Q1.

Answer in two sentences

a. How many board meetings in a year?
Board meetings are covered in section 173 of the Companies Act. Every company shall hold
minimum four board meetings in a calendar year.

b. Two basic types of capital

According to Section 43 of the Companies Act, 2013, the share capital of a company is of two
types:
i. Preferential Share Capital
ii. Equity Share Capital

c. Explain Proxy
A proxy is a person, who is appointed by a member to attend and vote at a meeting in the
absence of the member. Section 105 of the Companies Act, 2013 provides that a member,
who is entitled to attend to vote, can appoint another person as a proxy to attend and vote
at the meeting on his behalf.

d. Minimum number of directors in company

Section 149(1) of the Companies Act, 2013 requires that every company shall have a
minimum number of 3 directors in the case of a public company, two directors in the case of
a private company, and one director in the case of a One Person Company.

e. False

Q2.
a. What is MoA
As per section 2(56) of the Companies Act, 2013 memorandum means the memorandum of
association of a company as originally framed or as altered from time to time in pursuance
of any previous company law or of this Act. MOA is the fundamental charter of the company
and defines the reason for the company’s existence.A Memorandum of Association (MoA)
represents the charter of the company. It is a legal document prepared during the formation
and registration process of a company to define its relationship with shareholders and it
specifies the objectives for which the company has been formed. The company can
undertake only those activities that are mentioned in the Memorandum of Association. As
such, the MoA lays down the boundary beyond which the actions of the company cannot go.
If the acts of the company are beyond the scope of activities stated in the memorandum,
such acts are treated as ultra vires and cannot be rectified in order to be binding on the
company.

Clauses of MOA:
i. Name clause
ii. Object clause
iii. Registered office clause
iv. Capital clause
v. v.Liability clause
vi. Nomination clause
vii. Association clause/Subscription clause

i.Name clause:
Applying for the name of the company and the name stated in MoA shall not be identical or
resemble too closely the name of the existing company. It should not be an undesirable one
in the opinion of the Central Government. A person may make an application in such form
and manner and accompanied by such fees as may be prescribed to the Registrar of
Companies (RoC).

ii.Registered office clause:

This clause specifies the state in which the registered office of the company is situated.
Complete address of the registered office is not mandatory to be mentioned in the clause at
the time of registration. The company shall from the day it commences business or within 30
days of incorporation file with the RoC. The address of the registered office of the company
is the address at which all communication and notices will be addressed.

iii.Object clause (imp):

The purpose for which the company is incorporated is mentioned in the object clause. It
defines the scope of the company in terms of carrying out business activities. It contains the
object for which the company is formed and therefore identifies the possible scope of the
operations beyond which the actions cannot go. It enables shareholders, creditors and all
those who deal with the company to know what powers are given to them and in which
activities they are engaged in. A memorandum is a public document under section 399 of
the Companies Act, 2013. Consequently, every person entering in the contract with the CO is
presumed to have the knowledge of the conditions contained therein.
Note: A company cannot depart from the provisions contained in the MoA. It cannot enter in
contract or engage in any trade or business which is beyond the power conferred on it by
the MoA therefore if it does so, it would be ultra vires of the company and void.

iv.Capital clause
This clause states the amount of share capital of the company (authorise capital- to be
raised by issue of share) The division of the total capital into shares of fixed amount and
value per share to be mentioned in this clause.

v. Liability clause
This clause covers details on the liability of the members of the company. In case of a
company limited by shares that the liability of its members is limited to the amount unpaid if
any on the shares held by them. In case of a company limited by guarantee the amount upto
which each member undertakes to contribute.

vi.Nomination clause:
This clause is applicable only to One Person Company (OPC). In case of OPC the person who
in the event of death of the subscriber shall become the member of the company.

vii.Subscription clause
This clause contains a declaration by the members or subscribers that they are forming a
company as specified in MoA, the name, the address, the number of shares taken by each of
them along with the signature of the subscribers is given in this clause. Filed with the
registrar within whose jurisdiction the registered office of a company is proposed to be
situated.

b. Difference between equity and preference share

Parameter: Definition
Equity Share: Equity shares represent the extent of ownership in a company.
Preference Share: Preference shares come with preferential rights when it comes to
receiving dividend or repaying capital.

Parameter: Dividend payout

Equity Share: Shareholders receive dividends after all liabilities have been paid off.
Preference Share: Preference shareholders are given more priority over equity shareholders
when it comes to the dividend payment.

Parameter: Rate of dividend

Equity Share: The rate fluctuates as per earnings.
Preference Share: Rate of dividend remains fixed.

Parameter: Bonus shares

Equity Share: These shares are entitled to receive bonus against existing shareholdings.
Preference Share: These shares do not offer bonus against existing shareholdings.

Parameter: Capital repayment

Equity Share: It is repaid at the end.
Preference Share: It is repaid before equity shares.

Parameter: Voting rights

Equity Share: The shares come with voting rights.
Preference Share: Preferential shares do not have voting rights.

Parameter: Role in management

Equity Share: Equity share comes with the power to participate in the company’s
management.
Preference Share: Preference share does not extend management rights.

Parameter: Redemption
Equity Share: It cannot be redeemed.
Preference Share: It can be redeemed.

