UNIT 4: MANAGEMENT & MEETINGS

Q-1 Legal Position of Directors

The Companies Act, does not define the legal position of directors.
 Directors as Agents: The company has no person; it can act only through directors. Where, the
directors contract on behalf of and in the name of the company, the company is liable and not its
directors. But directors are not completely like agents because whereas agents are appointed,
directors are elected. Agents work for a commission but not so the directors.
 Directors as Managing Partner: A company has been sometimes likened to a large partnership
where the directors are charged with the responsibility of managing its affairs. The directors enjoy
vast powers of management and act as the supreme policy and decision-making body. They perform
all proprietorial functions. But they are not completely like partners because they cannot bind other
directors as partners in a firm can do. They are subject to retirement whereas partners rarely retire.
 Directors as Trustees: Directors are trustees of- the company's money, or property which comes
into their hands or which is actually under, their control and of the powers entrusted to them.
Directors are accountable for their proper use and are required to refund the same if improperly used
or breach of trust committed. Directors like trustees occupy a fiduciary position, which enjoins upon
them a duty to act on behalf of a company with utmost good faith, utmost care and skill and due
diligence and in interest of company they represent. Directors owe no fiduciary duty towards
strangers to the company. Directors are the trustee of the company and not of individual
shareholders. But a director is not the owner of the property so he is not entirely like a trustee either.
 Are Directors the Employees of the Company?
There is nothing in law to prevent a director from accepting employment under the company under a
special contract, which he may enter into with the company. Where a director accepts employment
under the company under a separate contract of service, in addition to the directorship, he is also
treated as an employee of the company. He will be entitled to remuneration and other benefits
admissible to employees, in addition to his remuneration as director under the act. Section 188
provides for a director to hold an office or place of profit under a company.

Q-2 Woman Director

 The Rule 3 of Companies (Appointment and Qualification of Directors) Rules, 2014 provides
that:
1) every listed company.
2) any other public company having paid up capital of 100 crores or more.
3) turnover of 300 crores or more.
shall have at least 1 Woman Director.
 Every existing company was required to comply with this requirement within 1 year of
commencement of this Act.
 Any new company registered, shall comply with this provision within 6 months from the date of its
incorporation.
 SEBI (LODR) Regulations, 2015 have recommended that at least 1 woman independent director
should be appointed in the top 1000 listed entities by market capitalisation by April 1, 2020. It will
encourage companies to bring at least 2 women directors. It was a positive development in ensuring
gender diversity.
 Any intermittent vacancy of a Woman Director shall be filled by the board at the earliest but not
later than the immediate next board meeting or 3 months from the date of such vacancy,
whichever is later.
Q-3 Appointment of Directors
 Reappointment of Retiring Directors: The retiring director is subject to re-election. The AGM at
which the director retires, the company may fill up the vacancy by appointing the director or any
other person. If the vacancy is not filled at the AGM, it shall be filled at the adjourned meeting which
will be held same day, same time of the next week unless it is a national holiday. If at the adjourned
meeting the vacancy is not filled, or if it is expressly resolved not to fill up vacancy, then the
retirement director shall be deemed to have been reappointed except in the following cases:
1) At any previous meeting, a resolution for his reappointment was put to vote, but lost.
2) The retiring director has, in writing, expressed his unwillingness to continue.
3) He is not qualified or is disqualified for appointment.
4) A special or ordinary resolution is necessary for his appointment or reappointment by
virtue of any provisions of the Act.
5) Filling for more vacancies by a single resolution is applicable.

 By Board of Directors: Section 161 provides that the BOD can exercise the power to appoint
directors in the following 4 cases:
1) Additional Directors: BOD has the power to appoint any person, other than a person who
has failed to get appointed in a general meeting, as an additional director. Additional director
is a director who holds office only up to the date of the next AGM or the last date by which
the AGM should have been held, whichever is earlier.
2) Alternate Director: BOD appoints a person, other than a person who is already holding
alternate directorship for any other director in the company or holding directorship in the
same company, to act as an alternate director for a director during his absence, for a
period of not less than 3 months. An alternate director holds office till the original director
returns to India. The Act has now made it possible to attend board meetings through video
conferencing. Thus, there is no need to appoint an alternate director unless otherwise required
to manage the affairs of the company.
3) Nominee Director: Govts., collaborators, financial institutions and other lenders nominate a
director to safeguard their interests and to ensure that the money lend is invested in stipulated
purposes only.
4) Filling up Casual Vacancy: filled by the BOD at a board meeting, which shall be
subsequently approved by members in the immediate next general meeting. The person who
appointed shall not hold office till the next AGM, but for the entire period for which the
person in whose place he is appointed would have held office.

