FOURTH MODULE

Definition of member

Member means:
 The subscribers to the memorandum of a
company on registration of a company and whose
name is entered in register of members.
 Every other person who agrees in writing to become
a member of a company and whose name is entered
in register of members.
 Every person holding shares of a company and
whose name is entered as a beneficial owner in the
records of a depository.
 Who can become a member

 Minor/Major
 Sound Mind/Unsound Mind
 Solvent and Insolvent
 Convicts
 Alien enemy/ Alien friend
 How to become a member/Acquiring
membership

 Subscribing memorandum of a company

 Private agreements
 Buying shares of a company
 Transfer of shares
 Transmission of shares
 Cease to be a member/ cancellation/
termination of member ship

 Company is wound up
 Cancellation of contract: time, fraud, etc.
 Transfer of shares
 Transmission of shares
 Shares are forfeited, shares are sold by the company
to enforce a lien, shares are voluntary surrendered to
company, redeemable preference shares are
redeemed, company itself buy-back shares
 Rights
 Right to receive notice, vote and attend
meetings
 Right to receive copy of financial statement
and audit report
 Right to inspect register and returns
 Right to transfer shares, get dividends, appoint
directors etc.
 Right to file case against directors or
company.
 Liabilities

o Ltd by shares, guarantee and unlimited

liability
o Members are also liable to BOD, other
members, MOA and AOA.
 Register of Members
Every company shall keep and maintain certain Registers
(records/information in paper or electronic form):
 register of members for each class of equity and preference
shares (separately)
 register of debenture holders
 register of any other security holders and
 Foreign register of members and debenture holders etc.
Every register shall include an index of the names and other
such details.
The register and index of beneficial owners maintained by a
depository shall be deemed to be the corresponding register
and index. (Online)
 Meetings
1)Meeting of members/shareholders: AGM,
EGM, class meeting (meeting of either of the
two class of shareholders: equity and
preferential shareholders)
2)Board of Directors meetings
3)Other meetings: meetings of creditors,
meetings of debenture holders, meeting of
contributories.
AGM (Annual General Meeting)
 Every company must in each year hold an AGM.
 Ordinary business as well as special business, if any
is done at such meeting.
 First AGM of the company should be held within 9
months from the closing of the first financial year.
 Subsequent annual general meeting of the company
should be held within 6 months from the date of
closing of the relevant financial year.
 The gap between two AGM shall not exceed 15
months.
EGM (Extraordinary General Meeting)

 All general meetings other than AGM are called EGM.

 Such meeting is usually called by the Board of Directors/at
the request of members for some urgent business which
cannot wait to be decided till the next AGM.
 Every business conducted at such a meeting is special
business.
 The BOD is required to proceed to call a meeting within 21
days from the date of receipt of a valid request and conduct
EGM within 45 days of such request.
 BOD Meeting
 Every company shall hold BOD meeting within 30
days of its incorporation.
 A company shall hold at least 4 BOD meetings in a
year.
 The gap between each such meeting shall not be
more than 120 days.
 A seven day prior notice should be given to each
director.
 Directors may participate in the meeting either in
person or through video conferencing or other
audio visual means.
Essential Conditions for a Valid Meeting
o Proper authority
o Proper notice: 21 days, mode, time, place, day, agenda
o Proper quorum: public company-5 (less than 1000), 15
(1000-5000) and 30 (more than 5000); private company
quorum is 2
o Proper chairman: to control and regulate the meeting,
decide priority amongst speakers, to demand poll, to exercise
casting vote, to expel an unruly member ,close a discussion,
adjourn meeting and the chairman should act bona fide
according to his best ability and judgment and without any
prejudices.
o Proper resolutions and voting
o Proper minutes
 Motion and Resolution

Motion Resolution
A motion is a formal A motion resolved is a
proposal resolution
A motion is the first stage of A resolution is the last stage
discussion of a proposal at a of discussion of a proposal
meeting. at a meeting.
All motions are not put to A motion put to vote can
vote only be resolved
A motion can be amended A resolution can’t be
amended
 Types of Resolution