Parameter: Convertibility
Equity Share: Shares cannot be converted.
Preference Share: Shares cannot be converted.

Parameter: Arrears of dividend

Equity Share: Shareholders are not entitled to avail arrears of dividends.
Preference Share: Shareholders are likely to avail arrears of dividend along with current
year’s dividend.

Parameter: Capitalisation
Equity Share: There is a high chance of over-capitalisation.
Preference Share: There is a relatively less chance of over-capitalisation.

Parameter: Types
Equity Share: They are categorised as an ordinary stock of a company.
Preference Share: There are several types. E.g. participatory, non-participatory, convertible,
non-convertible, cumulative, non-cumulative, etc.
Parameter: Financing term
Equity Share: It serves as a means of long-term financing.
Preference Share: It serves as a means of midterm and long-term financing.

Parameter: Mandate to issue

Equity Share: Companies must issue equity share capital.
Preference Share: All companies do not need to issue preference share capital.

Parameter: Investment denomination

Equity Share: Equity shares have a lower denomination.
Preference Share: Most preference shares come with a high denomination.

Parameter: Type of investors

Equity Share: It is suitable for risk-taking investors.
Preference Share: It is suitable for risk-averse investors.

Parameter: Associated burden

Equity Share: Paying off equity dividend is not mandatory and depends entirely on the
company’s profit.
Preference Share: Companies are obligated to pay dividends to its preference shareholders.

c. Debentures and its types

A debenture is one of the capital market instrument which helps business houses to raise
funds from the market for the development of the business. The word debenture has been
derived from the Latin word “debere” which means borrowing or taking a loan. Debenture
can be defined as an acknowledgement of debt issued by the company to the third parties
under the common seal of the company. In accordance with Section 2(30) of the Companies
Act, 2013, debentures include debenture stock issued by the company as an evidence of
debt taken by such company, either by creation or non-creation of the charge over the
assets of the company. Some of the salient features of debentures are as follow:
i. It is an acknowledgement of the debt;
ii. It is issued by the company under its common seal;
iii. Debentures can be both secured or unsecured;
iv. The rate of interest and the date of payment is pre-determined;
v. Debentures issued are freely transferrable by debenture holders;
vi. Debenture holders do not get any voting right in the company;
vii. Interest payable to the debenture holders are charged against the profits of the
company.

Types of Debentures
There are various forms of debentures which a company can issue depending upon its
requirement. Debentures can be issued based on various factors i.e. performance, security,
priority, convertibility and record.

1. Based on Performance
Based on the performance, there are two types of debentures which are issued i.e.

a) Redeemable Debentures: Redeemable debentures are the debentures where the date
of redemption of the debentures are specifically mentioned in the debenture certificate
issued, where on such date, the company is legally bound to return the principal
amount to the debenture holder.
b) Irredeemable Debentures: Irredeemable debentures continue for perpetuity and unlike
redeemable debentures, there is no fixed date on which the company needs to pay the
debenture holders. It becomes redeemable only when the company goes into
liquidation.

2. Based on security
a) Secured Debentures: When the debentures are issued by way of creation of charge over
the assets of the company, then such debentures are called as secured debentures. The
charge created over the debentures may be fixed or maybe floating. In accordance with
the provisions of the Companies Act, 2013, such charge created has to be registered
with the Registrar within 30 days of such creation.

b) Unsecured Debentures: Unlike secured debentures, unsecured debentures are issued

by the company without creation of charge over the assets of the company. In other
words, these debentures do not offer any protection to the debenture holder in case
the company is unable to pay the principal amount on the due date.

3. Based on Priority
a) First Mortgaged Debentures: Basically, the distinction of debentures based on priority
can be called as a subcategory of the secured debentures. First Mortgaged Debentures
are those debentures which has first preference over all the other debentures issued by
the company. Such preference is claimed at the time of liquidation of the company
when the assets of the company are distributed among the credit holders.

b) Second Mortgaged Debentures: Second Mortgage Debenture, as the name suggests,

has second preference over the assets of the company at the time of liquidation after
the first mortgaged debentures. Only after the first mortgaged debenture holders are
satisfied, will the second mortgaged debenture holders can claim their principal amount
from the company at the time of liquidation.

4. Based on Convertibility
a) Fully Convertible Debentures: Fully convertible debenture holders have the right to
convert their debentures into equity shares of the company at a future date, at the
option of the debenture holders. The conversion ratio, the rights of the debenture
holders post-conversion and the trigger date for conversion are defined at the time of
issue of these debentures.

b) Partially Convertible Debentures: Partially convertible debentures can be divided into

two parts. The first part being the debentures which are convertible to equity shares of
the company and the second part being non-convertible debentures which shall
redeem at the expiry of its tenure. An option is given to the debenture holder to
partially convert its debt into shares of the company. Partially convertible debentures
are also deemed as optionally convertible debentures.

c) Non-Convertible Debentures: Debentures which do not have an option to get converted

into equity shares of the company are called non-convertible debentures. These
debentures get redeemed at the end of the maturity period.

5. Based on Record
a) Registered Debenture: In case of registered debenture, the name, address, number of
debentures and other details pertaining to holding are entered by the company in the
register of debentures. In such cases, the transfer of debentures from one debenture
holder to another debenture holder is recorded in the register of debenture holders as
well as register of transfer.

b) Unregistered Debentures: Unregistered debentures are also called bearer debentures.

