Company Meetings Under Company Law in India

8/14/2019 Company Meetings Under Company Law in India

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5 DECEMBER 09 www.afterschool.tk 1

COMPANY MEETINGS UNDER

COMPANY LAW IN INDIA

by :

DR. T.K. JAIN

AFTERSCHOOL

centre for social entrepreneurship

sivakamu veterinary hospital road

bikaner 334001 rajasthan, india

FOR PGPSE participants

[email protected]

mobile : 91+9414430763


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TYPES OF MEETINGS

1. AGM (ANNUAL GENERAL MEETING)

2. STATUTORY MEETING

3. EXTRAORDINARY GENERALMEETING

4. CLASS MEETING

5. BOARD MEETINGS


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STATUTORY MEETING

First general meeting of a public company

Once in the life of a company

only in a public companyin period from 1 to 6 month of start of

company

statutory report is presented with details ofissue / preliminary expenditure

penalty : 5000 sec. 165


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AGM

In 18 month from start there after everyfinancial year gap should not be more than

15 months.

Ordinary business : 1. annual reports &accounts 2. dividends 3. directors & auditors

appointments & terms.

Any other special business

on any day except public holiday (as per NI act1881)


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Place of AGM

Registered office or in the same city whereregistered office is located at business hours

penalty for not organising (sec. 168) : 50000 +2500 per day.


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Case : Asia Udyog

When police has seized the books of accounts,the company is exempted from holding AGM


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CASE : MEENASKHI MILLS

THERE MUST BE ONE AGM EVERYYEAR = AS MANY AGM AS THE YEARS

OF THE COMPANY


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CASE : WEST COAST

PLANNERS

NO AGM IS NECESSARY WHEN ONLYONE SHAREHOLDER IS LEFT


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EGM (169 TO 186)

Who may call it :Directors

shareholders

company law boardrequisitionists


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Time period of EGM

The board will call it in 21 days to 45 daysfrom the date of requisition

OTHERWISE

requisitonists can themselves call it (they musthave 1/10th of shares.


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CLASS MEETINGS

BY PARTICULAR CLASS OFSHAREHOLDERS FOR EXAMPLE BYPREFERENCE SHAREHOLDERS ETC.

ON ANY MATTER AFFECTING THATCLASS OF SHAREHOLDERS LIKE NON

PAYMENT OF DIVIDEND


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REQUISITIONS OF A VALID

MEETING

PROPER NOTICE

QUORUM TO BE PRESENTPROPERLY HELD

AGENDA PROPERLY CIRCULATED

MINUTES PREPARED & PRESENTED INNEXT MEETING

PROPER CHAIRMAN


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NOTICE OF MEETING

At least 21 day clear notice

(less than 21 day notice is permitted if 95%shareholders agree to it )

notice has to be sent to auditor also

notice must be sent to legal representative when the member is not alive / insolvent


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QUORUMMINIMUM NUMBER OF MEMBERS

REQUIRED

5 MEMBERS FOR PUBLIC COMPANY

2 MEMBERS FOR PRIVATE COMPANY /ADJUOURNED MEETING OF PUBLIC CO.

OR AS PER ARTICLES

(SEC. 174)IF QUORUM DOESNT COME IN HOUR,

THE MEETING IS POSTPONED FOR SAME

TIME NEXT WEEK.


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CHAIRMAN

SENIORMOST DIRECTOR

OR

IF NO DIRECTOR IS PRESENT IN 15MINUTES MEMBERS TO CHOOSE

AMONG THEMSELVES

CHAIRMAN WILL HAVE CASTING VOTE


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PROXY

Right of every shareholder to proxy (sendsomeone else in his place) proxy form is is

sent with notice must be submitted incompany before 48 hours before meeting.

Proxy cannot speak in meeting, cannot vote in

show of hand he can only vote in pollno person / company convass for proxy

any member can inspect proxy list


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Voting (177 to 185)

By show of hand or by poll

poll can be demanded by members / proxy /chairman and must be held in 48 hours of

demand.

Chairman will appoint 2 scrutinizer at poll outof whom one should be a member


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Adjournment of meeting

1. when qorum is not present in hours

2. when members demand adjuournment

3. when there is chaos chairman may adjournit for short period


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Resolution

Ordinary : 51%

speical : 75%

motion is a proposal it is also seconded bysomeone when it is passed it is resolution


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Resoluions requiring special

notice (sec. 190)

All the matters that require special notice require that 14 day notice be given - then only

that matter can be taken up in meeting

some matters require special notice are :

appointment of auditor (sec. 225)

appointment of director (sec. 284)


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Registration of resolutions ...

