Acts which are ultra-vires to the Articles but intra-vires to the

memorandum
All the acts or contracts which are made or done beyond the powers provided by the
articles but are within the powers and authority given by the memorandum are called
ultra-vires the articles but intra-vires the memorandum. Such acts and contracts can be
ratified by the shareholders (even retrospectively) by making alterations in the articles
to that effect.

Acts which are ultra-vires to the directors but intra-vires to the

company
All the acts or contracts which are made by the directors beyond the powers provided
to them are called acts ultra-vires the directors but intra-vires the company. The
company can ratify such acts and then they will be binding.

DIRECTORS: APPOINTMENT, POWERS

AND DUTIES
In simple terms, the ‘director’ is the supreme executive authority in the company, who
is entrusted with the management and control of the company’s affairs. Generally, a
company has a team of directors, which are ultimately responsible for the entire
management of the company’s state of affairs. These teams of directors are collectively
known as the ‘Board of Directors’. In ideal corporate governance practice, it is the team
of directors that ensures the protection of the stakeholders of the company and of other
members of the company.

This institution of the formulation of a team of members, known as directors, was based
on the foundation that a company must have a team of faithful, trustable, and respectable
members who work for the betterment of the company. They are appointed to work for
the company’s best interests.

It is pertinent to mention here that the directors do not work in an individual capacity,
unless specifically said so, in any board resolution meeting. It means that all the
directors have to work collectively. The work done by any director in its individual
capacity is not binding on the company.

The term ‘director’ is defined under Section 2(34) of the Companies Act,
2013 (hereinafter referred to as the 2013 Act). It states that a ‘director’, “means a
director appointed to the board of a company.” The definition provided under the 2013
Act is not an exhaustive one. This section corresponds to Section 2(13) of
the Companies Act, 1956. It defines a director as “any person occupying the position
of director by whatever name called”.

Board of Directors
As discussed above, a company, being an artificial person with no mind of its own, cannot function
without a human agency. Thus, the persons responsible for managing the affairs of a
company are known as directors, and collectively they are termed as ‘Board of
Directors’. The definition of the term is provided under Section 2(10) of the 2013 Act.
It states that a ‘Board’ or ‘Board of Directors’ of a company refers to a collective body
of the directors of the company.

Board meetings
In simple layman’s language, as defined under Collin’s dictionary, the term ‘board
meeting’ means a meeting held by the board of a company or any organisation.
According to Section 173 of the 2013 Act, after the formulation of a company, a
meeting of the board of directors should be conducted within thirty days. Also, there
should not be a gap of more than 120 days between two consecutive meetings. The
mode of conducting such board meetings is enumerated under Section 173(2) of the
2013 Act.

Classification of directors
As per the Companies Act 2013, directors can mainly be classified under two subheads,
namely, managing directors (one who has substantial powers of management and
control of the affairs of the company) and full-time directors (one who is in full-time
employment).

Further, the classification of the directors based on the manner in which they are
appointed, the role they play, the duties they have, the powers they possess, etc. can be
under the following subheads, namely:

 First Directors: As per the rules and norms laid down in the Article of
Association or any charter or constitution of the company, the ones who have
signed the Memorandum of Association of the company are considered to be
as first directors, and they hold the office until any other directors are
officially appointed by the company in the first annual general meeting.
 Casual vacancies: The directors who are appointed for a short-term term
when any existing directors vacate the office.
  Additional Directors: If the Articles expressly provide, the Board of
Directors has the authority to appoint additional directors as they deem fit and
necessary. These additional directors will serve until the subsequent annual
general meeting.
 Alternate Director: the director who has been appointed by the Board
through a special resolution in place of the director who has been absent from
his post.
 Shadow Director: A person who isn’t officially appointed to the Board but
whose advice or directions the Board is accustomed to following is held
accountable as a director of the company. It is pertinent to note that this
doesn’t apply if the individual is providing advice in a professional capacity.
Therefore, such a ‘shadow’ Director could be considered an ‘officer in
default’ under the 2013 Act.
 De Facto Director: A person who has not been officially appointed as a
director by the company but acts as a director and is also held out as a director
by the company is classified as a ‘de facto director’.
 Rotational Directors: In a public company or a private company that is a
subsidiary of a public company, at least two-thirds of the directors are
supposed to retire by rotation, and the ones retiring through such a process
are referred to as “rotational directors”. Further, if the articles of the company
provide so, they can be reappointed.
 Nominee Directors: These are the directors who have been appointed by the
shareholders, third parties through contract, or other parties as may be
prescribed.

Position of directors : a legal perspective

As discussed above, directors are the key managerial personnel of a company. By far, it is very
clear that a company, be it private or public, is required to appoint a director. They are entrusted
with the entire management of the affairs of the company, and the same is done in accordance with
prevailing laws. The role played by the directors in the corporate governance of a company is very
significant and crucial.

The term ‘director’ has been defined under Section 2(34) of the 2013 Act; however, the definition
fails to provide clarity pertaining to the exact meaning of the term, duties, responsibilities,
functions, etc. the director is supposed to perform.

Defining and explaining the position that a director holds is a complex and herculean task. The
reasoning is that it varies according to the context and circumstances. There are no precise words
that can explain the position that directors hold in any corporate enterprise. However, attempts have
been made by various courts to explain the position that a director holds. Let’s take a look at a few
important case laws wherein this subject has been dealt with.
Director as an agent
Put simply, a company is an artificial person, and thus it cannot function and work on its own.
Thus, a company needs someone to work for it and manage its affairs. So in this sense, the director
acts as the agent of the company for which they work. Hence, pursuant to this proposition, the
relationship between the director and the company is governed by the principles of the law of
agency.

The fact that directors also act as the agents of the company was also recognised by the Scottish
Court of Session in the case of Ferguson v. Wilson (1904). The court acknowledged the fact that a
corporation or a company, being an artificial person, cannot act on its own, and hence the directors
act as the agents of the company and manage the affairs of the company. While considering this
duty that a director is entrusted with, the court opined that the relationship between a director and
company is akin to the relationship that exists between a principal and agent.

It is pertinent to note that, just as a director does not act as the trustee of the shareholders but that
of a company, similarly, the directors are not the agents of individual members but of the institution
as a whole.

Director as trustee
It is pertinent to note that the directors are the trustees of the money of the company, which they
are duty-bound to handle as they act as agents in the transactions that are carried out on behalf of
the company. As the directors are entirely in control of the company’s funds in the official capacity,
which they are obligated to utilise and administer for the benefit and profit of the company, in this
sense, they can be regarded as the trustees of the company.

Director as a managing partner

As the terms suggest, managing partner in a literal sense connotes the person who is responsible
for or who manages the day-to-day running of a company, enterprise, etc. Further, as we have
discussed, a director, before everything else, is the person responsible for the management of the
affairs of the company. Thus, his role as a managing partner needs no explanation.

Furthermore, the shareholders’ will and their needs are entirely taken care of by the directors of the
company. They act as the agents of the shareholders’ and pursue their objectives. Also, one must
note that a director possesses extensive powers and exercises many proprietary functions. The
Article of the Association as well as the Memorandum of Association bestow on the board of
directors the ultimate authority to formulate policies and decisions for the welfare of the company
in accordance with the law.

Directors as an organ of the company

The transformation and evolution of the roles and responsibilities of modern-day corporate
entities, with time, have led to the emergence of a new theory called the ‘organic theory
of corporate life’. In terms of this theory, certain officials of the company are treated as
the organs of the company. As per this theory, the company is held liable for the actions
of these organs in a manner similar to the one where a natural person is held accountable
for the actions of his limbs. Put simply, in the modern era, the directors are much more
than just agents or trustees; they are often regarded as the organs of the company.
Almost the entire work of the corporate entities and companies is conducted by the
directors and their managerial personnel. They are conferred with enormous powers
through the regulations embodied in the Articles of Association. The courts in various
judgements have opined that the directors function like the brain of the company, and
it is through the directors that the company acts.

Appointment of directors
The crucial role that the directors play in the management of the affairs of the companies is
unquestionable. Thus, the persons appointed to the post of director hold desirable
qualities and integrity. The 2013 Act has an ample body of provisions that deal with the
appointment of various directors in a very elaborate manner.

According to Section 149 of the 2013 Act, every company is required to have a Board
of Directors. The board shall have individuals as directors. Further, it provides the
minimum number of directors that a company is required to have, i.e., for a public
company, the minimum number is three, and for a private company, the minimum
number is two. In the case of a one-person company, the minimum number is one.
Furthermore, the provision also provides for a maximum number of directors, i.e.,
fifteen.

The proviso clause provides that a company can also appoint more than fifteen directors
by passing a special resolution. Also, having one woman director is an essential
requirement.

