Company Law Solved Paper May' 2018 Semester Exam
Dibrugarh University B.Com 4th Semester
Time: 3 hours
(Company Law)
(NEW COURSE)
Full Marks: 80
Pass Marks: 24
a. A public company is required to have minimum Rs. Nil as paid-up capital.
b. After registration of the company, the memorandum becomes a principal document.
c. Quorum, for General Meeting for a public company is 30 members personally present, if the total numbers of members as on the date of meeting is more than 5000.
d. The maximum number of directors in a public company is 15 as per the provision of the Companies Act.
2. Write True or False: 1x4=4
a) Under Sections 5(1) and 7(1) of 2013 Act, it is not compulsory for every company to have its own articles. True
b) A company can become a member of another company. True
c) Member’s voluntary winding-up takes place only when the company is insolvent. True
d) Only Board of Director can convene an Extraordinary General Meeting. True
3. Answer any four of the following questions: 4x4=16
a) Write the disadvantages of a private company.
Ans: Disadvantages of private company:
a) Limited capital: Since maximum number of members in a private company is 200, therefore financial resources of a private company are limited.
b) No transferability of shares: Shares of a private company are not transferable.
c) No valuation of investments: Since shares of private companies are not listed in stock exchange, therefore it is not possible for a shareholder to determine the value of his investments.
d) Lack of confidence by public: Public prefers to invest in government company or public company. The have little confidence in private companies.
b) When a company does not require to issue a prospectus?
Ans: In the following cases no prospectus is issued:
a) A Private company is not required to issue prospectus.
b) A public company, which does not raise its capital by public issue, need not issue a prospectus. In such a case a statement in lieu of prospectus must be filed with the Registrar 3 days before the allotment of shares or debentures is made. It should be dated and signed by each director or proposed director and should contain the same particulars as are required in case of prospectus proper.
c) No prospectus is issued in case of issue of sweat equity shares.
d) No prospectus is issued in case of private placement of shares.
c) What are the objects of holding the Annual General Meeting?
Ans: As the term denotes, annual general meeting is the meeting under section 96 which has to be held annually. It is the meeting of the members through which they get the opportunity to express their views on the management of the company. Through this meeting, the shareholders can exercise control over the affairs of the company. The ‘Annual General Meeting’ is sometimes called ‘”Ordinary General Meeting” as it usually deals with the so-called ‘Ordinary Business’.
The main purpose (Objectives) to hold these meetings are:
a) To submit the annual account, balance sheet, director’s report and auditor’s report.
b) To declare the dividend.
c) Special business- any other business to be transacted will be deemed special business likes:
d) To increase share capital
e) To alter Article of Association
f) To appoint auditors and fix their remuneration.
g) To elect directors are that liable to retire by rotation.
d) What is the role of a Company Secretary as a coordinator?
Ans: The Company Secretary as a co-coordinator has an important role to play in administration of the company’s business and affairs. It is for the secretary to ensure effective execution and implementation of the management policies laid out by the Board. The position that the company secretary occupies in the administrative set-up of the company makes his function as one of co-coordinator and link between the top management and other levels. He is not only the communicating channel between the Board and the executives but he also co-ordinates the actions of other executives vis-a-vis the Board.
The ambit of his role as a co-coordinator also extends beyond the Company and he is the link between the Company and its shareholders, the society and the Government. Thus, the role of a company secretary as a co-coordinator has two aspects, namely internal and external. The internal role of a co-coordinator extends to the Board including the Chairman and Managing Director, various line and staff personnel, the trade unions and the auditors of the company. His role as an external co-ordinator extends to the relationship of the company with shareholders, Regulators, Government and Society.
e) What are the differences between a member and a shareholder?
Ans: Distinction between a member and a shareholder
| Basis | Member | Shareholder |
| Registration | A registered shareholder is a member. | A registered member may not be a shareholder |
| Shares | A person may be a member without holding shares. | No person can be a shareholders without holding shareholders. |
| On the Death of member | A legal representative may not be a member until he applies for registration | The legal representative remains a shareholder though his name does not appear on the register |
| Share warrant | Holder of share warrant is not a member his name is struck off | A person who owns a share warrant is a shareholder |
| On subscription | A person who subscribes to the MOA immediately become the member | When the shares are allotted to the subscriber they become shareholder. |
f) What is meant by share qualification of a director?
