005 Allied III - Company Secretarial Practice - III Sem

STUDY MATERIAL FOR B.
COM CORPORATE
COMPANY SECRETARY PRACTICE
SEMESTER - III, ACADEMIC YEAR 2020-21
UNIT CONTENT PAGE Nr
I COMPANY SECRETARIAL PRACTICE 02
II FORMATION OF COMPANY 08
III ISSUE OF DEBENTURES 13
IV COMPANY MEETINGS 16
V WINDING UP 24
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STUDY MATERIAL FOR B.COM CORPORATE
UNIT - I
COMPANY SECRETARIAL PRACTICE
Meaning & Definition
The word ‘secretary’ has been originated from the Latin word ‘Secretarious’ which
means ‘a person entrusted with a secret’ or ‘keeper of secrets.
According to Section 2(24) of the Companies Act, 2013 defines “Company Secretary” or
“Secretary” means any individual possessing the prescribed qualifications, appointed to
perform the duties which may be performed by a secretary under this Act and any other
ministerial or administrative duties”. According to the explanation from Oxford Dictionary, “a
secretary is a person who is employed to conduct correspondence on behalf of an individual or
a company and also to execute filing, documentation and administrative functions”.
Types of Secretary:
Private Secretary:
A private secretary is a person who is employed for performing some personal works of
his employer. Generally, the high officials of any organization or the important persons of the
society, like businessmen, doctors, actors and actresses, political leaders, lawyers etc. employ
private secretary for getting help in performing their routine functions. The duties of a private
secretary are conducting correspondences, preserving and filling the important documents,
making and recording appointments, attending the guests and visitors, handling telephone calls
etc.
Secretary of an association:
Sometimes it is seen that many associations, like cultural and sporting clubs, trade
associations or some human organizations appoint secretaries to administer their day to day
activities. This type of secretary acts either as the chief executive officer or as the
representative or as the chief adviser of the association. The main job of such secretaries are to
direct and supervise the functions of subordinates, conducting correspondence with the
outsiders, maintaining the important documents and books of accounts, arranging and
conducting various meetings etc. however, they perform their activities under the supervision
of the managing committee of the concerned body or association.
Secretary of embassy:
Every embassy or high commission or foreign mission appoints a secretary for
performing some of its important functions. The secretary of the embassy or high commission is
positioned net to the ambassador or high commissioner. In absence of the ambassador or high
commissioner, he runs the embassy or commission office.
Secretary of a cooperative society:

The managing committee of every cooperative society generally appoints a secretary to
administer the society on their behalf. Any member of the society or any other outsider person
can be appointed as the full time secretary of the society on fixed salary. The secretaries of
cooperative societies also discharge their duties under the direct supervision of the managing
committee.
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Secretary of local body
When a person is appointed as the executive head of any municipal corporation or
district board or of any local body, he is designated as the secretary of that body. Secretary of
any local body is appointed as per the rules of that body and the law also specifies the
functions, duties and responsibilities of the secretary.
Secretary of Government department

Generally, government activities are performed under various ministries and
departments. Every ministry or department is controlled by a minister with the help of a
secretary. The secretary is the executive head of the ministry, while the minister is the head of
the ministry.
Company secretary
Company secretary is a high-level officer of the company having requisite qualifications.
He is appointed as per the rules prescribed in the companies act. Company secretary is mainly
responsible for looking after the secretarial works. He generally maintains liaison with the
board of directors, employees, shareholders and other outside parties. Now a day, company
secretary is one of the most important persons who perform some specified duties in the
company form of business. The functions that are performed by company secretaries are
maintenance of books and registers as required by the company’s act, issue of share
certificates, certification of meetings, arranging and attending meetings, drafting the minutes,
sending returns to the register etc.
Qualifications of Company Secretary

