Elements of Company Law – II – CS Foundation Business Law Notes

Authorities under the Companies Act, 2013:

  1. Registrar of Company (RoC)
  2. Official Liquidator
  3. Regional Director
  4. National Company Law Tribunal (NCLT)
  5. National Company. Law Appellate Tribunal (NCLAT)

Number of Directors:

Company Minimum Maximum
Private 2 15
Public 3 15
One Person Company 1 1

Women Director – Conditions for Women Director:
Women director is described under Section 149(1) of Companies Act, 2013.
Elements of Company Law – II – CS Foundation Business Law Notes IMG 1

Introduction:

  1. Activities of companies are carried out by persons known as directors.
  2. Meetings are the set pattern of process according to which the company’s work.
  3. Company Secretary is one of the officers responsible for the legal compliance of the company.
  4. Company Secretary is the bridge between Board and shareholders.

Meaning of Directors:

  1. Company is an artificial legal person, thus cannot act on its own.
  2. Directors are the persons who are entrusted with the charge of management of company’s affairs.
  3. The Directors are the brain of the company.
  4. They occupy the pivotal position in the structure of the company.
  5. They are collectively known as Board of Directors or Board.
  6. The position of BOD is that of trust as the board is entrusted with the responsibility to act in the best interests of the company.
  7. The actions and deeds of directors individually functioning cannot bind the company, unless a particular director has been specifically authorised by a Board resolution to discharge certain responsibilities on behalf of the company.
  8. As per Section 2(10), “BOD” or “Board” in relation to a company, means the collective body of the directors of the company.
  9. These decisions are taken by directors at the meetings known as Board Meetings.
  10. Decisions at meetings are taken by majority votes.
  11. In case of equal number of votes, chairman has the casting votes.

As per Companies Act, 2013:

  • Every company shall hold first Board Meeting within 30 days of the date of Incorporation.
  • Every company to hold a minimum number of 4 Board Meetings every year in such a way that not more than 120 days shall intervene between 2 consecutive Board meetings.

Definition of Director:

  • As ppr Section 2(34) of Companies Act, 2013, states ‘director’ means a director appointed to a Board of a company.
  • He is appointed to perform the duties and functions of director of a company in accordance with the provisions of the Companies Act, 2013.

Number of Directorship: (Section 165):

  • Maximum no. of directorships, including any alternate directorship a person can hold is 20.
  • It has come with a rider that number of directorships in public companies/ private companies that are either holding or subsidiary company of a public Company shall be limited to 10.

Residence of Director in India (Section 149 (3)) – Every company has atleast one director, who has stayed in India for a total period of not less than 182 days in the previous calendar year.

Independent Directors:

  • Section 2 (47) of the Companies Act, 2013, prescribed that “Independent Director” means an independent director referred to in sub – section (5) of Section 149 of the Act.
  • It means a director other than a MD or whole-time director or nominee director who does not have any material or pecuniary relationship with the company/directors.

Under Section 149(6), following criteria have been laid down:
(i) Who in the opinion of the Board, is a person of integrity and possesses relevant industrial expertise and experience.

(ii) He must not have any material or pecuniary relationship during two immediately preceding financial years or during the current financial year either with company or its promoters/directors/holding/ subsidiary/associate company.

(iii) He must possess such other qualifications prescribed in Rule 5 of Companies (Appointment and Qualification of Directors) Rules, 2014.

(iv) He should not be a promoter or related to promoter of company or its holding, subsidiary or associate company.

(v) Relatives of such person should not have had any pecuniary relationship with company or its subsidiaries, amounting to:

  • 2% or more of its gross turnover or total income, or
  • ₹ 50 Lakh or such higher amount as prescribed whichever is less, during immediately two preceding financial years or in current financial year.

(vi) He must not either directly or any of his relatives
1. hold or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years, immediately preceding financial year in which he is proposed to be appointed.

2. is or has been an employee or proprietor or a partner in any of the three financial years immediately preceing the financial year in which he is proposed to be appointed, of:

  • a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
  • any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to 10% or more of the gross turnover of such firm.

3. is a Chief Executive or Director by whatever name called of any non-profit organisation that receives 25% or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds 2% or more of the . total voting power of the company, then also he is not eligible for office of independent director.

4. holds together with his relatives two percent or more of the total voting power of the company.

5. Every listed public company shall have at least 1/3rd of total number of directors as independent directors. (Fraction is to be rounded off to one)

6. CG has prescribed that public companies with:

  • paid up capital of ₹ 10 crore or more, or
  • turnover of ₹ 100 crore or more or
  • In aggregate outstanding loans/borrowings/debentures/deposits exceeding ? 50 crore or as on the last date at latest audited financial statements shall have at least 2 independent directors.

Any investment vacancy in the office of the independent director shall be filled by BOD

  • within 3 months from date of such vacancy, or
  • not later than immediate next Board meeting, whichever is later.

Independent Directors:
Conditions:
Elements of Company Law – II – CS Foundation Business Law Notes IMG 2

Directors Elected by Small Shareholders:

  • As per Section 151, Every listed company may have one director elected by such Small Shareholders.
  • “Small Shareholder” means a shareholder holding shares of nominal value of not more than ₹ 20,000 or such other sum as may be prescribed.

Amendment of Section 164 – In Section 164 of the Principal Act,:
(i) in sub-section (2), the following proviso shall be inserted, namely : Provided that where a person is appointed a director of a company which is in default of clause (a) or clause (b), he shall not incur the disqualification for a period of six months from the date of his appointment;

(ii) in sub-section (3), for the proviso, the following proviso shall be inserted, namely : Provided that the disqualifications referred to in clause (d), (e) & (g) of sub-section (1) shall continue to apply even if the appeal or petition has been filed against the order of conviction or disqualification.

Who can be Appointed as a Director:

  • Only individual can be appointed as a director.
  • Companies Act has not prescribed any academic or professional qualifications for directors.
  • Unless company’s Articles contain a provision regarding share qualification, a director need not be a member of company even.

Who Cannot be Appointed as a Director/Disqualifications:
1. As per Section 164 of Companies Act, 2013, a person cannot be appointed as a director of a company, if:

  • he has been found by a competent Tribunal to be of unsound mind.
  • he is an undischarged insolvent,
  • he has applied to be adjudicated as an insolvent and his application is pending.
  • he has been convicted by a Tribunal of any offence involving moral turpitude and sentenced in respect
  • there of to imprisonment for not less than 6 months, and a period of 5 years has not elapsed from the date of expiry of the sentence.
  • he has failed to pay any call on his shares in the company for 6 months from the date fixed for the payment.
  • he has been disqualified by a court which empowers the court to restrain fraudulent persons from managing companies.
  • he has not got the DIN
  • he is already a director of a public company, which:
  • has not filed the annual accounts and annual returns for any continuous 3 financial years, commencing on and after the first day of April 1999 or
  • has failed to repay its deposits or interests thereon on due date or redeem its debentures on due date or pay dividend and such failure continues for 1 year or more.
  • he has been convicted of the offence dealing with related party transaction under Section 188 of Companies Act, 2013 at any time during the last five years.

2. Such director shall be disqualified to be appointed or re-appointed as director of any other public company for 5 years from the date on which such public company in which he is a director above (a) and (b) have done.

3. CG may remove the disqualification incurred by any person by virtue of (iv) or (v) above.

4. A private company, may, by its Articles provide for additional disqualifications.

5. No body corporate, association or firm can be appointed as a director.

6. Thus, only individual can be appointed as a director.

7. No company can appoint or re-appoint any individual as a director unless he has been allotted a DIN-Director’s Identification Number under section 154.

Amendment of Section 153: “Provided that CG may prescribe any identification number which shall be treated as DIN for the purpose of this Act and in case any individual hold or acquire such identification number, the requirement of this section shall not apply or apply in such as may be prescribed”.

Number of Directors: [Section 149(1)]:

  • Every public company shall have at least 3 directors.
  • Private company should have at least 2 directors and one director in case of one person company.
    Articles may prescribe the maximum and minimum number of directors.
  • Increase in number of directors beyond the maximum permitted by articles has to be approved by passing SR, in general meeting provided the number exceeds 15.
  • Approval of CG is not required even if number of directors exceed 15.
  • Every listed company and every other public company having paid up capital of 100 crores or more or turnover of 300 crores or more as on the last date of latest audited financial statements, shall appoint at least one woman director.
  • Every company shall have atleast one director who is resident of India, i.e. who has stayed in India for a total period of not less than . 82 days in previous calendar year.

