Formation of company

Formation of company.—

(1) A company may be formed for any lawful purpose by—

(a) seven or more persons, where the company to be formed is to be a public company;

(b) two or more persons, where the company to be formed is to be a private company; or

(c) one person, where the company to be formed is to be One Person Company that is to say, a private company,

by subscribing their names or his name to a memorandum and complying with the requirements of this Act in respect of registration:

Provided that the memorandum of One Person Company shall indicate the name of the other person, with his prior written consent in the prescribed form, who shall, in the event of the subscriber‘s death or his incapacity to contract become the member of the company and the written consent of such person shall also be filed with the Registrar at the time of incorporation of the One Person Company along with its memorandum and articles:

Provided further that such other person may withdraw his consent in such manner as may be prescribed:

Provided also that the member of One Person Company may at any time change the name of such other person by giving notice in such manner as may be prescribed:

Provided also that it shall be the duty of the member of One Person Company to intimate the company the change, if any, in the name of the other person nominated by him by indicating in the memorandum or otherwise within such time and in such manner as may be prescribed, and the company shall intimate the Registrar any such change within such time and in such manner as may be prescribed:

Provided also that any such change in the name of the person shall not be deemed to be an alteration of the memorandum.

(2) A company formed under sub-section (1) may be either—

(a) a company limited by shares; or

(b) a company limited by guarantee; or

(c) an unlimited company

Incorporation of company

(1) There shall be filed with the Registrar within whose jurisdiction the registered office of a company is proposed to be situated, the following documents and information for registration, namely:—

(a) the memorandum and articles of the company duly signed by all the subscribers to the memorandum in such manner as may be prescribed;

(b) a declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, and by a person named in the articles as a director, manager or secretary of the company, that all the requirements of this Act and the rules made thereunder in respect of registration and matters precedent or incidental thereto have been complied with;

(c) an affidavit from each of the subscribers to the memorandum and from persons named as the first directors, if any, in the articles that he is not convicted of any offence in connection with the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;

(d) the address for correspondence till its registered office is established;

(e) the particulars of name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed, and in the case of a subscriber being a body corporate, such particulars as may be prescribed;

(f) the particulars of the persons mentioned in the articles as the first directors of the company, their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity as may be prescribed; and

(g) the particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the company in such form and manner as may be prescribed.

(2) The Registrar on the basis of documents and information filed under sub-section (1) shall register all the documents and information referred to in that subsection in the register and issue a certificate of incorporation in the prescribed form to the effect that the proposed company is incorporated under this Act.

(3) On and from the date mentioned in the certificate of incorporation issued under sub-section (2), the Registrar shall allot to the company a corporate identity number, which shall be a distinct identity for the company and which shall also be included in the certificate.

(4) The company shall maintain and preserve at its registered office copies of all documents and information as originally filed under sub-section (1) till its dissolution under this Act.

(5) If any person furnishes any false or incorrect particulars of any information or suppresses any material information, of which he is aware in any of the documents filed with the Registrar in relation to the registration of a company, he shall be liable for action under section 447.

(6) Without prejudice to the provisions of sub-section (5) where, at any time after the incorporation of a company, it is proved that the company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or by any fraudulent action, the promoters, the persons named as the first directors of the company and the persons making declaration under clause (b) of subsection (1) shall each be liable for action under section 447.

(7) Without prejudice to the provisions of sub-section (6), where a company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such 28 company or by any fraudulent action, the Tribunal may, on an application made to it, on being satisfied that the situation so warrants,—

(a) pass such orders, as it may think fit, for regulation of the management of the company including changes, if any, in its memorandum and articles, in public interest or in the interest of the company and its members and creditors; or

(b) direct that liability of the members shall be unlimited; or

(c) direct removal of the name of the company from the register of companies; or

(d) pass an order for the winding up of the company; or

(e) pass such other orders as it may deem fit: Provided that before making any order under this sub-section,—

(i) the company shall be given a reasonable opportunity of being heard in the matter; and

(ii) the Tribunal shall take into consideration the transactions entered into by the company, including the obligations, if any, contracted or payment of any liability.

Meetings under Company Law

Meetings

Meetings is association or gathering of several number of person for discussing on corporate matters. Decision making requires majority of votes. The directors and also members discuss on various matters. According to companies Act, meetings are important provision. Act has many provisions for meeting. Meeting should at least have two persons. One person can not constitute meeting.

