POWERS, DUTIES & LIABILITIES OF BOARD OF DIRECTORS OF A COMPANY IN INDIA (provisions of the Companies Act, 1956 with regards

to directors) POWERS The directors powers are normally set out in the articles. The shareholders cannot control the way in which the Board of Directors act provided its actions are within the powers given to the Board. Section 291 of Companies Act, 1956 provides for general powers of the Board of directors. It mandates that the Board is entitled to exercise all such powers and do all such acts and things, subject to the provisions of the Companies Act, as the company is authorized to exercise and do. However, the Board shall not exercise any power and do any act or things which is required whether by the Act or by the memorandum or articles of the company or otherwise to be exercised or done by the company in general meeting. Power of the individual director. Unless the Act or the articles otherwise provide, the Decisions of the Board are required to be the majority decisions only. Individual directors do not have any general powers. They shall have only such powers as are vested in them by the Memorandum and Articles. Section 292(1) of the Companies Act, 1956 provides that the Board of directors of a company shall exercise the following powers on behalf of the company and it shall do so only by means of resolution passed at meeting of the Board: (a) the power to make calls on shareholders in respect of money unpaid on their shares; (aa)the power to authorize the buy-back referred to in the first proviso to clause (b) of sub-section (2) of section 77A; (b) the power to issue debentures; (c) the power to borrow moneys otherwise than on debentures; (d) the power to invest funds of the company; and (e) the power to make loan. DUTIES 1. Statutory Duties: (A) To file return of allotment: Section 75 of the Companies Act, 1956 requires a company to file with the Registrar, within a period of 30 days, a return of the

allotments stating the specified particulars. Failure to file such return shall make the directors liable as officer in default. A fine up to Rs. 5000/- per day till the default continues may be levied. (B) Not to issue irredeemable preference share or shares or share redeemable after 20 years: Section 80, as amended by Amendment Act, 1996, forbids a company to issue irredeemable preference shares or preference shares redeemable beyond 20 years. Directors making any such issue may be held liable as officer in default. And may be subject to fine up to Rs. 10,000/-. (C) To disclose interest (Section 299-300): In respect of contracts with director, Section 299 casts an obligation on a director to disclose the nature of his concern or interest (direct or indirect), if any, at a meeting of the Board of directors. The said Section provides that in case of a proposed contract or arrangement, the required disclosure shall be made at the meeting of the Board at which the question of entering into the contract or agreement is first taken into consideration. In the case of any other contract or arrangement, the disclosure shall be made at the first meeting of the Board held after the director become interested in the contract or arrangement. Every director who fails to comply with the aforesaid requirements as to disclosure of concern or interest shall be punishable with fine, which may extend to Rs. 50,000/-. (D) To disclose receipt from transfer of property (sec. 319): Any money received by the directors from the transferee in connection with the transfer of the companys property or undertaking must be disclosed to the members of the company and approved by the company in general meeting. Otherwise, the amount shall be held by the directors in trust for the company. This money may be in the nature of compensation for loss of office but in essence may be on account of transfer of control of the company. But if it is bona fide payment of damages for the breach of contract, then it is protected by sec. 321(3). Even no director other than the managing director or whole time director can receive any such payment from the company itself. (E) To disclose receipt of compensation from transferee of shares (Sec.320): If the loss of office results from the transfer (under certain conditions) of all or any of the shares of the company, its directors would not receive any compensation from the transferee unless the same has been approved by the company in general meeting before the transfer takes place. If the approval is not sought or the proposal is not approved, any money received by the directors shall be held in trust for the shareholders, who have sold their shares. Any such director, who fails to take reasonable steps as aforesaid, shall be punishable with fine, which may extend up to