Ans: Qualification shares are those which a director must own for appointment as a director in a company. A director must posses qualification shares within 2 months from the date of appointment and the value of such share must not exceed Rs. 5,000. According to the section 270, the directors of the company may require to hold certain share in the company to be eligible to become director in the company such shares are called qualification shares. However, directors of private companies and directors appointed by the central government are not require to hold qualification shares.
4. (a) What do you mean by Articles of Association? Distinguish between Articles of Association and Memorandum of Association. 4+10=14
Ans: Articles of Association: The Articles contain rules and regulations for the internal management of the company. They are framed with the object of carrying out the aims and object of the memorandum of association and also to monitor that the same are carried as prescribed.
Section 2 (5) of the Companies Act, 2013 defines articles as “Articles means Articles of Association of a company as originally framed or altered from time to time in pursuance of any previous law or of this act including so far as they apply to the company the regulations contain as the case may be in Table A to Schedule I of this act”
The Model contents of the Article of association are as under:
a) the business of the company;
b) the amount of capital issued and the classes of shares into which the capital is divided; the increase and reduction of the share capital;
c) the rights of each class of shareholders and the procedure for variation of their rights;
d) the execution or adoption of a preliminary agreement, if any;
e) the allotment of share; calls and forfeiture of shares for non – payment of calls;
f) transfer and transmission of shares;
The difference between Memorandum of Association & Article of Association is given here:
| BASIS OF DISTINCTION | MEMORANDUM OF ASSOCIATION | ARTICLE OF ASSOCIATION |
| MEANING | It is a charter of a company .It sets the constitution .It defines limits ,powers and objects of the company | It contains rules and regulation for the internal management of the company |
| OBJECTIVES | It governs relationship with the external world i.e. creditors, sellers, buyers & debtors | It governs internal relationship between the members of the company. |
| STATUS | It is the primary document. It is the foundation of the company. | It is the secondary document & it is based on the memorandum of association. |
| ALTERATION | It is an unalterable document. Alteration can only be done by the permission of court | It can be stitched according to the management a resolution is to be passed and it is within the limits of Memorandum of Association |
| Ultra Vires Actions | It lays down the boundaries beyond which a company cannot work. All such acts are illegal and they are called ultra vires acts. | The articles are controlled by the memorandum Within it the shareholders and the directors may make such regulations as they feel fit for internal management. |
Or
(b) Explain the procedure of alteration of the (a) name clause and (2) registered office clause of memorandum of a company. 7+7=14
Ans: ALTERNATION OF MEMORANDUM (Sec. 13 of the Companies Act, 2013)
1. Alteration of name: A company may change its name at any time by passing a special resolution and with the prior approval of the Central Government. The company shall file with the registrar a copy of special resolution and a copy of the order of the central government approving the change of name. The registrar shall enter the new name of the company in the register of companies and issue a fresh certificate of incorporation to the company. The change in the name shall become complete and effective from the last date of issue of fresh certificate of incorporation. However, it should be noted that no approval of central government will be required if the change consists merely addition or deletion of the word “private” consequent on the conversion of a public company into a private company or vice versa.
2. Alteration of registered office clause: A company may change the place of its registered office from one state to another state by passing a special resolution and obtaining approval of central government. For obtaining the approval of central government (CG), the company shall make an application to CG in such form and manner as may be prescribed. CG shall dispose of the application within 60 days. Before passing any order, CG shall satisfy itself that the creditors and lenders have consented to such alterations. After obtaining the approval, the company shall file with the registrar a copy of special resolution and a copy of the order of the central government approving the change of the address. The registrar shall enter the new address of the company in the register of companies and issue a fresh certificate of incorporation to the company. The change in the address shall become complete and effective from the last date of issue of fresh certificate of incorporation.