Q-4 Qualifications & Disqualifications of Directors

 Qualification:
1) DIN
2) Individual
 Disqualification: Section 164 provides that a person shall not be eligible of being appointed as
director of any company if-
1) He is of unsound mind and stands so declared by a competent court.
2) He is an undischarged insolvent.
3) He has applied to be adjudged an insolvent.
4) He has been convicted by a court of an offence involving moral turpitude and sentenced
in respect thereof to imprisonment for not less than 6 months and a period of 5 years
has not elapsed from the date of the expiry of the sentence. If a person has been convicted
of any offence and sentenced under it to imprisonment for a period of 7 years or more,
he shall not be eligible to be appointed as a director in any company.
 5) An order disqualifying him for appointment as a director has been passed by a court or
tribunal, and the order is in force.
6) He has not paid any call, in respect of shares of the company held by him, and 6 months
have elapsed from the last date fixed for the payment of the call.
7) He has not complied with the provisions of the act which deals with DIN.
8) He has not complied with provisions which deals with maximum number of directorships.

Q-5 Removal of Directors

1) Removal By Shareholders:
 A company may by an ordinary resolution passed in a general meeting, after due receipt of special
notice, remove a director before the expiry of his period of office.
 It is not necessary that there be proof of mismanagement, breach of trust or other misconduct on the
part of the directors.
 An independent director re-appointed for second term shall be removed by the company only by
passing a special resolution and after giving him a reasonable opportunity of being heard.
 Special notice of any resolution to remove a director or to appoint somebody in his place at the
meeting at which he is removed is necessary. 14 days, special notice of the intention must be given
by the shareholders to the company.
 The company must send a copy of this notice to the concerned director who shall have the right to
make a representation.
 The grounds for removal of the directors are required to be stated in the explanatory statement
accompanying the notice of the meeting.
 The director removed cannot be re-appointed but will get compensation for wrongful
termination.

2) Removal By Tribunal:
 On an application made to it by any member of the company for prevention of operation and
mismanagement, the Tribunal can order the removal of the MD, Manager or any of the Directors of
the company.
 The Tribunal may make an order for the recovery of undue gains made by the MD, Manager or any
of the Directors during the period of their appointments.
 The Directors so removed cannot, except with the leave of the Tribunal, hold any managerial office
for a period of 5 years in any company. Such a person shall not be entitled to any compensation
for the loss or termination of office.

3) Removal By Tribunal on Application by Central Government:

 Central Govt. Applies to the Principal Bench of the Tribunal if in its opinion:
i. Any person concerned in the conduct and management of the affairs is or has been
guilty of fraud, persistent negligence or default in carrying out his obligations.
ii. The business of a company is or has not been conducted and managed in accordance
with sound business principles.
iii. A company has been managed in a manner which is likely to cause, or has cost serious
injury or damage to the interest of the industry or business.
iv. The business has been managed by such person with intent to defraud its creditors
members or any other person or otherwise for a fraudulent or unlawful purpose,
against public interest.

 Central Govt. may request Tribunal to inquire into the case and record a decision as to whether or not
such person is a fit and proper person to hold the office of director or any other office connected with
the conduct and management of any company.
  Tribunal shall record its decision stating as to whether or not the respondent is a fit and proper
person.
 Person who is not a fit and proper person shall not hold the office of a director or any other office
connected with the conduct and management of the affairs of any company for a period of 5 years
from the date of the said decision.
 Central Govt. may, with the leave of the Tribunal, permit such person to hold any such office before
the expiry of the said period of 5 years. Such person shall not be entitled to, or be paid, any
compensation for the loss or termination of office.
 Any person who knowingly acts as a managing director or other director or manager of a company,
in contravention of the 5-year ban and every other director who knowingly contravenes this
provision, shall be punishable with imprisonment up to 6 months or fine up to 5 lakhs or both.

Q-6 Duties of Directors

Section 166 A director of a company shall:
 Act in accordance with the company’s articles.
 Exercise his duties with due and reasonable care, skill and diligence and shall exercise
independent judgement.
 Act in good faith in order to promote the objects of company for benefit of its members as a whole
and in the best interest of the company, its employees, shareholders, community and for protection of
the environment.

A director of a company shall not:

 Involve in a situation in which he may have a direct/indirect interest that conflicts with the interest of
the company.
 Achieve/attempt to achieve any undue advantage either to himself, his relatives, partners or
associates.
 Assign his office, and any assignment so made shall be void.