Amendment of Section 149 : “Provided that in case of newly incorporated as the requirement under this sub-section shall apply proportionally at the end of the financial year in which it is incorporated”.
Elements of Company Law – II – CS Foundation Business Law Notes IMG 3

Rotational Directors Non-Rotational
1. Rule : Atleast (2/3) directors should be rotational directors.

2. They are also known as temporary directors.

3. All (2/3) directors are not retire all at once. They are retire in proportion of (1/3).

4. Those directors are retired first who are admitted first.

1. Atleast (1/3) directors should be non-rotational directors.

2. They are also known as fixed directors.
example: Mukesh Ambani

Note: When the directors are retiring from the post, their retirement can be cancelled by voting of members.

Appointment of Directors:

  1. Every director shall be appointed by the company in general meeting.
  2. Director Identification Number is compulsory for appointment of director, of a company.
  3. Every person proposed to be appointed as a director shall furnish his DIN and a declaration that he is not disqualified to become a director under the Act.
  4. A person appointed as a director shall on or before the appointment give his consent to hold the office
  5. of director.

Their appointment can be dealt under following points:

  1. Appointment of first directors
  2. Appointment at general meeting
  3. Appointment by Board of Directors

Appointment of first Directors:
(i) First directors of most of companies are named in their articles.

(ii) If articles do not provide, the subscribers to memorandum, who are individuals, shali be deemed to be first directors until the directors are duly appointed.

(iii) in case of one person company, an individual being a member shall be deemed to be its first director until the director(s) are duly appointed by the member in accordance with the provisions of Section 152 of the Companies Act, 2013.

Appointment at general meeting:
(i) As per Section 152, in case of public company or a private company which is a subsidiary of a public company:

  • Unless the Articles provide for the retirement of all directors at every AGM, at least 2/3rd of the total number of directors must be persons whose period of office is liable to be determined by rotation and eligible to be reappointed at AGM.
  • Out of rotational directors, 1/3 of such rotational directors shall retire at each Annual General Meeting (fraction nearest to 1).

(ii) Retiring directors shall be those who have been longest in office since their last appointment.

(iii) Vacancies caused are filled by the shareholders by appointment in same AGM by means of majority vote (Section 152)

(iv) The director appointed can either be the retiring director or some other person.

(v) If any person, other than retiring director, wishes to stand for directorship, he must signify his intention to dd so by giving 14 days notice to the company before the general meeting (Section 160)

(vi) If vacancy is not filled up and meeting has not expressly resolved not to fill the vacancy, meeting shall stand adjourned till the same day in next week, at the same time and place, or if that day is a national holiday till the next succeeding day, which is not a holiday, at the same time and place.

(vii) If at the adjourned meeting also, vacancy of the retiring director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been re appointed, unless:

  • a resolution for the re-appointment of such director has been put and lost,
  • he is not qualified or is disqualified for appointment,
  • retiring director has expressed his unwillingness to be re-appointed,
  • appointment of directors is to be voted individually, or –
  • a resolution, ordinary or special, is required for his appointment or re-appointment.
    Elements of Company Law – II – CS Foundation Business Law Notes IMG 4

Circular Resolution:
It is a letter in which the ‘consent’ of all the members are taken. Only ‘Yes’ and ‘No’ decisions are taken through ‘Circular Resolution’.

Note : Important decisions are hot taken through circular Resolution.

Appointment by Board of Directors:
(i) They have a power to appoint directors in 3 cases:

  • Additional Directors
  • Filling up the Casual Vacancy
  • Alternate Directors

(ii) Additional Director [Section 161 (i)]:

  • Board has such power only if authorised by its Articles
  • Total Number of Director including these additional shall not exceed the Maximum Number fixed by the Articles
  • They hold office-only upto the date of next AGM or the last date on which AGM should have been held, whichever is earlier.

(iii) Filling up the Casual Vacancy [Section 161(4)]:

  • it means vacancy caused in the office of director appointed by shareholders in the genera! meeting and caused by death, resignation, insolvency or disqualification.
  • The person appointed holds office for the entire period for which the person in whose place he was appointed would have held office.

(iv) Alternate Director [Section 161(2)]:

  • Board has such power if authorised by Articles or a resolution has been passed by company in general meeting.
  • He is appointed to act for a director during his absence for a period of not less than 3 months form the state in which meetings of the board are ordinary held.
  • He shall vacate the office when the original director returns. Amendment of Section 161

In Section 161 of the Principal Act:
(i) in sub-section (2), after the words “alternate director ship for any other director in the company”, the words “or holding directorship in the same company” shall be inserted;

(ii) in sub-section (4):

  • the words “in the case of public company”, shall be omitted.
  • after the words “Meeting of the Board”, the words “which shall be subsequently approved by members in the immediate next general meeting” shall be inserted.

Duties of Director (Section 166):

  • Exercise his duties with due and reasonable care, skill and diligence and exercise independent judgement.
  • Not to assign his office and any assignment so made shall be void.
  • Act in good faith in order to promote company’s objects for benefit of its members, and best interest of company, its employees, shareholders, community and environment protection.
  • Not to involve in any situation in which he has a direct or indirect interest which conflict with company’s interests.
  • Act in accordance with AOA of company.
  • Not to achieve or attempt to achieve any undue gain or advantage, either to himself or his relatives, partners or associate. He will be liable to pay an amount equal to that gain to the company, if he is found guilty.
  • If any director contravenes any of the above provision, he shall be punishable with fine from ₹ 1,00,000 to ₹ 5,00,000.

Power of Board of Directors (Section 179):
1. The BOD of a company shall be entitled to exercise all such powers and to do all such acts and things, as the company is authorised to exercise and do.

2. Exercise of power is subjected to various provisions of Companies Act, 2013, MOA, AOA and any regulations that are not inconsistent with them, made by the company at the general meeting.

3. Shareholders cannot interfere in the exercise of board’s power.

4. However, shareholders may restrict the powers of BOD by amending the Articles that too not retrospectively.

5. Relationship of BOD with the general meeting is more of federation than of subordinate and superior.

6. There are 2 limitations on powers of BOD:

  • Being agents of the company, directors cannot act ultra virus the memorandum. Such acts will be void and ineffective.
  • Articles limits the powers of BOD even when acting within the power of company. Such acts needs to be ratified by shareholders at general meeting, also directors will be liable to third parties for breach of warranty of authority.

7. In following cases, in the general meeting, the shareholders is competent to intervene and act in respect of matters delegated to BOD:

  • Directors acting mala fide : Directors act for their own personal interests completely disregarding the company’s interests or their personal interests clashes with their duty.
  • Directors themselves wrong doers : They are the only person to conduct litigation in name of the company, and are themselves the wrong doers.
  • Incompetency of the Board : Board has become incompetent to’ act as none of the directors were validly appointed.
  • Deadlock in management : When the members of the Board are equally divided.

Powers to be Exercised only at Board Meetings (Section 179):
1. Following powers shall be exercised by the Board only by passing a resolution at the Board Meeting:

  • to make calls on shareholders in respect of money unpaid on their shares.
  • to buyback its shares U/S 68.
  • to issue securities, including debentures, whether in or outside India.
  • to borrow money.
  • to invest funds of the company.
  • to grant loans or give guarantee or provide security in respect of loans.
  • to diversify company’s business;
  • to make political contributions;
  • to approve financial statements and Board’s report;
  • to appoint internal auditors and secretarial auditor;
  • to appoint or remove KMP;
  • to approve amalgamation, merger or reconstruction;
  • to review or change the terms and conditions of public deposits;
  • to take note of disclosure of director’s interest and shareholding;
  • to take over a company or acquire a controlling or substantial stake in another company;
  • to invite or accept or renew public deposits and related matter;
  • to approve quarterly, half yearly and annual financial statements or financial results;
  • to take note of appointment or removal of one level below KMP;

Quorum for Board Meeting – Meaning: Minimum strength required to conduct a meeting.

