Q1. Describe the definition of a company and its salient features?

Company is a voluntary association of persons formed for the purpose of doing business
having a distinct name and limited liability. It is a juristic person having a separate legal entity
distinct from the members who constitute it, capable of rights and duties of its own and
endowed with the potential of perpetual succession. The Companies Act, 1956, states that
'company' includes company formed and registered under the Act or an existing company i.e.
a company formed or registered under any of the previous company laws. 

Salient Features of a company

1. Separate Legal Entity

Company is separate legal entity distinct from its shareholders. The major
constituents of a company are its members, who are the ultimate owners and its
directors. It is an important feature of the company form of business, that there is a
gap between the ownership and control over the affairs of the company. In real
sense the members are the owners of a company, but it is being managed by the
directors who are elected representatives of its members, because it is absolutely
necessary for it to have a human agency called as the Company's board of directors.
The Board of Directors comprises the directors.

2. Separate Property

It is also feature of company that property of company is different from its members.
It can purchase or sell property without the permission of shareholders. In other
words, assets of company are not the assets of members like partnership.

3. Limited Liability

Limited liability is also another important feature of company. It is the reason that
large number of investors invest in limited liability companies. It is the liability of
company to repay not the liability of its members. Members’ liability is only limited
up to the purchased value of shares. They have to pay balance amount of their
shares.

4. Perpetual Succession

The life of company is very stable that human being’s life. There is no effect of
changing, death, insolvency of respected member on company. Its existence is not
affected by members’ existence. Shares can easily transfer from one member to
another member, so liquidation of company is only possible by law.
 5. Common Seal

Company cannot sign on any contract because it is artificial person and it works with
common seal. Every document of contract with company is only valid, if there is
common seal of company on it.

6 Right to Sue

Company can sue on other parties like natural person for protecting its assets and
properties. Other persons can also charge on the company.

Q2. Explain the significance of the Memorandum of Association, the

clauses of Memorandum of Association and the Articles of
Association?

MEMORANDUM OF ASSOCIATION
Definition
Sec 2 (28) means the Memorandum of Association as originally framed altered from
time to time
Definition does not specify nature and importance of MOA

Business parlance - It is Constitution of the Company

IMPORTANCE OF MOA

 MOA is Charter of a Company an defines its limitations and powers (Ashbury

Railway Carriage Co. Ltd v Richie)
 It contains objects for which Company is formed, beyond which it cannot go
 It enables the stakeholders to know with certainty the objects for which the
company is formed and ambit within which it can function
 FORMS OF MOA [Sec 14]
Table B Table C Table D Table D
Company Ltd Co. Ltd by Co. Ltd by Unlimited
by shares Guarantee not Guarantee with Company
having SC SC

CONTENTS OF MOA [Sec 13]

 MOA of every company shall contain:-

Clause I Name clause  As approved by ROC
 Must contain `Ltd.` or `Pvt. Ltd
 Sec 25 companies may be granted licence not to
suffix
 Guidelines issued for approval
Grounds for refusal
 Identical with or nearly resembles, phonetical similar
to name of existing company
Clause II Domicile/situation/  Name of State where the Registered office
Registered office clause  Upon registration, postal address with nearest Police
Station
Clause III Objects clause A (i) Main Objects
(ii) Objects incidental or ancillary to the attainment
of main objects
B Other Objects
 Objects may take up on
incorporation/anytime
 This clause may contain as many as such
objects as the company deems appropriate
 Commercial document
Clause IV Liability clause  States liability of members (at the time of liquidation)
Clause V Capital clause  States amount, division thereof in No. and face value
of Capital company is authorized to raise
Clause VI Association clause  Subscribers to MOA assent to form an AOP

PRINTING AND SIGNATURE

 MOA shall be
 Printed
 Divided into paragraphs, consecutively numbered
  Signed by each subscriber/his POA, with name, address, occupation, no of
shares subscribed
DOCTRINE OF ultra vires
Ultra – beyond vires – powers [Beyond the powers]
Purpose of doctrine
 To protect investors
 To know for which their money is employed
 To ensure that company funds are not dissipated for unauthorized
purpose

Ashbury Rly. Carriage and Iron Co. v Riche

Object - `Mechanical Engineers and Contractors`
Company entered into agreement – Financing construction of Railway track
Held – ultra vires

ALTERATION OF MOA
I. Name Clause II. Registered office III. Objects
Clause Clause
Within city Within One State
same State to another
Sec.17A
[Sec. 17]
How suo moto CG direction Board Resl. Ord. Resl. Spl Resl Spl. Resl.
Any time [Rectification]
Spl Resl.
Grounds Business  Name Business Same ROC (a) to carry on business
expediency identical with expediency  Ord. more economically and
existing Co. Resl. efficiently
 Approval (b) to attain main purpose
thru by new improved means
inadvertence Different (c) to enlarge/change local
 CG ROC areas o operations
direction within  Ord. (d) to carry on some
12 months of Resl. business which may
registration/  RD conveniently and
name approval approval advantageously be
combined with existing
business
(e) to restrict/abandon any
objects
(f) sale of undertaking
(g) amalgamation
 Alteration of MOA (Contd.)

