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Companies Act , 2013

Chapter VII Management & Administration

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Highlights - Chapter VII Management & Administration

Disclosures in the Annual Return (Sec 92):

Particulars of holding, subsidiary and associate companies

Certificate of compliance by practicing company secretary

Remuneration to directors and key managerial personnel

Change in Promoters Stake (Sec 93):

Applies to listed companies

Should capture the change in the number of shares held by the promoters and the top ten shareholders of the company

Time period = 15 days from change

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Your Legal Team

Highlights - Chapter VII Management & Administration Annual General Meeting (Sec 96):

First AGM within 9 months from closure of financial year

Quorum for Meetings (Sec 103- Notified):

For public companies, quorum is dependant on number of members of the company. Companies with more than 5000 members would require 30 members to form a quorum

Voting through electronic means (Sec 108):

Prescribed class or classes of companies will be permitted to exercise his right to vote electronically

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Highlights - Chapter VII Management & Administration Demand for poll (Sec 109);

Eligibility for demand for polls may be made by a person present and having not less than 1/10th of the total voting power or not less than a sum of 5 Lakhs or such higher amount

Postal ballots (Sec 110);

Postal ballot permitted for all companies

Draft rules provide for business such as alteration of the object clause, articles, change in the registered office, change in the object of a public limited company, issue of DR shares, variation in the rights of a class of shares, buy back, election of director, sale of whole or substantially whole undertaking of a company, giving or extending loans

One member company and company with less than 50 members not to transact business through postal ballot

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Highlights - Chapter VII Management & Administration Circulation of Members Resolution (Sec 111- Notified):

1/10 the of members or 1/10th of the voting power can requisition a circular resolution

The company to bear the expenditure of the circulation of the resolution

Resolution requiring Special Notice (Sec 115)

Special notice to move a resolution

Members holding 1% of total voting power or sum of INR 5 Lakhs in paid up capital

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Highlights - Chapter VII Management & Administration Report on Annual General Meeting (Sec 121):

Listed public companies to prepare and submit a report

This is in addition to the minutes, report to be signed by the Chairman or in his absence by two directors one who is the MD

Rules provide for a list of all the matters that the report is to capture

Report to be submitted to the Registrar within 30 days from the AGM date

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Your Legal TeamAnalysis: Chapter VII

Section 88- Register of Members

(Old Act: Sec 150,151,152, 157)

Register and index of members needs to be maintained for: (i) each class of equity and preference shareholders; (ii) debenture holders;(iii) other security holders

Register and index of beneficial owners to be maintained

Register can be maintained outside India if permitted under the Act (“Foreign Register”)

In case of default, punishable with a fine of not less than INR 50,000 up to INR 3,00,000. Followed by a fine which may extend to INR 1,000 per day

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Information to be maintained:

i. Name of the member

ii. Address

iii. Email id, PAN, UIN

iv. Father’s, Mother’s or Spouse's name

v. Occupation

vi. Status, Nationality

vii. In case member is a minor, name of guardian and date of birth of the minor

viii. Name and address of the guardian

ix. Instructions if any with regards to sending notice etc

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Special resolution required to maintain the register in any other place, subject to a minimum of 1/10th residing of the members reside.

Any change in the status of a member due to death, insolvency etc. should be update along with the reason for the change

Part of the register can be maintained outside which correlates to any foreign members or debenture holders

A fee along with an intimation to the ROC shall be undertaken within 30 days of opening a foreign register.

Company secretary or such other person to authenticate each entry and mention the board resolution date

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Your Legal Team

Section – 89 Declaration in respect of beneficial interest in any share

(Old Act: Sec 187C)

Declaration to be made by person holding shares on behalf of another

The Declaration shall to be filed with the company, in duplicate within 30 days from the name being entered into the register. Any change shall be intimated within 30 days of the change being undertaken

Any changes to the holder of beneficial interest shall be intimated within 30 days

Fine of INR 50,000 shall apply to any person not making a declaration within the prescribed time

A declaration received by the company needs to be filed with the registrar along with the applicable fees.

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Section 90 :Investigation of beneficial ownership of shares in certain cases

(Old Act: Sec 187D)

Central government may appoint a person to investigate the beneficial ownership in shares or a class of shares

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Section 91: Power to close register of members or debenture holder or other security holders

(Old Act: Sec 154)

(Notified)

Public limited: if listed or going to list, notice of 7 days or such shorter period as specified by SEBI needs to be given, publishing the closure in at least a vernacular newspaper and an English newspaper and publishing the notice on the website of the company

The closure shall not exceed 45 days in aggregate and not more than 30 days at a stretch

Private limited: the provisions of the above (point 1). In terms of publication, will not apply so long as all members have been intimated of the same prior to the closure of register of members.