  • One – third of total strength or two directors, which is higher, shall be the quorum for a meeting.
  • Quorum shall be present not only at the time of commencement of the meeting but also while transacting a business.
  • If at any time the number of interested directors exceeds or is equal to two – third of the total strength of the Board of Director, the number of directors who are not interested and presented at the meeting, being not less than two shall be the quorum during that time.
  • If the quorum is not achieved during a specified time then it will be happened as written in the articles.
  • The meeting shall be adjourned due to want of quorum, unless the articles provide shall be held to the same day at the same time and place in the next week or if the day is National Holiday, the next working day at the same time and place.

Appointment of KMP:

Listed Co. Public Co. Private Co.
Always 10 crore No need

Key Managerial Personnel:
1. KMP are the point of first contact between company and its stakeholders.

2. They are responsible for laying down strategies and its implementation.

3. As Per Section 2(51) “key managerial personnel” in relation to a company, means:

  • the Chief Executive Officer or the Managing Director or the Manager.
  • the Company Secretary.
  • the Whole-Time Director.
  • the Chief Financial Officer and.
  • such Other Officer as may be prescribed.

As per the Amendment made by Companies (Amendment) Act, 2017 Revised Section 2(51)-
1. ‘Key Managerial Personnel” in relation to a company, means –

  • the Chief Executive Officer or the Managing Director or the Manager;
  • the Company Secretary;
  • the Whole-time Director;
  • the Chief Financial Officer;
  • such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and
  • such other officer as may be prescribed;”

2. Section 203 of the Companies Act, 2013 read with Rule 8 of the companies (Appointment and Remuneration of managerial personnel) Rules, 2014 mandates the appointment for –
(i) listed Company, and

(ii) every other public company having a paid up capital of ? 10 crore or more, to appoint following whole time key managerial personnel:

  • Managing directors CEO or Manager, and in their absence, a whole time director.
  • Company Secretary
  • CFO.

3. Every whole time KMP shall be appointed by means of a Board resolution. Containing terms and conditions for the appointment including remuneration.

4. An individual cannot be appointed or re-appointed as the Chairperson of the company as well as MD or CEO of the company at the same time unless AOA so provide, or company does not carry multiple businesses.

5. Certain class of companies engaged in multiple businesses notified by CG have been exempted.

6. Whole time KMP shall not hold office in more than one company except in its subsidiary company.

7. However, he can hold such other directorship in more than one company with BOD’s permission.

8. A whole-time KMP holding office in more than one company at same time shall within a period of six months from such commencement, choose one company in which he wishes to continue to hold the office of KMP.

9. If the office of any whole – time KMP is vacated, the resulting vacancy shall be filled-up by the board at a meeting of the Board within a period of six months from the date of such vacancy.

Whole time Directors: [Section 2(94)]:

  • Whole time Director is a director who is in whole time employment of the company.
  • Company can have one or more whole time directors.
  • Company can have either a Manager or a MD.

Managing Director:

  • As per Section 2(54), of the Companies Act,2013 MD means a director who by the virtue of the articles of a company or an agreement with the company or a resolution passed in general meeting or by its BOD is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called”.
  • Performs functions as assigned by BOD
  • He must be an individual.

Disqualifications of MD [Section 196(3)]:
1. No company shall appoint or employ, any person as its MD or whole time director who:

  • is below the age of twenty one year or has attained the age of 70 years,
  • is an undischarged insolvent or has at any time adjudged an insolvent,
  • suspends or has at any time suspended payment to his creditors, or makes or has at any time made a composition with them.
  • is or has been convicted by a court of an offence involving moral turpitude.

2. Moral turpitude refers to anything done contrary to justice, honesty, principles or good morals.

Manager:
1. Section 2(53) defines manager as “an individual who, subject to the superintendence, control and directions of the BOD, has the management of the whole or substantially the whole of the affairs of the company, and includes a director or any other person occupying the position of a manager, by whatever name called and whether under a contract of service or not”.

2. Only individual can be appointed as a manager.

3. A departmental manager or a branch manager is not deemed to be manager.

Disqualifications of Manager [Section 196(3)]: No. company shall appoint or continue the appointment or employment of any person as its manager, who:

  • is an undischarged insolvent
  • has at any time within the preceding 5 years been adjudged as an insolvent.
  • suspends or has suspended within the previous 5 years, payment to its creditors.
  • maxes, or has at any time, within the preceding 5 years made a composition with his creditors.
  • is, or has at any time within the preceding 5 years been convicted of an offence involving moral turpitude.

Tenure of MD or Manager:

  • Term of office cannot exceed 5 years at a time.
  • He may be re-appointed for a further period of 5 years.
  • Re-appointment, however, shall not be sanctioned earlier than 1 year before the expiry of his term.

Chief Executive Officer [Section 2(18)]:
CEO means an office of a company, who has been designated as such by it.

Chief Financial Officer [Section 2(19)]:

  • CFO means a person appointed as a CFO of a company.
  • Company Secretary [Section 2 (24)] → Clause (c) of sub – section (1) of the Section 2 of the Company Secretaries Act, 1980 defines company secretary as one who is appointed by a company to perform the function of company secretary under this act.

Meaning of Meeting:

  • Meeting means gathering or assembly of number of persons for transacting any lawful business.
    A meeting to be valid must be convened and held as per the provisions of Companies Act, 2013 and the rules framed there under.
  • Members and directors exercise their decision making powers through resolutions passed by them.
  • One such meeting should be compulsorily convened every year.

Kinds of Meetings:
They are:
(i) Members/Shareholders:

  • Annual General Meeting (AGM)
  • Extra ordinary General Meeting (EGM)
  • Class Meeting

(ii) BOD:

  • Meeting of BOD
  • Meeting of Board Committees

(iii) Creditors:

  • For winding up
  • For purpose other than winding up

(iv) Meeting of debenture holders

(v) Meeting of contributories in winding up

Annual General Meeting (Section 96 to 99):
1. It is required to be held by every company once in every year.(Other than OPC)

2. First AGM

  • It is to be held within nine months from the date of closing of first F.Y. of company after its incorporation.
  • There is no need of holding AGM in the year of its incorporation.
  • ROC cannot allow extension.

3. Subsequent AGM:

  • It is to be held in each calender year
  • It is to be held within 15 months from the date of last AGM
  • It is to be held within 6 months from the close of F.Y.
  • ROC can grant extension upto 3 months

Amendment of Section 96: In Section 96 of Principal Act in sub-section (2), in the proviso for the words provided that “the following shall be substituted, namely:
the AGM of an unlisted company may be held at any place in India, if consent is given in writing or by electronic mode by all members in advance.

  • It shall be held during the business hours
  • It shall not be held in a national holiday.

It shall be held at:

  • The registered office of the company, or
  • Some other place within the city, town or village in which the registered office is situated.

AGM can be held on public holiday:

  1. If the day is declared by CG as national holiday after the issue of notice.
  2. If it is a Section 8 company.
  3. If public or private company which is a subsidiary of a public company has fixed time by passing a resolution in GM for its subsequent AGM.
  4. If it is an adjourned AGM to be held accidently.
  5. If public company by its articles, fix the time for its AGM.
  6. If private company by its articles and by a resolution agreed to by all the members thereof, fix the time and place for its AGM.

At least 21 days clear notice either in writing or through electronic mode should be given for calling a meeting Shorter notice is valid if consent is given in writing or by electronic mode by not less than 95% of the members entitled to vote at such meeting.

Following business are transacted at AGM.

  • the consideration of the accounts, balance sneet and the reports of the BOD and auditors.
  • the declaration of dividend.
  • the appointment of directors in the place of those retiring and
  • the appointment of and the fixing of remuneration of the auditors.

The company and every officer of the company who is in default shall be punishable with fine upto ? 1,00,000.
If default is a continuing one, an additional fine of ? 5,000 per day may be imposed

NCLT may on application of any member:

  • Call a GM which shall be deemed to be the AGM of the company.
  • Giving such direction as it thinks fit, like 1 member present in person or proxy shall be the quorum (Section 97)

Content of Notice:

  • Place of Meeting
  • Day of Meeting
  • Time of Meeting
  • Agenda
  • Proxy clause with reasonable prominence.

