meetings and winding up of company

Meetings and Winding up of company

Meetings and Winding up of company

Under the Companies Act, 1956 a private company could start its business immediately upon receiving certificate of incorporation.

They were not required to obtained a certificate of commencement of business under section 149 of Companies Act, 1956

Now under Section 11 of the Companies Act, 2013, ALL companies having a share capital shall not commence business or exercise any borrowing powers, unlessthey acquire a Certificate of Commencement of Business.

There are some requirements which need to be fulfilled to get the certificate of commencement of business

11.Commencement of business, etc

(1) A company having a share capital shall not commence any business or exercise any borrowing powers unless

(a) a declaration is filed by a director in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him and the paid-up share capital of the company is not less than five lakh rupees in case of a public company and not less than one lakh rupees in case of a private company on the date of making of this declaration; and

(b) the company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12.

(2) If any default is made in complying with the requirements of this section, the company shall be liable to a penalty which may extend to five thousand rupees and every officer who is in default shall be punishable with fine which may extend to one thousand rupees for every day during which the default continues.

(3) Where no declaration has been filed with the Registrar under clause (a) of subsection (1) within a period of one hundred and eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.

Meetings of a Company

Shareholders

BoD

Meetings of Shareholders

General Meetings

Class Meetings

Annual General

Meeting

Extraordinary

Meeting (only when required)

114. (1) A resolution shall be an ordinary resolution if the notice required under this

Act has been duly given and it is required to be passed by the votes cast, whether on a show

of hands, or electronically or on a poll, as the case may be, in favour of the resolution,

including the casting vote, if any, of the Chairman, by members who, being entitled so to do,

vote in person, or where proxies are allowed, by proxy or by postal ballot, exceed the votes,

if any, cast against the resolution by members, so entitled and voting.

(2) A resolution shall be a special resolution when

(a) the intention to propose the resolution as a special resolution has been duly

specified in the notice calling the general meeting or other intimation given to the

members of the resolution;

(b) the notice required under this Act has been duly given; and

(c) the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by postal ballot, are required to be not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.

DECISION MAKING BY DIRECTORS

DECISION MAKING BY DIRECTORS

Board meeting

Resolution by circulation

Committee meetings

BOARD MEETING SECTION 173

First Board Meeting to be held within 30 days of incorporation.

Notice of Board meeting shall be given to all directors, whether he is in India or outside India by hand delivery or by post or by electronic means.

At least one independent director to be present at a Board Meeting called at shorter notice to transact urgent business.

In case of absence of independent directors from board meeting, decisions taken at meeting shall be circulated to all the directors and shall be final if ratified by a independent director.

Director can participate in the Board meeting through video conferencing or other audio visual mode as may be prescribed.

Draft Rules provide for the procedure and manner of such process

BOARD MEETINGS: VIDEO CONFERENCING

MATTERS NOT TO BE DEALT IN MEETING THROUGH VIDEO CONFERENCING

To approve the annual financial statements; and

To approve the boards report.

The procedure of conduction of Board Meetings through Video Conferencing is specifically provided for, with major responsibilities casted upon the Chairman of the Company and Company Secretary.

An important provision provides that every director who attended the meeting, whether personally or through video conferencing or other audio visual means, shall confirm or give his comments, about the accuracy of recording of the proceedings of that particular meeting in the draft minutes, within seven days after receipt of the draft minutes failing which his approval shall be presumed.

This provision is very important as far as the liability of Directors is concerned.

BOARD MEETING SECTION 173

At least 4 Board meetings should be held each year, with a gap of not more than 120 days between two Board meetings

No requirement of holding the Board Meeting in every quarter

For One Person Company (OPC), small company and dormant company at least 1 Board meeting must be held in each half of a calendar year with a gap of not less than 90 days between two Board Meetings

In case of only One Director in OPC, requirement of holding meeting will not apply

Resolution by circulation shall be approved if consented by majority of Directors instead of the requirement of consent of all Directors present in India or by majority of them (as was provided in the Companies Act 1956)

MATTERS TO BE DISCUSSED IN

BOARD MEETINGS ONLY (SECTION 179)

To issue securities whether in India or outside.