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Section 92: Annual Return

(Old Act: Sec 159,160,161,162)

Additional information to be captured as per this Act:

i. Principal business activities of the holding, subsidiary and associate company

ii. Details of other securities issued

iii. Details of promoters, KMP along with any changes in the last year

iv. Remuneration to the directors and KMP

v. Penalties if any on the company, along with details of compounding of offences and appeals if any against them, penalty and punishment

vi. Details related to certification of compliance, disclosures

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vii. Details of meetings of members or a class, board and various committees along with attendance details

viii. Details of the shares held by FII’s including name, countries of incorporation, percentage of shareholding

Company secretary in practice to certify annual returns of company which are:

i. Listed

ii. Paid up share capital of 5 cores or more and turnover of 25 crores or more

Company secretary in practice which defaults herein shall be liable to a fine of which shall be not less than INR 50,000 up to INR 5 Lakhs.

Annual return to carry information upto the date of closure of financials and not up to AGM date only

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Annual return to be signed by 1 director and the company secretary or where there is no company secretary by a company secretary in practice

One man company and small company, the annual return to be signed by a company secretary or if there is no company secretary by one director only

Extract of the annual return to be a part of the director’s report rather than the Balance Sheet

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Section 93: Return to be filed with ROC in case of promoters’ stake changes

(New Provision)

Applicable to listed companies

Change in the promoters shareholding or the top 10 shareholder shall be intimated to the ROC within 15 days of the change

this is in addition to the compliance with SEBI

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Section 94: Place of keeping and inspection of registers, returns etc.

(Old Act: Sec 158, 163)

Registers and copies of annual return to be maintained in the registered office or other places where a minimum of 1/10th of the members are residing and approved in a special resolution

For debenture holders, the register shall be maintained for 15 years from the date of redemption

Annual return shall be maintained for 8 years from the date of filing

Foreign register shall be maintained permanently. For the foreign debenture holder for 15 years from the date of redemption

Copies of the returns can be taken by any holder of securities on paying a maximum price of INR 10

Section 95 states that the annual return and the registers are admissible as evidence for any matter

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Section 96: Annual general meeting

(Old Act: Sec 166)

Except for one man company, AGM shall be held each year and not more than 15 months between 2 AGM’s

First AGM within 9 months from the closure of the first financial year. Other cases, within 6 months from the date of closure of financial year

AGM to be held between 9:00 am to 6:00 pm and not on a National Holiday as declared by the central government

Sec 97 provides that the tribunal may call for an AGM, if an application has been made by a member

This power has been now given to the tribunal as opposed to the central government.

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Section 100: Calling of extraordinary general meeting

(Old Act: Sec 169)

(Notified except for sub-clause (6))

The board may call an EGM as deemed required for conducting business

On receipt of a requisition from members holding at least 1/10th of the paid up capital the board may call for an EGM

A valid requisition shall require the company to call for an EGM within 21 days from the requisition to a maximum of 45 days.

The requisition should contain the matters to be transacted along with the date, time and place where the EGM is to be held

No explanatory statement is required to be annexed to the notice and the reason for the meeting can be explained at the meeting.

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Your Legal Team Notice shall be sent to all members on the register of members of the company.

Notice of meeting shall be given by ordinary post, registered post or through electronic means. Non-receipt of notice by a member shall not invalidate the meeting.

Any expenses paid by the requisitionists in conducting a meeting due to failure of the board shall be reimbursed

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Your Legal Team Section 101: Notice of meeting

(Old Act: Sec 171,172)

Notice can be given through electronic means as well and the same is to be provided to: (i) every member of the company including the legal representative if any; (ii) the auditor of the company; (iii) every director of the company

To constitute electronic mode, it should be sent through a computer which is authorized, which may be a link, an attachment or in the body, if an attachment should be in pdf.

The subject line for the email should contain the name of the company, the notice of the type of meeting and the date of the meeting

Company to maintain record of the number of emails sent, including any which may be resent and this amounts to “proof of sending”.