Rs. 2500/-. (F) Duty to attend Board meetings: A number of powers of the company are exercised by the Board of directors in their meetings held from time to time. Although a director may not be able to attend all the meetings but if he fails to attend three consecutive meetings or all meetings for a period of three months whichever is longer, without permission of the Board, his office shall automatically fall vacant [Section 283(1)(g)]. (G) To convene statutory, Annual General meeting (AGM) and also extraordinary general meetings [ Section 165,166 &169] (H) To prepare and place at the AGM along with the balance sheet and profit & loss account a report on the company.s affairs including the report of the Board of Directors (Section 173, 210 & 217). (I) To authenticate and approve annual financial statement (Section 215). (J) To appoint first auditor of the company (Section 224). (K) To appoint cost auditor of the company (Section 233B). (L) To make a declaration of solvency in the case of Members. voluntary winding up (Section 488). 2. General Duties: (A) Duty of good faith: The directors must act in the best interest of the company. Interest of the company implies the interest of the present and future members of the company on the footing that company would be continued as going concern. (B) Duty of care: A director must display care in performance of work assigned to him. He is, however, not expected to display an extraordinary care but that much are which a man of ordinary prudence would take in his own case. Any provision in the companys Articles or in any agreement that excludes the liability of the directors for negligence, default, misfeasance, breach of duty or breach of trust, is void. The company cannot even indemnify the directors against such liability. (C) Duty not to delegate: Director being an agent is bound by the maxim delegatus non potest delegare, which means a delegatee can not further delegate. Thus, a director must perform his functions personally. However, he may delegate his in certain conditions. LIABILITES 1. Liability to the company: (A) Breach of fiduciary duty: where a director acts dishonestly to the interest of the Company, he will be held liable for breach of fiduciary duty. Most of the powers of

directors are powers in trust. and therefore, should be exercised in the interest of the company and not in the interest of the directors or any section of members. (B) Ultra vires acts: Directors are supposed to act within the parameters of the provisions of the Companies Act, Memorandum and Articles of Association, since these lay down the limits to the activities of the company and consequently to the powers of the Board of directors. Further, the powers of the directors may be limited in terms of specific restrictions contained in the Articles of Association. The directors shall be held personally liable for acts beyond the aforesaid limits, being ultra vires the company or the directors. (C) Negligence: As long as the directors act within their powers with reasonable skill and care as expected of them as prudent businessman, they discharge their duties to the company. But where they fail to exercise reasonable care, skill and diligence, they shall be deemed to have acted negligently in discharge of their duties and consequently shall be liable for any loss or damage resulting there from. (D) Mala fide acts: Directors are the trustees for the moneys and property of the company handled by them, as well as exercise of the powers vested in them. If they dishonestly or in a mala fide manner, exercise their powers and perform their duties, they will be liable for breach of trust and may be required to make good the loss or damage suffered by the company by reason of such mala fide acts. They are also accountable to the company for any secret profits they might have made in course of performance of duties on behalf of the company. Directors can also be held liable for their acts of. misfeasance. i.e., misconduct or willful misuse of powers. Liability to third parties: Liability under the Companies Act: (A) Prospectus: Failure to state any particulars as per the requirement of the section 56 and Schedule II of the act or mis-statement of facts in prospectus renders a director personally liable for damages to the third party. Section 62 provides that a director shall be liable to pay compensation to every person who subscribes for any shares or debentures on the faith of the prospectus for any loss or damage he may have sustained by reason of any untrue or misleading statement included therein. (B) With regard to allotment: Directors may also incur personal liability for: (a) Irregular allotment, i.e., allotment before minimum subscription is received (Section 69), or without filing a copy of the statement in lieu of prospectus (Section 70) - [Section 71(3)] - Under section 71(3), if any director of a company knowing contravenes or willfully authorizes or permits the contravention of any of the provisions of section 69 or 70 with respect to all allotment, he shall be liable to