Section 149(3) mandates the presence of at least one director who stays in India for a
total of 182 days during the financial year. Whereas, sub-section 4 provides that every
listed company is to have at least one-third of the total independent directors. For public
companies, the Central Government may prescribe a limit on the minimum number of
independent directors.

Section 152 provides for the appointment of directors. Let’s have a brief overview of
how different classes of directors are appointed.

Appointment of the first directors

Generally, the first directors are appointed by the subscribers of the Memorandum of
Association (Section 152(1) of the 2013 Act). In case the appointments are not done in
the aforementioned way, the individual subscribers and signatories of the MOA become
the directors. Further, it is important to note that the first directors only hold the office
until the new ones are appointed in the first annual general meeting.

It is pertinent to note that no person shall be capable of being appointed as a director of

a public company (that has a share capital) unless he fulfils the below-mentioned points:

 Allotment of a Director Identification Number (DIN) as per the provisions

of Section 154 of the 2013 Act.
 The First Director has signed and filed a consent in writing for the
appointment with the Registrar of Companies (ROC). Provided this must be
done within thirty days of the appointment of the director.
 He has signed the memorandum for his qualification shares, if any.
 A written undertaking to the ROC if he has taken any qualification shares
from the company. He must also pay for that qualification share. Further, an
affidavit is also required to this effect, specifying that shares have been
registered in his name.
 In cases of independent directors appointed in the general meeting, it is
mandatory that an explanatory statement by the board be provided for such
an appointment. The statement must mention that the director fulfils the
requirements as per the 2013 Act.

Section 162: Voting on the appointment of director

It is important to note that the appointment of every director in a public company or its
subsidiary and the passing of an ordinary resolution in this context in the general
meeting are mandatory. According to Section 162 of the 2013 Act, it is mandatory that
each candidate must be voted individually. Thus, if two or more directors are appointed
by a single resolution, then it will be invalid and void in the eyes of the law. However,
if in the meeting it has been unanimously decided, more than one director can be
appointed by a single resolution. Further, if such an appointment is made, it is necessary
that first a resolution is passed which authorises such an appointment.

One must note that this provision does not apply to private companies that are not
subsidiaries of public companies.

Appointment by proportional representation

The basic or traditional method for appointment is an election by a simple majority of the
shareholders. However, it has been observed that this method of appointment frequently
fails to appoint even a single director on the board. Thus, Section 163 of the Companies
2013 Act allows the minority to place their representative and enables minority
shareholders to appoint directors through the method of proportional representation.
The very purpose of enumerating this provision of voting through proportional
representation is to amplify the method of minority voting. This method can be followed
by different methods, namely, a single transferable vote, voting by way of cumulative
voting or any other means. This system of appointment by way of proportional
representation is also called a ‘cumulative voting system’. Put simply, this provision
allows companies to appoint directors through the method of proportional
representation. One must note that this method can only be adopted if the Articles of
Association (AOA) provide for it.

Rights of the persons to stand for directorship apart from the

retiring directors
Section 160(1) of the 2013 Act provides that a person who is not retiring from the post
of director (appointed as per Section 152 of the 2013 Act) is eligible to be appointed a
director, provided he fulfils all the requirements of the 2013 Act.

Appointment of directors by the board

As per the provisions of the 2013 Act, the board has the power to appoint any person as
director if he fulfils the requirements in a general meeting. As per Section 162 of the
2013 Act, the following directors can be appointed by the board, namely:

 Additional director (Section 161(1) of the 2013 Act)

 Alternate director (Section 161(2) of the 2013 Act)
 Nominee director (Section 161(3) of the 2013 Act)
 To fill in vacancies of directors (Section 161(4) of the 2013 Act)

Appointment by tribunal
The Company Law Tribunal has been given the power to appoint directors, and the
provision for the same has been enumerated under Section 242(j) of the 2013 Act.
Appointment of directors through election by small
shareholders
As enunciated under Section 151 of the 2013 Act, it is mandatory that at least one
director should be elected by small shareholders. The term ‘small shareholders’
connotes those shareholders who possess a maximum of Rs. 20,000 shares in the
company.

Independent directors and their appointments

The provisions pertaining to the independent directors are laid down under Section
149(4) of the 2013 Act. It enumerates that at least one-third of the total number of
directors in every listed company should be independent directors. However, as far as
the public companies are concerned, the central government has the power to prescribe
the minimum number of independent directors.

Who is an independent director?

Section 149(6) of the 2013 Act provides for the definition of an independent director.
It states that an independent director is a director other than a managing director, a
whole-time director, or a nominee director. It further lays down certain characteristics
and other circumstances that must be fulfilled in order to be an independent director.
The following are the points that need to be considered:

1. A person with integrity who has the desired expertise and experience.
2. A person who has never been a promoter of the company, its subsidiary or
any other holding company in the past or present.
3. A person who does not have a pecuniary relationship with the company, its
subsidiary, or any other holding company, directors, or promoters.
4. A person whose relative or he himself does not hold any post of key
managerial personnel. Further, he must also not be an employee of the
company.
It is pertinent to note that every independent director is required to clarify and declare
his independence at the very first board meeting and shall continue to do so every year
at the first board meeting of every financial year. It is to be noted that an independent
director holds the office of directorship for a period of five years. Also, an independent
director can be reappointed, provided the same shall be done after the passing of a
special resolution. However, an independent director can only hold office for two
consecutive terms.
Disqualifications
Section 164 of the 2013 Act provides for the eligibility criteria for the directors of the
company. Under the following circumstances, a person will not be eligible for the
appointment of director if,

 He is of unsound mind and has been declared as a person of unsound mind by

the competent court.
 He is an undischarged insolvent.
 A person who has applied to be adjudicated as an insolvent or whose
application for adjudicating him as an insolvent is pending.
 A person charged for any offence, whether involving moral turpitude or
otherwise and has been sentenced for that offence to imprisonment for not
less than 6 months, and a maximum of 5 years has not been passed after that
imprisonment. Provided that if a person has been convicted of any offence
and sentenced in respect thereof to imprisonment for a period of seven years
or more, he shall not be eligible to be appointed as a director in any company.
 If he has been disqualified by any tribunal for the concerned position.
Provided that if a person has been convicted of any offence and sentenced in
respect thereof to imprisonment for a period of seven years or more, he shall
not be eligible to be appointed as a director in any company.
 A person who has been convicted of the offence dealing with related party
transactions under Section 188 at any time during the last preceding five
years.
 The concerned person has not made any calls relating to the shares of the
company he holds.
 If he has not complied with the provisions of Section 152(3) and Section
165(1) of the 2013 Act.
Further, if the person who has been previously appointed as a director has not a filed
financial statement and paid returns for up to 3 financial years, continuously failed to
repay the accepted deposits, payment of interest, or pay any declared dividend, he or
she shall not be eligible to be re-appointed as director in any other company for a period
of 5 years.

Apart from this, a private company may provide in its Articles of Association for any
disqualifications along with the ones provided in the aforementioned provision.
Removal of director
Section 169 of the 2013 Act, provides for the removal of the director. As per the said
provision, a director can be removed from his office by any of the two below-mentioned
authorities;

1. Company
2. Tribunal

Removal by company
Section 169(1) of the 2013 Act provides that a person can be removed from his
directorship prior to the expiration of the term of his office by passing an ordinary
resolution. However, the aforesaid section does not apply to the below-mentioned
circumstances.

1. If the director is appointed by the tribunal in pursuance of Section 242.

2. If the company has adopted the system of electing two-thirds of its directors
by the method of proportional representation.
In order to remove a person from his directorship, furnishing him with a special notice
is mandatory. In the aforesaid notice, an intimation regarding the intention to remove
the director must be there. Further, it should be served at least 14 days prior to such a
meeting.

As soon as the company receives such notice, a copy of such notice is furnished to the
director concerned. Then the concerned director has the right to make a presentation
against the resolution at the general meeting. If a director makes a representation, then
its copy needs to be circulated among the members.

Removal by the Tribunal

Clause (h) of Section 242(2) confers the power to remove a managing director, manager,
or any other director of the company. When an application is made to the tribunal for
relief from oppression or mismanagement, it may terminate any agreement of the
company that has been made with a director. When the appointment of a director is
terminated, he cannot serve the managerial position of any company for five years
without leave of the Tribunal.
Resignation by the director
The provision for resignation by the director is provided under Section 168 of the 2013 Act. A
director of a company may resign from the position of directorship as per the norms or
rules or in the manner provided in the Articles of Association of the company. In case
the articles do not contain any rules or provisions in this respect, then the director may
give his resignation after providing a notice for the same to the board and the company.
Further, the company, after taking notice of the resignation, is required to inform the
Registrar of Companies in the manner and within the time as prescribed. The report of
such resignation by the director should also be placed forward in the general meeting
of the company.

