EXTRAORDINARY GENERAL MEETING

 Regulation 42 of the Table F provides

 A Statutory meeting and AGM of a company are called ordinary meetings All general
meetings other than these are called Extraordinary General Meetings

Definition
All general meetings of a company, other than the AGM and the statutory meeting, shall be
called extra general meetings

Notice
The notice of EGM is required to be sent to the member's at least 21 days before the date of
the meeting similarly as of the notice of AGM.
However, in case of unlisted company if all the members entitled to attend and vote at any
EGM su agree, a meeting may be held at a shorter notice.

Need for EGM

 For the purpose of dealing with any extra ordinary matter
 Which can't be postponed till the next annual general meetings such as:
 Changes in Μ.Ο.Α
 Changes in A.O.A
 Reduction or reorganization of share capital
 Issue of Debentures
 Removal of Director
 Removal of Auditors

BUSINESS TO BE TRANSACTED
All business transacted at such meeting is called special business Every item on the agenda
must be accompanied by the 'Explanatory Statement' in terms of Section 102

WHO CAN CONVENE?

An extraordinary general meeting may be convened by any one of the following:
A. The Board of directors.
i) on its own
ii) on the requisition of shareholders
B. By Requisitionists themselves
C. By the National Company Law Tribunal (NCLT)

Calling the EGM

1. By the board (themselves)
The board may at any time call an EGM to consider any matter which requires the approval
of the company in a general meeting.

2. By the board (on requisition of members)

The board shall forthwith proceed to call an EGM, at the requisition made by the members:
•in case of a company having share capital, m representing not less than 1/10th of the total
voting power as on the date of deposit of requisition, and
•in case of a company not having share capital, not less than 1/10th of the total members.

The requisition shall state the objects of the meeting, be signed by the requisitionists and
deposited at the registered office of the company

3. By requisitionists themselves
If the board does not proceed within 21 days from the date of the requisition being so
deposited to cause a meeting to be called, the requisitionists, may themselves call the
meeting, but in either case any meeting so called shall be held within 90 days from the date of
the deposit of the requisition.

Any meeting called by the requisitionists shall be called in the same manner, as nearly as
possible, as that in which meetings are to be called by board.

Any reasonable expenses incurred by the requisitionists in calling a meeting:

•shall be reimbursed to the requisitionists by the company and
•the sums so paid shall be deducted from any fee or other remuneration payable to such of the
directors who were in default in calling the meeting.
 Statutory meeting

Statutory meeting is the meeting of shareholders of a company.

Requirement
Every public company having a share capital shall hold a general meeting of the members of
the company, to be called the "statutory meeting".
In case first annual general meeting (AGM) of a company is decided to be held earlier, no
statutory meeting shall be required.
The requirement shall not apply to a public company which converts itself from a private
company after one year of incorporation.

Time limit: The statutory meeting shall be held within earlier of:
•180 days from commencement of business; or
•9 months from the date of its incorporation.

Notice:
The notice of a statutory meeting shall be sent to the members at least 21 days before the
meeting along with a copy of statutory report.

Example 01: A public company was incorporated on 3 January 2021 and was allowed to
commence business from 25 April 2021.
It should hold statutory meeting latest by 2 October 2021 being earlier of:

 25 April 2021 + 180 days------ 21 October 2021.

 3 January 2021 + 9 months-----2 October 2021

Example 02: A public company was incorporated on 7 January 2021 and was allowed to
commence business from 22 February 2021.
It should hold statutory meeting latest by 20 August 2021 being earlier of:
  22 February 2021 + 180 days----- 20 August 2021
 7 January 2021 + 9 months ------6 October 2021.