To grant loans or give guarantee or provide security in respect of loans;

To approve financial statement and the directors report;

To diversify the business of the company;

To approve amalgamation, merger or reconstruction;

To take over a company or acquire a controlling or substantial stake in another company



Other matters prescribed in Draft Rules-

To make political contributions; to fill a casual vacancy in the Board; to enter into a joint venture or technical or financial collaboration or any collaboration agreement;

To commence a new business; to shift the location of a plant or factory or the registered office;

To appoint or remove key managerial personnel (KMP) and senior management personnel one level below the KMP;

To appoint internal auditors;

To adopt common seal;



To take note of the disclosure of directors interest and shareholding;

To sell investments held by the company (other than trade investments), constituting five percent or more of the paid up share capital and free reserves of the investee company;

To accept public deposits and related matters and;

To approve quarterly, half yearly and annual financial statements.

Registered office, principal business activities

securities and shareholding pattern

Indebtedness

Members and debenture holders

Promoters, directors, key managerial personnel

Meetings of members

Meeting of board and committees

Remuneration of directors and KMP

Penalty or punishment & details of compounding

shares held by or on behalf of the FIIs

other matters as may be prescribed.

ANNUAL RETURN - Contents

(Sec 92)

92. Annual return.

(1) Every company shall prepare a return (hereinafter referred to as the annual

return) in the prescribed form containing the particulars as they stood on the close of the

financial year regarding

(a) its registered office, principal business activities, particulars of its holding,

subsidiary and associate companies;

(b) its shares, debentures and other securities and shareholding pattern;

(c) its indebtedness;

(d) its members and debenture-holders along with changes therein since the

close of the previous financial year;

(e) its promoters, directors, key managerial personnel along with changes therein

since the close of the previous financial year;

(f) meetings of members or a class thereof, Board and its various committees

along with attendance details;

(g) remuneration of directors and key managerial personnel;

(h) penalty or punishment imposed on the company, its directors or officers and

details of compounding of offences and appeals made against such penalty or

punishment;

(i) matters relating to certification of compliances, disclosures as may be

prescribed;

(j) details, as may be prescribed, in respect of shares held by or on behalf of the

Foreign Institutional Investors indicating their names, addresses, countries of

incorporation, registration and percentage of shareholding held by them; and

(k) such other matters as may be prescribed,

and signed by a director and the company secretary, or where there is no company secretary,

by a company secretary in practice:

Provided that in relation to One Person Company and small company, the annual

return shall be signed by the company secretary, or where there is no company secretary, by

the director of the company.

(2) The annual return, filed by a listed company or, by a company having such paid-up

capital and turnover as may be prescribed, shall be certified by a company secretary in

practice in the prescribed form, stating that the annual return discloses the facts correctly

and adequately and that the company has complied with all the provisions of this Act.

(3) An extract of the annual return in such form as may be prescribed shall form part of

the Boards report.

(4) Every company shall file with the Registrar a copy of the annual return, within sixty

days from the date on which the annual general meeting is held or where no annual general

meeting is held in any year within sixty days from the date on which the annual general

meeting should have been held together with the statement specifying the reasons for not

holding the annual general meeting, with such fees or additional fees as may be prescribed,

within the time as specified, under section 403.

(5) If a company fails to file its annual return under sub-section (4), before the expiry of

the period specified under section 403 with additional fee, the company shall be punishable

with fine which shall not be less than fifty thousand rupees but which may extend to

five lakhs rupees and every officer of the company who is in default shall be punishable with

imprisonment for a term which may extend to six months or with fine which shall not be less

than fifty thousand rupees but which may extend to five lakh rupees, or with both.

(6) If a company secretary in practice certifies the annual return otherwise than in

conformity with the requirements of this section or the rules made thereunder, he shall be

punishable with fine which shall not be less than fifty thousand rupees but which may

extend to five lakh rupees.

Quorum for Board meetings

The quorum for meeting of board is one third of total strength or two directors whichever is higher

E commerce has been proposed for maintenance and inspection of documents, however the MoM have to be taken in hard copy, duly signed and then can be kept in soft copy for inspection

Soft copy as an option for keeping books of accounts

Financial statements on companies website.