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Also Read: Company Law Question Papers (Non-CBCS Pattern)
Also Read: Company Law Question Papers (CBCS Pattern)
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Also Read: Company Law Solved Question Papers (CBCS Pattern)
5. (a) Who can be a member of a company? Can the following parties become member of a company? Explain. 4+10=14
1) Minor.
2) Company.
3) Partnership Firm.
4) Foreigner.
5) Insolvent.
Ans: Who is a Member of Company?
The members of a company are the persons who collectively constitute the company as a corporate entity. Section 2(55) of the companies Act, 2013 defines a member as:
a) The subscription to MOA of a company shall be deemed to have agreed to become members of the company and on its registration, shall be entered as members in its register of members.
b) Every other person who agrees in writing to become a member of a company and whose name is entered in the register of members shall be a member.
c) Every person holding equity share of a company and who name is entered ass beneficial owner in the records of the depository shall be deemed to be the member of the company.
Capacity of parties to become a member of a company
Any person who is competent to contract may become the member of the company as per the provision of Memorandum and Articles of Association of the company. Provisions of the Companies Act, 2013 for various categories of person are given below:
1. Minor: If the company allots shares to a minor in ignorance of minority, following consequences shall follow:
a) The minor shall not be liable to pay any calls remaining unpaid on the shares held by him.
b) The guardian cannot be compelled to pay the calls due on the shares held by a minor.
c) The minor can repudiate the allotment made to him. The company can repudiate the allotment made to the minor. The minor shall be entitled to receive back the money paid by him.
d) On attaining majority, the minor does not automatically become a member in a company.
e) If on attaining majority, the minor does anything which shows that he has accepted the membership, the minor shall be henceforth deemed to be a member.
2. Company: A company can become a member of any other company only if it is specifically authorized by the memorandum to purchase shares of any other company. A subsidiary company cannot become a member of its holding company (Sec. 19 of the Companies Act, 2013)
3. Partnership firm: A firm is not a legal person. It cannot hold property in its own name; the property is held in the name of the partners on behalf of the firm. Therefore, a firm cannot become a member in a company. However, a partnership firm may become a member in a company licensed u/s 8 of the Companies Act, 2013.
5. Foreigner: A foreigner can become a member in a company by complying with the requirements of Foreign Exchange Management Act, 1999. In case a war breaks out with foreign country, the foreigner cannot enforce any right available to the members.
5. Insolvent: The shares of the insolvent vest in the official assignee or the official receiver, as the case may be. However, an insolvent continues as a member until his shares are sold by the official assignee or the official receiver, as the case may be. Until an insolvent discharged, he cannot become a member.
Or
(b) Discuss the rights and powers of a Company Secretary. Are there any restriction on the power of a Company Secretary? 10+4=14
Ans: Rights of the Company Secretary: Company Secretary is a senior level officer. He enjoys the rights as per the agreement signed by him with the Company. Some rights areas follows:
a) As a senior level officer Company Secretary can supervise, control and he can direct subordinate officers and employee.
b) A Company Secretary can sign any contractor agreement on behalf of the company as a principle officer of a company, subject to the delegation of power by the board of the company.
c) Company Secretary can issue guidelines for the employees on behalf of the company.
d) Company Secretary can attend meeting of shareholders and the meeting of board of directors.
e) During Winding up he can claim his legal dues as a preferential creditor of a company.
f) He can sign and authenticate the proceeding of meetings (Board, Annual general or extra ordinary general meeting) and other documents on behalf of the company where common seal is not required.
g) Company Secretary is a Compliance Officer and he has a right to blow whistle whenever he finds the conduct of the officers or of the directors of the company are detrimental to the interest of the company.
Duties of the Company Secretary
The duties of a company secretary are classified under the following heads:
A) General Duties: General duties of a company secretary are given below:
(1) To provide to the directors of the company, collectively and individually, such guidance as they may require, with regard to their duties, responsibilities and powers;
(2) To facilitate the convening of meetings and attend Board, committee and general meetings, and maintain the minutes of these meetings;
(3) To obtain approvals from the Board, general meetings, the Government and such other authorities as required under the provisions of the Act;
(4) To represent before various regulators, Tribunal and other authorities under the Act in connection with discharge of various functions under the Act;
(5) To assist the Board in the conduct of the affairs of the company;
(6) To assist and advise the Board in ensuring good corporate governance and in complying with the corporate governance requirements and best practices; and
(7) To discharge such other duties as may be assigned by the Board from time to time;
(8) Such other duties as have been prescribed under the Act and Rules.