As per the proviso to Section 168(1) of the 2013 Act, the director may also forward a
copy of his resignation within thirty days to the registrar, along with mentioning the
reasons for the same. Further, as per Section 168(2), the resignation shall be effective
as soon as the company receives the intimation of the same by the notice or on any
specific date as provided in the notice. Section 168(3) of the 2013 Act provides that if
all the directors vacate their offices under Section 167, then, for the time being, the
promoters or the Central Government, in the absence of any promoter, shall appoint the
required number of directors, who shall hold office till the directors are appointed by
the company in a general meeting.

In the case of Mother Care (India) Pvt. Ltd. v. Ramaswamy P. Aiyar (2003),
the Karnataka High Court held that the resignation of a director would be effective even
if he was the only director in the office.

It is important to note that even after resignation, the director can be held liable for any
wrong associated with him or that has been done in his personal capacity during the
period in which he served as the director.

Liability of directors
The directors can be held liable for the acts done by them without the company’s
authority. Such acts may also be called ultra vires acts. Furthermore, they can also be
held liable, in their personal capacity, for the acts that are intra vires the company;
however, those acts are beyond a director’s scope or power, provided they are not
ratified by the company. The liability of directors can be divided into two subheads,
namely, criminal and civil liability.

Below is a detailed explanation of each of the classifications.

Powers of directors
Generally, the powers conferred upon the directors are expressly or otherwise outlined
in the Articles of Association of the company. Once these powers mentioned in articles
are delegated and vested in the Board of Directors, only they can exercise them. It is
pertinent to note that the shareholders cannot order or direct the board as to how the
powers are to be exercised. Provided, the board exercises these powers within the
prescribed scope.

General powers vested under Section 179

Section 179 of the 2013 Act provides that the Board of Directors will be entrusted with all the
powers conferred upon them by the company. The board is entitled to exercise all the
powers that the company has authorised. However, it is pertinent to note that these
powers are subject to certain restrictions.

The powers of directors are co-extensive with the powers of the company itself. The
director, once appointed, has almost total power over the operations of the company.

There are two limitations on the exercise of the power of directors, which are as follows:

1. The board of directors is not competent to do the acts that the shareholders
are required to do in general meetings.
2. The powers of directors are to be exercised in accordance with the
memorandum and articles.
The individual directors have powers only as prescribed by memorandum and articles.

The intervention of shareholders in exceptional cases

In the following exceptional situations, the general meeting is competent to act on
matters delegated to the board:

1. When directors have acted malafide.

2. When directors have due to some valid reason become incompetent to act.
3. The shareholders can intervene when directors are unwilling to act or there is
a situation of deadlock.
4. The general meetings of shareholders have the residuary powers of a
company.
Powers to be exercised with general meeting approval
Section 180 of the 2013 Act mentions certain powers that can be exercised by the Board
only when they are approved in the general meeting:

 To sell, lease, or otherwise dispose of the whole or any part of the company’s
undertakings.
 To invest otherwise in trust securities.
 To borrow money for the purpose of the company
 To give time or refrain the director from repayment of any debt.
When the director has breached the restrictions imposed under the sections, the title of
lessee or purchaser is affected unless he has acted in good faith along with due care and
diligence. This section does not apply to companies whose ordinary business involves
the sale of property or putting a property on lease.

Power to constitute an audit committee

Section 177 of the 2013 Act provides power to the board of directors to formulate an
audit committee. It is to be noted that the committee should be constituted of at least
three directors, including independent directors. Further, it is mandatory that the
committee should have independent directors in the majority. The chairperson and
members of the audit committee should be persons with the ability to read and
understand the financial statements.

The audit committee is required to act in accordance with the terms of reference
specified by the board in writing.

Power to constitute nomination and remuneration committees and

stakeholder relationship committee
The Board of Directors can constitute the Nomination and Remuneration Committee
and Stakeholder Relationship Committee under Section 178 of the 2013 Act. The
Nomination and Remuneration Committee should consist of three or more non-
executive directors out of which one-half are required to be independent directors.

The Board can also constitute the Stakeholders Relationship Committee, where the
board of directors consists of more than one thousand shareholders, debenture holders,
or any other security holders. The grievances of the shareholders are required to be
considered and resolved by this committee.
Power to make a contribution to charitable or other funds
The Board of Directors of the company is empowered under Section 181 to contribute
to bona fide charitable and other funds. The prior permission of the company in a
general meeting is required when the aggregate amount of contribution, in any case,
exceeds 5% of the average net profit of the company for the immediately preceding
financial years.

Power to make a political contribution

Under Section 182 of the 2013 Act, the companies can make a political contribution.
The company making a political contribution should not be other than a government
company or a company that has been in existence for less than three years.

Also, the amount of contribution should not exceed 7.5% of the company’s net profit in
the three immediately preceding financial years. The contribution needs to be
sanctioned by a resolution passed by the Board of Directors.

Power to contribute to the national defence fund

The Board of Directors is empowered to make contributions to the national defence
Fund or any other fund approved by the Central Government for the purpose of National
Defence under Section 183 of the 2013 Act. The amount of contribution can be the
amount as much as the company thinks fit. This total amount of contribution made is
mandated to be revealed in the profit and loss statement during the financial year to
which it pertains.

Restrictions on powers under the statutory provision

The Companies Act 2013 also lays out the manner in which the powers of the company are to be
exercised. There are certain powers that can be exercised only when their resolution has
been passed at the board’s meetings. Those powers, such as the power:

1. To make calls.
2. To borrow money.
3. To issue funds for the company.
4. To grant loans or give guarantees.
5. To approve financial statements.
6. To diversify the business of the company.
 7. To apply for amalgamation, merger, or reconstruction.
8. To take over a company or to acquire a controlling interest in another
company.
The shareholders in a general meeting may impose restrictions on the exercise of these
powers.

PROCEDURE OF CALLING MEETINGS

A meeting as defined by the Miriam Webster dictionary as “a gathering of people for a
particular purpose.” This purpose may be social business or a corporate business deal.
A meeting is held with a specific purpose, that is, to debate upon certain related issues
or to take decisions. Meetings are held specifically for an end game purpose at a pre-
defined place, time and with a specific agenda in mind.

In a corporate set-up, a meeting is an important aspect in the running of the company.

A meeting in this context is important not only because important resolutions are
discussed and taken, but other matters pertaining to the running of the company and
management are discussed herein. These meetings are classified into two main
categories, i.e., organizational meetings and operational meetings. While the former
deals with matters dealing with shareholders and the management, the latter involves
meetings with the management and employees of different committees like the sales,
marketing, etc.

Meetings are an important element in the running of a corporate set-up, and this is made evident
through the laws set up under the Companies Act, 2013.

Calling a Board Meeting

A Board meeting is called by the directors of the committee. The company directors
exercise their powers collectively at a Board Meeting. As per the old Companies Act,
1956, a board meeting had to be held once in three months with at least four meetings
in a year. Under Section 285 of the Companies Act, 2013, every company must hold a
board meeting at least once in every three months and at least four such meetings should
be held every year[1]. If a meeting is called within the given period, then it would not
amount to a violation, though it could not be held due to want of a quorum[2].

Notice for the Board Meeting

Before the beginning of the Board Meeting, a notice for the same should be given to
every Director in the Company. A failure to give notice for the meeting would invalidate
the meeting and the matters debated or approved upon in the meeting would be null and
void. Section 286 of the Act states that there is a penalty imposed on the concerned
officer if the notice for the meeting is not given[4]. The Act does not give any period
for the length of such a notice. In Brown v. La Trinidad[5], it was held that even a few
minutes notice would amount to notice given.

Agenda for the Board Meeting

It is wise to send the agenda of the meeting before the meeting so that the Directors’
can ponder and jot down their notes before the meeting. The Act does not lay down any
provision that the Agenda of the Meeting should be sent to the Directors’ attending the
meeting before the start of the meeting as mentioned above. Other matters apart from
the agenda items can also be discussed in the meeting. However, it would be a matter
of wisdom if the extra items to be discussed are also added to the agenda list.

Quorum for the Board Meeting

The quorum for a Board Meeting is one-third of the total number of the directors of the
company or two directors, whichever is higher. If the quorum is not present then, the
meeting will be adjourned to the same time and place on the same day in the following
week. As seen in Hood Sailmakers Ltd. v. Axford BCLC[7], it’s pertinent to note that
a “meeting” where one director is present irrespective of the number of the people
present is not a valid meeting.