Contents of Statutory Report

The statutory report shall state:
a) the total number of shares allotted, distinguishing shares allotted other than in cash, and
stating the consideration for which they have been allotted;
b) the total amount of cash received against the shares allotted;
c) an abstract of receipts and payments made up to a date within 15 days of date of the report,
under distinctive headings:
• the receipts from shares, debentures and other sources;
•the payments made;
•the balance remaining in hand; and
•an account or estimate of the preliminary expenses of the company showing
separately any commission or discount paid or to be paid on issue of shares or
debentures;

d) the names, addresses and occupations of the directors, chief executive, secretary, auditors
and legal advisers of the company and the changes, if any, since incorporation;
e) the particulars of any contract to modified for which approval of meeting is required,
together with proposed modification;
f) the extent to which underwriting contracts have been carried out together with the reasons
for their not having been carried out; and
g) any commission or brokerage the particulars of any contract to modified for which
approval of meeting is required, together with proposed modification;

The statutory report shall also contain a brief account of the state of the company's affairs
since its incorporation and the business plan, Including any change or proposed change
affecting the interest of shareholders and business prospects of the company.

Auditors' Report, Authentication and Filing

Financial issues to the receipts and payments of the company, be accompanied by a report of
the auditors of the company as to the correctness of such allotmens, receipe of cash, receipts
and payments.
Report of the auditors
The statutory report shall, so far as it relates to:
•the shares allotted by the company,
•the cash received in respect of such shares and

Certification / Authentication
The statutory report shall be certified by the chief executive and at least one director of the
company, and in case of a listed company also by the chief financial officer.

Filing with registrar

The directors shall cause a copy of the statutory report, along with report of the auditors a
resald, to be delivered to the registrar for registration forthwith after sending the report to the
members or the company

List of members at meetings

The directors shall cause a list showing the names, occupations, nationality and addresses of
the members of the company, and the number of shares held by them respectively, to be
produced at the commencement of the meeting and to remain open and accessible to any
member of the company during the continuance of the meeting.

Discussion at meeting
The members of the company present at the meeting shall be at liberty to discuss any matter
relating to the formation of the company or arising out of the statutory report, whether
previous notice has been given or not, but no resolution of which notice has not been given in
accordance with the articles may be passed.

Adjournment
The meeting may adjourn from time to time, and at any adjourned meeting any resolution of
which notic has been given in accordance with the articles, either before or after the original
meeting, may be passed, and an adjourned meeting shall have the same powers as an original
meeting
 Powers, duties, and kinds of directors
Introduction
The well-being of a company lies in the hands of the directors, who are also accountable for
the firm’s and the shareholders’ interests. Directors are fundamentally fiduciary agents who
owe responsibilities to the company. Directors are hired by the company’s shareholders to
administer the company’s operations in the best interests of the shareholders. Furthermore, no
company can achieve success without having excellent and honest directors, therefore
corporate success can only be reached if the company’s directors fulfill their obligations and
completely enforce the director’s duties. As a result, directors play a critical role in every
corporate governance mechanism. The general obligations of the director are founded on
certain common law norms and equitable principles.
Modern shareholders are more conscious of their obligations than ever before and they wield
more influence than anybody can imagine. With the arrival of the Shareholders Revolution,
there has been a democracy in business matters in which the shareholders are the supreme
power that selects its cabinet in the form of directors to run the show and create money for
them. The directors are given the appropriate authority, but also additional responsibilities,
during the process. The Companies Act of 2013 has guaranteed that this balance of power and
duties is preserved to the greatest degree possible for the benefit of the shareholders and to
ensure corporate governance. It employs both regulatory and punitive measures, including
rigorous judicial measures, to guarantee that regulations are effectively obeyed and to avoid
any mishaps in corporate governance, as well as to protect the organization’s legal integrity.

