SESSION 12

Corporate Governance – Meeting,

Resolutions, Voting by Share Holders,
Minutes, Corporate Social Responsibility

1
 CORPORATE GOVERNANCE

 In relation to company’s decision-making, it implies a set of processes, customs, policies,

laws, and institutions affecting the way a company is directed, administered or
controlled.

 The report of the SEBI Committee on Corporate Governance defines it as the acceptance
by management of the inalienable rights of shareholders as the true owners of the
corporation, and of their own role as trustees on behalf of the shareholders.

 It is about commitment to values, about ethical business conduct and about making a
distinction between personal and corporate funds in the management of a company - the
Gandhian principle of trusteeship and the Directive Principles of the Indian Constitution.

 Corporate governance is viewed as ethics and moral duty. It also includes the
relationships among the many stakeholders involved and the goals for which the
corporation is governed. Corporate governance as a matter of fact concerns all issues
about the best way to run a company.
 PARTIES TO CORPORATE GOVERNANCE

Key Stakeholders:
1. Board of Directors: overall management &governance of the company. 1/3rd
directors to be independent directors in listed companies
2. Audit Committee (section 177) – committee having independent directors
who oversee financial reporting and audit of financial records. Atleast 3
members with majority independent directors.
3. Shareholders: to appoint and remove directors
4. KMPs: MD, WTD, CFO, CS. Ensure operational & financial management,
5. Statutory Auditors: (section 139) – appointed to audit companies financial
statements and to ensure compliance with accounting standards and
principles.
6. Regulators –
MCA – enforce provisions of companies act and rules
SEBI – Listing Obligations & Disclosure Requirements (LODR), Prohibition of
Insider Trading for listed companies
NCLT – corporate disputes
RBI – regulate banking & financial companies
PARTIES TO CORPORATE GOVERNANCE

Since a Directors holds office, exercises control and management over the company,
the law recognizes strict duties to be discharged by the directors in relation to the
exercise of their powers.

As per Section 164:

1) Every director shall act in accordance with the Articles.

2) He/she shall act in good faith in order to promote the objects of the company in
the best interests of the company, its members and other stakeholders.
3) He/she shall exercise his duties with due and reasonable care, skill and diligence
and shall exercise independent judgment.
4) He/she shall not involve in a situation in which he may have a direct or indirect
interest that conflicts, or possibly may conflict, with the interest of the company.

5) He/she shall not achieve or attempt to achieve any undue gain or advantage either
to himself or to his relatives, partners, or associates.
6) He/she shall not assign his office and any assignment so made shall be void.
PRINCIPLES OF CORPORATE
GOVERNANCE

I. Rights and equitable

treatment of shareholders
II. Interest of other
stakeholders
III. Role and responsibilities of
the Board
IV. Integrity and ethical
behaviour
V. Disclosure and transparency
 ISSUES INVOLVING CORPORATE
GOVERNANCE
 Internal controls and the independence of the entity’s auditors
 Oversight and management of risks
 Oversight of the preparation of the entity’s financial
statements.
 Review of the compensation arrangements for the chief
executive officer and other senior executives
 The resources made available to directors in carrying out their
duties
 The way in which individuals are nominated to positions on
the Board
 Dividend Policy

6
 Company Meetings – Kinds of
Company Meetings

Company Meetings can broadly be categorized into the following

types:
I. Board Meetings
II. Meetings of Members
(i) General Meetings
(a) Annual general meeting, and
(b) Extraordinary general meeting.
(ii) Class Meetings
III. Other Meetings
(a) Meeting of debenture holders
(b) Meeting of creditors
 Board Meetings

Board meetings refer to meetings of directors. The directors are supposed to act collectively as a single
entity, called the board, hence the term ‘board meetings’.

Periodicity of the Board meetings. Every company shall hold the first meeting of the Board of Directors
within thirty days of its incorporation and thereafter hold a minimum four meetings every year in such a
manner that not more than one hundred and twenty days shall intervene between two consecutive
meetings. [Section 173(1)]
*OPC , small company and a dormant company shall hold at least one meeting of its Board in each half of a calendar year and a gap between two meetings shall not be less than 30 days.

Day of holding meeting. Though an original Board meeting should normally be held during business hours
and only on a working day, it may validly be held on a public holiday too.