B) Statutory Duties: Apart from general secretarial duties with regards to organizing Board and general meetings, keeping minutes of meeting, recording approved share transfers, corresponding with directors and shareholders, maintaining statutory records, filing necessary returns with Registrar of Companies etc., the Companies Act, 2013 has also prescribed some duties and authorities, which are as follow:
1. Declaration regarding compliance with requirement of registration: In terms of section 7(1)(b) of the Companies Act, 2013, a company gets incorporated by submitting memorandum and articles duly signed along with a declaration in a prescribed form that all requirements of Act and rules have been complied with in respect of registration of company. Such declaration in prescribed form can be signed by an Advocate, a chartered accountant, cost accountant or company secretary in practice who is engaged in the formation of the company and by a person named in the articles as a director, manager or secretary of the company.
2. Authentication of documents, proceedings and contracts: A document or proceeding requiring authentication by a company or contract made by or on behalf of a company must be signed by any key managerial personnel or an officer of the company duly authorized by the Board in this behalf. However, in case of a company does not have a common seal, the requirement of law would be complied with if the authorization is done by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary.
3. Signing share certificate: Share certificates of the company should be signed by two directors (out of which one should be Managing Director or whole time director, if appointed) and Secretary or other person authorized by Board.
4. Signing annual return: Annual return to be filed with Registrar of Companies has to be signed by a director and Company Secretary. If Company does not have Company Secretary, the return can be signed by company secretary in practice.
5. Signing of financial statements: The financial statement, including consolidated financial statement is to be signed on behalf of the Board by the chairperson of the company where he is authorised by the Board or by two directors out of which one shall be managing director, if any, and the Chief Executive Officer, the Chief Financial Officer and the company secretary of the company, wherever they are appointed.
6. Appear before NCLT: A Company Secretary can appear before National Company Law Tribunal (NCLT) on behalf of the company.
7. Secretary as Compliance Officer of listed company: As per clause (1) of Regulation 6 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a listed company is required to appoint the company secretary to act as ‘Compliance Officer’, who will be responsible for the following:
(a) ensuring conformity with the regulatory provisions applicable to the listed entity in letter and spirit.
(b) co-ordination with and reporting to the Board, recognised stock exchange(s) and depositories with respect to compliance with rules, regulations and other directives of these authorities.
(c) ensuring that the correct procedures have been followed that would result in the correctness, authenticity and comprehensiveness of the information, statements and reports filed by the listed entity.
(d) monitoring email address of grievance redressal division as designated by the listed entity for the purpose of registering complaints by investors.
8. Demat shares: Secretary has to coordinate between depository and stock exchange in case of demat shares.
9. Additional duties: In addition to statutory duties of company secretary, he is often entrusted with additional duties like looking after legal matters, personnel matters, finance and sometime even general administration.
10. Nodal Officer: Company secretary has to perform duty of nodal officer under IEPF Rules. He shall verify all applications filed to reclaim shares from IEPF.
Restrictions on the powers of a Company Secretary
a) A Company secretary cannot enter into contract on behalf of the company if he is not authorised to do so by the board of directors.
b) A company secretary cannot allot shares and no right to register transfer of shares if he is not authorised by the board of directors to do so.
c) A company secretary cannot call meeting of creditors and debenture holders.
d) A company secretary cannot borrow money in the name of the company. If he borrow money , then he will be personally liable for such borrowings.
e) A company secretary cannot acknowledge a debt against a suit against company.
6. (a) What is Extraordinary General Meeting? Who may convene such a meeting? What are the needs for holding such meeting? 3+4+7=14
Ans: Extraordinary General Meeting: Every general meeting (i.e. meeting of members of the company) other than the statutory meeting and the annual general meeting or any adjournment thereof, is an extraordinary general meeting. Such meeting is usually called by the Board of Directors for some urgent business which cannot wait to be decided till the next AGM. Every business transacted at such a meeting is special business. An explanatory statement of the special business must also accompany the notice calling the meeting. The Articles of Association of a Company may contain provisions for convening an extraordinary general meeting.