Extra Ordinary General Meeting:
Provided that an EGM of the company, other than of the wholly owned subsidiary of a company iricorporated outside India, shall be held at a place within India.

  • It refers to all the general meetings of a company, with the exception of the AGM
  • If any matter is urgent and cannot be postponed till the next AGM, an EGM is called to discuss such  matters and to obtain the consent of members.
  • All business transacted at EGM is a special business.
  • An explanatory statement must be given in respect of each proposed resolution.
  • It can be held anywhere in India.
  • It can be even held on a public holiday and even after the business hours.

EGM may be called:

  • By Board on its own
  • By board on requisition of share holders.
  • by requisitionists.
  • by Tribunal

Calling EGM on Requisition:
(i) Members have been empowered that if any business requiring consent of members is beneficial to the company but has not been proposed by the Board, members can propose such resolution.

(ii) Company having share capital: One or more members can call an EGM only if they hold 1/10th or more of the paid up share capital of the company as on the date of the requisition.

(iii) Company not having share capital: Requisition is valid if on the date of requisition it has been made by member (s) holding 1/10 or more voting power of all the members.

(iv) Requisition must specify matters for the consideration for which EGM is called.

(v) It must be signed by requisitionists.

(vi) It shall be deposited at the registered office of the company.

(vii) On receipt of requisition Board may within 21 days, proceed to call an EGM to be held not later than 45 days from the date- of requisition.

(viii) If the Board fails to call an EGM, it may be called by the requisitionists themselves.

(ix) Meeting should be held within 3 months from date of requisition.

(x) Reasonable expenses incurred will be reimbursed by company to the requisitionists.

(xi) Company can recover such expenses from the directors in default. If the Quorum is not present with in half- an hour, the meeting shall stand cancelled.

Calling EGM by Tribunal:
(i) If it is impracticable to call a meeting of a company or to hold or conduct the meeting of the company. The tribunal may

  • either suo moto or
  • on the application of any director or
  • member of the company who would to entitled to vote at the meeting
  • order a meeting of the company to be called, held and conducted in such manner as it may thinks fit.

(ii) It may give such ancillary or consequential directions as it thinks fit.

(iii) It may give direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

  • Class Meetings (Section 48) : Class Meeting of holders of particular classes of shares debenture holders, creditors are to be held if the right attaching to these classes are to be varied.

Meetings of Debenture holders:

  • All matters in connection with the holding, conducting and proceeding of the meetings of Debenture holders are,given in Debenture Trust Deed.
  • These are held either to vary the terms of security or to alter their rights in certain circumstances.
  • Decision taken at these meetings with requisite majority, are valid and binding upon the minority.

Meeting of Creditors:

  • It can be held either during the lifetime of the company or at the time of winding up of company to make certain arrangements with the creditors.
  • NCLT may order holding of creditor’s meeting on application.
  • NCLT may sanction the scheme if it is agreed by majority in number holding debts to the value of 3/4,h of the total value of the debts.
  • Its copy has to be filed with ROC.
  • It becomes binding on all the creditors.
  • At the time of winding up, it has to be held to ascertain the total amount due by the company to its creditors and also appoint a liquidator to wind up the affairs of the company.
  • These are not the company meetings.

Meetings of BOD – BOD have to meet in order to discuss various matters regarding the management and administration of company’s affairs in the best interests of shareholders and public interest.

It functions as an advisory board:
1. Its most important function is to provide direction to the company and set the “tone at the top”.

2. As per Section 173,

  • It provides that the first Board Meeting should be held within thirty days of the date of incorporation.
  • There shall be minimum of four Board meetings every year and not more than one hundred and twenty days shall intervene between two consecutive Board Meeting.

3. In case of OPC, small company and dormant company, at least one BM should be conducted in each half of calender year and the gap between two meetings should not be less than 90 days.

4. If OPC has only one director, No BM is required.

5. Not less than 7 days notice in writing shall be given to every director at the registered address available with the company.

6. Notice can be given by hand delivery or by post or by electronic means.

7. If BM is called at a shorter notice, at least one independent director shall be present at the meeting.

8. If he is not present, then decision of meeting shall be circulated to all the directors and it shall be final only if it have to be ratified by at least one independent director.

Amendment of Section 173 : In Section 173 of the Principal Act, in sub¬section (2), after the first proviso, the following proviso shall be inserted namely:

“Provided that where there is quorum in a meeting through physical presence of director, any other director may participate through video conferencing or other audio, visual means in such meeting on any matter specified under first proviso”.
1. As per Section 173,

  • Notice of every BOD Meeting must be given in writing to every director for the time being in India, and at the usual address in India to every other director.
  • In case of default, every officer who is at fault shall be punishable with fine upto ₹ 1,000.

2. If Articles provide that it will be held on fixed days of every month or directors are duly informed that all future meetings will be held on a fixed day of every month, it is a sufficient compliance with Section 173.

3. All proceedings of the meeting will be considered void^f the notice is not properly given.

4. Notice has to be given even to a director who has stated that he wHI be unable to attend the meeting.

5. It may be held at any time, on any day, including a public holiday, and at any place.

6. No business should be transacted at a meeting.if notice in accordance with the section has not been given.
Company Secretary (CS):
As per Section 203,

  • every company having paid up share capital of ? 5 crore or more must have a whole time secretary.
  • where Board comprises of only 2 directors, neither of them can act as a secretary of the company.

Definition of Company Secretary:

  • As per Section 2(24) of the Companies Act, 2013 defines “Company Secretary” or “Secretary” means a company secretary as defined in clause (c) of sub-section(1) of section 2 of the Company Secretaries Act, 1980 who is appointed by a company to perform the functions of a Company Secretory under this Act.
  • As per company Secretaries Act, 1980, “He is a person who is a member of the Institute of Company Secretaries of India”.
  • Word ‘secretary’ is derived from word ‘secret’ meaning something confidential about the job.

Qualifications of Secretary:
CS must possess the qualification prescribed by CG. For this purpose, the Companies (Appointment and Qualification of Secretary) Rules, 1988 have been divided into 2 categories:
1. Companies having a paid-up capital of ? 5 crores or more : whole-time secretary must be a member of ICSI.

2. In case of any other company: Secretary must possess the following qualifications:

  • Membership of the ICSI;
  • Pass in the Intermediate Examination conducted by the ICSI;
  • Degree in law granted by any university;
  • Membership of the ICAI;
  • Membership of the ICWAI;
  • Post-graduate degree or diploma in management sciences granted by Universities or Institutes of Management, Ahmedabad, Calcutta, Bangalore and Lucknow.
  • Diploma in corporate laws and management granted by Indian Law Institute, New Delhi;
  • Post-graduate diploma in Company Secretaryship granted by the Institute of Commercial Practice under
  • Delhi; Administration or Diploma in Corporate Laws and Management granted by Indian Law Institute, New Delhi.
  • Membership of the association of See retaries and Managers, Calcutta;
  • Post-graduate diploma in Company Law and Secretarial Practice granted by the University of Udaipur.

Other Qualifications that a CS should Process are:

  • Sound General Education
  • Proficiency in Language
  • Wide Knowledge
  • Knowledge of Company Law
  • Knowledge of Other Laws
  • Knowledge of Office Organisation and. Method
  • Knowledge of Economics, Banking and Finance
  • Good personality.

If paid-up capital increases to ₹ 5 crores or more, Company must appoint a whole time secretary.

Appointment of Secretary:
1. For every company not being required to employ a whole time secretary and having a paid-up capital of 10 lakh rupees or more but less than 5 crore, it is mandatory to file with ROC a certificate from a secretary in whole time practice in such form, and in such time and subject to such conditions as may be prescribed.

2. This certificate should be attached to the Board’s report made u/s 134.

3. He is generally appointed by a formal resolution of the Board.

4. If any director is interested in such appointment, he must disclose such interest and should not participate in the discussion or voting.

Powers of Secretary – He should perform:

  • All acts which he is required to perform under various enactments.
  • All acts which BOD specifically direct him to perform.
  • All acts which enable him to discharge his duties smoothly.

Any act performed without being authorised by the company, does not bounds the company.