If a director of a company contravenes these provisions such director shall be punishable with a fine ranging
from 1 lakh to 5 lakh.

Q-7 Powers of Directors

General Powers Vested in the Board:
 The BOD of a company shall be entitled to exercise all such powers, and to do all such acts and
things as the company is authorised to exercise and do.
 It confers on the directors the full powers of the company subject to certain regulations, and the
shareholders, cannot by resolutions passed in a general meeting, without altering the articles, give
effective directions to the directors as regards management of the company's affairs, nor can they
overrule any decisions of the directors in the conduct of the company's affairs.
 Any director acting individually has no power to act on behalf of the company in respect of any
matter except to the extent to which any power or powers of the Board have been delegated to him
by the Board within the limit permitted by the Companies Act or any other law.
 Once specific powers of management and control have been granted by the company to its
directors, the company cannot without justification impose its will at a general meeting. The
shareholders cannot dictate to the directors the manner in which their executive authority
is to be employed.
 In the following exceptional situations, the general meeting is competent to act even in a matter
delegated to the Board:
 1) Malafide: When the directors are themselves the wrong-doers, and have acted malafide, and
their personal interest is in conflict with their duty in such a way that they cannot or will not
take steps to seek redressal for the wrong done to the company.
2) Board Incompetent: When there is no legally constituted Board which could function, or if
there is a Board but that is unable or unwilling to act.
3) Dead Lock: The directors are unwilling to act, or on account of a deadlock, unable to act.
4) Residuary Powers: Shareholders have the power to validate any act of the director by an
ordinary resolution.

Q-8 Managing Director

Section 196 prohibits the simultaneous appointment of a Managing Director and a Manager in a company.
But a Whole Time Director can co-exist with a Managing Director or Manager.
 MD is a director who-
a) by virtue of an agreement with the company, or
b) of a resolution passed by the company in a general meeting, or
c) by its BOD, or
d) by virtue of its MOA, is entrusted with 'substantial' powers of management of the
affairs of the company and includes a director occupying the position of a Managing
Director, by whatever name called.

 The MD is the executive head of the company, who exercises his powers subject to the
superintendence, control and direction of the BOD.
 Any director entrusted with managerial functions will be a MD even though he may be called a
technical director or technical advisor.
 He is both a director as well as an employee of the company.
 An MD is normally appointed through a separate service agreement with the company. If his
appointment is prematurely terminated, he is entitled to compensation. If termination is brought
about by an alteration of articles in a manner inconsistent with the terms of appointment, damages
will have to be paid.

Q-9 Whole Time Director

 A Whole Time Director means a director who devotes all his time and attention to the carrying
on of the affairs of the company as may be assigned to him by the board, and therefore he is
almost like a MD though not so designated.
 A person who does not devote substantially the whole of his time to the company is not a Whole
Time Director.
 Regarding appointment/reappointment and remuneration of Whole Time Directors, same provisions
which are applicable to MDs shall be applicable.
 A company can have more than one whole time director, each looking after a different aspect of
the business of the company.

Q-10 Manager
 Manager means an individual, who subject to the superintendence, control and direction of the
BOD, has the management of the whole, or substantially the whole of the affairs of a company,
and includes a director or any other person occupying the position of a director, by whatever
name called, whether under a contract of service or not.
 Only an individual can be appointed as the Manager of a company.
 Where a director is a Manager of a company and for some reason his office of director is vacated, the
office of Manager held by him shall not be affected.
  Manager is not an agent who is to do a particular thing or a servant who is to obey orders, but a
person who is entrusted with the power to transact the whole of the affairs of the company.
 A person who is one of the departmental manager or a branch manager is not deemed to be a
Manager in this sense.

Q-11 Meetings of Board of Directors

1) Notice of the Meeting:
 A notice of not less than 7 days is required to call a BOD meeting. A written notice must be
sent, delivered by hand or by post or by electronic means.
 A meeting can be called by giving a shorter notice than that of 7 days provided at least 1
independent director is present. In case of absence of any independent director, decisions
taken in such a meeting shall be circulated to all the directors and will be final only when
they have been ratified by at least 1 independent director, if any.
 Every officer of the company who is responsible to give notice but fails to do so shall be
liable to fine of Rs 25000.
2) Quorum of the Meeting:
 The quorum for a BOD meeting is 1/3rd of its total strength or 2 directors whichever is
higher and the participation of directors by video conferencing or by other audiovisual means
shall we counted for the purpose of quorum.
 While determining the total strength, vacancies and interested directors (whose presence
cannot be counted) are not counted.
 If sometimes, the number of interested directors equal to 2/3rd or more than 2/3rd, the
directors who are not interested will be the necessary quorum provided they are not less
than 2.
 Unless a quorum is present, the business transacted is void. Quorum is required to be present
throughout the meeting.
 If the meeting could not be held for want of quorum then, unless the articles provide
otherwise, the meeting shall automatically be adjourned to the same day, next week at the
same time. If that day is a public holiday, then till the next succeeding day which is not a
public holiday.
 If at the adjoint meeting there is no quorum, the meeting cannot transact any business.

