Category Archives: Chapter VII – CA2013

MANAGEMENT AND ADMINISTRATION

Emeritus Chairman vs Chairman


In India, most companies have designation of Chairman but there is no legally recognised office of chairman of company under the Companies Act, 2013. In Indian law, chairman or chairperson is not legal position but a momentary position in meetings.

Chairman under the company law is person appointed/elected as chairman of the Meeting of Board of Directors or meetings of members (general meetings). To avoid time to appoint/select/elect chairman in each such meeting, usually board of directors names a person as its chairman once. Chairman of the Board of Directors may act as chairman of the company (means chairman of its general meetings). However, this position usually treated as permanent designation for a person.

Section 104 of the Companies Act, 2013, talk about chairman of meetings. In some later sections term chairperson is also used in same meaning.

Indian Secretarial Standards bring some legal definition for the position of chairman.

For Indian Secretarial Standards SS – 1 dealing with meetings of Board of Directors, Chairman means the Chairman of the Board or its Committee, as the case may be, or the chairman appointed or elected for a meeting.

For Indian Secretarial Standards SS – 2 dealing with general meetings, Chairman means Chairman of the Board or the Chairman appointed or elected for a Meeting.

These definitions given in Indian Secretarial Standards give some legal backing for permanently appointed chairman of the board.

Chairman Emeritus is more ceremonial position. Chairman Emeritus is an honorary position usually given to people who have retired from the position. It is just a respect to person named so. Chairman Emeritus is like a head of family who lost all powers to younger generation but have high regards at least in society (if not in the family). More often than not, Chairman Emeritus conducts meetings just by presence and all legal responsibilities rest on named chairman.

Basic responsibility of chairman is to conduct a meeting and certify as correct the proceeding when noted down as minutes of meeting. Thus, legally chairman is higher and actual position.

In listed companies, Chairman is preferably a non – executive position and sometime independent directors need to be elected as chairman. Chairman of most committees of Board should legally be an independent director. In private companies and closely held companies managing director act as chairman. In family owned head of family acts as chairman.

This post was earlier written as Quora answer here.

 

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Companies Act 2013 Amended by Insolvency and Bankruptcy Code 2016


A notification issued by Ministry of Corporate Affairs notified section 255 of the Insolvency and Bankruptcy Code, 2016. By virtue of notification of Section 255 of Insolvency and Bankruptcy Code, 2016; the Companies Act, 2013, stands amended in accordance with Schedule XI of the IBC2016 with effect from 15th November 2016. We shall have a short discussion here.

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Amendment in Management and Administration Rules


Ministry of Corporate Affairs notified on 23rd September 2016 the Companies (Management and Administration) Amendment Rules, 2016 amending the Companies (Management and Administration) Rules, 2013 with effect from that date.

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Notification of Sections Relevant for NCLT


Yesterday late evening, I posted here about press release issued by Ministry of Corporate Affairs. Soon thereafter, two files uploaded on Official Gazette website with two notifications in each. In earlier post here today, we discussed establishment and jurisdiction of various NCLT benches.

In this post, we will have a bird’s eye view on Sections notified on 1st June 2016 related to NCLT.

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MGT – 7 (v. 17Nov2015)


We live in a changing world; corporate world changing fast and Indian Corporate Law fastest. A draft of the Companies (Management and Administration) third Amendment Rules, 2015 dated 16th November 2015, which is pending for publication in Official Gazette of India amend the version of form MGT -7 once again. Though these amendment rules are not available in official gazette, new version of form MGT – 7 is made available on the MCA21 portal for filing.

Note: MGT – 7 Version 17th November 2015 is being used for writing this post. Earlier posts here and here are only historic relevance now.

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City in Companies Act, 2013


Companies Act, 2013 uses city 3 times (without taking subordinate legislations into account):

  • In section 12(5)(a) with reference to registered office;
  • In Section 27(1) for advertisement in news paper in the city of registered office;
  • In Section 96(2) for place of Annual General Meeting in city of registered office.

The Companies Act, 1956 also used this term in similar reference.

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REPRESENTATIVE, PROXY AND WHO ELSE


This is not possible every time for a member to be present in a General Meeting. Members are very much concerned for well being of the company, its management, profit and growth. Corporate law does not permit members to participate members to interfere in day to day management. A member at most may seek certain information or participate in general meetings of the company. Participation in a meeting need a presence; a personal presence of a member. Even in a virtual presence, a member needs to spare time for the purpose.

