Companies Act Part 3

WELCOME TO INDIAN COMPANIES ACT 1956 PART 3

Companies Act Part 3

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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

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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

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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

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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

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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

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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

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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

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Company Meetings 4. Meeting of Directors (a) Board Meetings (b) Committee Meetings 5. Meeting of Debenture Holders

Companies Act Part 3

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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

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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

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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

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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

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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

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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

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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.

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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

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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

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End of Part 3

THANK YOU!

Companies Act Part 3

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