3) Participation in a Board Meeting through Video Conferencing or Other Audio-Visual Means:

 A director can participate in the board meeting through video conferencing or other audio-
visual means which are capable of recognising and recording the participation of the
directors, and of recording and storing the proceedings of such meetings, along with date and
time.
 Procedure for conducting a board meeting through video conferencing:
i. Notice of the meeting shall be sent to all directors-
a) Directors are informed regarding the option available to them to participate
through video conferencing mode or other audio-visual means in the notice of
the meeting.
b) Every Board meeting in which director(s) are participating through video
conferencing or other audio visual means the scheduled venue set forth in the
notice shall be a place in India.
ii. Intimation by the directors- A director may intimate his intention of participation
through the electronic mode at the beginning of the calendar year and such
declaration shall be valid for one calendar year. The director shall communicate
his intention to the Chairperson or the CS of the company, sufficiently in advance. In
 absence of the intimation, it shall be assumed that he shall attend the
meeting in person.
iii. Conduct of the meeting- At the commencement of the meeting, a roll call shall be
taken by the Chairperson where every director participating through video
conferencing or other audio-visual means, shall state, for the record, the following:
a) Name.
b) The location from where he is participating.
c) That he has received the agenda and all the relevant material for the meeting.
d) That no one other than the concerned director is attending or having access to
the proceedings of the meeting at the location mentioned.

iv. Information to the board about participation through video conferencing or

other audio-visual means- The Chairperson or the CS shall inform the Board about
the names of persons, other than the directors, who are present for the said meeting.
v. Placing statutory registers at the meeting- The statutory registers which are
required to be placed in the Board meeting, as per the provisions of the Act, shall be
placed at the scheduled venue of the meeting, and where such registers are required to
be signed by the directors, the same shall be deemed to have been signed by the
directors participating through electronic mode, if they have given their consent to
this effect, and it is so recorded in the minutes of the meeting.
vi. Participation in the discussion-
a) Every participant shall identify himself for the record before speaking on any
item of business on the agenda.
b) If a statement of a director in the meeting through video conferencing or other
audio-visual means is interrupted or garbled, the Chairperson or CS shall
request for a repeat or reiteration by the Director.

vii. Voting- If a motion is objected and there is a need to put it to vote, the Chairperson
shall call the roll and note the vote of each director who shall identify himself while
casting his vote.
viii. Maintaining confidentiality- No person other than the persons whose presence is
required shall be allowed access to the place where any director is attending the
meeting, either physically or through video conferencing, without the permission of
the board.
ix. Minutes-
a) The draft minutes of the meeting shall be circulated among all the directors
within 15 days of the meeting, either in writing or in electronic mode.
b) Every director who attended the meeting shall confirm or give his comments
in writing, about the accuracy of recording of the proceedings, within 7 days
or some reasonable time as decided by the board after receipt of the draft
minutes, failing which his approval shall be presumed.
c) The minutes shall disclose the particulars of the director who attended the
meeting.
d) After completion of the meeting, the minutes shall be entered in the minute
book and signed by the Chairperson.

Q-12 Annual General Meeting

Section 96 of the Companies Act provides that every company, whether public or private, whether with
share capital or without, whether limited or unlimited except an OPC, must hold a meeting of its members
each year. Since it is to be held annually, it is known as the AGM.
In case of OPC, it shall be sufficient if the resolution is communicated by the member to the company,
entered in the minutes book and that minutes shall be signed and dated by him.
Importance:
The annual general meeting is very important because of the nature of business transacted at it
which comprises of-
1) Ordinary business:
a) consideration of the accounts, balance sheet, auditors and directors’ reports;
b) the declaration of dividend;
c) the appointment of directors in place of those retiring;
d) the appointment of auditors and fixation of their remuneration.
2) Special business: any other matter, other than that mentioned above shall we consider to be
special business. Whenever any item of special business is to be transacted at a meeting, a
statement giving all material facts concerning each item of business should be
annexed to the notice.
A meeting shall not be deemed to be held simply by distribution of agenda and financial statements to
members.