Representative:

Further, it may also be possible that member is a corporate sole like President of India or Governor of an Indian State who may not be present himself but through representative. President of India and Governor of an Indian State may appoint a person as his representative for a meeting of the company [Section 112(1)]. Where a member is a body corporate, it may also appoint a person as representative [Section 113(1)]

A representative of President or Governor shall be deemed to be a member of such a company and shall be entitled to exercise the same rights and powers, including the right to vote by proxy and postal ballot, as the President or, as the case may be, the Governor could exercise as a member of the company. [Section 112(2)]

A representative of body corporate shall be entitled to exercise the same rights and powers, including the right to vote by proxy and by postal ballot, on behalf of the body corporate which he represents as that body could exercise if it were an individual member, creditor or holder of debentures of the company. [Section 113(2)]

Major difference among representative under Section 112(2) and 113(3) is that representative of President or Governor shall be deemed to be a member but representative of body corporate is a mere representative who may exercise powers as a member. This difference arises from drafting and may not have much practical impact.

 Major similarity among representative under Section 112(2) and 113(3) is that both representatives may vote by proxy and postal ballot.

So now, for the purpose of this post, we may treat all members as individual as corporate sole and body corporate also being represented by individuals exercise same powers in the general meeting.

Proxy:

Where a member may not present, member may appoint a proxy under Section 105 of the Companies Act, 2013 t attend and vote in the meeting. Similar provision was there in earlier Acts also.

A proxy may vote even if member present personally in the meeting until members expressly revoke proxy or vote himself which implicitly revoke the proxy. [Tata Iron & Steel Co. Ltd., In Re., AIR 1928 Bom. 80].

We have discussed legal provisions related to proxies earlier here and here. We here reproduced only few provisions required for this post.

The instrument appointing a proxy shall be in writing and be signed by the appointer or his attorney. Where appointer is a body corporate, it shall be sealed of body corporate and signed by an officer of attorney. [Section 105(6)] The appointment of proxy shall be in the Form MGT – 11. [Rule 19(3)]

Limitation of Proxy:

Proxy is an agent for the purpose of voting on poll in a general meeting and cannot speak or vote otherwise. [Section 105(1)] What is use of such agent, if the voice of the member could not reach and heard in General Meeting? This limit right of the members to certain manner.

This limited right to appoint is not available to all classes of members. A member of a company not having a share capital shall not be entitled to appoint proxy unless articles provide so. Central Government may also specify companies whose members shall not be entitle to appoint a proxy.  [Proviso to Section 105(1)]

How can a member ensure to coup with such limitation where he could not be represented through proxy? How can a member ensure his voice in general meeting?

Attorney:

The companies Act, 2013 does not give the answer to abovementioned questions. This does not render a member helpless. The Power of Attorney Act, 1882 come to rescue a member in this situation.

A Power of Attorney includes any instrument empowering a specified person to act for and in the name of the person executing it. [Section 1A of the Power of Attorney Act, 1882]

A ‘power-of-attorney’ means a formal instrument by which one person empowers another to represent him, or act in his stead, for certain purposes, usually in the form of a deed poll, and attested by two witnesses. The donor of the power is called the principal or constituent; the donee is called the attorney or agent. [Osborn’s Concise Law Dictionary, 7th Edn.,]

The donee of a power of attorney may execute pr do any instrument or thing in and with his own name and signature, and his own seal, where sealing is required, by authority of the donor of the power; and every instrument and thing so executed and done, shall be as effectual in law as if it had been executed or done by the donee of the power in the name, and with the signature and seal, of the donor thereof. [Section 2 of the Power of Attorney Act, 1882]

However, an attorney may do such act only when the attorney and the donor have capacity to make contract.

Where a Power of Attorney contains the following words “… to appear and to represent me at any meeting of any joint stock company in which I am interested as a shareholder or debenture holder or preference shareholder, or as a member or otherwise and to vote there, and also to grant proxies to any other person …” These words are sufficient for attorney to exercise powers of member in a general meeting. [Tata Iron & Steel Co. Ltd., In Re., AIR 1928 Bom. 80].

A holder of General Power of Attorney shall be treated as member personally present not as a proxy. Accordingly, he will be counted for the purpose of quorum. A General Power of Attorney may include all power of members which it may exercise as members under the Companies Act 2013 and any other law for the time being in force.

However, a power of attorney executed outside India shall be treated in accordance with the law of that that country for the time being in force.

Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.