1.Companies Act 1956 PREPARED BY; LENY MICHAEL CAARMEL ENGINEERING COLLEGE PATHANAMTHITTA

2. Administration of Company Law 1. 2. 3. 4. 5.6. 7.Central government The board of Company Law Administration Securities and Exchange Board of India (SEBI) The Company Law Advisory Committee The Public Trustee The Official Liquidators The court 3. COMPANY Meaning An association of individuals formed for some common purpose. it is regarded by the law as a person, a human being. But it has no physical existence. Definition The company is an association of a number of persons, formed for some common purpose and registered according to the law relating to companies. 4. Sec.3 (1) (i) of the Companies Act 1956 A company formed and registered under this Act, or an existing company A voluntary incorporated association which is an artificial person, created by law with limited liability having a common seal and perpetual succession 5. Salient Features of a Registered company (Characteristics) 1.Incorporated association 2. Artificial Person 3. Separate Legal Entity 4. Perpetual Succession 5. Common Seal 6. Separate Property 7. Limited Liability 8. Transferability of Shares 9. Capacity to sue and being sued 6. Characteristics of company 1. Incorporated association A company comes into existence on incorporation or registration under the companies act. Minimum number of persons required for the purpose of incorporation is seven in case of a public company and two in case of a private company. 7. 2. Artificial person The co is created with the sanction of law and is not itself a human being. It is therefore called artificial; and since it is clothed with certain rights and obligation, it is called a person 8. 3. Separate legal entity On incorporation company gets personality which is separate and distinct from those of its members. It can hold and deal with property and can sue and sued in its own name. no one can claim any ownership rights in the assets of the company 9. 4. Perpetual succession An incorporated company never dies. Its existence is not affected in any way by the death or insolvency of any shareholder. Members of the co may come and go , but the company continues its operations until it is wound up. 10. 5. Common seal As a company is an artificial person it cannot sign its name on a contract. So it function with the help of seal. All contract entered into by the members will be under the common seal of the company. 11. 6 separate property The company can own , enjoy and dispose off its property in its own name. 12. 7. Limited liability The liability of every share holder of a co limited by shares or guarantee is limited to the extent of the face value of the shares or the amount of the guarantee given by him. 13. 8 . Transferability of share. Members can freely transfer the shares of the company prescribed in the Articles of Associationa.The right to transfer share is a statutory right of members. 14. 9. Capacity to sue and being sued A company being legal person can file a suit against third parties and can also be sued by them for breach of its legal duties . 15. Classes or Kinds of Companies On the Basis of Incorporation 1.Chartered Companies 2.Statutory Companies 3. Registered Companies 4.Foreign company (B) On the Basis of Liabilities 1.Companies with Liability limited by Shares 2.Companies with Limited by Guarantee 3.Companies with unlimited Liability (C) On the basis of Number of Members 1. Public Company 2. Private Company (A) 16. D) On the basis of control 1. Holding company 2. Subsidiary company E) On the basis of Ownership 1. Government Company 2. Non-govt. Company F) Others 1. One man co 2. Licensed co 3. Existing co 17. 1.Basis of Incorporation A. Chartered company The company which have formed and incorporated under a special charter granted by the king or queen of . Eg: East India company. Bank of England. After independence its find no place in India 18. B. Statutory company These are companies which are created by means of a special Act of Parliament or any state legislature. Eg: RBI, Railway 19. C. Registered company Company formed and registered under companies Act 1956 is called Registered companies. 20. D. Foreign Company It means any company incorporated outside India which has an established place of business in India 21. 2. Basis of Liability A. Limited company or company limited by shares When the liability of the members of a company will be limited by M.A to the amount, if any unpaid on the shares. Majority of registered companies will be company limited by shares 22. B. Company limited by guarantee Here liability of each member is limited by the memorandum to such amount as he may guarantee by the memorandum to contribute to the assets of the company in the event of its winding up. Such companies are formed for the purpose of profit ,but for the promotion of art ,science, culture, sports etc. 23. C. Unlimited company A company not having any limit on the liability of its members is termed as unlimited company. The members are liable for the debts of the company to an unlimited extent at the time of winding up. 24. 