By Whom EGM is called:
a) By the Board of directors: EGM may be called by the board whenever it deems fit by depositing a valid requisition at the registered office. On receipt of a valid requisition, the board shall within 21 days proceed to call an EGM to be held not later than 45 days from the date of deposit of requisition. The notice shall be given to those members whose names appear in the register of members within 3 days of receipt of a valid requisition.
b) On the Requisition of shareholders: EGM may be called on requisition of members holding 1/10th or more of the paid up equity share capital if company have share capital. If company do not have share capital, on requisition of members holding 1/10th or more of total voting power. The requisition shall specify the matters for the consideration of which EGM is to be called and it is signed by all the requisitionists or a requisitionist duly authorised.
c) By the requisitionists themselves: If the board fails to call an EGM, it may be called by the requisitionists themselves as follows:
The EGM shall be held within 3 months from the date of deposit of the requisition.
The EGM shall be called in the same manner in which a meeting is called by the board of directors.
The requisitionists shall be entitled to receive a list of members from the company.
The EGM should be convened on a working day at the registered office or in the same city or town in which the registered office is situated.
The notice of EGM shall be given by speed post or registered post or electronic mode.
The notice of EGM shall disclose the place, date, day, hours and business to be transacted at the meeting.
d) By the tribunal: If for any reason it is impractible to call a meeting of a company, other than annual general meeting, in any manner in which meeting of the company may be called, or to hold or conduct the meeting of the company in the manner prescribed by this act or the articles, the tribunal may, either of its own motion or on the application of any director of the company, or of any member of the company who would be entitled to vote at the meeting order a meeting of the company to be called, held and conducted in such manner as the tribunal thinks fit and give such ancillary directions as the tribunals thinks necessary.
Need/Purpose of Extraordinary General Meeting
Every general meeting (i.e. meeting of members of the company) other than the statutory meeting and the annual general meeting or any adjournment thereof, is an extraordinary general meeting. Such meeting is usually called by the Board of Directors for some urgent business which cannot wait to be decided till the next AGM. Every business transacted at such a meeting is special business. An explanatory statement of the special business must also accompany the notice calling the meeting. The Articles of Association of a Company may contain provisions for convening an extraordinary general meeting. The main purpose (Objectives) to hold these meetings are:
1. Change in memorandum of association.
2. Change in articles of association.
3. Reduction or reorganization of share capital.
4. Issue of debentures.
5. Removal of directors.
6. Removal of auditors.
The business transacted at an extraordinary general meeting, being special business, every notice of such meeting must be accompanied by an explanatory statement.
Or
(b) Discuss the various kinds of meeting that are to be convened by a public company. 14
Ans: Types of Company’s Meeting: A company is an association of several persons. Decisions are made according to the view of the majority. Various matters have to be discussed and decided upon. These discussions take place at the various meetings which take place between members and between the directors. Needless to say, the importance of meetings cannot be under-emphasised in case of companies. Company 'meetings can broadly be classified as follows:
1) Meetings of Shareholders: Such meetings are also known as general meeting of the members which are held to exercise their collective rights. The meetings of the shareholders may again be of the following four types:
a) Statutory Meeting; (Sec. 165 of Companies Act’ 1956 is omitted from the Companies Act, 2013)
b) Annual General Meeting; (Sec. 96 of the Companies Act, 2013)
c) Extraordinary General Meeting; and (Sec. 100 of the Companies Act, 2013)
d) Class Meeting.
2) Meetings of Directors: The directors are to act collectively in the form of a board, and the decisions are taken at the meetings of the Board of directors. These meetings may again be of two types:
a) Meetings of the Board of directors; and (Sec. 173 of the Companies Act, 2013)
b) Meetings of the committee of directors.