Requisites of Valid Meeting

Following are the requisites for valid meeting:

1. Properly conducted

2. Conducted by Authorized persons

3. Proper and also adequate notice

4. Legally constituted.

5. Must have chairperson.

6. Follow rules of quorum

7. Validly transacted business.

Types of Meeting

1. Member’s Meeting :

This meeting is only for the members of the company. Members and also directors discuss on the matters related to company.

Following are the types of member’s meeting:

Statutory Meeting.

Annual General Meeting.

Extra Ordinary General Meeting.

A. Statutory Meeting : (NOW REPEALED)

Statutory meeting is the first meeting which company conducts afters its commencement. Conduction of statutory meeting is compulsory. Public limited company is required to hold such meeting within a period not less than one month and not more than six months from the date of commencement.

The directors of company also need to make statutory report. Every members also must be given a copy of report at least 21 days before the date of the meeting and a copy is also to be sent to the Registrar for registration.

Section 165(3) provides that the Statutory Report must con­tain the following particulars:

(i) The total number of fully paid-up and partly paid-up shares allotted;

(ii) The total amount of cash received ;

(iii) the receipts, classifying them and also the expenses incurred for commission, also brokerage etc.

(iv) The names, addresses and also occupations of directors, auditors, managers and secretaries and also changes of the names, address etc.

(v) Particulars of contracts with proposed modifications presented at meeting for approval;

(vi) The arrears of calls;

(vii) Commissions and brokerages paid to directors and managers.

Every director or any other officer of the company who is in default shall be punishable with a fine which may extend to Rs. 500.

B. Annual General Meeting (AGM) AGM (Sec 96 & 97)

Applicability: Every Company other than One Person Company.

Key Provisions:

Every Company to which this section applies shall hold its 1st AGM within 9 months from the closure if financial year and subsequent AGM within 6 months form the closure of financial year. The gap between two meetings shall not be more than 15 months and in case of first AGM, it is not necessary to hold AGM in the year of incorporation. ROC has power to give extension upto 3 months for holding AGM except first AGM on special reason.

Every AGM shall be called during business hour i.e. 9.00 a.m. to 6.00 p.m. on any day except national holiday and shall be held at registered office or other place within the city, town or village in which the registered office of the company is situated.

Central Govt. has power to exempt any company form the provision of subsection (2) of section 96 of the Act, 2013.

In case of default in holing AGM, Tribunal may call AGM on application of any member of the company and give ancillary or consequential directions as it may think expedient and such directions may include a direction that one member can present in person or by proxy shall constitute quorum.

REPORT ON AGM (Sec 121)

Apart from minutes of AGM, Listed Companies are required to prepare report on each AGM in a manner prescribed in rule 31 of Companies (Management & Administration) Rules, 2014 including the confirmation to the effect that the same was convened, held and conducted as per the provisions of this Act and rules made there under. The copy of report shall be filed with ROC within 30 days from the date of conclusion of AGM failure to submit that report attract fine on Company of Rs. 1 lakh minimum which may extend to five lakh and on every defaulting officer of Rs. 25 thousand minimum which may extend to 1 lakh

Under Section 96 of the companies act, every company shall hold a general meeting as annual general meeting every year. Except one person company. There should not be a gap of more than fifteen months between two AGM.

Notice of AGM can be either in writing or also in electronic form. The member should get the notice at least fore 21 clear days. . The notice should consist of place, day, date and the proper hour of the meeting. It should also contain agenda of meeting. Every member of the company, legal representative of deceased and assignee of insolvent member, auditor and every director of the company should get notice. Section 101 of the Companies act 2013, deals with the provision of Notice for the AGM.

C. Extra ordinary meeting (EGM)

Every meeting which is not a AGM or statutory meeting meeting is EGM. An EGM is held for some special business which can not be transacted at AGM. It is also held to transact some urgent business. This meeting may be called by the Directors or by the member’s according to Sec.169 of the Companies Act, 1956.

By Board: Board may whenever think necessary may call general meeting of the Company.

By Requisition: Sec 100 with Rule No. 17 of Companies (Management & Administration) rules 2014

Board shall proceed to call EGM at the requisition made by members holding on the date of receipt of requisition atleast 1/10 of share capital carrying voting right (in case of company having share capital) or 1/10 of total voting power (in case of company not having share capital) as on the date of receipt of requisition. If Board fail to proceed to call an EGM within in a period of twenty one day from the date of receipt of valid requisition in regard to any matter on a day not later than 45 days from the date of receipt of such requisition, the meeting may be called and held by requisitionist themselves within a period of three months form the date of requisition. Requisition shall set out the matter for which meeting is to be called and shall be singed by requisitionsts and shall be sent to the registered office of the Company. EGM called by requisition will canceled if adjourned due to want of quorum.