Unlike registered debentures, the company does not maintain the records of such
debentures and the principal amount and the interest is paid to the bearer of the
instrument as against the name written over such instrument. These debentures are
easily transferrable in the market.

d. Importance of registered office of the company

The registered office of a company is a place to which all official communications pertaining
to a Company is sent. In addition to a registered office, a company can have an corporate
office or administrative office or branch office or factory, etc., However, only the registered
office of the Company needs to be registered with the Ministry of Corporate Affairs. All
other offices or additional locations can be opened by a company without any intimation to
the ROC.

Following is a list of reasons why having a registered office of the company is necessary:
1) Every company has to mandatorily mention the state in which its registered office is
situated, in to its “Memorandum of Association” one of the incorporation document.
2) Companies Act needs to have a registered Office of every company since its beginning
of the business or from the 30th day after the date of its incorporation.
3) Every notice and Communication served on the registered office of the company will be
treated as served in the company.
4) Every company needs to affix the registered office address at outside of each and every
place where its business is carried on , even every letter or communication should
printed with the registered office address.
5) The registered office of the Company will determine the domicile of the company
(State of Incorporation).
6) The state or location in which the registered office of the Company is situated will
determine the Registrar of Company (ROC) to which the application for company
registration must be made.

e. Types of directors
1. Woman director
At least one-woman director shall be on the Board of every listed company; every other
public company having -
a) paid-up share capital of one hundred crore rupees or more; or
b) turnover of three hundred crore rupees or more.
c)
2. 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 However,
in case of a newly incorporated company the above requirement shall apply proportionately
at the end of the financial year in which it is incorporated. [Section 149(3)]

3. Independent Director: Prescribed large public companies are required to appoint

independent directors on their Board with a view to boosting the level of corporate
governance.
4. Interested Director: when an existing director becomes interested in a transaction of the
company, he is called interested director; and he needs to disclose his interest at the
appropriate forum and at an appropriate time.

5. Executive and Non-Executive Directors: The Board of Directors may comprise both
executive and non-executive directors. The executive directors are responsible for managing
different business operations undertaken by the company. It is their responsibility that the
departments which they head operate smoothly. In contrast, the non-executive directors
participate through Board meetings in discussions relating to framing of policies for the
efficient management of the company. Independent directors are a type of non-executive
directors. They are not as active as executive They are to be held liable only if they
knowingly consented to the wrongful acts.

6. Rotational and Non-rotational Directors: In every public company, there is a legal

requirement to have the 2/3rd of the total number of directors, excluding the independent
& nominee directors of a Financial institution, as rotational directors. However, only 1/3rd of
the rotational directors are liable to retire at every AGM. There is no restriction on
reappointment. All other than rotational are Non-rotational directors. E.g. Independent
directors are non-executive and non-rotational.

7. Small shareholder’s directors: Sec 151 a listed company may have one director elected by
the small shareholders. This provision enables the small shareholders to place their
representative on the Board of Directors of a listed company so that their voice is also heard
effectively. The term “small shareholders” means a shareholder holding shares of the
nominal value of not more than Rs 20,000 or such other sum as may be prescribed.

8. Additional Director: Section 161 of the Act provides for the appointment of additional
director. With a view to meet urgent requirements of management, the Board of Directors is
empowered to appoint any person as an additional director at any time if such power is
granted by The notable point is that it is not Section 161 (1) but the articles which confer
such power.

9. Alternate Director: Section 161 (2) of the Act provides for the appointment of alternate
According to this section: The Board of Directors of a company may, if so authorized by its
articles or by a resolution passed by the company in general meeting, appoint a person, not
being a person holding any 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 three months from India.

10. Nominee Director Section 161(3) of the Act provides for the appointment of the
nominee director. According to this section: Simply stated, a nominee director is not like any
other director. He represents the body which makes his nomination for appointment as
director in the company. Whenever a company obtains financial assistance from some
financial institution or bank, such institutions invariably nominate its representative for
safeguarding its interests till the loaned amount is completely repaid. The nominee director
is expected to ensure that the terms of loan agreements are religiously complied with all the
time by the company concerned which has been granted financial assistance. The Board of
Directors (subject to the articles) is empowered to appoint a nominee director and the
shareholders cannot interfere with such appointment. Further, by virtue of its shareholding
in a Government company, the Central Government or the State Government may also
nominate a person for appointment as nominee director and the Board shall have to follow
the suit without any hindrance on its part.

11. Managing Director means a director who, by virtue of the articles of a company or an
agreement with the company or a resolution passed in its general meeting, or by its Board of
Directors, is entrusted with substantial powers of management of the affairs of the company
and includes a director occupying the position of managing director, by whatever name
called. In other words, the Managing Director is a person who is entrusted with substantial
powers of management of the affairs of the company. This position falls under the definition
of “Key Managerial Personnel” under the Companies Act, 2013.