compensate the company and the allottee respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby. (b) For failure to repay application monies in case of minimum subscription having not been received within 120 days of the opening of the issue: Under section 69(5) read with SEBI guidelines, in case moneys are not repaid within 130 days from the date of the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of 6 % per annum on the expiry of 130th day. However, a director shall not be liable if he proves that the default in repayment of money was not due to any misconduct or negligence on his part. (c) Failure to repay application monies when application for listing of securities are not made or is refused: Under section 73(2) . Where the permission for listing of the shares of the company has not been applied or such permission having been applied for, has not been granted, the company shall forthwith repay without interest all monies received from the applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severely liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money. (C) Unlimited liability: Directors will also be held personally liable to the third parties where their liability is made unlimited in pursuance of section 322(i.e., vide Memorandum) or section 323(i.e., vide alterations of Memorandum by passing special resolution). By virtue of section 322, the Memorandum of a company may make the liability of any or all directors, or manager unlimited. In that case, the directors, manager and the member who proposes a person for appointment as director or manager must add to the proposal for appointment as a statement that the liability of the person holding the office will be unlimited. Notice in writing to the effect that the liability of the person will be unlimited must be given to him by the following or one of the following person, namely: the promoters, the directors, manager and officers of the company before he accept the appointment. Further, in case of limited liability Company, the company may, if authorized by the articles, by passing resolution alter its Memorandum so as to render the liability of its directors or of any director or manager unlimited. But the alteration making the liability of director or directors or manager unlimited will be effective only if the concerned officer consents to his liability being made unlimited. This alteration also,

unless specifically consented to by any or all directors will not have any effect until expiry of the current term of office. (D) Fraudulent trading: Directors may also be made personally liable for the debts or liabilities of a company by an order of the court under section 542. Such an order shall be made by the court where the directors have been found guilty of fraudulent trading. Section 542(1), in this regard, provides that if in the course of the winding up of a company, it appears that any business of the company has been carried on, with intent to defraud creditors of the company or any other person, or for any fraudulent purpose, the court, on the application of the Official Liquidator, or the liquidator or any creditor or contributory of the company may if it thinks it proper so to do, declare that any persons who were knowingly parties to the carrying on business in the manner aforesaid shall be personally responsible without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct. Further, section 542(3) provides that every person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to fifty thousand rupees, or with both. Liability for breach of warranty: Directors are supposed to function within the scope of their authority. Thus, where they transact any business in respect of matters, ultra vires the company or ultra vires the articles, they may be proceeded against personally for any loss sustained by any third party. 2. Liability for breach of statutory duties: The Companies Act, 1956 imposes numerous statutory duties on the directors under various sections of the Act. Default in compliance of these duties attracts penal consequences. The various statutory penalties, which directors may incur by reason of non-compliance with the requirements of Companies Act, are referred to in their appropriate places. 3. Liability for acts of co-directors: A director is the agent of the company except for matters to be dealt with by the company in general meeting and not of the other members of the Board. Accordingly, nothing done by the Board can impose liability on a director who did not participate in the Boards action or did not know about it. To incur liability he must

either be a party to the wrongful act or later consent to it. Thus, the absence of a director from meeting of the Board does not make him liable for the fraudulent act of a co-director on the ground that he ought to have discovered the fraud. 4. Criminal liability: Apart from the civil liability under that Act or under the common law, directors of a company may also incur criminal liability. Some of the provisions of the Companies Act, which make directors criminally liable, are as follows: (i) Section 44(4) - filing of prospectus or statement in lieu of prospectus containing untrue statement. Penalty -Two years imprisonment or / and fine up to Rs. 50000. (ii) Section 58A(5) - failure to repay deposits within the prescribed time limit as specified under sub sections (3) and (4) of section 58A. Penalty Up to five years imprisonment and fine. (iii) Section 58A(6) - Accepting deposits or inviting deposits in excess of the prescribed limits. Penalty - up to five years imprisonment and fine. (iv) Section 63 - Issuing a prospectus containing untrue statement. Penalty Imprisonment upto two years or/ and fine upto Rs. 50000. (v) Section 68 - Knowingly making a false, deceptive or misleading statement and there by inducing persons to invest money. Penalty- Imprisonment upto five years or/ and fine upto Rs. 1,00,000. (vi) Section 73 . Failure to repay excess application money. Penalty . Default in repayment of application money and interest is punishable with fine upto Rs. 50000 but if repayment is not made within six months from the expiry of eight day, also with imprisonment for a term upto one year. (vii) Section 84(3) . Fraudulently renewing a share certificate or issuing a duplicate share certificate. Penalty. Imprisonment upto six months or/ and fine upto Rs.100000 (viii) Section 105 . Concealing name of creditor or misrepresenting the nature and the amount of the debt or claim of any creditor. Penalty Imprisonment upto one year or/ and fine or both. (ix) Section 202(1). Undischarged insolvent acting as director. Penalty Imprisonment upto two years or/ and fine upto Rs. 50000. (x) Section 207. - Default in distributing dividends. Penalty - Simple imprisonment upto three years and fine up to Rs. 1000 for every day during which the default continues. (xi) Section 209A.- Failure to assist Registrar or any officer so authorized by Central Government in inspection of books of account, etc., of the company. Penalty -Imprisonment for a term not exceeding one year and fine to be not less than Rs. 50000.

