Secretarial Practice:

The Indian economy is rapidly developing, with its service sector being one of the fastest-
growing in the world. Finance plays a crucial role in establishing, running, modernizing,
expanding, and diversifying businesses. As business dynamics evolve, the role of expert
professionals becomes more important, and the profession of a Secretary has gained
significance in meeting modern business needs.

The subject of Secretarial Practice covers the origin, roles, importance, and functions of
different types of secretaries, particularly in joint-stock companies.

Origin of the Secretary:

 The word "Secretary" is derived from the Latin term Secretarius, meaning a
confidential officer who handles secrets.
 In the Roman Empire, a Scribae was responsible for writing letters and maintaining
confidential records.
 In ancient India, secretaries were called Amatya, Sachiva, or Chitnis, tasked with
secretarial duties.
 Today, secretarial positions are found across government departments in India.

Additional developments in the profession include Sir Isaac Pitman's founding of a school for
professional writers in 1870, followed by the invention of the typewriter in 1888, which
expanded the role of secretaries. In 1942, the National Secretaries Association was formed
in the USA, and the last week of April is now celebrated as Administrative Professional’s
Week to honor their contributions.

Meaning and Definition of Secretary:

The role of a Secretary is defined in various ways, emphasizing administrative and

organizational responsibilities:

1. Oxford Dictionary Definition: A Secretary is a person responsible for writing on

behalf of others, managing correspondence, keeping records, and handling various
business transactions for individuals or entities like societies, corporations, or public
bodies.
2. Companies Act 2013 (Section 2(24)): A Company Secretary is defined as someone
appointed by a company to perform the role under the Act, specifically a member of
the Institute of Company Secretaries of India (ICSI), as per the Company Secretaries
Act, 1980.

In summary, a Secretary plays a crucial role in ensuring the smooth functioning of an

organization by managing correspondence, meetings, records, and other administrative tasks.
A Company Secretary, in particular, has a legal and professional standing defined by the
Companies Act and the Company Secretaries Act.
Features of a Secretary:

1. Individual: Only an individual can be appointed as a Secretary, not a firm, institution,

or corporate body. This is due to the specific skills and responsibilities required for
the role, as outlined by Company Law.
2. Duties: Secretaries handle routine and administrative tasks such as correspondence,
conducting meetings, maintaining records, and providing information. They manage
clerical work, appointments, reminders, and ensure legal compliance as per the
organization's needs.
3. Qualification: The qualifications of a Secretary vary depending on the organization.
A Company Secretary, for instance, must meet specific qualifications under the
Companies Act 2013, while a Government Secretary must adhere to government
regulations.
4. Appointment: Secretaries can be appointed by individuals, societies, corporations,
public organizations, or government bodies. They may serve as personal or
institutional secretaries.
5. Paid Employee: A Secretary is a paid employee, receiving either a salary or an
honorarium, but also holds an important position within the organization.
6. Confidential Officer: As a custodian of secret and confidential information,
Secretaries are closely linked to top management and may be involved in policy
decisions.
7. Representative: A Secretary represents the organization. Personal secretaries
represent individuals, while institutional secretaries represent societies, companies, or
government departments.
8. Qualities: A Secretary must have key qualities such as concentration, intelligence,
tact, loyalty, cooperation, courtesy, leadership, and orderliness to efficiently manage
secretarial duties.

Importance of a Secretary in Modern Organizations

In today's dynamic business environment, the role of a Secretary has grown in
status and importance due to evolving business demands. The key
responsibilities and significance of a Secretary include:
1. Expert Advice and Guidance: A Secretary offers valuable advice to
superiors, assists in decision-making, and provides guidance that helps in
policy formulation and business growth.
2. Administrator: The Secretary efficiently manages both routine and
executive duties, such as office administration, documentation, and
helping with policy formulation and execution.
3. Custodian of Secret Information: As a confidential officer, the
Secretary protects sensitive organizational information, ensuring it
remains undisclosed unless authorized.
4. Correspondent: The Secretary manages inward and outward
correspondence with members, directors, banks, insurance companies,
government authorities, and others.
5. Legal Compliance Officer: The Secretary ensures timely legal
compliance by maintaining statutory records, filing returns, and submitting
required documents as per the Companies Act, 2013.
6. Conducting Meetings: The Secretary facilitates business meetings by
handling the necessary formalities, such as preparing the agenda, sending
notices, and documenting meeting minutes.
7. Link Between Management and Staff: The Secretary acts as a
communication bridge between management and staff, ensuring decisions
are effectively coordinated across all levels.
8. Secretarial Standards and Audit: The Secretary ensures adherence to
secretarial standards and conducts secretarial audits to confirm that the
company complies with legal and procedural requirements.

Types of Secretary
The role of a Secretary has expanded across various types of organizations due
to industrialization and modernization. Secretaries play crucial roles in both
personal and institutional capacities. The main types of Secretaries are:
1. Personal Secretary:
o A Personal Secretary or Personal Assistant is appointed by busy
professionals like doctors, lawyers, engineers, politicians, or actors
to handle daily correspondence and routine tasks.
o Appointment: Hired by individuals to manage non-core duties,
allowing them to focus on their primary work.
o Qualifications: No specific requirements, but a graduation degree,
good communication skills, and computer proficiency are preferred.
2. Institutional Secretary:
o Secretaries appointed by institutions or organizations fall under this
category, including several types:
2. Secretary of a Non-Profit Association:

 Works for organizations promoting social, cultural,

educational, or sports activities, not for profit.
 Appointment: Appointed by the management committee,
can be part-time or full-time.
 Qualifications: No prescribed qualifications but requires
knowledge of filing, computers, and the organization’s
operations.
3. Secretary of a Co-operative Society:

 Serves a co-operative society formed by members to provide

services like banking or housing.
 Appointment: Elected by the managing committee,
sometimes on a full-time basis for large co-ops.
 Qualifications: Knowledge of the Co-operative Societies Act
and basic educational qualifications like graduation.
4. Secretary of a Joint Stock Company (Company Secretary):

 Plays a key role in managing business operations for large-

scale organizations and works under the Board of Directors.
 Appointment: Required by the Companies Act, 2013 as part
of Key Managerial Personnel (KMP).
 Qualifications: Must be a member of the Institute of
Company Secretaries of India (ICSI).
5. Secretary of a Government Department:
  Holds a senior administrative position in government
ministries, such as Finance or Home Secretary.
 Appointment: Appointed through the Civil Services
Examination, typically serving as Indian Administrative
Service (IAS) officers.
 Qualifications: Graduation degree and successful
completion of the Civil Services Examination.

Functions of a Secretary
A Secretary plays a crucial role in handling both clerical and administrative
responsibilities, ensuring the smooth functioning of an organization or individual.
The key functions of a Secretary include:
1. Correspondence:
o Manages all inward and outward mail, responding to inquiries from
external stakeholders, government departments, and others. Keeps
organizational records up to date.
2. Office Management:
o Oversees office routines, supervises staff, ensures efficient
operations, and is involved in staff management activities like
training, promotion, and transfer.
3. Reception Functions:
o Attends phone calls, welcomes visitors, handles inquiries, and
manages appointment schedules.
4. Financial Functions:
o Handles banking transactions, monitors receipts and payments,
maintains proper books of accounts, and provides financial
information to management, banks, and government.
5. Arranging Meetings:
o Organizes meetings such as general, board, and committee
meetings, prepares notices, agendas, and records minutes as per
legal requirements.
6. Statutory Functions:
o Ensures compliance with relevant laws like the Income Tax Act,
Stamp Act, GST, and other applicable regulations.
7. Assistance in Policy Formulation:
o Collects statistical data and information to assist management in
policy-making.
 8. Providing Information:
o Supplies accurate and relevant information to management,
government, banks, shareholders, and employees for decision-
making and regulatory purposes.
9. Administrative Functions:
o Helps with employee appointments, work distribution, supervision,
training, and maintaining statutory records under proper custody.
Qualities of a Secretary
A Secretary must possess various qualities beyond academic qualifications to
effectively fulfill the responsibilities of the role. These qualities ensure that a
Secretary can support the organization or employer in achieving their goals:
1. Accuracy:
o The Secretary must be precise and correct in tasks like drafting
letters, recording minutes, and maintaining records.
2. Adaptability:
o The ability to adjust to changing situations, such as shifts in
government or management policies, is essential.
3. Co-operativeness:
o A willingness to assist others and contribute to team efforts helps in
building teamwork and collaboration.
4. Courtesy:
o Politeness and kindness in dealing with people create a positive
impression of the employer and organization.
5. Initiative:
o The Secretary should voluntarily take efforts and make decisions
when necessary, especially in the employer's absence.
6. Leadership:
o The Secretary should be able to guide, motivate, and inspire
subordinates, fostering team spirit and collaboration.
7. Loyalty:
o Confidentiality and faithfulness are crucial, as the Secretary handles
sensitive information and must prioritize organizational goals.
8. Orderliness:
o Systematic work habits ensure that tasks are completed efficiently
and on time.
9. Pleasing Personality:
 o A calm, professional demeanor, good manners, and a willingness to
accept challenges contribute to a Secretary’s success.
10.Knowledge Seeker:
 Continuous learning and staying updated on relevant knowledge enable
the Secretary to perform statutory duties effectively.
11.Punctuality:
 Timely completion of tasks and good time management are essential to
create a positive impression of the organization.
12.Sound Judgment:
 The Secretary should have the ability to assess situations accurately and
make sound decisions, including evaluating subordinate performance.
13.Tactfulness:
 The ability to handle different people and situations wisely and sensibly
ensures smooth interactions and problem-solving.
Comparative Study of Different Types of Secretary
Secretaries are appointed in various capacities, including personal, institutional,
and governmental roles. Below is a comparative overview of the different types
of Secretaries:
1. Personal Secretary:
o Meaning: Appointed by busy professionals or individuals (e.g.,
doctors, lawyers, businessmen) to assist in their day-to-day work.
o Purpose: To support the individual in managing their workload.

o Appointment: Made by the employer (e.g., individual

professionals).
o Legal Status: No legal status.

o Qualification: No prescribed qualifications.

o Position: Personal assistant to the employer.

o Powers & Duties: Limited to what the employer assigns.

o Compulsion to Appoint: Not compulsory.

o Remuneration: A salaried role.

2. Secretary of a Non-Profit Organization:

o Meaning: Appointed to manage the activities of non-profit
organizations (e.g., Rotary Club, sports clubs).
o Purpose: To promote the organization’s activities.

o Appointment: By the managing committee.

 o Legal Status: No legal status.

o Qualification: No specific qualifications.

o Position: Member of the managing committee.

o Powers & Duties: Limited to the powers provided by the

managing committee.
o Compulsion to Appoint: Based on the nature and size of the
organization.
o Remuneration: May work for a salary or honorarium.

3. Secretary of a Co-operative Society:

o Meaning: Appointed from among the members of the managing
committee to manage the society’s activities.
o Purpose: To safeguard the interests of society’s members.

o Appointment: By the managing committee of the co-operative

society.
o Legal Status: Has legal status under the Co-operative Societies
Act.
o Qualification: No specific qualifications.

o Position: A member of the society.

o Powers & Duties: Governed by the Co-operative Societies Act.

o Compulsion to Appoint: Compulsory as per the Act.

o Remuneration: May work for a salary or honorarium.

4. Secretary of a Joint Stock Company (Company Secretary):

o Meaning: Appointed to manage legal compliance for a business
organization.
o Purpose: To assist the Board of Directors in decision-making and
ensuring compliance.
o Appointment: By the Board of Directors.

o Legal Status: Has legal status as per the Companies Act.

o Qualification: Must be a member of the Institute of Company

Secretaries of India (ICSI).
o Position: Key Managerial Personnel (KMP).

o Powers & Duties: Statutory and managerial, as per the

Companies Act.
o Compulsion to Appoint: Mandatory for listed companies and
those with a paid-up capital of ₹5 crore or more.
 o Remuneration: A full-time salaried position.

5. Secretary of a Government Department:

o Meaning: A high-ranking officer managing the administrative
functions of a government department.
o Purpose: To assist in the administration under the guidance of
ministers.
o Appointment: By the State or Central Government.

o Legal Status: Holds legal status as a government officer.

o Qualification: Must pass the Civil Services Examination (IAS).

o Position: Administrative head of the department or ministry.

o Powers & Duties: Statutory powers within the department or

ministry.
o Compulsion to Appoint: Compulsory for every government
department.
o Remuneration: Full-time salaried employee with government
perks.

2 - JOINT STOCK COMPANY

Industrial Revolution and the Evolution of Joint Stock Companies

The Industrial Revolution, which began in England in 1760, marked a significant
shift in production and commerce. Prior to this, production was manual, using
local resources, and required limited capital, often conducted at home. The
revolution introduced large-scale production with machines, aimed at meeting
anticipated demand, leading to the expansion of local markets into regional,
national, and international markets. Innovations in transport and commerce
further fueled this transformation. To address the new business challenges, the
Joint Stock Company form of business organization emerged, offering a
structure better suited to large-scale industrial and commercial activities.

Evolution of Business Organization

As industry and commerce evolved, traditional business structures like Sole
Trading Concerns, Joint Hindu Family Businesses, and Partnership Firms became
inadequate for large-scale operations. This led to the emergence of the Joint
Stock Company, a more suitable business form to meet modern industrial
demands.
Different Types of Business Organizations:
1. Sole Trading Concern:
o Owned, managed, and controlled by a single person, known as the
Sole Trader.
o Features: No separate legal status, unlimited liability, small capital,
and limited to small-scale operations.
2. Joint Hindu Family Business:
o A business owned by a Hindu Undivided Family, governed by the
Hindu Succession Act, 1956.
o Features: Managed by the "Karta" (head of the family), with
members known as co-parceners. Liability of the Karta is unlimited,
while co-parceners have limited liability.
3. Partnership Firm:
o Owned and managed by two or more partners, governed by the
Indian Partnership Act, 1932.
o Features: Unlimited and joint liability, shared profits and losses, no
separate legal status, and capital contribution by partners.
4. Limited Liability Partnership (LLP):
o Combines features of a partnership and a Joint Stock Company,
governed by the LLP Act, 2008.
o Features: Separate legal entity, limited liability for partners, no
minimum capital requirement, and no double taxation on profits.
5. Co-operative Society:
o A voluntary association formed to achieve economic objectives, with
a service-oriented approach.
o Features: Open membership, democratic management (one
member, one vote), limited liability, and control by the state
government.
 6. Joint Stock Company:
o A formal organization capable of handling large-scale industrial
activity, with independent legal status, shareholder ownership, and
liability limited to the share capital invested.
o Suitable for large-scale business and governed by specific laws,
such as the Companies Act.
Meaning, Definition, and Features of a Joint Stock Company
A Joint Stock Company is a voluntary association of individuals formed to
achieve a common lawful objective, often economic, such as running a business.
It raises large capital by dividing ownership into small units called shares, and
the shareholders are part-owners of the company. The daily management is
carried out by elected directors, collectively known as the Board of Directors.
Profits distributed to shareholders are called dividends.
Definitions:
1. Companies Act 2013:
o A company is any entity incorporated under this act or prior
company laws.
2. Prof. H.L. Haney:
o A Joint Stock Company is a voluntary association for profit, with
capital divided into transferable shares, and share ownership is the
basis of membership.
Key Features of a Joint Stock Company:
1. Voluntary Association:
o Membership is open to all, and individuals can join or leave at their
discretion, following the company's Articles of Association.
2. Incorporated Association:
o The company is formed and registered under the Companies Act,
and incorporation is mandatory.
3. Separate Legal Entity:
o The company has a legal identity distinct from its members, with
rights and duties independent of its shareholders and directors.
4. Artificial Person:
o The company is created by law and has legal rights like entering
into contracts or purchasing assets, though it cannot act as a
natural person.
5. Perpetual Succession:
 o The company continues to exist despite changes in membership
due to death, insolvency, or retirement, offering stability and
longevity.
6. Common Seal:
o The company uses a common seal to sign important documents
since it cannot sign on its own like a natural person.
7. Limited Liability:
o Shareholders' liability is limited to the unpaid portion of their shares,
protecting personal assets from being used to settle company
debts.
8. Separation of Ownership and Management:
o Shareholders own the company but elect a Board of Directors to
manage it, due to the large number and changing nature of
shareholders.
9. Transferability of Shares:
o Shares in public companies are freely transferable, allowing
shareholders to sell their stake. Private companies may have
restrictions.
10.Number of Members:
o A private limited company requires 2 to 200 members, while a
public company needs at least 7 members, with no maximum limit.
11.Capital:
o A Joint Stock Company can raise significant capital by issuing
shares, debentures, and bonds, and taking loans from banks.
12.Government Control:
o The company operates under government regulations, must
maintain proper financial records, file statements, and undergo
audits to protect investors' interests.
Types of Companies
Companies can be categorized based on various factors, including incorporation,
number of members, liability, control, and other criteria. Below is a summary of
the different types of companies:
A) On the Basis of Incorporation:
1. Statutory Company:
o Incorporated through a special Act passed by the central or state
government.
o Examples: Reserve Bank of India, State Bank of India.

2. Registered Company:
 o Registered under the Companies Act, 2013 or earlier company laws.

B) On the Basis of Number of Members:

1. Private Company (Section 2(68)):
o Limited to 200 members, restricts the transfer of shares, and does
not invite the public to subscribe to its securities.
o Must include “Private Limited” in its name.

2. Public Company (Section 2(71)):

o No restrictions on the transfer of shares, requires a minimum of 7
members, and can invite the public to subscribe.
3. One Person Company (Section 2(62)):
o Has only one member, with limited liability, and does not require an
Annual General Meeting (AGM).
C) On the Basis of Liability of Members:
1. Company Limited by Shares (Section 2(22)):
o The liability of members is limited to the unpaid value of their
shares.
2. Company Limited by Guarantee (Section 2(21)):
o Members guarantee to contribute a fixed sum in the event of
liquidation.
3. Unlimited Liability Company (Section 2(92)):
o Members have unlimited liability for the company's debts.

D) On the Basis of Control:

1. Holding Company (Section 2(46)):
o Controls more than 50% of another company’s shares or has the
power to appoint/remove directors.
2. Subsidiary Company (Section 2(87)):
o Controlled by a holding company, either through shareholding or
management control.
E) Other Types of Companies:
1. Government Company (Section 2(45)):
o A company with at least 51% of its capital held by the central or
state government.
o Examples: Coal India Limited, Bharat Heavy Electrical Limited.

2. Foreign Company (Section 2(42)):

o Incorporated outside India but conducts business in India.
 3. Dormant Company:
o Registered for future projects or inactive for the last two years, with
no significant financial activity.
4. Listed Company (Section 2(52)):
o A public company with its securities listed on a recognized stock
exchange, subject to SEBI regulations.
5. Small Company (Section 2(85)):
o Has a paid-up capital not exceeding ₹50 lakh or turnover not
exceeding ₹2 crore.
6. Associate Company (Section 2(6)):
o A company in which another company holds a significant influence,
generally through control of at least 20% of the capital.
7. Company Not for Profit (Section 8):
o Registered under section 8, formed for non-profit purposes like
charity, education, or arts.
Distinction Between Private Company, Public Company, and
Comparative Study of Forms of Business Organization
1. Private Company vs Public Company:
1. Definition:
o Private Company: Restricts share transfer and limits members to
200.
o Public Company: Does not restrict share transfer and allows an
unlimited number of members.
2. Number of Members:
o Private Company: Minimum 2, Maximum 200.

o Public Company: Minimum 7, no maximum limit.

3. Number of Directors:
o Private Company: Minimum 2.

o Public Company: Minimum 3.

4. Right to Transfer Shares:

o Private Company: Shares are not freely transferable.

o Public Company: Shares are freely transferable.

5. Issue of Prospectus:
o Private Company: Cannot issue a prospectus.

o Public Company: Can issue a prospectus.

 6. Ending Words:
o Private Company: Must include "Private Limited" in the name.

o Public Company: Must include "Limited" in the name.

2. Comparative Study of Different Forms of Business Organization:

1. Meaning:
o Sole Trading Concern: Owned and controlled by one person.

o Joint Hindu Family Business: Owned by family members of a

Hindu family.
o Partnership Firm: Owned by two or more persons.

o Joint Stock Company: Incorporated, created by law, with

perpetual succession.
o Co-operative Society: Voluntary association formed to provide
services to members.
2. Registration:
o Sole Trading Concern and Joint Hindu Family Business: Not
required.
o Partnership Firm: Optional, but compulsory in some states like
Maharashtra.
o Joint Stock Company and Co-operative Society: Compulsory.