3) Other Meetings: These meetings may be either of the following:
a) Meetings of debenture-holders;
b) Meetings of creditors;
1) Meetings of Members: These are meetings where the members / shareholders of the company meet and discuss various matters. Member’s meetings are of the following types:-
A. Statutory Meeting: A public company limited by shares or a guarantee company having share capital is required to hold a statutory meeting. Such a statutory meeting is held only once in the lifetime of the company. Such a meeting must be held within a period of not less than one month or within a period not more than six months from the date on which it is entitled to commence business i.e. it obtains certificate of commencement of business. In a statutory meeting, the following matters only can be discussed:
Ø Floatation of shares / debentures by the company
Ø Modification to contracts mentioned in the prospectus
The purpose of the meeting is to enable members to know all important matters pertaining to the formation of the company and its initial life history. The matters discussed include which shares have been taken up, what money has been received, what contracts have been entered into, what sums have been spent on preliminary expenses, etc. The members of the company present at the meeting may discuss any other matter relating to the formation of the Company or arising out of the statutory report also, even if no prior notice has been given for such other discussions but no resolution can be passed of which notice have not been given in accordance with the provisions of the Act.
A notice of at least 21 days before the meeting must be given to members unless consent is accorded to a shorter notice by members, holding not less than 95% of voting rights in the company. A statutory meeting may be adjourned from time to time by the members present at the meeting.
B. Annual General Meeting: Every company must in each year hold an annual general meeting. Not more than 15 months must elapse between two annual general meetings. However, a company may hold its first annual general meeting within 9 months from the close of 1st financial year. In such a case, it need not hold any annual general meeting in the year of its incorporation as well as in the following year only. A notice of at least 21 days before the meeting must be given to members unless consent is accorded to a shorter notice by members, holding not less than 95% of voting rights in the company. The notice must state that the meeting is an annual general meeting. The time, date and place of the meeting must be mentioned in the notice.
The AGM must be held on a working day during business hours at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated. The Central Government may, however, exempt any class of companies from the above provisions.
C. Extraordinary General Meeting: Every general meeting (i.e. meeting of members of the company) other than the statutory meeting and the annual general meeting or any adjournment thereof, is an extraordinary general meeting. Such meeting is usually called by the Board of Directors for some urgent business which cannot wait to be decided till the next AGM. Every business transacted at such a meeting is special business. An explanatory statement of the special business must also accompany the notice calling the meeting. The Articles of Association of a Company may contain provisions for convening an extraordinary general meeting.
D. Class Meeting: Class meetings are meetings which are held by holders of a particular class of shares, e.g., preference shareholders. Such meetings are normally called when it is proposed to vary the rights of that particular class of shares. At such meetings, these members discuss the pros and cons of the proposal and vote accordingly. (See provisions on variations of shareholder’s rights). Class meetings are held to pass resolution which will bind only the members of the class concerned, and only members of that class can attend and vote.
Unless the articles of the company or a contract binding on the persons concerned otherwise provides, all provisions pertaining to calling of a general meeting and its conduct apply to class meetings in like manner as they apply with respect to general meetings of the company.
2) Meetings of the Board of Directors
A. Meeting of the Board of Directors: As the affairs of a company are managed by the board of directors, therefore it is necessary that the directors should often meet to discuss various matters regarding management and administration of affairs of the companies in the best interest of shareholders.
B. Meeting of a Committee of the Board: As per sec. 179(3), the board my, by a resolution passed at a meeting, delegate various powers to a committee of directors, managing directors, manager or any other principle officer of the company.
3) Other Meetings
A. Meeting of debenture holders: A company issuing debentures may provide for the holding of meetings of the debenture holders. At such meetings, generally matters pertaining to the variation in terms of security or to alteration of their rights are discussed. All matters connected with the holding, conduct and proceedings of the meetings of the debenture holders are normally specified in the Debenture Trust Deed. The decisions at the meeting made by the prescribed majority are valid and lawful and binding upon the minority.
B. Meeting of creditors: Sometimes, a company, either as a running concern or in the event of winding up, has to make certain arrangements with its creditors. Meetings of creditors may be called for this purpose. E.g. U/s 393, a company may enter into arrangements with creditors with the sanction of the Court for reconstruction or any arrangement with its creditors.
