October 16

Steps for Holding an EGM under Companies Act, 2013

Note: The following sections are notified:

Section 100- General Provision for holding EGM – no change

Section 102- Statement to annexed to notice – change w.r.t Companies Act, 1956

Section 103- Quorum for meetings – change w.r.t Companies Act, 1956

Section 104- appointment of chairman- no change

Section 105 – Appointment of proxies change w.r.t Companies Act, 1956 but changes not notified

Section 107- Voting by show of Hands-no change

Section 108- Demand for Poll- no change

General provision: An Extra Ordinary General Meeting can be conducted in the following three ways: (No change with respect to the old companies act)

Meeting by Board: Section 100(1)[1]: The Board may, whenever it deems fit, call an extraordinary general meeting of the company.

Meeting by Board on requisition: Section 100(2)[2] : The board can also call an EGM at the requisition of members.

a) in the case of a company having a share capital, such number of members who hold, on the date of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date carries the right of voting;

(b) in the case of a company not having a share capital, such number of members who have, on the date of receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said date a right to vote, call an extraordinary general meeting of the company within the period specified in subsection

Meeting by requisitonits: Section 100(3)[3]: If the Board does not, within twenty-one days from the date of receipt of a valid requisition in regard to any matter, proceed to call a meeting for the consideration of that matter on a day not later than forty-five days from the date of receipt of such requisition, the meeting may be called and held by the requisitonists themselves within a period of three months from the date of the requisition.

The following are the steps for holding an EGM under the Companies Act, 2013 by the board:

Step 1: Convene Board Meeting after giving notice to all the directors to discuss besides others the following matters.

· To propose resolutions to be passed at the Extraordinary General Meeting of shareholders

· To fix the date, time and place for convening the Extraordinary General Meeting of shareholders.

Step 2: Section 101[4], Notice: Issue and dispatch notices in writing or through electronic mode giving atleast 21 clear days in such a manner as may be prescribed. Chapter VII, Rule 7.16 lays down in details the procedure to be followed while sending a notice through electronic means. The notice shall specify the place, date, day and hour of the meeting and shall contain a statement of business to be transacted at such meeting[5]. The notice of meeting shall be given to:

(a) every member of the company, legal representative of any deceased member
or the assignee of an insolvent member;
(b) the auditor or auditors of the company; and
(c) every director of the company

Step 3: Section 101(1) Provio[6]: The meeting can be held at a shorter notice if the consent is given in writing or electronically by not less than 95 percent of members entitled to vote at such meeting.

New: Step 4: Attach statement to the notice[7]: According to Section 102[8]: the statement annexed to the notice shall contain

(a) the nature of concern or interest, financial or otherwise, if any, in respect of each items of—

(i) every director and the manager, if any;

(ii) every other key managerial personnel; and

(iii) relatives of the persons mentioned in sub-clauses (i) and (ii);

(b) any other information and facts that may enable members to understand the meaning, scope and implications of the items of business and to take decision thereon

Step 5:Quorum: section 103[9]: Ensure that the quorum required for private companies that is 2 members is present. If the quorum is not present within half-an-hour from the time appointed for holding a meeting of the company—

(a) the meeting shall stand adjourned to the same day in the next week at the same time and place, or to such other date and such other time and place as the Board may determine; or

(b) the meeting, if called by requisitionists under section 100, shall stand cancelled:

New: Provided that in case of an adjourned meeting or of a change of day, time or place of meeting under clause (a), the company shall give not less than three days notice to the members either individually or by publishing an advertisement in the newspapers (one in English and one in vernacular language) which is in circulation at the place where the registered office of the company is situated.

Step 6:Chairman: Section 104[10]: The members personally present at the meeting shall elect one of themselves to be chairman on show of hands. If a poll is demanded on the election of the Chairman, it shall be taken forthwith in accordance with the provisions of this Act and the Chairman elected on a show of hands shall continue to be the Chairman of the meeting until some other person is elected as Chairman as a result of the poll, and such other person shall be the Chairman for the rest of the meeting

Step 7:Appointment of Proxies: Section 105[11]: Provision exactly same as old act except the following:

New :Section 105 (1)Proviso 3[12]: Provided also that the Central Government may prescribe a class or classes of companies whose members shall not be entitled to appoint another person as a proxy:

Section 105 (1) Proviso 4[13]: Provided also that a person appointed as proxy shall act on behalf of such member or number of members not exceeding fifty and such number of shares as may be prescribed

Step 8:Voting: Section 107[14]states that voting can be done by show of hands unless a poll is demanded.