Participation is allowed through video conference provided such participation is capable of recording and recognizing and storing

Extract of Annual Return

No. of BMs

Declaration by Independent Director

Directors Responsibility Statement

Comments/explanation by BOD on Secretarial Audit Report

Particulars of loan/guarantee/ investment

Particulars of contracts/arrangements with related party

Material changes from end of FY to date of Report

Statement on risk management policy

Details of CSR policy developed and implemented

BOD/Committees performance evaluation

Other such matters

BOARDS REPORT

financial summary/highlights

change in the nature of business,

Details of directors or KMP

Companies ceased to be Subsidiaries, JVs or associate companies;

Details relating to Deposits

Details of significant and material orders passed by the Regulators or courts

BOARDS REPORT:

OTHER MATTERS PRESCRIBED

MEETINGS AND RELATED MATER

General Meetings

Quorum

Proxies

Statement to be annexed with notice

Postal ballot

Resolution requiring special notice & closure of register of members

GENERAL MEETINGS

OPC not required to hold AGM

First AGM to be held within 9 months from closure of first FY

AGM to be held on between business hours i.e. 9 AM to 6 PM

Notice of GM may be sent through electronic mode

To be sent to all Directors

21 clear days notice to be given

In case of AGM Shorter notice can be given by consent of 95% of members who are entitled to vote (like for EGM)

Secretarial Standards mandated

Report of AGM, prepared in prescribed manner, to be filed with RoC

(1) Every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next:

Provided that in case of the first annual general meeting, it shall be held within a period of nine months from the date of closing of the first financial year of the company and in any other case, within a period of six months, from the date of closing of the financial year:

Provided further that if a company holds its first annual general meeting as aforesaid, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation:

Provided also that the Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall be held, by a period not exceeding three months.

(2) Every annual general meeting shall be called during business hours, that is, between 9 a.m. and 6 p.m. on any day that is not a National Holiday and shall be held either 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.

Section 96

REPORT ON AGM

(Sec 121)

Every Listed Public Company to prepare a Report on each AGM.

Report to contain confirmation that the meeting was convened, held and conducted as per the provisions of the Act / Rules.

The company to file the Report with the Registrar within 30 days of the conclusion of the AGM.

Proceedings at the AGM of a listed co. thus becomes a public document.

Public Company

5 members personally present

1000 members


> 1000 members but

5000 members


> 5000 members

Private Company


QUORUM FOR MEETINGS

PROXIES (SECTION 105)

Single person not to be proxy for more than 50 members

Proxy cannot vote by show of hands

Member of Private Limited company cannot appoint more than 1 proxy to attend on same occasion

Nature of interest/ concern

Relatives

KMP

Director and Manager

Other Interest

Financial Interest

Explanatory Statement in case of special business to specify

Liability in case of non-disclosure or insufficient disclosure in Explanatory Statement

Non-disclosure /insufficient disclosure

Promoter

KMP

Director and Manager

Profit

Benefit

Explanatory statement to specify shareholding % of Promoters/directors/manager/KMP whose shareholding is not less than 2% of paid up capital

Liable to compensate to Company to the extent of such profit/benefit

STATEMENT TO BE ANNEXED WITH NOTICE SEC 102

POSTAL BALLOT SECT 110

Postal ballot applicable to all companies

Postal Ballot resolutions to be prescribed by CG. (Other than any businesses in which directors/auditors have the right to be heard at the meeting and ordinary business)

To maintain minutes

RESOLUTIONS REQUIRING SPECIAL NOTICE & CLOSURE OF REGISTER OFMEMBER

RESOLUTIONS REQUIRING SPECIAL NOTICE SEC 115

CLOSURE OF REGISTER OFMEMBER SECTION 88

IS CLOSURE OF REGISTER OF MEMBERS STILL REQUIRED IN TODAYS CONTEXT ?

Listed Company / Company which intends to get listed to give notice of atleast 7 days (or such lesser days as specified by SEBI) before closure of Register of security holders

Not less than 1% of voting power or Member holding min Rs. 5,00,000 paid up share capital can move Special Notice

100. Calling of extraordinary general meeting

(1) The Board may, whenever it deems fit, call an extraordinary general meeting of

the company.

(2) The Board shall, at the requisition made by,

(a) in the case of a company having a share capital, such number of members

who hold, on the date of the receipt of the requisition, not less than one-tenth of such

of the paid-up share capital of the company as on that date carries the right of voting;

(b) in the case of a company not having a share capital, such number of members

who have, on the date of receipt of the requisition, not less than one-tenth of the total

voting power of all the members having on the said date a right to vote,

call an extraordinary general meeting of the company within the period specified in subsection (4).

(3) The requisition made under sub-section (2) shall set out the matters for the

consideration of which the meeting is to be called and shall be signed by the requisitionists

and sent to the registered office of the company.