7. Briefly discuss the provisions of the Companies Act regarding appointment of Director of a Company. 14
Ans: Appointment of Directors: Section 149 of the Companies Act, 2013, makes it obligatory on every public company to have at least three directors and on every other company to have at least two directors. The directors may be appointed in the following ways:
1. Appointment of First Directors (Sec. 152): First directors mean the director of the company who assumes office from the date of incorporation of the company. The first directors of a company may be named in its articles of association and if it is not mentioned, then the subscribers of the memorandum of association who are individual, shall be deemed to be the first directors of the company, until the directors are not appointed in accordance with Section 152.
In case of public company, if the article provides any share qualification, only such subscribers as possess the necessary share qualification shall be deemed to be directors. The articles at the time of registration may contain the names of the first directors until directors are appointed in the first general meeting.
2. Appointment of Directors by Members in the General Meeting (Sec. 152(2): Except for the first director, the subsequent directors are appointed by the company in the general meeting. Sec. 152(2) provides that not less than 2/3 of the total number of directors of a public company, or of a private company which is subsidiary of a public company must be appointed by the company in general meeting. These directors must be subject to retirement by rotation. The remaining directors of such a company and a purely private company are appointed by the company in general meeting
3. Appointment by Board of Directors: The directors are appointed in the general meeting by the members. But, the Board of Directors may also appoint the directors, in the following way:
a. Additional Directors: Section 161, of the Act, lays down that the Board may appoint additional directors if the article of association of a company empower the Board of Directors to do so. Such additional directors shall hold office only up to the date of the next annual general meeting. If the annual general meeting is not held, then such additional director vacates his office on the last day on which the annual general meeting should have been held in terms of Section 166. The additional directors are exempted from the requirement of filing consent to act as directors.
b. Casual Vacancies: Section 161 empowers the Board of Directors to appoint the directors in the casual vacancy which may occur due to any reasons like, death, resignation, insanity, insolvency etc of the directors. Such casual vacancy may be filled according to the regulations and procedure prescribed by the articles of association. A person appointed to fill a casual vacancy will hold office only till the date up to which the directors in whose place, he is appointed would have held office.
c. Alternate Directors: The Board Meeting may be held at a time when a director is, absent for a period of more than three months from the state and in such a situation, an ‘alternate director’ is appointed. The Board of Directors can appoint the additional director in the absence of a director if so authorized by articles or by a resolution passed by the company in general meeting. The alternate director shall work until the original director return or up to the period permitted to the original director. The provision of the Act not applicable to the alternate director is as:
A. The appointment of an alternate director is not considered as an increase in the strength of the Board of Directors.
B. Alternate Directorship held by a person cannot be counted for the maximum number of directorship, which a person can hold.
C. An alternate director is not required to hold any qualification shares.
4. Appointment of Directors by Central Government: At least 100 members of the company or the members of the company who hold at least one-tenth of the total voting power, approach the Central Government for appointing a director to safeguard the interest of the company or its members or the public or to curb the oppressive and mismanagement of company’s affairs.
The term of appointment of the directors by the Central Government should not exceed 3 years and he may be removed by the Central Government for appointing another person to hold the office.
5. Appointment of Directors by Third-Parties if the Article provides (Sec. 152): A company may have ‘nominee directors’ which is permissible in a company if the articles of association gives power to such third parties to appoint their nominee on company’s board. Here the third party may be debenture holders, financial corporation, banking companies who have advanced loan to the company to safeguard their interests that the money is only used for the purpose for which it was borrowed.
6. Appointment of Directors By small shareholders if the article provides: The Small Shareholders, in case of a public company having:
i) A paid-up capital of five cores rupees or more, and
ii) one thousand or more small shareholders.
may have a director elected by such small shareholders in the manner as may be prescribed.
The directors are appointed by ordinary resolution i.e. through the majority of the shareholders. The minority of the shareholders does not get the opportunity to send representative in the Board of Directors. But, through proportional representative voting, the shareholders can get that opportunity.