Legal Provisions:
1) First AGM: held within 9 months from the date of closing of the first financial year of the
company. The holding of an AGM in each calendar year is a statutory necessity.
2) Subsequent AGMs:
a) Every subsequent AGM must be held within 6 months from the date of closing of the
financial year.
b) The gap between two AGMs should not be more than 15 months. Where time has been
extended by 3 months due to special reasons, the interval between 2 successive AGMs
should not exceed 18 months.
c) It is imperative that no calendar year should pass without an AGM being held
during its course.
3) Power to convene an AGM: The BOD is the proper authority to convene an AGM. If any MD
manager, secretary or any other officer calls an AGM, it will be ineffective unless the board ratifies
their act.
4) Notice: The company must give a clear 21 days’ notice to all the members, the legal representatives
of the deceased members, official receiver of the insolvent members, the auditors of the company
and directors of the company. AGM can be held with a shorter notice if it is agreed by 95% of the
members entitled to vote at the meeting. The notice must specify the place, the day and the hour of
the meeting and must contain a statement of the business to be transacted at the meeting.
5) Day, hour & place: Every general meeting should be held during business hours between 9 am to 6
pm, on a day that is not a National Holiday, at either 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.

Q-13 Extraordinary General Meeting

A general meeting of a company which is held between 2 consecutive AGMs for transacting some
special or urgent business is known as an EGM. All general meetings, other than AGM, shall be called as
EGMs. Since all the business transacted at such a meeting is special business, an explanatory statement;
giving all the material facts related to every item on the agenda, must be given along with the notice of the
meeting including the nature of interest, financial or otherwise, in respect of each item of special business.

Who can convene an EGM: Section 100

1) Board of Directors: The Board may, whenever it deems fit, call an EGM by passing an ordinary
resolution at a BOD meeting, which is duly convened and properly constituted. The BOD must give
 a clear 21 days’ notice before holding an EGM. A shorter notice may be valid, if shareholders
holding 95% or more of the paid-up share capital, give their consent. In case of a company not
having share capital, if members holding not less than 95% of the total voting power give there
consent, notice of less than 21 days will be valid.

2) Directors on Requisition: The BOD must convene an EGM upon receiving a return request or
requisition from-
a) members holding 10% or more of the paid-up share capital that carries the right to vote in
case of a company having share capital;
b) members holding 10% or more of the voting power of the company, if the company does
not have share capital.
The requisitionists are under no obligation to attach the explanatory statement to the requisition.
On receiving a valid requisition, the BOD, must within 21 days of receiving the requisition move to
convene or call a meeting. At least 21 days’ notice must be given before holding the meeting. Thus,
EGM must be held within 45 days of the receipt of the requisition.

3) The Requisitionists themselves: If the BOD fails to call an EGM within 45 days of the deposit of a
valid requisition, then the meeting may be called by the requisitionists themselves. It must be held
within 3 months of the date of deposit of the requisition. The requistionists should convene the
meeting at the registered office or in the same city/town where the registered office is situated and
should be convened, during business hours, on any day except National Holiday. However, where
the registered office is not made available to the requisitionists to hold the meeting, they may
hold the meeting elsewhere. Directors must provide all assistance to the requisitionists. If in a
requisitioned meeting there is no quorum present within half an hour of the time fixed for the
meeting, the meeting stands dissolved. The company is bound to repay all reasonable expenses
incurred by the requisitionists in calling a meeting.

4) The Tribunal: The Tribunal has been vested with the powers to call an EGM only if it is
impracticable for the company to call the same. It means impossible, to carry out or to put into
practice with available means. Where shareholders are themselves in a position to requisition an
EGM, but without availing themselves of that procedure, apply to the 'Tribunal', it should not make
the order. Tribunal should not call an EGM, if there is a BOD who can call a meeting. It should
interfere only, if it is fully satisfied that the application has been made bonafide, in the best
interest of the company as a whole, for removing a deadlock otherwise irremovable, and there'
is 'prima facie' evidence of the fact that the holding of the meeting has become impracticable.

Q-14 Requisites of a Valid Meeting

Every meeting in order to be valid must be properly convened and legally constituted.
1) Proper Authority: The BOD is the proper authority to convene a meeting. The shareholders or the
Tribunal may convene a meeting under certain exceptional circumstances. If the BOD meeting is
unlawful i.e. some directors who are validly in office are prevented from attending the meeting, then
the decision taken for convening a general meeting of the company also becomes invalid.