(4) If the Board does not, within twenty-one days from the date of receipt of a valid

requisition in regard to any matter, proceed to call a meeting for the consideration of that

matter on a day not later than forty-five days from the date of receipt of such requisition, the

meeting may be called and held by the requisitonists themselves within a period of three

months from the date of the requisition.

(5) A meeting under sub-section (4) by the requisitionists shall be called and held in

the same manner in which the meeting is called and held by the Board.

(6) Any reasonable expenses incurred by the requisitionists in calling a meeting under

sub-section (4) shall be reimbursed to the requisitionists by the company and the sums so

paid shall be deducted from any fee or other remuneration under section 197 payable to such

of the directors who were in default in calling the meeting.

Section 118 Minutes of Meetings

Minutes of proceedings of general meeting, meeting of Board of Directors and other meeting and resolutions passed by postal ballot.

(1) Every company shall cause minutes of the proceedings of every general

meeting of any class of shareholders or creditors, and every resolution passed by postal

ballot and every meeting of its Board of Directors or of every committee of the Board, to be

prepared and signed in such manner as may be prescribed and kept within thirty days of the

conclusion of every such meeting concerned, or passing of resolution by postal ballot in

books kept for that purpose with their pages consecutively numbered.

(2)..(12)

121.Report on annual general meeting

(1) Every listed public company shall prepare in the prescribed manner a report on

each annual general meeting including the confirmation to the effect that the meeting was

convened, held and conducted as per the provisions of this Act and the rules made thereunder.

(2) The company shall file with the Registrar a copy of the report referred to in subsection

(1) within thirty days of the conclusion of the annual general meeting with such fees

as may be prescribed, or with such additional fees as may be prescribed, within the time as

specified, under section 403.

(3) If the company fails to file the report under sub-section (2) before the expiry of the

period specified under section 403 with additional fee, the company shall be punishable with

fine which shall not be less than one lakh rupees but which may extend to five lakh rupees

and every officer of the company who is in default shall be punishable with fine which shall

not be less than twenty-five thousand rupees but which may extend to one lakh rupees.

COMMITTEE OF BOARD

NOMINATION AND RENUMERATION

COMMITTEE SECTION 178

8/17/2014

35

1.

For listed and other prescribed class of Companies

2.

Shall consist of 3 or more non-executive directors out of which not less than one half shall be IDs

3.

The Committee to formulate the criteria for:

As per Draft Rules: Nomination and Remuneration Committee of the Board for every listed company, and every other public company having paid up capital of >Rs. 100 cr; or which have outstanding loans or borrowings or debentures or deposits > Rs 200 cr

Determining qualifications, positive attributes and independence of directors;

Recommending to the board a policy relating to remuneration for directors, KMP and other employee.

SHAREHOLDERS GRIEVENCE

COMMITTEE SECTION 178

Committee shall consider and resolve the grievances of security holders of the company

For companies > 1000 shareholders, debenture-holders, deposit-holders and other security holders at any time during a FY

Chairperson : non-executive director and other members as may be decided by the Board

8/17/2014

36

AUDIT COMMITTEE SECTION 177

Every listed company and such other class of company shall constitute an Audit committee. (As per Draft Rules: Audit Committee of the Board for every listed company , and every other public company having paid up capital of Rs. 100 cr or more; or which have, in aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs. 200 cr)

Committee shall consist of minimum three director with the independent director forming majority

Auditors and KMP have right to be heard in the meeting of committee

Boards report to disclose

1. Composition of the audit committee and

2. Any recommendation which has not been accepted by the board.

AUDIT COMMITTEE.VIGIL MECHANISM

Whistle Blower (a non mandatory item as per Cl 49) is now made mandatory, in the name of Vigil Mechanism

Every listed company or such class of companies shall establish a vigil mechanism

As per Draft Rules: Companies which accept deposits from public and Companies which have borrowed money from banks and public financial institutions > Rs 50 Cr

Mechanism facilitates directors and employees to report genuine concerns

Adequate safeguards against victimisation of persons who use such mechanism

Provision for direct access to the chairperson of the audit committee

Introduction of NCLT

The creation of a single forum (NCLT) which is dedicated to corporate matters is a welcome move, and removes the problem of multiple regulators.