Demand for Poll: Section 108[15]states that before or on declaration of result of voting on any resolution by show of hands a poll may be ordered by the chairman on an demand made by:

(a) in the case a company having a share capital, by the members present in person or by proxy, where allowed, and having not less than one-tenth of the total voting power or holding shares on which an aggregate sum of not less than five lakh rupees or such higher amount as may be prescribed has been paid-up; and

(b) in the case of any other company, by any member or members present in person or by proxy, where allowed, and having not less than one-tenth of the total voting power.

New: Section108[16]: Voting can also be done through electronic means for the class or classes of companies so prescribed by the central government. Chapter VII Rule 7.18 states that the following companies can conduct voting through electronic means:

a) Every listed company

b) a company having five hundreds or more shareholders may provide to its members facility to exercise their right to vote at general meetings by electronic means.

The procedure for electronic voting and requirements are further stated in proviso to Rule 7.18 , Chapter VII Draft Rules

Step 9: After the voting is done and resolutions are passed ensure that the minutesof the meeting are prepared and signed within 30 days of the conclusion of the meeting. (Section 118[17])

Step 10:Section 117[18]: File the appropriate form with ROC within 30 days of passing of the resolution.

[1] In force

[2] In force

[3] In force

[4] Not in force

[5] Section 101(2), not in force

[6] Not in force

[7] Section 102, in force

[8] In force

[9] In force

[10] In force

[11] In force

[12] Not in force

[13] Not in force

[14] In force

[15] Not in force

[16] Not in force

[17] Not in force

[18] Not in force

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October 2

Liability of directors with respect to Annual Accounts

The companies Act provides a range of obligations to be discharged by every company registered under this act and also on the part of its Directors / Managers / Secretaries, etc. The law relating to penalties and criminal liabilities arising from noncompliance with respect to Annual Accounts are enlisted below:

Officer in default: Section 2(31) of the Companies Act, 1956 defines an officer in default in the following terms “in relation to provision referred to section 5, has the meaning specified in that section.” Section 5 of the Companies Act, 1956 defines officer in default as including all the following officers of the company including the managing director or managing directors, the whole-time director or whole time directors, the manager, the secretary, any person charged by the board with the responsibility of complying with that provision, where no officer mentioned above is specified all the directors.

Section 2(60)[1]of the Companies Act, 2013 ,defines an officer in default for the provisions of the act as any officer who is in default namely whole time director, key managerial personnel, where there is no key managerial personnel, such director or directors specified by board, any person charged with the responsibility by the board , any person with whose advice board of director is accustomed to act, every director who has knowledge of contravention and in respect of share issue, transfer the share transfer agents, registrars and merchant bankers.

1) Default in laying down accounts at AGM:

Under the Companies Act, 1956, Section 210(5) lays down that the board of directors of the company shall lay down the balance sheet and profit and loss at the annual general meeting. If the person being a director of a company fails to take reasonable steps to comply with the provisions of the section, he shall in respect of each offence be punishable with imprisonment for a term which may extent to six months or fine which may extend to ten thousand Rupees or with both.

Under the companies act, 2013, Section 129 (7) [2]lays down that if the company makes a contravention of the section that deals with preparing of financial statements and laying down the financial statement at the AGM , the managing director, the whole time director in charge of finance, the Chief Financial Officer, or any other person charged by the Board with the duty of complying with the requirements of this section and in absence of any of the officers mentioned above all the directors shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees which may extend to five lakh rupees or with both .

2) Failure to file Annual Accounts with MCA:

Section 220 of the Companies Act, 1956 lays down that that after the Balance Sheet and Profit and Loss have been laid at the AGM the Profit and Loss and Balance Sheet duly signed the managing director, manager or secretary of the company or if there be none of these, by a director of the company has to be file with the registrar within 30 days from the date of AGM. If any default is made in complying with the provisions of this section the punishment for the default is penalty of Rs. 500 till the default continues.