All special resolutions have to be registeredwith registrar of companies

some other resolutions alsohave to be filed

with registrar like resolution to wind upcompany voluntarily


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Contents of chairman speech :

Situation of the country

situation of industry

situation of company

performance of company

environment / employee / society welfaremeasures etc.


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Postal Ballot

Every member gives vote by post (ballot =vote)

Company amendment act (2000) requirepostalballot on some matter like :

alteration of memorandum / articles

change in registered office


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Definitions

Foreign exchange sec 2 (n) : -foreign currency,notes, draft etc.

Foreign security sec 2(o) : shares, debenturesetc. In foreign company

capital account transaction 2(e) : which alters

assets / liabilities out of indiacurrent account transaction 2(j) : foreign trade

payments etc.


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Current account transactions

They are generally permitted and dont require

RBI permission. However, schedule I gives alist of transactions which require prior

permission, some of these are : remittances

relating to lottery, commission (if rate is morethan 10% of export price), payments from NRE(rupee) account etc.


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Prior approval of RBI is required

in the following cases :

Forex more than $10000 for private visit

abroadgift over $5000

exchange facilities for emigrants / visitors

above $5000over $100000 per annum for any person

purchase of foreign trade mark / franchise


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Capital account transactions

require prior permission of RBILease of property in India for more than 5years by foreigner require prior permission

transfer of shares / sale of securities toforeigners require RBI approval

foreign currency loans out of India by Indian

residentstransfer of immovable property out of India by

residents


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FDI

There are two routes :

1. automatic

2. government


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Restricted sectors for FDI

Retail, atomic energy, lottery business,gambling, betting, nidhi company, chi fund,real estate business, agricultural, plantation,trading in transferable development rights

agriculture doesnt include floriculture,horticulture, seeds etc.


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FDI In SSI

Upto 24% investments in SSI are permitted

(even if it is in FTZ)


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ARCs

Investment upto 49% of capital in AssetReconstruction companies is permitted by FDI


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Infrastructure companies

26% FDI and 23% FII investment is permittedin infrastructure companies


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DIRECT INVESTMENT OUT

OF INDIA

INDIAN RESIDENTS ARE PERMITTED TO

INVEST OUT OF INDIA IN COMPANIESIN JOINT VENTURES / WHOLLY OWNED

SUBSIDIARIES (WOS)

INVESTMENT IN REAL ESTATEBUSINESS/ BANKING BUSINESS ISPROHIBITTED.


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HOW TO FUND

INVESTMENTS OUT OF INDIA

Use your funds from FCCB, EEFC, foreignexchange funds, capitalisation of exports, swap

of shares, foreign currency funds etc.


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Immovable property out of India

A person requires RBI permission for acquringimmovable property out of India. He may buy

it using his RFC account (Resident foreigncurrency account)

similarly, an NRI will have to take prior

permission to acquire agriculture / plantationproperty in India (no permission required forother property)


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Place of business

As per FEMA prior approval of RBI isrequired for foreign companies which are

opening their offices in India and similarly

when Indian companies go out of India andopen their office out of India


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FCCB

Foreign currency convertible bond these arepermitted upto $500 million as per guidelines

of RBI and SEBI


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Bonus and rights issue to NRIs

Indian companies can issue bonus / rights toNRI shareholders without RBI / SEBIpermission subject to sectoral caps.

Bonus issue : free issue to a shareholder

rights issue : a share issued to existingshareholder


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Who is resident?

182 days of stay in India during last financialyear.


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Difference between foreign

currency and foreign exchange

Foreign currency means currency notes ofother countries

foreign exchange is a wider word and includes

currency, cheque, drafts and other instrumentsof other countries.


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HOW MUCH FOREIGN

CURRENCY CAN YOU TAKE?

Authorised dealers can release upto $25000 fora business trip to any country except Nepal andBhutan. If you want more amount, you have to

obtain permission from RBI.


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What is non cooperative countries

/ territories?