3. Basis of Membership A. Private company A private company is a company -which restricts the right to transfer its shares. -limits the number of its members to 50. -prohibits any invitation to public to subscribe its shares. 25. B. Public company A public company means a company which is not a private company Has a minimum paid-up capital of 5 lacks rupees or such higher paid-up capital may be prescribed 26. (D)On the basis of Control 1. Holding Company A company is known as the holding company of another company if it has control over that other company. 2. Subsidiary Company A company is known as a subsidiary of another company when control is exercised by the latter over the former called a subsidiary company 27. (E)On the Basis of Ownership 1. Government company A government company means any company in which not less than 51% of the paid up capital is held by; (a) Central Government (b) any state government or governments (c) partly by the central government and partly by one or more state governments 2. Non-government company controlled and operated by private capital 28. F. Others: 1. One-man company This is a company in which one man hold practically the whole of the share capital of the company, and in order to meet the statutory requirement of minimum number of members , some dummy members who are mostly his relations or friends hold just 1 or 2 shares each. 29. 2. Licensed company (companies not for profit) Any association formed for promoting commerce, art, science, religion, charity or any other useful object and which does not intended to apply its profits. Its registration as a limited co may apply to the central govt. for a license to omit the word limited from its name 3. Existing Company A company formed and registered under any of the act prior to companies act 1956 namely 1866,1882,1913 1942. 30. Difference between Public company and Private company Private CompanyPublic Company1. Minimum number of members 2 and max number of members not exceed 50. 2. It cannot invite public to subscribe for shares or debentures 3. Need not wait for minimum subscription to make allotment of shares1. Minimum number -7 and no limit on maximum number.2. It invite general public3. It shall have to wait 31. 4. It can immediately commence its business, after its incorporation 5. It is not necessary to hold statutory meeting 6.Quorum required for a meeting is Two persons 7.Restriction on transfer4. It shall have to wait till certificate for commencement of business received 5. It has to hold statutory meeting6. Five persons must personally be present 7.Can be freely transferred 32. 8.Not required to issue prospectus 9. MA need be signed only by 2 members 10.There shall be at least 2 directors 11. Not necessary for the directors to retire by rotation 12.No age limit for a director to continue in office8.Issuing of prospectus is a necessary precondition 9.MA should be signed by at least 7 members 10. There must be 3 directors 11. one-third of directors have to retire by rotation12. Up to 65 years 33. 13.Previous approval of central government not required for grant loan to Directors 14.It can be wound up only if its members fall short of 2 15. Members have no right to receive the balance sheet 16. Its name should end with the word Private Limited13. Required14. It can be wound up only if its members fall short of 7 15. Right to receive the duly audited balance sheet of the co. 16.Its name should end with the word Limited 34. Formation and Incorporation of Companies The procedure or formation of a company may be divided into four stages; 1.Formation 2. Registration or Incorporation 3. Raising of Capital 4. Commencement of Business 35. 1. Promotion or formation It is the first stage in the formation of a company. In this stage the idea of carrying on a business is conceived by a person or by a group of persons called Promoters. They make detailed investigation about; - Workability of idea - Amount of capital required - Operating expense - Probable income 36. They have to take necessary steps for assembling the proposition. It includes; Securing necessary patents Acquisition of suitable sites for factory Arrangements for machinery and equipment Tentative arrangements for employees 37. 2. Incorporation or Registration Registeredwith registrar of the joint stock companies Decide the form of the company (public or private) Decide the name of the company If co. wants to issue share capital exceeding one crore, previous sanction of central government must be obtained 38. Procedure for registration The promoter has to first decide the proposed form of company as whether it is to be a public company or a private company. They may form the company with limited liability , unlimited liability or limited by guarantee. They have to decide the name of the company agreeable and desirable to all. For eg if the name proposed is identical with or closely resembles the name of an existing company , it is undesirable 39. Documents to be filed with Registrar along with application 1. The Memorandum of association 2. The Articles of association 3. A list of Directors with their consent 4. A statement of nominal capital 5 . A notice of address of the registered office of the company. 