IV. Liability clause V. Capital clause

How Members agree in Ordinary Resolution

writing
Grounds Business 1. Increase Authorised capital by
expediency issue of fresh shares
2. Consolidation/sub-division of
shares
3. Conversion of shares into
stocks/vice versa
4. Diminution of share capital
(not taken up by members)

This clause must contain a statement as to the amount of capital with which the
company proposes to be registered and the division thereof into shares at certain
fixed amount.

For e.g.:

The Memorandum of Association of Reliance Industries Limited

contains the following clauses:

Particulars Clause /
Regulation No.

MEMORANDUM OF ASSOCIATION

Name of the Company ................................................................. I

Registered Office of the Company............................................... II
Main Objects of the Company...................................................... III A
The objects Incidental or ancillary to the attainment of main
objects........................................................................................... III B
Other Objects not included in (A) and (B)................................... III C
Limited Liability of the Members................................................. IV
Authorised Share Capital of the Company................................... V
Subscribers to the Memorandum of Association..........................
 ARTICLES OF ASSOCIATION
The Articles of Association are rules and regulations for the internal working of a
company.
The articles of association are very important for the company. They are important
because they are the regulations that govern the relationship between shareholders
and directors of the company. They are required for the establishment of a company
under the law. 

Usually, the Articles contain rules and regulations regarding: (i) share capital an
variation of rights, (ii) exercise of lieu by the company, (iii) calls on shares, (iv)
transfer, transmission, forfeiture and surrender of shares, (v) conversion of shares
into stock and its reconversion into shares, (vi) issue of share warrants and rights of
their holders, (vii) alternation of capital, (viii) conduct of any proceedings at general
meetings of shareholders, (ix) voting by members. (x) powers, rights, remuneration,
qualification and duties of directors, (xi) proceedings of Board, (xii) appointment of
manager, secretary, etc., (xiii) seal of the company, (xiv) dividend, reserves and
capitalization of profits (xv)accounts, and, (xvi) winding up.

Q3. State the different types of company meetings and their

significance?

A company is an association of several persons. Decisions are made according to the

view of the majority. Various matters have to be discussed and decided upon. These
discussions take place at the various meetings which take place between members
and between the directors. Needless to say, the importance of meetings cannot be
under-emphasised in case of companies. The Companies Act, 1956 contains several
provisions regarding meetings. These provisions have to be understood and
followed.

For a meeting, there must be at least 2 persons attending the meeting. One member
cannot constitute a company meeting even if he holds proxies for other members.

Kinds of Company Meetings: Broadly, meetings in a company are of the following

types:-

I. Meetings of Members:
These are meetings where the members / shareholders of the company meet and
discuss various matters. Member’s meetings are of the following types:-
A. Statutory Meeting:
A public company limited by shares or a guarantee company having share capital is
required to hold a statutory meeting. Such a statutory meeting is held only once in
the lifetime of the company. Such a meeting must be held within a period of not less
than one month or within a period not more than six months from the date on which
it is entitled to commence business i.e. it obtains certificate of commencement of
business. In a statutory meeting, the following matters only can be discussed :-

a. Floatation of shares / debentures by the company

b. Modification to contracts mentioned in the prospectus

The purpose of the meeting is to enable members to know all important matters
pertaining to the formation of the company and its initial life history. The matters
discussed include which shares have been taken up, what money has been received,
what contracts have been entered into, what sums have been spent on preliminary
expenses, etc. The members of the company present at the meeting may discuss any
other matter relating to the formation of the Company or arising out of the statutory
report also, even if no prior notice has been given for such other discussions but no
resolution can be passed of which notice have not been given in accordance with the
provisions of the Act.

A notice of at least 21 days before the meeting must be given to members unless
consent is accorded to a shorter notice by members, holding not less than 95% of
voting rights in the company.

A statutory meeting may be adjourned from time to time by the members present at
the meeting.

The Board of Directors must prepare and send to every member a report called the
"Statutory Report" at least 21 days before the day on which the meeting is to be
held. But if all the members entitled to attend and vote at the meeting agree, the
report could be forwarded later also. The report should be certified as correct by at
least two directors, one of whom must be the managing director, where there is one,
and must also be certified as correct by the auditors of the company with respect to
the shares allotted by the company, the cash received in respect of such shares and
the receipts and payments of the company. A certified copy of the report must be
sent to the Registrar for registration immediately after copies have been sent to the
members of the company.

A list of members showing their names, addresses and occupations together with the
number shares held by each member must be kept in readiness and produced at the
commencement of the meeting and kept open for inspection during the meeting.
If default is made in complying with the above provisions, every director or other
officer of the company who is in default shall be punishable with fine upto Rs. 500.
The Registrar or a contributory may file a petition for the winding up of the company
if default is made in delivering the statutory report to the Registrar or in holding the
statutory meeting on or after 14 days after the last date on which the statutory
meeting ought to have been held.