Time of holding Board meetings. Board meetings can be held during business hours or outside business
hours. There is no restriction on that matter under the Companies Act.

Place for holding a Board Meeting. Board meetings can be held at any place, be it the company’s
registered/head office, or any other premises within or outside the city, town, village, or state in which the
registered office of the company is situated, or even abroad if the situation so warrants.

Key Committees of Board.

Audit Committee Investor Relation Committee
Nomination & Remuneration Committee (NRC) CSR Committee
Risk Management Committee (RMC) ESG Committee
 Meetings of Members

These are the meetings where members of a company meet

to discuss various matters and take decisions by means of
passing resolutions. Members’ meetings may further be
classified as general meetings and class meetings.

General Meetings:
General meetings can further be discussed under the
following two heads:
 Annual General Meetings and
 Extraordinary General Meetings
 Annual General Meeting

Annual General Meeting (AGM) must be held each year by every company other than OPC. AGM
is an important platform by which the general body of shareholders finds an opening to exercise
their power of control.

Rules Relating to Annual General Meeting.

Following are the rules regarding annual general meetings:
i. A company must hold its first AGM within 9 months from the date of its closing of its
financial year. In such a case, it need not hold any AGM in the year of its incorporation.
[Section 96(1)]
ii. Every subsequent AGM shall be held within a period of 6 months from the date of its
closing of its financial year. [Section 96(1)]
iii. Not more than 15 months shall elapse between two AGMs. [Section 96(1)]
iv. In case there is any difficulty in holding any AGM (except the first one), the ROC may, for
any special reasons shown, grant an extension of time for holding the meeting by a period
not exceeding 3 months provided the application for the purpose is made before the due
date of the annual general meeting.
 Annual General Meeting

v. A notice (either in writing or electronic mode) of at least 21 days before the meeting must be given
to the members.
However, a general meeting may be called after giving a shorter notice if consent is given in writing
or by electronic mode by not less than ninety-five per cent of the members entitled to vote at such
meeting. [Section 101]
vi. A statement setting out the following material facts concerning each item of Special Business to be
transacted at a general meeting, shall be annexed to the notice calling such meeting: the nature of
concern or interest, financial or otherwise, if any, in respect of each items of—
(i) every director and the manager, if any;
(ii) every other key managerial personnel; and
(iii) relatives of the persons mentioned in sub-clauses (i) and (ii);
(b) any other information & facts that may enable members understand the meaning, scope
and implications of the items of business and take decision thereon.
[Section 101(1)]
vii. The AGM must be held on a working day during business hours ( between 9 am and 6 pm) on any
day that is not a ‘National Holiday’ 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(2)]
viii. The Central Government may, however, exempt any class of companies from the above provisions.
 Business to be Transacted at AGM

At every AGM, the following matters must be discussed and decided. Since such
matters are discussed at every AGM, they are known as Ordinary Business. All other
matters and business to be discussed at the AGM are Special Business.

Following matters constitute Ordinary Business at an AGM :-

1. Consideration of final accounts, director’s report and the auditor’s report
2. Declaration of dividend
3. Appointment of directors in the place of those retiring
4. Appointment of & fixing the remuneration of the statutory auditors.

Other matters constitute Special Business. In case any Special Business has to be
discussed and decided upon, an explanatory statement of the special business must
also accompany the notice calling the meeting. The notice should also give the nature
and extent of the interest of the directors or manager in the special business, as also
the extent of the shareholding interest in the company of every such person.
[Section102(2)]
 Consequences of Not Holding an AGM

Default in holding an AGM may result in the following consequences:

1. Any member of the company may apply to the NCLT which may in turn
call or direct the calling of the meeting.
2. NCLT may give such ancillary or consequential directions as it may
consider expedient in relation to the calling, holding and conducting of
the meeting.
3. The NCLT may also direct that one member present in person or by
proxy shall be deemed to constitute the meeting. [Section 97]
4. A fine, which may extend to Rs one lakh on every officer of the company

who is in default, may be levied and for continuing default, a further fine
which may extend to five thousand rupees per day for the duration of
the default may be levied. [Section
99]
 Extraordinary General Meeting

 An extraordinary meeting is usually called by the Board for taking some

urgent business that cannot be kept pending till next AGM.
 Every business transacted at such a meeting is a special business.
 An explanatory statement of the special business must also accompany the
notice calling the meeting.
 The notice should also give the nature and extent of the interest of the
directors or manager in the special business, as also the extent of the
shareholding interest in the company of every such person.
 In case approval of any document has to be done by the members at the
meeting, the notice must also state that the document would be available for
inspection at the Registered Office of the company during the specified dates
and timings.
 Extraordinary General Meeting

Who can call an Extraordinary General Meeting?