2) Notice: A communication to all those who are entitled to attend a meeting regarding the date, time,
place and business of the meeting. The notice in order to be valid- should be of proper length;
should be given to all persons entitled to receive it; and should contain the date, time, place and
the nature of business to be transacted at the meeting. The notice of a general meeting must be
sent 25 days before the date of the meeting (where service of notice is by post). The notice of the
general meeting shall also simultaneously be placed on the website of the company and on any other
website as notified by central govt. If special business is to be transacted, an explanatory statement
 should be attached to the notice of the meeting. The notice must convey the purpose of the meeting
intelligently and not by benevolent construction.

3) Quorum: It is defined as the minimum number of members who must be personally present at a
meeting for the business of the meeting to be validly transacted. Only members present in person
and not by proxies are to be counted. Joint Holders are treated as one member for the purpose of
quorum. A corporate member may authorise a person to act as its representative. Such a person shall
be deemed to be a member present in person and counted for the purpose of quorum.
The quorum in respect of general meeting-
a) In case of a public company,
i. 5 members personally present if the number of members as on the date of meeting is
not more than 1000.
ii. 15 members personally present if the number of members as on the date of meeting is
more than 1000 but up to 5000.
iii. 30 members personally present if the number of members as on the date of meeting
exceeds 5000.
b) In case of a private company,
2 members personally present.

4) Chairman: Chairman is the person who has been designated or elected to preside over and conduct
the proceedings of a meeting. The main function is to see that the meeting is properly convened and
duly constituted. He must ensure that proceedings at the meeting are conducted according to rules,
and that order and decorum is maintained. The chairman of a meeting can adjourn a meeting under
certain circumstances for instance when the tendency falls below quorum. If a poll is demanded, it is
the duty of the chairman to see that the poll is taken according to the provisions of the act.

5) Minutes: A statutory obligation on every company to keep minutes of the proceedings of every
general meeting of shareholders or creditors, every resolution passed by postal ballots, every meeting
of the Board of Directors, and meeting of every committee of the BOD. Entries should be made
within 30 days of the conclusion of the meeting in books kept specially for that purpose, known as
the Minutes Book. The minutes of each meeting shall contain a fair and correct summary of the
proceedings of that meeting. The Chairman of a meeting enjoys absolute, discretion regarding
inclusion or non-inclusion of any matter in the minutes of the meeting. The minutes book should be
kept at the registered office' of the company and should be open for inspection by the members (for
at least 2 hours each day) during business hours without any charge.

Q-15 Voting & Poll

Whenever a matter is put before a meeting, unanimity on that matter may not be obtained. Chairman may
put the matter to vote in order to ascertain the wishes of the persons present at the meeting.
There are 2 most popular methods of voting:
1) By Show of Hands: At any general meeting, voting in the first instance is to be by show of hands,
unless a poll is demanded. Voting by means of show of hands will not be allowed in case voting is
carried out electronically. Under this method, every member has one vote and proxies are not
allowed unless expressly allowed by the articles. It is applicable to companies other than listed
companies or companies with less than 1000 shareholders and to listed small and medium
enterprises. A private company may make its own rules regarding voting, if its articles so permit. In
case of voting by show of hands, the results may not reflect the true opinion of members as
there may be a number of proxies present who can only vote by poll and not by show of hands.
It doesn’t pay regard to the wishes of a member holding a large number of shares since he has
only one vote on a show of hands.
 2) By Poll: Under this method, each member has the right to vote according to the number of shares
held by him. Proxies are also allowed. In case of companies not having share capital, every member
has only 1 vote and proxies are not allowed unless expressly provided for in the articles. In case of
voting by poll, the member is free to split his votes in favour of and against the same resolution.
The court cannot curtail the right of firms and companies to have individual members as their
representatives. The court cannot direct that one person can vote only once i.e. if he voted in his own
right he can’t vote as a representative of a member firm or a member company.

Q-16 Proxy
The term proxy means two things:
1) The instrument or letter of authority whereby a member of the company appoints another person to
represent him at the meeting and vote on his behalf.
2) The agent or the person appointed to represent and vote on behalf of the member at the meeting.
Unless the articles otherwise provide:
1) A member of a company having no share capital cannot appoint a proxy.
2) A proxy cannot vote except on a poll.
3) Central Govt. may prescribe a class or classes of companies whose members shall not be entitled to
appoint another person as a proxy.
4) A member of Section 8 company is not entitled to appoint any other person as proxy, unless such
other person, is also a member of such company.
5) A person cannot act as a proxy for more than 50 members who together hold not more than
10% of the total share capital of the company carrying voting rights. A member holding more
than 10% of the total share capital of the company carrying voting rights may appoint a single
person as proxy and such person shall not act as proxy for any other person or shareholder.