Since the amendment of the Companies Act in 1994, only a person having prescribed
qualifications can be appointed secretary of a company. Apart from the statutory qualifications,
he should also have other qualifications as may be necessary to conduct the affairs of the
company.
Statutory Qualifications
According to Section 2(45) of the Companies Act 2013, a Company Secretary must
possess the qualifications prescribed by the Central Government from time to time. The
qualifications prescribed by the Companies Secretary’s Qualifications) Rules 1975, for the
Secretary of a Company are:
a. In case of a company having a paid- up share capital of ₹5 crore or more,

b. The Secretary must be a member of the Institute of Company Secretaries of India
incorporated under the Companies Act, 1956, and licensed under Sec. 25 of that Act.
c. A person who is a member of the Institute of Chartered Secretaries of London shall also
be eligible for appointment as Secretary of such a company.
d. In the case of any other company, one or more of the following qualifications shall have
to be possessed by the Secretary:
e. Qualifications specified in clause (a) above;
f. A degree in law granted by any university.
g. Membership of the Institute of Chartered Accountants of India.
h. Membership of the Institute of Cost and Works Accountants of India.
a. A post-graduate degree or diploma in Management or Commerce granted by any
university or the Indian Institute of Management.
b. A diploma in Company Law granted by any Indian Law Institute.
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Other Qualifications
Statutory qualifications are not enough to become a company secretary. The Secretary
must be smart, unbiased, and must have high IQ, besides presence of mind and amiable
personality. Having reasonable proficiency in speaking and writing in different regional
languages is an added qualification of a secretary. A Company Secretary should also have a
thorough knowledge of company law, mercantile law, economic law, labour law, and
Accounting and Office Management.
Appointment of Company Secretary

As per section 2(24), 203, 204 of Companies Act 2013 the provisions regarding
appointment of company secretary are every listed Company must have full-time Company
Secretary. Every unlisted company and every private company having a paid up capital of Rs.5
crore or more must also have a full time secretary. Only an individual who is a member of
institute of company secretaries of India can be appointment as a company secretary.
By the Promoters:
The first secretary of a company is appointed by the promoters at pre- incorporation
stage and such name is mentioned in the Articles of Association.
By the First board of Directors:

After the company has been registered, the first board of directors appoints the
secretary at the first board meeting. The board of directors can continue the existing secretary
appointed by promoters or can appoint a new company secretary.
Removal / Dismissal of Company Secretary

In accordance with the law governing relationship between a master and servant,
company secretary may be dismissed like an ordinary servant of a company. The Board of
directors of a company has absolute discretion to remove a company secretary or to terminate
his services at any time for any reason or without any reason. Generally secretary may be
terminated under the following situations:
a. When his term of appointment has expired;
b. When he is given a proper notice of dismissal as per the terms of agreement of
employment;
c. When he makes a secret profit;
d. When he misconducts himself ;
e. Where he is found to be guilty of moral turpitude, negligence, disobedience,
incompetence. Where he suffers from permanent mental and physical disabilities.
Legal position of the secretary

Servant of the company:
The Secretary of a company is servant of the company, whose duty is to act in
accordance within the instructions given to him by directors.
Agent of the company:

The secretary of a company, being chief administrative officer of the company by virtue
of his office, is also an agent of the company in a restricted sense.
Officer of the company:
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As an officer of the company, the secretary may incur personal liability to statutory
penalties by reason of non-compliance with the requirements of Companies Act, 2013.
Rights and Powers of the Company Secretary

Company Secretary is a senior level officer. He enjoys the rights as per the agreement
signed by him with the Company. Some rights follows:
a. As a senior level officer Company Secretary can supervise, control and he can direct
subordinate officers and employee.
b. A Company Secretary can sign any contractor agreement on behalf of the company as a
principle officer of a company, subject to the delegation of power by the board of the
company.
c. Company Secretary can issue guidelines for the employees on behalf of the company.
d. Company Secretary can attend meeting of shareholders and the meeting of board of
directors.
e. During Winding up he can claim his legal dues as a preferential creditor of a company.
f. He can sign and authenticate the proceeding of meetings (Board, Annual general or
extra ordinary general meeting) and other documents on behalf of the company where
common seal is not required.
g. Company Secretary is a Compliance Officer and he has a right to blow whistle whenever
he finds the conduct of the officers or of the directors of the company are detrimental
to the interest of the company.
Functions/ Duties of the Company Secretary

1. Statutory Functions or Duties and
2. Non-statutory Functions or Duties.
Statutory Functions
As the principal officer of the company, the secretary must observe all the legal
formalities in respect of the provisions of the Companies Act and other laws (e.g., Income-tax
Act, Stamp Act, Sales-tax Acts, etc.) which have a bearing on the activities of the company.
According to Companies Act 2013

a. To sign document and proceedings requiring authentication by the company
b. To maintaining share registers and register of Directors and of contracts
c. To give notice to register for increase in the share capital
d. To deliver share certificate of allotment within 2 months after transfer
e. To sign and send annual return
f. To make a statutory declaration for receiving certificate of commencement of business
g. To send notice of general meeting to every member of the company
h. To make statutory books
i. To prepare minutes of every general meeting and board meeting within 30 days
j. To file a resolution with the registrar
k. To assist in preparing the statement of affairs in a winding up
Under the Income-tax Act:

He is responsible for deduction of requisite income tax from salaries of employees,
dividends and interests payable. He has to ensure that the tax deducted is deposited at
government treasury. Secretary has to submit and verify various forms for timely filing of
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income tax returns to the authorities in accordance with the law. He has to see that the
certificate of Tax Deducted at Source (TDS) is issued to every employees and shareholders.
Under Indian Stamp Act:

The company secretary has to ensure that whether proper stamps are affixed on the
company’s documents like letter of allotment and share certificate or not. He is also
Complying with Minimum Wages Act, Industrial Disputes Act, Employee State Insurance Act etc.
Under the Sales-Tax Act:

He must ensure timely submission of tax returns to the Sales-tax authorities and
payment of tax.
Under Other Acts:

He must see that the provisions of any other Act applicable to the company, e.g.,
Foreign Exchange Regulation Act, Industries (Development and Regulation) Act, and Rules, are
also complied with. Where the company is carrying on manufacturing business, he must also
comply with the provisions of the Factories Act, Payment of labour laws. Wages Act, Industrial
Disputes Act and other
Non-Statutory Functions
Secretary has to discharge non-statutory functions in relation to directors, shareholders
and office and staff. These functions are briefly mentioned.
1. Functions as agent of directors;
2. Functions towards shareholders;
3. Functions towards office and staff.
1. Functions in Relation to Directors

A company secretary acts under the full control of the board of directors and carry out
the instructions of the directors. The secretary provides necessary advice and information to
the board to formulate company policy and arrive at decisions. It is the secretary’s duty to
implement the decisions taken by the board of directors.
The duties of the secretary includes arranging board meetings, issuing notice and
preparing agenda of such meetings, recording the attendance of the directors and the minutes
and resolutions of the meeting in consultation with the Chairman. He maintains all important
correspondence, files, documents and records in the board office.
2. Functions in Relation to Shareholders

The company secretary must serve in the best interests of the shareholders. He also
must safeguard the shareholders’ interest. Under the Companies Act 2013, secretary should act
as link between the board of directors and the shareholders and also ensure that the
shareholder’s rights are violated. He has to arrange the issue allotment letters, call letters,
letters of regret, share certificates, share warrants to Shareholders. Besides he has to issue
notices and agenda of all meeting of shareholders and also send replies to the inquiries and
complaints of the shareholders on behalf of the board of directors.
3. Functions in Relation to Office and Staff

The Secretary is the kingpin of the whole corporate machinery. He is responsible for
smooth functioning of the office work. He exercises an overall supervision, control and co-
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ordination of all clerical activities in the office.
Responsibilities and Liabilities of Company Secretary
Statutory liabilities
a. If he fails to hold a statutory meeting
b. If he does not circulate the statutory report
c. If he fails to hold annual general meeting
d. If he fails to submit to the register of the co-regarding copies of annual accounts
e. If he fails to give a notice of the board meeting
f. If he fails to record the minutes of the board &general meeting
g. If he fails to maintain register of directors, shareholders & debenture holders
h. If he fails to rectify the mistake with in a period of 2months
i. If he fails to filing of documents with the registrar which is required by act
j. If he fails to submit the annual returns of income of the company
k. If he fails to have the name & address of register office
l. If he fails to issue every employee, shareholders &debenture holders a certificate in
respect of tax deducted at a source
Contractual liabilities
a. He must carry out the obligations of a service on agreement with the company.
b. He must carry out the order given by the director
c. He should not disclose any confidential information of the company
d. He should not be anything beyond his authority
e. He is liable for any damages/loss suffered by the company by his default
f. He should liable for any fraud on the part of any of his assistance if it is proved
g. If a secretary of a company falsify the books of the company reports, certificates,
documents then he will be punishable with imprisonment.
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UNIT - II
FORMATION OF COMPANY
Company is an artificial person. The formation of a company is a lengthy process. For