Q3. Situational questions

a. Section 101 of the Act deals with Notice of meeting. As per this section, every board
meeting shall be held by giving at least seven days notice in writing to every director at his
address registered with the company and such notice shall be sent by hand delivery or by
post or by electronic means. In order to transact urgent business, board meeting can be
called by giving shorter notice subject to the condition that at least one independent
director should be present at the meeting. A meeting in order to be valid must be convened
by a proper notice issued by the proper authority. It means that the notice convening the
meeting be properly drafted according to the Act and the rules, and must be served on all
members who are entitled to attend and vote at the meeting. In the current case, the date
of the meeting is pre-determined as it has been previously mentioned in the Article of
Association of the Company. However despite this providing a notice to the director or any
other participant in the meeting is necessary. This has been laid down in the SS - 1 –
Secretarial Standard on meetings of the Board of Directors. According to provision 1.3.5 of
SS-1, the Notice of a Meeting shall be given even if Meetings are held on pre-determined
dates or at pre-determined intervals. The Articles or Resolution or any agreement to which
the company is a party may provide that Meetings should be held on a particular day of the
week or month or at prescribed intervals, or the Directors may agree in advance on the
dates for Meetings. However, Notice, Agenda and the Notes thereon should be given
separately for each Meeting in accordance with SS-1.

b.

c. Issue of share capital

Primarily, issues can be classified as a Public issue, Rights or preferential issues (also known
as private placements). Chapter III of the Companies Act, 2013 deals with “Prospectus and
allotment of securities”, the chapter is divided into two parts, Part I deals with Public Offer
and Part II deals with Private Placement. Section 23 of the Companies Act, 2013 provides
that a company whether public or private may issue securities. As per Section 23(1),a public
company may issue securities:
a) to public through prospectus (“public offer”) by complying with the provisions of Part I
of Chapter III of the Act; or
b) through private placement by complying with the provisions of Part II of Chapter III of
the Act; or
c) through a rights issue or a bonus issue in accordance with the provisions of this Act and
in case of a listed company or a company which intends to get its securities listed also
with the provisions of the SEBI Act, 1992 and the rules and regulations made
thereunder.
For a private company, Section 23(2) provides that a private company may issue securities:
d) by way of rights issue or bonus issue in accordance with the provisions of this Act; or
e) through private placement by complying with the provisions of Part II Chapter III of the
Act.

The word ‘securities’ includes shares and other instruments. A public company may issue
any of the aforesaid securities by way of a public offer or rights/ bonus issue or private
placement. Public Offer here includes initial public offer (IPO) or further public offer (FPO) of
securities to the public by a company, or an offer for sale (OFS) of securities to the public by
an existing shareholder, through issue of a prospectus. Public offer has been defined for the
first time Explanation to Section 23 states that “public offer” includes initial public offer or
further public offer of securities to the public by a company, or an offer for sale of securities
to the public by an existing shareholder, through issue of a prospectus.

Q4. Long Answers

a. Salient features of a company
1. Incorporated Association:
Company is an incorporated association of persons created by the law of the country. In
India companies are formed and registered under the Companies Act 1956. Incorporation of
a company requires registration of formal documents with the Registrar of Companies.
These include:
i. Memorandum of Association is the important document which contains the
fundamental conditions and purposes for which a company is formed. In fact, a
company does not have its existence beyond its memorandum of association.
ii. The other important document is the Articles of Association which lay down the rules
and regulations for governance of the company.
iii. The ‘Registration Certificate’ or the ‘Certificate of Incorporation, grants a legal entity to
a company enabling it to discharge functions such as entering into contract, purchasing,
owning and holding of properties. A company may be held liable for breach of law. It
can sue and be sued in its name.

2. Independent Legal Entity:

A company has a legal entity distinct and separate from its constituent members
(shareholders). It is an autonomous body, self-controlling and self-governing. It can hold and
deal with any type of property of which it is the owner, in any way it likes. It can enter into
contracts, open a bank account in its own name, sue and be sued by its members as well as
outsiders.
The rights and obligations of a company are distinct from its constituent members.
“Shareholders are not, in the eyes of the law, part owners of the undertaking. The
undertaking is something different from the totality of the shareholders.” Shareholders
cannot be held liable for the wrongs or misdeeds of the company.
A company has a nationality, domicile and residence but cannot ask for the enforcement of
those fundamental rights which are exclusively available to national citizens. The nationality
of the company, however, does not depend upon the nationality of its shareholders.
A company can enter into partnership with one or more individuals or another company. It
can buy shares or debentures of another company. A company can form other companies by
subscribing to their Memorandum of Association.
A director of a company can be the office bearer of the trade union of the workers of the
same company. A shareholder, if qualified as a chartered accountant, can be the auditor of
the same company.
 A director or a managing director cannot be held personality liable for the payment of
arrears of taxes or salaries of employees due by the company. A company can sue for libel or
slander effecting its business reputation.
A company can be held liable for criminal acts. It can be held liable for breach of law and
can be made to pay fine. However, no imprisonment of a company is possible. It can be
charged with conspiracy to defraud or may be convicted of making use of false documents
with intent to deceive. It can also be held liable for torts committed by its employees in the
course of their employment.
On account of this independent corporate existence the creditors of a company are
creditors of the company alone and their remedy lies against the company and its property
only and not against any of its members. Law recognizes the existence of the company quite
irrespective of the motives, intentions, scheme or conduct of the individual shareholders.
The principle of separate legal entity of the company was judicially recognized by the
House of Lords in 1867 in the case of Oakes v. Turquand and Hording (1867). It was then
held that since an incorporated company has a legal personality distinct from that of its
members, a creditor of such a company has remedy only against the company and not
against an individual shareholder.