Section 137(3)[3]of the Companies Act, 2013 provides that if a company fails to file financial statements before the expiry of time provided in Section 403, the penalty imposed is Rs. 1000 for every day of default but this amount shall not be more than 10 lakh rupees and in the absence of managing director, chief financial officer and in the absence of the managing director and chief financial officer and in the absence of above any director who is charged with the responsibility shall be punishable with imprisonment for a term which may extend to six months or fine which shall not be less than one lakh rupees but which may extend to a five lakh rupees or both .

3) Improper issue, circulation or publication of Balance sheet and Profit and loss Account:

Section 218 of the Companies Act, 1956 states that is any copy of balance sheet and profit and loss which has not been signed and issued, circulated or published or if any balance sheet is issued circulated and published without attachments such as profit and loss, any accounts, statements, auditor’s report , directors report the company and every officer in default shall be punishable with fine which may extent to 5000 Rupees.

Section 134[4]of the Companies Act, 2013 states that the financial statement including the consolidated financial statement shall be approved by the board of directors before they are signed on behalf of the board . The auditor’s and Director’s Report as required by the section shall be attached .The signed copy of every financial statement including consolidated financial statement if any shall be issued, circulated or published. If there is any contravention of this section the company shall be punishable with fine that shall not be less than 50 thousand Rupees but may extend to 25 Lakh Rupees and every officer who is in default shall be punishable with imprisonment for a term which may extend to 3 years or fine which shall not be less than 50 thousand Rupees but may extent to 5 Lakh Rupees or both.

4 ) Failure to comply with provisions of Annual Return :

Section 162 of the Companies Act, 1956 states that the non compliance of Section 159(form of annual return for a company having a share capital ), 160 (form of annual return for a company not having share capital ), 161 (Annual return to be signed by both a directory and secretary and to be filed with the registrar )with respect to Annual Return will attract a fine of Rs. 5000 which has to be paid by the company

Section 92 [5]of the Companies Act, 2013 lays down that a company who fails to file its annual return within a the period so allowed by section 403 with additional fee shall shall be punishable with fine that shall not be less than 50 thousand Rupees but may extend to 25 Lakh Rupees and every officer who is in default shall be punishable with imprisonment for a term which may extend to 6 months or fine which shall not be less than 50 thousand Rupees but may extent to 5 Lakh Rupees or both .

5) Failure to send the Annual Accounts to members:

Section 219(1) of the Companies Act, 1956 lays down that the Annual accounts should be sent atleast 21 days before the Annual General Meeting. Section 219 (3), furthermore states that any default in complying with this requirement would attact a fine of Rs. 5000 by the company and any every officer in default. Section 219(4) lays down that if any member makes a demand of annual account and the same is not provided to him the company and every officer in default would attract a fine of Rs. 5000.

Section 136[6]of the Companies Act, 2013 also lays down the same requirement but the penalty which the company is subject to Rupees 25 thousand and every officer in default is subject to a penalty of 5000 Rupees.

Summing up, criminal liability is only attracted in the following cases with respect to Annual Accounts

a) Default in laying down accounts at AGM: Criminal Liability under both Old and new act

b) Failure to file Annual Accounts with MCA: Criminal Liability Only under new act

c) Improper issue, circulation or publication of Balance sheet and Profit and loss Account: Criminal Liability Only under new act

d) Failure to comply with provisions of Annual Return: Criminal Liability Only under new act

[1] In force, by notification dt . 12.09.2013

[2] Not in force

[3] Not in force

[4] Not in force

[5] Not in force

[6] Not in force

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September 30

Change in authorized capital – a comparison between companies Act 1956 and Companies Act, 2013

Increase in the authorized capital under Companies Act, 1956: The provisions regarding increase of share capital are found in section 94(1) r/w Section 16, 31 and section 97 of the Companies Act, 1956.

Section 94 (1) of the act states that a limited company having a share capital, if so authorized by its articles , alter the conditions of its memorandum to increase its share capital by such amount as it thinks expedient by issuing new shares.

Furthermore section 31 of the act states that the articles of company can be altered by a special resolution if so allowed by the memorandum of the company and section 16(3) states that the memorandum of articles can be altered by the same procedure as provided for altering of articles if the procedure for same is not provided in the section.