3. Number of Members:
o Sole Trading Concern: One member.

o Joint Hindu Family Business: No limit.

o Partnership Firm: Minimum 2, Maximum 50.

o Joint Stock Company: Private - 2 to 200; Public - 7 to unlimited.

o Co-operative Society: Minimum 10, no maximum limit.

4. Liability:
o Sole Trading Concern: Unlimited liability.

o Joint Hindu Family Business: Karta has unlimited liability; co-

parceners have limited liability.
o Partnership Firm: Unlimited and joint liability.

o Joint Stock Company and Co-operative Society: Limited

liability.
5. Stability:
 o Sole Trading Concern, Joint Hindu Family Business, and
Partnership Firm: Lack stability due to the potential death or
insolvency of owners.
o Joint Stock Company and Co-operative Society: Stable due to
separate legal entities and perpetual succession.
6. Capital:
o Sole Trading Concern and Joint Hindu Family Business:
Limited capital.
o Partnership Firm: More than Sole Trading Concern and Joint Hindu
Family Business, but less than Joint Stock Company.
o Joint Stock Company: Huge capital.

o Co-operative Society: More capital than small firms but less than
Joint Stock Companies.
7. Secrecy:
o Sole Trading Concern and Joint Hindu Family Business: Higher
business secrecy.
o Partnership Firm: Shared secrecy among partners.

o Joint Stock Company and Co-operative Society: Less business

secrecy.
8. Management:
o Sole Trading Concern: Sole trader manages the business.

o Joint Hindu Family Business: Managed by the Karta.

o Partnership Firm: All partners manage collectively.

o Joint Stock Company: Managed by a Board of Directors.

o Co-operative Society: Managed by a committee.

9. Government Control:
o Sole Trading Concern, Joint Hindu Family Business, and
Partnership Firm: Minimal control.
o Joint Stock Company and Co-operative Society: More
government control to protect shareholders and members.
 3 - FORMATION OF A COMPANY
Introduction
A company is an artificial legal entity created by law, which
comes into existence through a formal registration process. The
formation of a company involves incorporating the company by
following the procedures outlined in the Companies Act, 2013.
This process requires registering the company with the
Registrar of Companies in the state where the company's
registered office will be situated. The registration process
grants the company legal recognition and status .
Types of Companies Based on Minimum Number of Promoters and Capital
Structure
Based on Minimum Number of Promoters (Section 3 of the Companies Act, 2013):
1. Public Company:
o Requires a minimum of 7 promoters/persons.

2. Private Company:
o Requires a minimum of 2 promoters/persons.

3. One Person Company:

o Requires a minimum of 1 promoter/person.

Based on Capital Structure (Section 3(2) of the Companies Act, 2013):

1. Company Limited by Shares:
o Capital is raised by issuing shares, and members' liability is limited
to the unpaid value of the shares they hold.
2. Company Limited by Guarantee:
o Members guarantee a certain amount towards the company's
assets or costs in the event of winding up.
3. Unlimited Liability Company:
o Members have unlimited liability and are fully responsible for
covering the company's debts and liabilities.

Stages in the Formation of a Company

The formation of a company involves three key stages:
1. Promotion:
 o This is the initial phase where promoters undertake the idea of
forming a company, gather necessary resources, and prepare key
documents.
2. Incorporation:
o The legal process of registering the company with the Registrar of
Companies, following the rules outlined in the Companies Act, 2013.
3. Commencement of Business:
o After incorporation, the company begins its business operations.

Key Conditions for Company Formation (Section 3(1) of the Companies

Act, 2013):
i) The company must be formed for a lawful purpose.
ii) Minimum 7 promoters for a public company, 2 for a private company, and 1
for a One Person Company.
iii) All promoters must subscribe to the Memorandum of Association.
iv) Compliance with the provisions of the Companies Act, 2013, regarding
incorporation is mandatory.

Promotion in the Formation of a Company

Promotion refers to the process of taking all necessary steps to incorporate a
company according to the Companies Act, 2013.
Meaning of Promoters:
 Promoters are individuals, partners, companies, associations, or
syndicates responsible for forming a company.
 As defined in Section 2(69) of the Companies Act, 2013, a promoter is
someone:
1. Named in the prospectus or identified by the company in its annual
return.
2. Who has control over the company’s affairs, directly or indirectly.
3. Whose advice or directions the Board of Directors typically follows.
 A professional assisting the promoter (e.g., lawyer or accountant) is not
considered a promoter.
Role of Promoters:
1. Generate the idea of starting a business.
2. Define business objectives, capital requirements, and the scale of
operations.
3. Prepare key documents like the Memorandum of Association and Articles
of Association.
 4. Approach investors for capital.
5. Often nominate themselves as first directors and subscribe to the
company’s Memorandum and Articles.
6. Enter into pre-incorporation contracts on behalf of the company.
7. Have fiduciary duties to protect and promote the interests of the proposed
company, including disclosing any personal interests in company
transactions.
8. After incorporation, promoters are compensated for their efforts and
expenses (preliminary expenses), and the Board of Directors takes over
company management.
Steps in the Promotion of a Company:
1. Idea or Business Activity:
o The promoters develop a business idea based on factors like
competition, laws, and available resources.
2. Financial Plan:
o A financial plan is created, outlining capital needs and sources of
funding.
3. Prepare Draft Memorandum and Articles of Association:
o These critical documents are prepared for submission during the
incorporation process.
4. Enter Preliminary Contracts:
o Promoters may enter contracts (e.g., hiring offices) on behalf of the
company before incorporation.
5. Appoint First Directors:
o Promoters appoint the first directors who will manage the company
post-incorporation.
Incorporation of a Company
The Incorporation of a company involves a series of steps taken to legally
register a company under the Companies Act, 2013. The promoters decide
whether to form a public or private company based on the company's objectives,
scale, and capital requirements.
Steps in Incorporating a Company:
1. Obtain Digital Signature Certificate (DSC):
o A DSC is needed for electronic filing and is issued in the name of
one of the directors.
2. Register DSC with MCA:
 o The DSC must be registered with the Ministry of Corporate Affairs
(MCA) to enable official submissions.
3. Obtain Director Identification Number (DIN):
o Each director must obtain a unique identification number through
an application.
4. Apply for Reservation of Name:
o The company name is proposed and reserved with the Registrar of
Companies (ROC).
5. Finalize Memorandum and Articles of Association:
o These key documents outline the company’s purpose, structure,
and regulations.
6. Signing, Stamping, and Dating of Memorandum and Articles:
o The Memorandum and Articles of Association must be properly
signed, stamped, and dated.
7. Prepare Other Necessary Documents:
o Additional documents, such as the consent to act as directors and
declaration of compliance, are prepared.
8. Decide Address for Communication:
o A registered office address is provided for communication purposes.

9. Obtain a Statutory Declaration:

o A statutory declaration, affirming compliance with the Companies
Act, is required.
10.File Application and Documents for Incorporation with ROC:
o The application, along with all required documents, is submitted to
the ROC.
11.Obtain Certificate of Incorporation:
o Upon approval, the ROC issues the Certificate of Incorporation,
officially recognizing the company’s legal existence.
Certificate of Incorporation and Corporate Identity Number (CIN)
Contents of the Certificate of Incorporation:
1. The name of the company.
2. Date of issue of the Certificate of Incorporation.
3. Corporate Identity Number (CIN).
4. PAN and TAN of the company.
5. Signature of the Registrar with the date and seal.
Importance of the Certificate of Incorporation:
1. The Certificate acts as the birth certificate of the company, signifying its
legal existence from the date mentioned.
2. The company becomes a legal person, distinct from its members.
3. The company attains perpetual succession, continuing indefinitely
unless dissolved.
4. The company can now sue and be sued in its own name.
Corporate Identity Number (CIN):
 CIN is a 21-digit alphanumeric code issued by the Registrar of
Companies (ROC) at the time of incorporation, serving as the company’s
unique identity.
 It must be quoted in all official documents and communications of the
company.
CIN provides key information, including:
 Whether the company is listed (L) or unlisted (U).
 Industry code, state of incorporation, and year of incorporation.
 Type of company, e.g., public (PLC), private (PTC), or One Person
Company (OPC).
 The registration number assigned by ROC.
Example of CIN Structure:
Tata Steel Limited’s CIN: L27100MH1907PLC000260
 L: Listed
 27100: Industry code
 MH: Maharashtra (state code)
 1907: Year of incorporation
 PLC: Public limited company
 000260: ROC registration number
Activity: From the CIN, identify the type of company:
1. U74999TN2014OPC098340: Unlisted, One Person Company (OPC).
2. L28920MH1945PLC004520: Listed, Public Limited Company.
3. U72900KA2003PTC033028: Unlisted, Private Limited Company.

Commencement of Business
  Public companies and private companies without share capital can
start business activities immediately after receiving the Certificate of
Incorporation from the Registrar of Companies.
 Public and private companies with share capital, incorporated after
2nd November 2018, must obtain a Certificate of Commencement of
Business from the Registrar of Companies before:
o Starting business activities.

o Exercising borrowing powers.

This additional requirement ensures compliance and proper validation before

these companies can fully operate.

Steps to Obtain a Certificate of Commencement of Business

1. Filing of Declaration by Director:
o A company director must file a declaration with the Registrar of
Companies (ROC), stating that all subscribers to the Memorandum
have paid for their shares.
o The declaration must be verified by a Company Secretary,
Chartered Accountant, or Cost Accountant.
o This filing must be done within 180 days from the company's
incorporation.
2. File Verification of Registered Office:
o The company must submit a verification of its registered office to
the ROC.
3. Obtain License or Approval from Sectoral Regulator:
o Companies operating in regulated sectors like banking, insurance,
or securities must obtain approval from relevant regulators (e.g.,
RBI, SEBI) and submit this approval to the ROC.
4. Commencement of Business:
o After filing the required declaration and documents, the ROC issues
the Certificate of Commencement of Business.
o Public and private companies with share capital can then begin
business operations, issue shares to the public (via prospectus), or
borrow funds.
These steps ensure that the company is compliant before starting business
activities.
 4 - DOCUMENTS RELATED TO
FORMATION OF A COMPANY
Introduction to Documents Required for Incorporation of a Company
At the time of incorporation, a company must submit the following key
documents to the Registrar of Companies (ROC):
1. Memorandum of Association (MoA):
 o Defines the company's purpose, scope, and relationship with
shareholders.
2. Articles of Association (AoA):
o Outlines the internal rules and regulations governing the company's
management.
Additionally, if a public company plans to raise capital from the public, it must
issue a prospectus, inviting the public to purchase its shares or debentures.
These essential documents provide the legal framework for a company's
operations and relationship with shareholders.

Memorandum of Association
The Memorandum of Association (MoA) is a fundamental document for a
company, outlining its purpose and the range of activities it can undertake.
Definition:
1. Section 2(56) of the Companies Act, 2013:
o Defines the Memorandum as the legal document prepared during
the formation of a company, which can be altered in accordance
with company law provisions.
2. Lord Cairns:
o Describes the Memorandum as the company’s "charter," defining
the scope of the company’s powers and limitations. It outlines what
the company is authorized to do and what it cannot do.
In essence, the Memorandum of Association establishes the company’s
objectives, powers, and boundaries, serving as its constitutional document.

Features of Memorandum of Association

1. Primary Document:
o The Memorandum is a fundamental document stating the
company's aims and objectives.
2. Regulates External Relationships:
o It governs the relationship between the company and outsiders like
shareholders, creditors, and investors, helping them understand
what activities the company can legally undertake.
3. Required at Incorporation:
o Every company must prepare and submit the Memorandum of
Association at the time of incorporation to the Registrar of
Companies (ROC).
 4. Signed by Subscribers:
o It must be signed by a minimum of:

 7 persons for a public company,

 2 persons for a private company,
 1 person for a One Person Company.
o Subscribers must agree to take at least one share each, except in
guarantee companies without share capital.
5. Contains Specific Clauses:
o The Memorandum includes: a) Name Clause
b) Registered Office (Address) Clause
c) Objects Clause
d) Liability Clause
e) Capital Clause
f) Association/Subscription Clause
6. Difficult to Alter:
o It defines the company's nature and character, and altering it
requires following specific legal procedures.
7. Must Comply with the Companies Act:
o It cannot contain any provisions that contradict the Companies Act,
2013.
8. Acts Beyond Memorandum Are Ultra-Vires:
o Any act outside the powers of the Memorandum is considered Ultra-
Vires, meaning it is invalid.
9. Public Document:
o The Memorandum is a public document, and anyone dealing with
the company is assumed to be aware of its contents.
10.Prescribed Format:
o The Companies Act, 2013 provides formats for preparing the
Memorandum (Table A, B, C, D, and E) for different types of
companies.
This document sets the framework for the company's legal powers and
boundaries, ensuring clarity for both internal and external stakeholders.

Clauses of Memorandum of Association and Provisions for Alteration -

Name Clause
The Name Clause is an essential part of the Memorandum of Association,
specifying the company's name, which establishes its separate legal identity
from its members.
Choosing the Name:
1. The name must not be identical to or resemble an existing company’s
name.
2. It should not include words that would constitute an offense or offend any
section of people.
3. The name must not violate the Emblems and Names (Prevention of
Improper Use Act, 1950).
4. It should not infringe on any registered trademark.
5. The name must not imply a connection with the Central or State
Government or any local authority.
6. Public companies must end their name with "Limited," private companies
with "Private Limited," and One Person Companies (OPC) with "(OPC)" in
brackets.
Alteration of the Name Clause:
A company can change its name:
1. Voluntarily through a special resolution passed in the General Meeting.
2. Upon conversion from a public company to a private company, or vice
versa.
3. If directed by the Central Government due to name similarities with an
existing company or trademark.

Address Clause (Registered Office Clause)

The Address Clause in the Memorandum of Association specifies the state in
which the company's Registered Office will be located. The company must
establish its registered office within 30 days of incorporation.
Importance of a Registered Office:
1. It establishes the domicile or location of the company.
2. It is the official address for receiving communications, notices, and legal
documents.
3. Statutory books, records, and company documents are maintained there.
4. It determines the jurisdiction of courts for legal matters involving the
company.
Alteration of the Address Clause:
1. Within the same city/town:
 o No alteration in the Memorandum is required.

2. From one city/town to another within the same state:

o A special resolution must be passed in the General Meeting.

3. From one state to another:

o A special resolution and approval from the Regional Director
are required.

Object Clause and Doctrine of Ultra Vires

The Object Clause of the Memorandum of Association defines the purpose for
which a company is formed, specifying the main and incidental activities the
company can undertake. The objects must be legal, moral, and compliant with
the Companies Act and other laws.
Key Points of the Object Clause:
1. Main Objects: The primary activities for which the company is
established.
2. Incidental/Consequential Objects: Activities related to and resulting
from the main objects.
3. The company cannot engage in activities beyond or outside the scope of
its object clause.
Doctrine of Ultra Vires:
 Ultra Vires refers to actions taken beyond the powers of the
Memorandum.
 According to the Doctrine of Ultra Vires, any act outside the object
clause is null and void, with no legal effect, even if all members agree to it.
Effects of Ultra Vires Transactions:
1. Null and Void: Ultra vires acts are legally ineffective.
2. Injunction: Members can seek a court injunction to stop such acts.
3. Directors’ Liability: Directors may be personally liable for ultra vires
acts.
Purpose of the Doctrine:
 It protects stakeholders (shareholders, creditors, investors, banks) by
ensuring that the company uses funds only for the activities stated in the
object clause.
Alteration of Object Clause:
 A company may alter its object clause through a special resolution
passed in the General Meeting if necessary for its growth or survival.
The Liability Clause
The Liability Clause in the Memorandum of Association specifies the extent of
liability for a company's members.
Types of Liability:
1. Company Limited by Shares:
o The liability of members is limited to the unpaid amount on the face
value of their shares.
2. Company Limited by Guarantee:
o Members are liable to pay a guaranteed amount toward the
company’s assets or winding-up expenses.
3. Unlimited Liability Company:
o The members’ liability is unlimited, meaning they are fully liable
for the company’s debts and obligations.
Alteration of the Liability Clause:
 The Companies Act, 2013 does not provide any specific provisions for
altering the liability clause.
 Since the liability relationship is contractual between the company and its
members, any alteration must have the written consent of the
members.

The Capital Clause

The Capital Clause in the Memorandum of Association specifies the amount of
authorized capital with which the company is registered. This is the maximum
amount of capital the company is permitted to raise and is also called
Registered Capital. For companies with share capital, it includes:
 The total amount of share capital.
 The number of shares.
 The face value per share.
Alteration of the Capital Clause:
 The Articles of Association allow for the alteration of the capital clause
when needed, such as increasing authorized capital or converting shares
into stock.
 The capital clause can be altered by passing an Ordinary Resolution in
the General Meeting of the company.
The Association or Subscription Clause
The Association or Subscription Clause is the final clause in the
Memorandum of Association. It contains a declaration by the subscribers that
they are desirous of forming the company in accordance with the Memorandum
and agree to take a specified number of shares.
 For a Public Company, the Memorandum must be signed by at least
seven subscribers.
 For a Private Company, by at least two subscribers.
 For a One Person Company, by one subscriber.
Each subscriber must provide their name, address, and occupation, and the
Memorandum must be signed in the presence of at least one witness, who also
provides their details.

4.2 ARTICLES OF ASSOCIATION

Articles of Association is the second most important document which needs to be
filed with
the ROC along with the Memorandum at the time of incorporation of a Company.
This document is
subordinate (secondary) to the Memorandum. It is like the Bye-Laws of the
company as it contains
rules and regulations that governs the internal management of the company. It
defines the powers,
rights and duties of the Board of Directors and officers and also the manner in
which the business
of the company will be carried on. It establishes relationship between the
company and its members
and also between the members.

Articles of Association
As defined in Section 2(5) of the Companies Act, 2013, the Articles of
Association (Articles) is a legal document that outlines the internal rules and
regulations for the management of a company. While the Memorandum of
Association governs the company’s external relationships, the Articles focus on
the internal structure and management.
Key Points:
 1. The Articles define the powers, rights, and duties of the governing
body, procedures for issuing shares, handling share transfers, and
other operational matters.
2. The Companies Act, 2013 provides Model Articles (Table F, G, H, I, and
J) for various types of companies, but companies are free to modify or
adopt these regulations.
3. The Articles must not exceed the powers outlined in the Memorandum of
Association or contradict the Companies Act or other applicable laws.
4. The Articles must be signed by all subscribers of the Memorandum, along
with their details (name, address, occupation), in the presence of a
witness who attests the signatures.

Contents of Articles of Association

The Articles of Association outlines the internal management rules and
regulations of a company. While companies can adopt the Model Articles
provided by the Companies Act, 2013, they can also customize the Articles
based on their specific needs.
Typical Contents of Articles of Association:
1. Share Capital:
o Details about shares, their value, and the division into different
types.
2. Shareholder Rights:
o Rights of each class of shareholders and the procedure for altering
those rights.
3. Share Allotment and Forfeiture:
o Procedures for allotment, making calls on shares, and forfeiture of
shares.
4. Transfer and Transmission of Shares:
o Rules and procedures for transferring and transmitting shares.

5. Lien on Shares:
o The company’s right to hold shares until a member’s debts are paid.

6. Alteration of Share Capital:

o Rules for increasing, altering, or reducing share capital.

7. Directors and Officers:

o Procedures for the appointment, remuneration, powers, and duties
of directors and officers.
8. Conversion of Shares:
 o Provisions for converting shares into stock and vice versa.

9. Meetings and Voting:

o Procedures for Board, Committee, and General Meetings, including
voting rights, quorum, proxy, polls, and adjournment.
10.Accounts and Dividend:
 Rules for auditing, transferring money to reserves, and declaring
dividends.
11.Borrowing Powers:
 The company’s borrowing powers and modes of borrowing.
12.Share Certificates:
 Procedures for issuing share certificates and duplicate certificates.
13.Committees:
 Constitution of committees such as the Audit Committee, Remuneration
Committee, and Corporate Social Responsibility (CSR) Committee.
14.Winding Up:
 Provisions related to the winding up of the company.
15.Arbitration:
 Dispute resolution mechanisms.
16.Indemnity:
 Rules related to indemnifying officers and directors.
Additional Provisions for Private Companies:
 Limit the number of members to 200.
 Restrict the transfer of shares.
 Prohibit inviting the public to purchase shares, debentures, or
securities.