Duties of a Companies Secretary:
Contractual Duties:

  • Has a duty to act within the scope of his authority if appointed by an agreement of service.
  • Perform his duties with reasonable care and skill.
  • Abstain from disclosing any confidential information relating to the company’s affairs.
  • Should not make any secret profits by virtue of his position.

Statutory Duties:
(i) Under Companies Act:

  • report to BOD about compliance with provisions of this Act, rules and other laws applicable.
  • to ensure that the company complies with the applicable secretarial standards.
  • to discharge such other duties as may be prescribed.

The Central Government has prescribed such duties of CS as follows:

  • to facilitate convening of meetings and attend BM, GM committee meetings and maintain their minutes.
  • to assist, the Board in the conduct of company’s affairs.
  • to obtain approval from BOD, GM, government and other authorities.
  • to provide guidance to directors as required, with regard to their duties, responsibilities and powers.
  • to represent before various regulators, tribunals and other authorities.
  • to assist and advice BOD in ensuring good corporate governance and complying with its requirements and best practices.
  • to discharge such other duties as may be assigned by the Board from time to time.
  • such other duties as have been prescribed under the Act and Rules.

(ii) Under IT Act: He is a principal officer of the company.

  • Ensure proper tax is deducted at source.
  • Ensure that tax deducted is deposited with government.
  • Ensure that TDS certificate is furnished to every debenture holder/ depositor.
  • Verify and submit various forms and returns.

(iii) Under Indian Stamp Act: He has to ensure that ail legal documents are affixed with stamps of requisite amount as required under the Act.

(iv) Under other Acts: He is required to perform several other duties under various other Acts.

Role of a Secretary:
1. His role is not limited only to its company but also to its shareholders, depositors, creditors, employees, consumer, society and Government

2. He has the following roles to play:

  • Statutory officer/Key Managerial Personnel.
  • Co-ordinator
  • Administrative officer

Statutory Officer:
1. ‘Officer’ includes any director, manager, secretary or any person in accordance with whose directions or instructions the BOD is or are accustomed to act.

2. He can be assigned managerial duties in addition to his statutory duties.

3. He is responsible for strict compliance of following provisions of Companies Act:

  • to sign the Annual Return filed with ROC.
  • authenticate the financial statement.
  • to make declaration before incorporation of a company confirming all the requirements of the Act and rules have been compiled with.
  • to make declarations regarding commencement of business.
  • to see share certificates, debentures, letter of allotment, mortgages are issued duly stamped.
  • comply with the provisions of various statutes.

4. He is also responsible to comply with provisions of various other Acts.

Co-ordinator:

  • He has to ensure that the policies managerial of BOD are effectively implemented and executed.
  • He co-ordinates the work of executives at different levels.
  • He acts as an important link between top management (Board) and other levels.
  • He is known as ‘Mouthpiece of Board.’
  • Even plays the role of a coordinator with outsiders like shareholders, society and the Government.
  • This role has two aspects – Internal and External.

Internal Role:
(i) Relating to Board, Chairman and MD:

  • Responsible for conveying the Boards decision to persons in charge of such functions.
  • responsible to ensure that the returns and reports received from various operational executives are submitted in time complete in all respects.
  • Communicates with outside agencies like government and semi-government bodies to ensure that the information given to various agencies do not conflict with each other, and are in accordance with statutory requirements and objectives of the organisation.

(ii) Relating to Trade Unions:

  • on sure whether trade union officials are recognized or not.
  • Ensure that good labour relations are maintained.
  • During any agreement with trade union, he should make proper note of it so as to avoid any misunderstanding or deputes later on.
  • Ensure strict compliance with provisions of different labour welfare laws.
  • Whenever long term settlement is finalised, ensure that it is in accordance with relevant statues.
  • Wherever possible, grants and subsidies should be given.
  • Before employees guilty of misconduct are charge-sheeted and ‘ punished, all formalities must be completed.

External Role:
(i) Relating to Shareholders:

  • Ensure that their rights are honoured in time
  • Extracts of registers asked by them are supplied to them within stipulated time
  • Ensure that all letters and complaints from them are promptly dealt with and their queries are answered without violating the statutory, provisions.
  • Maintain proper relationship with shareholders of the company.
  • He should attend the shareholders who personally come for information, to furnish documents or details as image of company depends upon relationship of CS with shareholders.

(ii) Relating to Government:

  • Ensure strict compliance with provisions of Companies Act, and other laws.
  • Must see that government policies are being implemented by company in true spirit.
  • Advise Board about changing government’s policy.
  • Ensure that information send to the government is factually correct.
  • Helps in uniform reporting.

(iii) Relating to Community:

  • Advise Board regarding areas where company can make useful contribution.
  • Ensure that company should provide quality goods and services at reasonable policies.
  • Ensure that requirement of keeping pollution within legally and socially acceptable limits are complied with.
  • Ensure promotion of employment-opportunities.
  • Undertake rural development.

Administrative Officer:

  • Ensure that company’s activities are in conformity with companies policy
  • Supervise, control and coordinate the functions of different departments.
  • Advise BOD on the need to develop good structure.
  • Has an opportunity of knowing the strengths and weaknesses of the functional executives.
  • Analytically study various financial statements.
  • Devise suitable system of accounting procedure, internal control and internal audit in order to safeguard company’s funds.
  • Responsible for various office services including their cost.
  • Can render valuable advice to BOD regarding the recruitment, training, remuneration, etc. of staff.
  • Ensure safety and proper maintenance of assets and properties of the company.
  • Ensure that property and other records are properly insured.
  • All records are maintained properly.
  • Ensure that statutory time limits relating to meetings, dividend and interest filing of payment returns etc. are complied with.
  • Has to negotiate with banks and financial institutions, the terms of finance both for working capital requirement and capital expenditure.
  • Different office departments are properly staffed, organised, co-ordinated and supervised.
  • Timely renewal of contracts and leases.
  • Ensure that adequate system of security of personnel are available.

E-Governance:

  • It refers to a highly complex process that requires provision of hardware, software, networking and re-engineering of procedures for better service delivery
  • It involves application of IT to bring about SMART i.e. (Simple, Moral, Accountable, Responsive and Transparent) governance.
  • MCA – 21 is an e-governance initiative of Indian Government that builds Government’s vision of National e-governance in India.
  • It is executed by MCA i.e. Ministry of Corporate Affairs in partnership with TCS.
  • MCA – 21 is a fine example of public/private partnership and is built on BOOT i.e. (Built, Operate, Own and Transfer) model.
  • MCA-21 is an ambitious e-governance initiative of Government that builds on the Government’s vision of national e-governance in the country.
  • The project was named MCA-21 as it aimed at re-positioning MCA as an organisation capable of fulfilling the aspiration of its stakeholder in the 21st Century.

Scope of MCA-21 includes services provided by:

  • Regional Director (RDs)
  • Offices of Registrar of Companies (ROCs)
  • Ministry Headquarter, etc.

Multiple Choice Questions

Question 1.
Which of the following statement is correct?
(a) The joint shareholders are counted as one member for the membership of a private company.
(b) The joint shareholders are counted as one member for the quorum of a meeting.
(c) The joint shareholders are always counted as different member for all the provision of the Companies Act.
(d) Both (a) and (b) are correct as there are specific provisions to that effect.
Answer:
(d) Both (a) and (b) are correct as there are specific provisions to that effect.

Question 2.
The subscribers to the Memorandum of Association _________.
(a) May become members only if there is a specific provision to that effect in company’s Articles of Association.
(b) Become a member as soon as the company is registered.
(c) Are members irrespective of any formality as to registration etc.
(d) Can never be the members as their only job is to get the company registered.
Answer:
(b) Become a member as soon as the company is registered.

Question 3.
A person ceases to be a member when the share warrant is issued to him in exchange of fully paid up shares.
(a) True
(b) False
(c) Partly true
(d) Partly false
Answer:
(a) True

Question 4.
Every company (whether public or private) is required to hold an annual general meeting.
(a) True
(b) False
(c) Partly true
(d) Partly false
Answer:
(a) True

Question 5.
Kinds of meetings are _________.
(a) Class Meeting
(b) Annual General Meeting
(c) Extraordinary General Meeting
(d) All of these
Answer:
(d) All of these

Question 6.
Can the Annual General meeting (A.G.M.) be held on a day which has been declared as a public holiday by the Central Government.
(a) Yes, but only if the notice of convening the A.G.M. has been issued prior to the declaration of the holiday.
(b) No, as the A.G.M. cannot be held on a public holiday.
(c) Both (a) and (b)
(d) None of the above
Answer:
(a) Yes, but only if the notice of convening the A.G.M. has been issued prior to the declaration of the holiday.

