Secretarial Practice in Drafting Notice, Agenda and Minutes of Company’s Meetings Resolution – Drafting, Pleadings and Appearances Important Questions

Question 1.
“A Company is an artificial judicial person created by Law”. Comment.
A company is incorporated under Companies Act, 2013. It is an artificial judicial person created by law having its own entity distinct from its members.

Following are the landmark judgments:-
In the case of Salomon vs. Salomon and Company Limited (1897) A.C. 22, the principle of the separate legal entity of a company was recognized by the House of Lords. It was held that once the company is incorporated, it becomes a separate entity in the eyes of law independent of a company from Mr. Salomon.

In the case of Re. Kondoli Tea Co. Ltd., (1886) ILR 13 Cal. 43, the Calcutta High Court recognised the principle of separate legal entity much earlier than the decision in Salomon case.

Certain persons transferred a Tea Estate to a company and claimed exemptions from ad valorem duty on the ground that they themselves were also the shareholders in the company. It was nothing but a trans¬fer from them in one name to themselves under another name. While rejecting this plea, Calcutta High Court observed:

“The company was a separate person, a separate body altogether from the shareholders and the transfer was as much a conveyance, a transfer of the property as if the shareholders had been totally different persons. ”

Thus a company being an artificial judicial person, it is capable of acting in its own name, entering into contracts, owning and holding property in its own name, sue and to be sued in its name. However, it expresses its will or takes its decisions through natural persons ie. directors or members.

Question 2.
‘Corporate decision-making process has to be collective as per law’. Comment.
A company is a separate legal entity. It is an artificial judicial person created by Law. It acts through its directors and members by passing resolutions at validly held meetings. A Meeting has been defined in the case of In Re. Associated Color Laboratories Ltd. (1970) 12 D.L.R. as “Coming together of two or more persons face to face so as to be in each other’s presence or company.”

Decisions of the Board of Directors:
The will of the Board of Directors is expressed through Resolutions at meetings of the Board or those passed by circulation. General Meetings of the members provide a forum for them to express their will with regard to the management of the affairs of the company. The primary purpose of a Meeting is to ensure that a company gives reasonable and fair opportunity to those entitled to participate in the meeting to take decisions as per the prescribed procedures.

The meetings of a company under the Companies Act, 2013 can be classified as under:

  • Meetings of the Directors and their Committees
  • Meetings of Members which can further be classified as:-

Annual General Meetings (AGM)
Extraordinary General Meetings (EGM)
Class Meetings.

The following resolutions can be passed at general meetings or through postal ballots:
Ordinary Resolutions: Resolution by majority of >51%
Special Resolutions: Resolution by majority of >75%.

Question 3.
Bank was authorised by its Articles to issue bonds. The directors issued bonds to ‘A’ without the requisite resolution. A filed a suit for recovery of the money against the company. The company resisted the suit on the ground that there was no resolution passed. Will ‘A’ succeed?
Meaning: According to the doctrine of indoor management, a person entering into a transaction with the company needed to satisfy that his proposed transaction is not inconsistent with the articles and memorandum of the company. He is not bound to see the internal irregularities of the company and if there are any internal irregularities, the company will be liable to honour its part of the contract.

This doctrine was laid down in the case of:
Royal British Bank v. Turquand(1856) 6 E&B 327 The directors of the company borrowed some money from the plaintiff. The article of the company provides for the borrowing of money on bonds but there was a necessary condition that a resolution should be passed in general meeting.

Now in this case shareholders claims that as there was no such resolution passed in general meeting so the company is not bound to pay the money. It was held that the company is bound to pay back the loan. As directors could borrow but subjected to the resolution, so the plaintiff had the right to infer that the necessary resolution must have been passed. It was held that

“Outsiders are bound to know the external position of the company but are not bound to know its indoor management. ”

In the present case, ‘A’ will succeed to recover his money as he was totally oblivious of the fact that a resolutions needs to be passed by the company before issuing of any bond. According to the doctrine of indoor management, A is well within its capacity to assume that all the necessary resolutions must have been passed by the directors of the company.