Entrenchment of Articles / Entrenched Articles

Entrenched Articles are specific provisions within the Articles of Association
that require a more stringent procedure for alteration than just passing a special
resolution. For example, altering the company's name may require 9/10th
majority approval instead of the usual majority.
 Entrenchment can be applied either at the time of formation of the
company or added later through the prescribed procedure in the
Companies Act.
  These provisions ensure that critical decisions require higher consensus,
providing additional protection for certain aspects of the company.

Alteration of Articles of Association

The Companies Act allows a company to alter its Articles of Association by
passing a special resolution in the General Meeting, provided it adheres to the
provisions of the Act and the conditions of the Memorandum of Association.
The alterations are binding on members just like the original Articles.
Ways to Alter the Articles of Association:
1. Adopting a new set of Articles.
2. Deleting an article.
3. Adding or inserting a new article.
4. Substituting an existing article.
5. Amending an article.

Doctrine of Indoor Management

The Doctrine of Indoor Management protects outsiders dealing with a
company, recognizing that they cannot be expected to know the internal
workings of the company. It assumes that the company and its officers act in
accordance with their Memorandum of Association and Articles of
Association.
The doctrine states that when outsiders enter into a contract with the company,
they are not required to inquire whether internal procedures have been properly
followed. As long as they act based on the company's Memorandum and
Articles, they are protected from any irregularities in the company’s internal
processes.

Prospectus
A Prospectus is a document issued by a public company when raising capital
from the public by offering shares. It provides detailed information about the
company and invites investors to purchase its securities.
Definition:
As per Section 2(70) of the Companies Act, 2013, a prospectus includes any
document that invites offers from the public to subscribe to or purchase a
company's securities. This also includes specific forms like Red Herring
Prospectus, Shelf Prospectus, or any notice, circular, or advertisement
related to securities.
The prospectus must contain accurate and factual information, as investors rely
on this information when making investment decisions.
Types of Prospectus:
1. Abridged Prospectus
2. Shelf Prospectus
3. Red Herring Prospectus
4. Letter of Offer

1.Abridged Prospectus:
 A brief version of the full prospectus containing key information. It is
attached to the application form during a public offer of securities.
2. Shelf Prospectus:
 Used by a public company to raise funds multiple times over a year
without issuing a new prospectus for each offering. It remains valid for one
year, but the company must file an Information Memorandum with the
ROC for each subsequent offer, updating material facts.
3. Red Herring Prospectus:
 An incomplete prospectus, typically used for an Initial Public Offering
(IPO) or under the Book Building process. It does not include details
like the number of securities or issue price. It must be filed with the ROC
at least 3 days before the offer opens.
4. Letter of Offer:
 Issued during a Rights Issue, offering additional shares to existing
shareholders in proportion to their holdings.
5. Offer Letter:
 Used in private placements, when a company offers securities to a
select group of investors, detailing the offer.

Contents of a Prospectus
A Prospectus must include specific details and declarations to ensure
transparency for potential investors. Below are the key contents:
1. Information and Reports:
 o The prospectus must provide the name of the company, its
registered office address, phone numbers, email, details of the
securities being offered (type, number, price), and the names of
the Lead Merchant Banker and Registrar to the Issue.
o It must also specify the stock exchanges where the shares will be
listed, along with the opening and closing dates of the issue and
general risk clauses.
o Financial reports must be included as per SEBI regulations.

2. Declaration:
o The company must declare that it has complied with all relevant
laws, including the Companies Act, Securities Contracts
(Regulation) Act, 1956, and the SEBI Act, 1992, and that there
is no contradictory information.
3. Statement of an Expert:
o If the prospectus includes a statement from an expert (e.g., a
Company Secretary, Chartered Accountant, Valuer), the
expert must provide written consent for including their statement.
4. Other Matters:
o Any additional content prescribed by the Companies Act.

Statutory Requirements for a Prospectus

The Companies Act mandates several statutory requirements to ensure the
legality and transparency of a prospectus issued by a company:
1. Draft Prospectus to be Made Public:
o A draft prospectus filed with SEBI must be made available to the
public and the stock exchanges where the company intends to list
its shares.
2. Signed by Directors:
o The prospectus must be signed by all directors or by their duly
authorized attorney.
3. Registration of Prospectus:
o A copy of the prospectus must be registered (filed) with the
Registrar of Companies (ROC) before it can be issued to the
public.
4. Dating of Prospectus:
o The prospectus must be dated, with the date considered the date
of publication.
5. Issuing Prospectus to the Public:
 o The prospectus must be issued to the public within 90 days of
registering it with the ROC.

Penalty for Non-Compliance with Prospectus Regulations

If a Prospectus is issued in violation of the statutory provisions, the following
penalties apply:
1. Company's Liability:
o The company will be fined between ₹50,000 and ₹3,00,000.

2. Individual Liability:
o Any person knowingly involved in issuing such a prospectus may
face imprisonment of up to 3 years, a fine between ₹50,000
and ₹3,00,000, or both.

Mis-statements in a Prospectus
A mis-statement in a prospectus refers to any information that is either
misleading in form or content, or where a statement's inclusion or omission
misleads the reader. As investors rely on the prospectus to make informed
decisions, it is crucial that all information is accurate.
If an investor purchases shares based on a prospectus containing misleading or
omitted material facts, they can take legal action against the company. The
company and the individuals responsible for issuing such a prospectus face the
following liabilities:
Liability for Mis-statement:
1. Civil Liability:
o The company must pay compensation to investors for any loss
suffered due to the mis-statement.
2. Criminal Liability:
o The company or its officers may face fines, imprisonment, or
both for issuing a prospectus with mis-statements.

Distinction Between Memorandum of Association and Articles of

Association
1. Meaning:
 o Memorandum of Association defines the aims and objectives
of the company.
o Articles of Association contains the rules and regulations for
internal management.
2. Status:
o The Memorandum is the primary document, necessary for
forming a company.
o The Articles is the second most important document,
subordinate to the Memorandum.
3. Scope:
o The Memorandum sets the boundaries beyond which the
company cannot act.
o The Articles provides regulations within the boundaries set by the
Memorandum.
4. Contents:
o Memorandum: Includes the company's name, registered office,
capital structure, objectives, and liability of members.
o Articles: Focuses on internal matters like share allotment,
director duties, and winding up procedures.
5. Relation:
o The Memorandum defines the relationship between the company
and outsiders.
o The Articles governs the relationship between the company and
its members.
6. Contradiction:
o The Memorandum cannot contradict the Companies Act or other
laws.
o The Articles cannot contradict either the Companies Act or the
Memorandum.
7. Alteration:
o Altering the Memorandum is more complicated and may require
approval from the Central Government.
o Altering the Articles is simpler, usually requiring only a special
resolution.
 5 MEMBERS OF A COMPANY

Introduction
An organization or institution is formed for various purposes like education,
entertainment, sports, health, or business. Although the organization itself
is a non-living entity, it is structured with clear objectives and relationships, and
it is managed by persons associated with it. These individuals are called
Members. In essence, an organization exists by the Members, of the
Members, and for the Members, as they are the key to its formation,
operation, and purpose.

Meaning of Member
A Member is a person whose name is entered in the Register of Members of a
company. This includes holders of equity shares whose names are recorded as
beneficial owners in the depository's records.
To become a member of a company, two key conditions must be met:
1. An agreement in writing to take shares of the company.
2. Registration of the person in the company's Register of Members.

Member vs. Shareholder

While Member and Shareholder are often used interchangeably, they may not
always refer to the same person. Below are cases where a person can be a
Member without being a Shareholder and vice versa.
I) Member without being a Shareholder:
1. Signatories to the Memorandum of Association:
o These individuals are Members but not Shareholders until shares
are allotted to them.
2. Company Limited by Guarantee:
o Such companies do not have share capital, so they only have
Members, not Shareholders.
3. Membership by Acquiescence/Estoppel:
o If a person misrepresents themselves as a Member or allows their
name to be entered into the Register of Members, they are
considered Members even without owning shares.
4. Transfer of Shares:
o The Transferor (Seller) remains a Member until the name is
updated in the Register of Members, though they no longer hold the
shares.
5. Death of a Member:
o After the death of a Member, their legal representative holds the
shares, but the deceased remains a Member until the shares are
transmitted.
6. Insolvency of a Member:
o An insolvent Member’s shares are held by the court-appointed
Official Receiver, and the Member retains their status until changes
are registered.
II) Shareholder without being a Member:
 Transferee (Buyer of shares), Official Receiver (in insolvency), or
Legal Heir (in case of death):
o They hold the shares but are not considered Members until their
names are entered into the Register of Members.

Eligibility of Membership in a Company

To be a Member of a company, an entity (person or organization) must be
competent to make contracts, as buying shares is considered a contractual
agreement. The eligibility of individuals and organizations is subject to the
Companies Act, Memorandum, and Articles of Association.
I) Individuals:
1. Minor:
o A minor cannot be a member directly, but a guardian can enter into
share transactions on their behalf.
2. Insolvent:
o An insolvent person cannot be a member as their beneficial rights
are held by an Official Receiver.
3. Insane/Lunatic:
o Those unable to enter contracts due to insanity are ineligible for
membership.
4. Foreigner:
o Foreigners can be members, subject to the Foreign Exchange
Management Act (FEMA) 1999.
II) Organizations:
1. Company:
o A company can be a member of another company, but it cannot
invest in its own shares.
2. Co-operative Society:
o Eligible for membership as a registered entity.

3. Limited Liability Partnership (LLP):

o Can be a member as it is a legal entity.

4. Hindu Undivided Family (HUF):

o HUF can be a member, but shares are registered only in the name
of the Karta.
5. Partnership Firm:
o The firm itself cannot be a member, but shares can be held in the
individual partners' names.
6. Trust:
o A registered trust can hold shares and be a member.

Eligibility at a Glance:
 Eligible (p): Foreigner, Company, Co-operative Society, LLP, Karta of
HUF/Partners, Trust.
 Not Eligible (x): Minor, Insolvent, Insane, Partnership Firm (as an entity).
Acquisition of Membership in a Company
A person can become a Member of a company through various means:
1. By Subscribing to the Memorandum:
o The subscribers to the Memorandum are the first members of the
company. This includes 7 members for a public company, 2 for a
private company, and 1 for a One Person Company (OPC).
2. By Application and Allotment of Shares:
o A person applies to purchase company shares, and upon
acceptance and allotment, they become a shareholder and
member, with their name entered into the Register of Members.
3. By Holding Shares in Dematerialized Form:
o A person whose name appears as the beneficial owner in the
depository's records is considered a member.
4. By Transfer:
o A person who purchases shares from an existing member becomes
a member after the company accepts the transfer request.
5. By Transmission of Shares:
o In cases of death, insolvency, or insanity, shares are transferred
by law to legal representatives, the Official Receiver, or an
administrator, who becomes a member.
6. Nominee of One Person Company (OPC):
o In the event of the death of an OPC member, the nominee
mentioned in the Memorandum becomes the sole owner.
7. By Acquiescence:
o If a person's name is mistakenly entered or remains on the
Register of Members, and they fail to correct it, they are
considered a member under the Principle of Estoppel and are
liable as a member.

Cessation/Termination of Membership
A person ceases to be a Member of a company in the following situations:
1. Transfer of Shares:
o When the member transfers their shares to another person.

2. Death or Insolvency:
o In case of the member’s death or insolvency, their membership is
terminated.
 3. Sale of Shares in a Buy-back Offer:
o If the member sells their shares during a buy-back offer by the
company.
4. Forfeiture of Shares:
o When the company forfeits the shares due to non-payment or
breach of contract.
5. Surrender of Shares:
o If the member surrenders their shares to the company.

6. Lien Over Shares:

o When the company exercises its lien over the member's shares to
settle debts or liabilities.
7. Redemption of Redeemable Preference Shares:
o A holder of redeemable preference shares ceases to be a
member when the company redeems these shares.
8. Rescinding Membership Due to Fraud:
o If the member rescinds the contract of membership due to fraud or
misrepresentation in the company's prospectus.
9. Winding up of the Company:
o Membership terminates when the company is wound up.

Rights, Duties, and Liabilities of a Member

Members of a company have specific rights and also need to fulfill certain
duties and liabilities. Below are the key rights, duties, and liabilities of a
member.
Rights of Members:
1. Right to Access Books and Documents:
o Members can obtain and inspect important company documents
such as the Memorandum and Articles of Association, financial
reports, and various registers.
2. Right to Make Fundamental Corporate Decisions:
o Members have exclusive authority to make significant decisions like
changing the registered office, increasing capital, amending the
Articles, mergers, and winding up.
3. Right to Participate in General Meetings:
 o Members are entitled to receive meeting notices, attend and vote at
meetings, appoint proxies, and demand polls or extraordinary
general meetings.
4. Right to Appoint and Remove Directors:
o Members can appoint or remove directors of the company.

5. Right Regarding Accounts and Audits:

o Members approve annual accounts, appoint and remove auditors,
and determine their remuneration.
6. Right to Participate in Company Profits:
o Members can approve dividends and are entitled to receive them
within 30 days of declaration.
7. Shareholding Rights:
o Members have the right to receive share certificates, transfer
shares, and benefit from rights or bonus issues.
8. Right to Receive Surplus Assets:
o Upon winding up of the company, members are entitled to a share
in the surplus assets after all liabilities are settled.
9. Right to Class Action Suit:
o Members can initiate class action suits against the company or its
directors in cases of fraud, unlawful acts, or misleading audit
reports.

Duties and Liabilities of a Member

Members of a company have specific duties and liabilities to fulfill:
1. Bound by Articles of Association:
o Members are obligated to adhere to all the covenants and rules
outlined in the company's Articles of Association.
2. Liability to Pay Full Value of Shares:
o In companies with limited liability, members are required to pay
the full face value of the shares they hold.
3. Personal Liability in Unlimited Liability Companies:
o In an unlimited liability company, members are personally
responsible for all the debts of the company.
 6 - DIRECTORS AND KEY MANAGERIAL
PERSONNEL OF A COMPANY

Directors and Key Managerial Personnel of a Company - Introduction

A company, as an artificial entity, requires a separation of ownership and
management due to the distinct roles of shareholders (owners) and
Directors (managers). Shareholders own the company, while Directors and Key
Managerial Personnel (KMP) manage its day-to-day affairs. Several factors
contribute to this separation:
1. Large Business Scope:
o The vast scope of a company's operations necessitates professional
management.
2. Scattered Shareholders:
o Shareholders are typically dispersed and cannot practically manage
the company.
3. Disinterest in Management:
o Many shareholders are not interested in managing the day-to-day
operations.
 4. Lack of Capability:
o Many shareholders lack the necessary qualifications or expertise to
effectively manage the company.

Hierarchy of Company Management

The management hierarchy of a company is structured to ensure effective
leadership and operational efficiency. At the top level management, key roles
are defined as follows:
1. Shareholders:
o The owners of the company.

2. Board of Directors:
o Responsible for overall governance and strategic direction, elected
by shareholders.
3. Managing Director (MD) and Chief Executive Officer (CEO):
o Lead the executive management team, overseeing the entire
company's operations.
4. Chief Officers (C-Suite Executives):
o CFO (Chief Financial Officer): Manages the company's financial
strategy and operations.
o COO (Chief Operating Officer): Oversees the day-to-day
operational functions.
o CLO (Chief Law Officer): Handles legal matters and ensures
compliance.
o CTO (Chief Technology Officer): Leads technology and
innovation.
o CMO (Chief Marketing Officer): Directs marketing and customer
outreach strategies.
o CS (Company Secretary): Ensures regulatory compliance and
maintains company records.
5. Managers:
o Account Manager, Regional Manager, Stores Manager,
Technical Manager, and Marketing Manager: Lead specific
functional areas and report to the C-suite officers.
6. Teams:
o Support the managers in executing tasks within their respective
departments.
Meaning
As per Section 2(34) of the Companies Act, a Director is defined as a person
appointed to the Board of Directors of a company.
In simple terms, a Director is an individual responsible for managing,
directing, and supervising the affairs and operations of the company. Directors
play a key role in ensuring the company is run effectively and in accordance with
its goals and legal obligations.

Provisions and Rules for Appointment of a Director (Section 149)

Section 149 of the Companies Act outlines the following key provisions for the
appointment of a Director:
1. Only Individuals:
o Only an individual can be appointed as a director; a body
corporate, association, or firm cannot serve as a director.
2. Minimum Number of Directors:
o Public Company: Minimum 3 directors.

o Private Company: Minimum 2 directors.

o One-Person Company (OPC): Minimum 1 director.

3. Maximum Number of Directors:

o A company can appoint up to 15 directors. If more than 15 are
needed, a special resolution must be passed.
4. Woman Director Requirement:
o Prescribed classes of companies must appoint at least one woman
director.
5. Resident Director Requirement:
o There must be at least one director who has stayed in India for
at least 182 days during the financial year.
6. Independent Directors:
o Every listed public company must have at least 1/3rd of its
Board composed of independent directors.
7. Limit on Directorships:
o A person can hold directorship in a maximum of 20 companies at
the same time, with a limit of 10 public companies.
Eligibility Criteria for Directors:
1. Individual:
o Only individuals can apply for directorship.

2. Director Identification Number (DIN):

o The person must have a DIN to be eligible for appointment as a
director.

Director Identification Number (DIN)

A Director Identification Number (DIN) is a unique identifier for individuals
serving as directors or intending to be directors of a company. Key aspects of DIN
include:
1. Unique Identification Number:
o DIN is a unique number assigned to each director or prospective
director.
2. Mandatory for Directors:
o Every director must acquire a DIN before being appointed.

3. Single DIN for Multiple Directorships:

o An individual needs only one DIN, regardless of how many
companies they serve as a director.
4. Not Cancelled on Resignation:
o DIN remains active even after a person resigns as a director.

5. Application Process:
o DIN is obtained through an online application process, which
requires a photograph, proof of residence, and attestation by a
notary or certified official.
6. Pre-requisite for E-filing:
o DIN is necessary for e-filing company documents.

7. DIN on Authorized Documents:

o Every document authorized by a director must mention their DIN
along with their name.

Importance of Director Identification Number (DIN)

1. Informed Decision-Making for Investors:
 o DIN enables investors to assess the top management of a
company, helping them make more accurate and informed
decisions.
2. Addressing Company Disappearances:
o DIN helps in tracking directors and handling issues related to
companies that disappear after raising money from the public.
3. Detection and Handling of Director Offences:
o DIN allows for detection and accountability in cases where a
director commits offences, making it easier to manage legal or
regulatory violations.

Qualification of a Director
The Companies Act does not mandate any specific academic or professional
qualifications for a director. Additionally, there is no requirement for directors
to hold shares in the company unless specified in the company's Articles of
Association.
Key points:
1. No Mandatory Qualifications:
o The Act does not prescribe any formal education or professional
experience for directors.
2. No Shareholding Requirement:
o Directors are not required to hold shares in the company, unless the
Articles of Association specify a minimum share qualification.
3. Voluntary Shareholding:
o A director may choose to hold shares in the company, but it is not
compulsory unless stated in the Articles.

Types of Directors
Different types of Directors play specific roles in a company, depending on their
appointment and responsibilities. Here are key types of directors:
1. First Directors:
o Appointed by promoters during the company's incorporation. They
serve until the first Annual General Meeting (AGM).
2. Rotational Directors:
 o These directors retire by rotation and are eligible for re-
appointment. For public companies, 2/3rd of the Board must retire
by rotation, and 1/3rd of them retire at each AGM.
3. Additional Director:
o Appointed by the Board as authorized by the Articles, and they hold
office until the next AGM.
4. Alternate Director:
o Appointed by the Board to act in the place of a director who is
absent for at least 3 months.
5. Woman Director:
o Mandatory for:

1. Listed companies.
2. Public companies with:
 Paid-up share capital of ₹100 crores or more, or
 Turnover of ₹300 crores or more.
6. Nominee Director:
o Nominated by a major shareholder like a financial institution to
represent and safeguard its interests on the Board.
7. Executive Director (Whole Time Director):
o In full-time employment with the company, involved in day-to-
day management with specific managerial responsibilities (e.g.,
Marketing Director, Finance Director).
8. Non-Executive Director:
o Not involved in day-to-day management. They provide outside
perspectives and independent opinions.
9. Independent Director:
o Defined under Section 149, they are directors who are not
Managing Directors, Whole Time Directors, or Nominee
Directors.

Term of Independent Director

1. Term Duration:
o An Independent Director can hold office for a term of up to five
(5) consecutive years and is eligible for reappointment.
2. Maximum Terms:
 o An Independent Director cannot hold office for more than two (2)
consecutive terms.