NOTICE OF GENERAL MEETING (SEC 101 WITH RULE NO. 18 OF COMPANIES (MANAGEMENT & ADMINISTRATION) RULES, 2014:

21 clear days notice either in writing or through electronic mode* (E-mode) in such manner as prescribed in rules.

Notice shall specify the day, date, time and place and the hour of the meeting and a statement of business to be transacted at such meeting and shall be given to Every Member of the Company, Legal representative of any deceased member or the assignee of an insolvent member and to the auditors and every director of Company.

Accidental omission to give notice or non-receipt of such notice shall not invalidate the proceeding of the meeting.

*Rule 18 of: Companies (Management & Administration) Rules, 2014

E-mode shall mean any communication sent by a Company through its authorized and secured computer programme which is capable of producing confirmation and keeping record of such communication. Notice may be sent through e-mail as text or as an attachment to e-mail or as notification providing electronic link or URL for accessing such notice.

E-mail shall be addressed to the person entitled to receive such e-mail as per records of company or as provided by depository. Company shall provide an advance opportunity at least once in a financial year, to member to register his e-mail address and changes therein.

E-mail shall state name of company, type of notice of meeting, place and the date of meeting. If mail is sent in the form of a Non-editable attachment to the e-mail, such attachment shall be in the portable document format or in a non-editable format together with a link or instruction for receipt for downloading relevant version of software. Mail may send through in-house facility or its registrar and transfer agent or any other Authorised agency for providing bulk email facility.

Notice of General Meeting of the Company shall be simultaneously placed on the website of the Company, if any, and on the website notified by C.G.

STATEMENT TO BE ANNEXED TO NOTICE (Sec 102)

In case of any business other than Ordinary Business a statement setting out following material facts concerning each item of business to be transacted at a general meeting shall be annexed to the notice convening such meeting, namely:

(i) Nature of concern or interest, financial or otherwise, if any, in respect of each items of every director and the manager, if any and every other KMP and relatives of the Director, manager or KMP.

(ii) Any other information and facts that may enable members to understand the meaning, scope and implications of the items of business and to take decision thereon.

(iii) Where any special business in the meeting of Company affects or relates any other company then shareholding of promoter, directors, manager and KMP shall be stated in the said statement, if that shareholding is 2% or more.

(iv) Where any item of business refers to any documents, which is to be considered at the meeting, the time and placed where the documents can be inspected shall also be specified in the statement.

Special Business in AGM means all businesses other than consideration of financial statements, report of Board and Auditors, declaration of any dividend, appointment of Directors in place of retiring and appointment of and fixation of remuneration of Auditors. In case of any other General Meeting all business shall be special.

In case of benefit arises due to non-disclosure of aforesaid material facts in the statement by promoters/directors/ manager/ KMP than the same shall be held in trust for the benefit of the Company.

Default in complying the provisions of this section every promoter, director, manager or other KMP who is in default shall be penalize with fine which may extend to Rs. 50000 or five times of amount of benefit accruing to promoters/directors/manager/KMP or any of their relatives, which ever is more.

QUORUM: (Sec 103)

In case of public Company if on date of meeting:

- Members <_ 1000 then 5 members personally present.

- Members>1000 but upto 5000 then 15 members personally present.

- Members>5000 then 30 members personally present.

In case of Private Company 2 members personally present shall constitute quorum. Articles may provide larger quorum

If quorum is not present within half an hour then meeting shall adjourned in same day in the next week on same time and place or such other time and place as board may determine but atleast 3 days notice is required to be given to members either personally or by newspapers advertisement in English and one vernacular language having circulation at the place where registered office of the company is situated. In case of absence of quorum at adjourned meeting, the members present shall be quorum.

Meeting called by requisition shall be canceled in case of absence of quorum.

APPOINTMENT OF CHAIRMAN OF GENERAL MEETING (Sec 104)

Members personally present at the meeting shall elect one of themselves to be the Chairman thereof on show of hands.

In case of poll is demanded, it shall be taken forthwith in accordance with provisions of this Act and the Chairman elected on show of vote shall be chairman until some other person is elected as a result of poll and that other person shall be chairman for rest of the meeting.

Articles of a Company can provide different manner for appointing Chairman.

PROXIES (Sec 105 with rules 19 of Companies (Management & Administration) rules, 2014))

Member entitled to attend and vote at a meeting of company shall be entitled to appoint another person as proxy to attend and vote at the meeting. Proxy shall not have right to speak and vote except on a poll.