Corporate governance
Corporate governance refers to a collection of principles, ethics, values, morals, rules, laws,
and processes, among other things. Corporate governance provides a structure in which
directors of a company are charged with the tasks and responsibilities pertaining to the
management of the company’s activities.
The term “governance” denotes “control,” as in “controlling a company, an institution, etc.,”
or “corporate governance,” as in “governing or controlling corporate entities,” such as ethics,
values, principles, and morals. To have excellent corporate governance, the director must
satisfactorily perform his/her duties towards the company’s owners (shareholders), creditors,
staff, clients, government, and society at large. Corporate governance aids in the
establishment of a system in which a director is entrusted with the tasks and obligations of the
company’s operations. For successful corporate governance, its rules must be such that the
company’s directors do not abuse their authority, but rather understand their obligations and
responsibilities towards the company and act in the best interests of the firm in the largest
context.
The idea of ‘corporate governance’ is not a goal in itself; it is only the beginning of a
company’s growth for long-term profitability.
Directors and the board of directors in a company
The term “director” is defined under Section 2 (34) of the Companies Act 2013 as “a director
appointed to the Board of a company,” where “Board of Directors” or “Board” in relation to a
Company refers to the collective body of the firm’s directors. According to Chapter
XI, Section 149 of the Companies Act 2013, every company must have a Board of directors,
the composition of which should be as follows:
1. Public Company: A minimum of three and a maximum of fifteen directors should be
appointed. Also, at least one-third of the directors must be independent.
2. Private Company: Minimum of two and a maximum of fifteen directors are required
for a private company.
3. One Person Company (OPC): A minimum of one director must be appointed.
In every Company format, a maximum of 15 directors can be appointed (OPC, Public,
Private). By passing a special resolution in the company, the number of directors can be
increased above 15. Out of all the appointed directors, one must have resided for more than
182 days in India in the preceding calendar year. Also, at least one of the directors among all
the directors should be a woman director.
The Companies Act of 2013 recognizes the concept of an independent director, which was
previously solely part of the listing agreement. It refers to a director who is not a full-time
director, the Managing director, or a nominee director and meets the qualifications outlined in
Section 149 of the Act.
According to sections 266A and 266B of the Companies Act of 1956, a Director
Identification Number (DIN) is a one-of-a-kind identification number assigned to existing
and/or future directors of any incorporated company. According to the requirements of the
Companies Act, every director shall be selected by the company in general meetings,
provided they have been assigned the Director Identification Number (DIN) and have
submitted a statement that he/she is not disqualified to become a director.
The Board of Directors appoints an additional director to serve until the next general meeting
using the Board’s inherent power. The Board of Directors may designate an alternate director
to function as a director in absence for a term of not less than three months and not more than
the allowed period for the director who is being replaced.
The Board may appoint as a director any individual nominated by any institution in
accordance with the terms of any extant legislation or other government regulation or
shareholdings, such directors are known as nominated directors.
As per Principle of Proportional, representation the articles of a company may allow for the
appointment of not less than two-thirds of the total number of directors of a company, and
such appointments may be made once every three years and casual vacancies of such
directors shall be addressed as specified in sub-section (4) of Section 161.

Responsibilities of the board of directors

A company’s board of directors is largely responsible for:
 Formulating the company’s strategic goals and policies;
 Tracking progress toward attaining goals and policies;
 Designating the senior management; and
 Accounting for the company’s actions to appropriate parties, such as shareholders.

Powers of the directors of a company

Most corporations have not included a separate article or passed a resolution stating that
directors do not have the authority to conduct certain tasks. However, the Act requires a
resolution at a general meeting to specify this sort of power. The following decisions should
be taken by the directors, but generally also requires shareholder approval through a
resolution:
 Loans to the directors
 Fixed-term employment contracts of directors for more than two years.
 Significant property transactions in which the directors have a personal stake.
 The issuance of the shares.
The directors are granted the above-mentioned powers collectively. Actually, the board is to
delegate authority to the concerned director in order to do this. This is permitted by both the
Model Articles and Table A of the Act.
Types of directors
Residential director
According to Section 149(3) of the Companies Act of 2013, every company must have one
director who has spent at least 182 days in India in the previous calendar year.