Qualification of Independent Directors

An Independent Director is expected to have appropriate skills, experience,
and knowledge in the following areas:
 Law
 Management
 Sales and Marketing
 Administration
 Corporate Governance
 Technical Processes/Operations related to the company's business

Number of Independent Directors (Section 149(4))

The Companies Act, 2013 specifies the required number of Independent
Directors based on the type of company:
1. Listed Public Company:
o Must have 1/3rd of its total number of directors as Independent
Directors.
2. Public Companies with the following criteria:
o Paid-up share capital of ₹10 crores or more, or

o Turnover of ₹100 crores or more, or

o Aggregate outstanding loans, debentures, or deposits

exceeding ₹50 crores
o Must have at least two (02) Independent Directors.

Small Shareholder’s Director (Section 151)

Under Section 151 of the Companies Act, 2013, listed companies may elect
one director to represent the small shareholders.
 This appointment is optional, not mandatory.
 It is aimed at giving small shareholders a voice in the company's
governance.
Appointment of Directors
The Companies Act, 2013 provides different methods for the appointment of
Directors under various sections:
A) First Directors (Section 152):
 Usually appointed by the promoters, as stated in the Articles.
 If the Articles don't specify, the signatories of the Memorandum are
deemed to be the first directors. In an OPC, the single member is deemed
to be the first director.
B) Appointment by Members (Section 152):
 Subsequent directors in a public company are appointed by the
members at the Annual General Meeting (AGM), generally constituting
2/3rd of the Board, and they are subject to retirement by rotation.
C) Appointment by the Board (Section 161):
1. Additional Directors: Appointed by the Board as per the Articles.
2. Casual Vacancy (Section 161(4)): Arises due to death, resignation, or
other reasons, and the Board fills the vacancy until the end of the original
director's term.
3. Alternate Directors: Appointed by the Board when a director is out of
the state for more than 3 months. The appointment is valid until the
original director returns.
4. Nominee Director: Appointed by the Board, as nominated by a financial
institution or another entity.
D) Appointment by the Tribunal (Section 241):
 The Tribunal may appoint directors on a petition from members to address
mismanagement.
E) Appointment by Central Government (Section 167):
 The Central Government may appoint directors when the existing
directors vacate office due to disqualification (e.g., conviction by a
court).
F) Proportional Representation (Section 163):
 Directors may be appointed by proportional representation or
straight majority as provided in the Articles.

Powers of the Directors (Section 179)

Directors, acting as a Board of Directors, have certain powers as prescribed
under Section 179 of the Companies Act, but they must exercise these powers
collectively rather than individually. Key points regarding the powers of directors
include:
1. Team Decision-Making:
o Directors act as a team through the Board of Directors, not
individually.
2. Shareholder-Exclusive Powers:
o The Board cannot exercise powers that are specifically reserved for
shareholders in general meetings, as outlined in the Act,
Memorandum, and Articles.
3. Bound by Provisions:
o The exercise of powers is subject to the provisions of the
Companies Act, Memorandum, and Articles of Association.
4. Two Ways to Exercise Powers:
o Powers can be exercised by:

1. Passing a Resolution at the Board Meeting.

2. Delegating to various committees created by the Board.
Examples of Board Powers:
a) Borrowing money for the company.
b) Investing funds of the company.
c) Issuing securities in India or abroad.
d) Diversifying the business operations.
e) Appointing or removing Key Managerial Personnel (KMP).
f) Filling casual vacancies in the Board.
g) Recommending dividends to shareholders.
h) Appointing the first auditors of the company.
i) Remitting or giving time for debt repayment by a director.

Duties of a Director
A Director holds a fiduciary position, meaning they are entrusted with the
responsibility to act in good faith, loyalty, and care toward the company.
Directors must prioritize the company's interests over personal gain and avoid
conflicts of interest.
Directors' duties are classified into two main categories:
I) Statutory Duties:
These are duties imposed by the Companies Act, such as:
 1. Filing the Return of Allotments.
2. Acting in accordance with the Articles of Association.
3. Disclosing interest in transactions.
4. Attending Board Meetings.
5. Appointing the first auditors of the company.
II) General Duties:
1. Duty of Good Faith:
o Directors must act in the best interest of the company and its
shareholders, both present and future.
2. Duty of Care:
o Directors must exercise reasonable care and diligence in their
duties, akin to the standard of care of an ordinary prudent
person.
3. Duty Not to Delegate:
o Directors are expected to personally perform their duties unless
delegation is allowed by the Act, Articles of Association, or in
urgent circumstances.

Liabilities of Directors
Directors of a company are subject to various forms of liability depending on
their actions and responsibilities. These include:
1. Liability to the Company:
o Directors can be held liable to the company for any breach of
duty, negligence, or mismanagement that causes harm to the
company.
2. Liability to Third Parties:
o Directors may be liable to third parties (such as creditors or other
stakeholders) if they act in bad faith, make misrepresentations,
or cause loss or damage due to wrongful acts.
3. Liability for Breach of Statutory Duties:
o Directors are liable if they fail to comply with statutory duties as
prescribed by the Companies Act (e.g., failing to file required
documents or making wrongful financial disclosures).
4. Liability for Acts of Co-Directors:
 o Directors may be liable for the acts of co-directors if they
knowingly participated in or failed to prevent any wrongful acts
committed by others on the Board.
5. Criminal Liability:
o Directors may face criminal liability for offences like fraud,
misrepresentation, or insider trading. This can result in fines,
imprisonment, or both.

Legal Position of Directors

The Companies Act does not explicitly define the legal position of Directors,
but based on their roles and responsibilities, they are often viewed in the
following capacities:
1. Directors as Agents:
o Since a company is an artificial entity, Directors act on its behalf,
representing it in dealings with outsiders. They are liable as agents,
while the company is considered the principal. Directors must act
with skill, care, and diligence.
2. Directors as Managing Partners:
o Directors act as representatives of shareholders in managing
the company's affairs. They hold vast management powers,
including issuing shares, raising loans, and investing funds.
Directors are often significant shareholders themselves, making
them the most active participants in the company's management.
The Board of Directors functions as the supreme policy and
decision-making body.
3. Directors as Trustees:
o Directors are trustees of the company's assets and the
shareholders' interests. They must act honestly and faithfully,
ensuring that the company’s funds and resources are used
responsibly and for the company’s benefit. Directors are expected
to account for all funds and safeguard the company's assets.
Directors vs. Employees:
Directors are elected representatives of shareholders with defined rights
and powers, unlike employees, who are bound by their employment
contracts and subject to the control of the employer. Therefore, Directors
are not considered employees of the company due to their independent roles
and responsibilities.

Remuneration of Directors (Section 197)

Directors and managerial personnel such as Managing Directors are entitled to
managerial remuneration, which can be in the form of:
 Monthly payments like salary.
 A specified percentage of net profits.
 Commission or sitting fees for attending Board or Committee meetings.
Key Points:
1. No Automatic Entitlement:
o Directors do not have an automatic right to remuneration; it
depends on the company’s decisions.
2. Limit on Remuneration:
o The total managerial remuneration payable by a public
company to its Directors, Managing Directors, and others should
not exceed 11% of the net profit in a financial year.
o This 11% cap excludes sitting fees paid for attending meetings.

Removal of a Director (Section 169 and 402)

A Director may be removed from office either by:
1. Shareholders under Section 169.
2. Tribunal under Section 402.
Vacation of Office by a Director (Section 167):
A Director's office automatically becomes vacant under the following conditions:
1. Disqualification (Section 164):
o A person cannot be appointed as a Director if disqualified due to
unsound mind, insolvency, or conviction by court.
2. Absenteeism from Board Meetings (Section 167):
o If the Director is absent from Board meetings for 12 consecutive
months without permission, they must vacate office.
3. Contravention of the Act:
o If the Director has violated Section 184 by entering into contracts
or arrangements where they have a direct or indirect interest.
4. Failure to Disclose Personal Interest:
o If the Director fails to disclose their personal interest in any
contract involving the company.
5. Disqualification by Court or Tribunal:
 o The Director must vacate office if disqualified by a court or
tribunal order.
6. Imprisonment for an Offense:
o If convicted of an offense and sentenced to imprisonment for six
months or more, the Director must vacate office.
7. Provision of the Act:
o A Director must vacate office if removed under the provisions of the
Companies Act.

Key Managerial Personnel (KMP) of the Company

Key Managerial Personnel (KMP) are individuals who assist the Board of
Directors in ensuring efficient and effective management of the company. They
function under the supervision and control of the Board.
According to Section 2(51) of the Companies Act, KMP includes the following
roles:
1. CEO (Chief Executive Officer) or Managing Director or Manager
2. Company Secretary (CS)
3. Whole-Time Director (WTD)
4. Chief Financial Officer (CFO)
5. Any other officer as prescribed by law
Section 203 - Requirements for KMP in Listed and Public Companies:
 Every listed company and public company with a share capital of
₹10 crores or more is required to appoint the following whole-time
KMP:
1. Managing Director (MD) or CEO or Manager, or in their absence,
a Whole-time Director.
2. Company Secretary (CS).
3. Chief Financial Officer (CFO).
Restrictions on Holding Multiple Positions:
 Whole-time KMP cannot hold office in more than one company
simultaneously, except in the case of a subsidiary, unless they obtain
permission from the Board.

The Managing Director (Section 2(54))

A Managing Director is a Director who is entrusted with substantial powers
of managing the company's affairs through the company's Articles of
Association, an agreement, or a resolution passed by the General Meeting
or the Board of Directors.
Appointment of Managing Director:
The appointment of a Managing Director can be made through:
1. An Agreement with the company.
2. A Resolution passed by the General Meeting.
3. A Resolution passed by the Board of Directors.
4. A clause in the company's Articles of Association.
 The Board of Directors appoints the Managing Director, and the terms
and conditions must be approved by the Board and confirmed by a
Resolution at the next General Meeting.
Term of Appointment:
 The term of a Managing Director is five years.
Disqualification for the Post of Managing Director:
1. Person under 21 or over 70 years old (special resolution required for
appointment over 70).
2. An undischarged insolvent or previously adjudged insolvent.
3. A person who has suspended payments to creditors or compromised
with them.
4. A person convicted by a court and sentenced to imprisonment for more
than six months.
Powers and Duties of the Managing Director:
1. Manages the affairs of the company.
2. Powers and duties are defined by:
o The agreement with the company.

o The company's Memorandum and Articles of Association.

o Resolutions passed by the Board and Members.

3. Entrusted with substantial powers of management.

4. Powers may relate to specific divisions of the business.
5. A company may appoint more than one Managing Director.
6. Functions under the supervision and control of the Board of Directors.
7. Must be a Director of the company.
8. Fulfill the responsibilities and liabilities of an ordinary director.
Whole Time Director (WTD) (Section 2(94))
1. A Whole Time Director (WTD) is a director who is in full-time
employment with the company.
2. The WTD devotes his entire time to working with the company.
3. He is often referred to as an employee director of the company.
4. Unlike the Managing Director, the WTD does not exercise substantial
powers of management.
5. The WTD primarily focuses on performing important administrative
functions within the company.

The Manager (Section 2(53))

1. Manager is any individual appointed to manage the whole or
substantially whole affairs of the company, subject to the
supervision, control, and direction of the Board.
2. The Manager is responsible for managing the company's operations but
does so under the authority of the Board.
3. The position of Manager can be held by a director or any other
individual who occupies the position of a manager, regardless of their
title.
4. A Manager does not need to be a director of the company.
5. The company can have only one Manager at a time.
6. The law allows the appointment of either a Managing Director or
Manager, but not both simultaneously.
Additional Clarifications:
1. Prohibited: Appointment of both a Managing Director and Manager at
the same time is not allowed.
2. Allowed: A Whole Time Director and Manager can be appointed
simultaneously.
3. Allowed: A Managing Director and Whole Time Director can be
appointed together.
4. Allowed: A company can have more than one Managing Director
simultaneously.

Company Secretary (Section 2(24))

 1. Definition: A Company Secretary is appointed to perform the functions of
a company secretary under the Companies Act. They must be a member
of the Institute of Company Secretaries of India (ICSI).
2. Mandatory Appointment:
o Listed companies.

o All other companies with a paid-up share capital of ₹5 crore or

more must appoint a full-time company secretary.
3. Appointment Process: The whole-time company secretary is appointed
by a resolution of the Board of Directors, which decides the terms,
conditions, and remuneration.
4. Limitations: A whole-time company secretary cannot hold office in more
than one company, but can be a director in another company with the
Board’s permission.
5. First Secretary:
o Appointed by promoters during the formation of the company,
referred to as a Pro-tem Secretary.
o The Pro-tem Secretary may or may not become the regular
secretary once the Board formally appoints a company secretary.
6. Pro-tem Secretary Role: The temporary Pro-tem Secretary assists with
the formalities during the company’s formation.
7. Registering Appointment: The appointment of the company secretary
must be recorded in the Register of Directors and key managerial
personnel and their shareholdings.

Duties of a Company Secretary

The duties of a company secretary are classified into two categories:
I) Statutory Duties: These are duties prescribed by the Companies Act:
1. Organize and be present at all meetings, including Board and general
meetings.
2. Record and maintain minutes of all meetings.
3. Handle correspondence with shareholders regarding the issue and transfer
of shares.
4. Issue notices and circulars to members and others as directed by the
Board.
5. Maintain and update various registers and books, such as the Register of
Members and Debenture-holders.
6. File necessary returns with the Registrar of Companies.
II) General Duties: These depend on the nature and size of the business and
the agreement between the company and the secretary:
1. Provide guidance to the Board regarding their duties, responsibilities,
and powers.
2. Represent the company before various regulators and authorities.
3. Assist the Board in managing the company's affairs.
4. Advise and assist the Board in ensuring good corporate governance.
5. Perform any other duties assigned by the Board from time to time.

Liabilities and Rights of a Company Secretary

Liabilities of a Company Secretary: As a Key Managerial Personnel
(KMP), a company secretary is liable for any non-compliance or defaults
related to provisions of the Companies Act and other laws. Penalties are imposed
on the secretary for failures or breaches in fulfilling statutory duties.
Rights of a Company Secretary:
1. Right to control and supervise the working of the department under
their responsibility.
2. Right to be indemnified by the company for any losses suffered while
performing official duties.
3. Right to authenticate documents on behalf of the company as the
company's principal officer.
4. Right to remuneration as a salaried employee of the company, as per
their service agreement and the company's policies.

Role of a Company Secretary

A company secretary plays a vital role in the administration, compliance, and
governance of the company, ensuring smooth coordination between the board,
stakeholders, and external authorities. The role can be classified into three
categories:
1. Secretary as a Statutory Officer:
o Acts as the principal officer responsible for ensuring compliance
with various legal provisions.
o Signs and authenticates important company documents, annual
returns, and forms for submission to regulatory bodies like the
Registrar of Companies.
 o Maintains statutory registers, including minutes of board and
general meetings, register of members, debenture-holders,
directors, and key managerial personnel (KMP).
2. Secretary as a Coordinator:
o Internal Coordinator: Acts as a liaison between the board of
directors, managing director, chairperson, and the executive team.
The secretary ensures that decisions made by the board are
effectively implemented across various departments.
o External Coordinator: Establishes and maintains relationships
between the company and external stakeholders such as
shareholders, the government, and the public.
3. Secretary as an Administrative Officer:
o Oversees the implementation of company policies and supervises
the functioning of different departments.
o Plays a role in recruitment, training, remuneration, and promotion of
staff members.
o Ensures that the company’s organizational structure is strong and
efficient to meet operational goals.

Company Secretary in Employment and Practice

A Company Secretary plays a crucial role in corporate management. The
responsibilities differ depending on whether the Secretary is in employment
(working as an employee within a company) or in practice (working
independently or in partnership).
Company Secretary in Employment:
 Acts as an employee of the company, responsible for ensuring compliance,
governance, and proper management of corporate affairs.
Company Secretary in Practice:
A member of the Institute of Company Secretaries of India (ICSI) is in practice
when they:
1. Engage in the profession independently or in partnership with other
professionals.
2. Offer services related to:
o Promotion, formation, incorporation, amalgamation,
reconstruction, or reorganization of companies.
3. Provide additional services such as:
 o Filing, registering, and verifying documents (e.g., forms,
applications, returns) on behalf of the company.
o Acting as a share transfer agent, share stockbroker, or issue
house.
o Working as a secretarial auditor or consultant.

Secretarial Standards (SS):

 Meaning: Standards developed by ICSI and approved by the Ministry of
Corporate Affairs to ensure standardized corporate practices.
 Compliance: Under the Companies Act 2013, compliance with
Secretarial Standards I and II is mandatory. These standards aim to
maintain uniformity and efficiency in corporate governance and secretarial
practices.

The Need and Impact of Adoption of Secretarial Standards

The adoption of Secretarial Standards (SS) aims to harmonize and
standardize corporate governance practices across companies, providing better
compliance monitoring and improving Board processes. It boosts investor
confidence and strengthens corporate governance practices in India. The
Secretarial Standards Board (SSB) was formed by the Institute of
Company Secretaries of India (ICSI) in 2000, with representatives from
professional bodies like the Institute of Chartered Accountants of India,
Institute of Cost and Work Accountants of India, and industrial associations
like ASSOCHAM, CII, and FICCI.
Key Impacts:
1. Harmonization of Practices: It integrates diverse corporate practices
and ensures consistency across companies.
2. Strengthened Compliance: Secretarial standards help in better
monitoring of legal and regulatory compliance.
3. Investor Confidence: Enhanced transparency and structured processes
boost trust among investors.
4. Standardization: Unique to India, secretarial standards ensure uniform
governance practices in the corporate sector.
Secretarial Standards (SS):
ICSI has issued 10 Secretarial Standards covering various corporate functions:
 S-1: Meetings of the Board of Directors (BOD)
 S-2: General Meetings
 S-3: Dividend
  S-4: Registers and Records
 S-5: Minutes
 S-6: Transmission of Shares and Debentures
 S-7: Passing Resolutions by Circulation
 S-8: Affixing Common Seal
 S-9: Forfeiture of Shares
 S-10: Board’s Report
Exemptions:
 SS-1 and SS-2 do not apply to One Person Companies (OPC), as they
have a single director.
 SS-2 is not applicable to companies exempted by the Central
Government.

Secretarial Audit (Section 204)

I) Meaning:
Secretarial Audit is a compliance audit that checks adherence to various
legislations, including the Companies Act and other corporate and economic laws
applicable to a company. It ensures that companies follow legal frameworks and
regulations.
II) Importance:
1. Compliance Monitoring: It acts as a mechanism to ensure that
compliance requirements are met.
2. Error Detection: Aims to detect errors or mistakes in the compliance
process.
3. Risk Prevention: Helps the company avoid risks and losses caused by
non-compliance.
4. Confidence Building: Provides assurance to regulators, management,
and stakeholders that the company is maintaining a disciplined approach
to governance, risk management, and control.
III) Applicability of Secretarial Audit (Section 204(1)):
1. Every listed company.
2. Public companies with a paid-up share capital of `50 crores or more.
3. Public companies with a turnover of `250 crores or more.
4. Private companies that are subsidiaries of public companies.
Appointment of Secretarial Auditor:
 1. Only members of the Institute of Company Secretaries of India (ICSI)
holding a certificate of practice are eligible to conduct the secretarial audit
and provide the audit report.
2. The Board of Directors appoints the secretarial auditor by passing a
resolution in a Board meeting.
3. This appointment is ideally made at the beginning of the financial year to
enable continuous compliance monitoring.
4. The Secretarial Audit Report must be in the prescribed format (Form
MR-3) and annexed to the Board's report.

