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WELCOME TO

INDIAN COMPANIES ACT 1956


PART 3

Companies Act Part 3 1


Powers of Directors
• The Board of Directors are entitled to
exercise all such powers of the company
and to do all such acts and things as the
company is authorized to exercise and do.
• The powers cover all the day to day
activities for the company and the actions of
the Board of Directors cannot be called into
question.
• The Board of Directors however cannot
exercise any power which is required to be
exercised by the company in general
meeting (either under any statute or
Companies Act Part 3 2
Examples where the powers
are out of competence of the
• Issue of shares at discount (Section
293)
• Undertaking lines of business not
provided for in the Memorandum of
Association (Section 293)
• Borrowings in excess of the aggregate
paid up capital plus free reserves of
the company (Section 293)
• Contributions to charitable funds
unrelated to its business beyond certain
specified limits, during a financial year
(Section 293)
Companies Act Part 3 3
Examples where the powers
are out of competence of the
• Reorganizing capital and
amendments of memorandum or
articles of association
• Winding up unless ordered by a
Court/Selling/
leasing or disposing in whole or part
of the company’s undertaking;
remission or reschedulment of any
debts due by a director
• Appointment of sole selling agents
Companies Act Part 3 4
Duties of Directors
• i. They are trustees of the wealth of
the company
• ii. They are agents of the company
for various transactions entered into
on behalf of the company.
• iii. They should act in utmost good
faith and exercise as much care as a
man of ordinary prudence should
take in running the affairs of the
company. ………
Companies Act Part 3 5
Duties of Directors
• iv. They should ensure to maintain
the records and accounts of the
company accurately
• v. It is their duty to protect the
interests of the share holders by
proper conduct of affairs of the
company in every respect.
• vi. They should ensure compliance
of all legal and statutory
requirements while in office as
Companies Act Part 3 6
Liabilities of Directors
• i. The Directors are liable to share
holders or public for any acts of
negligence
• ii. They are liable for any act that
results in breach of trust.
• iii. They are liable for any ultra viresacts
that arise when they exceed their
authority in any manner
• iv. A director may also become liable
for acts of other directors or employees,
if he has willfully allowed any acts of
irregularity or complacent in his duty in
Companies Act Part 3 7
Company Meetings
1. Meeting of Share holders or Members:
(b)Statutory Meeting
(c)Annual General Meeting
© Extraordinary General Meeting
6. Meeting of Creditors and
contributories
in winding up
9. Meeting of creditors otherwise
than in winding
Companies Act Part 3 8
Company Meetings
4. Meeting of Directors

(a) Board Meetings


(b) Committee Meetings

5. Meeting of Debenture Holders

Companies Act Part 3 9


Frequency of Board
A Board should meet at least once in 3
months whether a private or public
company (Sec285)

[that means four meetings in a year to be


conducted]

[Note: The Central Government, by


notification in the official
gazette, is empowered to reduce or enhance
Companies Act Part 3 10
Notice of Meeting

• Notice of Every Board Meeting should


be served in writing on each director .

• Normally the company secretary


is charged with the
responsibility of serving this
mandatory notice failing which
he is liable for penal measures
Companies Act Part 3 11
Quorum

• It is the prescribed minimum


number of persons authorized to
transact the business at a
meeting.

• A quorum is one third of the


total strength of a Board

Companies Act Part 3 12


Resolutions
i. Those passed at Board Meeting
ii. Those passed by Circulation
[According to Section 289, a
resolution by circulation is not
deemed to have been passed
unless a draft thereof is circulated
to all directors or all committee
meetings and approved by majority
of members present at that time in
the country].
iii. Those signed by all members of
the Board who are entitled to receive
Companies Act Part 3 13
DISSOLUTION OF A
A. By removal of company
’name from the register by the
Registrar of Company

B. By order of a Court or Order of


the Central Government u/s 396

C. By winding up

Companies Act Part 3 14


Official Liquidator
• He is the person appointed by the
Central Government.
• His role is to ensure satisfaction of
debts and obligations of a company
in liquidation and distribute
surplus assets amongst the
members according to their right
of share of such surplus assets.
• An official liquidator is attached to
each High Court where the
winding up cases are dealt. He is a
Companies Act Part 3 15
Provisional Liquidator

Appointed by a court when a


winding up petition is filed in the
court, but before passing a
winding up order, after serving
due notice on the company.

Companies Act Part 3 16


Powers of a Liquidator
i. To institute, defend any suit,
prosecution or legal proceeding (civil
or criminal) in the name and on behalf
of the company
ii. To carry the business of the
company so far as may be necessary
for its beneficial winding up
iii. To sell the assets of the company by
public auction or private contract
either wholly or piecemeal
iv. To raise money against the security
of the assets of the company.
v. To do any other act as may be
Companies Act Part 3 17
Who may file a petition for
i. The company
ii. Any creditor or creditors
iii. Any contributory or
contributories
iv. Any one or all of the above
together or separately
v. The Registrar of Companies
vi. Any person authorized by the
Central Government
Companies Act Part 3 18
End of Part 3

THANK YOU!

Companies Act Part 3 19