Ordinary resolution Special resolution

Passed by simple majority Passed by 3/4th majority
Notice do not need explanatory Notice require explanatory
statement statement

Concerned with ordinary Concerned with special business

business of company and of company
sometimes special business

Need not be registered with the Need to be registered with the

ROC in all cases ROC

Chairman has casting vote Chairman has no casting vote

 Types of Voting
At any general meeting, a resolution put to the vote of the meeting shall in the first occasion be
decided by voting on a show of hands, unless:
 Voting on poll is demanded
 Votes calculated on basis of number of shares
 Poll be ordered by chairman of a meeting or can be demanded by person having one-tenth of
the total voting power or holding shares worth 5 lakh or more.
 Demand for poll can be withdrawn at any time
 Chairman of the meeting have the power to regulate the manner to conduct the poll.
 Poll can be done through ballot process.
 Voting carried out electronically: a secured system based process of display of electronic
ballots, recording of votes of the members and the number of votes polled in favour or
against, in such a manner that the entire voting exercised by way of electronic means gets
registered and counted in an electronic registry in a centralised server with adequate cyber
security.
 Voting can also be done through postal ballot means voting by post or through any
electronic mode. It includes voting by shareholders by postal or electronic mode instead of
voting personally for transacting businesses in a general meeting of the company.
 Proxy/Proxies
A person who is appointed by a member to attend and vote at a meeting in
the absence of the member is termed as proxy.
 A proxy is an agent of the member appointing him.
 A proxy has no right to speak at the meeting.
 A proxy cannot vote except on poll.
 A proxy is not counted for the purpose of quorum.
 A person appointed as proxy shall not act as proxy on behalf of more than
fifty members.
 A proxy need not be a member of a company.
 A member of a section 8 company can only appoint another member as a
proxy.
 A member holding more than 10% of the total share capital of the
company carrying voting rights may appoint a single person as proxy.
 The application for appointing the proxy must be placed with the
company, 48 hours before the meeting.
DIRECTORS
Appointment

• Appointment of first directors

• Appointment by members or company
• Appointment by BOD
• Appointment by small shareholders
• Appointment by proportional
representation
• Appointment by tribunal
Removal

• Removal by company/members
• Removal by tribunal
• Removal due to any grounds of
disqualification or vacation of office.
 Disqualification Vacation of office
Unsound mind, insolvency due to any of the disqualifications

Convicted of offence for more than Does not attend any meetings
6 months held during 12 months

Disqualified by tribunal on any Enters into agreement with prior

ground interest and does not discloses it

For not paying call on shares Removed under the company law

For not having DIN Ceases to hold any office/

position which made him liable
to become the director
Powers of directors

• To make call on shares, issue securities, borrow monies.

• To authorize buy back of securities.
• To give/take loans, diversify business, approve financial
statement.
• To appoint directors, KMP, internal auditors, invest funds.
• To amalgamate, merge or reconstruct company etc.
Duties of directors

• To act in good faith and best interest.

• Act according to MOA and AOA.
• To follow all rules and regulations regarding prospectus.
• To follow all the rules regarding allotment of securities.
• To file annual return and financial statement.
• To call AGM and other meetings.
• To help any investigation and not to commit fraud.
[Write liabilities according to the duties]
Types of directors
• Independent director: A non-executive director who other than
receiving the directors remuneration have no
material/pecuniary relationships/transaction with company,
promoters, senior management or its holding, subsidiary and
associated companies which may affect the independence of
judgement of the director.
• Women Director: A listed company or a company with paid
up share capital 100 crores or more or turnover is 300 crores
or more should have at least one women director
• Resident Director: Every company shall have at least one
director who stays in India for a total period of not less than
one hundred and eighty-two days during the financial year
resident director
• Additional director: If the Board of Directors
needs one more director to be appointed in
company due to any reason and neither can
wait till AGM nor want to hold an EGM, then
Board can appoint an additional director.

• Alternate director: An alternate director can be

appointed where a director of a company is
away from India for a period of 3 months or
more.
• Nominee Directors: They are appointed by certain
shareholders, third parties through contracts, lending public
financial institutions or banks, or by the Central Government.