The Chief Financial Officer (CFO)

The Chief Financial Officer (CFO) is a key officer responsible for overseeing
the financial operations of a company. The role encompasses financial planning,
management, risk assessment, record-keeping, and financial reporting.
1. Financial Responsibilities: CFO manages financial planning, risk
management, and ensures accurate financial reporting.
2. Strategic Analysis: Analyzes the company’s strengths and weaknesses,
providing insights for timely corrective actions.
3. Timely Reporting: Ensures the presentation of accurate and timely
financial data to stakeholders.
4. Board Reports: Provides crucial inputs for the Board Report, influencing
company decisions.
5. Employment: The CFO can be a regular employee or hired on a
contractual basis.
6. Not Necessarily a Director: The CFO does not need to be a director of
the company.
7. Signatory Role: The CFO is required to sign the company’s audited
financial statements, making their role crucial in financial accountability.
Distinction between:
1. Director vs. Managing Director
1. Meaning: Director is elected by shareholders to manage the company,
while a Managing Director manages day-to-day business activities and
represents the Board.
2. Appointment: Directors are elected in the Annual General Meeting;
Managing Directors are appointed by the Board.
3. Number of Companies: A Director can work in 20 companies (max 10
public companies), while a Managing Director can hold the role in two
companies if unanimously approved by the second company’s Board.
 4. Tenure: Directors, including public company Directors, retire by rotation.
Managing Directors serve a five-year term.
5. Positions Held: Directors sit on the Board; Managing Directors serve as
both Director and head of company management.
6. Remuneration: Directors receive fees for attending meetings and specific
remuneration, while Managing Directors receive a monthly salary or
percentage of net profits.
7. Status: Directors are not employees, whereas Managing Directors are
considered employees due to their involvement in management.
2. Managing Director vs. Whole-Time Director
1. Meaning: Managing Directors manage the company’s day-to-day
operations, while Whole-Time Directors devote their entire time to the
company’s operations.
2. Powers: Managing Directors have substantial powers, whereas Whole-
Time Directors do not have discretionary powers in policy matters.
3. Number of Posts: A Managing Director can work for more than one
company if unanimously approved; a Whole-Time Director can only work
for one company at a time.
3. Managing Director vs. Manager
1. Meaning: The Managing Director represents the Board for day-to-day
activities, while the Manager handles the management of the company’s
affairs.
2. Powers: Managing Directors have substantial powers; Managers have
control over whole or substantial management responsibilities.
3. Position Held: A Managing Director must be a Director; a Manager need
not be a Director.
4. Number of Posts: A company can have more than one Managing
Director but only one Manager.
5. Appointment: Managing Directors are appointed via agreement or
resolution, whereas a Manager is appointed under a contract of service.
6. Remuneration: Managing Directors receive a maximum of 10% of the net
profit (if more than one), while Managers receive up to 5% of the net
profit.
 7-COMPANY MEETINGS – I
Introduction to Company Meetings
Company meetings are essential gatherings where decisions affecting
the company’s operations are discussed and made. They serve as
formal platforms for communication between shareholders, directors,
and other stakeholders to ensure smooth functioning and proper
governance of the company.
Key points of company meetings:
1. Purpose: Company meetings are held to discuss important
matters, make key decisions, ensure compliance with legal
requirements, and provide transparency in company operations.
2. Types of Meetings: Different types of meetings are held based on
the company’s needs, such as Annual General Meetings (AGM),
Extraordinary General Meetings (EGM), and Board meetings.
3. Legal Requirement: Meetings are required to be held as per the
provisions of the Companies Act and other regulatory
frameworks.
4. Decision Making: Shareholders and directors participate in the
meetings to vote on various issues related to company
operations, finances, policies, and governance.
5. Documentation: Minutes of the meetings are recorded and
maintained as legal documents to ensure transparency and
accountability in decision-making.

Meaning and Definition of Company Meetings

The term "meeting" originates from the Latin word ‘Maeta,’ meaning ‘face to
face.’
  Meaning: A meeting is defined as the gathering or assembly of two or
more individuals for conducting lawful business.
 Definition: As per Show & Smith, "Company Meeting is an assembly of
people connected with the company who have gathered for the purpose of
discussing matters related to it."

Importance of Company Meetings

1. Opportunity for Members to Gather: Meetings allow members to come
together and discuss the company's operations and strategies.
2. Review of Previous Meeting Minutes: The Secretary reads out the
minutes of the previous meeting, helping members understand the issues
previously discussed.
3. Policy Formulation and Implementation: Meetings facilitate the
development and execution of company policies, plans, and programs.
4. Problem Analysis: Members can discuss and analyze problems during
meetings, making it easier to reach solutions.
5. Compliance with Legal Requirements: Meetings ensure the company
adheres to the legal provisions of the Companies Act.
6. Other Key Decisions: Meetings are essential for decisions regarding the
appointment of directors, auditors, approval of financial statements, and
declaring dividends.

Essentials of Valid Meetings

For a company's meeting to be considered valid, the following essentials must be
met:
1. Duly Convened: The meeting should be properly scheduled and
organized, with notice sent to all entitled individuals as per the Companies
Act and Articles of Association.
2. Properly Constituted: The meeting must have the necessary quorum
(minimum number of members) to make decisions, ensuring that it's
legally constituted.
3. Properly Conducted: The meeting should follow the rules laid out in the
Companies Act and Articles of Association, including proper procedures,
voting methods, and minute recording.
4. Adherence to Legal Provisions: All actions, including agenda items,
must comply with legal requirements to ensure the validity of decisions
made at the meeting.

Proper Convening of a Meeting

 1. Proper Authority:
o A meeting must be called by the proper authority, typically the
Board of Directors. Under certain conditions, members, the National
Company Law Tribunal (NCLT), or the Central Government can also
convene a meeting.
o The secretary issues the notice under the Board's authority.

2. Notice (As per Section 101 of the Companies Act, 2013):

o Meaning: A written notice providing the day, date, time, and place
of the meeting.
o Contents: Type of meeting, day, date, time, place, agenda, special
resolutions, and an explanatory statement for special business.
o Authority to Send: The Board of Directors, usually through the
company secretary.
o Authority to Receive: All shareholders, auditors (for AGM), legal
representatives, joint holders, and directors.
o Period: 21 clear days for general meetings and 7 days for Board
meetings.
o Methods: Personal delivery, ordinary post, email, or advertising in
a newspaper.
o Omission to Give Notice: Deliberate omission invalidates the
meeting.
o Explanatory Statement: Required for special business with the
notice.
3. Agenda:
o Meaning: A list of items to be discussed at the meeting.

o Importance: Helps the chairman conduct the meeting efficiently

and ensures members are well-prepared.
o Guidelines: Should be simple, clear, and sequential with routine
items first and contentious matters last.
o Types: Bare statement agenda and draft minutes agenda.

Proper Constitution of a Meeting

1. Quorum (As per Section 103 of Companies Act, 2013):
o Quorum refers to the minimum number of members that must be
present for the meeting to be valid. It ensures legal business
transactions during the meeting.
 o The secretary ensures quorum is met before the meeting begins
and throughout its duration. A meeting without quorum is invalid.
o Quorum for General Meetings:

 Public Company:
 Up to 1000 shareholders: 5 members required.
 1001–5000 shareholders: 15 members required.
 Over 5000 shareholders: 30 members required.
 Private Company: 2 members personally present are
required for quorum.
o Quorum for Board Meetings:

 1/3 of the total number of directors or at least 2 directors,

whichever is higher.
2. Chairman of the Meeting (Section 104):
o A chairman must be present to properly conduct the meeting. The
chairman is responsible for presiding over and guiding the meeting
proceedings to ensure order and compliance with the meeting's
purpose.

Provisions for the Appointment of Chairman (Section 104)

If the Articles of Association do not provide any specific provisions for
appointing a Chairman, the Companies Act, 2013 provides the following
guidelines:
1. Election by Members Present:
o If the Articles do not specify the procedure, the members present at
the meeting shall elect one of themselves to act as Chairman,
through a show of hands.
2. Poll for Chairman:
o If a poll is demanded for the election of the Chairman, it must be
conducted immediately.
o The Chairman elected by a show of hands will continue to act as the
Chairman and exercise all powers until the result of the poll is
declared.
3. Change of Chairman:
o If a different person is elected as Chairman through the poll, that
person shall take over as Chairman for the rest of the meeting.
Powers of Chairman
The Chairman of a company meeting has the following key powers:
1. Maintaining Order: Ensures the meeting is conducted properly and
maintains decorum.
2. Managing Speakers: Decides the order in which speakers can present
their views.
3. Ensuring Relevance: Keeps the discussion relevant to the agenda and
prevents disorderly debates.
4. Regulating Behavior: Prevents the use of inappropriate language or
behavior by members.
5. Adjourning Meetings: Has the authority to adjourn the meeting if it
becomes impossible to proceed effectively.
6. Casting Vote: Exercises a casting vote in case of a tie in voting.
7. Declaring Results: Announces the result of any voting conducted during
the meeting.
8. Rulings on Points of Order: Provides rulings on any procedural issues or
points of order raised during the meeting.

Duties of the Chairman

The Chairman of a company meeting has the following essential duties:
1. Ensure Proper Convening and Constitution: Verifies that the meeting
is lawfully convened and all necessary members are present.
2. Conduct Proceedings: Ensures the meeting is conducted in a proper and
orderly manner.
3. Follow Agenda: Ensures that the discussion follows the items listed in the
agenda.
4. Maintain Order: Keeps order and discipline throughout the meeting.
5. Declare Voting Results: Officially announces the results of any voting
process.
6. Maintain Accurate Minutes: Ensures that the minutes of the meeting
are correctly recorded and signs them for accuracy.
7. Act in Best Interest: Conducts the meeting in the best interest of the
attendees and the organization.
8. Handle Incidental Questions: Addresses any incidental questions or
issues that may arise during the meeting.
Proper Conduct of Meeting - Proxy (Section 105)
1. Meaning of Proxy: A proxy is a person designated by a company
member to attend and vote on their behalf at a general meeting. This is
especially helpful when the member cannot attend the meeting personally.
2. Right to Appoint: Each member of a company has the statutory right to
appoint a proxy, ensuring their votes and opinions are represented in their
absence.
3. Proxy's Role: The proxy can attend the meeting, participate in
discussions, and cast votes as directed by the member who appointed
them. This ensures that all members have a voice in the company's
decisions, even if they cannot be physically present.

Legal Provisions Regarding Proxy

1. Appointment: Any company member eligible to attend and vote at a
meeting can appoint another person as a proxy to vote on their behalf.
Minors cannot be appointed as proxies, and proxies are not allowed at
Board meetings. The proxy appointment is valid for an adjourned meeting
as well.
2. Right to Vote: A proxy has the right to vote only during a poll and does
not have the right to speak at the meeting.
3. Membership: The person appointed as a proxy may or may not be a
member of the company.
4. Proxy Form: The proxy form, duly completed, must be submitted to the
company’s registered office at least 48 hours before the meeting. A
separate proxy form is required for each meeting.
5. Inspection: Members have the right to inspect proxy forms by giving the
company at least three days' notice.

Motion (Section 105)

A motion is a formal proposal presented to a meeting for discussion and
approval. Before it is adopted by the meeting, the motion can be modified or
altered. The individual who introduces the motion is referred to as the proposer
or mover. Motions serve as the basis for decisions made during company
meetings.
Essentials of a Valid Motion
1. Written and Signed: A motion must be in writing, signed by the
proposer, and introduced by the Chairman at the meeting.
2. Free of Defamatory Language: The motion must not contain any
arguments, inferences, or defamatory expressions.
3. Clear and Affirmative Wording: The language used in the motion
should be clear, definite, and expressed affirmatively.
4. Relevant to Agenda: The motion must fall within the scope of the
meeting’s agenda.
5. Seconded: It must be seconded by at least one member to proceed
further.
6. Single Opportunity to Speak: Each member is allowed to speak only
once on the motion.
7. Withdrawal by Proposer: The proposer has the right to withdraw the
motion by following a proper procedure.

Types of Motions
1. Formal Motion: These motions are related to the procedures at the
meeting and aim to manage the discussion efficiently, either by speeding
it up, delaying it, or avoiding unnecessary debates.
o Closure Motion: A proposal to stop further discussion and put the
matter to vote. If approved, no further discussion occurs.
o Previous Question Motion: A motion intended to prevent
discussion on the main motion. If passed, the discussion on the
original motion is dropped.
o Next Business Motion: A motion that moves the meeting to the
next item on the agenda, stopping further discussion on the current
motion.
o Adjournment of Debate Motion: Postpones the debate on a
specific subject to a later date for further information gathering.
o Adjournment of Meeting Motion: A motion to postpone the
entire meeting for a set or indefinite period.
2. Substantive Motion: A motion that has been amended and changed into
a new form. When an amendment is passed, it becomes a substantive
motion and is then put to vote. If accepted, it becomes a resolution.
Amendments
An amendment is a proposal made by a member to modify the original motion
during its discussion. It is introduced to improve or refine the motion without
changing its essence. Common ways to amend a motion include:
 Adding words: Introducing new wording to enhance the motion.
 Deleting words: Removing certain words to refine or clarify the motion.
 Replacing words: Substituting existing words with alternatives for better
clarity or meaning.
 Changing the position of words: Rearranging words to improve
understanding.
The amendment must remain relevant to the original motion and should not
completely alter its intent or meaning.

Point of Order
A Point of Order is an objection or question raised by a member during a
meeting to highlight any procedural irregularities or violations of the meeting
rules. It ensures the meeting follows proper protocol. The chairperson must
address and rule on the point of order to maintain orderly conduct and ensure
compliance with established guidelines during the meeting.

Point of Order
A Point of Order may be raised for various reasons, including:
1. Absence of quorum.
2. Breach of any rule relevant to the meeting.
3. Misbehavior by any member.
4. Use of improper language by a member.
When raised, the discussion on the original motion is paused until the
chairperson addresses the point of order. The chairperson's decision on the
matter is final and binding on the meeting, ensuring proper conduct and
adherence to the rules.

Voting
Voting is the formal way for members to express their opinions after a
discussion on a motion during a meeting. It helps in determining the overall
sentiment or decision of the meeting. Voting is essential to finalize decisions, and
each shareholder is entitled to vote on every motion in a lawful manner, ensuring
that their opinion is counted.

Methods of Voting
1. Voting by Voice: Members express their opinion by saying 'yes' or 'no.'
The decision is based on the volume of the voice, but it is not commonly
used due to its inaccuracy in determining the majority.
2. Voting by Division: Members are divided into groups based on their
stance on the motion, with the majority determined by counting members
in each group.
3. Voting by Show of Hands (Section 107): After discussion, members
raise their hands to vote for or against the motion, and the chairman
declares the result based on the count of raised hands.
4. Voting by Ballot: Ballot papers are distributed to maintain secrecy.
Members vote in writing, and the results are declared after counting the
ballots.
5. Voting Electronically (Section 108): Members can vote electronically in
certain companies as prescribed by the government, ensuring remote
participation and secure voting.
6. Voting by Postal Ballot (Section 110): Members receive ballot papers
by post and submit their votes via mail, often used for companies required
by the government to use this method.
7. Voting by Poll: After a show of hands, a poll can be demanded. Members
vote in proportion to their shareholding using polling papers, and the
result of the poll is considered final.

Legal Provisions Regarding Voting by Poll

1. Chairman’s Demand: The chairman of the meeting has the right to
demand a poll.
2. Private Company:
o Poll can be demanded by one member if not more than seven
members are present.
o If more than seven members are present, at least two members
must demand the poll.
3. Public Company: At least five members, present either in person or by
proxy, can demand a poll.
 4. Proportional Demand: Any member(s) present in person or by proxy
holding at least 1/10th of the total voting power can demand a poll.
5. Timing: The poll must be conducted within 48 hours of the demand.
6. Finality: The decision made by the poll is final and cannot be altered.
7. Withdrawal: The person who demanded the poll has the right to
withdraw the demand at any time.

Merits of Voting by Poll

1. Proxy Voting: Proxies are allowed to vote on behalf of shareholders,
ensuring representation even when shareholders cannot attend.
2. Secrecy: Voting by poll maintains confidentiality, as votes are cast in
secret.
3. Scientific Method: It is a precise and organized method of voting.
4. Proportional Voting: Shareholders can vote in proportion to the number
of shares they hold, reflecting their stake in the company.

Demerits of Voting by Poll

1. Capitalistic Criticism: The "one share, one vote" principle favors
shareholders with more shares, making it a method often criticized for
being capitalistic.
2. Expensive and Time-Consuming: This method is costly, time-
consuming, and more complex to execute compared to other voting
methods.

Resolution
A resolution is a formal and final decision made in a meeting after a motion is
accepted. It is brief, written in affirmative form, and recorded in the minutes
book. No further discussion is allowed once the resolution is passed, and the
number of members voting for and against it is noted. Resolutions are drafted in
the present tense and cannot be altered once passed.

Types of Resolution
A) Ordinary Resolution (Section 114):
Passed by a simple majority (more than 50% of votes in favor). No requirement
to file with the Registrar of Companies or provide specific notice. Examples
include approval of statutory reports, share capital alteration, dividend
declaration, and auditor appointments.
B) Special Resolution (Section 114(2)):
Requires a 3/4 majority (75% votes in favor). Purpose must be mentioned in the
notice, and a copy must be filed with the Registrar of Companies within 30 days.
Examples include changing the company name, altering the object clause, and
shifting the registered office.
C) Resolution Requiring Special Notice (Section 115):
Special notice resolutions, either ordinary or special, require the proposer to give
14 days' notice to the company. The company then gives members 7 days'
notice. Examples include appointing an auditor or removing a director.
D) Resolution Requiring Registration (Section 117):
Certain resolutions, such as all special resolutions or those regarding managing
director appointments, must be filed with the Registrar within 30 days.
E) Resolution by Circulation:
Used when urgent decisions are needed without time for a Board meeting. A
draft resolution is circulated to all directors for approval.

Validity of Resolution and Minutes

Validity of Resolution:
Resolutions passed in a meeting following the correct rules and regulations are
considered valid. If the process is not adhered to, the resolution becomes invalid.
Key points regarding Invalid Resolutions:
 Resolution is outside the scope of the meeting or notice.
 Meeting was not properly convened or constituted.
 Special business was not mentioned in the meeting notice.
 Resolution requiring a specific majority passed by an ordinary majority.
 Resolution goes beyond the Memorandum of Association's scope.
 Irregular voting on the motion.
Minutes (Section 118):
Minutes refer to the written record of decisions made at a meeting. M.C.
Kuchhal defines minutes as a concise and accurate official record of meeting
proceedings. Minutes must be prepared within 15 days after the meeting by the
secretary, recorded in the minutes book, and written in past tense. Separate
minutes books are maintained for General and Board Meetings.
Importance of Minutes
1. Authentic Record:
Minutes provide detailed and accurate information about the proceedings
of a meeting, serving as an official record.
2. Evidence:
Minutes serve as prima facie legal evidence in court, providing a
documented account of the meeting's decisions and discussions.
3. Future Reference:
Being a permanent record, minutes are valuable for making informed
managerial decisions in the future.
4. Legal Provisions:
Minutes are prepared following the legal requirements specified in the
Companies Act and secretarial standards.
5. Information for Absent Members:
Minutes provide absent members with an overview of the meeting's
proceedings and act as a reminder of the discussed subjects.
6. Information about Resolutions:
Minutes reflect motions and the discussions that led to resolutions, helping
interested parties resolve contradictions or confusion.
7. Inspection of Minutes (Section 119):
According to the Companies Act, the minutes book must be kept at the
company’s registered office, and every member has the right to inspect
the minutes of general meetings.

Distinction Between Motion, Amendment, Resolution, Agenda, Minutes,

and Voting Methods
1. Motion vs. Amendment
o Motion is a written proposal placed before a meeting for discussion
and decision.
o Amendment is a modification proposed to an original motion to
revise or improve it.
o Motion aims to initiate discussion, while an amendment revises the
main motion. When accepted, a motion becomes a resolution, and
an amendment becomes part of the motion.
2. Motion vs. Resolution
o Motion is a proposal for discussion.

o Resolution is an accepted motion that becomes a formal decision.

o A motion can be amended, but a resolution cannot be changed after

passing. Resolutions are recorded in the minutes and may need to
be filed with the Registrar of Companies.
 3. Agenda vs. Minutes
o Agenda is a list of items to be discussed at a meeting.

o Minutes are the official record of what was discussed and decided
in the meeting.
o The agenda is prepared before the meeting in future tense, while
minutes are written after the meeting in past tense.
4. Voting by Show of Hands vs. Voting by Poll
o Voting by Show of Hands involves members raising their hands
to vote, and proxies are not allowed.
o Voting by Poll involves members casting votes on ballot papers,
and proxies can vote. Polls maintain secrecy, unlike show of hands.
5. Ordinary Resolution vs. Special Resolution
o Ordinary Resolution requires more than 50% of votes and is used
for routine matters like appointing auditors or declaring dividends.
o Special Resolution requires at least 75% of votes and is for
significant matters like changing the company name or altering the
Memorandum of Association.