Contents of Statutory Report must provide the following particulars:- (a)The total
number of shares allotted, distinguishing those fully or partly paid-up, otherwise
than in cash, the extent to which partly paid shares are paid-up, and in both cases
the consideration for which they were allotted.(b) The total amount of cash received
by the company in respect of all shares allotted, distinguishing as aforesaid.(c) An
abstract of the receipts and payments upto a date within 7 days of the date of the
report and the balance of cash and bank accounts in hand, and an account of
preliminary expenses.(d) Any commission or discount paid or to be paid on the issue
or sale of shares or debentures must be separately shown in the aforesaid abstract.
(e) The names, addresses and occupations of directors, auditors, manager and
secretary, if any, of the company and the changes which have taken place in the
names, addresses and occupations of the above since the date of incorporation.(f)
Particulars of any contracts to be submitted to the meeting for approval and
modifications done or proposed.(g) If the company has entered into any
underwriting contracts, the extent, if any, to which they have not been carried out
and the reasons for the failure.(h) The arrears, if any, due on calls from every
director and from the manager.(i) The particulars of any commission or brokerage
paid or to be paid, in connection with the issue or sale of shares or debentures to
any director or to the manager.

The auditors have to certify that all information regarding calls and allotment of
shares are correct.

B. Annual General Meeting

Must be held by every type of company, public or private, limited by shares or by
guarantee, with or without share capital or unlimited company, once a year. Every
company must in each year hold an annual general meeting. Not more than 15
months must elapse between two annual general meetings. However, a company
may hold its first annual general meeting within 18 months from the date of its
incorporation. In such a case, it need not hold any annual general meeting in the
year of its incorporation as well as in the following year only.

In the case there is any difficulty in holding any annual general meeting (except the
first annual meeting), the Registrar may, for any special reasons shown, grant an
extension of time for holding the meeting by a period not exceeding 3 months
provided the application for the purpose is made before the due date of the annual
general meeting. However, generally delay in the completion of the audit of the
annual accounts of the company is not treated as "special reason" for granting
extension of time for holding its annual general meeting. Generally, in such
circumstances, an AGM is convened and held at the proper time . all matters other
than the accounts are discussed. All other resolutions are passed and the meeting is
adjourned to a later date for discussing the final accounts of the company. However,
the adjourned meeting must be held before the last day of holding the AGM.

A notice of at least 21 days before the meeting must be given to members unless
consent is accorded to a shorter notice by members, holding not less than 95% of
voting rights in the company. The notice must state that the meeting is an annual
general meeting. The time, date and place of the meeting must be mentioned in the
notice. The notice of the meeting must be accompanied by a copy of the annual
accounts of the company, director’s report on the position of the company for the
year and auditor’s report on the accounts. Companies having share capital should
also state in the notice that a member is entitled to attend and vote at the meeting
and is also entitled to appoint proxies in his absence. A proxy need not be a member
of that company. A proxy form should be enclosed with the notice. The proxy forms
are required to be submitted to the company at least 48 hours before the meeting.

The AGM must be held on a working day during business hours at the registered
office of the company or at some other place within the city, town or village in which
the registered office of the company is situated. The Central Government may,
however, exempt any class of companies from the above provisions. If any day is
declared by the Central government to be a public holiday after the issue of the
notice convening such meeting, such a day will be traeted as a working day.

A company may, by appropriate provisions in its its articles, fix the time for its annual
general meeting and may also by a resolution passed in one annual general meeting
fix the time for its subsequent annual general meetings.

Companies licensed under Section 25 are exempt from the above provisions
provided that the time, date and place of each annual general meeting are decided
upon beforehand by the Board of Directors having regard to the directions, if any,
given in this regard by the company in general meeting.

In case of default in holding an annual general meeting, the following are the
consequences:-

1. Any member of the company may apply to the Company Law Board. The
Company Law Board may call, or direct the calling of the meeting, and give
such ancillary or consequential directions as it may consider expedient in
relation to the calling, holding and conducting of the meeting. The Company
Law Board may direct that one member present in person or by proxy shall
be deemed to constitute the meeting. A meeting held in pursuance of this
order will be deemed to be an annual general meeting of the company. An
application by a member of the company for this purpose must be made to
the concerned Regional Bench of the Company Law Board by way of petition
in Form No. 1 in Annexure II to the CLB Regulations with a fee of rupees fifty
accompanied by (i) affidavit verifying the petition, (ii) bank draft for payment
of application fee.
 2. Fine which may extend to Rs. 5,000 on the company and every officer of the
company who is in default may be levied and for continuing default, a further
fine of Rs. 250 per day during which the default continues may be levied.