List of the countries where you cannot takeforeign exchange as identified by FATF(FINANCIAL ACTION TASK FORCE)

see the website : www.fatf-gafi.org
http://www.fatf-gafi.org/http://www.fatf-gafi.org/


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For students ...

Students going abroad for studies are treated as

NRIs and are given all the facilities that areoffered to NRIs. They can receive remittances

upto $100000

they can take with them $2000 for theirexpenditure in cash and remaining amount intraveller cheque/ bank draft.


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Private visit abroad

If you are going for private visit (for example

for tourism) you are allowed to take upto$10000 per annum from authorised dealers.You may visit more than once, but the total

aggregate foreign exchange withdrawals may

be upto $10000, beyond which you have totake permission from RBI. You Can take it for

visit for education / employment also.


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VISIT TO NEPAL & BHUTAN

No foreign exchange is available for visit toNepal and Bhutan


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Visit to Iraq & Libya

Normally a person can get foreign currencynotes upto $2000 when he visits abroad, but

when a person is visiting Iraq or Libya, he can

get upto $5000 .


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How to get foreign exchange?

Go to any authorised dealer / money exchangerand collect foreign exchange against rupees.You can do it in cash upto Rs. 50000. if the

amount is more than Rs. 50000, you have to doit against cheque / draft.


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ICC

With international credit card, you can makepayment of international journals, internationalpayments etc. You can also buy international

book and meet personal expenses in foreignexchange through ICC.


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Foreign Traveller

A foreign traveller can keep upto Rs. Rs. 5000,and foreign currency upto $5000 and totalforeign exchange upto $10000. if the amount ismore than this limit, the traveller will have to

make declaration at airport in CurrencyDeclaration form at the customs office.


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Current account / capital account

Current account transaction refers to

expenditure on day to day items and otherusual transactions. Capital account transactionsrefers to investments for long term like

Debentures / mutual funds etc. Current account

transactions in foreign exchange are generallypermitted. Capital account transactions

generally require prior permission.


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Permissible capital account

transactions....Following capital account transactions are

permissible :

schedule I for residents in Indiaschedule II fore persons from out of India

Non permissible : - real estate investments,

TDR (transferrable development rights),agriculture, plantation,nidhi company, chit

fund, etc.


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Schedule I

for residents in India :

insurance policy out of india

investment in foreign security

export / import of foreign currency

etc.


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Schedule II for persons from out

of India

Foreign currency accountsexport / import of foreign currency

remittance out of india

acquisition of immovable property in Indiaetc.


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Restrictions on Indian residents

Generally Indian residents are not permitted togive loan in Rupees to a foreign nationals

subject to some exceptions. Indian residentscan take loan in Rupees on non-repatriationbasis from non-residents subject to someconditions like amount has to come from

NRE / NRNR/NRO account and period of loanshould not be more than 3 year. Rate of interest

should not be more than 2% than bank rate.


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Indian companies issueing

debentures...If Indian companies issues debentures to non-residents, they have to inform RBI about it. If

they issue non-convertible debentures, theywill have to give all the details to RBI in 30days. Rate of interest should not be more than

PLR of SBI + 300 basis points. Minimum

duration of such debenture must be 3 years.The company cannot deal in agri / plantation /

nidhi / chit fund activities.


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Immovable property out of India

RBI has made Foreign exchange management

(acquisition and transfer of immovableproperty out of India) regulations 2000 as perthat no person can acquire immovable property

out of India other than as gift without RBIpermission. This doesnot apply to NRI or non-

residents.


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Repatriation of foreign exchange

If you earn any foreign exchange than youhave to bring it to India within maximum 60

days (if you resident in India) as per FEM(realisation, repatriation and surrender of

foreign exchange) regulations 2000

if you have taken some foreign exchange from

an authorised dealer for travel etc, you have toreturn it back in 90 days from return back to

India


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Facilities for foreign tourists

For a short stay in India, they can open NROrupee account for maximum 6 months. Whenthey return back they can get it converted into

foreign exchange. AD (Authorised dealers)have to ensure that repatriation of money fromIndia is such which is repatriable. A resident

in India can repatriate to his relative upto hissalary only. Forign nationals living in India canopen resident rupee account with banks and

can deal in rupees.


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Role of AD

They have follow all the rules and ensure that

they give money as per FEMA. They canrelease foreign exchange upto $25000 forbusiness trip, $100000 for education /employment / medical purpose and upto

$10000 for tourism purpose. They have toensure that forign exchange is repatriated as

per law.