3. Separate Property:
The corporate property is clearly distinguished from the members’ property and members
have no direct proprietary rights to the company’s property but merely their ‘shares’.
Change in the constitution of the company’s membership will not cause any realization or
slitting of its property.
Company cannot be the property of the person who owns all the shares in the company,
nor can it be considered to be his agent. No member can either individually or jointly claim
any ownership rights in the assets of company during its existence or on its winding up.
“No shareholder has any right to any item of property owned by the company, for he has
no legal or equitable interests therein.” A member cannot have any insurable interest in the
property of the company. The leading case is:

Macaura v. Northern Assurance Co. Ltd. (1925):

Mr. Macaura was the holder of nearly all the shares, except one, of a timber company. He
was also the substantial creditor. He insured the company’s timber in his own name. The
timber was destroyed by fire. It was held that the insurance company was not liable to
compensate as Macaura had no insurable interest in the property which belonged to the
company only.

4. Perpetual Existence:
A company has a perpetual, succession. It has no allotted span of life. The mode of
incorporation and dissolution of a company and the right of the members to transfer shares
freely guarantee the continuity of the existence of the company quite independent of the
life of the members. The existence of a company can be terminated only by law.
Being an artificial person, it cannot die irrespective of the fact that its members, even the
founders or subscribers to the Memorandum, may die or go out of it. Moreover, in spite of
the changes in the membership of the company, it can perform its contracts and enter into
future agreements. Thus, members may come and go but the company can go on forever.

5. Common Seal:
Though a company has an artificial personality, it acts through human beings, who are called
as directors. They act as agents to the company but not to its members. All the acts of the
company are authorized by its “common seal”. The “common seal” is the official signature of
the company. A document not bearing the common seal of the company will not be binding
on the company.

6. Separation of Ownership and Management:

A company is owned (de facto) by a number of shareholders which is too large a body to
manage the affairs of the company. Shareholders set the objectives of the company and
appoint their representatives or agents (known as directors) to manage the affairs of the
company on their behalf to pursue their objectives.
The directors, in turn, hire professional managers (executives) to run the day-to-day
operations of the company under their supervision and control. This striking feature of
separation of ownership and management has raised many issues which give rise to
evolution of corporate governance as the focal point of modern corporations.

7. Limited Liability:
The liability of shareholders of a company is different from the liability of the company.
Shareholders generally have limited liability- limited to the extent of unpaid value of shares
held up. Shareholders have no obligation to the company once they have paid full amount
on the shares held by them. In cases of losses, shareholders are not called upon to make
good the losses.
Creditors cannot claim from the personal wealth of the shareholders. In the case of a
guarantee company, the members are liable to contribute a specified agreed sum to the
assets of the company in the event of the company being wound up.

8. Transferability of Shares:
One can sell one’s share of ownership rights to an interested buyer as the shares of a
company are transferable. While in case of public companies shares are freely transferable
which is provided by the law, there are some restrictions in the transferability of shares of
private companies. In fact transferability of shares and limited liability are the enabling
factors for the tremendous rise of companies all over the world.

b. Oppression and management

The term ‘oppression’ is not clearly defined by Company Law 2013, the court of law defines
it as conduct that involves a visible departure from the standards of fair dealing especially
with regard to the right of shareholders. The term ‘oppression’ has been explained by Lord
Cooper in Elder v. Elder & Watson Ltd as, “The essence of the matter seems to be that the
conduct complained of should at the lowest involve a visible departure from the standards
of fair dealing, and a violation of the conditions of fair play on which every shareholder who
entrusts his money to the company is entitled to rely.” Looking to the various judicial
pronouncements, some of the acts amounting to oppression may be summarised as under:-
i. Not calling a general meeting and keeping shareholders in dark.
ii. Non-maintenance of statutory records and not conducting affairs of the company in
accordance with the Companies Act.
iii. Depriving a member of the right to dividend.
iv. Refusal to register transmission under will.
v. Issue of further shares benefiting a section of shareholders.
vi. Failure to distribute the amount of compensation received on nationalisation of
business of company among members, where required to be so distributed.
The term mismanagement does not find a clear meaning in the act but can be described as
conducting company affairs in a prejudicial, dishonest or inept manner. Section No 241 to
246 provides for remedies to the members when they face oppression and the company is
being mismanaged. The following acts have been held as amounting to mismanagement:-
i. Where there is serious infighting between directors.
ii. Where Board of Directors is not legal and the illegality is being continued.
iii. Where bank account(s) was/were operated by unauthorised person(s).
iv. Where directors take no serious action to recover amounts embezzled.
v. Continuation in office after expiry of term of directors.
vi. Sale of assets at low price and without compliance with the Act.
vii. Violation of Memorandum.
viii. Violation of statutory provisions and those of Articles.
ix. Company doomed to trade unprofitably.
x.
Any member of the company who has a complains that the affairs of the company are being
conducted in an oppressive manner or any material change has taken place which is not in
the interest of its members then he has a right to apply to the tribunal. Such an application
can also be made by the Central Government to the tribunal. If the tribunal is of the opinion
that the company’s affairs are being conducted in a manner prejudicial to the interest of the
public, members or company then the tribunal shall make such orders as he may deem fit on
whether the company should be wound up or not. The first remedy available to oppressed
minority is to move the Tribunal. Whenever the affairs of a company are being conducted in
a manner pre-judicial to public interest or in a manner oppressive to any member or
members, an application can be made to the Tribunal u/s 241. According to section 244, the
following members of a company shall have the
right to apply under section 241:
a) in the case of a company having a share capital, not less than one hundred members of
the company or not less than one-tenth of the total number of its members, whichever is
less, or any member or members holding not less than one-tenth of the issued share capital
of the company, subject to the condition that the applicant or applicants has or have paid all
calls and other sums due on his or their shares;
(b) in the case of a company not having a share capital, not less than one-fifth of the total
number of its members.