convenience the whole process of company formation may be divided into the following four
stages:
1. Promotion Stage,
2. Incorporation or Registration Stage,
3. Capital Subscription Stage,
4. Commencement of Business Stage.
1.Promotion Stage
Promotion is the first stage in the formation of a company. The term ‘Promotion’ refers
to the aggregate of activities designed to bring into being an enterprise to operate a business. It
presupposes the technical processing of a commercial proposition with reference to its
potential profitability. Promotion of a company refers to the sum total of the activities of all
those who participate in the building of the enterprise up to the organization of the company
and completion of the plan to exploit the idea. It begins with the serious consideration given to
the ideas on which the business is to be based.
According to C.W. Grestembeg, “Promotion may be defined as the discovery of business

opportunities and the subsequent organization of funds, property and managerial ability into a
business concern for the purpose of making profits there from.”
2.Incorporation or Registration Stage

Incorporation or registration is the second stage in the formation of a company. It is the
registration that brings a company into existence. A company is properly constituted only when
it is duly registered under the Act and a Certificate of Incorporation has been obtained from the
Registrar of Companies.
Procedure to Get a Company Registered

A.PreliminaryActivities:
a. To decide the name of the company
b. License under the Industries Development and Regulation Act, 1951
B.Filing of Document with the Registrar
a. Memorandum of Association
b. Articles of Association
c. List of directors
d. Written consent of directors
e. Statutory declaration
Certificate of Incorporation:
On the registration of memorandum and other documents, the Registrar will issue a
certificate known as the Certificate of Incorporation certifying under his hand that the company
is incorporated and, in the case of a limited company that the company is limited.
Capital Subscription Stage

A private company or a public company not having share capital can commence
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business immediately on its incorporation. As such ‘capital subscription stage’ and

‘commencement of business stage’ are relevant only in the case of a public company having a
share capital. Such a company has to pass through these additional two stages before it can
commence business.
Under the capital subscription stage comes the task of obtaining the necessary capital
for the company.
For this purpose, soon after the incorporation, a meeting of the Board of Directors is
convened to deal with the following business:
a. Appointment of the Secretary. In most cases the appointment of pre-term secretary

(who is appointed at the promotion stage) is confirmed.
b. Appointment of bankers, auditors, solicitors and brokers etc.
c. Adoption of draft ‘prospectus’ or ‘statement in lieu of prospectus’.
d. Adoption of underwriting contract, if any.
Besides the above mentioned business, the Board also decides as to whether
a. a public offer for capital subscription is to be made, and

b. Listing of shares at a stock exchange is to be secured.
After the above formalities have been completed, the directors of the company file a
copy of the ‘prospectus’ with the Registrar and invite public to subscribe to the shares of the
company by putting the ‘prospectus’ in circulation.
Application for shares are received from the public through the company’s bankers and
if the subscribed capital is at least equal to the minimum subscription amount as disclosed in
the prospectus, and other conditions of a valid allotment are fulfilled, the directors of the
company pass a formal resolution of allotment.
Allotment letters are then posted, return of allotment is filed with the Registrar and
share certificates are issued to the allottees in exchange of the allotment letters. If the
subscribed capital is less than the minimum subscription, the company could not obtain the
minimum subscription within 120 days of the issue of prospectus, all money will be refunded
and no allotment can be made.
It may be noted that a public company having a share capital, but not issuing a
‘prospectus’ has to file with the Registrar ‘a Statement in lieu of Prospectus’ at least three days
before the directors proceed to pass the first allotment resolution.
Commencement of Business Stage

After getting the certificate of incorporation, a private company can start its business. A
public company can start its business only after getting a ‘certificate of commencement of
business’.
After getting the certificate of incorporation
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a. A public company issues a prospectus of inviting the public to subscribe to its share
capital,
b. A minimum subscription is fixed, and
The company is required to sell a minimum number of shares mentioned in the prospectus.
After making the sale of the required number of shares a certificate is sent to the
Registrar stating this fact, along-with a letter from the banks, that it has received application
money for such shares. The Registrar scrutinizes the documents. If he is satisfied, he then
issues a certificate known as Certificate of Commencement of Business. This is the conclusive
evidence of the commencement of the business.
Duties of the secretary at the Promotion stage

