Proxy U/s (105)
7. Statutory Provisions Regarding Proxy.

 

Link : https://smckk14.blogspot.com/2023/07/quorum-under-section-103-resolution.html

Voting: Under Section (47)

1. Voting Rights:

(i) Voting Rights in case of Equity Shareholders -

Every member who has equity share has the right to vote on every resolution in the meeting of the company.

(ii) Voting Rights for Preference Shareholders –

Preference Shareholders have limited voting rights. A preference shares has the voting rights only if a resolution affects his rights. He will have proportionate voting rights on the basis of his share in paid up preference share capital.

Following Resolution directly affect the Rights of Preference Shareholders -

(a) In case of liquidation of company.

(b) Rate of change in dividend.

(c) Change in repayment period of capital.

(d) Agreement or rearrangement of company including amalgamation.

(e) Redemption or repayment of his share capital.

(iii) Preference Shareholders are entitled to vote on any resolution passed or moved in a meeting if on such preference shares, dividend for two or more years are in arrears.

(iv) Section 47 shall not apply to a private company where MOA or AOA of the company so provide.

2. Polling Methods:

(i) By Acclamation of Voice - (Aye, No) -

This method is used when decision is expected unanimously or almost unanimously.

(ii) By Show of Hands -

Most used method. One member can cast only one vote irrespective of his shareholding. If authorised by AOA, proxy may also vote in this method.

(iii) By Division -

In this method, to know the consent of members, the Chairman divides them into two categories.

(iv) By Ballot.

(v) By Electronic means U/s 108 -

This method is made available by Central Government to certain class of companies.

3. Demand for Poll Counting Under Section (109):

Chairman of the meeting may, at his own will or on demand of members, may order for counting. Demand for counting maybe raised before or after declaration of result by show of hands.

In following conditions, it is compulsory for the Chairman to order for counting -

(a) In case of Public company, on demand of 5 members present physically or proxy, who have right to participate in meeting.

(b) In case of Private company, if demand made by one member or one proxy, and number of members present is 7 or less. If number of present members is more than 7, and 2 members demand for poll.

(c) On demand of members present who have at least 10% of total voting power.

(d) According to companies (amendment) Bill, 1987, owner (s) of at least 50000 shares may also demand either present or proxy.

(e) On demand of members present who have at least 10% of total paid up capital.

4. Time of Poll:

If demand for poll made regarding adjourned or election of Chairman, arrangement of counting to be made at once. In other matters within 48 hours.

5. Postal Ballot: Under Section (110):

(i) Regarding those matters, in which Government of India permits.

(ii) In other matters, the ordinary business in which director's may take the decisions. Such transaction made be dealt by postal ballot in place of passing in General Meeting.

(iii) If in any resolution, consent is given by required majority of shareholders through postal ballot, the resolution shall be considered as duly passed in General Meeting called for this purpose.

(iv) Circulation of Member’s Resolution under section (111)

(v) Restrictions on Voting Rights under section (106)

(vi) Rights of member to use his votes differently.

(vii) Matter of taking Poll and Scrutiny of Poll.

Proxy: Under Section (105):

6. Meaning of Proxy U/s (105):

Proxy is a person appointed by a member to attend and vote at a meeting in the absence of member.

Proxy also refers to the instrument by which a person is appointed as proxy.

A proxy is not entitled to speak in meeting.

7. Statutory Provisions Regarding Proxy:

(i) To be appointed by a member -

Proxy need not be member of the company.

In the following conditions, provisions of proxy is not applicable, unless otherwise provided by AOA -

(a) Member of the company without share capital has no right to appoint proxy.

(b) Member of a private company cannot appoint more than one proxy in one meeting.

(c) Proxy has power to vote in the meeting in which counting of votes is required.

(d) Member of a public company may appoint more than one proxy, if that member has right to give more than one vote in the meeting.

(ii) Description of appointment of proxy in notice of meeting under section 105 (2) -

Notice of meeting must contain the statement that a member who is entitled to attend and vote in the concern meeting may appoint a proxy, and that the proxy need not be a member of company. The statement must appear with reasonable prominence in the notice.

This is applicable to companies having a share capital, or those companies whose articles permit voting through proxy. A member of a company can only appoint another member of the same company as a proxy.

Any violation with requirement of the statement in the notice of meeting would attract penalty of ₹ 5000 on each defaulting officer of company.