Conducting a Board Meeting

The Articles of Association of a Company provides for the manner or procedure in
which an item or business has to be conducted at a Board Meeting. A majority of votes
resolves all debates, questions, or resolutions and if a consensus is not obtained than the
Chairman of the Board of Directors has the casting vote in case of an equality of votes.

Recording of the Proceedings of the Meeting

The proceedings of the meeting are to be recorded within thirty days from the
conclusion of the meeting in a Minutes book. The minutes of the meeting should contain
the names of the Directors attending the meeting, resolutions taken in the meeting,
dissent on any issue, solution for the issue, etc. It should provide a fair and accurate
summary of the meeting and contain evidence of every issue discussed at the meeting.
It should contain the assent of the Chairman of the Board as well as details of the next
meeting.

Resolution of the Meeting

Section 289[8] States that a resolution can be passed either at the meeting of the Board
of Directors or by Circulation. If a resolution has to be passed through circulation, then
a draft of the resolution along with the necessary papers should be given to each and
every director. The resolution by circulation should be approved by a majority of the
directors on the board.

Under Section 292, the following six powers can be exercised by the Board of Directors,
with regards to passing of resolutions in a Board Meeting and not by Circulation:

1. Make calls on shareholders in respect to money which is unpaid on their

shares.
2. Authorize buy-back of the shares of the Company (the Buy-back should be
less than 10% of the total paid-up equity capital and free reserves of the
company.
3. Issuance of debentures.
4. Borrowing of Money other than on debentures.
5. Investing funds of the company.
6. Make loans.

TYPES OF MEETINGS
Numerous meetings are convened in a company, which are generally divided into
members’ meetings, directors’ meetings, and other meetings. These meetings are
carried on to attain different goals, and each meeting has its own distinct set of rules
and regulations. These rules have to be abided by the company, and meetings have to
be conducted in accordance with such set meetings. These meetings play a major role
in the decision-making process of the company.

Company meeting : an overview

A company meeting means two or more individuals coming together to carry out a
legitimate business or to take decisions on the same, like any other group of people
flocking together for a particular purpose. Now, in order to carry out the business of the
company properly, it becomes necessary for the directors and shareholders of
companies to meet as often as necessary and to take unanimous decisions based on their
viewpoints and discussions. Simply put, it is crucial for companies to hold meetings for
the effective functioning of the company. These meetings hold great importance in the
decision-making process.

Moreover, shareholders, who are the owners of the company, have the right to have
proper discussions on the affairs of the company and to further exercise their rights in
matters relating to the ongoing activities and future of the company. Conducting
meetings provides this chance to the shareholders and also gives them an opportunity
to keep a check on the activities of the board of directors, as the directors are obligated
to adhere to the decisions taken in the meetings of shareholders. Also, the management
of the company is vested in the hands of shareholders; hence, it is important that they
meet on a regular basis to take unanimous decisions and function effectively as a team.

Meaning and definition of company meetings

There is no definition of the term “meeting” per se in the Companies Act, 2013; in plain
language, a company can be defined as two or more individuals coming together,
gathering, or assembling either by prior notice or unanimous decision for discussing
and carrying out some legitimate activities related to business. A company meeting can
be said to be a concurrence or meeting of a quorum of members to carry out ordinary
or special business and take decisions on important matters of the company.

Why are company meetings held

Before we read about the types of company meetings, let’s take a look at why exactly
company meetings are conducted.

Control management function

Company meetings play a crucial role in controlling the management functions of a
company.

Control the affairs of the company

In a company, the directors are accountable to the shareholders. Directors have been
entrusted with the duty to run the business and manage the day-to-day affairs of the
company. By holding meetings, the affairs of the company are controlled.

Future policies
Through meetings, the past policies and experiences of a company can be discussed,
and new future policies can be fixed. As stated above, directors are answerable to
shareholders, so via such meetings, the shareholders can learn about the affairs of the
company. The rights of shareholders include:

1. Inquiring regarding the affairs of the company,

 2. Criticising the function of the company,
3. Have effective control on the board.

Important definitions of company meetings

In the case of Sharp v. Dawes (1971), a meeting is defined as “an assembly of people
for a lawful purpose” or “the coming together of at least two persons for any lawful
purpose.”

Further, according to P.K. Ghosh, “any gathering, assembly, or coming together of

two or more persons for the transaction of some lawful business of common concern
is called meeting.”

Moreover, according to K. Kishore, “a concurrence or coming together of at least a

quorum of members by previous notice or mutual agreement for transaction business
for a common interest is a meeting.”

Essence in context with the aforementioned definitions

From the above definitions, we can infer the following:

Number of individuals
In a meeting, there must be two or more individuals. The number of members
attending the meeting may be small, large, or extremely large, depending on the type
of meeting. In the case of a committee meeting, the total count of members may be
small, whereas in the case of an annual general meeting of any public company, the
total number may be large, and in the case of public meetings, the total count may be
very huge.

Definite place
There must be a specific place for the meeting. In the case of official meetings, the
meeting must be conducted in the office. Further, in the case of big meetings that entail
a huge involvement of members, like the annual general meeting of a public company,
the meeting can be held in a public hall. Also, public meetings can be held in public
halls, on open grounds, or even on roads, if required.

Fixed date and time

While conducting a meeting, it is necessary to decide on a date and time. In the case of
official meetings, the date chosen to conduct the meeting is often a working day, and
the time is within office hours; however, there can be restrictions in matters related to
the date and time under the Companies Act.

Discussion
There has to be some discussion while conducting the meeting, meaning the individuals
in the meeting must put forth their viewpoints and opinions on the agenda of the
meeting.

Predetermined topics
Usually, in company meetings, the topics or subject matter of the meeting are already
notified to the participants, so they can come prepared with their viewpoints on the
same.

Decisions
The decisions for the agenda are generally taken in the meeting itself, as getting to a
conclusion is the main objective of conducting the meeting. The decisions occurring in
the meeting are binding on the members of the company, irrespective of whether they
were able to attend the meeting or not, were present or not, or even if they agree with
or oppose the inference thus reached.

The decisions are taken either through votes or in the form of resolutions. Also, there
are distinct ways of voting. Usually, decisions are not taken at public meetings, and if
they are, they are not binding in any manner whatsoever.

Types
Meetings can be of different types, namely:

1. Private,
2. Public, or
3. International (like U.N.O.)
The types of company meetings, which can be private or public, are discussed in depth
below.

General notes

1. The meeting does not take place automatically. A meeting has to be called or
convened. In simple words, a notice has to be sent to every individual with
the authority to attend the meeting.
 2. In the case of a public meeting, general publicity is necessary. Every type of
meeting has its own procedure to be followed.
3. An accidental meeting of two or more individuals will not be referred to as a
meeting.
4. The secretary is responsible for calling and informing the members and
conducting the meeting.

Importance of company meetings

Meetings hold great value in our daily social lives. This is a democratic process that is quite
essential in the decision making of any organisation, be it a company, a club, or even
an association. Further, group discussions play a major role in:

1. Introducing changes in the company,

2. Decision making, and
3. Improves the relations between an employer and his employee.
The object and methods of conducting different types of meetings are different. Each
of them is discussed in detail in the upcoming passages.

Further, the following are some noteworthy pointers on the importance of holding
company meetings:

 Meetings are a crucial part of managing a company, as stated under

the Companies Act, 1956.
 The consent of the members of the company, commonly known as
shareholders, is obtained at the general meetings held by the company.
 If any mistake is committed by the board of directors, the shareholders have
the authority to rectify it at the meetings of the company.
 Shareholder’s meetings are held by the shareholders to give a final say on
their decisions on the measures taken by the board of directors.
 Meetings help enlighten the shareholders to know about the recent
happenings and procedures of the company and enable them to deliberate on
some matters.
 There are several criteria that have to be fulfilled in matters relating to the
calling, convening, and conduct of the meetings.

Components of a valid company meeting

A company meeting generally consists of the following:

Participants
The first and foremost requirement of a meeting is to have participants. In the case of a
private meeting, only the individuals having the authority to attend the meeting, like the
members of the organisation, the committee, the sub-committee and the people who
have received an invitation, can participate. At times, in the event of the non-availability
of such a person, he has the right to send his representative or proxy on their behalf.
Whereas, in the case of public meetings, the general public has the authority to attend
them.

Chairman
For a valid company meeting, there has to be a chairman at every meeting who has the
authority and duty to carry on the meeting effectively.

Secretary
The secretary of the organisation, committee, sub-committee etc., is entrusted with
several duties right from the beginning to the very end of the meeting. He plays a crucial
role in carrying out such meetings.

Invitees
Apart from those who have the authority to attend the meeting, there are some people
who are invited, for instance, the press reporters.