Independent director
According to Section 149(6), an independent director with reference to a company is one who
is not a managing director, whole-time director, or nominee director. Companies that must
appoint an independent director are mentioned in Rule 4 of the Companies (Appointment and
Qualification of Directors) Rules, 2014. The following companies must nominate at least two
independent directors:
 Public Companies with Paid-up Share Capital of Rs.10 Crores or more;
 Public Companies with a turnover of Rs.100 crores or more;
 Public companies having total outstanding loans, debentures and deposits of Rs. 50
crores or more.
Individuals qualified for independent directorship:
1. Who, in the board’s viewpoint, is a person of integrity and possesses appropriate
expertise and experience;
2. 1. Who is or was a promoter of the Company or any of its Holding, Subsidiary, or
Associate Companies (HSA Companies);
2. Who is not connected to the company’s promoters or directors, or its HSA companies;
3. Who has or has not had a Pecuniary (Money) relationship with the company and its
HSA company, or their promoters or directors, during the two most immediately
preceding fiscal years or the current fiscal year;
4. None of whose relatives has or has had a financial relationship with the company, its
HSA company, or their Promoters, directors, amounting to 2% or more of the firm’s
gross turnover or total income, or fifty lakhs, or such greater amount as may be
prescribed, whichever is less, during the two most recent preceding fiscal years or
during the current fiscal year.
5. Who, neither he nor any of his relatives-
1. Holds or has held the post of Key Managerial Personnel (KMP) or has worked for the
Company or its HSA companies in any of the three fiscal years;
2. He or any of his relatives has an employee or owner or a partner in any of the three
fiscal years immediately preceding the fiscal year in which he is suggested to be
hired, as an auditor in the firm, Company Secretary in practice, Cost Auditor, Legal
Consultant of the company or its HSA companies;
 3. Holds along with his relatives 2 per cent or more of the Company’s total voting
power;
4. He or she has not been the Chief Executive or director of any Non-Profit Organization
that receives 25% of its revenue from the Company or HSA Companies or its
Promoters or directors, or that NGO owns 2% or more of the Company’s total voting
power.
F. Who holds any other qualifications that may be needed.

Some general points:

 Tenure of an independent director
An independent director can serve for up to 5 consecutive years. He is also eligible for
reappointment by passing a special resolution, and this requires his reappointment in the
Board’s Report. However, he may not hold office for more than two consecutive terms, and
he shall be ineligible to be appointed after three years after ceasing to be an independent
director.
 Independent director’s remuneration
According to Section 149(9) of the Act, an independent director is not eligible for stock
options. They may, however, be remunerated in the form of a fee as per Section 197(5) of the
Act. Sitting fees for Board of Directors and other committee meetings must not exceed Rs.
1,00,000 per meeting.

Small shareholders directors

A single director can be appointed by small shareholders in a listed company. However, this
action requires an appropriate procedure, such as issuing a notice to at least 1000
shareholders, or one-tenth of the total shareholders.

Women director
According to Section 149 (1) (a) second proviso, certain kinds of corporations must have at
least one female director on their board. Such companies include any listed company and any
public company, having:
1. Paid-up capital of at least Rs. 100 crore, or more,
2. Turnover of Rs. 300 crore or higher.
Additional directors
Section 161(1) of the 2013 Act allows a company to designate any individual as an additional
director.

Alternate directors
According to Section 161(2), a company may appoint an alternate director if the Articles of
Incorporation grant such authority to the company or if a resolution is approved. An alternate
director is appointed if one of the company’s directors is abroad from India for at least three
months and in his/her absence, the alternate director is appointed.
 The tenure of an alternate director cannot be longer than the term of the director in
whose place he has been appointed.
 Furthermore, he will be required to vacate the post if and when the original director
returns to India.
 Any changes to the term of office made during the absence of the original director
will only affect the original director and not the alternate director.

Shadow director
A person who is not appointed to the Board but whose instructions the Board is accustomed
to act is responsible as a director of the company unless he or she is offering advice in his or
her professional role.

Nominee directors
They can be nominated by certain shareholders, third parties via contracts, lending public
financial institutions or banks, or the Central Government in cases of tyranny or
mismanagement.