Question 4.
Two shareholders sued the directors of a company, alleging various fraudulent and illegal transactions, whereby the company’s property was j misapplied. The transactions were, however, of such nature as the majority \of shareholders had the power to confirm. Will such suit succeed? Why?
A company is a legal entity separate from its shareholders. The Court will not interfere with the internal management of companies acting within ! their powers. Where an ordinary majority of members can ratify the act, the Court will not interfere. This simply means, if the majority can ratify | an act, the minority cannot sue.

Foss v. Harbottle (1843) 2 Hare 461, 67ER 189 In this case two shareholders commenced legal action against the promoters j and directors of the company alleging that they had misapplied the company j assets and had improperly mortgaged the company property.

The Court rejected the two shareholders’ claim and held that a breach of duty by the directors of the company was a wrong done to the company for which it alone could sue. In other words, the proper plaintiff, in that case, was the company and not the two individual shareholders.

Thus the suit filed by two shareholders against the directors of a company for alleged fraudulent act causing losses to the company will not succeed because if the majority of shareholders had the power to confirm the act of the directors, in such case any suit against the directors will not survive.

Question 5.
Distinguish between the following; Ordinary Resolution and Special Resolution.
The following are the differences between Ordinary Resolution and Special Resolution:-

Ordinary Resolution Special Resolution
1. An ordinary resolution is one which is passed in the company’s general meeting by a simple majority of votes. A Special Resolution is one which is passed in the company’s general meeting by a special majority Le the favourable votes whether in person or by proxy, should not be less than three times the votes cast against the resolution by members so entitled.
2. All matters relating to the company’s business, except those which need to be settled by a special resolution, are settled by an ordinary resolution. A special resolution is meant to make decisions in important matters and protect the rights of company’s members.
3. No notice is required to be given for moving an ordinary resolution. A prior notice needs to be given for moving a special resolution in any meeting of the company and the notice should contain the intention to propose the resolution as special resolution should be mentioned specifically.
4. Ordinary Resolution is one wherein simple majority is required to move the resolution at the general meeting. Special Resolution means a resolution in which supermajority is needed to pass the resolution at the general meeting.
5. Ordinary resolution requires the consent of at least 51% members, in favour of the resolution. Special resolution requires the consent of at least 75% members, in favour of the resolution.
6. The copy of an ordinary resolution, signed by the officer of the company should be filed with the registrar only in certain cases. A printed or handwritten copy of a special resolution, containing the signature of the officer of the company must be filed with the Registrar of Companies within 30 days.
7. Ordinary businesses are transacted at annual general meetings. Special businesses are transacted at Annual general meetings as well as extraordinary general meetings.

Question 6.
The directors of the company were authorised under the Articles of Association of Company to borrow? 20000 without the consent of shareholders in general meeting. The directors themselves let? 50000 to the company without such consent. Is the company held liable for? 50000.
Doctrine of indoor management According to the doctrine of indoor management, a person entering into a transaction with the company only needed to satisfy that his proposed transaction is not inconsistent with the articles and memorandum of the company. He is not bound to see the internal irregularities of the company and if there are any internal irregularities, the company will be liable to honour its part of the contract.

Exception to doctrine of indoor management The doctrine of indoor management will not apply if the person dealing with the company has a slight knowledge about the lack of authority of Z the person who is acting on behalf of the company in this situation the doctrine will not apply.

Howard vs. Patent Ivory Company (1888) 38 Ch D 156, the .article of the – company empowered directors to borrow up to 1000 pounds only. However, they could extend the limit of 1000 pound by consent in general meeting. Without such permission, they took 3500 pounds from one of the directors who took debentures. Later on, the company refused to pay back. The court held that the company is only liable to pay back 1000 pounds because the director had noticed about the limit and condition.

This problem refers to the exception to doctrine of indoor management. In this case, the company is liable for only ₹ 20000 which was authorized by Article of Association. The company will not be held liable for ₹ 50000 as this amount was in excess of the borrowing capacity of the company under Articles of Association and the director of a company should be well informed of the internal affairs and capacity of the company.