Material elements
Another major component of the meeting involves material elements. The material
elements include:

1. The sitting arrangement,

2. The materials for writing, etc.

General provisions to know about conducting valid

company meetings
Proper authority to convene meetings
In order for a meeting to be regarded as valid, it must be called by a proper authority,
like the board of directors. In a valid board meeting, the decision to convene a general
meeting and issue notice in this regard must be taken by passing a resolution.

Notice
For a meeting to be conducted properly, a proper notice must be issued by the proper
authority. It means that such a notice must be drafted properly according to the
provisions laid down under the Companies Act, 2013. Also, such a notice must be duly
served on all the members who are entitled to attend and vote at the meeting. Moreover,
the valid notice of the company must specifically mention the place, the day, the time,
and the statement of the business to be transacted at the meeting.

Quorum
A quorum is defined as the minimum number of members that are required to be present
as mentioned under the provisions of a particular meeting. Any business transaction
carried out at a meeting without a quorum shall be deemed to be invalid. The main
object of having a quorum is to avoid taking decisions by a small minority of members
that may not be accepted by the vast majority. Every company meeting has its own
number of quorum, the same has been discussed under separate headings in the
upcoming passages.

Agenda
The agenda can be described as the list of businesses to be transacted while conducting
any meeting. An agenda is important for carrying out a business meeting in a systematic
manner and in a proper, predetermined order. An agenda, along with a notice of the
meeting, is usually sent to all the members who are entitled to attend a meeting. The
discussion in the meeting has to be conducted in the same manner as stated in the
agenda, and changes can be made in the order only with the proper consent of the
members at the meeting.

Minutes
The minutes of the meetings contain a just and accurate summary of the proceedings of
the meeting. Minutes of the meetings have to be prepared and signed within 30 days of
the conclusion of the meeting. Further, the minutes books must be kept at the registered
office of the company or any place where the board of directors has given their approval.
Proxy
The term ‘proxy’ can be used to refer to a person who is chosen by a shareholder of a
company to represent him at a general meeting of the company. Further, it also refers
to the process through which such an individual is named and permitted to attend the
meeting.

Resolutions
Business transactions in company meetings are carried out in the form of resolutions.
There are two kinds of resolutions, namely:

1. Ordinary resolution, and

2. Special resolution.

Types of company meetings

Company meetings are majorly divided into three categories, and the three categories
are further divided into subcategories, which are again divided into some categories.
Let us have a look at the categories.

1. Meetings of shareholders or members

2. General meeting which is further divided into:

1. Statutory meeting,
2. Annual General Meeting,
3. Extraordinary General Meeting.
4. Class meeting.
5. Meetings of Directors

1. Board of directors meeting,

2. Committee of directors meeting.
3. Other meetings that are categorised as:

1. Debenture holders meeting,

2. Creditors meeting, and
3. Creditors and contributors meeting.
Before we dive deep into the nitty-gritty of each of the categories, here is a pictorial
representation of the types of company meetings for your better understanding-
Meetings of shareholders or members
The first main type of meeting is a meeting of shareholders or members of the company.
It is further divided into two categories, namely:

1. General meeting, and

2. Class meeting.
The first category is further divided into three subcategories, each of which is discussed
in detail below.

General meeting
The general meeting is subdivided into three categories. Let us have a look at the nitty-
gritty of each of them.
Statutory meeting
Please note: Before the enactment of the Companies Act, 2013, the requirements laid down for
statutory meetings and reports under Section 165 were legit. However, after its enactment, the
same has been dropped.

The following is just for the readers’ information.

What is statutory meeting

A statutory meeting is a type of general meeting that must be held by every company limited by
shares and every company limited by guarantee with a share capital within not less than a
month and not more than six months from the date it was incorporated. Private companies are
exempt from conducting a statutory meeting. In this meeting, a report known as the ‘statutory
report’ is discussed by the directors of the company.

Which companies do not need to conduct a statutory meeting

The following companies do not have any obligation to conduct a statutory meeting:

1. Private company,
2. Company limited by guarantee having no share capital,
3. Unlimited liability company,
4. A public company that was registered as a private company earlier,
5. A company that has been deemed as a public company under Sec. 43 A.

What is notice of the meeting

The board of directors of a company is duty-bond to forward a notice of the meeting to all the
shareholders or members of the company. This has to be done at least 21 days prior to holding the
meeting, and an explicit mention of ‘statutory meeting’ of the company has to be made in the
notice. If the board of directors does not name it the ‘statutory meeting’, it will be a breach of the
provision.

What is statutory report

Now that a mention of the statutory report was made above, you might wonder, what exactly is
it? Let’s find out.

The board of directors is obliged to forward a report known as the ‘statutory report’ at least 21
days before the date of the statutory meeting. A copy of the report has to be forwarded to the
registrar for registration. This report has to be drafted by the board of directors of the company
and certified and amended by at least two of them.
What are the particulars of a statutory report
Under Section 165(3) of the Companies Act, 1956, a prior mention of the contents of a statutory
report has been made; it says the report must contain:

1. The total number of fully paid-up and partly paid-up shares allotted
2. The sum of the amount of cash received by the company with respect to the shares;
3. Information on the receipts, distinguishing them on the basis of their sources and
mentioning the amount spent for commission, brokerage, etc.
4. The names of the directors, auditors, managers and secretaries along with their address
and occupation, and changes of their names and addresses, if any.
5. The particulars of agreements that are to be presented in the meeting for approval,
with suggested amendments, if any.
6. The justifications in cases where any underwriting agreement was not executed.
7. The arrears due on calls from directors and other individuals.
8. The details on the amount of honoraria paid to the directors, managers and others for
selling shares or debentures.

What is the procedure to carry out a statutory meeting

Now that we know about the statutory report and its particulars, you might wonder what the
proper procedure is for conducting a statutory meeting. The answer is in the below pointers.

The board of directors has to send a statutory report to every member of the company, as
mentioned above. The members who attend this meeting may carry out discussions on matters
relating to the formation of the company or matters that are incorporated in the statutory report.
Below are some of the points one must note:

1. While conducting the statutory meeting, no resolution can be taken.

2. The main motive of conducting such a meeting is to familiarise all the members of the
company with matters relating to the development and origination of the company.
3. The shareholders, perhaps, the members of the company, will receive particulars
relating to the following:

1. Shares taken up,

2. Money received,
3. Contracts entered into,
4. Preliminary expenses incurred, etc.

1. The members or shareholders also have the opportunity to carry out a discussion on
several business ideas and ways to prosper the business, along with the future
prospects of the company.
 2. Moreover, if a decision is not reached at the statutory meeting, an adjournment
meeting is called.
3. According to Section 433 of the Companies Act, 1956, if the company errs in
submitting the statutory report or in conducting the statutory meeting within the
specified time, it may be subjected to winding up.
4. However, the court, instead of directly winding up the company, has the authority to
instruct the company to submit a statutory report and conduct a statutory meeting,
along with levying a fine on the individuals who erred in conducting the meeting.

What will be the effect of non-compliance with the provisions on conducting a

statutory meeting
The following are the repercussions of not complying with the provisions on conducting a
statutory meeting:

1. If there is any mistake in complying with the provision for holding a statutory meeting
under Section 165, the directors or other officers of the company who are at fault will
be liable to pay a fine that is extendable up to ₹500.
2. Under Section 43(6) of the Companies Act, 1956, in case the company errs in
conducting the statutory meeting or if the statutory report is not in compliance with
the provisions of the Act, the company may be compulsorily wound up if the court
orders the same. However, under Section 443(3) of the Companies Act, 1956, the
court may pass an order to conduct a statutory meeting or to send the statutory report,
as the case may be, instead of winding up the company.
Before we study the annual general meeting (AGM) and extraordinary general meeting (EGM),
let us have a look at the key differences between them in a tabular format. This is done for a
better understanding of the topics.

Extraordinary general
Basis Annual general meeting (AGM)
meeting (EGM)

An extraordinary general
An annual general meeting,
meeting (EGM), is a
What is it? commonly known as an AGM, is a
meeting other than an
regular meeting held annually.
AGM.

Similarly, EGMs are

AGMs are applicable to all the
Applicability applicable to all
companies.
companies.

An AGM has to be held within six

Time of holding An EGM can be held at
months of the close of the
the meeting any time.
financial year.
 An AGM is held to serve the
following purposes: Electing the Whereas, an EGM is to
directors of the company,Passing be held for any matter
Purpose
of annual accounts, Declaring the for which a proper notice
dividends, and Appointing is given.
auditors.

The board of directors,

along with
Who may call The board of directors has the
requisitionists, have the
such a meeting? authority to call such a meeting.
authority to call such a
meeting.