6. Any agreement if any with the relevant persons of the proposed company 40. 7.A statutory declaration stating that all the requirements of the act have been complied with. Such declaration shall be signed by an advocate of high court or supreme court or a chartered accountant practicing in India who is engaged in the formation of company or a person named in the article as a director, manager or secretary of the Co. After scrutiny of all these documents and if they are in order , the registrar of companies shall issue a certificate of Incorporation 41. Certificate of Incorporation Sec.35 it is given by the Registrar shall be conclusive evidence that all the requirements of the Act have been complied with in respect of registration. The certificate of incorporation is the birth certificate of the company. A company comes into existence from the date mentioned in the certificate. 42. once the company is registered, the incorporation cannot be challenged even though there are irregularities prior to registration. The certificate of incorporation is a conclusive evidence of the fact that1. all the requirements of the act have been complied with. 2. company is duly registered. 3. company came into existence on the date of certificate. 43. Effect of Incorporation 1. Co. obtains separate legal entity from its members 2. It attains perpetual succession 3. Its property is not the property of share holders 44. Advantages of Incorporation Limited Liability 2. Transferability of shares 3. Separate legal entity 4. Control and Management Mgt through elected rep. so S.h dont worry about 5. Dealing between members and the company 6. Perpectual succession 7. Infinite membership 1. 45. Disadvantages 1.It requires expense. Elaborate formalities before it 2. It give powers to the state and the law courts to interfere in the affairs of the company. it brings about governmental control and regulations. 3. The management is entrusted to a few persons -they have dominant part in administration -they may misuse the power 46. 4. When the number of members reduced below the statutory minimum, the advantages of incorporation will withdraw and the members will be liable for whole debt. 5. Company though a legal person is not a citizen. So a company cannot claim protection of such fundamental rights 6. In some cases the court may disagreed the separate legal entity. 47. Lifting of Corporate Veil Cases where the Corporate Veil may be Lifted for the purpose of ; 1. To investigate the relationship between holding Co. and Subsidiary Co. 2. To investigate the number and names of members of the Co. 3. To investigate the true ownership of shares and controlling power over the Co. 48. 4 . To investigate the lawful objects of the Co. 5. To investigate mismanagement and oppression by the majority 6. To investigate the character of a Co. where it is trading with an alien enemy 7. To investigate into the affairs where there exists a tendency to create monopoly 49. 8. To investigate the Co. affairs where it is used for tax evasion 9. To investigate if the Co. is acting as an agent for its shareholders 10. To investigate the affairs, where it is formed for fraudulent purpose. 50. 3. Raising of Cpaital After incorporation a company can raise capital by issuing shares. A private company cannot issue shares to public. In case of public company a copy of prospectus is filed with the registrar and it will be issued to the public. Those who are intended in purchasing share are required to send their application money to company's 51. On the last date fixed for the receipt of application ,if the company has received application equal to minimum subscription the directors will start with allotment of shares. 52. 4. Commencement of Business A private company may commence its business immediately after incorporation.But a public company cannot commence business immediately after incorporation but it has to obtain a certificate of commencement of Business from the registrar 53. Memorandum of Association Memorandum of association for a company is like the constitutional law for a country. It is the document which contains the rules regarding constitution and activities of the company. It is a fundamental charter of the company. 54. it defines the relationship between of the Co. with the outside worldIt is not only indicates the purpose of the formation of the but also the extent of powers of the company, beyond that it cannot go. It is a document filed at the time of incorporation.It is a public document to know the state of affairs of the Co. And can be inspected by anybody 55. Form of Memorandum of Association It must be in one of the forms in Table B,C,D & E in schedule I of the Co.s Act 1956. It must be; Printed Divided into Paragraphs Numbered consecutively Signed by even 7 in case of public Co. and 2 in case of Pvt. Co. 56. Contents of memorandum 1. Name clause 2. Registered office clause (Domicile or situation Clause) 3. Object clause 4. Liability clause 5. Capital clause 6. Association clause (subscription clause) 57. 