Question 7.
_________ is a bridge between BOD and shareholders.
(a) Directors
(b) Company Secretary
(c) Chartered Accountant
(d) Employees
Answer:
(b) Company Secretary

Question 8.
DIN Stands for:
(a) Direct Identification Number
(b) Director’s Identity Number
(c) Direct Identity Name
(d) Director’s Identification Number
Answer:
(d) Director’s Identification Number

Question 9.
_________ of the total number of directors shall be non-rotational.
(a) 1/3rd
(b) 2/3rd
(c) 1/2nd
(d) 1/5th
Answer:
(a) 1/3rd

Question 10.
The managing director must be:
(a) Difector
(b) Employee
(c) Officer
(d) Debenture Holder
Answer:
(a) Difector

Question 11.
EGM can be called by:
(a) BOD
(b) Requisition’s
(c) Tribunal
(d) All of the above
Answer:
(d) All of the above

Question 12.
When a valid requisition is given by member for holding EGM, the BOD should call EGM:
(a) Within 14 Days
(b) Within 15 Days
(c) Within 21 Days
(d) Within 1 month
Answer:
(c) Within 21 Days

Question 13.
Resolution requiring special notice is required:
(a) For appointment of a person as an auditor other than the retiring auditor at the AGM
(b) For removing a Director before the Expiry of the period of his office
(c) For both (a) and (b)
(d) For none of the above
Answer:
(c) For both (a) and (b)

Question 14.
Alternate director shall hold office only upto the date of next AGM.
(a) True
(b) False
(c) Partly true
(d) Partly false
Answer:
(b) False

Question 15.
Additional director is studied u/s _________.
(a) 163
(b) 160
(c) 164
(d) 161
Answer:
(d) 161

Question 16.
Director can be removed before the expiry of his term by passing a _________.
(a) Special resolution
(b) Ordinary resolution
(c) Both (a) and (b)
(d) None of the above
Answer:
(b) Ordinary resolution

Question 17.
Company can have both a manager and a Managing Director.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(b) False

Question 18.
A departmental manager or a branch manager can also be deemed as a director.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(b) False

Question 19.
Term of office of MD cannot exceed _________ years at a time.
(a) 2
(b) 3
(c) 4
(d) 5
Answer:
(d) 5

Question 20.
If a resolution is to be decided by the way of show of hands _________.
(a) Every shareholder has one vote
(b) Every shareholder has as many votes as the shares held by him.
(c) Both (a) and (b)
(d) None of the above
Answer:
(a) Every shareholder has one vote

Question 21.
All business transacted at EGM is _________ business.
(a) Special
(b) Ordinary
(c) Both (a) and (b)
(d) None
Answer:
(a) Special

Question 22.
The length of the notice of GM is stated under which section of the Companies Act, 2013
(a) Sec. 101
(b) Sec. 102
(c) Sec. 108
(d) None of the above
Answer:
(a) Sec. 101

Question 23.
All the proceeding of Board meetings shall be _________ if proper notice has not been served.
(a) Valid
(b) Void
(c) Partly valid
(d) Partly void
Answer:
(b) Void

Question 24.
Secretary must be a member of:
(a) ICAI
(b) ICWA
(c) ICSI
(d) None
Answer:
(c) ICSI

Question 25.
A whole time secretary has to be appointed by companies having paid up capital of _________ or more.
(a) 1cr
(b) 2cr
(c) 4cr
(d) 5cr
Answer:
(d) 5cr

Question 26.
_________ is known as a mouthpiece of Board.
(a) Managing director
(b) Chartered Accountant
(c) Company Secretary
(d) Manager
Answer:
(c) Company Secretary

Question 27.
MCA Stands for.
(a) Ministry of Corporate Affairs
(b) Minister of Corporate Affairs
(c) Minister of Corporate Accounts
(d) Ministry of Corporate Accounts
Answer:
(a) Ministry of Corporate Affairs

Question 28.
Preference shareholders do not possess the following rights:
(a) Payment of dividend
(b) Rights to attend meeting .
(c) Claim on assets of the company
(d) Repayment of capital
Answer:
(c) Claim on assets of the company

Question 29.
A secretary in a company, does not perform the role of:
(a) A coordinator
(b) A legal officer
(c) An administrative officer
(d) A director
Answer:
(d) A director

Question 30.
Directors are of a company.
(a) Head
(b) Member
(c) Management Incharge
(d) Brain
Answer:
(d) Brain

Question 31.
A meeting of the Board of Directors must be held _________ in every 3 months and at least _________ meetings must be held every year.
(a) Once, 4
(b) Twice, 8
(c) Not req, 4
(d) Not req, 8
Answer:
(a) Once, 4

Question 32.
_________ has the power to exercise his casting vote for deciding the matter.
(a) CEO
(b) G.M.
(c) Directors
(d) Chairman
Answer:
(d) Chairman

Question 33.
Who can be the director of the company
(a) Undischarged insolvent
(b) Unsound mind
(c) Person disqualified by the Tribunal
(d) None of these
Answer:
(d) None of these

Question 34.
If a director has failed to file financial statement & annual returns for continuous _________ years, then he-will not be eligible to be appointed as a director of any other public company for a period of _________ years.
(a) 3,8
(b) 3,6
(c) 3, 5
(d) 4,5
Answer:
(c) 3, 5

Question 35.
Who cannot be the director under Sec. 149(1) of the Companies Act, 2013
(a) Body corporate
(b) Associations
(c) Firm
(d) All of these
Answer:
(a) Body corporate

Question 36.
The removal of director’s rests with the following authorities.
(a) Central Government
(b) NCLT
(c) The Company in G.M.
(d) Both (b) & (c)
Answer:
(d) Both (b) & (c)

Question 37.
A person compulsorily needs to obtain _________ to become a director in pursuance of Sec. 154 of the Companies Act, 2013.
(a) SST
(b) PAN
(c) DIN
(d) DAN
Answer:
(c) DIN

Question 38.
No. of directors need a special resolution in GM, if they are beyond _________.
(a) 6
(b) 15
(c) 18
(d) 24
Answer:
(b) 15

Question 39.
A legal representative of a deceased share holder is a share holder even if his name is not entered in the register of members.
(a) False
(b) True
(c) Partly True
(d) Partly False
Answer:
(b) True

Question 40.
The term member and director of a company are synonymous.
(a) False
(b) True
(c) Partly True
(d) Partly False
Answer:
(a) False

Question 41.
Sec. 96(i) of the Companies Act, 2013 states that every company must, in each calender year hold an AGM, so specified in the notice calling it, provided that not more than _________ months shall elapse between two AGM’s.
(a) 12
(b) 14
(c) 18
(d) 15
Answer:
(d) 15

Question 42.
A company can hold its first AGM within _________ months from date of its incorporation.
(a) 12
(b) 15
(c) 9
(d) None of these
Answer:
(c) 9

Question 43.
Registrar can grant for some special reasons extension of time for holding the AGM by a period not more than _________ months.
(a) 5
(b) 3
(c) 12
(d) 18
Answer:
(b) 3

Question 44.
If a company makes default in holding AGM, then fine imposed on the company & every officer of the company who is in default is upto _________.
(a) 25,000
(b) 50,000
(c) 5,000
(d) 1,00,000
Answer:
(d) 1,00,000

Question 45.
A board meeting can be held anywhere _________.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(a) True

Question 46.
A business can be transacted at a board meeting even if it is not mentioned in the agenda _________.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(b) False

Question 47.
Companies having paid up capital of not less than 5 crore must have _________ secretary.
(a) Whole time
(b) Part time
(c) Not required
(d) None of these
Answer:
(a) Whole time

Question 48.
The disqualification for being appointed as a director are contained in which section of Companies Act, 2013?
(a) Sec. 164
(b) Sec. 166
(c) Sec. 170
(d) None of the above
Answer:
(a) Sec. 164