Similarly, the tribunal

Repercussions of The tribunal may call and impose may call and impose a
default in a fine in case a company defaults fine in case a company
conducting such a in holding an AGM in a requisite errs in holding an EGM
meeting manner. in the prescribed
manner.

Annual General Meeting (AGM)

The annual general meeting is defined under Section 96 of the Companies Act, 2013.
As the name suggests, an annual general meeting is one of the general meetings held
once a year. As per Section 96 of the Companies Act, 2013, all companies have to hold
an AGM within the stipulated time. An AGM provides a chance for the members of the
company to review the workings of the company and express their opinions on the
management and workings of the company.

Purpose of conducting an annual general meeting

The main purpose of conducting an AGM is to transact the ordinary business of

the company. Ordinary business includes the following:

1. Consideration of financial statements and reports from the directors and

auditors.
2. Making declarations on dividends.
 3. Appointing a replacement of director or directors in place of those who have
retired.
4. Appointing and setting up the amount of remuneration for the auditors of the
company.
5. It also includes annual accounts, crucial reports, and audits.

Importance of conducting an annual general meeting

Under corporate law, an annual general meeting is regarded as one of the most important
institutions for protecting the members of the company. It is at this meeting— even
though it is held only once in a fiscal year- that the members of the company get the
opportunity to question the management on matters relating to the following:

1. The affairs of the company,

2. The business of the company, and
3. The accounts of the company.
It is only at this meeting that the members of the company have the chance not to re-
elect those directors in whom they have lost faith or confidence. Further, as auditors
also retire at this meeting, members of the company have another opportunity to think
about the re-election of these auditors.

Last but not least, it is at the AGM that members disclose the amount of dividend
payable by the company. While talking about dividends, it may be noted that the board
of directors makes recommendations on the amount of dividend, whereas the members
at the AGM declare the dividend. Further, the dividend cannot surpass the
recommended amount by the board of directors.

The three rules of conducting an annual general meeting

1. The meeting must be conducted on an annual basis.

2. A maximum duration of 15 months is permitted between holding two annual
general meetings.
3. The meeting must be conducted within six months of preparing the balance
sheet.
If any of these rules are not complied with, the same will be said to be an offence under
the Companies Act, 2013. It has been discussed in the upcoming passages.

Notice of conducting the annual general meeting

The company has to send a clear 21 days’ notice to its members to conduct the annual
general meeting. The notice must mention the day, date, and location of the meeting,
along with the hour at which it is decided to be held. The notice should explicitly
mention the business to be conducted at the AGM. A company is obligated to send the
AGM notice to the following:

4. All the members of the company, including the legal representatives of a

deceased member and the assignee of an insolvent member.
5. The statutory auditors of the company.
6. All the directors of the company.
The notice can be sent either by speed or registered mail or even through electronic
means like email.

Date, time, and place of conducting an annual general meeting

Usually, an annual general meeting can be conducted at any time, provided it is during
business hours (between 9 am and 6 pm) and the day of the meeting is not a national
holiday. Now, talking about the location of the meeting, it can be held either at any pre-
decided place within the area of the jurisdiction of the registered office or at the
registered office itself.

Below are some of the noteworthy pointers in context to the date, time, and place of
holding an annual general meeting:

1. A public company or a private company that acts as a subsidiary of a public

company may determine the timing of the meeting as per the articles of
association.
2. At a general meeting, a resolution can also be passed for determining the time
of holding subsequent meetings.
3. In the case of private companies, the time and location are determined by
passing a resolution at any of the meetings.
4. For a private company meeting, the location may not be within the area of
jurisdiction of the registered office of the company.
Further, as per Section 101 of the 2013 Act, if any member files an application in case
a company errs in holding an annual general meeting, the time frame for notice to call
for the meeting can be reduced to less than 21 days (21 days is the time frame to send a
notice to call for an annual general meeting) with the agreement of members who are
entitled to vote.

First annual general meeting and relaxations

As per Section 96 of the Companies Act, 2013, a general meeting must be held annually,
as the name suggests. It is mandatory that all companies hold such meetings at regular
intervals. When the annual general meeting is held for the first time after the company’s
incorporation, it has to be held within a period of nine months from the date of the
closing of the financial year of the company, and in other cases, within six months from
the date of the closing of the financial year. Further, as per Section 96 of the Companies
Act, 2013, a company has no obligation to hold any general meetings until it holds its
first annual general meeting. Such a relaxation is provided so that the company can set
up its final reports for a longer duration. Another provision that is provided under
Section 166(1) is that, with proper authorization from the registrar, the company can
postpone the date of the annual general meeting. The registrar has the authority to
postpone the date for a further three months at the most, however, such a relaxation
does not apply in the case of the company’s first annual general meeting. Further, a
company may not hold an annual general meeting in a year provided the registrar has
consented to it, however, the justification for such an extension should be reasonable
and genuine.

Gaps between two annual general meetings

According to Section 96 of the Companies Act, the gap between two annual general
meetings must not exceed fifteen months. Further, Section 210 of the Act states that a
company must provide a report on the accounts of all the profits and losses of the
company, and if the company does not have any profits, an income and expenditure
report must be submitted.

Furthermore, the following pointers are crucial to note in cases of gaps between two
annual general meetings:

1. When a company presents its report on profits and losses incurred, it has to
mention all the profits and losses endured by the company right from the day
of incorporation.
2. The account shall have an update of at least 9 months from the date of the last
annual general meeting.
3. A balance sheet along with the account report has to be submitted, as well.
Also, after conducting the first annual general meeting, the next AGM must be held
within 6 months from the end of the financial year. If, due to any unforeseeable
circumstance, the company fails to hold the meeting, the tribunal may grant an extension
of 3 months.

Quorum

Public company
The quorum in the case of a public company shall consist of the following:

1. 5 if the company has less than 1000 members,

2. 15 if the members are between 1000 and 5000, and
 3. 30 if the number of members exceeds 5000.

Private company
In the case of a private company, only two members who are present will constitute the
quorum.

Proxy in annual general meetings

Any member of the company who has the authority to vote at a meeting will be
entitled to appoint a proxy, i.e., another person to attend and vote instead of himself.
The appointment of a proxy shall be in Form No. MGT.11. Further, an individual
cannot act as a proxy on behalf of members exceeding a total of 50 and holding in
aggregate not more than 10% of total capital with the authority to vote.

Procedure to be followed after conducting the annual general meeting and

penalty if the company fails
After conducting the annual general meeting, a report in the form of MGT-15 within a
period of 30 days has to be filed. Further, under Section 121, the report will include
how the meeting was convened, held, and conducted as per the provisions of the 2013
Act. If the company errs in doing so, a penalty of ₹1 lakh shall be imposed. Further,
on every officer who has erred in following the procedure of the meeting, a penalty of
₹25,000 minimum shall be imposed, and in case the issue persists, a penalty of ₹500
for every day after the failure persists can be imposed, and the same shall be for a
maximum of ₹1 lakh.

Penalty for not holding an annual general meeting

If a company errs in holding an annual general meeting in accordance with Section
99 of the Companies Act, 1956, the act shall be considered a serious offence in the
eyes of the law. Every member of the company who is at fault shall be deemed to be a
defaulter.

Further, a fine extendable to ₹100,000 may be levied on the defaulters. Moreover, as

per Section 99 of the Companies Act, if the defaulters persist with the same mistakes,
and if the provisions under Sections 96 and 97 are not complied with, a fine of ₹5000
will be imposed on the defaulter until the problem continues.

Power of NCLT (National Company Law Tribunal)

The National Company Law Tribunal, commonly known as NCLT, has the authority
to call or direct a meeting under Section 97 of the Companies Act, 2013, in case an
application is filed by a member in matters relating to the failure to conduct the
meeting.
Extraordinary general meeting (EGM)
In a company, there are certain matters that are so crucial to be discussed that they
need to be addressed immediately to the members, which is where an extraordinary
general meeting comes into play. Such meetings are discussed under Section 100 of
the Companies Act, 2013. An extraordinary general meeting is any general meeting
apart from the statutory meeting, an annual general meeting, or any adjournment
meeting. Such a meeting is held to discuss special business, especially those
businesses that do not fall under the ordinary business that is discussed at annual
general meetings. Such meetings are usually called for matters that are urgent and for
those that cannot be discussed at annual general meetings. Extraordinary general
meetings are usually called by the following:

1. The directors or the board of directors of the company,

2. The shareholders of the company who hold 1/10th of the paid-up shares.

Calling of extraordinary general meeting

While dealing with the above heading, one might wonder when and by whom an
extraordinary general meeting can be called. Let’s find out.

An extraordinary general meeting can be called in the following circumstances:

By the board of directors suo moto

In cases when the board of directors has some urgent matters to discuss and such
matters cannot be postponed until the next general meeting, the board of directors may
hold an extraordinary general meeting if need be. The same is discussed under Section
100 (1) of the 2013 Act.