(xii) Section 210(5) . Failure to lay balance sheet, profit & loss account, etc., at the annual general meeting. Penalty . Imprisonment upto six months or/ and fine upto Rs. 10000. (xiii) Section 211(8) . Failure to comply with section 211 regarding form of balance sheet and matters to be stated therein and the content and disclosures to be made in the profit and loss account. Penalty . imprisonment upto six months or/ and fine upto Rs. 10000. (xiv) Section 217(5) . Failure to attach to balance sheet a report of the Board of directors. Penalty . Imprisonment upto six months or / and fine upto Rs. 20000. (xv) Section 221(4) . Failure to supply information to auditors. Penalty Imprisonment upto six months or / and fine upto Rs. 50000. (xvi) Section 233B(11) . Audit of cost account of the company -Default in complying with the requirements of the section. Penalty . Imprisonment for a term that may extent to three years or with fine which may go upto Rs. 50000 or with both. (xvii) Section 250(9) . Failure to honour restrictions upon shares and debentures imposed by the CLB. Penalty . Imprisonment upto six months or / and fine upto Rs. 50000. (xviii) Section 293A(5) . Contribution to political party or for political purpose in contravention of section 293A. Penalty . Imprisonment upto three years and fine. (xix) Section 295(4) . Grant of loan to directors without obtaining previous approval of the Central Government. Penalty . Simple imprisonment upto six months or fine upto Rs. 50000. (xx) Section 299(4) . Failure to disclose interest in a contract or arrangement. Penalty . Fine which may extend to Rs. 50000. (xxi) Section 308(3) . Failure to disclose shareholdings. Penalty . Imprisonment upto two years or / and fine upto Rs. 50000. (xxii) Section 371 . Giving loans to other bodies corporate in excess of the limit prescribed under section 370. Penalty . Fine upto Rs. 50000 or simple imprisonment upto six months. (xxiii) Section 407 . Any person, whose agreement has been terminated or set aside under section 402, knowingly acts as a managing or other director before expiry of a period of five years from the date of termination, without approval of the CLB, attracts criminal liability. Penalty . Imprisonment upto one year or / fine upto Rs. 50000 [Section 407(2)]. (xxiv) Section 488(3) . False declaration of companys solvency. Penalty Imprisonment upto six months or / and fine up to Rs. 50000. (xxv) Section 209(8) . Non-compliance with the requirement of maintenance of proper books of account. Penalty . fine not less than Rs. 50000 and also with imprisonment not exceeding one year for each offence committed.