Difference between the executive and non-executive director

An executive director of a company can be either a whole-time director (one who devotes his
whole working hours to the company and has a significant personal interest in the company
as his source of income) or a managing director (i.e., one who is employed by the company as
such and has substantial powers of management over the affairs of the company subject to the
superintendence, direction, and control of the Board). A non-executive director, on the other
hand, is a director who is neither a whole-time director nor a managing director.

Duties of a company’s directors under the Companies Act, 2013

Section 166 of the Companies Act 2013 stipulates the following duties of the directors of a
Company:
1. A director must function in line with the company’s Articles of Association.
2. A director must act in the best interests of the company’s stakeholders, in good faith
and promote the company’s objectives.
3. A director shall use independent judgment in carrying out his responsibilities with due
care, skill and diligence.
4. A director should constantly be aware of potential conflicts of interest and endeavour
to avoid them in the best interests of the firm.
5. Before authorizing related party transactions, the director must verify that appropriate
considerations have taken place and that the transactions are in the company’s best
interests.
6. To assure that the company’s vigilance mechanism and users are not prejudicially
affected on such use.
7. Confidentiality of sensitive proprietary information, trade secrets, technology, and
undisclosed prices must be protected and should not be released unless the board has
approved it or the law requires it.
8. A company’s director may not assign his or her office, and any such assignment shall
be invalid.
9. If a corporate director violates the terms of this section, he or she will be fined not less
than one lakh rupees but not more than five lakh rupees.
The Companies Act of 2013 additionally assigns specific obligations to independent directors
in order to ensure the Board’s independence and fairness. An independent director is a
member of the Board of Directors who does not own any shares in the company and has no
financial ties to it other than receiving the sitting fees. According to the Companies Act of
2013, Schedule IV, an independent director should:
1. Protect and support the interests of all stakeholders, particularly minority
stakeholders.
2. In the event of a conflict of interest among the stakeholders, then he/she should act as
a mediator in that situation.
3. Provide assistance in delivering an impartial and fair decision to the Board of
Directors.
4. Should pay adequate care to transactions involving related parties.
5. To honestly and impartially report any unethical behaviour, violation of code of
conduct or any suspected fraud in the company.

Liability of directors
For any and all acts harmful to the company’s interests, the directors might be held jointly or
collectively liable. Despite the fact that the director and the Company are different entities,
the director may be held responsible on behalf of the Company in the following situations:
 Tax Liability: Unless a director or a past director can show that the non-recovery or
non-payment of taxes is due to gross negligence or breach of duty, then any present or
past director (during the defaulter’s time period) will be responsible to pay the tax
deficit as well as any related penalties.
 Refunding a share application or excess portion of a share application amount.
 To pay the expenses of qualification shares.
 In the event of a misrepresentation in the prospectus, there lies a civil liability.
 Fraudulent Business Conduct and all connected debts and contracts signed.
 Failing in providing disclosures as stipulated under SEBI (Acquisition of Shares &
Takeovers) Regulations, 1997 and SEBI (Prohibition of Insider Trading) Regulations,
1992 by the directors might lead to legal proceedings by the Securities and Exchange
Board of India (SEBI).

Disqualification for appointment of the directors of a company

A person is ineligible to be appointed as a director of a corporation if:
 He is mentally unstable and has been proclaimed such by a competent court.
 He is insolvent without being discharged.
 He has applied for his insolvency adjudication but his application is pending.
 He was found guilty and imprisoned for at least six months in jail and five years from
the expiry of his term are still remaining.
 He was found guilty and sentenced to a minimum of seven years or more in prison.
 A court or tribunal has issued an order disqualifying him from serving as a director
and the order is still in effect.
 He has not paid any calls in respect of any of the company’s shares that he owns and
six months have passed from the last day fixed for payment of the call.
 He has been convicted of the offence of related party transactions under Section 188
at any point in the previous five years.
 He does not have a DIN number.
 A person who is a director of a firm that has not submitted financial statements or
annual returns for five years in a row, until the five-year period from the date of
default expires.
  A director of a business that has failed to repay deposits, debentures, or to distribute
dividends for a period of one year, until the expiration of five years from the date of
default
 Additional disqualifications might be included in the Articles of private companies.