In addition to this section 97 states that when the capital is increased a notice of the same has to be given to the registrar within 30 days of passing of the resolution (Form 5).

Procedure:

Meetings to be held:

A board meeting is to be convened to discuss the agenda and fix general meeting date for passing special resolution of shareholders.
Convene general meeting and pass Special resolution for alteration of MOA or AOA and increase of share capital.

Alteration in MOA and AOA:

If the Memorandum of Association (MOA) and the Articles of Association (AOA) contain a clause regarding the share capital they have to altered by filing E-Form 23 with an explanatory statement within 30 days of passing the resolution. (Section 192- Registration of Resolution)

Forms to be filed with Ministry of Corporate Affairs:

Form 5 has to be filed with ROC (Registrar of Companies) within 30 days and accordingly the Registrar of Companies will make necessary changes in the Company’s Memorandum & Articles of Association. (Section 97)

Increase in authorized capital under the Companies Act, 2013: The increase in authorized capital under companies Act, 2013 has been dealt under section 61 and section 64 R/W sections 13 and section 14

Section 13 and section 14 are regarding alteration of memorandum and articles by passing a special resolution. Section 61 states that a limited company having its share capital may if so authorized by its articles alter its memorandum in its general meeting to increase its authorized share capital by such amount as it thinks expedient. Section 64 states that when the authorized capital is increased the notice of the same should be given to the registrar in 30 days of such alteration or increase.

Changes: All the requirements are same except the following:

Notice to the registrar: According to the old act the notice to the registrar should be within 30 days after passing of the resolution whereas under the Companies Act the notice to the registrar has to be given in 30 days after such alteration or increase.

Penalty for not reporting to the Registrar : The penalty under the old act for not reporting about the change of capital to the registrar was Rs. 500 per day till the default continues but under the Companies Act, 2013 the penalty shall not be less than Rs. 1000 per day till default continues or Rs. 5,00,000 whichever is less .

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September 30

Changes in the Companies Act, 2013 with regards to holding of AGM and approval of Annual Accounts