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Section 102: Statement to be annexed with notice

(Old Act: Sec 173)

(Notified)

Each item of special business to be transacted to be annexed as a statement in the notice

In case the general meeting is an AGM except for the following all items will be considered as special business:

(i) Consideration of financials statements and reports of the Board of directors and the auditors

(ii) Declaration of dividend

(iii) Appointment of directors

(iv) Determining the remuneration of the auditors

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Your Legal Team Any related party matter shall also be set out in the statement

In case inspection of documents is required and stated in the statement, the date and place for such inspection shall also be stated

Any default in making a disclosure as per this section shall be punishable with a fine of up to INR 50,000 or 5 times the benefit tat accrues to such

As per the 2013 act, benefits that might accrue even to the KMP needs to be disclosed in the statement in.

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Section 103: Quorum for meeting

(Old Act: Sec 174)

(Notified)

Public company: 5 up to 1000, 15 for between 1000 to 5000, 30 for more than 5000 members

Private company: 2 person

Adjourned meeting: to the same day the next week at the same time and place

A requisitioned meeting under Sec 100 shall stand cancelled if the quorum is not present

At the adjourned meeting if a quorum is not present the members present will form the quorum

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Section 104: Chairman of meetings

(Old Act: Sec 175)

(Notified)

No change from the Old act.

The members shall appoint from amongst themselves a chairman on show of hands

A poll if requested for shall be taken and the election will happen in that manner

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Section 105 (Proxies)

(Old Act: Sec 176)

(Notified except sub clause (3) (4) of clause 1 & clause 7)

One person cannot represent more than 50 members as proxy

A person who is a member of a charitable organization will not be entitled to appoint another as a proxy unless such person is also a member in the company (Not notified)

The instrument appointing a proxy shall be in writing and be signed by the concerned party

The old act permitted voting by the proxy if the articles permitted it, has been dispensed with in this act

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Section 106: Restriction on voting rights

(Old Act: Sec 181,182 and 183)

(Notified)

Voting rights cannot be exercised if calls on the shares have not been paid or other sums presently payable have not been paid

No other restriction can be imposed for not casting a vote

Power of the private company to restrict voting power in case of shares or interests have not been held for a specific period has been dispensed with

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Section 107: Voting by show of hands

(Old Act: Sec 177, 178)

(Notified)

Voting shall be by show of hands unless the requirement for a poll is called.

A declaration by the chairman and an entry in the minutes is evidence of the resolution

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Section 108: Voting through electronic means

(New provision- Notified)

Public company or company with more than 500 members can provide the option for an electronic voting in general meetings

Rules provide for specifics on what is a “secured system”, “cyber security” through which the electronic voting takes place

An agency which is registered with the MCA will supervise the electronic voting or a company may get itself registered

Notice may be sent through RPAD or through electronic means

Notice on the companies website, the process and manner of voting shall also be mentioned

Specifics on the voting and the business conducted through the voting needs to be advertised in a vernacular and English newspaper

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Your Legal TeamSection 109: Demand for poll

(Old Act: Sec 179,180,184 and 185)

Prior to declaration of results of any voting on any resolution, a poll may be ordered for by: (i) 1/10th of the total voting power or if a member holds a minimum of INR 5 lakhs or such higher amount in the paid up share capital of the company or (ii) any member present in proxy

A poll for matters such as adjournment of meeting and appointment of a Chairman should be undertaken immediately. Polls for other matters need to be taken within a maximum of 48 hrs from the time the demand was made.

The chairman will appoint a scrutinizer, who shall have all documents necessary to facilitate a valid poll.

The polling papers that are issued will bear the initials of the scrutinizer

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Your Legal Team Polls will be counted in the presence of two witnesses, a report will

be prepared which will contain information on the total votes, number caste in favor and against the resolution including the details of the invalid polls

Report needs to be submitted within 7 days of the poll being undertaken.

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Section 110: Postal Ballot

(Old Act: Sec 192A)

Listed or unlisted companies can avail this mechanism.

The request should be sent with draft resolutions along with a request for an assent or a descent to be sent within 30 days

The notice that is sent shall include a pre-paid envelope for facilitating the communication

Advertisement will be sent out in an English and a vernacular newspaper containing all relevant information about the postal ballot

A notice of the ballot shall also be place on the website of the company till the last date of voting

The company shall appoint a scrutinizer to validate and report out the findings of the ballot.

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Section 111: Circulation of members’ resolution

(Old Act: Sec 188)

(Notified)

On requisition for a meeting by the required number of members and circulate to members the statement of the matter to be discussed in the resolution

No notice or circulation of resolution will be required unless a copy of the requisition which is duly executed has been deposited prior to 6 weeks before the meeting where notice is to be given and in all other cases 2 weeks before the meeting

The expenditure for sending a notice of any resolution will be borne by the company

The restrictions imposed on the number of words that can be captured in the circular resolution has been dispensed with.