By the Board on the requisition of members

The board of directors may call an extraordinary general meeting on the requisition of
the following number of members:

1. In case of a company having a share capital

Members who own 1/10th of the paid-up share capital of the company on the date of
receipt of the requisition on the date of exercising the voting rights.

1. In case of a company not having a share capital

Members who own 1/10th of the paid-up share capital of the company on the date of
receipt of the requisition on the date of exercising the voting rights.
By requisitionists
Under Section 100(4) of the Company Act, 2013, if a board does not, within 21 days
from the date of receipt of a valid requisition in relation to any matters thereto, take
any steps to call a meeting to consider the matter not later than forty-five days from
the date of receiving such a requisition, then the meeting may be called upon and
conducted by the requisitionists themselves within a time span of three months from
the date of the requisition.

Further, it is important to note the following pointers for a better understanding of the
topic:

1. Notice
The notice must specify the date, day, time, and place of holding the meeting, and
must be held in the same city as the registered office and on a working day.

1. Notice to be signed
The notice has to be duly signed by all the requisitionists or on behalf of those
requisitionists who have permission to sign in place of the requisitionists, provided the
permission is in writing. This can also be done via an electronic request attached to a
scanned copy to give such permission.

1. No need of an explanatory statement to be attached to the notice

There is no need for any explanatory statement under Section 102 to be attached with
the notice of an extraordinary general meeting that is convened by the requisitionists
and the requisitionists.

1. Serving notice of the meeting

The notice of the meeting has to be served on all those members whose names are on
the list of registered members of the company. It should be served within three days of
the requisitionists depositing a valid request for conducting an EGM in the company.

2. Method of serving the notice

The notice of the meeting can be sent through speed mail, registered mail, or even
electronic means like emails. If there is an issue with serving the notice or if some
member does not receive the notice for any reason, the meeting shall not
be invalidated by any member.

By the tribunal
According to Section 98 of the Companies Act, 2013, if it is not possible to conduct a
meeting in the company, the tribunal may either suo moto or through an application
submitted by any director or member of the company who has the authority to vote at
the meeting-
  Instruct to hold and conduct a meeting in a manner the tribunal thinks fit,
and
 Provide ancillary or consequential instructions as the tribunal deems fit,
including any directives thus amending or supplementing in matters relating
to the calling, holding and conducting the meeting, the operation of the
clauses of the Act or articles of the company.
Such instructions may also incorporate any command that a member of the company
present in person or via proxy shall be deemed to compose a meeting. The meeting
held pursuant to such orders shall be referred to as a meeting of the company that is
duly called, held, and conducted.

Place of conducting an extraordinary general meeting

An extraordinary general meeting can be held at the registered office or any other
location in the city where such a registered office is located.

Notice for extraordinary general meeting

The notice of an extraordinary general meeting must be served in writing or through
an electronic mode in at least 21 days of conducting such a meeting.

Penalty for not holding an extraordinary general meeting properly

In cases where an extraordinary general meeting is not conducted properly, a fine of
₹10,000 within a prescribed time can be levied on the defaulters. Moreover, in case
the issue persists, a fine of ₹1000 per day shall be levied. Additionally, the maximum
fines in cases of erring in conducting an EGM successfully are:

 ₹50,000 for a member of the company, and

 ₹200,000 for the company itself.

Class meeting
Company meetings come under two broad categories, namely:

 General meetings, and

 Class meetings.
We have already talked about the different types of general meetings above, let’s now
discuss what these class meetings are!

Class meetings, as the name suggests, are meetings conducted for shareholders of the
company that hold a particular class of shares. Such a meeting is conducted to pass a
resolution that is binding only on members of the concerned class. Also, only members
belonging to that particular class of shares have the right to attend and vote at the
meeting. Usually, the voting rules are applicable to class meetings as they govern voting
at general meetings.

Such class meetings can be conducted whenever there is a need to alter or change the
rights or privileges of that class as stated in the articles of association. In order to execute
such changes, it is crucial that these amendments be approved in a separate meeting of
the shareholders and supported by passing a special resolution. Under Section 48 of the
Companies Act, 2013, which talks about variations in shareholders’ rights, class
meetings of the holders of the different classes of shares must be conducted in case there
are any variations. Similarly, under Section 232, which discusses mergers and
amalgamations of companies, where a scheme of arrangement is proposed, there is a
requirement that meetings of several classes of shareholders and creditors be
conducted.

Meetings of directors

Board of directors

Board meetings
As per Section 173 of the Companies Act, 2013, a company has to hold the meeting of
board of directors in the following manner:

 The first board meeting has to be conducted within a span of thirty days
from the date of incorporation.
 In addition to the above meeting, every company has to hold a minimum of
four board meetings annually, and there shall not be a gap of more than one
hundred and twenty days between consecutive two meetings.
Please note: With the issuance of Secretarial Standard 1 (SS-1), a circular by ICSI, a
clarification was given that the board shall conduct a meeting at least once every six
months with a maximum gap of one hundred and twenty days between two
consecutive board meetings. Further, the SS also specified that it will be sufficient if a
company holds one meeting in every renaming calendar quarter in the year of its
incorporation in addition to the first meeting, which is to be held within thirty days
from the date of incorporation.

 In matters relating to Section 8 of the Companies Act, with an exemption by

MCA dated 5.06.2015, it was held that the sub clause (1) of Section 173 will
be applicable only to the extent that the board of directors of such
companies hold at least one meeting in every six months.
Purpose of holding a board meeting
Board meetings are held for the following purposes:

1. For issuing shares and debentures.

2. For making calls on shares.
3. For forfeiting the shares.
4. For transferring the shares.
5. For fixing the rate of dividend.
6. For taking loans in addition to debentures.
7. For making an investment in the wealth of the company.
8. For pondering over the difficulties of the company.
9. For making decisions of the policies of the company.

Notice of board meetings

As per Section 173(3) of the Companies Act, 2013-

1. A notice of not less than seven days must be sent to every director at the
address that is registered with the company.
2. Such notice can be sent either via speed post, by hand delivery, or through
any electronic means.
3. The SS-1 (mentioned above) states that if the company sends the notice by
speed post, or registered post, or by courier, an additional two days shall be
added to the notice served period.
4. In situations when the board meeting is called at shorter notice, it has to be
conducted in the presence of at least one independent director.
5. Further, if the independent director is absent, the decision occurred at must
be circulated to all the directors, and it shall be final only after ratification of
decision by at least one independent director.
6. Moreover, in cases where a company does not have its own independent
director, the decision shall be said to be final only if it is ratified by a
majority of directors, unless a majority of directors gave their approval at
the meeting itself.
Some important pointers on the requirements and procedures for
convening and conducting a valid board meeting

Directors can join the meeting-

1. In person,
2. Through video conferencing, or
3. Other audio visual means.

3. Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014,
has provisions related to the requirements and procedures, along with the
procedures needed for board meetings in person for matters relating to
conveying and conducting board meetings via video conferencing.
4. While conducting virtual meetings, it is necessary that companies make
proper arrangements to avoid any issues at the last moment.
5. The chairperson and the secretary of the company have to ensure that they
take necessary precautions in matters relating to video conferencing, like
proper security, recording the proceedings and preparing the minutes of the
meeting, having proper audio visual equipment, etc.
6. The notice for holding the meeting must be in accordance with the provisions
laid under Section 173, subsection 3 of the Act.
7. While beginning the meeting, the chairperson has the duty to roll call every
director participating through video conferencing or other such means to
record the following:

1. Name of the director;

2. The place from where the director is participating;
3. An affirmation that the director can completely see, listen, and
communicate with the other participants in the meeting;
4. A confirmation that the director has received the agenda and all the relevant
material related to the meeting;
5. A proclamation that no other individual other than the director is attending
or has access to the proceedings of the meeting at the palace mentioned in
pointer (b).

1. After the roll call, the chairperson or the secretary has to inform the
board about the names of the members who are attending the meeting
at the request or with the authorization of the chairman and affirm that
the required quorum is complete.
 2. There are some matters that must not be dealt with through video
conferencing or other audiovisual means, namely:

1. An approval of the annual financial statements;

2. An approval of the report of the board;
3. An approval of the prospectus;
4. The audit committee meetings for consideration of
statements related to finance, including a consolidated
financial statement, if any, that needs an approval from
the board under subsection (1) of Section 134 of the Act;
and
5. An approval on matters related to the amalgamation,
merger, demerger, acquisition, and takeover.