Question 7.
Describe the applicability of Secretarial Standard-1 under the Companies Act, 2013, issued by The Institute of Company Secretaries of India on Meeting of Board of Directors.
Secretarial Standard-1 issued by The Institute of Company Secretaries of India is applicable on meeting of Board of Directors as well as Meetings of Committees of the Board as given below:-
Applicability of Secretarial Standard-1 on meeting of Board of Directors: Secretarial Standard-1 prescribes a set of principles for convening and conducting meetings of the Board of Directors.

According to section 118(10) of the Companies Act, 2013, every company is required to observe Secretarial Standard-1 except:

  • One Person Companies (OPC) having only one Director on its Board and
  • Such other class or class of companies which are exempted by Central Government through Notification.

E.g. companies licensed under Section 8 of the Companies Act, 2013.
Exemptions shall be applicable to a Section 8 company provided it has not committed a default in filing its Financial Statements or Annual Return with the Registrar of Companies.

Applicability of Secretarial Standard-1 on Meetings of Committees of the Board: SS-1 is also applicable to the Meetings of Committees of the Board.

At present, Companies Act, 2013 provides for the constitution of following mandatory committees of the Board based on the certain thresholds:

  • Audit Committee
  • Nomination and Remuneration Committee
  • Corporate Social Responsibility (CSR) Committee
  • Stakeholders Relationship Committee

In case any other committee of the Board is constituted voluntarily or pursuant to any other statute or regulations etc., the company may comply with SS-l with respect to meetings of such committee as a good governance practice.

Question 8.
What are the provisions regarding quorum for the meeting of Board of Directors under Companies Act, 2013. Can article provide for the different quorum than the Companies Act, 2013?
According to Section 174 of the Companies Act, 2013, following shall be the Quorum for meetings of Board:-
The quorum for a meeting of the Board of Directors of a company shall be one-third of its total strength or two directors, whichever is higher. Participation of the directors by video conferencing or by other audiovisual means shall also be counted for the purposes of quorum under this sub-section.

The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company and for no other purpose.

Whereat any time the number of interested directors exceeds or is equal to two-thirds of the total strength of the Board of Directors, the number of directors who are not interested directors and present at the meeting, being not less than two, shall be the quorum during such time.

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

The Companies Act, 2013 does not provide cap on higher number of quorums. As per Secretarial Standard- 1, Articles of Association may provide for higher number of directors for quorum.

Question 9.
When an urgent resolution by circulation can be initiated?
Companies Act, 2013 as well as Secretarial Standard 1 on Meetings of the Board of Directors lists certain items of business which shall not be passed by circulation and shall be placed before the Board at its Meeting. However, other business that requires urgent decisions can be approved by means of resolutions passed by circulation.

Resolutions passed by circulation are deemed to be passed at a duly convened meeting of the board and have equal authority.

Procedure for Resolutions passed by circulation:
The chairman of the board or in his absence, the Managing Director or in their absence, any Director other than an Interested Director, shall decide whether the approval of the board for a particular business shall be obtained by means of a resolution by circulation.

Where not less than one-third of the total number of directors for the time being require the resolution under circulation to be decided at a meeting, the chairman shall put the resolution for consideration at a meeting of the board.

A resolution proposed to be passed by circulation shall be sent in draft, together with the necessary papers, to all the directors. Each business proposed to be passed by way of Resolution by circula¬tion shall be explained by a note setting out the details of the proposal.

Question 10.
XYZ Ltd. wishes to convey Meeting of Board of Directors through Electronic mode. Draft a suitable Notice for the same. Assume other information.
XYZ Ltd.

Notice Of 2nd Board Meeting

August/03 /2020

Mr. Ram Aggarwal,
New Delhi.
Dear Sir,

  1. NOTICE is hereby given that the 2nd meeting of the Board of Directors of the company will be held on Tuesday, 11th day of August 2020 at 11 a.m at the registered office of the company.
  2. The Agenda of the business to be transacted at the Meeting is enclosed.
  3. You may attend the Meeting through electronic Mode, the details of which are enclosed. In case you desire to participate through such mode, please send a confirmation via email in this regard to Mr. Raman Singh, Company Secretary of the company at [email protected] within 2 days to enable making necessary arrangements.