The directors are appointed by ordinary resolution i.e. through the majority of the shareholders. The minority of the shareholders does not get the opportunity to send representative in the Board of Directors. But, through proportional representative voting, the shareholders can get that opportunity.
7. Appointment of directors by professional representation (Sec. 163): The Directors of a company are generally appointed by simple majority. As a result majority shareholders controlling 51% or more votes may elect all directors and a substantial minority of 49% may not find any representation on the board. This section give power to the minority shareholders to elect directors through single transferable vote and cumulative voting.
Or
Briefly discuss the modes of winding-up of a company. 14
Ans: Modes of winding up of a company: As per section 270 of the Companies Act 2013, the procedure for winding up of a company can be initiated either:
a) By the tribunal or,
b) Voluntary.
a) Winding up by the tribunal: As per new Companies Act 2013, a company can be wound up by a tribunal in the below mentioned circumstances:
1. When the company is unable to pay its debts
2. If the company has by special resolution resolved that the company be wound up by the tribunal.
3. If the company has acted against the interest of the integrity or morality of India, security of the state, or has spoiled any kind of friendly relations with foreign or neighboring countries.
4. If the company has not filled its financial statements or annual returns for preceding 5 consecutive financial years.
5. If the tribunal by any means finds that it is just & equitable that the company should be wound up.
6. If the company in any way is indulged in fraudulent activities or any other unlawful business, or any person or management connected with the formation of company is found guilty of fraud, or any kind of misconduct.
Filling up winding up petition: Section 272 provides that a winding up petition is to be filed in the prescribed form no 1, 2 or 3 whichever is applicable and it is to be submitted in 3 sets. The petition for compulsory winding up can be presented by the following persons:
a) The company
b) The creditors ; or
c) Any contributory or contributories
d) By the central or state govt.
e) By the registrar of any person authorized by central govt. for that purpose
FINAL ORDER AND ITS CONTENT: The tribunal after hearing the petition has the power to dismiss it or to make an interim order as it think appropriate or it can appoint the provisional liquidator of the company till the passing of winding up order. An order for winding up is given in form 11.
b) Voluntary winding up of a company: The company can be wound up voluntarily by the mutual decision of members of the company, if:
a) The company passes a Special Resolution stating about the winding up of the company.
b) The company in its general meeting passes a resolution for winding up as a result of expiry of the period of its duration as fixed by its Articles of Association or at the occurrence of any such event where the articles provide for dissolution of company.
PROCEDURE FOR VOLUNTARY WINDING UP:
1. Conduct a board meeting with 2 Directors and thereby pass a resolution with a declaration given by directors that they are of the opinion that company has no debt or it will be able to pay its debt after utilizing all the proceeds from sale of its assets.
2. Issues notices in writing for calling of a General Meeting proposing the resolution along with the explanatory statement.
3. In General Meeting pass the ordinary resolution for the purpose of winding up by ordinary majority or special resolution by 3/4th majority. The winding up shall be started from the date of passing the resolution.
4. Conduct a meeting of creditors after passing the resolution, if majority creditors are of the opinion that winding up of the company is beneficial for all parties then company can be wound up voluntarily.
5. Within 10 days of passing the resolution, file a notice with the registrar for appointment of liquidator.
6. Within 14 days of passing such resolution, give a notice of the resolution in the official gazette and also advertise in a newspaper.
7. Within 30 days of General meeting, file certified copies of ordinary or special resolution passed in general meeting.
8. Wind up the affairs of the company and prepare the liquidators account and get the same audited.
9. Conduct a General Meeting of the company.
10. In that General Meeting pass a special resolution for disposal of books and all necessary documents of the company, when the affairs of the company are totally wound up and it is about to dissolve.
11. Within 15 days of final General Meeting of the company, submit a copy of accounts and file an application to the tribunal for passing an order for dissolution.
12. If the tribunal is of the opinion that the accounts are in order and all the necessary compliances have been fulfilled, the tribunal shall pass an order for dissolving the company within 60 days of receiving such application.
13. The appointed liquidator would then file a copy of order with the registrar.
14. After receiving the order passed by tribunal, the registrar then publish a notice in the official Gazette declaring that the company is dissolved.
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