An Extraordinary general meeting may be called by any four of the following.

1. The Board on requisitions. The Board must call an EGM of the company if required to do so
by the following number of members:
(a) in the case of a company having a share capital, such number of members, who hold, on the
date of receipt of the requisition, not less than one-tenth of the paid-up share capital of the
company as on that date carrying 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 requisition, not less than one-tenth of the total voting power of all the
members having on the said date a right to vote. [Section 100(2)]

2. By the requisitionists If the Board does not, within 21 days from the date of receipt of a valid
requisition in regard to any matter, proceeds to call a meeting for the consideration of that
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 the requisitionists themselves within a period of 3 months from the
date of requisition. [Section 100(4)]
 Class Meetings

 Class meetings are held by the holders of a particular class of shares (i.e., where the
share capital of a company is divided into different classes of shares), e.g., Preference
shareholders.
 Such meetings are normally called when it is proposed to alter, vary or affect the rights
of that particular class of shareholders.
 At such meetings, these members discuss the pros and cons of the proposal and vote
accordingly.
 Class meetings are held to pass resolutions, which will bind only the members of the
particular class of shares.
 Unless the Articles or a contract binding on the persons concerned otherwise provides,
all the provisions pertaining to calling of a general meeting do apply to class meetings.
 All resolutions in a class meeting are required to be passed as special resolutions.
 Requisites of a Valid Meeting

The following conditions must be satisfied for a meeting to be called a valid

meeting:

1. It must be duly convened. The persons calling the meeting must be authorized
to do so.
2. The proper authority in this regard is the Board of Directors, members, or
National Company Law Tribunal, as the case may be.
3. Proper and adequate notice must have been given to all those entitled to
attend.
4. The rules of quorum must be maintained, and the relevant provisions of the
Act and the articles must be duly complied with.
5. The business at the meeting must be validly transacted.
6. The meeting must be conducted in accordance with the regulations governing
the meetings.
 Proxy

A member may appoint another person to attend and vote at a meeting on his
behalf. Such other person is known as ‘Proxy’.
The term (proxy) is also applied to the instrument by which the appointment to
act on his behalf is made by the member.
If the articles so authorize, any member, entitled to attend and vote at a
meeting of the company, shall be entitled to appoint another person (whether a
member or not) as his proxy to attend and vote in his/her behalf.
The member appointing a proxy must duly deposit with the company a proxy
form at the time of the meeting or prior to it giving details of the proxy appointed.
A proxy is not entitled to vote except on a poll.
A proxy is automatically revoked by the death or insolvency of the member.

[Section 105]
 Quorum

The term ‘Quorum' implies specified minimum number of qualified persons whose
presence is necessary for transacting legally binding business at a meeting.

Unless the articles of the company provide for a larger number,—

(a) in case of a public company,—
(i) five members personally present if the number of members as on the date of
meeting is not more than one thousand;
(ii) fifteen members personally present if the number of members as on the date of
meeting is more than one thousand but up to five thousand;
(iii) thirty members personally present if the number of members as on the date of
the meeting exceeds five thousand;

(b) in the case of a private company, two members personally present, shall be the
quorum for a meeting of the company. [Section 103(1)]

A meeting without the requisite Quorum is invalid and ineffective.

 Agenda and Motion

AGENDA. The term 'agenda' literally means things to be done. In the context of
company meetings, it is a statement of the businesses to be transacted at a meeting.
The agenda helps in systematic and smooth transaction of businesses at a meeting.

MOTION. Motion means a proposal to be discussed at a meeting by the members.

 A resolution may be passed accepting the motion, with or without
modifications or a motion may be entirely rejected.
 A motion on being passed as a resolution becomes a decision.
 A motion must be in writing and signed by the mover and put to the vote of
the meeting by the chairperson.
 Only those motions which are mentioned in the agenda to the meeting can be
taken up and discussed at the meeting.
 Generally, a motion is proposed by one member and seconded by another
member.
 Resolutions

A motion, with or without amendments is put to vote at a meeting.