Directors of a Company Meaning of Director as per the Companies Act, 1956 A company is a legal entity and does not have any physical existence. It can act only through natural persons to run its affairs. The person, acting on its behalf, is called Director. A Director is any person, occupying the position of Director, by whatever name called. They are professional men, hired by the company to direct its affairs. But, they are not the servants of the company. They are rather the officers of the company. The definition of Director given in this clause is an inclusive definition. It includes any person who occupies the position of a director is known as Director whether or not designated as Director. It is not the name by which a person is called but the position he occupies and the functions and duties which he discharges that determine whether in fact he is a Director or not. So long as a person is duly, appointed by the company to control the company's business and, authorized by the Articles to contract in the company's name and, on its behalf, he functions as a Director. The Articles of a company may, therefore, designate its Directors as governors, members of the governing council or, the board of management, or give them any other title, but so far as the law is concerned, they are simple Directors. Duties of a Director There is no exhaustive list defining the duties of the Board of Directors towards the company and shareholders. But based on the analysis of the provisions of the Companies Act, 1956 with regards to a director, some general duties of a Director are mentioned herein: To file return of allotments: a company must file with the Registrar, within a period of 30 days, a return of the allotments, stating the specified particulars. Failure to file such return shall make the Directors liable as 'officer in default'. A fine, up to Rs.500 per day, till the default continues may be levied. Not to issue irredeemable preference shares or shares, redeemable after 20 years: A company cannot issue irredeemable preference shares or preference shares, redeemable beyond 20 years. Directors, making any such issue, may be held liable as 'officer in default' and, may be subject to a fine, up to Rs.1, 000. To disclose interest: A Director, who is interested in a transaction of the company, must disclose his interest to the Board. The disclosure must be made at the first meeting of the Board, held after he has become interested. This is because a

Director stands in a fiduciary capacity with the company and, therefore, he must not place himself in a position in which his personal interest conflicts with his duty. A company is not debarred from entering into a contract in which a Director is interested. It only requires that such interest be disclosed. An interested Director should not take part in the discussion on the matter of his interest. His presence shall not be counted for the purpose of quorum for that item. He shall not vote on that matter. If he does vote, his vote shall be void. Non-disclosure of interest makes the contract avoidable and not void. However, the concerned Director may be subjected to fine, up to Rs. 5,000. Duty to attend Board meetings - A number of powers of the company are exercised by the Board of Directors in their meetings, held from time to time. Although, a Director may not be able to attend all the meetings, but, if he fails to attend three consecutive meetings or, all meetings for a period of three months, whichever is longer, without permission of the Board, his office shall, automatically, fall vacant. A Director's duties also include the following: To convene Statutory, Annual General Meeting (AGM) and also Extraordinary General Meetings; To prepare and place at the AGM, along with the balance sheet and, profit and loss account, a report on the company's affairs, including the report of the Board of Directors; To authenticate and approve annual financial statement; To appoint first auditor of the company; To appoint cost auditor of the company; To make a declaration of solvency in the case of a Members' voluntary winding up; It is difficult to describe the duty of directors in general terms, whether by way of analogy or otherwise. The nature of duties of director would depend not only on the nature of the company's business but also on the manner in which the work of the company is distributed between directors and other officials. A director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. In case of a Non Executive Director: A director is not bound to give continuous attention to the affairs of his company. His duties are of an intermittent nature to be performed at periodical board meetings, and at meetings of any committee of the board upon which he happens to be placed. He is not, however, bound to attend all such meetings, though he ought to attend whenever, in the circumstances, he is reasonably able to do so. However an Executive Director needs to give constant attention and take active interest in the affairs of the Company.