1.Name clause The first clause of memorandum requires a company to state its name Rules:-Should not adopt identical with or resembles that of an existing company. Ltd for public company and Pvt Ltd for private company. Should not use a name prohibited by the Name and Emblems Act 58. 2. Registered office clause (Domicile or situation Clause) The memorandum must specify the state in which the registered office of the company is to be situated Within 30 days of its incorporation or commencement of business, the exact place where the registered office is to be located must be decided and notice of the situation of the registered office given to the Registrar 59. 3.Object Clause This is the most important clause of the memorandum of association. It defines the object of the company and the extent of its powers. The object of the company must be state very clearly . They must not be against the provisions of the Co.s Act A company cannot do anything beyond object clause. The objects of the company shall not be illegal or against public policy. 60. 4. Liability clause This clause state the nature of liability of members. 61. 5. Capital clause This clause contains the total amount of capital with which the company is registered and the number and value of the shares into which it is divided. This capital is known as authorized capital or nominal capital or registered capital. 62. 6. Association clause or subscription clause The memorandum concludes with subscription clause. The memorandum must be subscribed by at least 7 persons in case of public company and 2 in case of private company. Each subscriber must sign the document and write the number of shares taken by him. 63. Alteration of memorandum The alteration of the memorandum is possible only by strictly following the procedures laid down in the Act 64. 1.Alteration of a name clause The name of a company can be changed by passing a special resolution and with approval of central govt. If a company is registered with a name which is in the opinion of central govt is identical with or too closely resemble to the name of an existing company, it can be changed by passing an ordinary resolution but with the approval of central govt . 65. 2.Alteration of registered office clause If the shift of office is within local limits, ie from one place to another place in the same city , town or village that can be done by giving a notice of change to registrar. If the shift is outside local limits, a special resolution has to be passed. If the shift is from the jurisdiction of one registrar to another's the special resolution should be confirmed by the regional director of the state. (new sec 17 A Amendment Act 2000) 66. 3.Alteration of object clause The alteration of object clause is subject to so many restrictions. A company may change its objects for the following purposes 1. To carry business more economically or more efficiently. 2.To attain its main purposes by new or improved means. 3. To enlarge the business 67. 4. To restrict or abandon any of its objects specified in the memorandum. 5. To amalgamate the company with any other company. 6. To sell or dispose of the whole or any part of the undertaking of the company. A special resolution and approval of company law board is necessary for alteration. 68. 4.Alteration of liability clause Liability clause cannot be altered so as to make the liability of members unlimited. 69. 5.Alteration of capital clause Alteration can be made to 1.To increase share capital 2.To convert its shares into stock 3. To reduce its share capital 4. Share into higher denomination 5. Share into lower denomination 6.To cancel the unissued share capital 70. Doctrine of ultra vires Memorandum contains the rules regarding constitution and activities of the company. It is a fundamental charter of the company. It defines the extent of powers of the company, beyond that it cannot go. A co can act and function within the limits of memorandum. Any act which is beyond the memorandum is ultra vires the company. Such acts are void .Ultra means beyond and vires means powers. So ultra vires means beyond powers. The doctrine helps the shareholders , creditors and every third person dealing with the company to ensure that their investment are not diverted to 71. Articles of Association Articles of association are the rules and regulations framed for the purpose of managing its internal affairs and for the benefits of share holders. The article define the mode and form on which the business of the company is to be carried on. Its for general administration of the company. 72. Form of AA Articles must be ; a ) printed b ) divided into paragraphs c ) numbered consecutively d) sign the documents in the presence of at least two witness. 73. Contents of Articles of Association 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.Business of the company The share capital Different classes of shares Rights of different shareholders Number and value of shares Procedure of Allotment of shares Procedure of issuing share certificates Calls on shares Forfeiture of shares Procedure for transfer of shares 74. 