Question 49.
Who amongst the following cannot appoint a director in a company?
(a) Shareholders
(b) Board of Directors
(c) Articles
(d) Tribunal
Answer:
(d) Tribunal

Question 50.
The directors appointed in a company on an application made under Sec. 241 are appointed by _________.
(a) Auditor
(b) Tribunal
(c) Central Government
(d) None of the above
Answer:
(b) Tribunal

Question 51.
Which of the following statement is NOT true?
(a) The power to make calls can only be exercised at the Board Meeting
(b) The company can have both managing director and manager
(c) A director cannot be removed by the State Government
(d) None of the above
Answer:
(b) The company can have both managing director and manager

Question 52.
A person is disqualified from being appointed as a managing director if –
(a) He is insolvent
(b) He is convicted by Tribunal
(c) Suspends payment to his creditors
(d) All of the above
Answer:
(d) All of the above

Question 53.
Which of the following statement is true?
(a) A person having share warrant is a member of the company
(b) A person having share warrant is only a shareholder of the company and not a member
(c) A legal representative of a deceased shareholder is not a shareholder of a company
(d) All of the above
Answer:
(b) A person having share warrant is only a shareholder of the company and not a member

Question 54.
Which of the following statement is false?
(a) Equity shares have a right to vote on every resolution of the company
(b) Preference shares cannot vote on all the resolutions of the company
(c) All the equity shareholders have equal voting rights
(d) All of the above
Answer:
(c) All the equity shareholders have equal voting rights

Question 55.
Which one of the following statements is not true in respect of holding the Annual General Meeting?
(a) AGM should be held in every calender year
(b) AGM should be held within six months from the end of financial year
(c) The gap between two AGM’s should not exceed fifteen months
(d) Private company is not required to hold an AGM
Answer:
(d) Private company is not required to hold an AGM

Question 56.
Which of the following business is NOT transacted at the AGM?
(a) Appointment of directors
(b) Declaration of dividend
(c) Appointment of auditors
(d) Making calls on shares
Answer:
(d) Making calls on shares

Question 57.
The proportion of directors which shall retire by rotation in a public company is _________.
(a) One – Third
(b) One – Fifth
(c) Half
(d) Two – Third
Answer:
(d) Two – Third

Question 58.
The meeting which is held by a particular category of shareholders is called as _________.
(a) Class Meeting
(b) Specific Meeting
(c) Sporadic Meeting
(d) None of the above
Answer:
(a) Class Meeting

Question 59.
Which of the following task Company Secretary?
(a) Communicating results to the interested parties
(b) Signing the annual return
(c) Sending notice of meetings to the Directors
(d) Assisting the liquidator in the winding up of the company
Answer:
(a) Communicating results to the interested parties

Question 60.
It is compulsory for a company to appoint a Company Secretary if _________.
(a) The paid up share capital is 5 crore or more
(b) The paid up share capital is 10 crore or more
(c) The annual turnover of the company exceeds 100 crore
(d) If the net profit of the company is more than 2 crore
Answer:
(a) The paid up share capital is 5 crore or more

Question 61.
Which one of the following is not a power of a Secretary?
(a) The acts directed to him by the Board
(b) The acts required to perform in order to discharge his duties
(c) The acts required to be performed under an Act
(d) Calling up the Board Meeting
Answer:
(d) Calling up the Board Meeting

Question 62.
As per Sec. 2(35) of the Income Tax Act, 1961, a Company Secretary is _________.
(a) Manager
(b) Principle officer
(c) Coordinator
(d) None of the above
Answer:
(b) Principle officer

Question 63.
MCA stands for _________.
(a) Ministry of Corporate affairs
(b) Manager of Company Accounts
(c) Ministry of Corporate
(d) None of the above
Answer:
(a) Ministry of Corporate affairs

Question 64.
BOOT stands for _________.
(a) Building Optimum Operational Tools
(b) Budgetary Online Operational Technology
(c) Build, Organise, Operate and Transfer
(d) Build, Operate, Own and Transfer
Answer:
(d) Build, Operate, Own and Transfer

Question 65.
Which amongst the following is NOT a role of a Company Secretary?
(a) As a statutory officer
(b) As an administrative officer
(c) As a coordinator
(d) As a manager
Answer:
(d) As a manager

Question 66.
The persons who are in charge of the management of the affairs of a company are termed as directors. They are collectively known as _________.
(a) Shareholders
(b) Employees
(c) Board of directors
(d) Either (a) or (b)
Answer:
(c) Company is an artificial legal person, thus cannot act on its own. Directors are the persons who are entrusted with the charge of management of company’s affairs. In other words, Director means an appointed or elected member of a company who, with other directors, has the responsibility for determining and implementing the company’s policy. They are collectively known as Board of Directors or Board.

Question 67.
Every company having a paid-up share capital of must have a whole-time secretary.
(a) ₹ 2 Crore or more
(b) ₹ 5 Crore or more
(c) ₹ 50 Lakh
(d) ₹ 10 Lakh
Answer:
(b) In term of Section 203 of the Companies Act, it is necessary to appoint a secretary in a company having a paid-up capital of ₹ 5 crores or more who is an individual possessing the prescribed qualification i.e., he should be member of the Institute of Company Secretaries of India. Normally, the appointment is done by means of a resolution of the Board as the position of company secretary is slightly different from that of other officers as he is an officer recognised under the Companies Act, 2013.

Question 68.
Dividend of a company is declared in:
(a) Statutory meeting
(b) Extra-ordinary general meeting
(c) Annual general meeting
(d) None of the above.
Answer:
(c) Sec. 102 of the Companies Act lays down that all business to be transacted at an annual general meeting shall be deemed Special Business with the exception of the business, relating to:

  • The consideration of the accounts, balance sheet and the reports of the board of directors and auditors,
  • The declaration of dividend
  • The appointment of directors in the place of those retiring; and
  • The appointment of, and the fixing of remuneration of, the auditors.

Question 69.
In a company maximum time difference between two consecutive board meetings is:
(a) 120 days
(b) 180 days
(c) 140 days
(d) 90 days
Answer:
(a) Section 173 of the Act deals with Meetings of the Board and Section 174 deals with quorum. The Act provides that the first Board meeting should be held within thirty days of the date of incorporation. In addition to the first meeting to be held within thirty days of the date of incorporation, there shall be minimum of four Board meetings every year and not more one hundred and twenty days shall intervene between two consecutive Board meetings.

Question 70.
If Which of the following type of business are ordinarily carried out at annual general meeting of a company?
X. To declare dividend
Y. To recommend dividend .
Z. To appoint the auditors W.
To make calls on shares Correct option is –
(a) X and Y
(b) X and Z
(c) X, Z and W
(d) X, Y, Z and W
Answer:
(b) Following businesses are transacted at AGM –

  • Financial Statement are presented for consideration.
  • Appointment or re-appointment of auditors.
  • Declaration of dividends.
  • Appointment or re-appointment of auditors.

Thus, only businesses given in point X and Z are transacted at AGM of company.

Question 71.
A director of X Ltd. has given a guarantee of ₹ 500 for someone, yet he can become the director of another company _________.
(a) True
(b) False
(c) Partly true
(d) Partly false
Answer:
(a) A director of a company who has given a guarantee for someone can become the director of another company as per the Companies Act, 2013. There’s no such disqualification for such a director. Hence, option (a) is correct.

Question 72.
Preferential shareholders can call meeting in which situation?
(a) Curfew
(b) Emergency
(c) Bomb blast
(d) None of the above
Answer:
(d) As per section 48 of Companies Act, 2013 class meetings are held by preferential shareholders. Need for such meetings arises when it is proposed to vary the rights of a particular class of shares. Thus, none of the above given are the reasons for calling the meeting in case of preferential shareholders.

Question 74.
Who can be a director?
(a) Individual
(b) Partnership firm
(c) Company
(d) HUF
Answer:
(a) Only an Individual can be a director, any corporate body cannot be a director.

Questions 75.
Which amongst the following is the expanded form of ‘DIN’?
(a) Directors Identification Number
(b) Digitalised Identification Number
(c) Director’s Identifying Number
(d) None of these
Answer:
(a) No company can appoint or re-appoint any individual as a director unless he has been allotted a DIN i.e. Director’s Identification Number U/s 154 of the Companies Act, 2013.