Agenda
The word “agenda” can be described as things to be done. In the case of company
meetings, it can be said to be a statement of the business that must be transacted at a
meeting, along with the order in which the business must be dealt with. Even though
there is no explicit mention or provision in the Companies Act, 2013, for the secretary
to send an agenda or include the same in the notice of the board meeting, it is necessary
by convention for the agenda to be mentioned with the notice served to conduct the
meeting. When an agenda is attached to the notice, the director is aware of the proposed
business and the objects of conducting the meeting, thus, he can come duly prepared
for the discussion to be held in the meeting.

Quorum
As we know, every company needs to have a proper quorum to conduct a valid
company meeting. Now, the quorum for a board meeting under Section 174 of the Act
is one third of the total strength or two directors, whichever is higher. It must be noted
that, any director participating through video conferencing or any other audiovisual
means must also be considered to determine the quorum.

Further, if the number of directors is reduced or there is any removal of a director or

directors, the directors who continue may act on behalf of the missing number of
directors to fill the missing gap for the quorum or for summoning a general meeting of
the company; however, they shall not act for any other purpose. Moreover, in cases
where the number of directors interested surpasses or is equal to two-thirds of the total
strength of the board of directors, the number of directors who are not interested and
are there to attend the meeting, the number not being below two, shall be the quorum
at such times.
It is pertinent to note that the quorum has to be present not only at the time of
commencement of the meeting but also at the time of transacting business with the
company.

Committee of directors
The board of directors has the authority to form committees and delegate powers to
such committees; however, it is crucial that such a committee only consist of directors
and no other members. Further, it is mandatory for such committees to be authorised
by the articles of association of the company and be in lieu of the provisions set out in
the Companies Act. The meetings of all these committees are held in the same manner
as board meetings.

In large companies, the following routine matters are looked after by the sub-
committees of the board of directors:

1. Allotment,
2. Transfer,
3. Finance.

Other meetings

Debenture holders meeting

A company is entitled to issue debentures, and to further implement the same, a
meeting for debenture holders can be called. This meeting is between the board of
directors and the debenture holders. These meetings are usually called to discuss the
rights and responsibilities of debenture holders.

Meetings of debenture holders are conducted in accordance with the provisions laid
down in the debenture trust deed. The rules and regulations mentioned in the trust
deed are related to the following:

2. Notice of the meeting,

3. Appointment of a chairman of the meeting,
4. Passing resolutions,
5. Quorum of the meeting, and
6. Writing and signing of minutes of the meeting.
Debenture holder meetings are generally conducted from time to time to discuss
matters where the interest of debenture holders is involved, like at the time of:

1. Reconstruction,
2. Reorganisation,
3. Amalgamation, or
4. Winding up of the company.

Creditors meeting
Meetings of creditors is a term used to describe a meeting setup by the company to
conduct a meeting of the company’s creditors. Under the Company Act, 2013,
companies are not only entrusted with the power to negotiate with creditors but also set
up a procedure to do so. Such meetings are always arranged in matters where a creditor
decides to voluntarily wind up.

Moreover, Section 108 of the Companies Act, 2013, discusses the holding of meetings
of creditors. It also states that meetings be held in accordance with the provisions laid
down under the following sections of the said Act:

Section 109 that discusses demand for poll,

Section 110 that talks about postal ballot, and

Section 111 that has provisions in relation to the circulation of members’

resolutions.
In the creditors meeting, the creditors can decide to either approve, amend, or reject the
repayment plan. Further, the resolution professional must make sure that any sort of
changes or modifications suggested by the creditors of the company are approved by
the directors of the company before carrying out that particular change. Furthermore,
the resolution professional also has the authority to adjourn the meeting of the creditors
for a period of not more than seven days at a time.

Notice of meetings of creditors

If a company is voluntarily winding up, a meeting of creditors must be called to propose
a resolution for voluntary winding up. Such a meeting has to be called either on the day
of taking such a decision or the subsequent day, and a general meeting must be
conducted to propose the resolution.

The notice to creditors must either be sent by post along with the notices regarding the
general meeting of the company for winding up. Additionally, with the notice to the
creditors, the company also has to advertise at least once in the official gazette and once
in two newspapers that are circulated in the district where the company’s registered
office or principal place of business is situated.

Procedure for conducting a company meeting

While discussing the procedure for consulting the meeting of the creditors, the
following pointers are noteworthy:

Obligation of the board of directors

While conducting a meeting, the board of directors must submit a statement on the
position of the company’s affairs along with a list of the company’s creditors and the
estimated amount of their claims. The director who is entrusted with the duty to conduct
the meeting of creditors or who is in charge of the same must attend the meeting and
hold it at the same time.

Next course of winding up of the company

Based on the decision that occurred at the meeting of creditors, the company shall
decide its next course of action. The decision could be one of the following:

1. The company would wind up on a voluntary basis if all the parties agree to it
unanimously.
2. In case the company is not able to repay all the debts from the assets sold in
the voluntary winding up of the company, then a resolution can be passed
from winding up the company by involving the tribunal.

Passing the notice of resolution

When a notice of resolution is passed in the meeting of creditors, the same must be filed
with the registrar within 10 days of passing such a resolution. If the company does not
adhere to the set provisions of company law under the Companies Act, 2013, a penalty
with a fine that will not be less than fifty thousand rupees and extendable up to two lakh
rupees shall be imposed. Further, the director of the company who errs in following the
procedure, will also be penalised with an imprisonment for a term extendable to six
months or with a fine not less than fifty thousand rupees and extendable up to two lakh
rupees.

Quorum of creditors
A meeting cannot be commenced unless the creditors of the company, known as quorum
attend the meeting. The requisite quorum is as follows:
Quorum in case of creditors
In the case of creditors, at least one creditor entitled to vote must be in the quorum.

Creditors and contributors meeting

Creditor and contributor meetings are usually conducted when the company has gone
into liquidation to calculate the total amount due by the company to its creditors. The
main motive of holding such meetings is to seek the approval of the contributors to the
scheme of compromise or rearrangement to save the company from economic
difficulties.

At times, even a court can pass an order to conduct such a meeting. It should be noted
that the term “contributory” encompasses every individual who is accountable for
making contributions to the assets of the company at the time of winding up.

Quorum in case of contributors

In the case of a meeting of contributors, at least one creditor is entitled to vote, or all
the contributors if their number does not exceed two.

Requisites of a valid company meeting

If the business carried on in a company is valid and legally binding, it is necessary that
the meeting called to conduct such business also be held in a valid manner. To
understand the same, there are some pointers one must understand to consider a meeting
valid. The following are the requisites for conducting a valid company meeting:

1. The meeting is convened by proper authority.

2. The announcement of holding the meeting is served through a proper notice.
The same has been discussed under Section 101 and 102 of the Companies
Act, 2013.
3. While holding the meeting, it is crucial that a proper quorum is present.
4. To conduct the meeting, it is important that it must be presided over by a
proper chairman.
5. At the meeting, business must be validly transacted.
6. It is crucial that proper minutes of the meeting must be prepared.
Relevance of different company meetings
Every company has its own importance. Let’s quickly take a look at each of the
company law meetings’ relevance.

Annual general meeting (AGM)

An AGM is conducted to transact the ordinary business of the company. Ordinary
business includes the following:

1. Consideration of financial statements and reports from the directors and

auditors.
2. Making declarations on dividends.
3. Appointing a replacement of directors in place of those who have retired.
4. Appointing and setting up the amount of remuneration for auditors of the
company.
5. It also includes annual accounts, crucial reports, audits.

Extraordinary general meeting (EGM)

An EGM is conducted to discuss special businesses, usually those that do not fall under
the category of ordinary businesses, which are discussed at AGMs. These meetings are
generally called only in cases of urgent matters or for those matters that are not
discussed at AGMs.

Class meetings
Class meetings are conducted for shareholders belonging to a particular class. These
meetings are held to gain approval via a special resolution of all such members
belonging to the particular class to seek their approval on important matters or amends
in any field related to their interests.

Board of directors meeting

A board of directors is held for several purposes, namely, for making calls on shares,
issuing shares and debentures, forfeiting the shares, for discussing the difficulties of the
company, etc.
Committee of directors meeting
A committee of directors meeting can be held for issues relating to the allotment or
transfer of any share or asset of the company, or even for any issues relating to the
finances of the company.

Debenture holders meeting

Debenture holders meetings are conducted to decide upon matters relating to the reconstruction,
reorganisation, amalgamation, or winding up of the company.

Creditors meeting
Creditors meetings are usually conducted for the creditors to either approve, change, or deny the
repayment plans of a company when it decides to wind up voluntarily.

Creditors and contributors meeting

Similar to the aforementioned meeting, a contributors meeting is conducted for the calculation of
the total amount due by the company to repay creditors or contributors when the company has gone
into liquidation.