11. Alteration of share capital 12. Conversion of shares into stock 13. Voting rights of members 14. Rules regarding meetings 15.Execution and adoption of preliminary contracts 16. Appointments, powers, duties, qualifications remuneration etc. of Directors 17. Appointment, reappointment, powers, duties, qualifications, remuneration etc. of M.D, Manger and secretary 75. 17. Appointment and remuneration of Auditors 18.Borrowing powers of the company 19. Dividends and reserves 20. keeping of books of accounts and their audit 21.Number of Directors 22. Capitalization of profit 76. 23. Common seal of the company 24. Payment of interest out of capital 25. Winding up 77. Alteration of article A company has the right to alter the articles of association. It can be altered only through a special resolution.A copy must be filed with the registrar within 30 days of passing it. 78. Limitation to Alteration 1. It must not be against any provisions of the companies act 2. Must not inconsistent with memorandum 3. Must not sanction anything illegal 4. Approval of central govt for conversion of public company into private company 5. No increase in the liability of members 79. 7. Alteration by special resolution only. 8. Permission of company law board is required 9. Should not cause breach of contracts. 10. Alteration must not constitute fraud on minority 11. Power to alter must be exercised bonafide and for the benefit of company 80. Distinction between memorandum of association & articles of association 1.memo: is the charter of Co. It lays down the scope and limit of cos activities. 2.Memo: defines the relation of Co with the outside world. 3.Supreme document.Art: contains rules and regulation for the internal mgmt of the company. 2. Deals with rights of members and the relation of Co with its members. 3. Subordinate to memorandum. 1. 81. 4. Every Co must have memorandum. 5. Alteration of memo: is difficult. 6.Any act by Co beyond its memo: is ultravires Which cannot be ratified by the shareholders4. A public co limited by share may not have articles. 5. Article can be easily altered 6. An act beyond articles is only irregular and may be ratified by the shareholders. 82. Constructive notice of memorandum and articles The memorandum and articles , when registered become public document and can be inspected by anyone on payment of a nominal fee. So every person dealing with the company is expected or presumed to have read this document and understood its meaning. 83. Third persons while entering into contracts should carefully go through the document. If the contract he entered is beyond the power of the company, he will not have any rights against the company. He must have been careful at the time of contracting as he had an opportunity to read and understand the document. So he is deemed to have understood the contents of document. This presumption is known as Doctrine of constructive notice. 84. Doctrine of indoor management The doctrine of indoor management is an exception to the doctrine of constructive notice. Persons dealing with company are only expected to read memorandum and articles, the way in which it is published. They are not expected to enquire into the regularity of internal proceedings . An outsider is presumed to know the constitution of a company, but not what may or may not have taken place within the doors that are closed to him. 85. Prospectus After obtaining the certificate of incorporation the next step is to collect the required capital. For this a public company may issue a prospectus inviting the general public to subscribe its shares. 86. Definition Prospectus means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from public or inviting offers from public for the subscription or purchase of any shares or debentures of a body corporate. Simply , it is a document inviting deposits from the pubic or inviting offers from the pubic for the subscription of shares or debentures of a company. Subscription means, taking or agreeing to take shares for cash 87. Requirements of prospectus 1. Time -cannot be issued before incorporation 2. Date -must be dated 3. Registration - filed with the registrar before issue 4. Statement by expert - statement relating to the company by an expert such as Engineer, Accountant etc. 88. 5. Terms of Contract - it stated in the prospectus, cannot be changed after registration of prospectus 6. Copy of prospectus - copy must be accompanied with every application form 7. Contents - it disclose the matters required in Schedule II of the act 89. Rules regarding issue of prospectus 1.Registration of prospectus A copy of prospectus must be delivered to the registrar for registration before its publication 2. Dating of prospectus Every prospectus must be dated. This date shall be taken as the date of publication of prospectus 3.Penalty for non registration of prospectus If a prospectus has been issued without it being registered the company and every person liable for the issue of prospectus shall be punishable with a fine which may extend to Rupees 50 thousand. 