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Section 112: Representation of the President and Governor

(Old Act: Sec 187A)

(Notified)

The President or the Governor as the case may be may appoint a representative to exercise his rights including voting by proxy and postal ballot

Section 113: Representation of Corporations at Meeting of Companies and of Creditors

(Old Act: Sec 187)

(Notified except (b) of (1))

A body corporate if it is a member by way of a resolution may authorize a person to be a representative including performing all such acts as on behalf of the body corporate.

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Section 114: Ordinary and Special Resolution

(Old Act: Sec 189)

A resolution shall be ordinary if the number of votes in favor exceeds those that are against

A resolution is special if the votes cast in favor is 3 times those against it.

A special resolution is required for only those matters that are considered so in the notice and specified under the Act.

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Section 115: Resolution requiring Special Notice

(Old Act: Sec 190)

Person holding not less than 1% or not less than 1 lakh can move for a special resolution

Notice to move a special resolution needs to be at least 14 days prior to the said meeting excluding the day on which the notice is sent and the board meeting date

Once the company receives the said notice at least 7 days notice should be given to all members

Where it is not practicable to give notice as is usual, advertisement in an English and vernacular newspaper should be undertaken at least 7 days prior to the meeting

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Section 116: Resolutions passed at adjourned meeting

(Old Act: Sec 191)

(Notified)

Resolutions passed at the adjourned meeting shall be deemed to be passed at that meeting as opposed to the original date

Eg: Original meeting date is 10th October but for want of quorum it was adjourned to 17th October. The matters resolved will be dated 17th October

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Section 117: Resolutions and agreements to be filed

(Old Act: Sec 192)

Other than the resolutions that have been prescribed in the old act the following new resolutions need to be filed with the ROC:

i. To make calls on shareholders for amounts unpaid

ii. Authorizing the buy back of securities

iii. Issue securities including debentures whether in or outside India

iv. To borrow money

v. Invest the funds of the company

vi. To grant loans or give guarantee or provide security in respect of loans

vii. Financial statement and the Board report

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viii. Diversify the business of the company

ix. To approve amalgamation, merger or reconstruction

x. To take over a company or acquire controlling or substantial stake

All such resolutions need to be filed within the specified period along with the applicable fees

Any default herein will result in a fine ranging from INR 5 Lakhs to 25 Lakhs

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Section 118: Meetings

(Old Act: Sec 193,194, 195 and 197)

Minutes of all meetings shall be recorded including for each class of shares and resolutions that are passed by postal ballot

Minutes book to be separately maintained for general meetings, meetings of the creditors, meetings of the board and any committee of the board

Minutes to be maintained according to the Secretarial standard and shall be recorded in the relevant book within 30 days from the close of the said meeting

All appointments of directors, KMP, auditors or company secretary in practice shall be deemed to be valid

Each page of every minute book shall be initialed or signed and the last page shall be signed by the chairman of the BM, general meeting or the presiding chairman during the postal ballot

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Minutes book for the general meeting shall be kept at the registered office

Minutes book shall be preserved permanently and kept in the custody of the company secretary or a duly authorized director by the board

Penalty of 25,000 shall be payable by the company and every defaulting office of the company

Tampering of the minutes will lead to imprisonment of the said person for a term which may extend up to 2 years

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Section 119: Inspection of minute-books of General Meeting

(Old Act: Sec 196)

Minutes for the general meeting shall be kept in the registered office and available for inspection during business hours

A member on furnishing a request will receive a copy within 7 days, the fees to be paid shall not exceed INR 10 per page

A default herein shall lead to a penalty of INR 25,000

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Section 120: Maintenance and inspection of documents in electronic form

Applies to listed companies and companies with not less than 1000 shareholders, debenture holders and other security holders

Such companies can maintain the register, minutes and other records in electronic format and can accordingly inspected

Records should be maintained such that it can be printed, retrievable, digitally executable

Security of the records is entrusted to the director, company secretary

Adequate security processes should be in place to ensure that the records cannot be tampered.

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Section 121: Report on AGM

Listed Companies: report out the AGM including confirmation on the manner it was convened

Within 30 days the company shall file the AGM documents with the ROC

The report is in addition to the minutes for the AGM, the report is to be signed and dated by the chairman and two other directors one of whom is the managing director

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Section 122: Applicability to One person company

Sec 98 to 100 and 111 shall not apply

Any business transacted at an AGM shall be deemed to be transacted in such AGM and the same shall be recorded as per 118 of the Act.

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Your Legal Team

Thank You

Ramya Sridhar