Changes re AGM	Companies Act, 1956	Companies Act, 2013	Current status
Maximum time for holding first AGM	Maximum time for holding first AGM is 18 months from incorporation : Proviso to Section 166 states that first AGM would be conducted within a period of 18 months from incorporation	Maximum time for holding first AGM is 9 months from closing of financial year : Section 96 states that in case of the first annual general meeting, it shall be held within a period of nine months from the date of closing of the first financial year of the company	Not in force
Time and day of conducting AGM	Section 166(2) : Every annual general meeting shall be called for a time during business hours, on a day that is not a public holiday, and shall be	Section 96(2): Every annual general meeting shall be called during business hours, that is, between 9 a.m. and 6 p.m. on any day that is not a National Holiday	Not in force
Consent for shorter notice	Section 177(2): Consent to be given by all members entitled to vote at the meeting.	Section 101: consent to Given in writing or by electronic mode by not less than ninety-five per cent. of the members entitled to vote at such meeting.	Not in force
Statement to be annexed with notice :	Explanatory statement to be annexed with notice mentions about nature of concern of director and manager: According to section 173 where the business to be transacted at the meeting is special there shall be annexed to the notice a statement settling out all material facts including in particular the nature and concern of if any of director and manager	Statement annexed with the notice mentions about the nature of concern of the director, manager, key managerial personnel and relatives of directors and key managerial personnel : According to Section 102 the statement annexed to the notice shall contain (a) the nature of concern or interest, financial or otherwise, if any, in respect of each items of— (i) every director and the manager, if any; (ii) every other key managerial personnel; and (iii) relatives of the persons mentioned in sub-clauses (i) and (ii); (b) any other information and facts that may enable members to understand the meaning, scope and implications of the items of business and to take decision thereon	In force notified on 12.09.2013
Quorum for AGM	According to section 175 the quorum in case of : a) Private Companies : 2 members b) Public companies : 5 members	According to section 103 the quorum is as follows : a) Private companies : 2 members b) Public companies if no of members on date of meetings is not more than 1000: 5 members c) Public companies if no of members on date of meetings is more than 1000 but less than 5000 : 15 members d) Public companies if no of members on date of meeting exceeds 5000 : 30 members	In force notified on 12.09.2013
Annual Return	a) Annual return to contain particulars as on date of AGM : Section 159 and 160 : The annual return has to be prepared and filed with the registrar containing particulars as on date of agm b) Particulars to be mentioned in Annual Return , Section 159(1): Details of registered office , register of its members, register of debenture holders, shares and debentures, indebtedness, members and debenture holders past and present, directors, managing directors, managers, secretaries past and present	a) Annual return to contain particulars as on date of close of financial year : Section 92: According to the new provision every company will prepare an annual return in the prescribed format containing particulars as they stood on the close of financial year b) Particulars to mentioned in the Annual Return , Section 92(1): Old requirements which are incorporated : Details of registered office , register of its members, register of debenture holders, shares and debentures, indebtedness, members and debenture holders past and present, directors, managing directors, managers, secretaries past and present New Requirements which would form a part of particulars to be stated in the Annual Return : i) Details of principal business activities ii) Particulars of holding, subsidiary and associate companies, iii) Details of promoters and key managerial personnel , iv) Meetings of members or a class thereof, board and its various committees along with attendance details, v) Remuneration of directors and key managerial personnel, vi) Penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment, vi) Matters relating to certification of compliances, disclosures as may be prescribed vii) Details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by them, vii) such other matters as may be prescribed Extract of Annual Return has to be attached to Boards Report : Section 92 (3) states an extract of the annual return in such form as may be prescribed shall form part of the Board’s report.	Not in force
Appointment of Auditor	Auditor to be appointed for a period of one year: Section 224 states that at each AGM, every company shall appoint an auditor or auditors to hold office from the conclusion of that meeting to the next AGM Intimation re appointment to be given by Auditor to ROC within 30 days : According to section 224 (1) every company is required to give information to the Auditor regarding his appointment within 7 days from his appointment and then the according to section 224(2)auditor has to give information of his accep tance or refusal to ROC by filing a form 23B within 30 days from date of receipt of appointment letter	Auditors to be appointed for a period of five years : Section 139 states that every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting and the manner and procedure of selection of auditors by the members of the company at such meeting shall be such as may be prescribed Intimation re appointment of Auditor to be given by Company to ROC within 15 days : The proviso to Section 139 states the company shall inform the auditor concerned of his or its appointment, and also file a notice of such appointment with the Registrar within fifteen days of the meeting in which the auditor is appointed	Not in force
Directors Report		Additional requirements : According to Section 134 the directors report will include the following : (a) the extract of the annual return as provided under sub-section (3) of section 92; (Form No. 7.9. , ) (b) number of meetings of the Board; (c) Directors’ Responsibility Statement with additional points; (d) a statement on declaration given by independent directors under sub-section (6) of section 149; e) particulars of loans, guarantees or investments under section 186; f) particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the prescribed form g) a statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company; h) the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year; i) such other matters as may be prescribed. New requirements for Directors’ Responsibility Statement : According to section 134(5) the Directors Responsibility statement will include the following additional requirements a) in case of a listed company and every other public company having such paid-up share capital as may be prescribed, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors; b) statement that directors had devised proper systems to ensure Compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.	Not in force
Books of Account	Comprises of Balance sheet and profit and loss	Concept of Balance Sheet and profit and loss now collectively termed as Financial Statement: Definition of Financial Statement : Section 2(40) states that financial statement” in relation to a company, includes— (i) a balance sheet as at the end of the financial year; (ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year; (iii) cash flow statement for the financial year; (iv) a statement of changes in equity, if applicable; and (v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv): Provided that the financial statement, with respect to One Person Company, small company and dormant company, may not include the cash flow statement; Requirements of Financial Statements : Section 129 states that (1) The financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III: Provided that the items contained in such financial statements shall be in accordance with the accounting standards: Additional Requirements when company has one or more subsidiaries : According to section 129(3) Where a company has one or more subsidiaries, it shall, in addition to financial statements provided under sub-section (2), prepare a consolidated financial statement of the company and of all the subsidiaries in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company along with the laying of its financial statement under sub-section (2): Also Provided that the company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiary or subsidiaries in such form as may be prescribed:	Section 2(40) in force by notification dated 12.09.2013 Not in force

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