Business to be transacted at Annual General Meeting:

At every AGM, the following matters must be discussed and decided. Since such
matters are discussed at every AGM, they are known as ordinary business. All other
matters and business to be discussed at the AGM are specila business.

The following matters constitute ordinary business at an AGM :-

a. Consideration of annual accounts, director’s report and the auditor’s report

b. Declaration of dividend

c. Appointment of directors in the place of those retiring

d. Appointment of and the fixing of the remuneration of the statutory auditors.

In case any other business ( special business ) has to be discussed and decided upon,
an explanatory statement of the special business must also accompany the notice
calling the meeting. The notice must should also give the nature and extent of the
interest of the directors or manager in the special business, as also the extent of the
shareholding interest in the company of every such person. In case approval of any
document has to be done by the members at the meeting, the notice must also state
that the document would be available for inspection at the Registered Office of the
company during the specified dates and timings.

C. Extraordinary General Meeting

Every general meeting (i.e. meeting of members of the company) other than the
statutory meeting and the annual general meeting or any adjournment thereof, is an
extraordinary general meeting. Such meeting is usually called by the Board of
Directors for some urgent business which cannot wait to be decided till the next
AGM. Every business transacted at such a meeting is special business. An
explanatory statement of the special business must also accompany the notice
calling the meeting. The notice must should also give the nature and extent of the
interest of the directors or manager in the special business, as also the extent of the
shareholding interest in the company of every such person. In case approval of any
document has to be done by the members at the meeting, the notice mus also state
that the document would be available for inspection at the Registered Office of the
company during the specified dates and timings.

The Articles of Association of a Company may contain provisions for convening an

extraordinary general meeting. Eg. It may provide that "the board may, whenever it
thinks fit, call an extraordinary general meeting" or it may provide that "if at any
time there are not within India, directors capable of acting who are sufficient in
number to form a quorum, any director or any two members of the company may
call an extraordinary general meeting".

Extraordinary General Meeting on Requisition :

The members of a company have the right to require the calling of an extraordinary
general meeting by the directors. The board of directors of a company must call an
extraordinary general meeting if required to do so by the following number of
members :-

a. members of the company holding at the date of making the demand for an
EGM not less than one-tenth of such of the voting rights in regard to the
matter to be discussed at the meeting ; or

b. if the company has no share capital, the members representing not less than
one-tenth of the total voting rights at that date in regard to the said matter.

The requisition must state the objects of the meetings and must be signed by the
requisitioning members. The requisition must be deposited at the company's
registered office. When the requisition is deposited at the registered office of the
company, the directors should within 21 days, move to call a meeting and the
meeting should be actually be held within 45 days from the date of the lodgement of
the requisition. If the directors fail to call and hold the meeting as aforesaid, the
requisitionists or any of them meeting the requirements at (a) or (b) above, as the
case may be, may themselves proceed to call meeting within 3 months from the date
of the requisition, and claim the necessary expenses from the company. The
company can make good this sum from the directors in default. At such an EGM, any
business which is not covered by the agenda mentioned in the notice of the meeting
cannot be voted upon.

Power of Company Law Board to Order Calling of Extraordinary General Meeting :

If for any reason, it is impracticable to call a meeting of a company, other than an
annual general meeting, or to hold or conduct the meeting of the company, the
Company Law Board may, either i) on its own motion, or ii) on the application of any
director of the company, or of any member of the company, who would be entitled
to vote at the meeting, order a meeting to be called and conducted as the Company
Law Board thinks fit, and may also give such other ancillary and consequential
directions as it thinks fit expedient. A meeting so called and conducted shall be
deemed to be a meeting of the company duly called and conducted.

Procedure for Application under Section 186 :

An application by a director or a member of a company for this purpose is required
to be made to the Regional Bench of the Company Law Board before whom the
petition is to be made in Form No 1 specified in Annexure II to the CLB Regulations
with a fee of Rs200. The petition must be accompanied with the following
documents -

a. Evidence in proof of status of the applicant.

b. Affidavit verifying the petition.

c. Bank draft evidencing payment of application fee.

d. Memorandum of appearance with copy of the Board's resolution or executed

vakalat nama, as the case may be.

D. Class Meeting
Class meetings are meetings which are held by holders of a particular class of shares,
e.g., preference shareholders. Such meetings are normally called when it is proposed
to vary the rights of that particular class of shares. At such meetings, these members
dicuss the pros and cons of the proposal and vote accordingly. (See provisions on
variations of shareholder’s rights). Class meetings are held to pass resolution which
will bind only the members of the class concerned, and only members of that class
can attend and vote.

Unless the articles of the company or a contract binding on the persons concerned
otherwise provides, all provisions pertaining to calling of a general meeting and its
conduct apply to class meetings in like manner as they apply with respect to general
meetings of the company.