BIFR

High Court

CLB

NCLT

The establishment of NCLT and NCLAT will have the following beneficial effects:

(i) reduce the pendency of cases and reduce the period of winding-up process from 20 to 25 years to about two years;

(ii) avoid multiplicity of litigation before various fora (High Courts and quasi-judicial Authorities like CLB, BIFR and AAIFR) as all can be heard and decided by NCLT;

(iii) the appeals will be streamlined with an appeal provided against the order of the NCLT to an appellate Tribunal (NCLAT) exclusively dedicated to matters arising from NCLT, with a further appeal to the Supreme Court only on points of law, thereby reducing the delay in appeals; and

(iv) with the pending cases before the Company Law Board and all winding-up cases pending before the High Courts being transferred to NCLT, the burden on High Courts will be reduced and BIFR and AAIFR could be abolished.

Introduction of NCLT
ParticularsHigh CourtCLBBIFROtherPowersHigh Courts primarily in relation to winding-up, amalgamation, restructuring and appeals from CLBCLB under the Companies Act, 1956 primarily oppression and mismanagementBIFR under the Sick Industrial Companies (Special Provisions) Act, 1985Seeking exemption for having FY of a company which ends on a day other than 31 March;Issue of further redeemable preference shares in lieu of arrears of dividend or failure to redeem existing reference shares as per the terms of issue;Preparation of revised financial statement or board report for past 3 FYs, where BOD believes that they do not comply with the relevant provisions;Conversion of a public limited company into a private limited company;Filing Class action suits;
Powers Vested to NCLT

Appeal Can be made to NCLAT

SC (Only on the Question of Law)
AppealsWithin the HC and then to Supreme Court (SC)High Court (HC), then appeal to SC AAIFR , then writ petition to HC

Sec 271 provides the circumstances in which the wound by the Tribunal

Sub clause (b) and ( c) of Section 271(1) are new grounds for winding up by the tribunal

Provisional liquidator or Company liquidator to be appointed from a panel maintained by the Central Government

The panel may consists of CAs, Advocates, CS, and cost accountants.

LLPs

The process of winding up has been made time bound

Voluntary Winding UpAssets > Liabilities

Decision backed by Affidavit

Resolution Passed

Liquidator Appointed

Vote: 2/3 Ayes!

+5 weeks

+1 day

+14 days

+10 days

Every Quarter

Official Gazette

Newspaper

Progress Report

General Meeting

Report on Winding Up

Vote: 50% + 1 Ayes!

Fine: Rs. 50,000 to Rs. 2,00,000 and / or,

Imprisonment: Up to 6 months

306

305

304310

312

Fine: Rs. 500 per day

307

316

Fine: Up to Rs. 10,00,000

318

~

~

Responsibility of Company

Responsibility of Liquidator

WOUND UP

Time

If Assets < Liabilities, the Winding Up By Tribunal, Refer Next Slide

Board

Meeting

Creditors Meeting

ROC

Informed

ADVT.

Liquidation

General Meeting

Meeting of members and creditors

Winding Up By CreditorsAssets < Liabilities

44

+14 days

+7 days

+60 days

+7 days

Every Quarter

Forward copy of Tribunal Order to ROC within 30 days

275

306

272

277

281

282

288

302

~

~

Responsibility of Creditor(s)

Responsibility of Tribunal

WOUND UP

Time

Statement of Affairs submitted

Petition Accepted


Order in which the dues are paid up:

Workmens dues

Government dues

Secured creditors

Secured creditors floating charge

Unsecured creditors

Members

CREDITORS MEETING

LIQUIDATOR APPOINTED

INTIMATION TO ROC

LIQUIDATED

Petition to tribunal

Report to Tribunal AND fix a time limit

Report to Tribunal

Winding Up By CreditorsDemand Raised By Creditor(s)

+21 days

+7 days

+60 days

+7 days

Every Quarter

Forward copy of Tribunal Order to ROC within 30 days

275

271

272

277

281

282

288

302

~

~

Responsibility of Creditor(s)

Responsibility of Tribunal

WOUND UP

Time

Statement of Affairs submitted

Petition Accepted


Order in which the dues are paid up:

Workmens dues

Government dues

Secured creditors

Secured creditors floating charge

Unsecured creditors

Members

CREDITOR(S)

DEMAND >

Rs. 1,00,000

LIQUIDATOR APPOINTED

INTIMATION TO ROC

LIQUIDATED

Petition to tribunal

Report to Tribunal AND fix a time limit

Report to Tribunal

meetings and winding up of company

Documents