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Gifts from residents

You can give gifts upto Rs. 500000 to non-residents.


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IMPORTANT INFORMATION

DOCUMENTSEXIM POLICY

HANDBOOK OF IMPORT AND EXPORTPROCEDURE

FEMA

EXCHANGE CONTROL MANUALSFEDAI DOCUMENTS


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IMPORTANT DOCUMENTS AT

THE TIME OF IMPORT

IMPORT LICENSE

FOREIGN EXCHANGE CONTROL COPY

BILL OF ENTRY FOR HOMECONSUMPTION

CUSTOMS ASSESSMENT CERTIFICATEOR POSTAL ASSESSMENT FORM


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OPENING L/C

Importer will approach his bank for opening anL/C

L/C = Letter of credit

the bank of the importer will give a guaranteeabout payment to the bank of the exporter

under L/C. When the exporter exports, he can

obtain immediate payment from his bank onproducing L/C of the importer's bank. Thebanks will have transaction between

themselves.


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Difference between packing credit

and L/CPacking credit is issued to exporter, but L/C is

issued to importer. Packing credit covers all the

expenditure till export, L/C covers the price ofimport = and as per this the exporter gets

payment as soon as he exports. The bank of theimporter provides this facility to the importer

against some charges.


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Foreign exchange requirements

Importer requires foreign exchange forimports. The banker / authorised dealer

provides foreign exchange after looking at thenecessary documents like import licence etc.The foreign exchange must be used for the

purpose for which it has been obtained. The

banker / authorised dealer has to ensure thatonly that amount is released which is actually

required.


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Mode of payment

Authorised dealers will ensure that paymentregarding impor is made in account. Cash

payments are not permitted.

In case advance payment is made, physicalgoods must come in 3 months. If the amount is

more than $25000 then there must be a

guarantee from some international bank.Proper EC copy must be submitted by the

importer


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Time limit for settlement

Import payments must be settled within 6months from the date of import. If it is morethan 6 months, then it will be treated as ECB

(external commercial borrowing) and willrequire prior permission of RBI/ Government


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Export remittances

The exporter has to declare exports to RBI andhas to ensure that payments are received within

time and as per approved methods ofpayments. Payments can be collected through

bank account / international credit card / FCNR/ NRE account / escrow account etc


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Exports that dont require

declarations....

Demonstrations / sales promotions (UPTO 2%OF TOTAL EXPORTS ONLY) , gifts (upto 1lakhs), exports for reimports only, goods sentfor repairs, goods less than 25000 rupees in

value, samples, publicity material, personalgoods of travellers.


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What is consignment export ?

Consignment means you are sending goods tosomeone for trade on your responsibility and

if goods are not sold, they are your propertyand you may get it back. Consignment export

means sale or return back. It has to be settledin 6 months.


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Exports requiring RBI approval

Examples : project exports, export as contractagainst imports, elongated payment period,

exports relating to agrements of government of

India or other governments


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Remittances relating to exports...

These include : agency commission, exportclaims etc.


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SEZ

If you are operating from SEZ you arepermitted to have foriegn currency account

with an authorised dealer


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Authorised dealers

These are listed with RBI as per FEMA, theyhave to obtain RBI permission for some

specified business transactions. Example: theycannot give guarantee in favour of exporters

without RBI permission unless that exporter islisted as non-caution exporter.


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Forfaiting

Factoring and forfaiting can be undertaken byEXIM bank / authorised dealers. Under this

they collect payments regarding export

receivables against commission.


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New trends....

Indian companies are now permitted to have

foreign exchange accounts in other countriesand to have properties in other coutnries (with

prior approval from RBI) and they can acquirebusinesses / firms in other countries also as per

their business requiremetns (as per govt.Policies) .


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PEM

PEM stands for Project Export memorandum when companies are entering into project

exports, they have to follow guidelines relatingto this. Project exports generally has deferred

payments - therefore prior permission mustobtained before enteringi into PEM.


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Other provisions

Authorised dealers have to ensure that they getcopesof GR Form and other documents

required andforeign currency is used for acutalimport / export and all required documents are

submitted.


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FDI

Upto 100% Foreign Direct Investment ispermitted under automatic route in many

sectors. Investors will have to inform regionaloffice of RBI in 30 days of remittances. In

some sectors industrial licence is required and

in some sectors, FDI is not permitted. But inmost of the sector, now it is permitted

including atomic energy etc.