8 COMPANY MEETINGS – II
Company meetings are essential for ensuring that important decisions are made
in a structured and legal manner. In these meetings, members, shareholders,
directors, and key managerial personnel (KMPs) come together to discuss and
resolve various issues related to the company's management and operations.
There are various types of meetings that companies hold based on the purpose,
participants, and legal requirements as mandated by the Companies Act, 2013.
The meetings help ensure transparency, accountability, and proper governance
within the organization. They also provide a platform for stakeholders to express
their views, vote on matters, and oversee the functioning of the company.
This section will cover different types of company meetings and their significance
in corporate governance, focusing on General Meetings, Board Meetings, and
other statutory meetings essential for ensuring the lawful operation of a
company.

8.1 Types of Company Meetings

1. Shareholders' Meetings: These meetings are held to discuss matters related to
the company's operations, management, and future direction. They include:
 General Meetings: Held regularly for discussing business matters of the
company.
1. Annual General Meeting (AGM): Mandatory meeting held once a
year, where shareholders discuss key issues like the approval of
financial statements, declaration of dividends, election of directors,
and appointment of auditors.
2. Extraordinary General Meeting (EGM): Called to discuss urgent or
special matters that require immediate shareholder approval, which
cannot wait until the next AGM.
 Class Meetings: These meetings are held for specific classes of
shareholders (e.g., preference shareholders) to discuss matters related to
their particular rights.
2. Directors' Meetings: These meetings involve company directors and focus on
managerial and operational decisions.
 Board Meetings: Regular meetings of the company's board of directors to
manage and oversee the company's affairs. This includes policy
formulation, approving financial decisions, and delegating authority.
 Committee Meetings: These are specialized meetings within the board,
where committees such as audit, risk management, or nomination
committees discuss specific areas of the company's operations and report
back to the board.
3. Creditors' Meetings: These are meetings with the company’s creditors,
often held during insolvency or liquidation proceedings to discuss the
company’s financial health and recovery plans.
8.1.1 Shareholders' Meeting
General Meetings: Shareholders participate in the company's management
through general meetings, where key issues are discussed, and decisions are
made. There are two main types of general meetings:
1. Annual General Meeting (AGM) (Section 96): The AGM is held once every
financial year for the equity shareholders. Its primary purpose is to review the
company's progress, assess financial performance, and take important decisions.
Key objectives include:
 1. Adoption of the Annual Accounts, Directors' Report, and Auditor’s Report.
2. Declaration of dividends.
3. Election of directors to replace retiring directors.
4. Appointment of auditors and fixing their remuneration.
5. Reviewing the company’s progress and performance for the financial year.

Legal Provisions for Annual General Meeting (AGM)

1) Time of Holding AGM:
 First AGM: Must be held within nine months of the closing of the first
financial year.
 Subsequent AGMs: Should be held within six months after the end of the
financial year.
 Interval Between AGMs: The gap between two AGMs should not exceed
15 months.
 Extension: The Registrar may extend the time for holding an AGM by up
to three months, but no extension is allowed for the first AGM.
 Exemption: One Person Companies are exempted from AGM provisions.
2) Authority to Convene the Meeting:
The Board of Directors has the authority to convene the AGM.
3) Notice:
A 21-day clear notice must be sent to all members at their registered addresses,
either by post or electronically.
4) Date, Time, and Place of AGM:
AGMs must be held during business hours (9:00 AM to 6:00 PM), on a non-
national holiday, at the company's registered office or another place in the same
city or village.
5) Quorum for AGM:
 Public Company:
o Up to 1000 shareholders: 5 members

o 1000-5000 shareholders: 15 members

o More than 5000 shareholders: 30 members

 Private Company: A minimum of two members must be personally

present.
6) Adjournment:
If the quorum is not met, the AGM is adjourned to the same day, time, and place
in the following week.
7) Default in Holding AGM:
Failure to hold the AGM as required by law results in a fine. The company and its
officers may face penalties up to ₹1,00,000, with an additional fine of ₹5000 per
day for continuing default.

Extra Ordinary General Meeting (EOGM) - Section 100

Meaning:
An Extra Ordinary General Meeting (EOGM) is a meeting convened to address
special or urgent matters that require immediate attention and cannot wait until
the next Annual General Meeting (AGM). The special matters discussed in EOGM
are called "special business." This meeting is typically held between two AGMs.
Purpose of EOGM:
The EOGM is convened to make critical decisions on significant matters affecting
the company. These matters include:
1. Alteration of the Memorandum of Association.
2. Alteration of the Articles of Association.
3. Removal of a Director before the expiration of their term.
4. Removal of an Auditor before the expiration of their term.
5. Voluntary winding up of the company.

Legal Provisions for Extra Ordinary General Meeting (EOGM)

1. Authority to Convene:
o A) Board of Directors:
The Board of Directors has the right to call an EOGM by giving
proper notice to the shareholders.
o B) Board of Directors on Requisition of Members:
Members can request the Board to convene an EOGM. In companies
with share capital, shareholders holding at least 1/10th of the paid-
up share capital with voting rights can make this request. For
companies without share capital, members with 10% of voting
power can make this request. The Board must hold the meeting
within 45 days of receiving the requisition.
o C) Requisitionists Themselves:
If the Board fails to convene the EOGM, the requisitionists can hold
it themselves. The meeting should be held within three months from
 the date of requisition deposit. The company is responsible for
covering the expenses of the meeting.
o D) National Company Law Tribunal (NCLT) or Government:
If it becomes impracticable for the company to hold the meeting,
the NCLT or the government may order the company to convene it.
This can be done either on its own motion or upon the request of a
director or any member with voting rights.
2. Notice and Quorum Provisions:
The rules regarding the notice period (21 days) and quorum requirements
for an EOGM are the same as those for the Annual General Meeting (AGM).

Class Meeting (Section 48) Summary

1. Meaning:
A Class Meeting is convened to make changes in the rights and duties of a
specific class of shareholders (e.g., preference or equity shareholders) and
to seek their consent for changes that affect their interests.
2. Resolution:
Typically, special resolutions are passed in class meetings to approve
changes.
3. Purpose:
The purpose of a class meeting is to obtain the approval of shareholders in
a particular class when the company seeks to alter their rights, ensuring
that their interests are protected.
4. Frequency:
Class meetings are not held on a regular basis and are only convened
when necessary to address changes affecting a particular class of
shareholders.

Directors' Meetings (Section 173) Summary

1. Board Meeting
The Board of Directors meet to discuss policy matters and make decisions
related to the management of the company. This includes frequent
meetings for effective business management.
Legal Provisions Regarding Board Meetings:
o Authority to Convene: The Chairman of the Board has the
authority to call Board Meetings.
o Number of Meetings:

 First Board Meeting: Must be held within 30 days of

incorporation.
  Subsequent Board Meetings: A minimum of 4 meetings
must be held each year, with no more than 120 days
between two consecutive meetings.
 One-Person Company, Small Company, and Dormant
Company: At least one meeting is required in each half of
the calendar year, with a gap of not less than 90 days
between two meetings.
o Virtual Meetings: Directors can participate via video conferencing
or other audio-visual means, with certain matters excluded as per
government regulations.
o Notice (Section 173 (3)): A notice of at least 7 days must be
given to all directors, delivered by hand, post, or electronically.
o Quorum (Section 174): The quorum for Board Meetings is 1/3 of
the total number of directors or two directors, whichever is higher.
o Adjournment of Meeting: If the quorum is not met, the meeting
is adjourned to the same day, time, and place in the following week.
2. Committee Meetings
These are meetings of small committees appointed by the Board to handle
specific tasks or problems. Examples include audit committees, share
allotment committees, and inquiry committees. A separate minute book is
maintained for each committee meeting.

Creditors' Meetings Summary

Creditors' meetings are organized by the company to discuss matters that
impact the interests of its creditors, such as debenture holders, depositors,
bankers, and lenders. These meetings are usually held when the company needs
to modify terms related to loans or securities that affect the creditors. For
example, the company may seek to alter the rate of interest, change the terms
of security, or modify the rights of creditors.

Functions of Secretary Related to Annual General Meeting (AGM)

Before the AGM:
1. Fixing the Board Meeting: The secretary arranges the Board Meeting to
decide the date, time, and place of the AGM.
2. Issue of Notice: The secretary sends notices and the agenda to all
members and statutory auditors at least 21 clear days before the meeting.
Notices are also published in leading newspapers for wider
communication.
3. Chairman’s Speech Preparation: The secretary assists the chairman in
preparing the speech for the meeting.
 4. Preliminary Arrangements: The secretary books the venue and
arranges the necessary setup for the AGM.
5. Company Accounts: The secretary ensures that the company’s accounts
are finalized, the financial statements are audited, and the auditor’s report
is prepared. They also prepare the Annual Report for presentation.

Functions of Secretary During the Annual General Meeting (AGM)

1. Attendance: The secretary arranges for the attendance sheet, ensuring
that members sign it upon arrival.
2. Quorum: The secretary ensures that the required quorum is present and
informs the Chairman.
3. Reading of Reports: The secretary reads the notice, Director’s Report,
and other necessary reports to the attendees.
4. Recording Proceedings: The secretary documents the proceedings of
the meeting to draft accurate minutes later.
5. Assisting the Chairman: The secretary provides information and
materials to the Chairman as needed for smooth meeting conduct.
6. Conducting Polls: If a poll is demanded, the secretary organizes and
oversees the polling process.

Functions of Secretary After the Annual General Meeting (AGM)

1. Drafting the Minutes: The secretary drafts the minutes of the meeting
and submits them to the Chairman for approval.
2. Implementing Decisions: The secretary instructs the relevant officers to
implement the decisions made during the meeting.
3. Sending Documents and Filing Resolutions: The secretary sends
dividend warrants to members and files the Annual Report with the
Registrar. If any special resolutions were passed, they must be filed with
the Registrar within 30 days.
4. Informing Absent Members: The secretary sends details of the meeting
proceedings to members who were absent.

Distinction Between Annual General Meeting (AGM) and Extraordinary

General Meeting (EOGM)
1. Meaning:
o AGM: Held annually as per Section 96 of the Companies Act, 2013.
 o EOGM: Held for urgent or special matters as per Section 100 of the
Companies Act, 2013.
2. Purpose:
o AGM: Reviews the company's yearly progress and addresses
regular business.
o EOGM: Discusses and decides urgent or special matters.

3. Timing:
o AGM: First AGM within 9 months of the company’s first financial
year and subsequent AGMs within 6 months after each financial
year.
o EOGM: Can be held at any time between two AGMs.

4. Authority:
o AGM: Typically convened by the Board of Directors, or in special
cases, by the Central Government.
o EOGM: Convened by the Board of Directors, requisitionists, or by
order of the National Company Law Tribunal (NCLT).
5. Business Transacted:
o AGM: Approval of annual accounts, auditor/director reports, director
and auditor appointments, and dividend declaration.
o EOGM: Matters like altering the Memorandum of Association,
removing directors or auditors before their term, and voluntary
winding up of the company.
6. Penalty for Non-Compliance:
o AGM: Non-compliance results in a fine of up to ₹1,00,000, with an
additional fine of ₹5,000 per day until the issue is rectified.
o EOGM: If directors fail to hold the meeting upon requisition,
requisitionists can hold the meeting themselves and recover
expenses from the company.

9 BUSINESS COMMUNICATION SKILLS

 OF SECRETARY

Business Communication Skills of Secretary - Introduction:

The role of a company secretary involves a significant amount of communication,
both internal and external. Effective communication skills are essential for
carrying out the various functions related to management, compliance, and
stakeholder engagement. As a key managerial personnel, the secretary must
possess strong business communication skills to ensure clarity, accuracy, and
professionalism in all correspondence and interactions.
Communication skills are critical in tasks such as drafting reports, preparing legal
documents, conducting meetings, and maintaining relationships with
shareholders, directors, regulatory authorities, and other stakeholders. These
skills ensure that the secretary can perform their duties effectively and
contribute to the smooth operation of the company.

Meaning and Definition of Business Communication

Meaning:
Business communication refers to a specialized form of communication that
focuses on business-related activities and issues. It involves the exchange of
information, ideas, and messages between individuals, groups, or entities within
a business context, such as companies, organizations, and stakeholders.
Definition:
According to Brennar, "Business communication is the expression, channeling,
receiving, and interchanging of ideas in commerce and industry." This definition
emphasizes the active exchange of ideas and information that is crucial for
business operations and decision-making.

Types of Communication
A. Internal Communication:
Internal communication occurs within the organization and is essential for
smooth functioning and coordination between different departments. It plays a
crucial role in supporting managerial functions like planning, organizing, leading,
and controlling. Effective internal communication ensures that employees are
informed, aligned, and motivated to achieve organizational goals.
B. External Communication:
External communication involves interactions between the business and external
entities such as banks, suppliers, creditors, government agencies, and
customers. This form of communication helps a business stay connected to its
external environment and is vital for building relationships, maintaining a good
reputation, and ensuring successful business operations.

Methods of Communication
A. Verbal (Oral) Communication:
Verbal communication involves conveying messages through spoken words. It
can occur in various forms, such as personal conversations, interviews,
speeches, and phone calls. This method allows for immediate feedback and
clarification but may lack documentation.
B. Non-Verbal Communication:
Non-verbal communication refers to conveying messages without the use of
words, whether spoken or written. This can include body language, facial
expressions, eye contact, silence, symbols, signs, and gestures. Non-verbal cues
play a crucial role in enhancing or modifying the meaning of spoken or written
messages.
C. Written Communication:
Written communication involves exchanging information through written words.
This method is commonly used in official work, including letters, reports,
circulars, and memos. Written communication provides a permanent record of
exchanges and requires careful word choice to ensure clarity and avoid
confusion. It is particularly important in professional settings where accuracy and
clarity are essential.

Merits of Written Communication

1. Accurate and Precise:
Written communication is crafted carefully, emphasizing accuracy and
factual information, making it reliable and verifiable.
2. Can Be Re-read Multiple Times:
The receiver can read the written message as many times as needed to
fully understand it.
3. Permanent Record:
Written communication serves as a permanent record for the organization,
useful for future reference.
4. Documentary Evidence:
It holds legal value and can be used as documentary evidence when
required.
5. Wide Access:
Written communication is an effective way to convey information to
people in different locations.
 6. No Need for Personal Contact:
Both parties do not need to be available simultaneously; the message can
be read at the receiver’s convenience.
7. Completeness:
Written messages are often comprehensive, with all relevant information
included.
8. Economical:
Sending written messages, especially through modern means like email, is
cost-effective, particularly over long distances.

Modes of Electronic Communication

1. E-Mail:
E-mail allows sending messages electronically via the internet, with the
ability to attach various formats like documents, images, graphs, sounds,
and videos.
2. Websites:
A website is a collection of web pages containing information that is
accessible via the internet or private networks, with each site having a
unique URL, typically beginning with ‘www’.
3. Blog:
A business blog (b-blog) is an online platform for informal articles related
to a company, aimed at either internal communication or public sharing.
4. Social Media Network:
Social media platforms like Twitter, Facebook, and YouTube enable
businesses to interact with the public, build relationships, and promote
products and services.
5. Mobile/Cellular Phone:
Mobile phones serve as a communication tool for businesses to engage
customers through calls or SMS, providing an effective channel for
advertising.
6. Video Conferencing:
This involves using computers to establish video links between multiple
participants, enabling real-time communication, presentations, and
sharing of visual data remotely.

Essential Skills for Effective Communication

1. Listening:
Active listening is crucial for effective communication. It involves hearing
and understanding the message being conveyed to respond appropriately.
 2. Body Language:
Non-verbal cues like body language, tone, pitch, hand gestures, and eye
contact complement spoken words, making the communication more
effective.
3. Clear and Concise:
Communicate clearly and directly, using as few words as possible. This
prevents confusion and ensures the message is understood.
4. Personable:
Using a friendly tone and asking personal questions during face-to-face
interactions helps create a personal connection.
5. Confidence:
Displaying confidence through eye contact and a firm, friendly tone makes
the communication more persuasive and effective.
6. Empathy:
Empathy allows one to understand and share another person’s feelings,
which helps in delivering thoughtful and considerate responses.
7. Give and Receive Feedback:
Providing and accepting feedback is essential for improving
communication and overall performance.

Role of Secretary in Business Communication

1. Handling Correspondence:
The secretary manages communication with directors, officers, employees,
and external entities, ensuring clear and efficient information exchange.
2. Drafting Notices:
The secretary is responsible for preparing and distributing official notices
related to meetings, events, and company updates.
3. Preparing Reports:
Drafting various reports, including financial and management reports, is a
key responsibility to ensure accurate and timely communication within and
outside the organization.
4. Recording Minutes:
During meetings, the secretary documents the proceedings by drafting
accurate minutes, which serve as official records for future reference.
5. Liaison Role:
The secretary acts as a link between the board of directors and other
stakeholders, facilitating smooth communication and ensuring proper
dissemination of information.
Business Letters
Meaning:
A business letter is a formal type of written communication prepared by a
Secretary to convey important messages or information. It plays a crucial role in
maintaining the image and reputation of a business.
Definition:
According to Robert Shurter, "business correspondence is a message that
attempts to influence its recipient to make some action or attitude, desired by
the sender." Thus, business letters are written not only to communicate but also
to encourage the recipient to take specific actions or make decisions based on
the contents of the letter.
Business letters are essential for formal communication in business settings.

Layout of a Business Letter

Layout refers to the proper arrangement of various parts of a business letter to
ensure clarity and professionalism. A well-structured letter creates a positive
impression on the reader and enhances the effectiveness of the communication.
1) Heading
 Contains the name and address of the company, including its Corporate
Identification Number (CIN), telephone number, email address, fax, and
website.
 Example:
COMPANY NAME
Address: ...................................
CIN: ........................................
Telephone: ................................
Email: ........................................
Fax: ........................................
Website: ..................................
2) Date
 The date the letter is written.
3) Reference No.
 A unique reference number for the letter (if applicable).
4) Inside Address
 Address of the recipient:
To,
[Name]
[Designation]
[Company Name]
[Address]
5) Subject
 A brief summary of the purpose of the letter.
6) Salutation
 A formal greeting (e.g., "Dear Sir/Madam," or "Dear Mr. [Last Name]").
7) Body of the Letter
 A. Introduction – Introduces the purpose of the letter.
 B. Main Paragraph – Contains the details or main content of the
communication.
 C. Concluding Paragraph – Summarizes the letter and states the
desired action or closing remarks.
8) Complimentary Close
 A polite ending (e.g., "Yours faithfully," or "Sincerely").
9) Signature
 Name and designation of the sender, including the company’s name if
needed.
10) Enclosure
 Indicates any attached documents.
11) CC (Carbon Copy)
 Lists additional recipients of the letter, if any.
The format of the letter should follow a clean and professional alignment (e.g.,
left alignment or justified alignment), which enhances readability and
presentation. Proper spacing and formatting contribute to the overall visual
appeal.

Layout of a Business Letter

A business letter is a formal written communication between businesses or
between a company and its clients, partners, or stakeholders. Below are the key
components of a business letter:
1. Heading: Contains the company's name, address, telephone number, fax
number, email, website, and CIN. It introduces the sender to the receiver.
o Example:
TATA MOTORS LTD.
17C, S.B. Road, MIDC, Pune-411015
CIN: L28920MH1945PLC004520
Tel: (022) 4756823
Email: tatamotors@gmail.com
 2. Date: The date of the letter, placed below the heading on the right side. It
acts as a legal reference for the letter.
3. Reference Number: A unique number used for quick reference to the
specific letter, typically placed below the heading on the left.
4. Inside Address: Name and address of the recipient, written on the left.
For individuals, titles like "Mr." or "Mrs." are used; for businesses, "M/s" is
used.
5. Subject: A brief statement summarizing the purpose of the letter, helping
the reader identify the matter without reading the full content.
6. Salutation: A polite greeting, such as "Dear Sir/Madam" or "Respected
Sir/Madam."
7. Body of the Letter: The main content of the letter, divided into three
parts:
o Introduction: Briefly introduces the subject.

o Main Paragraph: Provides the details of the letter.

o Closing Paragraph: Summarizes the letter and calls for the

required action.
8. Complimentary Close: A polite end to the letter, such as "Yours
faithfully."
9. Signature: The signature of the sender, followed by their name and
designation, to authenticate the letter.
10.Enclosure: Lists the attached documents, if any.
11.CC (Carbon Copy): Indicates that copies of the letter are being sent to
additional recipients.
Essentials of a Good Business Letter
1. Clarity: The letter must be clear and simple, avoiding technical jargon or
ambiguous words.
2. Conciseness: Keep the message brief and to the point, avoiding
unnecessary details.
3. Completeness: Provide all relevant information to avoid follow-up
queries.
4. Courtesy: Use polite language to create a positive impression.
5. Correctness: Ensure all information, grammar, and spellings are
accurate.
6. Coherence: Arrange paragraphs logically and maintain a clear flow of
thought.
7. Consideration: Write from the reader's perspective, considering their
needs.
 8. Cheerfulness: Use positive language to create a good tone.
Physical Appearance of a Business Letter
1. Paper Quality: Use superior-quality paper, generally A4-sized.
2. Typing/Printing: Ensure clean, error-free typing or printing.
3. Margins: Use a standard margin of 1.5" on all sides for a neat
appearance.
4. Spacing: Use appropriate spacing between lines and paragraphs.
5. Letterhead: Ensure the letterhead (company name, address, etc.) is
visually appealing.
6. Folding: Minimize the number of folds before inserting into an envelope.
7. Envelope: The envelope size should match the letter, with a clear, typed
address for easy handling.