90. Contents of prospectus Itis divided into Part 1 and Part IIPart 1 1. Nameand registered address of the company 2. Main objects of the company and details of signatories of the memorandum 3. Number and class of shares 91. 4. Number of redeemable preference shares 5. The number of qualification shares of the directors. 6. Remuneration of directors. 7. Names, addresses, descriptions and occupations of directors, managing directors, secretaries, treasures and managers. 8.Minimum amount of subscription 92. 9. Minimum amount to be paid on application and allotment of shares 10. Up-to-date capital structure of the company 11.Premium on shares 12. Name of underwriters and the amount of underwriting commission payable within 2 preceding years 93. 13. Particulars of the property of company. 14. Details of every contract of company. 15. Name and address of the auditors 16. Voting rights of the different classes of shareholders. 17 .Time and place of Inspection of copies of the accounts of the company 94. 18.Time and place where contracts may be inspected. 19. Nature and extent of restrictions imposed upon members of the company. 20. Particulars of reserves. 21. Business time (length of time) 22. Amount of preliminary expenses 23.Amonut of the expenses of the issue 95. Part 2 Part 2 contains various reports , mainly 1. Auditors report setting out the financial position of the company mainly the assets and liabilities etc. 2. Accountants report on the similar lines 96. Misstatement of prospectus Prospectus must make full and honest declaration of material facts without concealing or omitting any fact. Misstatement includes; -untrue statement -Statement which produce wrong impression -misleading statement, -concealment of material facts -omission of facts The misstatement in the prospectus imposes a civil and criminal liability on the persons who are responsible for that. 97. Statement in lieu of prospectusSec.70 of the Co.s Act states that where no prospectus is issued , a company is not allowed to allot shares to any party If the promoters of a public company are confident of raising the required capital privately, no prospectus need be issued to pubic. In such a case they are to prepare a draft prospectus containing the information required to be disclosed by schedule III of the Act. This document is called a Statement in lieu of prospectus 98. Meetings and resolutions A company takes important decisions through meetings and resolutions. A company meeting may be defined as a concurrence or coming together of at least a quorum of members in order to transact either the ordinary or special business of the company. Company meetings are meetings of directors or shareholders or the creditors or the debenture holders, who discuss matters relating to the affairs of the company and take decisions affecting 99. Kinds of company meetings 1) Meetings of the shareholders a) Statutory meeting b) Annual general meeting c) Extraordinary general meeting d) Class meeting 2) Meetings of directors a) Meetings of Board of directors b) Meetings of Committees of the board 100. 3) Meetings of creditors a. Meetings of debenture holders. b. Meetings of creditors during the life time of the company c. Meetings of creditors at the winding up of the company. 101. Meeting of share holders 1. Statutory meeting It is the first general meeting of the shareholders of a public company. Every public company with in six months from the date of commencement of business shall hold a meeting of the members which is called statutory meeting. This meeting is held only once in the lifetime of a company. Private company need not hold a statutory meeting 102. Object of the meeting The object of holding a statutory meeting is shareholders of the progress of the company since incorporation and to discuss matters arising out of the promotion and formation of the company It deals with; -Existing financial situation of the company -Contracts entered into -Management -Other aspects of the company 103. Notice The directors are required to send notice of meeting to every member of the company at least 21 days before the date of meeting. 104. Statutory report This report must be drafted by the directors which is called statutory report. It is presented in the statutory meeting of the company. The report contains particulars relating to the formation and incorporation of the company. It must be certified by as correct by at least two directors, managing director and auditor. The report must be sent to every member at least 21 days before the date of meeting. A copy should also be sent to the registrar for registration. The purpose of report is that it helps the shareholder to make the best use of the opportunity. 105. Contents of statutory report The total number of shares allotted 2. The total amount of cash received 3. Abstract of receipts and payment 4. Details of directors, managing director, auditors, secretary etc. 5. Particulars of contracts etc 6. Underwriting contracts 7. The arrears due on calls 8. Commissions and brokerage to directors ,M.D 1. 106. 