Kindly make it convenient to attend the Meeting.

Yours faithfully,
For XYZ Limited
Raman Singh
Company Secretary
[email protected].

Question 11.
Write down the required important practical aspects, while drafting agenda and notes thereon.
Following are the important practical aspects while drafting agenda j and notes thereon:
1. Agenda have to be written with special care which not only requires good drafting skills but also an understanding of commercial considerations and the business environment.
For the purpose divide the agenda into two parts: the first part containing usual or routine items and the second part containing other items which can be bifurcated as:

  • Items for approval.
  • Items for information/noting.

2. For each item of the agenda an explanatory note should be annexed providing details like introduction, proposal, with recommendations of the management, provisions of Law, decisions to be taken and in¬terest, if any, of any Directors. The explanatory note may be drafted under the following heads:

  • Background (or Introduction)
  • Proposal, with recommendations of the management
  • Provisions of Law
  • Decisions to be taken.
  • Interest, if any, of any Directors.

3. As a good governance practice, the agenda item should be initiated by the concerned department (Head of Department or another authorised person) and approved by the competent authority as may be decided by the Board.

4. The Company Secretary should refer to the Agenda of previous Meet¬ings, to see whether any items had been deferred and should consider whether such items are to be included for discussion at the ensuing meeting.

5. The Company Secretary should also refer to the Minutes of the Meet¬ing held during the corresponding period of the previous year to see whether there are any recurring periodic items. The Company Sec¬retary should finalise the Agenda in consultation with the Chairman or in his absence the Managing Director or Whole-time Director.

6. The Company Secretary should maintain and refer folder of notes, documents to ensure that all items which require the decision of the Board are included in the Agenda.

7. A separate Agenda item number should be given for items which are brought forward for discussion from a previous meeting.

Question 12.
Draft a Resolution for appointment of ‘David’ as Company Secretary I pursuant to Section 203 of The Companies Act, 2013.
The Chairman advised the Board that it is proposed to appoint Mr. j David who holds the prescribed qualifications as Company Secretary of the | company; Mr. David has given his consent to act as Company Secretary if appointed.

The Board agreed with the same and passed the following Resolution:
“Resolved That pursuant to Section 203 of the Companies Act, 2013 and Rule 8 and Rule 8A of Companies appointment & remuneration of Managerial Personnel Rules, 2014 and other applicable provision if any, of the Companies Act, 2013; Mr. David, holding the prescribed qualification under Section 2(24) of the Companies Act, 2013, be and is hereby appointed 1 as Company Secretary of the company w.e.f April/1/2020, on the terms I specified in the draft agreement placed on the table, a copy of which was initialled by the Chairman for the purpose of identification.”

“Resolved Further That, Mr. David, Company Secretary, shall perform j*s the duties which are required to be performed by a secretary under the 7 Companies Act, 2013 and any other duties assigned to him by the Board j or the Chief Executive Officer.”

“Resolved Further That, Mr. X, Director be and is hereby authorised to sign and file the necessary forms /documents with the Registrar of companies ‘ and make entries, as appropriate, in the registers of the company.”

Question 13.
Draft a specimen affidavit for issue of duplicate Share Certificate, as the original Share Certificate issued by the Company has lost. Assume data.

(On stamp paper of ₹10 or above)

I, ABC Sb X, R/o ……… do hereby solemnly affirm and declare oath as under:

1. That I am a Shareholder of xYz Ltd, holding 1000 Equity shares having Folio distinctive Nos. 18 to 1018 issued by the company.
2. That the said share certificates, covering the above-said shares have been lost.
3. That the FIR has been registered in Saket Police Station. vide No. 54/2019 dated 3rd June 2019.
4. That I have not sold and/or transferred the said shares in favour of any other person or persons.
5. That I have not pledged, created any charge or encumbrance on said shares in favour of any person or persons.
6. That I have filed a request to the Company to issue duplicate certificate for the said shares. ‘




I, the above-named deponent, verify that the contents of paragraphs 1 to 6 of this affidavit are true to my personal knowledge and belief.