Question 76.
Under which Section the duties of the directors are given.
(a) 166
(b) 152
(c) 160
(d) 161
Answer:
(a) Duties of director are given under Section 166 of Companies act, 2013.

Question 77.
Who fills casual vacancy in the office of director?
(a) Shareholders in the General Meeting
(b) Directors in the board meeting
(c) Company law board
(d) Central Government
Answer:
(b) Casual vacancy means vacancy caused in the office of director appointed by shareholders in the general meeting and caused by death, resignation, insolvency or disqualification. Any casual vacancy in the office of director is filled by directors in the board meeting.

Question 78.
Sec. 96(i) of the Companies Act, 2013 states that every company must in each calender year hold as AGM, so specified in the notice calling it, provided not more than months shall elapse between two AGM.
(a) 12
(b) 14
(c) 18
(d) 15
Answer:
(d) As per Section 96 (i) of Companies Act, 2013 every subsequent AGM,

(i) It is to be held in each Calendar year
(ii) It is to be held within 15 months from the date of last AGM
(iii) It is to be held within 6 months from close of FY.

Thus, 15 months shall not elapse between two AGMs.

Question 79.
Small shareholder means a shareholder holding shares of nominal value of not more than _________ rupees or such other sum as may be prescribed.
(a) 25,000
(b) 10,000
(c) 50,000
(d) 20,000.
Answer:
(d) According to Sec. 151 of the Companies Act, 2013 every listed company may have one director elected by such small shareholders. For the purpose of this section, “small shareholders means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.

Question 80.
_________ is to be held by every company every year.
(a) Annual general meeting
(b) Board meeting
(c) Statutory meeting
(d) Extraordinary meeting.
Answer:
(a) As per Sec. 96 (i) of the Companies Act, 2013, states every company must, in each calender year hold an Annual General Meeting.

Question 81.
As per Companies Act, 2013 who can be appointed as a director.
(a) A company or a firm
(b) Only a natural person
(c) Any person including a company
(d) Managing agency.
Answer:
(b) As per Sec. 149 (i) of the Companies Act, 2013, only individuals shall be appointed as Directors, that means no body corporate, association or firm shall be appointed as a director of the company.

Question 82.
Small shareholders are holders holding shares of nominal value of not more than
(a) ₹ 10,000
(b) ₹ 20,000
(c) ₹ 40,000
(d) ₹ 30,000
Answer:
(b) Snail shareholders are holders holding shares of nominal value of no more than ₹ 20,000.

Question 83.
Which of the following companies should compulsorily appoint a Woman Director?
(a) Listed company
(b) Public company having paid-up share capital of ₹ 100 crores or more
(c) Public company having turnover of ₹ 300 crores or more
(d) All of the above.
Answer:
(d) Every listed company shall appoint at least one women director and every other public company having paid up share capital of ₹ 100 crores as more as turnover of ₹ 300 crores or more as on the last date of latest audited financial statement, shall also appoint at least one women director under Section 149(1) of Companies Act, 2013.

Question 84.
Company Secretary is a _________.
(a) Key managerial personnel
(b) One of the directors’ in the board
(c) Member of a company .
(d) Officer of the Government.
Answer:
(a) As per Section 2(51) of Companies Act, 2013 “key managerial personal” in relations to a company, means –

  • The Chief Executive Officer of MD or Manager.
  • The Company Secretary
  • The Whole time-Director
  • The Chief Financial Officer and other officers as may be prescribed.

Question 85.
If investors are given periodic payments based on the net profit of the company, these payments are known as:
(a) Dividends
(b) Incentive payments
(c) Rewards
(d) Deposits
Answer:
(a) According to the Companies Act, 2013, the periodic payments based on the net profit earned by the company these payments are known as dividends.

Question 86.
A special resolution means a resolution passed by:
(a) 2/3rd majority
(b) Simple majority
(c) 2/5,h majority
(d) 3/4’h majority
Answer:
(d) A special resolution is a resolution of company’s shareholders which requires at least 3/4th of the notes cast by shareholders in famous of it in order to pass the resolution.

Question 87.
Acts of directors which are beyond their powers but within that provided in the memorandum of association of the company _________.
(a) Cannot be ratified and are void
(b) Can be ratified in general meeting
(c) Are illegal
(d) Are voidable at the option
Answer:
(b) The Board of Directors is entitled to exercise all such powers and do all such acts and things as the company is authorised to exercise and do. In the exercise of its powers the board is subjected to the provisions of the Company Act, the memorandum and the articles and any regulations, not inconsistent with them made by the company in General Meeting.

Question 88.
Board Meeting is the meeting of:
(a) Shareholders
(b) Class Meetings
(c) Employees
(d) Board of Directors
Answer:
(d) Meeting of Board of the Directors is known as Board Meetings

Question 89.
should be held every year.
(a) Board Meeting
(b) AGM
(c) EGM
(d) None
Answer:
(b) Annual Genera! Meeting (AGM) should be held every year.

Question 90.
If BoD’s is not appointed within 30 days then it shouid be filled within _________.
(a) 60 days
(b) 45 days
(c) 21 days
(d) 90 days
Answer:
(d) Late filing is allowed upto 90 days if BoD’s are appointed within 30 days of incorporation.

Question 91.
Custodian of the Foreign Exchanqe Reserves is:
(a) SBI
(b) Ministry of Corporate Affairs
(c) RBI
(d) Finance Minister.
Answer:
(c) RBI is act as custodian of the Foreign Exchange Reserves.

Question 92.
Total Managerial Remuneration should not exceed in public company?
(a) 11%
(b) 10%
(c) 12%
(d) 18%
Answer:
(a) Total Managerial Remuneration should not exceed 11% in public company.

Question 93.
Company Secretary is a :
(a) KMP
(b) Auditor of company
(c) MD of company
(d) Chairman of a company
Answer:
(a) Company Secretary is a Key Managerial Personnel (KMP).

Question 94.
Which of the following type of business are ordinarily carried out at annual general meeting of a company?
X. To declare dividend
Y. To recommend dividend
Z. To appoint the auditors
Z. To make calls an shares
(a) X and Y
(b) X and Z
(c) X, Z and W
(d) X,Y, Z and W
Answer:
(b) Following business are transacted are at AGM –

  • Financial Statement are presented for consideration.
  • Appointment or re-appointment of auditors ‘
  • Declaration of dividend
  • Appointment or re-appointment of auditors.

Thus only businesses given in point X and Z are transacted at AGM of the company.

Question 95.
Company Secretary is a _________.
(a) Key Managerial personnel
(b) One of the directors in the board
(c) Officer of the government
(d) All of these
Answer:
(a) As per Section 2(51) of Companies Act, 2013. “Key managerial personnel” in relation to a compa- means –

  • The CEO / MD or Manager
  • The Company Secretary
  • The Whole Time Director
  • The CFO and other officers as may be prescribed.

Question 96.
Small shareholders are holders holding shares of nominal value of not more than _________.
(a) ₹ 10,000
(b) ₹ 20,000
(c) ₹ 50,000
(d) ₹ 1,00,000
Answer:
(b) Small shareholders are holders holding shares of nominal value of not more than ₹ 20,000.

Question 97.
Company may furnish to the Registrar verification of registered office within _________ days.
(a) 45 days
(b) 15 days
(c) 30 days
(d) 60 days
Answer:
(c) Under Section 12, of the Companies Act, 2013, a company shall on the and from 15th days of incorporation and at all times there after, have registered office capable of receiving all communication and notice. The company can furnish to the registrar verification of registered office within 30 days of incorporation in the manner prescribed. The Rule 25(1) of Companies (Incorporation) Rules, 2014, verification of registered office shall be filed in Form no. INC 22.

Question 98.
Quorum for Board Meetings one-third of or two directors whichever is higher:
(a) Present strength
(b) Total strength
(c) Both ‘A’ or ‘B’
(d) None of Above
Answer:
(b) The Quorum of Board should be one-third of total strength or two directors whichever is higher as per Companies Act, 2013.

CS Foundation Business Environment and Law Notes