• Executive and Non-Executive Director:- An Executive

Director can be either a Whole-time Director of the company or
a Managing Director. In contrast, a non-executive Director is a
Director who is neither a Whole-time Director nor a Managing
Director.
Composition of directors

• Minimum: OPC 1, private company two and public company

3 and maximum 15
• One person can become director of at least 20 companies
• All listed companies must have at least one-third proportion
of their board of directors as independent directors.
• The board must consist of executive and non-executive
directors.
[Write about types of directors]
CSR
• Corporate Social Responsibility (CSR) enables companies to
engage in activities related to social welfare and improvement
given under the terms of Companies Act, 2013.
• The companies are required to form a CSR committee.
Corporate Social Responsibility Committee should have 3 or
more directors, out of which at least one director shall be an
independent director. This committee oversees the entire CSR
activities of the Company. This is compulsory for:
 Companies with a net profit of Rs. 5 crores or more.
 Companies with a net worth of Rs. 500 crores or more
 Companies with a turnover of Rs. 1000 crores or more
Functions of CSR committee
• formulate and recommend to the Board, a Corporate Social Responsibility
Policy
• recommend the amount of expenditure to be incurred on the activities
referred to in clause and
• monitor the Corporate Social Responsibility Policy of the company from
time to time.
• It is the responsibility of the board of directors to check and regulate CSR
committee
• The Board shall also ensure that the company spends, in every financial
year, at least 2% of the average net profits of the company for such CSR
activities.
• CSR policy should include social and environmental activities like
eradicating hunger and poverty, promotion of education, gender equality,
environment sustainability, protection of national heritage etc.
RTP

In a company related party means,

• a director/KMP or his relative
• a firm/a private company in which a director, manager or his relative is a
partner/member or director
• a public company in which a director and manager is a director and holds
along with his relatives, more than two per cent of its paid-up share capital
• any person or body corporate whose Board of Directors, managing
director or manager is used to to act in accordance with the advice,
directions or instructions of a director or manager
• any company which is a holding, subsidiary or an associate company of
such company
• any such other person.
No company shall without the consent of the Board of Directors given by a
resolution at a board meeting enter into any contract or arrangement with a
related party (except ordinary business) regarding:

o sale, purchase or supply of any goods or materials

o selling/leasing or otherwise disposing of, or buying, property of any kind
o availing or rendering of any services
o appointment of any agent for purchase or sale of goods, materials,
services or property
o such related party's appointment to any office or place of profit in the
company, its subsidiary company or associate company
o underwriting the subscription of any securities of the company.
AUDIT COMMITTEE
Every listed company and such other class or classes of
companies, as may be prescribed, shall constitute an Audit
Committee. The Audit Committee shall consist of a minimum
of 3 directors with independent directors forming a
majority. Every Audit Committee shall act as stated in writing
by the BOD.
Functions:
 recommend appointment, remuneration of auditors
 Review and monitor auditor’s independence and performance
 Examine financial statement and auditors report
 Scrutiny of inter-corporate loans and investments etc..
Powers of Audit Committee:
 To call for the comments of the auditors and review of
financial statement before their submission to the Board.
 To discuss any related issues with the internal and statutory
auditors and the management of the company.
 To investigate into any matter in relation to the items or
referred to it by the Board.
 To obtain professional advice from external sources.
 To have full access to information contained in the records of
the company
Books Of Accounts

Books of account include records maintained in respect of:

• all sums of money received and spent by a company and
related matters
• all sales and purchases of goods and services by the company
• the assets and liabilities of the company and
• the items of cost of company as specified.
KMP
Key Managerial Personnel in relation to a company means:
•Chief Executive Officer (CEO)
•Chief Financial Officer (CFO)
•managing director [director who has substantial powers of
management of the affairs of the company]
•whole-time director [director in the whole-time employment of
the company]
•manager [person under the superintendence, control and
direction of the Board of Directors and has the management of
the whole]
•the company secretary
•such other officer as may be prescribed.