a. To arrange the meetings of the promoters.
b. To attend the meetings of the promoters, record the proceedings and keep the minutes
of these meetings.
c. To ascertain from the Registrar of Companies if the proposed name of the company is
available for registration.
d. (To help the Promoters in obtaining a Letter of Intent (to be converted later on into an
Industrial License) under Industries (Development and Regulation) Act, 1951 if the
Company’s business comes within the purview of this Act.
e. To help the promoters in the finalization of the various preliminary contracts with
vendors, underwriters, bankers, brokers, solicitors, auditors, managerial personnel etc.
f. To get Memorandum, and Articles of Association prepared and printed.
g. To see that all other prescribed documents for the registration of the company, namely,
(a) a written consent of the Directors to act in that capacity and to purchase
qualification shares, (b) the notice of address of the Registered office of the company,
and (c) a statutory declaration stating that all the legal requirements of the Act
precedent to incorporation have been complied with, are ready for delivery to the
Registrar.
Duties of secretary at the Incorporation stage

a. To file the application for registration with the Registrar along with the prescribed
documents and to pay the necessary stamp duty, filing fees and registration charges.
b. To see that the provisions of the Companies Act relating to incorporation are strictly
complied with.
c. To obtain the Certificate of Incorporation from the Registrar as early as possible.
Duties of the Secretary at the Capital Subscription Stage

a. To arrange for the first meeting of the Board of Directors in order to pass necessary
resolutions relating to:
i. Appointment of Secretary.
ii. Adoption of preliminary contracts.
iii. Approval of the design of the Common seal of the company and authorizing the
custody thereof.
iv. Appointment of Managing Director or Manager.
v. Appointment of Bankers and authorizing for the opening of a bank account.
vi. Deciding on the mode of floatation of shares and listing arrangements.
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b. To get the name-board of the company fixed in the premises of registered office.
c. To get the necessary stationery printed with the name and registered address of the
company super-scribed thereon.
d. To arrange for opening of a bank account as per the resolution of the Board.
e. To have the common seal prepared as per the resolution of the Board.
f. To adhere with the “guidelines for disclosure and investor protection” issued by SEBI
regarding public issue of capital.
g. To enter into agreements with underwriters.
h. To appoint the brokers.
i. To prepare the prospectus or statement in lieu of prospectus, whichever is applicable.
j. To obtain consent in writing from the persons like directors, auditors, bankers, etc., who
are all named in the prospectus to act in their capacities.
k. To convene a meeting of the Board to get approval for draft of prospectus.
l. To print the prospectus and submit the same with the Registrar after it is duly signed by
every director named therein.
m. To arrange for advertisement of the issue with other relevant information relating to
issue.
n. To issue the prospectus to the public within the prescribed time from the date of
registration.
o. To apply with stock exchange for securing permission to list out the company’s shares
thereafter.
p. To complete the formalities relating to the issue and allotment of shares.
q. To file a return of allotment with the Registrar of the Companies.
r. To issue share certificates to the allotted within the specified time.
Duties of the Secretary at the Commencement of business stage

i. To make an application to the Registrar of Companies for the issue of a Certificate of
Commencement of Business.
ii. To file along with the application the prescribed declarations including the declarations
that all the legal conditions required to be fulfilled for obtaining the certificate have
been duly filled.
iii. To collect the Certificate of Commencement of business from the Registrar of
Companies office.
Meaning of forfeiture
Forfeiture means termination of membership as a sort of penalty for the non-payment
of calls on the due date. To forfeit means to take away or to withdraw the rights of a person.
Forfeiture of share refers to the cancellation or termination of membership of a share holder by
taking away the shares and rights of membership.
Duties of company secretary in respect of forfeiture of shares:

i. To arrange a Board meeting; to take a decision on forfeiture after the first reminder
for payment of call money to defaulting shareholders has been issued.
ii. To issue a second reminder to still defaulting members with a caution that shares
may be forfeited if the call money is not paid within a specified period of time.
iii. To have a resolution passed at a Board meeting on forfeiture.
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iv. To make necessary changes in the Register of Members and to cancel the share
certificates concerned.
v. In case forfeited shares are re-issued, the Company Secretary has to make further
entries in the Register of Members, to issue share certificates to the re-purchasers,
and to see that necessary entries are made in the books of account.
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UNIT - III
ISSUE OF DEBENTURES
When a company needs funds for extension and development purpose without
increasing its share capital, it can borrow from the general public by issuing certificates for a
fixed period of time and at a fixed rate of interest. Such a loan certificate is called a debenture.
Kinds of Debentures
Debentures are generally classified into different categories on the basis of:
 Convertibility of the Instrument
 Security of the Instrument
 Redemption ability
 Registration of Instrument
On the basis of convertibility:

Debentures may be classified into following categories:
Non Convertible Debentures (NCD):

These instruments retain the debt character and cannot be converted into equity
shares.
Partly Convertible Debentures (PCD):

A part of these instruments are converted into Equity shares in the future at the notice
of the issuer. The issuer decides the ratio for conversion. This is normally decided at the time of
subscription.
Fully convertible Debentures (FCD):

These are fully convertible into Equity shares at the issuer's notice. The ratio of
conversion is decided by the issuer. Upon conversion the investors enjoy the same status as
ordinary shareholders of the company.
Optionally Convertible Debentures (OCD):

The investor has the option to either convert these debentures into shares at a price
decided by the issuer/agreed upon at the time of issue.
On the basis of Security, debentures are classified into:

Secured Debentures:
These instruments are secured by a charge on the fixed assets of the
issuer company. So if the issuer fails on payment of either the principal or interest amount,
such fixed assets can be sold to repay the liability to the investors.
Unsecured Debentures:
These instrument are unsecured in the sense that if the issuer defaults on payment of
the interest or principal amount, the investor has to be included as unsecured creditors of the
company.
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On the basis of Redeemably, debentures are classified into:

Redeemable Debentures:
It refers to the debentures which are issued with a condition that the debentures will be
redeemed at a fixed date or upon demand, or after notice, or under a system of periodical
drawings. Debentures are generally redeemable and on redemptionthese can be reissued or
cancelled.
Perpetual or Irredeemable Debentures:

A Debenture, in which no specific time is specified by the companies to pay back the
money, is called an irredeemable debenture. The debenture holder cannot demand repayment
as long as the company is a going concern. Issuing company has to pay interest periodically. But
all debentures, whether redeemable or irredeemable become payable on the company going
into liquidation. However, after the commencement of the Companies Act, 2013, now a
company cannot issue perpetual or irredeemable debentures.
On the basis of Registration, debentures may be classified as

Registered Debentures:
Registered debentures are issued in the name of a particular person, whose name
appears on the debenture certificate and who is registered by the company as holder on the
Register of debenture holders.
Bearer debentures:
Bearer debentures on the other hand, are issued to bearer, and are negotiable
instruments, and so transferable by mere delivery like share warrants.
Duties of Secretary in issue of Debenture

i. Arrange Board meeting to pass resolution deciding the issue of debenture.
ii. To examine to obtain or not consent of Controller of Capital Issue as per the capital
issues (exemption) order 1969.
iii. If issue is underwritten, secretary has to see Board passes a resolution and also fix their
remuneration.
iv. He should arrange for the execution of the trust deed.
v. He should arrange with the company’s bankers for receiving applications.
Introduction
For running a new business effectively and successfully and adequate amount of capital
is required. In some of the case is the capital is arranged through internal sources that is by the
way of issuing equity share capital are true accumulated profit. Whereas in some cases
external resources are also used this can be external commercial, borrowing, debentures,
public fixed deposits, bank loans etc .Borrowing can be defined as under which money is
arrange with an external sources.
Types of borrowings:
i. Long term borrowings: Under the long term the funds are borrowed from a period
ranging from 5 years or more.
ii. Short term borrowings: Under the short-term borrowed for a very short period that is
up to 1 year. These funds are generally borrowed so that working capital amount can be
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made. Medium term borrowings: These are the borrowing under which the funds world
from a period of 2 to 5 years.
iii. Secured borrowing: Under the secured borrowing, if a creditor has the re-course of
assets of the company or a proprietary then a debt obligation is considered as security.
iv. Unsecured borrowing: Under the unsecured borrowing the debt comprises of financial
obligations.
v. Syndicated borrowing: Under the syndicated borrowing, if a borrower requires a large
fund, it is generally provided by a group of lenders. Under this one agreement is used by
borrower covering the whole group of bank and different types of facilities rather than
entering into series of separate loans.
vi. Bilateral borrowing: When a company makes a borrowing from a particular meaning of
financial institution it is known as bilateral Borrowing. There is only single type of
contract between the company and the borrower in this type of borrowing.
vii. Private borrowing: The private borrowing consists of bank loan obligations. Under this
the company takes loan from Bank of financial institution.
viii. Public borrowing: Public borrowing consists of all the financial institutions that are
freely tradable on a public exchange.
Meaning of Public Deposits:

The deposits that are raised by organizations directly from the public are known as public
deposits. Companies offer higher rates of interest on public deposits usually than that offered on
bank deposits. Any person who prefers depositing money in an organization does so by filling up a
prescribed form. The organization in return issues a deposit receipt as an acknowledgement of the
debt. Public deposits take care of both medium and short-term financial requirements of a
business.
Advantages of Public Deposits:

i. Acquisition of finance through public deposits is very easy.
ii. Interest paid on public deposits is tax deductible expenditure.
iii. Administrative cost of issuing a public deposit is lower than the cost involved in issuing
shares and debentures.
iv. Since the rate of interest paid on a public deposit is fixed, it helps the company play
trading on equity.
v. It does not dilute the control of shareholders.
Disadvantages of Public Deposits:

i. They are uncertain and unrealistic forms of financing.
ii. Public deposits are available for short periods only.
iii. The management may misuse the deposit as these deposits are not secured.
Preventing Misuse of Public Deposits

i. The Central Government is empowered (in consultation with R.B.I) to prescribe the
conditions and limits up to which deposits may be accepted.
ii. Every deposit accepted by the company before this Act, shall be repaid in accordance
with the terms of such deposits.
iii. This section has also provided penal provisions for companies and their defaulting
officers.
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UNIT - IV
COMPANY MEETINGS
Meanings of Meeting
A meeting can be defined as a lawful association or assembly of two or more persons by
previous notice for transacting some business. The meeting must be validly summoned and
convened. Such gatherings of the members of companies are known as.
Essentials of Company meetings

Two or More Persons
To constitute a valid meeting, there must be two or more persons. However, the articles
of association may provide for a larger number of persons to constitute a valid quorum.
Lawful Assembly
The gathering must be for conducting a lawful business. An unlawful assembly shall not
be a meeting in the eye of law.
Previous Notice
Previous notice is a condition precedent for a valid meeting. A meeting, which is purely
accident and not summoned after a due notice, is not at all a valid meeting in the eye of law.
To Transact a Business
The purpose of the meeting is to transact a business. If the meeting has no definite
object or summoned without any predetermined object, it is not a valid meeting. Some
business should be transacted in the meeting but no decision need be arrived in such meeting.
Kinds of company meetings
The meetings of a company can be broadly classified into four kinds.

1. Meeting of the Shareholders
2. Meeting of the Directors
3. Meeting of the Debenture Holders
4. Meeting of the Creditors
Meeting of the Share Holders

The meetings of the shareholders can be further classified into four kinds namely,
1. Statutory Meeting,
2. Annual General Meeting
3. Extraordinary General Meeting, and
4. Class Meeting
Statutory Meeting
This is the first meeting of the shareholders conducted after the commencement of the
business of a public company. Companies Act provides that every public company limited by
shares or limited by guarantee and having a share capital should hold a meeting of the
shareholders within 6 months but not earlier than one month from the date of commencement
of business of the company. Usually, the statutory meeting is the first general meeting of the
Page 16 of 26
company. It is conducted only once in the lifetime of the company. A private company or a
public company having no share capital need not conduct a statutory meeting.
Annual General Meeting

The Annual General Meeting is one of the important meetings of a company. It is usually
held once in a year. AGM should be conducted by both private and public ltd companies
whether limited by shares or by guarantee; having or not having a share capital. As the name
suggests, the meeting is to be held annually to transact the ordinary business of the company.
Extra-ordinary General Meetings (EOGM)

Statutory Meeting and Annual General Meetings are called the ordinary meetings of a
company. All other general meetings other than these two are called Extraordinary General
Meetings. As the very name suggests, these meetings are convened to deal with all the
extraordinary matters, which fall outside the usual business of the Annual General Meetings.
EOGMs are generally called for transacting some urgent or special business, which cannot be
postponed till the next Annual General Meeting. Every business transacted at these meetings is
called Special Business.
The following persons are authorized to convene an extraordinary general meeting.