2. Annual general meeting Every company shall in each year hold in addition to any other meeting a general meeting known as its annual general meeting. The annual general meeting is regarded as the most important of all company meetings. The purpose of this meeting is to give full information to members of progress made by the company during the year. 107. Business transacted in the annual general meeting Consideration of annual accounts Consideration of repots of board of directors and auditors. Declaration of dividend Appointment of directors in place of those retiring etc. 108. Rules 1.First annual general meeting The company must hold its first annual general meeting within 18 months from the date of incorporation. 2. Subsequent meeting It must be held in each year and the interval between two annual general meetings must not be more than 15 months. 109. 3. Power to convene annual general meeting Board of directors is the proper authority to convene the meeting 4. Notice It must be given at least 21 days before the meeting 110. 5. Date, time and place of holding an annual general meeting Meeting shall be called during the business hours on a day that is not a public holiday and shall be held either at the registered office of the company or some other place where the registered office of the company is situated. 111. 6. Power of company law board If company fails to hold the meeting the company law board on the application of any member may either call or direct for calling a meeting 7. Penalty for default If fails to hold the meeting every officer responsible shall be punishable with a fine which may extend to Rs 5000. 112. 3. Extra ordinary general meeting Any general meeting other than statutory and annual general meeting is called extra ordinary general meeting. Such meetings are held to transact an urgent business which cannot be postponed till the next annual general meeting. 113. 4. Class meeting Meetings of different classes of shareholders is called class meeting. These meetings are holding for making any variation in the rights attached to shares of any particular class of shareholders. 114. Meeting of the directors 1. Meeting of the Board of directorsDirectors together form a body called board of directors. Wide powers have been vested in the board in regard to management of companies. So transacting the important business of the company directors must hold their meetings frequently as possible. These meetings of the directors are known as Board meetings. 115. Business transacting in the Board meeting The power to make calls The power to issue debentures The power to borrow money The power to invest the funds of the company The power to make loans etc.. 116. 2. Meetings of the committees of the board Sometimes the directors delegate some of their powers to committees appointed by the board from time to time. The committees of directors also hold meetings for formulating their recommendations to the board. 117. Meeting of creditors 1.Meeting of debenture holders A meeting of debenture holders may be held for any of the following purposes Varying the security of debentures Modifying the rights attached to debenture Altering the rate of interest etc 118. 2. Meeting of the creditors during life time These meetings are called when the company proposes to make a scheme or arrangement or compromise with its creditors. 119. 3. Meetings of creditors and contributories on winding up These meetings are held when the company has gone into liquidation. Contributory means every person liable to contribute to the assts of the company in the event of winding up. These meetings are held to ascertain the total amount due by the company to its creditors 120. Requisites of a valid meeting The following are the requisites of a valid meeting1. Proper authority The first essential requisite of a valid meeting is that it should be convened by a proper authority. The valid authorities include Board of directors, Directors on the requisition of shareholders and by the company law board. 121. 2. Notice A notice with required length of time must be given to every member entitled to receive it stating the kind of meeting, date, time and place of meeting and the business to be transacted. Notice may be served on a member either personally or by post. 122. 3. Quorum The quorum is the minimum number of persons that should be presented at a meeting. Normally the quorum will be fixed by the articles. If not the quorum is 2 for private company and 5 for public company. 123. 4. Chairman The members personally present at the meeting shall elect one of themselves to be the chairman of the meeting. Chairman conducts the proceedings of the meetings of the company. 5. Minutes of the meeting Minutes are the official record of the proceedings of the meeting . Company must keep minutes books for keeping the proceedings of the meeting. 124. 5. Agenda Agenda means the list of business or things to be done at the meeting. It is prepared for all kinds of meeting in order that the meeting may be conducted systematically. A copy of agenda is usually send to the members along with the notice of the meeting ,so that members can prepare themselves for the meeting.