Solemnly affirmed before me on this ……………………………………. day of ……………………………………. 2013 of ……………………………………. (time) by the deponent.

(Oath Commissioner)

Question 14.
ABC Ltd. called an Annual General Meeting on 28th December 1998. £ As the quorum was not present on that day, the meeting was adjourned Z; to 4th January 1999 on which date the meeting was duly held. No other  AGM was held in 1999. Can the company be prosecuted for not holding AGM every year?
Section 96 of the Companies Act, 2013 deals with Annual General Meeting. It should be held once in each calendar year.

First annual general meeting of the company should be held within 9 nionths Irom the closing of the first financial year. Hence it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation.

Subsequent annual general meeting of the company should be held within 6 months from the date of closing of the relevant financial year. The gap between two annual general meetings shall not exceed 15 months.

Meenakshi Mill Company Ltd. y. Assistant Registrar of Joint Stock Companies AIR 1938 In this case, the company failed to call an annual general meeling. The Company had called general meeting in December 1934 which was adjourned and held on March 1935. It was pleaded by the company that since the general meeting called on 30th December 1934, was adjourned to 31st March 1935, and was held on that date, it follows that general meeting was held in 1934 and in 1935, and the general meeting held on the 28th January 1936, was within 15 months of 31st March 1935.

It was held by the Court that the annual general meeting held in March 1935 was the adjourned meeting of 1934. There shall be a general meeting held once at least in every year, that is, one meeting per year, and as many meetings as there are years. 1935 is a separate year and distinct meeting should be held. The Company was convicted.

In the present case, ABC Ltd. called an AGM on 28th December 1998 and because of want of quorum, the meeting was adjourned and the meeting was held on 4th January 1999. The meeting held on 4th January 1999 was the adjourned meeting of 1998. Thus, the company must hold meeting for the financial year 1999. If it is not doing so, company can be prosecuted for not holding AGM every year.

Question 15.
Draft a specimen notice by Requisitionists convening an Extraordinary General Meeting as per annexure VII in this regard under the Companies Act, 2013.
Following is the notice by Requisitionists convening an Extra-ordinary General Meeting:
NOTICE is hereby given that the persons named below, who are Members of ABC Ltd, having its registered office at ………… , and who have requisitioned the convening of an Extraordinary General Meeting of the Company, hereby, in exercise of the powers and rights conferred by Section 100 of ‘ the Companies Act, 2013, give notice that the said requisitioned meetings shall be held on 3rd day of June 2019, at 2 p.m. at the registered office.

For considering and, if thought fit, passing the following Ordinary/Special Resolution:
Removal Of Mr. Ram (DIN: ………) From The Post Of Director Of The Company
“Resolved That pursuant to Section 115 read with Section 169 of the Companies Act, 2013 and rules made thereunder, Mr. RAM (DIN: ………) be and is hereby removed from the office of Director of the Company with effect from the date of this meeting.”

Names of requisitionists:
1. …………………..
2. …………………..
3. …………………..
4. …………………..
By Order of the Board of Directors
For …………………..
………………….. (Signature)
Place: …………………..
Date: …………………..

………………….. (Name)

Company Secretary
(ACS/FCS No ………………….. )

1. A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and, on a poll, to vote instead of himself and the Proxy need not be a Member of the Company. Proxies, in order to be effective, should be duly completed, stamped (if applicable) and signed and must be received at the Registered Office of the Company not less than forty-eight hours before the time fixed for the Meeting.

2. The requisition dated ………………….., referred to above, signed by the requisite number of Members in terms of Section 100 of the Companies Act, 2013, and all documents referred to in the Notice are available for inspection by any Member at the Registered. Office of the Company on any working day of the Company between the hours of 11:00 a.m. and 1:00 p.m. up to the date of this Extra-Ordinary General Meeting and at the venue of the Meeting for the duration of the Meeting.

3. Route-map to the venue of the Meeting is enclosed.

Drafting, Pleadings and Appearances Notes