(iii) Period of submitting the form of proxy under section 105 (4) -

Any provisions contained in AOA which specifies or require a longer period than 48 hours before meeting, for depositing with the company or any other person any instrument appointing a proxy or any other document necessary to show the validity or otherwise relating to the appointment of a proxy in order that the appointment maybe effective at such meeting, shall have effect as if a period of 48 hours had been specified in or required by such provisions for such deposit.

(iv) Inviting any person to be appointed as proxy is punishable -

If, for meeting, invitation to appoint as proxy, a person or one of persons specified in the invitations are issued at expenses of company to any member entitled to have a notice of the meeting sent to him and to vote there at by proxy, every office who issues invitation or permits their issue shall be liable to penalty of rupees 15000.

An officer shall not be liable by reason only of the issue to a member at his request in writing of a form of appointment naming the proxy, or of a list of persons willing to act as proxies, if the form or list is available on request in writing to every member entitled to vote at the meeting by proxy.

(v) Proxy form must be written and signed -

The institution appointing a proxy shall -

(a).be in writing and (b) be signed by the appointer or his attorney duly authorised in meeting or, if the appointer is a body corporate, be under its seal or be signed by an officer or attorney duly authorised by it.

(vi) Format of proxy form should be as per schedule II.

(vii) Inspection of proxy form -

Each member who has Right to Vote, may inspect the proxy forms before 24 hours of beginning the meeting till the end of meeting, during business hours, if he has informed the company in this respect to the company at least before 3 days of meeting.

(viii) Other Provisions -

(a) First right to vote belongs to shareholder –

If member and his proxy both present in the meeting. If proxy votes in presence of member, it will be treated as the member had no objection.

(b) Vote by proxy on insanity or death of the member is valid –

Valid only if the company has not any information regarding insanity or death of member.

(c) Rights of proxy representing the company –

If a company is the member of another company, it can appoint its proxy to present and vote in the meeting. Such proxy has right to speak in addition to voting.

(d) Proxy appointed by the president or governor is considered as a member –

Such proxy can appoint any person as his proxy.

(e) A person cannot be appointed as proxy for more than one meeting under one proxy form. i.e. for different meetings, different proxy forms to be submitted in the company. 

Quorum: Under Section (103) & Resolution/Motion: Under Section (114 to 117).

Key Points:

A. Quorum Under Section (103): Rules & Regulations.
B. Resolution / Motion: Under Section (114 to 117)
1. Meaning of Resolution / Motion.
2. Types of Resolution.
   (A) Ordinary Resolution.
3. Business (matters) considered with Ordinary Resolution.
   (B) Special Resolution.
4. Business (matters) with Special Resolution.
5. Resolution Requiring Special Notice.
6. Procedure for Special Notice.

Link : https://smckk14.blogspot.com/2023/07/meetings-of-creditors-debenture-holders.html

 

A. Quorum U/s (103): Rules & Regulations

1. Unless the AOA provides for a large number -

(a) In case of Public Company -

(i) 5 members personally present if number of members as on the date of meeting is not more than 1000,

(ii) 15 members personally present if number of members as on the date of meeting is more than 1000 but up to 5000,

(iii) 30 members personally present if number of members as on the date of meeting exceeds 5000.

(b) In case of Private Company, two members personally present.

2. If Quorum is not present within 30 minutes from the time appointed -

(a) The meeting shall stand adjourned to the same day in next week at same time and place, or to such other date and such other time and place as the board may determine, or

(b) The meeting, if called by requisitions under section (100), shall stand cancelled.

Provided that in case of an adjourned meeting or of a change of day, time or place of meeting under clause (a), the company shall give not less than 3 days' notice to the members individually or by publishing an advertisement in newspapers (one in English and one in vernacular, any) which is in circulation at the place where the registered office of the company is situated.

3. If at the adjourned meeting also, quorum is not present within 30 minutes from the time appointed, the members present shall be the quorum.

While calculation of quorum, proxy is not considered. AOA may determine the quorum but not less or more than provisions of Companies Act.

Exception - In following case, quorum will be accepted as it is -

(i) Meeting called by Central Government.

(ii) Class Meetings.

4. Quorum for meeting of Board of Directors -

If otherwise provided in AOA, 1/3rd of total directors or 2 directors, whichever is more shall be the quorum.

B. Resolution / Motion: under section (114 to 117):

1.Meaning of Resolution / Motion:

When a proposed resolution or motion is accepted with required majority of shareholders, it converts into resolution. i.e. Accepted motion is resolution.