In respect of all duties that, having regard to the exigencies of business, and the articles of association, may properly be left to some other official, a director, is in the absence if grounds for suspicion justified in trusting that officer to perform such duties honestly. A director must of necessity trust the officials of the company to perform properly and honestly the duties allocated to those officials. When presenting their annual reports and balance sheet to their shareholders and when recommending the declaration of a dividend, directors ought not to be satisfied as to the value of their company's assets merely by the assurances neither of their chairman, nor with the experience or the belief of the auditor howsoever competent and trust worthy he is. All in all, there is no difference between legal and equitable duties of directors. If the directors act within their power with such care as is reasonably to be expected from them, having regard to their knowledge and experience, and if they act honestly for the benefit of the company. They discharge both their legal as well as equitable duty to the company. The directors are not liable for all mistakes they make, although if they had taken more care they might have avoided them. What are the Liabilities of the Directors of a company towards the company? The liability of a Director to the company may arise from: Breach of fiduciary duty: Where a Director acts dishonestly to the interest of the company, he will be held liable for breach of fiduciary duty. Most of the powers of Directors are powers in trust and, therefore, should be exercised in the interest of the company and, not in the interest of the Directors or, any section of members. Thus, in a case where the Directors, in order to forestall a take-over bid, transferred the unissued shares of the company to trustees, to be held for the benefit of the employees, and an interest-free loan from the company was advanced to the trustees to enable them to pay for the shares, it was held to be a wrongful exercise of the fiduciary powers of the Directors. Ultra vires acts: Directors are supposed to act within the parameters of the provisions of the Companies Act, Memorandum and Articles of Association, since these lay down the limits to the activities of the company and, consequently, to the powers of the Board of Directors. Further, the powers of the Directors may be limited in terms of specific restrictions, contained in the Articles of Association. The Directors shall be held, personally, liable for acts beyond the aforesaid limits, being ultra vires the company or the Directors. Thus, where the Directors pay dividends or interest out of capital, they will be liable to indemnify the company for any loss or damage, suffered due to such act.

Negligence: As long as the Directors act within their powers with reasonable skill and care, as expected of them as prudent businessmen, they discharge their duties to the company. But, where they fail to exercise reasonable care, skill and diligence, they shall be deemed to have acted, negligently, in discharge of their duties and, consequently, shall be liable for any loss or damage, resulting there from. However, error of judgment will not be deemed as negligence. The Directors cannot be absolved of their liability for negligence by any provisions in the Articles of Association. Mala fide acts: Directors are the trustees for the money and property of the company, handled by them, as well as for exercise of the powers, vested in them. If they dishonestly or in a mala fide manner, exercise their powers and perform their duties, they will be liable for breach of trust and, may be required to make good the loss or damage, suffered by the company by reason of such mala fide acts. They are also accountable to the company for any secret profits they might have made in course of their performance of duties on behalf of the company. Directors can also be held liable for their acts of 'misfeasance', i.e., misconduct or willful misuse of powers. However, misconduct, which is not willful, shall not amount to 'misfeasance'. Where a Director misapplies or misappropriates the money or properties of the company or, has been guilty of breach of trust or misfeasance, the Court may order him to repay the money or, restore the property or, to pay compensation. Can a Director be made liable for the acts of his Co-Directors? A Director is the agent of the company, except for matters to be dealt with by the company in General Meeting and, not of the other members of the Board. Accordingly, except in one instance, nothing done by the Board can impose liability on a Director, who did not participate in the Board's action or, did not know about it. To incur liability, he must either be a party to the wrongful act or, later acquiesce (consent) to it. Thus, the absence of a Director from a meeting of the Board does not make him liable for the fraudulent act of a co-Director, on the ground that he ought to have discovered the fraud, except where he had the knowledge or, he was a party to confirm that action. Where a Director is made liable for the acts of a co-Director, he is entitled to contribution from the other Directors or co-Directors, who were a party to the wrongful act. However, where the Director, seeking contribution alone, benefited from the wrongful act, he is not entitled to contribution.

Board's powers and restrictions thereon General powers of Board (1) Subject to the provisions of this Act, the Board of directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do: Provided that the Board shall not exercise any power or do any act or thing which is directed or required, whether by this or any other Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting: Provided further that in exercising any such power or doing any such act or thing, the Board shall be subject to the provisions contained in that behalf in this or any other Act, or in the memorandum or articles of the company, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting. (2) No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made. Certain powers to he exercised by Board only at meeting (1) The Board of directors of a company shall exercise the following powers on behalf of the company, and it shall do so only by means of resolutions passed at meetings of the Board :(a) the power to make calls on shareholders in respect of money unpaid on their shares; (b) the power to issue debentures; (c) the power to borrow moneys otherwise than on debentures; (d) the power to invest the funds of the company; and (e) the power to make loans : [Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of directors, the managing director, the manager or any other principal officer of the company or in the case of a branch office of the company, a principal officer of the branch office, the powers specified in clauses (c), (d) and (e) to the extent specified in sub-sections (2), (3) and (4) respectively, on such conditions as the Board may prescribe: Meetings of Board