Notice in Business Communication

Meaning:
A notice is a formal written communication that provides precise information
regarding an upcoming event or meeting. It serves as a public announcement to
inform people about important events and actions they need to be aware of or
participate in.
Definition:
According to the Companies Act 2013, a notice is an advance intimation given by
a company to notify individuals (e.g., shareholders, directors) about the details of
a meeting, such as the day, date, time, place, and the business to be discussed.
Key Responsibilities of a Secretary in Issuing a Notice:
1. Content:
o The notice must clearly state the purpose of the meeting, including
specific details of the event or business to be transacted.
2. Agenda:
o The secretary must ensure that the agenda is included with the
notice, outlining the topics or business that will be discussed at the
meeting.
3. Period of Notice:
o For various meetings, there are specific periods within which the
notice must be sent. For instance, for an Annual General Meeting
(AGM), a 21-day notice period is required.
4. Mode of Delivery:
 o Notices are typically sent through postal services or electronic
means (such as email), depending on the regulations and the
preferences of the recipients.
5. Publishing Public Notices:
o In certain cases, such as an Annual General Meeting or office
relocation, the secretary may need to publish a public notice in
newspapers to reach a broader audience and comply with legal
requirements.
Importance of Notice:
 Ensures Participation: It allows relevant parties to prepare and attend
the meeting.
 Legal Compliance: Sending timely and correctly drafted notices is crucial
to comply with legal obligations.
 Transparency: Provides transparency regarding the agenda and actions
to be taken, ensuring stakeholders are well-informed in advance.
Reports in Business Communication
Meaning:
A report is a formal and organized presentation of facts, data, or opinions leading
to conclusions and sometimes recommendations. Reports can address specific
events, topics, or issues, and they serve to inform or assist in decision-making
within an organization.
Definition:
A report is a systematic presentation of facts, figures, and conclusions related to
a specific event or topic, which may also include recommendations. Reports may
be prepared by individuals or committees and are often required by law or for
internal business needs.
Types of Reports:
1. Statutory Reports:
o These are required under specific laws, such as the Companies Act,
and must be prepared in a particular format. Example: Annual
Report.
2. Non-Statutory Reports:
o These reports are prepared for internal use or based on company
requirements. Example: A report on the potential site for setting up
a new branch.
Role of the Secretary in Reports:
 Drafting Reports: The secretary is responsible for drafting clear, concise,
and accurate reports, reflecting the necessary facts and findings. It
requires thorough research and data collection.
  Familiarity with Formats: The secretary must be familiar with the
content, format, and structure of different types of reports to ensure
compliance and effectiveness.
 Annual Report: A key responsibility is the preparation of the Annual
Report, which includes financial statements, the directors' report, auditors'
report, and other relevant information.
Importance of Reports:
 Decision Making: Reports help in making informed business decisions by
presenting relevant facts and findings.
 Compliance: Statutory reports ensure compliance with legal
requirements.
 Internal Assessment: Non-statutory reports assist in internal evaluations
and planning.

Minutes in Business Communication

Meaning:
Minutes refer to a written summary of the business transacted at a meeting. It is
a concise, accurate, and official record of the discussions and decisions made
during a company meeting. Minutes serve as a reference for future meetings and
legal purposes.
Key Features of Minutes:
1. Official Record:
o Minutes provide a formal, verifiable record of the decisions taken at
a meeting. It is crucial for ensuring transparency and accountability.
2. Preparation Timeline:
o As per the Companies Act, minutes for various types of meetings
must be prepared by the secretary within 15 days after the
meeting.
3. Format:
o Minutes are written in a specific format that includes:

 Day, date, time, and place of the meeting.

 Type of meeting (e.g., Annual General Meeting, Board
Meeting).
 Names of the Chairman and attending members or directors.
 A detailed record of resolutions passed during the meeting.
4. Confirmation and Signing:
 o Minutes are first drafted by the secretary, then confirmed by the
members or directors. The Chairman signs the minutes, and the
secretary countersigns them to complete the process.
5. Tense:
o Minutes are always written in the past tense, reflecting the actions
and decisions that occurred during the meeting.
6. Resolution Recording:
o All resolutions passed in the meeting are clearly recorded, stating
whether they were ordinary or special resolutions and providing the
results of any votes.
Importance of Minutes:
 Legal Evidence: Minutes can be used as prima facie evidence in legal
matters to prove the actions and decisions of the meeting.
 Future Reference: Minutes act as an official record that can be referred
to for future decisions, clarifications, and planning.
 Transparency: Proper minutes promote transparency and provide a clear
record of how decisions were made.

10 CORRESPONDENCE WITH
DIRECTORS

Correspondence with Directors - Introduction

Correspondence with directors refers to the official communication between the
company and its directors. The secretary plays a crucial role in managing this
communication to ensure smooth business operations, legal compliance, and
effective decision-making within the company.
Directors are the key decision-makers, and effective communication with them is
vital for maintaining transparency and ensuring that business policies, decisions,
and resolutions are executed properly. This correspondence includes notices of
meetings, reports, circulars, resolutions, minutes, and other official documents
that keep directors informed about the company's activities and their
responsibilities.
Since directors are responsible for making high-level decisions, the
correspondence must be clear, concise, professional, and adhere to the legal
standards as prescribed by company law. The secretary must ensure that all
communication with directors is well-documented and filed for future reference.
Key areas of correspondence with directors include:
1. Meeting Notices: Informing directors about board meetings, committee
meetings, and other important events.
2. Agenda and Reports: Providing necessary reports, data, and agenda for
meetings.
3. Resolutions: Communicating decisions or resolutions passed during
meetings.
4. Minutes of Meetings: Sharing minutes of previous meetings for approval
and record-keeping.
5. Legal and Compliance Matters: Corresponding about statutory
compliance, audits, and legal obligations.

Precautions to be Taken by the Secretary While Corresponding with

Directors
When corresponding with directors, the company secretary must be cautious and
strategic, as directors hold key positions within the organization. The following
points outline the precautions that should be taken:
1. Prompt Reply: The secretary must respond to directors' queries quickly.
Timely communication on business matters is crucial to assist directors in
making informed decisions.
2. Politeness: A courteous and respectful tone is essential. The secretary
should avoid harsh language and maintain professionalism in all
correspondence with directors, fostering goodwill and mutual respect.
3. Initiative: The secretary should proactively make arrangements for board
meetings, send reminders about shareholder meetings, and assist in
ensuring meetings are conducted smoothly.
4. Accuracy: Providing precise and correct information is vital for directors to
make well-informed decisions. Any numerical or factual data should be
double-checked for accuracy.
5. Brevity: Correspondence should be concise and to the point, offering
maximum information in minimum words. The secretary should avoid
unnecessary details, lengthy paragraphs, and irrelevant explanations.

Circumstances Under Which a Secretary Has to Correspond with

Directors
The company secretary often communicates with directors for various reasons
related to the company's functioning. Some common circumstances include:
 1. Notice and Agenda of Routine Board Meetings: The secretary sends
out notices and agendas to inform directors about upcoming board
meetings, ensuring they are aware of the time, location, and topics for
discussion.
2. Disclosure of Personal Interest in a Contract: If a director has a
personal interest in a contract, the secretary is responsible for informing
and ensuring the director discloses this to avoid conflicts of interest.
3. Report to an Absent Director: When a director misses a meeting, the
secretary reports on the proceedings and decisions made during the
meeting, keeping the director informed.
4. Reminder Regarding Absenteeism at Board Meetings: If a director
has been absent from several board meetings, the secretary may need to
send a reminder about the regulations concerning absenteeism and its
consequences.

Specimen Letter: Notice and Agenda of a Routine Board Meeting

Diamond Company Ltd.
Registered Office: 30, Diamond House,
M.G. Road, Camp, Pune-411001
CIN: L10013 MH2015PLC300477
Phone: 020-20041977 Website: www.diamondlimited.com
Fax: 020-70052010 Email: Diamond12@gmail.com
Ref. No.: D/DR/11/18-19
Date: 30th March 2018
To,
Mr. Anju N. Rangwala,
5, Ganesh Apartment,
J.M. Road, Deccan,
Pune-411004
Subject: Notice of the Board Meeting on 25th April 2018
Dear Sir,
Notice is hereby given that a meeting of the Board of Directors of the company
will be held on Thursday, 25th April 2018 at 11:00 A.M. at the registered
office of the company, to transact the following business:
AGENDA
1. To read the notice convening the board meeting.
2. To take note of the minutes of the previous Board Meeting.
3. To consider and approve applications for the transfer of shares.
4. To review the financial position of the company for the year ended 31st
March 2018.
 5. To open the Dividend Account.
6. To discuss and decide any other matters with the permission of the chair.
You are kindly requested to be present at the Board Meeting.
Thanking you,
Yours faithfully,
For Diamond Company Ltd.
(Company Secretary)

Specimen Letter: Disclosure of Personal Interest of Director in a

Contract
Diamond Company Ltd.
Registered Office: 30, Diamond House,
M.G. Road, Camp, Pune - 411001
CIN: L30309 MH2016 PLC123075
Phone: 020-20041977 Website: www.diamondlimited.com
Fax: 020-50062018 Email: Diamond30@gmail.com
Ref. No.: D/DR/12/18-19
Date: 15th June 2018
To,
Mr. Atul N. Shah,
48, Gurwar Peth,
Pune-411007
Subject: Disclosure of Personal Interest
Dear Sir,
This is to bring to your attention that a meeting of the Board of Directors is
scheduled for 7th July 2018. During this meeting, the Board will discuss
appointing sole selling distributors on a commission basis to accelerate the sales
of the company's products.
It has come to our notice from a reliable source that your relative, Ms. Neelam
R. Shah, has applied for the position of sole selling agent. If you have any
personal interest in this appointment, we kindly request you to disclose the
nature of your interest in accordance with Section 184 of the Companies Act,
2013.
Please provide your response at your earliest convenience.
Thanking you,
Yours faithfully,
For Diamond Company Ltd.
(Company Secretary)
Specimen Letter: Report to the Director Absent from a Meeting
Diamond Company Ltd.
Registered Office: 30, Diamond House,
M.G. Road, Camp, Pune-411001
CIN: L30309 MH2016 PLC123075
Phone: 020-30041977 Website: www.diamondlimited.com
Fax: 020-50062018 Email: Diamond30@gmail.com
Ref. No.: D/DR/13/18-19
Date: 12th November 2018
To,
Mr. Mahesh N. Saluja,
Sr.No.78, Guru Niwas,
Kondhwa, Pune-411048
Subject: Report of Board Meeting held on 5th November 2018
Dear Sir,
Please find enclosed a copy of the draft Minutes of the Board Meeting held on
5th November 2018, which you were unable to attend.
I would like to specifically draw your attention to Point No. 8 of the minutes.
The proposal to open a new branch office at Mumbai, Mira Road (E) was
moved by Mr. A.N. Shah and seconded by Mr. M.H. Gunjal. After detailed
discussions, the proposal was passed with a majority vote of the directors
present.
The other items on the agenda were of routine nature and require no further
explanation.
Thank you for your attention.
Yours faithfully,
For Diamond Company Ltd.
(Company Secretary)
Encl: Copy of the draft Minutes of Board Meeting

Specimen Letter: Reminding the Director of the Provision Regarding

Absenteeism at Board Meeting
Diamond Company Ltd.
Registered Office: 30, Diamond House,
M.G. Road, Camp, Pune-411001
CIN: L30309 MH2016 PLC123075
Phone: 020-30041977 Website: www.diamondlimited.com
Fax: 020-50062018 Email: Diamond30@gmail.com
Ref. No.: D/DR/14/18-19
Date: 31st December 2018
To,
Mr. Ashish V. Shroff,
78, Narayan Peth,
Pune-411030
Subject: Information about Absenteeism in the Board Meeting
Dear Sir,
I am instructed by the Chairperson to bring to your kind attention that you have
been unable to attend all the Board Meetings held since 1st April 2018.
As per Section 167(1) (b) of the Companies Act, 2013, a director is required
to vacate their office if they remain absent from all Board Meetings held during a
period of twelve months, with or without leave of absence from the Board.
In light of this provision, I kindly request you to ensure your presence at the next
Board Meeting, scheduled for 25th January 2019, to avoid disqualification
under Section 167(1) (b). The notice and agenda for this meeting have already
been forwarded to you.
Thanking you.
Yours faithfully,
For Diamond Company Ltd.
(Company Secretary)

11 CORRESPONDENCE
WITH BANKS

Introduction
Correspondence with banks plays a crucial role in the operations of a company. It
involves various types of communication, such as seeking financial assistance,
requesting bank facilities, clarifying terms, and maintaining business
relationships. The company secretary typically handles this communication,
ensuring that the company’s financial dealings with banks are smooth, accurate,
and comply with regulatory requirements. Such correspondence should be
formal, precise, and prompt, as it often deals with significant financial matters,
including loans, overdrafts, bank guarantees, and opening or closing accounts.
Meaning and Definitions of Bank
Meaning of Bank: A bank is a financial institution where individuals deposit
their surplus cash, which is then used by the bank to lend to others who require
funds. Banks play a crucial role in promoting the habit of saving among people
and directing these savings toward profitable investments.
Definitions of Bank:
1. Cairns Cross: "A Bank is an institution which deals in money and credit."
2. Section 5(1)(b) of the Banking Regulation Act, 1949: "Banking
means accepting for the purpose of lending or investment of deposits of
money from the public, repayable on demand or otherwise, and
withdrawable by cheque, draft, order, or otherwise."
3. Section 5(c) of the Banking Regulation Act, 1949: A banking
company is any company that transacts the business of banking in India.

Functions of Commercial Banks

Commercial banks perform two main types of functions: Primary functions and
Secondary functions.
A) Primary Functions:
1. Accepting Deposits: Accepting deposits from the public is the
fundamental function of commercial banks. The bank pays interest on
deposits at a lower rate and lends money at a higher rate. The difference
between these rates constitutes the bank's profit. There are two main
types of deposits:
o Demand Deposits: These are deposits that can be withdrawn on
demand. They include:
 Savings Deposits: Encourages people to save. There are
limits on the frequency and amount of withdrawals. A
passbook or e-statement is provided.
 Current Deposits: Mainly for businesses, with no
restrictions on withdrawals. No interest is usually paid, but
overdraft facilities are available.
o Time Deposits: These deposits cannot be withdrawn on demand
and have specific maturity periods. They include:
 Fixed Deposits: Deposits are for a fixed period, offering
higher interest rates. Interest can be paid periodically or upon
maturity.
 Recurring Deposits: Encourages periodic savings for a
specific period, with interest rates higher than savings
deposits. Depositors receive passbooks or e-statements.
 2. Lending Money: After keeping cash reserves, banks lend money in
various forms, charging a higher interest rate than they pay on deposits.
Loans are typically granted against personal security, gold, or assets. Key
forms of lending include:
o Loans: These are term loans given for specific time periods,
credited directly to the borrower’s account.

Types of Term Loans

1. Short Term Loans: These loans are provided for a period of less than one
year, typically used to meet immediate business needs such as working
capital. The interest rate on short-term loans is higher than call loans but
lower than medium-term loans.
2. Medium Term Loans: These loans are given for a duration ranging from
one to five years. The interest rate charged on medium-term loans is
higher than short-term loans but lower than long-term loans. They are
generally used for expansion or capital improvements.
3. Long Term Loans: Loans that extend beyond five years are classified as
long-term loans. These loans carry the highest interest rate compared to
short- or medium-term loans and are often used for significant business
investments, like infrastructure or long-term development projects.

Advances
Advances are short-term credit facilities provided by banks to customers,
typically for meeting day-to-day business needs. Unlike loans, advances are
generally given for shorter periods, and interest is charged only on the amount
withdrawn, not the total amount sanctioned. Advances differ from loans in that
they are aimed at fulfilling short-term business requirements.

Types of Advances
1. Overdraft: An overdraft is a credit facility extended to current account
holders, allowing them to withdraw more than their available balance, up
to a specified limit. The overdraft is typically secured by collateral such as
shares, government securities, fixed deposit receipts (F.D.R.), or life
insurance policies (L.I.C.). The interest charged on the overdraft amount is
usually low, making it a cost-effective option for short-term financial
needs.
2. Cash Credit: Cash credit is a facility where a separate account is opened
for the borrower, and a specific withdrawal limit is sanctioned by the bank.
The borrower can withdraw funds as needed, with interest being charged
only on the amount actually utilized. Collateral, such as stock of raw
materials or finished goods, is required to secure the cash credit facility.
 3. Discounting of Bills: This is a short-term financing option where the
bank provides funds to the borrower by discounting bills of exchange
before their maturity date. The bank deducts a small interest fee for the
period remaining until the bill's due date, allowing the borrower to access
funds sooner.

Secondary Functions of a Bank

The secondary functions of a commercial bank are divided into two categories:
Agency Functions and Utility Functions.
1. Agency Functions: Banks perform various tasks on behalf of their
customers or account holders, which include:
a) Collection of Cheques and Bills: Banks collect cheques and bills of
exchange for their customers.
b) Collection of Dividend, Interest, and Salary: Banks help customers
collect dividends, interest on investments, and salaries.
c) Payment of Rent, Insurance Premium, Electricity Bill, etc.: Banks
facilitate payment of regular bills such as rent, insurance premiums, and utility
bills.
d) Purchase and Sale of Securities: Banks act as Depository Participants
(D.P.), assisting customers in buying and selling securities.
e) Remittances (Transfer) of Money: Banks help in the transfer of money
between accounts and to different locations.
f) Fulfill Standing Instructions of Depositors: Banks execute standing
instructions like regular transfers, payments, or investments for customers.
g) Act as Trustees, Executors of Wills, and Attorneys: Banks manage the
assets of customers and act as executors of wills or legal attorneys.
h) Banker to the Issue, Lead Manager: Banks also assist companies in
issuing shares, debentures, and act as lead managers for public issues.
2. Utility Functions: Banks offer various general utility services that help
the public, such as:
a) Safe Deposit Vaults (Locker Facility): Banks provide locker facilities for
customers to keep their valuables safe.
b) Letter of Credit: Banks issue letters of credit that guarantee payments to
sellers in international trade.
c) Dealing in Foreign Exchange: Banks handle foreign exchange services,
assisting in currency conversion and international trade.
d) ATM, Credit Cards, and Debit Cards: Banks provide customers with ATM,
credit, and debit card services for easy access to their money.
e) Financial Position Status Report: Banks offer reports on the financial
position of their customers or businesses.
f) Buying and Selling of Securities: Banks help customers invest by buying
and selling securities on their behalf.
g) Traveller's Cheques: Banks issue traveller's cheques for customers traveling
abroad, which can be easily encashed.
h) RTGS, NEFT, NACH, and ECS: Banks facilitate electronic fund transfers
through systems like Real-Time Gross Settlement (RTGS), National Electronic
Funds Transfer (NEFT), National Automated Clearing House (NACH), and
Electronic Clearing Service (ECS).