 Every notice sent by a company for calling a meeting must prominently mention the right of a
member to appoint a proxy along with the fact that the proxy need not be a member of the company.
 If a default is made in complying with this provision, every officer in default shall be liable to a
penalty of Rs 5000.
 Appointment of Proxy: The instrument appointing a proxy must be deposited with the company
within 48 hours before the meeting. An instrument appointing proxy, if duly authorized (by the
appointer or his attorney) and in the prescribed form cannot be questioned on the ground that it fails
to comply with certain special provisions specified in the articles. There is nothing preventing a
company from fixing, by its articles, a shorter period for depositing proxies, or even permitting
proxies being deposited just before the commencement of the meeting. The only restriction is that the
period for lodging proxies cannot be extended to a time more than 48 hours before the meeting.
 Right of Proxy: Unless the articles of a company provide otherwise a proxy cannot vote except on a
poll. However, he may demand or join in demanding a poll. A proxy cannot speak at a meeting. The
relationship between a shareholder and his proxy is that of a principal and agent.
 Revocation of Proxy: A proxy can be revoked any time before the proxy has voted. If there are 2 or
more proxies given by the same shareholder in respect of the same shares, the proxy bearing the
latest date will supersede the earlier one. In other word: the earlier proxy stands revoked. Death of a
member revokes a proxy but if the company has no notice of such death, then the vote given by the
proxy will be valid. Where a shareholder who having given a proxy, personally attends and votes at
the meeting, the proxy stands revoked.

Q-17 Voting by Electronic Means

 E-voting is casting of votes by shareholders in an electronic form by using a secured electronic
system which enables display, recording and registry of votes cast by or against the resolution.
 It includes Remote e-voting. It is the facility of casting vote by member using an electronic voting
system from a place other than venue of general meeting.
 Eligibility for e-voting facility:
1) Every listed company.
2) Every company having 1000 or more shareholders.
 Shareholders need not register for e-voting. If their email ID is in the records of the issuer or agent,
they will automatically receive an email from the depository. It will contain the user ID and
password for logging into the online portal. If a shareholder's email ID is not available with them, the
login details will be dispatched to his address in a PIN mailer. All that the shareholder has to do is to
login to the portal using these details.
 At the first login attempt, he will be prompted to change the password. Then he will be asked to
select the company in which he holds the shares.
 Once he has entered the voting section, he will be able to cast his votes to the extent of the total
voting rights (shares) he holds. Each resolution will be accompanied by a choice: 'for', 'against' and
'abstain'. Votes once cast cannot be modified and will be considered final.

 Procedure for e-voting:

1) Notice of the meeting sent:
 to all members, auditors and directors of the company.
 placed on website of company.
 placed on website of agency approved by MCA.
2) Notice must mention that:
 Company providing e-voting facility
 Those who already cast vote by Remote e-voting can attend meeting but cannot do
so again at general meeting.
 Those not able to caste vote, by Remote e-voting can do so at the meeting.
 The process and manner of voting, including details about login ID.
 Time schedule of e-voting including Remote e-voting.

3) On dispatch of notices, but at least 21 days before date of general meeting, company
should advertise in a vernacular and english newspaper having wide circulation:
 The business to be transacted
 Cut-off date to determine eligibility of members to vote by electronic means.
 Time schedule of Remote e-voting.
 Remote e-voting to be open for at least 3 days and to close at 5 PM, on the
day preceding the date of general meeting.
 Details of persons to address grievances.

4) Appointment by BOD of a person not in employment of company as Scrutinizer.

5) Scrutinizer, after voting at the general meeting is complete, has to:
 Count votes cast at the meeting.
 Unblock votes cast earlier, in the presence of 2 witnesses.
 Make a consolidated report of votes cast for and against the resolution in
prescribed Form.
 Keep all papers and register pertaining to voting (both electronic or manual)
in safe custody till Chairman approves report.