Board to meet at least once in every three calendar months. In the case of every company, a meeting of its Board of directors shall be held at least once in every [three months and at least four such meetings shall be hold in every year]: Provided that the Central Government may, by notification in the Official Gazette, direct that the provisions of this section shall not apply in relation to any class of companies or shall apply in relation thereto subject to such exceptions, modifications or conditions as may be specified in the notification.] Notice of meetings (1) Notice of every meeting of the Board of directors of a company shall be given in writing to every director for the time being in India, and at his usual address in India to every other director. (2) Every officer of the company whose duty it is to give notice as aforesaid and who fails to do so shall be punishable with fine which may extend to 100[one thousand rupees]. General meetings of the Company Annual general meeting [(1) Every company shall in each year hold in addition to any other meetings a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it; and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next: Provided that a company may hold its first annual general meeting within a period of not more than eighteen months from the date of its incorporation; and if such general meeting is held within that period, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation or in the following year; Provided further that the Registrar may, for any special reason, extend the time within which any annual general meeting (not being the first annual general meeting) shall be held, by a period not exceeding three months.]

(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 held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situate: Provided that the Central Government may exempt any class of companies from the provisions of this sub-section subject to such conditions as it may impose: Provided further that(a) a public company or a private company which is a subsidiary of a public company, may by its articles fix the time for its annual general meetings and may

also by a resolution passed in one annual general meeting fix the time for its subsequent annual general meetings; and (b) a private company which is not subsidiary of a public company, may in like manner and also by a resolution agreed to by all the numbers thereof, fix the time as well as the place for its annual general meetings.] Contents and manner of service of notice and persons on whom it is to be served (1) Every notice of a meeting of a company shall specify the place and the day and hour of the meeting, and shall contain a statement of the business to be transacted thereat. (2) Notice of every meeting of the company shall be given(i) to every member of the company, in any manner authorised under the Act (ii) to the persons entitled to a share in consequence of the death or insolvency of a member, by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in India supplied for the purpose by the persons claiming to be so entitled, or until such an address has been so supplied, by giving the notice in any manner in which it might have been given if the death or insolvency had not occurred; and (iii) to the auditor or auditors for the time being of the company, in any manner authorized under the Act in the case of any member of members of the company: Provided that where the notice of a meeting is given by advertising the same in a newspaper circulating in the neighborhood of the registered office of the company, the statement of material facts referred to need not be annexed to the notice as required by that section but it shall be mentioned in the advertisement that the statement has been forwarded to the members of the company. (3) The accidental omission to give notice to, or the non-receipt of notice by, any member or other person to whom it should be given shall not invalidate the proceedings at the meeting. Explanatory statement to be annexed to notice (1) For the purposes of this section(a) in the case of an annual general meeting, all business to be transacted at the meeting shall be deemed special, with the exemption of business relating to (i) the consideration of the accounts, balance sheet and the reports of the Board of directors and auditors, (ii) the declaration of a dividend, (iii) the appointment of directors in the place of those retiring, and (iv) the appointment of, and the fixing of the remuneration of the auditors; and (b) in the case of any other meeting, all business shall be deemed special.