II. Meetings of the Board of Directors

- Meeting of the Board of Directors

- Meeting of a Committee of the Board

III. Other Meetings

A. Meeting of debenture holders

A company issuing debentures may provide for the holding of meetings of the
debenture holders. At such meetings, generally matters pertaining to the variation in
terms of security or to alteration of their rights are discussed. All matters connected
with the holding, conduct and proceedings of the meetings of the debenture holders
are normally specified in the Debenture Trust Deed. The decisions at the meeting
made by the prescribed majority are valid and lawful and binding upon the minority.

B. Meeting of creditors
Sometimes, a company, either as a running concern or in the event of winding up,
has to make certain arrangements with its creditors. Meetings of creditors may be
called for this purpose. Eg U/s 393, a company may enter into arrangements with
creditors with the sanction of the Court for reconstruction or any arrangement with
its creditors. The court, on application, may order the holding of a creditors' s
meeting. If the scheme of arrangement is agreed to by majority in number of holding
debts to value of the three-fourth of the total value of the debts, the court may
sanction the scheme. A certified copy of the court's order is then filed with the
Registrar and it is binding on all the creditors and the company only after it is filed
with Registrar.

Similarly, in case of winding up of a company, a meeting of creditors and of

contributories is held to ascertain the total amount due by the company and also to
appoint a liquidator to wind up the affairs of the company.

Requisites of a Valid Meetings The following conditions must be satisfied for a

meeting to be called a valid meeting :-

1. It must be properly convened. The persons calling the meeting must be

authorised to do so.

2. Proper and adequate notice must have been given to all those entitled to
attend.

3. The meeting must be legally constituted. There maust be a chairperson. The

rules of quorum must be maintained and the provisions of the Companies
Act, 1956 and the articles must be complied with.

4. The business at the meeting must be validly transacted.. The meeting must
be conducted in accordance with the regulations governing the meetings.

Notice of General Meeting

A meeting cannot be held unless a proper notice has been given to all persons
entitled to attend the meeting at the proper time, containing the necessary
information. A notice convening a general meeting must be given at least 21 clear
days prior to the date of meeting. However, an annual general meeting may be
called and held with a shorter notice, if it is consented to by all the members entitled
to vote at the meeting. In respect of any other meeting, it may be called and held
with a shorter notice, if at least members holding 95 percent of the total voting
power of the Company consent to a shorter notice.
Notice of every meeting of company must be sent to all members entitled to attend
and vote at the meeting. Notice of the AGM must be given to the statutory auditor
of the company.

Accidental omission to give notice to, or the non-receipt of notice by, any member or
any other person on whom it should be given will not invalidate the proceedings of
the meeting. The notice may be given to any member either personally or by sending
it by post to him at his registered address, or if there is none in India, to any address
within India supplied by him for the purpose. Where notice is sent by post, service is
effected by properly addressing, pre-paying and posting the notice. A notice may be
given to joint holders by giving it to the jointholder first named in the register of
members. A notice of meeting may also be given by advertising the same in a
newspaper circulating in the neighbourhood of the registered office of the company
and it shall be deemed to be served on every member who has to registered address
in India for the giving of notices to him.

A notice calling a meeting must state the place, day and hour of the meeting and
must contain the agenda of the meeting. If the meeting is a statutory or annual
general meeting, notice must describe it as such. Where any items of special
business are to be transacted at the meeting, an explanatory statement setting out
all materials facts concerning each item of the special business including the concern
or interest, if any, therein of every director and manager, is any, must be annexed to
the notice. If it is intended to propose any resolution as a special resolution, such
intention should be specified.

A notice convening an AGM must be accompanied by the annual accounts of the

company, the director’s report and the auditor’s report. The copies of these
documents could, however, be sent less than 21 days before of the date of the
meeting if agreed to by all members entitled to vote at the meeting.

Proxy
In case of a company having a share capital and in the case of any other company, if
the articles so authorise, any member of a company entitled to attend and vote at a
meeting of the company shall be entitled to appoint another person (whether a
member or not) as his proxy to attend and vote instead of himself. Every notice
calling a meeting of the company must contain a statement that a member entitled
to attend and vote is entitled to appoint one proxy in the case of a private company
and one or more proxies in the case of a public company and that the proxy need
not be member of the company.

A member may appoint another person to attend and vote at a meeting on his
behalf. Such other person is known as "Proxy". A member may appoint one or more
proxies to vote in respect of the different shares held by him, or he may appoint one
or more proxies in the alternative, so that if the first named proxy fails to vote, the
second one may do so, and so on.
The member appointing a proxy must deposit with the company a proxy form at the
time of the meeting or prior to it giving details of the proxy appointed. However, any
provision in the articles which requires a period longer than forty eight hours before
the meeting for depositing with the company any proxy form appointing a proxy,
shall have the effect as if a period of 48 hours had been specified in such provision.

A company cannot issue an invitation at its expense asking any member to appoint a
particular person as proxy. If the company does so, every officer in default shall be
liable to fine up to Rs1,000. But if a proxy form is sent at the request of a member,
the officer shall not be liable. Every member entitled to vote at a meeting of the
company, during the period beginning 24 hours before the date fixed for the
meeting and ending with the conclusion of the meeting may inspect proxy forms at
any time during business hours by giving 3 days notice to the company of his
intention to do so.