2. Types of Resolution: Under section (114 to 115):

(A) Ordinary Resolution:

When a resolution is passed by simple majority of votes, it is called "Ordinary Resolution".

A resolution shall be an ordinary resolution in the notice required under this Act has been duly given and it is required to be passed by the votes cast, whether on a show of hands, or electronically or on a poll, as the case maybe, in favour of the resolution including the casting vote, if any, of the Chairman, by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy or by postal ballot, exceed the votes, if any, cast against the resolution by members, so entitled and voting.

If provided in articles, information about passing Ordinary Resolution to members is essential otherwise not ordinary resolution are passed in General Meetings and notice in this regard is sent at least before 21 days but there is no motion about Ordinary Resolution in the notice.

In case of statutory General Meeting, all the resolution to be passed must be pre-informed to the members whether it is ordinary resolution or special resolution.

3. Business (matters) considered with Ordinary Resolution:

(I) Ordinary Business -

(i) Adoption of final accounts of company.
(ii) Adoption of reports of directors and auditors.
(iii) Declaration of Dividend.
(iv) Appointment of auditor and determining their remuneration.
(v) Appointment of new directors in place of retiring directors.

(II) Special Business -

(i) Accepting a statutory report.
(ii) Issue of shares at discount.
(iii) Alteration in share capital.
(iv) Increase or decrease in number of directors as given in AOA.
(v) Removal of Director.
(vi) Appointment of sole selling agent.
(vii) Authorizing directors to sell the business of company.
(viii) Voluntary winding up in specific cases.
(ix) Any other business according to provisions of AOA.

(B) Special Resolution -

A resolution is known as "Special Resolution", when -

(i) In the notice of General Meeting, it has been clearly mentioned that this (such) resolution shall be presented with intention of being Special Resolution.

(ii) Notice of General Meeting has been sent in according to Companies Act, (21 days before).

(iii) 3/4th or more votes must be in favour of resolution.

There is no provisions for vote of Chairman. A copy of Special Resolution must be sent to the ROC within 30 days of passing it.

4. Business (matters) with Special Resolution:

(i) Alteration in MOA.

(ii) Alteration in AOA.

(iii) Creation of Reserve capital.

(iv) Redemption in share capital.

(v) Keeping registers and returns at another place other than registered office.

(vi) Appointment of sole selling agent for the company having paid up capital of rupees 50 lacks or more.

(vii) Payment of interest out of capital.

(viii) Determining the liability of directors or other officers of the company.

(xi) To demand for investment.

(x) Providing a director any office of profit.

(xi) For appointment or reappointment of auditors, if the government or public financial institution have ownership on 25% or more in subscribed share capital.

(xii) Granting of loan to the companies come under same management.

(xiii) To apply in the court for compulsory liquidation.

(xiv) Determining remuneration of directors (if given in AOA)

(xv) For voluntary liquidation.

(xvi) Implement of Table 'F' of Scheme I.

(xvii) In case of voluntary liquidation, giving right to accept the share of other companies in return to sale of assets of company.

(xviii) Alteration in rights of any Class of shareholders.

(xix) Alteration in basic structure of company.

(xx) Any other business, for which, special resolution is compulsory as provided in AOA.

5. Resolution Requiring Special Notice:

When members of a company want to move any resolution in a General Meeting then members with prescribed (1%) voting power of shares, give notice to the company at least 14 days before the date of the meeting at which the resolution is to be moved. Such notice by members to the company is called "Special Notice".

6. Procedure for Special Notice:

(i) Signing of special notice

(ii) Notice to the company

(iii) Receipt of notice

(iv) Publication of notice -

If it is not practicable to give the notice in same manner as it gives notice of any General Meeting, the notice shall be published in English and vernacular language, newspapers, both have wide circulation in the state where registered office of the company is situated.

Such notice shall also be posted on the website of company. The notice shall be published at least 7 days before the meeting, exclusive of the day of publication of the notice and day of the meeting.

Special Notice can be given by such number of member (s) -

(i) Holding not less than 1% of total voting power, or

(ii) Holding shares on which an aggregate sum of not less than rupees 5 lakh has been paid up on the date of the notice.

Special Notice Shall be sent by members to the company not earlier than 3 months but at least 14 days before the date of meeting at which the resolution is to be moved.

After receipt of Special Notice, the company shall give its members the notice of resolution at least 7 days before the meeting.