Precautions to be Taken by the Secretary While Corresponding with

Banks
When corresponding with banks, a secretary must adhere to several important
precautions to ensure effective and professional communication:
1. Prompt Reply:
o It is essential to provide timely responses to banks without any
delay to maintain good relations and ensure smooth transactions.
2. Brevity/Conciseness:
o Correspondence should be concise and to the point. Avoid lengthy
letters and unnecessary details.
3. Courtesy:
o The tone of the letter should always be polite. Harsh or rude
language should be avoided in communication with the bank.
4. Clarity:
o To avoid any misunderstandings, the secretary must provide clear,
true, factual, and up-to-date information about the organization.
5. Accuracy:
o The secretary should ensure that the information, especially facts
and figures, provided to the bank is accurate and reliable.
6. Secrecy:
o Confidential matters of the company should not be disclosed in
correspondence with the bank. Maintaining confidentiality is critical.
7. Legal Procedure:
o The secretary must follow the legal procedures in the content of the
correspondence. Necessary documents should be enclosed with the
letter when required.
Circumstances Under Which a Secretary Has to Correspond with Banks
A secretary is required to correspond with banks under several circumstances,
including:
1. Opening a Current Account:
o The secretary sends a formal letter to the bank, requesting the
opening of a current account for the company.
2. Request to Stop Payment of a Cheque:
o When a cheque is lost or a potential fraudulent situation arises, the
secretary sends a letter to the bank, asking them to stop payment
on a specific cheque.
3. Request for Overdraft Facility:
o The secretary may request the bank to provide an overdraft facility
for the company, outlining the company's financial needs and
terms.
4. Issuing a Letter of Credit:
o A letter of credit may be required for international or large
transactions, and the secretary corresponds with the bank to
request the issuance of this financial document.

Specimen Letter for Opening a Current Account with the Bank

Platinum Company Ltd.
Registered Office: 35, Platinum House,
J.M. Road, Nariman Point, Mumbai-400021
CIN: L30309 MH2017PLC123075
Phone: 022-12111972
Fax: 022-35029191
Website: www.PlatinumLimited.com
Email: Platinum30@gmail.com
Ref-P/BK/07/18-19
Date: 5th June, 2018
To,
The Bank Manager,
Bank of Maharashtra,
30, J.M. Road, Nariman Point,
Mumbai-400021
Subject: Opening of a Current Account
Dear Sir,
We kindly request you to open a Current Account in the name of our company,
Platinum Company Limited. The Board of Directors passed a resolution regarding
this in their meeting held on 27th May 2018.
Please find enclosed the following documents for opening the Current Account:
1. Duly filled and signed Current Account Opening Form.
2. Certified copy of the Certificate of Incorporation.
3. Certified copies of the Memorandum and Articles of Association.
4. Certified copy of the list of current Directors.
5. Specimen signature card containing the signatures of two Directors, Mr.
Yash and Ms. Yukta, and the Company Secretary.
6. Certified copy of the Board Resolution dated 27th May 2018.
7. Duly filled pay-in slip with an initial deposit of ₹3,000/- (Rupees Three
Thousand Only).
8. Copies of the PAN and TAN cards.
Thank you for your assistance.
Yours faithfully,
For Platinum Company Ltd.,
Sign
(Company Secretary)
Enclosures:
 As mentioned above

Specimen Letter Requesting a Bank to Stop Payment of Cheque

Platinum Company Ltd.
Registered Office: 30, Platinum House,
J.M. Road, Nariman Point, Mumbai-400021
CIN: L30309 MH2017PLC123075
Phone: 022-12111972
Fax: 022-35029191
Website: www.PlatinumLimited.com
Email: Platinum30@gmail.com
Ref-P/BK/08/18-19
Date: 12th February, 2018
To,
The Bank Manager,
Bank of Maharashtra,
30, J.M. Road, Nariman Point,
Mumbai-400021
Subject: Stop Payment of Cheque No. 017913
Reference: Our Current Account No. 1555
Dear Sir,
We request you to stop the payment of Cheque No. 017913, dated 5th February
2018, for an amount of ₹1,50,000/-, issued from our Current Account No. 1555 in
favour of M/s. N.J. Industries, Pune.
The party has reported that the cheque is lost. As a precautionary measure, we
kindly request you to stop the payment of the said cheque immediately.
We regret any inconvenience caused.
Thanking you,
Yours faithfully,
For Platinum Company Ltd.,
Sign
(Company Secretary)

Specimen Letter Requesting a Bank for Granting Overdraft Facility

Platinum Company Ltd.
Registered Office: 30, Platinum House,
J.M. Road, Nariman Point, Mumbai-400021
CIN: L30309 MH2017PLC123075
Phone: 022-12111972
Fax: 022-35029191
Website: www.PlatinumLimited.com
Email: Platinum30@gmail.com
Ref-P/BK/09/18-19
Date: 5th July, 2018
To,
The Bank Manager,
Bank of Maharashtra,
30, J.M. Road, Nariman Point,
Mumbai-400021
Subject: Request for Overdraft Facility
Reference: Current Account No. 1555
Dear Sir,
Our company has maintained a Current Account with your bank for the last 5
years (Account No. 1555). The Board of Directors, in its meeting held on 3rd July
2018, has decided to request an overdraft facility of ₹5 Lakhs for a period of
three months from August to October 2018.
As a manufacturer of computer peripherals, we have recently received a large
export order that requires short-term working capital. We propose to offer fixed
deposits worth ₹5 Lakhs with your bank as security for the overdraft.
We would appreciate an early response to this request.
Thanking you,
Yours faithfully,
For Platinum Company Ltd.,
Sign
(Company Secretary)

Summary of Specimen Letter Requesting a Bank to Issue Letter of

Credit
The letter is a formal request from Platinum Company Ltd. to Bank of
Maharashtra for issuing a letter of credit. The company plans to import
photocopying machines and printers from Japan and has placed an order worth
80,00,000 Yen with Canon Photo Copies of Japan. The Japanese company has
requested a letter of credit as per the contract's terms.
Platinum Company Ltd. offers a Fixed Deposit Receipt worth ₹50 lakhs as
security and is willing to provide any additional required security. The letter
concludes with a polite request for the bank to issue the letter of credit as early
as possible.
The letter includes essential details such as the company's current account
number, the transaction amount, and the provided security, ensuring a clear and
precise communication with the bank.

Distinction Between Current Account and Savings Account

1. Meaning:
o Current Account: Opened by business people or entities that have
frequent banking transactions.
o Savings Account: Opened by individuals to save a portion of their
income.
2. Withdrawals:
o Current Account: Withdrawals are made through cheques.

o Savings Account: Withdrawals can be made via cheques or

withdrawal slips.
 3. Facilities:
o Current Account: Passbook, cheque book, statement of account,
and pay-in-slip book are provided.
o Savings Account: Passbook, cheque book, and pay-in-slip book are
provided.
4. Rate of Interest:
o Current Account: Usually, no interest is provided, or it is given at a
nominal rate.
o Savings Account: Interest is provided at a higher rate than a
current account.
5. Overdraft Facility:
o Current Account: Overdraft facility is available.

o Savings Account: No overdraft facility is offered.

6. Suitability:
o Current Account: Suitable for traders, businesses, firms, and
institutions.
o Savings Account: Suitable for salaried individuals and those in the
fixed-income group.

Distinction Between Fixed Deposit Account and Recurring Deposit

Account
1. Meaning:
o Fixed Deposit Account: A fixed sum of money is deposited for a
specific, predetermined period.
o Recurring Deposit Account: Depositors regularly deposit a fixed
amount for a specific period.
2. Facilities:
o Fixed Deposit Account: The bank provides a Fixed Deposit
Receipt to the depositor.
o Recurring Deposit Account: The bank issues a passbook and a
pay-in-slip book.
3. Rate of Interest:
o Fixed Deposit Account: Offers a higher rate of interest. The
longer the deposit period, the higher the interest rate.
 o Recurring Deposit Account: Interest is higher than a savings
account but lower than a fixed deposit account.
4. Suitability:
o Fixed Deposit Account: Suitable for individuals with surplus
income.
o Recurring Deposit Account: Ideal for individuals with a fixed
income who can save regularly.

Distinction Between Loan and Overdraft

1. Meaning:
o Loan: A certain amount is advanced for a fixed period, usually for a
specific purpose.
o Overdraft: A facility that allows the current account holder to
withdraw more than the available balance in their account.
2. Eligibility:
o Loan: Available to any account holder, including Current, Savings,
Fixed, and Recurring account holders.
o Overdraft: Only available to Current Account holders.

3. Duration:
o Loan: Generally for a long period.

o Overdraft: Typically for a short period.

4. Purpose:
o Loan: Used to meet long-term financial needs.

o Overdraft: Used to meet short-term working capital requirements.

5. Repayment:
o Loan: The loan amount along with interest is repaid in installments
or as a lump sum on the due date.
o Overdraft: The amount overdrawn is adjusted against the balance
of deposits in the current account.
6. Security:
o Loan: Some valuable assets must be provided as security.

o Overdraft: Sanctioned against the hypothecation of stock, or

pledge of Fixed Deposit Receipts.
 12 CORRESPONDENCE WITH
STATUTORY AUTHORITIES
Correspondence with Statutory Authorities - Introduction
Statutory authorities are government bodies or agencies responsible for
enforcing specific laws and regulations. They hold significant power in ensuring
compliance with various legal obligations, such as tax laws, corporate
regulations, labor laws, and environmental laws. In the course of business
operations, a company’s secretary frequently corresponds with these authorities
to comply with legal requirements, file necessary reports, seek approvals, and
provide clarifications.
The communication with statutory authorities must be formal, precise, and clear
to ensure proper compliance and avoid penalties. Statutory authorities may
include entities like the Registrar of Companies (RoC), Income Tax Department,
Goods and Services Tax (GST) authorities, and other regulatory bodies.

Ministry of Corporate Affairs (MCA) - Summary

The Ministry of Corporate Affairs (MCA) is responsible for regulating the
corporate sector in India. It administers a range of laws and acts to ensure
smooth functioning and compliance within the business environment.
Acts Administered by MCA:
1. The Companies Act, 2013 - Governs companies incorporated in India.
2. The Partnership Act, 1932 - Regulates partnerships.
3. The Limited Liability Partnership Act, 2008 - Covers Limited Liability
Partnerships.
4. The Competition Act, 2002 - Prevents anti-competitive practices.
5. The Societies Registration Act, 1860 - Governs the registration of
societies.
Supervisory Role:
MCA also oversees professional bodies such as:
 Institute of Chartered Accountants of India (ICAI)
 Institute of Company Secretaries of India (ICSI)
 Institute of Cost Accountants of India
Objectives of MCA:
1. Administer corporate laws to promote ease of doing business.
2. Detect non-compliance with the Companies Act swiftly.
3. Promote better Corporate Governance and responsible business
practices.
4. Ensure fair competition in the market.
5. Provide corporate data to the public.
6. Offer services to various stakeholders involved in corporate regulation.
Organizational Setup to Administer the Companies Act, 2013
The Ministry of Corporate Affairs (MCA), headquartered in New Delhi, has a
structured organizational setup to administer the Companies Act, 2013 across
India. The setup includes various regional and local offices responsible for
implementing the Act and related corporate regulations.
Key Components of the Organizational Setup:
1. Ministry of Corporate Affairs (MCA) Headquarters: Located in New
Delhi, overseeing the overall administration of corporate laws.
2. 7 Regional Directors (RDs):
o Locations: Ahmedabad, Chennai, Hyderabad, Kolkata, Mumbai, New
Delhi, Shillong.
o Each RD supervises the Registrars of Companies (ROCs) and Official
Liquidators in their respective regions.
3. 22 Registrars of Companies (ROCs): Responsible for registering
companies and ensuring compliance with the Companies Act within their
jurisdiction.
4. 1 Central Registration Center: Handles the centralized registration of
companies, ensuring efficient processing of new company incorporations.
5. 9 ROCs-cum-Official Liquidators: These officers combine the roles of
ROCs and Official Liquidators, managing both registration and liquidation
duties.
6. Official Liquidators: Officers attached to various High Courts, assisting in
the winding-up process of companies as ordered by the courts.

Registrar of Companies (ROCs)

The Registrar of Companies (ROCs) are appointed by the Central Government
under the Companies Act, 2013 to oversee the registration and administration
of companies in their respective states or regions. They act as full-time field
officers with significant responsibilities and powers to enforce the provisions of
the Act.
Duties of ROCs
1. Examination of Documents: ROCs are responsible for examining the
documents submitted by companies to ensure compliance with the
Companies Act. If documents are found defective or incomplete, the ROC
requires the company to rectify them within a prescribed timeframe.
2. Decision Making: ROCs must make decisions and respond within 30 days
regarding the documents filed by companies.
 3. Public Access to Documents: Documents filed with the ROC are
accessible to the public upon payment of prescribed fees. The public can
inspect or obtain copies of the documents.
4. Fee Collection: ROCs charge fees for the filing of documents, based on
the rates set by the Companies (Registration Offices and Fees) Rules,
2014.
Powers of ROCs
1. Extension of AGM: The ROC can extend the time for holding an Annual
General Meeting (AGM), excluding the first AGM, by a maximum of three
months.
2. Inspection of Company Records: The ROC can inspect or request the
company’s books of accounts, other records, and papers.
3. Information Requests: The ROC can ask for explanations or additional
information in writing regarding any documents submitted.
4. Seizure of Books and Papers: Upon suspicion that company records
may be destroyed, altered, or falsified, the ROC can request the Special
Court to seize the company’s books and papers.
5. Striking Off Company Names: The ROC has the authority to remove the
name of a company from the register if necessary.

National Company Law Tribunal (NCLT)

The National Company Law Tribunal (NCLT) is a quasi-judicial body
established by the Central Government in June 2016. It was created to handle
corporate civil disputes and grant approvals under the Companies Act, 2013.
NCLT operates through various benches, each consisting of a judicial member
and a technical member. Currently, there are 15 benches across India, with the
Principal Bench in New Delhi.
Key Functions of NCLT:
1. Handling Corporate Civil Disputes: NCLT adjudicates corporate-related
disputes, granting approvals for corporate restructuring, and hearing
cases of oppression, mismanagement, and winding-up.
2. Timely Disposal: The tribunal is mandated to resolve petitions and
applications within 3 months of receipt.
3. Appeals: Any appeal against the order of NCLT can be made to the
National Company Law Appellate Tribunal (NCLAT).
Powers of NCLT:
1. Compromise, Arrangement, and Reconstruction: NCLT hears and
decides all matters related to corporate compromises, arrangements, and
reconstructions.
 2. Winding-Up Petitions: NCLT handles petitions regarding a company’s
inability to pay its debts and other winding-up cases.
3. Extension for Repayment of Deposits: NCLT decides petitions for the
extension of time for the repayment of company deposits.
4. Oppression and Mismanagement: It hears and resolves cases related
to corporate oppression and mismanagement.
5. Directing Meetings: NCLT can direct a company to hold its Annual
General Meeting (AGM) or Extraordinary General Meeting (EOGM).
6. Freezing Assets: The tribunal can order a company to freeze its assets or
prevent the disposal of company funds if it is in the company’s interest.
7. Share Transfer Grievances: NCLT addresses grievances regarding the
rejection of share and securities transfers.

National Company Law Appellate Tribunal (NCLAT)

The National Company Law Appellate Tribunal (NCLAT) was established
under the Companies Act, 2013 by the Central Government to hear appeals
against the orders of the National Company Law Tribunal (NCLT) and the
National Financial Reporting Agency (NFRA). NCLAT was set up in June
2016.
Structure of NCLAT:
 Chairperson: The head of NCLAT.
 Members: It can have up to 11 members, comprising Judicial and
Technical members.
Jurisdiction:
NCLAT has jurisdiction to hear appeals against:
1. Orders of NCLT: Appeals related to corporate civil disputes and other
matters handled by NCLT.
2. Orders of NFRA: Appeals against the orders of the National Financial
Reporting Agency.
3. Insolvency and Bankruptcy Board of India (IBBI): NCLAT is also the
appellate body for cases under the Insolvency and Bankruptcy Code
(IBC).
4. Competition Commission of India (CCI): Appeals regarding decisions
made by CCI.
Appeal Process:
 Any person aggrieved by an order of the NCLT or other relevant bodies
may file an appeal to NCLAT within 45 days from the date of receipt of the
order.
  NCLAT may confirm, modify, or set aside the order of the tribunal.
 If a party is dissatisfied with the decision of NCLAT, they can further
appeal to the Supreme Court of India within 60 days from the date of
the NCLAT order.

Securities and Exchange Board of India (SEBI) - Summary

Securities and Exchange Board of India (SEBI) was established in 1992 as a
statutory body responsible for regulating the securities market in India. It is
headquartered in Mumbai.
Key Functions of SEBI:
1. Supervision of Stock Exchanges: SEBI regulates and controls the
operations of stock exchanges to ensure fair and transparent practices.
2. Regulation of Companies: It oversees companies that issue securities to
ensure compliance with laws and protect investor interests.
3. Monitoring Intermediaries: SEBI regulates intermediaries such as
underwriters, merchant bankers, and brokers, ensuring their adherence to
fair practices.
Main Objectives of SEBI:
a) Regulation of Securities Markets: Ensures the smooth functioning of
securities markets and stock exchanges. b) Investor Protection: Safeguards
the rights and interests of investors in the securities market. c) Regulation of
Market Intermediaries: Develops a code of conduct for intermediaries like
brokers and underwriters to ensure ethical practices.

Precautions for Secretary While Corresponding with Statutory

Authorities - Summary
1. Prompt Reply: The secretary must respond promptly to any inquiries or
letters received from statutory authorities.
2. Legal Aspects: Ensure all legal provisions are adhered to while replying,
and enclose required documents or proofs where necessary.
3. Accuracy: All information provided must be true and accurate to avoid
any legal or regulatory issues.
4. Clarity: The correspondence should be clear, precise, and easy to
understand.
5. Brevity: Keep the letter short and to the point, focusing on the essential
information.
 6. Courtesy: Maintain a polite and respectful tone to create a good
impression on the authority being addressed.
Specimen Letter - Extension of Time for Holding Annual General
Meeting (AGM)
When a company is unable to hold its AGM within the prescribed time limit, it
needs to request an extension from the Registrar of Companies (ROC). Reasons
for requesting an extension may include:
1. Directors' Unavailability: If most directors are traveling and cannot
attend the AGM.
2. Employee Strike: Strikes or labor issues affecting the normal operations
of the company.
3. Government Raids: Raids by authorities such as the Income Tax
Department, which disrupt company operations.
4. Financial Statement Delays: Incomplete financial audits or approvals,
or data loss due to natural calamities.

Summary of Specimen Letter: Requesting Extension of Time for Holding

AGM
Company Name: Sunrise Limited
Subject: Request for extension of time to hold the 8th Annual General Meeting
(AGM)
The letter is addressed to the Registrar of Companies (ROC) in Maharashtra,
requesting a two-month extension to hold the AGM, beyond the deadline of 30th
September 2018. Due to a strike by employees since 20th June 2018, the
company has been unable to finalize its accounts on time. As a result, the AGM
cannot be held by the statutory deadline. The company requests an extension
until 30th November 2018 and encloses the annual report of 2016-17 as
supporting documentation. The letter is signed by the company secretary.

Summary of Specimen Letter: Raising a Ticket for Technical Complaints

with MCA
Company Name: Sunrise Limited
Subject: Difficulty in downloading e-form
The letter is addressed to the Web Information Manager at the Ministry of
Corporate Affairs (MCA) in New Delhi. It details the company's inability to
download Form SH-7, which is required to notify the Registrar of Companies
about alterations in share capital. For the past two days, the system has been
showing an error message stating "The File is damaged and it cannot be
repaired." Despite the company’s efforts to resolve the issue, they have been
unsuccessful. The company requests MCA’s assistance to resolve the matter
promptly. A copy of the error message is enclosed for reference. The letter is
signed by the company secretary.

Receipt of Annual Report

Company Name: Sunrise Limited
Subject: Non-Receipt of Annual Report
The letter addresses Mr. Vaibhav Joshi, acknowledging his complaint regarding
the non-receipt of the company’s Annual Report for the financial year 2017-18.
The company clarifies that the notice of the 8th Annual General Meeting (AGM)
along with the Annual Report was sent to all members via post as per the
address on record. Apologizing for the inconvenience caused, the company
assures Mr. Joshi that the report is being resent to the address provided in his
letter. A copy of the Annual Report is enclosed, and a CC is also sent to SEBI to
address the regulatory body.
The letter is signed by the company secretary.

Receipt of Annual Report

Company Name: Sunrise Limited
Subject: Non-Receipt of Annual Report
The letter addresses Mr. Vaibhav Joshi, acknowledging his complaint regarding
the non-receipt of the company’s Annual Report for the financial year 2017-18.
The company clarifies that the notice of the 8th Annual General Meeting (AGM)
along with the Annual Report was sent to all members via post as per the
address on record. Apologizing for the inconvenience caused, the company
assures Mr. Joshi that the report is being resent to the address provided in his
letter. A copy of the Annual Report is enclosed, and a CC is also sent to SEBI to
address the regulatory body.
The letter is signed by the company secretary.