A 'motion' when passed by requisite majority of votes by the shareholders becomes
a company resolution.
Thus, a resolution may be defined as the formal decision of a meeting on any
proposal placed before it.

Kinds of Resolutions: There are two types of resolutions:

Ordinary Resolution [section 114(1)] – An ordinary resolution is one which can be
passed by a simple majority. That is if the votes (including the casting vote, if any, of
the chairperson), at a general meeting cast by members entitled to vote in its favour
are more than the votes cast against it.
An ordinary resolution is required to transact such businesses as: declaring dividend,
appointment of auditors, electing directors, or to pass the annual accounts.
 Kinds of Resolutions: Special
Resolution
A Special Resolution [section 114(2)] – is one which is passed by at least three-
fourths clear majority.
This means that the votes cast in favour of the resolution is at least three times the
number of votes cast against it.
Special resolutions are needed to decide on important matters of the company.
[Section 114(2)]

Examples where special resolutions are required are:

1. To alter the domicile clause of the memorandum from one state to another, or
to alter the objects clause of the memorandum.
2. To alter the name of the company with the approval of the Central
Government.
3. To alter the articles of association.
4. To change the name of the company by omitting ‘Limited’ or ‘Private Limited’.

[Section 8]
 Kinds of Resolutions: Resolution
Requiring Special Notice
There are certain matters specified in the Act which may be discussed at a general
meeting for which a prior intention to move the resolution has to be given to the
members.
Such a prior intention in the form of special notice enables the members to be prepared
on the matter to be discussed and gives them time to indicate their views on the
resolution. [Section 115]

The following matters require special notice to passed at a meeting:

1. To appoint an auditor other than a retiring auditor at an annual general meeting.
2. To resolve at an annual general meeting that a retiring auditor shall not be
reappointed.
3. To remove a director before the expiry of his period of office.
4. To appoint another director in place of removed director.
5. Where the articles of a company provide for serving a special notice for a resolution,
in respect of any specified matter or matters.
6. A resolution requiring special notice may be passed either as an ordinary resolution
or as a special resolution.
www.hindustanpetroleum.com/documents/pdf/Notice%20of%20AGM.pdf
 Minutes
 Every company must keep minutes containing details of all proceedings at the meetings.

 The minutes are a gist of the discussions at the meeting and the final decisions taken
there at.

 It normally includes only the resolutions numbered

 The pages of the minute books must be consecutively numbered and the minutes must
be recorded therein within 30 days of the conclusion of the meeting.

 Each page of minute books must be initialed or signed and the last page of the record of
proceedings of each meeting in such books must be dated and signed by:
(i) The Chairperson of that meeting or that of the succeeding meeting, in case of
the meeting of the Board of directors or committee thereof, and
(ii) The Chairperson of the same meeting in the case of a general meeting, within
the aforesaid 30 days.
(iii) In the event of the death or inability of that chairperson within the period, by a
director duly authorized by the Board for the purpose.
Corporate Social Responsibility

 CSR refers to the voluntary actions taken

by a company to address social,
environmental, and economic concerns,
extending beyond its profit-making
activities.
 CSR is aimed at contributing to sustainable
development and benefiting communities
and society as a whole.
 Legal Framework: Enshrined in Section 135
of the Companies Act, 2013.
Applicability of CSR Provisions (Section
135(1))

Section 135(1) of the Companies Act, 2013 applies to companies

meeting at least one of the following criteria:

 Net worth of ₹500 crore or more.

 Turnover of ₹1000 crore or more.
 Net profit of ₹5 crore or more during any financial year.

Companies meeting these criteria must comply with CSR

provisions.
CSR obligations apply regardless of the company’s legal structure
(Private or Public).
 CSR Committee, Composition and
Responsibilities
 CSR Committee Formation:
 Every eligible company must establish a CSR Committee, consisting of at
least three directors, including one independent director.

 Composition:
 A mix of independent and non-independent directors. At least one
member should be an independent director (if the company is listed).

 Responsibilities:
 Formulating and recommending the CSR policy.
 Monitoring CSR activities and ensuring compliance with the policy.
 Reporting CSR spending in the Annual Report.
 Approving CSR projects and initiatives.
Thank You