The proxy form must be in writing and be signed by the member or his authorised
attorney duly authorised in writing or if the appointer is a company, the proxy form
must be under its seal or be signed by an officer or an attorney duly authorised by it.

The proxy can be revoked by the member at any time, and is automatically revoked
by the death or insolvency of the member. The member may revoke the proxy by
voting himself before the proxy has voted, but once the proxy has exercised the
vote, the member cannot retract his vote. Where two proxy forms by the same
shareholder are lodged in respect of the same votes, the last proxy form will be
treated as the correct proxy form.

A proxy is not entitled to vote except on a poll. Therefore, a proxy cannot vote on
show of hands.

Quorum
Quorum refers to the minimum number of members who must be present at a
meeting in order to constitute a valid meeting. A meeting without the minimum
quorum is invalid and decisions taken at such a meeting are not binding. The articles
of a company may provide for a quorum without which a meeting will be construed
to be invalid. Unless the articles of a company provide for larger quorum, 5 members
personally present (not by proxy) in the case of a public company and 2 members
personally present (not by proxy) in the case of a private company shall be the
quorum for a general meeting of a company.

It has been held by Courts that unless the articles otherwise provide, a quorum need
to be present only when the meeting commenced, and it was immaterial that there
was no quorum at the time when the vote was taken. Further, unless the articles
otherwise provide, if within half an hour from the time appointed for holding a
meeting of the company, a quorum is not present in the person, the meeting :-

a. if called upon the requisition of members, shall stand dissolved;

 b. in any other case, it shall stand adjourned to the same day in the next week,
at the same time and place, or to such other day and time as the Board of
Directors may determine.

If at the adjourned meeting also, the quorum is not present within half an hour from
the time appointed for holding the meeting, the members present shall a quorum.

In case the Company Law Board calls or directs the calling of a meeting of the
company, when default is made in holding an annual general meeting, the
government may give directions regarding the quorum including a direction that
even one member of the company present in person, or by proxy shall be deemed to
constitute a meeting. Similarly the Company Law Board may, direct a meeting of the
company (other than an annual general meeting) to be called and held where for any
reason it is impracticable to call a meeting and direct that even one member present
in person or by proxy shall be deemed to constitute a meeting.

Voting and Demand for Poll

Generally, initially matters are decided at a general meeting by a show of hands. If
the majority of the hands raise their hands in favour of a particular resolution, then
unless a poll is demanded, it is taken as passed. Voting by a show of hands operates
on the principle of "One Member-One Vote". However, since the fundamental voting
principle in a company is "One Share-One Vote", if a poll is demanded, voting takes
place by a poll. Before or on declaration of the result of the voting on any resolution
on a show of hands, the chairman may order suo motu (of his own motion) that a
poll be taken. However, when a demand for poll is made, he must order the poll be
taken. The chairman may order a poll when a resolution proposed by the Board is
lost on the show of hands or if he is of the opinion that the decision taken on the
show of hands is likely to be reversed by poll. When a poll is taken, The decision
arrived by poll is final and the decision on the show of hands has no effect.

A poll is allowed only if the prescribed number of members demand a poll. A poll
must be ordered by the chairman if it is demanded:-

a. in the case of a public company having a share capital, by any member or

members present in person or by proxy and holding shares in the company-

i. which confer a power to vote on the resolution not being less than one-tenth
of the total voting power in respect of the resolution, or

ii. on which an aggregate sum of not less than fifty thousand rupees has been
paid up.

b. in the case of a private company having a share capital, by one member

having the right to vote on the resolution and present in person or by proxy if
not more than seven such members are personally present, and by two such
members present in person or by proxy, if more than seven such members
are personally present.
 c. in the case of any other, by any member or members present in person or by
proxy and having not less than one-tenth of the total voting power in respect
of the resolution.

Motion
Motion means a proposal to be discussed at a meeting by the members. A resolution
may be passed accepting the motion, with or without modifications or a motion may
be entirely rejected. A motion, on being passed as a resolution becomes a decision. A
motion must be in writing and signed by the mover and put to the vote of the
meeting by the chairman. Only those motions which are mentioned in the agenda to
the meeting can be discussed at the meeting. However, motions incidental or
ancillary to the matter under discussion may be moved and passed. Generally, a
motion is proposed by one member and seconded by another member.

Amendment
Amendment means any modification to a motion before it is put to vote for
adoption. Amendment may be proposed by any member who has not already
spoken on the main motion or has not previously moved an amendment thereto.
There can be an amendment to an amendment motion also. A motion must be in
writing and signed by the mover and put to the vote of the meeting by the chairman.
An amendment must not raise any question already decided upon at the same
meeting and must be relevant to the main motion which it seeks to amend. The
chairman has the discretion to accept or reject an amendment on various grounds
such as inconsistency, redundancy, irrelevance, etc. If the amendment is adopted on
a vote by the members, it is incorporated in the body of the main motion. The
altered motion is then discussed and put to vote and if passed, becomes a
resolution.