(2) Where any items of business to be transacted at the meeting are deemed to be special as aforesaid, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each such item of business, including in particular [the nature of the concern or interest], if any, therein, of every director and the manager, if any: Provided that where any item of special business as aforesaid to be transacted at a meeting of a company relates to, or affects, any other company, the extent of shareholding interest in that other company of every director and the manager, if any, of the first mentioned company shall also be set out in the statement if the extent of such shareholding interest is not less than twenty per cent of the paid-up share capital of the other company.] (3) Where any item of business consists of the according of approval to any document by the meeting, the time and place where the document can be inspected shall be specified in the statement aforesaid. Quorum for meeting (1) Unless the articles of the company provide for a large number, five members personally present in the case of public company, and two members personally present in the case of any other company, shall be the quorum for a meeting of the company. (2) Unless the articles of the company otherwise provide, the provisions of subsections (3), (4) and (5) shall apply with respect to the meetings of a public or private company. (3) If within half an hour from the time appointed for holding a meeting of a company, a quorum is not present, the meeting, if called upon the requisition of members, shall stand dissolved. (4) In any other case, the meeting shall stand adjourned to the same day in the next week, at the same time and place, or to such other day and at such other time and place as the Board may determine. (5) If at the adjourned meeting also, a quorum is not present within half an hour from the time appointed for holding the meeting, the members present shall be a quorum. Chairman of meeting (1) Unless the articles of the company otherwise provide, the members personally present at the meeting shall elect one of themselves to be the chairman thereof on a show of hands.

(2) If a poll is demanded on the election of the chairman, it shall be taken forthwith in accordance with the provisions of this Act, the chairman elected on a show of hands exercising all the powers of the chairman under the said provisions. (3) If some other person is elected chairman as a result of the poll, he shall be chairman for the rest of the meeting. Proxies (1) Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself; but a proxy so appointed shall not have any right to speak at the meeting: (2) The instrument appointing a proxy shall(a) be in writing; and (b) be signed by the appointer or his attorney duly authorised in writing or, if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it. (3) An instrument appointing a proxy, if in any of the forms set out shall not be questioned on the ground that it fails to comply with any special requirements specified for such instrument by the articles. (4) Every member entitled to vote at a meeting of the company, or on any resolution to be moved thereat, shall be entitled during the period beginning twenty-four hours before the time fixed for the commencement of the meeting and ending with the conclusion of the meeting, to inspect the proxies lodged, at any time during the business hours of the company, provided not less than three days' notice in writing of the intention so to inspect is given to the company Voting to be by show of hands in first instance At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded under section 179, be decided on a show of hands. 178. Chairman's declaration of result of voting by show of hands to be conclusive. A declaration by the chairman in pursuance of section 177 that on a show of hands, a resolution has or has not been carried, or has or has not been carried either unanimously or by a particular majority, and an entry to that effect in the books containing the minutes of the proceedings of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes cast in favour of or against such resolution. Minutes of proceedings of general meetings and of Board and other meetings Every company shall cause minutes of all proceedings of every general meeting and of all proceedings of every meeting of its Board of directors or of every committee of the Board, to be kept by making within [thirty] days of the conclusion of every such

meeting concerned, entries thereof in books kept for that purpose with their pages consecutively numbered. (1A) Each page of every such book shall be initialed or signed and the last page of the record of proceedings of each meeting in such books shall be dated and signed(a) in the case of minutes of proceedings of a meeting of the Board or of a committee thereof, by the chairman of the said meeting or the chairman of the next succeeding meeting; (b) in the case of minutes of proceedings of a general meeting, by the chairman of the same meeting within the aforesaid period of [thirty] days or in the event of the death or inability of that chairman within that period, by a director duly authorised by the Board for the purpose. (1B) In no case the minutes of proceedings of a meeting shall be attached to any such book as aforesaid by pasting or otherwise.] (2) The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat. (3) All appointments of officers made at any of the meetings aforesaid shall be included in the minutes of the meeting. (4) In the case of a meeting of the Board of directors or of a committee of the Board, the minutes shall also contain(a)the names of the directors present at the meeting; and (b) in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring in, the resolution. (5) Nothing contained in sub-sections (1) to (4) shall be deemed to require the inclusion in any such minutes of any matter which, in the opinion of the chairman of the meeting(a) is, or could reasonably be regarded as, defamatory of any person; (b) is irrelevant or immaterial to the proceedings; or (c) is detrimental to the interests of the company. Explanation.- The chairman shall exercise an absolute discretion in regard to the inclusion or non-inclusion of any matter in the minutes on the grounds specified in this sub-section. A resolution will be taken to be passed at the Board meeting if a majority of the Directors give their consent to the same ***