Evolution of directors from Companies Act of 1956 to 2013

 Under the Companies Act, 1956, the maximum number of directors in a company was
12 and appointing extra directors required the consent of the central government.
Whereas the Companies Act, 2013 allows for a maximum of 15 directors and
additional directors can be appointed by approving a special resolution in a meeting,
as stipulated for in Section 149(1) of the Act. As a result, it is clear that the permission
of the central government is not required under the current legislative framework.
 There were no provisions in the 1956 Act mandating the appointment of a female
director. Whereas Section 149(1) of the Companies Act, 2013 states that one woman
director must be appointed in a prescribed class or classes of companies.
 Under the Companies Act, 1956, there was no requirement for a Resident director,
however, under Section 149(3) of the Companies Act, 2013, every company must
have at least one director who has resided in India for a total of not less than 182 days
in the preceding calendar year.
 There was no provision in the Companies Act, 1956 that required independent
directors, whereas under Section 149(4) of the Companies Act, 2013, every listed
public company must have at least one-third of its total number of directors as
independent directors, and the Central Government may recommend the minimum
number of independent directors in the case of any class or classes of public
companies.
 The duties of a director were not stipulated in the 1956 Act, however, they are
explicitly stated in Section 166 of the Companies Act, 2013.
 The maximum number of directorships under the 1956 Act was 15, but under the Act
of 2013, the maximum number of directorships is 20, of which 10 can be public
companies. Furthermore, the new statute includes alternate directorship, which was
not previously included in the 1956 Act.
 The Companies Act, 1956 had no specific provision for a director’s resignation, but
Section 168 of the Companies Act, 2013 allows a director to resign by presenting a
resignation letter. He must also provide a copy of his resignation letter to the Registrar
of Companies within 30 days to guarantee transparency.

Important judgments
Re: City Equitable Fire Insurance Company Ltd (1925)
It is a case involving the responsibilities of directors of a company in which it was discovered
that the directors of the insurance company had delegated almost entirely the administration
of the company’s operations onto the chairman of the company, which was the primary cause
for the commission of frauds. It was thus decided that in the course of their work, the
directors of the firm must observe the duties of care and skill required.

Regal (Hastings) Ltd v. Gulliver (1942)

In this case, the Court held that directors are liable to the company if it can be proven:
 That what the directors did was related to the company’s affairs to such an extent that
it could be said to have been done in the course of their management and in the use of
their opportunities and special knowledge obtained by them by virtue of being
directors.
 That they made a profit as a result of their actions.

Weeks v. Propet (1873)

The firm borrowed money in excess of its borrowing capacity, resulting in ultra vires debts.
The directors were found to have breached their warranty. When the directors made an ultra
vires contract with a connected person and the members failed to rectify the same, the
directors were held responsible. Such a contract was not held to bind the company and such a
connected individual was given the liberty to sue the directors for breach of warranty.

Bates v. Standard Land Co. (1911)

The main issue in this case, was, when presented before a court, was there a distinction
between a person’s personality and that of a company. It was therefore held that the board of
directors was the corporation’s only brain and that the company could only act via them.
Nonetheless, the company could be a legal person like a natural person, in many instances. It
has the ability to engage in contracts and sue or be sued in its name, either by its members or
by outsiders. However, it is not a citizen who may enjoy the Fundamental Rights guaranteed
by the Indian Constitution.

Conclusion
An analysis of the provisions of the 2013 Companies Act reveals that the 2013 law is
effective in addressing the gaps left by the preceding legislation, the 1956 Act. Though the
2013 Act was implemented in a phase-wise manner, and it wasn’t until 2019 that the 1956
Act was entirely abolished. The 2013 Act has effectively modernized India’s corporate law
framework, putting it on par with corporate regulation throughout the world. Moreover, the
2013 Act’s provisions relating to the directors of a company are more clear and evident when
compared to those of the 1956 Act.