Adjournment
Adjournment means suspending the proceedings of a meeting for the time being so
that the meeting may be continued at a later date and time fixed in that meeting
itself at the time of such adjournment or to decided later on. Only the business not
finished at the original meeting can be transacted at the adjourned meeting.

The majority of members at a meeting may move an adjournment motion at a

meeting. If the chairman adjourns the meeting, ignoring the views of the majority,
the remaining members can continue the meeting. The chairman cannot adjourn the
meeting at his own discretion without there being a good cause for such an
adjournment. Where the chairman, acting bona fide within his powers, adjourns the
meeting as per the view of the majority, the minority members cannot to continue
with such meeting and, if they do the proceedings there will be null and void.

An adjourned meeting is merely the continuation of the original meeting and

therefore, a fresh notice is not necessary, if the time, date and place for holding the
adjourned meeting are decided and declared at the time of adjourning it. If a
meeting is adjourned without stipulation as to when it will be continued, fresh notice
of the adjourned meeting must be given.

Postponement
Postponement of a meeting means defering the holding of the meeting itself at a
later date. Postponement is done by the Board of Directors or by the person
convening the meeting. In case of adjournment, it is the decision of the majority of
the members present at the meeting itself.

Dissolution
Dissolution of a meeting means termination of a meeting. The meeting no longer
exists once it has been dissolved. If within half an hour after the time appointed for
holding a general meeting; the quorum is not present, the meeting shall stand
dissolved if it was called on requisition by members.

Minutes of Proceedings of Meetings

Every company must keep minutes of the proceedings of general meetings and of
the meetings of board of directors and its committees. The minutes are a record of
the discussions made at the meeting and the final decisions taken thereat.

Every company must keep minutes containing details of all proceedings at the
meetings. The pages of the minute books must be consecutively numbered and the
minutes must be recorded therein within 30 days of the meeting. They have to be
written directly on the numbered pages. Pasting or attaching of papers is not
allowed. Each page of every such minutes books must be initialed or signed and last
page of the record of proceedings of each meeting in such books must be dated and
signed by :-

a. in the case of the meeting of the Board of directors or committee thereof, by

the chairman of that meeting or that of the succeeding meeting, and

b. in the case of a general meeting, by the chairman of the same meeting within
the aforesaid 30 days or in the event of the death or inability of that
chairman within the period, by a director duly authorised by the Board of
directors for the purpose.

The Company Law Board, however, may not object if minutes are maintained in
loose leaf form provided all other procedural requirements are complied with and all
possible safeguards against manipulation or interpolation of the minutes are
ensured. The loose leaves must be bound at reasonable intervals. Entering the
minutes in a bound minute book by a chemical process, which does not amount to
attachment to any book by pasting or otherwise is permissible provided on the
mechanical impression of the minutes, the original signatures of the Chairman are
given on each page. All appointments of officers made at any of the meetings must
be included in the minutes of the meeting. In the case of a meeting of the Board of
directors or its Committee, the minutes must also state the names of directors
 present at the meeting and the names of directors, if any, dissenting from, or not
concurring with a resolution passed at the meeting.

The chairman may exclude from the minutes any matters which are defamatory,
irrelevant or immaterial or which are detrimental to the interests of the company.
The discretion of the Chairman with regard to the inclusion or exclusion of any
matter is absolute and unfettered.

Where minutes of the proceedings of any meeting have been kept properly, they
are, unless the contrary is proved, presumed to be correct, and are valid evidence
that the meeting was duly called and held, and all proceedings thereat have actually
taken place, and in particular, all appointments of directors or liquidators made at
the meeting shall be deemed to be valid.

The minute books of the proceedings of general meetings must be kept the
registered office of the company. Any member has a right to inspect, free of cost
during business hours at the registered office of the company, the minutes books
containing the proceedings of the general meetings of the company. Further, any
member shall be entitled to be furnished, within 7 days after he has made a request
to the company, with a copy of any minutes on payment of Rupee One for every
hundred words or fraction thereof. If any inspection is refused or copy not furnished
within the time specified, every officer in default shall be punishable with fine up to
Rs. 500 for each offence. The Company Law Board may also by order compel an
immediate inspection or furnishing of a copy forthwith. But the minutes books of the
board meetings are not open for inspection of members

Q4. Explain the significance of Incorporation and Certificate of

Incorporation?
INCORPORATION

The process by which business receives a state charter, allowing it to become a

corporation is called incorporation.

