Social & Legal Issues

Indian Companies Act

1956

Social & Legal Issues

Director
A company is an artificial legal person and the directors as a body endow the artificial legal person with human face than can act and react. The person through whom a company acts and does its business, and termed as director. An individual can be appointed as director, no corporate body corporate, association or firm Cannot hold a office of more than fifteen companies

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Qualifications of a director
No academic, professional or share qualification Articles may provide for any qualifications Where share qualification is fixed by articles then the act provides a) Qualification shares must be taken within 2 months after appointment Nominal value of qualification shares must not exceed Rs. 5000 or one share where its value exceeds Rs. 5000 Share warrants will not count for this purpose

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Appointment of Directors
First director Appointment of directors by company Appointment of directors by the board Appointment of directors by third parties (nominee director) Appointment of directors by proportional representation Appointment by central government Appointment by small shareholders Consent for appointment Written consent is required to be signed and files with the registrar and the company

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Removal of Directors

By shareholders By Central Government By Tribunal

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Powers of Board of Directors

The board of directors of a company shall be entitled to exercise all such powers and to do all such acts and things, as the company is authorized to exercise and do. The following powers are: The power to make calls The power to issue debentures The power to borrow money otherwise than on debentures The power to invest funds The power to make loans The power to buy back of shares

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Power to be exercised in the general meetings

Sale, lease or disposal of the undertaking Showing any concession regarding payment of debts Make investment of the amount of compensation received Contribution to charitable Borrowing monies exceeding the aggregate of the paid up capital and free reserves of the company

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Duties /Limitations
Good faith Reasonable care Disclose interest Participate in the communities Attend board meetings Actions malafide Incompetent to act Deadlock in the board

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Company meeting

General meeting Requisites of valid meeting Notice of meting must be proper and adequate Chairman of the meeting Quorum Voting Agenda Minutes

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Kinds of Meetings
Meetings of a Company

Shareholders

Directors

Creditors/ Debenture holders

General Meetings

Class meetings

Statutory Meetings

Annual General Meetings

Extra Ordinary Meetings

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Statutory Meetings

Object When held Not required to be held Notice Statutory report In case of default

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Annual general meeting

Which company to hold When to be held Gap between two AGM First AGM Subsequent AGM Extension of time maximum 3 months Business to be transacted Notice 21 days Default

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Board Meetings
When to hold:Atleast once in every three calendar months and 4 meetings every year Notice: To be given to every director in writing. No form or period of notice is laid down. Usually a weeks notice is sufficient. The notice must state the date, time and place of meetings. Quorum:1/3 of the total strength or two, whichever is higher. Passing of resolution by circulation is permissible

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Motion A proposal under consideration by members in a meeting before it is voted upon Rules Should be positive in terms and should always be in writing Within power, scope and relevant to business Comply with the provisions of the Act, memorandum and articles Duly proposed by any member in a meeting Should not be withdrawn before consent

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Resolution
Any motion voted upon and agreed to in a meeting and entered in minutes. A motion passed with or without amendment is called resolution Types of Resolution Ordinary resolution: Simple majority of the members voting at a general meeting. Special resolution: Members present should not be less than three times the votes cast against the resolution. Resolutions requiring special notice: Resolution should be given to the company not less than 14 clear days before the meeting at which it is to be moved.

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Winding up of a Company
Company dissolved Winding up a company is a process whereby its life is ended and its property administered for the benefit of its creditors and members. An administrator called liquidator, is appointed and he takes control of the company, collects its assets, pays its debts and finally distributes any surplus among the members in accordance with their rights

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Winding up of a Company

Winding up of a company differs from insolvency of an individual in as much as a company cannot be made insolvent under the insolvency law. Even a solvent company can be wound up.

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Modes of winding up

Compulsory winding up under orders of the National company law Tribunal NCLT Voluntary Winding up The power of the court are transferred to the National Company Law Tribunal by the company (Amendment)Act 2002. The central government is in the process of formation of this Tribunal

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Grounds for winding up by the Tribunal (NCLT)

By the company passing a special resolution. Default in holding statutory meeting or in delivering statutory report to the registrar Failure to commence business within a year from the date of incorporation or suspension of business for a whole year Reduction in membership below the minimum required Inability to pay its debts of Rs 1 lakh Tribunal is of the opinion that it is just and equitable Default of companys filing its balance sheet and profit and loss account on annual return for any five consecutive financial years

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Grounds for winding up by the Tribunal (NCLT)

If the company has acted against the interests of sovereignty and integrity of India, the security of the state, friendly relations with foreign states public order, decency or morality. If the Tribunal is of the opinion that the company should be wound up as it had become sick and is unlikely to become viable in future

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Who may petition for winding up

The company Any Creditor Any Contributor Any combination of creditor, contributory acting jointly or separately The registrar Any person authorized by the central government The official liquidator The central government and the state government Workers of a company cannot prefer a winding up petition against the company

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Liquidator
To conduct proceeding in winding up To make a report To take custody of companys property To comply with directions of the creditors or contributories or the committee of inspection To summon meeting of creditors and contributories To obtain directions from the tribunal To keep statutory books To get accounts audited Central governments control of liquidator Information as to a pending winding up