c. Change in registered office of a company

The registered office of a company is a place to which all official communications pertaining
to a Company is sent. In addition to a registered office, a company can have an corporate
office or administrative office or branch office or factory, etc., However, only the registered
office of the Company needs to be registered with the Ministry of Corporate Affairs. All
other offices or additional locations can be opened by a company without any intimation to
the ROC.
The registered office of the Company will also determine the domicile of the company
(State of Incorporation). The state or location in which the registered office of the Company
is situated will determine the Registrar of Company (ROC) to which the application for
company registration must be made. Any change of address of Registered Office must be
notified to the Registrar of Company (ROC) within 15 days.
Once the registered office of a Company is declared by filing INC 22, any further changes to
the registered office of the Company must be intimated to the ROC. Any change is registered
office address within the same area of city or town or village must be notified within fifteen
days by filing the appropriate forms. In case of change of registered office of a company,
outside the local limits of any city, town or village, then the change of registered office must
be approved by a special resolution passed by the Company. If the registered office of a
company is to be changed from one jurisdiction of a ROC to another jurisdiction, then the
change in registered office must be approved by the Regional Director of ROC.
The notice of change of the situation of the registered office and the verification of the same
shall be filled in form INC 22 along with the prescribed fees and shall be attached to the form
above. The documents and the manner in which they are to be verified are mentioned in the
terms of sub-section (2) of section 12. To verify the registered office of the company, the
documents are to be attached in the prescribed format with the form INC- 22 both for giving
intimation of the registered office at the time of incorporation and the any time there are
changes in the registered office. The documents for verification (depending on the
ownership status) of the registered office are mentioned below.

i. Incase the registered office owned by the company itself, the conveyance deed of the
property in the name of the company is required.
ii. Incase the registered office is taken on lease/rent by the company, the lease deed or
the rent agreement and rent receipts (in case of rental) is required. The rent receipt
cannot be older than one month.
iii. Incase the office is owned by the director or any other persons and the premises are
not on lease by the company, the company needs to attach proof that the company is
permitted to use the place as its registered office. This may be in the form of a ‘No
Objection Certificate’ from the owner.

Copies of the utility bills mentioned below need to be attached in all the above cases. These
bills should bear the name of the company along with the address that is to be used as the
registered address of the company. These should not be more than 2 months old.

i. Mobile phone bill

ii. Telephone bill
iii. Electricity bill
iv. Gas bill

The company has to pass certain resolutions such as the special resolution and the board
resolution.

i. Special Resolution– This is to be passed in a general meeting if it wants to change the

registered office to a place outside the local lists of the city, town or village wherein the
office is presently located.
ii. Board Resolution– A board resolution to enable the authorisation of the director to sign
and submit form INC- 22 needs to be passed.

Incase the company wants to change the registered office from the jurisdiction of one ROC
to the other ROC, it has to apply for the approval of the Regional Director (RD) in the manner
prescribed in form INC- 23. Once the Regional Director confirms this change, it has to file the
same confirmation the ROC within 60 days. The ROC shall confirm the change of the address
within 30 days of the filing.
The company needs to amend the Memorandum of Association to change the registered
office from one state to another. A special resolution needs to the be passed by the
company for alteration of the MOA. This resolution needs to be filed with the ROC in form
MGT-14 within 30 days of the resolution being passed. To change the registered office from
one state to another, the company needs to get the approval of the CG in form INC- 23. The
documents to be attached along with the application in form 23 are mentioned below.

i. A copy of the special resolution sanctioning the alteration by the members of the
company.
ii. a copy of the memorandum and articles of association
iii. A copy of the notice conveying the general meeting along with relevant explanatory
statement
iv. A copy of the minutes of the general meeting wherein the resolution authorising the
alteration.
v. A list of creditors and debenture holders
vi. A copy of board resolution or Power of Attorney
vii. Document relation to payment of application fee

Central government shall dispose of the change of registered office application outside the
state within 60 days of the application and before passing it may confirm that the change is
with consent of the creditors, debenture holders etc. The approval given by the Centre shall
be filed with the registrars of both the states in which the old and the new registered office
is situated. The registrar of the state wherein the new office will be located shall register the
same and issue a fresh certificate of incorporation.

d. Proxy
The term “proxy” has been used to denote both the instrument and the person appointed
through the instrument. The term is not defined in the Act. Secretarial Standard-2 defines
the term as follows:

”Proxy” means an instrument in writing signed by a Member, authorising another

person, whether a Member or not, to attend and vote on his behalf at a Meeting
and also where the context so requires, the person so appointed by a Member.