6) If sufficient votes are cast in favour of the resolution, the resolution is deemed to be
passed on the date of general meeting.
7) The results of the voting will be declared within 2 days after the resolution is passed at
the company’s shareholder meeting. Declared result along with Scrutinizer’s Report to be
placed on the website of the company, as well as the Recognized Stock Exchange on
which the shares of the company are listed.
Q-18 Postal Ballot
Postal ballot means voting by post or through any electronic means.
A company, other than OPC and other companies having up to 200 members, shall transact the following
items of business, only by means of postal ballot:
1) Alteration of the objects clause of the memorandum.
2) Alteration of AOA.
3) Change in place of registered office outside the local limits.
4) Change in objects for which a company has raised money from public through prospectors.
5) Issue of shares with differential rights as to voting or dividend etc.
6) Variation in the rights attached to a class of shares or debentures or other securities.
7) Buy back of shares.
8) Election of a director.
9) Sale of the whole or substantially the whole of an undertaking of a company.
10) Giving loans or extending guarantee in excess of the limit specified under the requisite section.
The Companies (Amendment) Act, 2017 allows the company to transact any item of business which is
mandatory required to be transacted through postal ballot, at a general meeting where the facility of
electronic voting is provided.

Procedure for postal ballot:

1) The company shall send a notice to all the shareholders, along with a draft resolution explaining the
reasons therefore, and requesting them to send their assent or dissent in writing on a postal ballot or
through electronic means, within a period of 30 days, from the date of posting of the letter.
2) The notice of the General Meeting shall be sent either under Registered Post with
Acknowledgment Due, or Speed Post or through Courier Service or through electronic mail.
3) An advertisement announcing the fact that notices along with Ballot Papers have been despatched
must appear in an English Newspaper and 1 Vernacular Newspaper, circulating in the state in
which the company's Registered Office is located. The notice of the postal ballot shall also be placed
on the website of the company.
4) The notice shall clearly mention that whether the company is providing voting through postal ballot
or by electronic mode. If electronic, notice shall clearly indicate the process and manner for voting
by electronic mode provided by the 'Agency'. Agency means agency appointed for providing and
supervising electronic platform, for voting by electronic mode, and shall be an agency
approved by the MCA.
5) The BOD shall appoint one scrutinizer, who in the opinion of the Board can conduct the postal
voting process in a fair and transparent manner.
6) The scrutinizer should be willing to be appointed and should be available at the Registered Office of
the company for the purpose of ascertaining the requisite majority.
7) The scrutinizer shall submit his report as soon as possible after the last date of receipt of postal
ballots but not later than 7 days thereof.
8) The scrutinizer shall maintain a register to record the consent or dissent received. Scrutinizers
shall also maintain a record of those ballot papers which are received in torn or defaced form or
are invalid. The Postal Ballot and all other papers relating to postal ballot shall be under the safe
custody of the scrutinizer till the chairman considers, approves and signs the minutes of the meeting.
9) Consent received after 30 days from the date of issue will be strictly treated as if the reply
from, the member has not been received.
10) The result shall be declared by placing it along with the scrutinizer's report on the
website of the company.

Q-19 Resolutions
Ordinary Resolution: An ordinary resolution is a resolution that is passed if the votes cast by the eligible
members, including the casting vote of the chairman, if any, in favour of the resolution, exceed the votes cast
against it. Votes for and votes against the resolution are both to be counted and the neutral votes are to be
ignored.
Ordinary business transacted at the AGM is as follows:
1) Adoption of directors’ report, balance sheet, profit and loss account and auditors report;
2) Election of directors;
3) Declaration of dividend;
4) Appointment of auditors and fixing their remuneration.

There are certain items of special business which require an ordinary resolution such as:
1) Change of name at the direction of the Central Govt.
2) Increase of share capital, consolidation or division of shares, conversion of shares into stock
and reconversion of stock into shares.
3) Issue of bonus shares.
4) Removal of a director other than director appointed by the Tribunal.
5) To contribute to bonafide and charitable fund.

Special Resolution: A resolution shall be a special resolution when:

1) The intention to propose the resolution as a special resolution has been duly specified in the notice.
2) The notice of 21 clear days as required, has been given.
3) The votes cast in favour of the resolution are not less than 3 times the number of votes, if any cast
against the resolution.

 Absentations if any are not to be taken into account. Votes cancelled are also not taken into account.
 An explanatory statement setting out all material facts concerning the subject matter of the special
resolution shall be annexed to the notice of the meeting.
 Within 30 days of passing a special resolution, a copy of the resolution along with the explanatory
statement must be filed with the ROC.
 Some of the important items which require the passing of a special resolution:
i. To alter the memorandum of the company in any of the following ways- to change the
registered office; to change the object; to change the name.
ii. Amendment of articles for insertion of entrenchment clause by a public company.
iii. For buy back of shares.
iv. To issue sweat equity.
v. To reduce share capital.
vi. To make variation in terms of contract or objects in prospectus.
vii. Issue of shares with differential rights.
viii. To appoint more than 15 directors.
ix. To appoint an independent director on completion of term of consecutive 5 years.
x. To remove an auditor.