C.G. may prescribe the companies whose member shall not appoint proxy other then member of that company and C.G. has prescribed the company registered under section 8.

A person can act as proxy of maximum 50 members if their aggregate holding is not exceeding 10 % of total share capital of company caring voting rights. A member who holds more then 10 % of total share capital carrying voting rights may appoint a single person as his proxy but that proxy shall not act as proxy of other person. Appointment of proxy shall be in form MGT-11.

Notice of Meeting shall contain a statement that a member entitled to attend and vote is entitled to appoint a proxy or where that is allowed, one or more proxies to attend and vote instead of him and that proxy need not be member. Default of mentioning of such statement every officer of company in default shall be liable to fine upto Rs. 5000.

Provisions in articles requiring longer period then 48 hours before the meeting for a depositing of proxy or other document relating to proxy with company shall be deemed as 48 hours.

POSTAL BALLOT (Sec 110 read with rule no. 22 of Companies (Management & Administration) Rules 2014)

Notwithstanding anything contained in this Act. A Company shall in respect of items of businesses as the C.G. may by notification, declare to be transacted only by means of postal ballot and if Company voluntary want in respect of any item of business, other than Ordinary Business and any other in respect of which Directors or Auditors have a right to be heard at any meeting, transact by means of postal ballot in such manner as prescribed in rule 22 of Companies (Management & Administration) Rules 2014) instead of transacting at General Meeting

Meeting of Creditors:

Meeting is when directors of company has any scheme for creditors. The Court may order a meeting of the creditors on the application of the company or of liquidator in case of a company being wound-up.

Meeting of Debenture Holders:

Such meetings is held in the interest of debenture holder. The rules for appointment of Chairman, no­tice of the meeting, quorum etc. are there in the Trust Deed.

Meeting of Creditors and Contributories:

The main purpose is obtain consent of creditors and contributories to the scheme of rearrangement or compromise. It is to save the company from financial difficulties. Sometimes, the Court may also order to conduct meeting. The term “contributory” covers every person who is liable to contribute to the assets of the company when the company is being wound-up.

4. Meeting of the Board of Directors:

The Board of Directors controls the management of the company. Therefore, the Directors are to meet frequently to decide both policy and also other related matters. It is conducted four times in a year.

BOARD MEETING (Sec 173)

Applicability for all Companies including OPC

Provisions: First Board Meeting: within thirty days of the date of its incorporation.

Subsequent Board Meeting: 4 Board meeting in ever year and maximum gap between two Meetings shall be 120 days.

One Person Company, Small Company and Dormant Company may convene Board meeting at least once in half calendar year and gap between two meetings is not less then ninety days

Power of central government

C.G. has power to direct that the provisions of sub-section (1) of Section 173 shall not apply in relation to any class or description of Company or shall apply subject to such exceptions, modifications or conditions.

Board of Director may participate either personally or by video conferencing or other audio-video means, as prescribed in Rule No. 3 of Companies (Meeting of Board and its Power) Rules, 2004, which are capable of recording and recognizing and storing.

C.G. may specify by notifications of such matter which may not be dealt with by video conferencing or other audio-video means.

Notice of Meeting: Not less then 7 days notice writing to every director at his usual address registered with company and such notice shall be sent by hand delivery or by post or by e-mode. Board meeting may be called at shorter notice to transact urgent business subject to condition that atleast one independent director, if any, shall be present at the meeting and in case of absence of independent directors from such a meeting of board, decisions taken at such a meeting shall be circulated to all directors and shall be final only on ratification thereof by atleast one independent director, if any.

Failure to give notice may attract penalty of Rs. 25000/- on every officer whose duty is to do so.

Section 173 (5) is not applicable to OPC in which only one director is on the board.

Quorum of Board Meeting 1/3rd of total strength or 2 whichever is higher and participation by video conferencing shall also be counted.

Continuing Directors may act notwithstanding any vacancy on the Board, but if and so long as their number is reduced below the quorum fixed by the Act for a meeting of Board, continuing director may act for the purpose of increasing the number of directors to that fixed for quorum or of summoning a General Meeting and no other purpose.

Where at any time interested directors exceed 2/3 or equal to 2/3rd of total strength then those who are not interested and present at the meeting being not less then two shall be quorum during such time.

Where meeting of board couldn’t be held for want of quorum and articles is silent in that then the meeting shall automatically stand adjourned to the same day at the same time and place in the next week or if that day is national holiday, till the next succeeding day, which is not a national holiday, at the same time and place.

For calculation of quorum any fraction of a number shall be rounded off as one and total strength shall not include directors whose places are vacant.