Sub-section (1) of section 105 enables a member, who is entitled to attend and vote to
appoint another person as a proxy to attend and vote at the meeting on his behalf.
However, a proxy so appointed cannot speak at a meeting though he may vote on poll. A
member may appoint one or more proxies to vote in respect of the different shares held by
him or he may appoint one or more proxies in the alternative, so that if the first named
proxy fails to vote, the second one may do so, and so on.
Second proviso to sub-section (1) provides that the said sub-section does not apply to a
company not having share capital unless the articles otherwise provide. In other words
articles of a company not having share capital may entitle a member to appoint a proxy to
attend, speak and vote on behalf of himself. Alternatively, the articles of such company may
restrict the right of the member to appoint proxy.
Third proviso to sub-section (1) empowers Central Government to prescribe a class or
classes of companies whose members shall not be entitled to appoint another person as a
proxy.
Dealing with the question of whether a company can be appointed as proxy, it was held in
Re United Western Bank Limited that “we find that neither the term ‘person’ nor ‘proxy’ has
been defined in the Act and, therefore, we have to construe this term ‘person’ with
reference to the object with which the same has been used in section 176(1). This section
authorizes a member, who is unable to attend a general meeting of a company, to appoint
another through an authorisation known as a proxy to attend and vote instead of the
shareholder himself. Further, the section also says that the proxy shall not have any right to
speak. As a rule, a proxy can demand a poll. No company, being an artificial entity can be
present, vote and speak or demand a poll. Only a natural person/individual could do all the
above. Therefore, the term ‘person’ used in the section means only a natural
person/individual and the definition of the General Clauses Act cannot be applied in respect
of the term ‘person’ as is used in Section 176.”
Proxy in case of adjourned meeting:
Secretarial Standard provides for validity of proxy instrument in case of adjournment of
meeting as well as appointment of fresh proxy at the adjourned meeting. Para 6.2.2 provides
that proxy instrument duly filled, stamped and signed, is valid for the meeting to which it
related including any adjournment thereof. Para 6.6.2 provides that a member who has not
appointed a proxy at the original meeting may appoint a proxy for any adjourned meeting if
the articles provide for the same. Such proxy needs to be appointed not later than 48 hours
before the time of such adjourned meeting.

Maximum number of members to be represented by a proxy:

Fourth proviso of sub-section (1) of section 105 read with rule 19 (2) prescribes restriction
on total number of members and total number of shares a proxy may represent. It provides
that a person cannot act as proxy on behalf of more than 50 members and cannot hold in
aggregate more than 10 percent of the total share capital of the company carrying voting
rights. In case where a member holds more than 10 percent of the total share capital
carrying voting rights, a single person may be appointed as proxy who shall not act as proxy
for any other person or shareholder.

Limitation on right of member of section 8 company:

Rule 19 (1) provides that a proxy shall be a member of the company in case of companies
registered under section 8 of the Act.

Instrument of appointment of proxy

Sub-section (6) read with rule 19 (3) provides that the instrument of appointment of proxy
shall be in the Form No. MGT.11. Such instrument shall be in writing and be signed by the
appointer or his attorney duly authorised in writing. Where the appointer-member is a body
corporate, such instrument shall be signed under its seal, if any, or by an officer or an
attorney duly authorised by the body corporate. Where the name in the register of members
is as attorney, executors, administrator or guardian, the relevant documents showing the
authority to sign a proxy should accompany the proxy.

Deposit of proxy instrument

Sub-section (4) of section 105 read with SS-2 clause 6.6.1 provides that the proxies shall be
deposited with the company either in person or through post. The proxies are to be
deposited not later than 48 hours before the commencement of the meeting in relation to
which they are deposited. A proxy shall be accepted on a holiday if the last date by which it
could be accepted is a holiday.

Stamping of proxies
An instrument of proxy is valid only if it is properly stamped as per the applicable law.
Unstamped or inadequately stamped proxies or proxies upon which the stamps have not
been cancelled are invalid.

e. Merger and its process

The Companies Act, 2013 has nowhere defined the term Merger and Amalgamation. The
merger is basically the combining of two or more companies, generally by offering the
stockholders of one company securities in acquiring company in exchange for the surrender
of their stock. The merger means the fusion of two or more than two companies voluntarily
to form a new company. Merger and Amalgamation are synonyms of each other. The mutual
decision of the companies going through mergers. The purpose to merge the company is to
decrease competition and increase operational efficiency. Section 391 to 396A of part 5 of
Chapter 6 of the Company Act defines the provisions related to Merger and Amalgamation.

1) The first step for the merger of companies is to examine the object clauses. In
memorandum of association of the company there are five types of clauses which are
as follows:
i. Name Clause
ii. Registered Office Clause
iii. Object Clause
iv. Liability Clause
v. Capital Clause
Object clause is the most important clause of memorandum of association. It contains the
main object of the company and other secondary objectives which the company may
pursue. This clause defines the scope and limitations of the activities of the company. The
Examination of object clauses of the memorandum of association must be conducted to
check and search if the power to amalgamate is available to form a new company. Further,
the clauses of amalgamated company( transferee company) should permit it to carry on the
business of the amalgamating company(transferor company). In case, if such clauses do not
exist necessary approvals from the Board of directors, shareholders and company law board
are required.