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Shares issue to NRIs

Within 30 days of share issue to Non-residents,FC GPR form has to be submitted. They have

to submit all the details like they haveimplemented all the provisions of companies

act & FEMA for this purpose.


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Transfer from NR

Now non residents can transer shares to other

non-residents / residents and such transfer canbe for consideration / as a gift. This tranfercan be only to an NRI / resident Indian. They

can also sell it in stock exchanges throughbrokers. They will have to take NOC from

income tax department


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Tranfer by residents

As per RBI notification of 2000, residents can

also tranfer to non-residents as per FEMA so long as it is in automatic route. You have tokeep in mind SEBI (Substantial acquisition of

shares and takeover) regulation 1997 +required regulations under IRDA or other such

laws.


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Permission from RBI

If it is not falling in automatic route, apply for

permission to RBI with a copy of FIPBapproval and details like pric, mode of

payment etc. Price must not be lower than thehigher of the average weekly high / low of last

6 months. FC-GPR form with details ofexisting shareholding must also be submitted.


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FDI in different modes

FEMA regulations 2000 give schedule I whichgives list of industries for which automatic

route is there. It doesnt requre prior RBIpermission, for othe industries, take prior

permission from RBI. Rate of dividend should

not exceed SBI prime lending rate + 300 basispoints. For other sectors take permission from

SIA / FIPB/ RBI for investments.


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PORTFOLIO INVESTMENT

FIIs including asset management companies,mutual funds, hedge funds etc. Are permittedto invest in shares in India. FII have to investin ratio of 70:30 in equity and debt when they

invest in India, they are also permitted to investas 100% debt.


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Limits for FII investment

An NRI / PIO can buy upto 5% in a company.All NRI/PIO/OCB can invest upto 10% in a

company. A single FII can invest upto 10% ina company and all FIIs together can invest upto

24% in a company. Companies can raise this

limit by passing board resolution and specialresolution in general meeting subject to

sectoral cap (like 49'% or 74% etc.)


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FII dealings

FII can deal through stock exchanges withoutRBI permission, but if they are dealing without

stock exchanges, they have to obtain

permission from RBI.


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NRI dealings

NRIs have to deal through NRE /FCNRaccount only. Sometimes they are permitted to

deal in NRO account also when they are

investing on non-repatriation basis.


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PERMITTED FIIs

FOLLOWNG CAN REGISTER AS FII WITHRBI & SEBI:

banks, pension funds, hedge funds, mutualfunds, insurance companies, investment funds

etc.


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ECB

External commercial borrowings : Indiancomapnies can raise loans from other countriesthrough various routes like : FRN (floating rate

note), ECP (euro commercial paper), FCCB

(foreign currency convertible bond), NIF (noteissue facility), syndicate loan, etc.


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ECB MECHANISMS

Companies engage in many ECB mechanismslike :

arbitrage

hedging

underwriting

fund raising etc.


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ADR /GDR

American depository receipt / Globaldepository receipt are permitted by RBI as perscheme of 1993, companies can also sponsorissue of ADR / GDR. Infosys, Wipro etc. Aresome of the companies which went for ADR /

GDR during 1990s. After ADR/ GDR

company will have to submit return inproforma as per annexure C of RBI

notification 2000.


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Royalty / technical fees

Upto $2million of royalty upto 5% ofdomestic sale or 8% of export sale is permitted

as royalty.


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EEFC account

Exchange Earners Foreign Currency account

a person who has earned foreign currency canretain 50% of the foreign currency earned inEEFC account with authorised dealers. This

account can be used for current accounttransactions or for permitted capital account

transactions.


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RFC account

Resident foreign currency account if an NRIis returning India for ever, he can keep his

foreign currency in RFC account and there are

no restriction on use of funds in RFC account.


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RFC (DOMESTIC) ACCOUNT

A Resident who lives in India but receivesforeign exchange payments / honorarium canopen RFC (Domestic) account for retaining

such payments.


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Liberalised Remittance Scheme

Residents can use upto $25000 for paymentsfor permitted transactions per annum in this

scheme Foreign Exchange Management(current account transactions) rules 2000

schedule I and II.


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Company Meetings Under Company Law in India

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Transcript of Company Meetings Under Company Law in India