The first step in the formation of a company is the approval of the name by the
Registrar of Companies (ROC) in the State/Union Territory in which the company will
maintain its Registered Office. This approval is provided subject to certain conditions:
for instance, there should not be an existing company by the same name. Further,
the last words in the name are required to be "Private Ltd." in the case of a private
company and "Limited" in the case of a Public Company.  The application should
mention at least four suitable names of the proposed company, in order of
preference. In the case of a private limited company, the name of the company
should end with the words "Private Limited" as the last words. In case of a public
limited company, the name of the company should end with the word "Limited" as
the last word. The ROC generally informs the applicant within seven days from the
 date of submission of the application, whether or not any of the names applied for is
available. Once a name is approved, it is valid for a period of six months, within
which time Memorandum of Association and Articles of Association together with
miscellaneous documents should be filed. If one is unable to do so, an application
may be made for renewal of name by paying additional fees. After obtaining the
name approval, it normally takes approximately two to three weeks to incorporate a
company depending on where the company is registered.

CERTIFICATE OF INCORPORATION
After the duly stamped Memorandum of Association and Articles of Association,
documents and forms are filed and the filing fees are paid, the ROC scrutinizes the
documents and, if necessary, instructs the authorised person to make necessary
corrections. Thereafter, a Certificate of Incorporation is issued by the ROC, from
which date the company comes in to existence. It takes one to two weeks from the
date of filing Memorandum of Association and Articles of Association to receive a
Certificate of Incorporation. Although a private company can commence business
immediately after receiving the certificate of incorporation, a public company cannot
do so until it obtains a Certificate of Commencement of Business from the ROC.

Significance of Certificate of Incorporation

Another function of the Certificate of Incorporation is to establish the company's
legal name. Article I usually states the company's name that must be used to identify
the company in legal proceedings and official documents. The incorporator must
conduct a search of the state's registered name database prior to submitting the
Certificate of Incorporation or risk it being rejected due to lack of availability.
Additionally, states often require the name to reflect the type of business entity---
with the words "Incorporated" or "Corporation," or abbreviations of these terms.

Q5. Explain the role played by auditor and company secretary in a

company?

AUDITOR
Definition and Nature of the Work
An auditor is a type of accountant. The main job of the auditor is verification of a
company's financial records. Auditors study various sources to find out whether a
company's records present its true financial situation. They check the company's
bookkeeping and accounting methods by analyzing its books and records. They
compare the company's books with the records of the banks, brokers, creditors, and
others who deal with the company. They check the books of the departments within
the company as well. These objective analyses and reports often help management
cut costs, save on taxes, and increase profits.

There are two types of auditors—external and internal. External or independent

auditors work for public accounting firms or are self-employed. Businesses,
industries, and government agencies contract with auditors to verify and certify their
financial statements. Well-run companies usually have their books audited once a
year. An independent audit gives shareholders and creditors an outside, expert
opinion of a company's financial condition.

The work of internal auditors is similar to that of external auditors, but internal
auditors work for and receive a salary from one company. These auditors examine
and evaluate the financial system of their firm to ensure that it is being run
efficiently and economically. They examine all financial records, including accounting
books, payroll records, and equipment and inventory records. They submit reports to
management on how well accounting policies are working and where changes
should be made.

COMPANY SECRETARY
In India every company having a paid up share capital of Rs.50 million (5 crores) or
more is required to appoint a qualified person as Company Secretary. A qualified
Company Secretary should be a member of Institute of Company Secretaries of
India. A company having not less than Rs.one million (10 lacs) paid up capital and not
required to appoint a full time company Secretary should file a compliance
certificate signed by a practicing Company Secretary with Registrar of Companies.

Section 383A of the Companies Act, 1956 provides for the mandatory appointment
of a whole time secretary where the paid up capital of the Company exceeds Rs.50
million (5 crores). If the capital is less than Rs.50 million (5 crores), the company is
required to obtain a secretarial compliance certificate and attach the same to the
Directors' Report and file it with the Registrar of Companies.

Statutory declarations of compliance under various other provisions of the

Companies Act, 1956 are also to be certified by practising company secretaries.
Under the MCA 21 e filing regime several forms (including some, exclusively) are
required to be pre-certified by practising company secretaries.

The annual returns of companies listed on recognized stock exchanges are to be

signed by a practising company secretary.

Further, the Securities and Exchange Board of India (SEBI) also recognizes the
Company Secretary as the Compliance Officer and the practising company secretary
to issue various certificates under its Regulations. Further, the practising Company
Secretaries are also authorised to certify compliance of conditions of corporate
governance in case of listed companies.

The Reserve Bank of India also authorises company secretaries to issue various
certificates.

The Institute of Company Secretaries of India is the premier professional body to

develop and regulate the profession of Company Secretaries in India. It was set up by
an Act of Parliament in 1980.

When the Companies Bill, 2009 is passed by the parliament and becomes an Act, the
National Company Law Tribunal (NCLT) will be given powers of a court and all
matters relating to Company Law would be heard before it instead of High Court.
Only a Company Secretary would be eligible to appear before NCLT and not a lawyer.
This will open more opportunities for a Company Secretary.