2) The Second Step for the merger of companies is that the stock exchanges where
amalgamation and amalgamated companies are listed should be informed about
amalgamation or merger proposal. From time to time, copies of all notices, resolutions
and orders should be properly communicated in good faith as to give correct
information to the concerned stock exchanges. It is not mandatory for the prior
approval of the stock exchange for the companies. Non-receipt of approval of the stock
exchange will not bar the company to file a petition for the approval of the merger
scheme because its approval from the stock exchange is just a procedural formality.

3) The next step is the approval of the draft merger proposal by the respective boards. The
merger Proposal means any actual or proposed agreement, compromise, arrangement,
business combination or understanding the purpose for which the company is to be
merged. The proposal of draft merger should be approved by the board of directors of
both the companies. It is necessary for the board of each company to pass the
resolutions giving directions to its directors or executives to continue the matter
further.

4) Once the approval of the draft merger approval is confirmed by the respective board of
directors an application for merger and amalgamation can be filed with the tribunal or
High court. Under Section 230-232 of the Companies Act,2013 both the transferor and
transferee Company shall make an application in the form of a petition to the Tribunal
for the necessity to approve the scheme of the merger in order to summon the
meetings of the respective shareholders and creditors to pass the merger proposal.

5) When more than one company is involved in any type of scheme or proposal like
merger then it is the discretionary power of the company to file a Joint Application. In
case, when the headquarters of each of the companies are in different states, then
there will be two tribunals having different jurisdiction over those companies hence
separate petitions have to be filed by both the companies. In practice, the application is
 generally filed by the transferee company. The Company makes an application to the
National Company Law Tribunal of relevant territorial jurisdiction in form no NCLT-1.

6) A notice and explanatory note of the meeting approved by the NCLT should be
dispatched by each company to its shareholders and its creditors with the purpose to
call upon the meeting in order to get 21 days in advance. The notice of the meeting
should be published at least in two newspapers. An affidavit should also be filed with
NCLT giving information that notice has been dispatched by each company to
shareholders and creditors and that the same has been published in two newspapers.
(Vernacular and English)

7) In order to pass the scheme of merging the companies and to work upon it a meeting of
shareholders should be held by each company in which at least 75 percent of
shareholders in each class must vote either in person or by proxy must approve the
scheme of merging the companies. In the same way, another meeting of creditors of
the company must be held in the same manner to pass the scheme of merging the
company. Section 391(2) states that ¾ of the majority should be passed i.e a special
resolution for the approval of the scheme of merger. Normally, Court appoints a
chairperson and alternate for each such meeting. The court has the discretionary power
to issue the directions on the following matters:
i. Date, time, place of meeting.
ii. Appointment of chairpersons and alternate chairperson for the meetings.
iii. Content of notice and manner of service of notice.
iv. Determination of quorum.
v. Any other matter the court may deem fit.
It is necessary for the chairperson to submit the report to the court of proceedings of
meetings on the following matters:
i. The number of persons present at the voting.
ii. The number of persons voting in person and proxy.
iii. The votes casted in the favour of the resolution.
iv. The votes casted against the resolution.

8) When the scheme of merging the companies is passed by the shareholders and
creditors then a petition has to be filed to honourable High Court by the companies
which are involved in merging the companies for confirming the scheme of merging the
companies. The High Court will decide a date for the hearing. A notice has to be
published in two newspapers (one vernacular and one English) stating that the scheme
of the merger is approved. After hearing of the High Court the parties involved in
merger companies state that the scheme is fair, reasonable and in bonafide intention,
the High Court must give its verdict approving the scheme. It is the discretionary power
of the Court that when creditors and shareholders have given their consent to the
scheme of merger the court grants permission. After analyzing the facts and
circumstances of the case the court exercises its discretion while approving the scheme.
The High Court is authorized to modify the scheme according to their own will and give
its verdict according to that. The Court enjoys a vast power related to the scheme of
merger of the company which are as follows:
i. the transfer of undertaking, property or liabilities of the transferor company to the
transferee company.
ii. The transferor appropriation of any shares, debentures, policies or any other like
interest in that company or person under the compromise or arrangement by the
transferee company.
 iii. the continuation by or against the transferee company of any legal proceedings
pending by or against any transferor company.
iv. Without winding up the court has the authority to dissolve the transferor company
without winding up.
v. the provisions which are made for any person who, within such time and in such
manner as the tribunal directs, dissent from the compromise or arrangement; and
vi. The matters which are mandatory to secure reconstruction of merger shall be
effectively carried out such as incidental, consequential and supplemental matters.

9) A true certified copy of the High Court order must be filed with the registrar of
companies within the time specified by the High Court. The registrar of the company
also makes the report to the Court and it is necessary for the Court to consider the
report of the registrar of the company before sanctioning the scheme of merger of the
company.

10) After the order is passed by the Honourable High Court, then there would be the
transfer of liabilities and assets to the merged company which is the third company
which will be formed after merging two companies. Once the merged company is
formed, then the shares and debentures must be issued by the company which will be
listed on the stock exchange.