1. The Board of Directors.
2. The Requisitionists.
3. The National Company Law Tribunal.
4. Any Director or any two Members.
Class Meetings
Class meetings are those meetings, which are held by the shareholders of a particular
class of shares e.g. preference shareholders or debenture holders. Class meetings are generally
conducted when it is proposed to alter, vary or affect the rights of a particular class of
shareholders. Thus, for effecting such changes it is necessary that a separate meeting of the
holders of those shares is to be held and the matter is to be approved at the meeting by a
special resolution.
For example, for cancelling the arrears of dividends on cumulative preference shares, it
is necessary to call for a meeting of such shareholders and pass a resolution as required by
Companies Act. In case of such a class meeting, the holders of other class of shares have no
right to attend and vote.
2.Meetings of the Directors

Meetings of directors are called Board Meetings. These are the most important as well
as the most frequently held meetings of the company. It is only at these meetings that all
important matters relating to the company and its policies are discussed and decided upon.
Since the administration of the company lies in the hands of the Board, it should meet
frequently for the proper conduct of the business of the company. The Companies Act
therefore gives wide discretion to the directors to frame rules and regulations regarding the
holding and conduct of Board meetings. The directors of most companies frame rules
concerning how, where and when they shall meet and how their meetings would be regulated.
These rules are commonly known as Standing Orders.
Page 17 of 26
3.Meetings of Debenture Holders

The debenture holders of a particular class conduct these meeting. They are generally
conducted when the company wants to vary the terms of security or to modify their rights or to
vary the rate of interest payable etc. Rules and Regulations regarding the holding of the
meetings of the debenture holders are either entered in the Trust Deed or endorsed on the
Debenture Bond so that they are binding upon the holders of debentures and upon the
company.
4. Meetings of the Creditors

Strictly speaking, these are not meetings of a company. They are held when the
company proposes to make a scheme of arrangements with its creditors. Companies like
individuals may sometimes find it necessary to compromise or make some arrangements with
their creditors, In these circumstances, a meeting of the creditors is necessary.
Requirement of a valid meeting

There must be some requisites in order to validate the meeting. The necessary pare-
conditions of a valid meeting are stated below:
1.Proper authority to convey the meeting:

A meeting must be the proper authority. The proper authority to convey a general
meeting of a company is the board of directors. The board of directors must convey the
general meeting by passing a resolution that effect at a validly held board meeting.
2.Proper notice of the meeting:

This is the second important requirement of a valid general meeting. A proper notice of
the meeting should be given to all those who are entitled to attend the meeting. The notice
should contain particulars relating to the kind of meeting, place, date, time of meeting agenda
of meeting.
3.Quorum of the meeting:

Next essential is the presence of quorum in the meeting quorum is the minimum
numbers members required to attend the meeting & transact business validly. According to
companies act in case of a private company the quorum is 2 in case of public company it is 5
members.
4.Proxies
As per provision of companies act a member of company may vote at a meeting
either in person or by proxy. “Proxy” is a person who is authorized by a member of a
company to attend & vote at a meeting of the company on behalf of share holder.
Types of proxies are as follows:
 Special proxy: He is a person who is authorized to attend & vote on a particular
proposal or resolution.
 General proxies : He is a person who is authorized to vote & attend all proposals /
resolution
5.Proper person in thechair:
Page 18 of 26
A chairman is a person who has been designated or elected to act as a guide & to
preside over the meeting & conduct the presiding of the meeting. He is the chief authority
at a meeting & control & regulates the speech of members at the meeting every meeting
must have the chair men in order to regulate the proceedings of the meeting.
6.Agenda ofmeeting
Agenda means the things to be done & it is a statement of business to be discussed &
transacted at meeting. Simple the agenda means the matters to be discussed at the meeting it
is list of items of the business to be transacted at the meeting.
Types of agenda are

 Brief agenda: in this agenda the items of business briefly mentioned to be transacted in
business.
 Detailed agenda : it gives more details about each item of the business to betransacted
7. Motion
No discussions will take place at a meeting unless there is a definite proposal for discussing
before the meeting. A motion is a definite proposal placed before the meeting for discussion &
decision.
8.Sense of meeting
Companies meeting are held for discussing the specific issues relating to the
working of the company for taking decisions on the same. To arrive at the decision the
chairmen has to ascertain the views of the members on each of the matters under
discussion.
9. Resolution
When a motion or a proposal is passed in a meeting it becomes a resolution. Resolution
may be defined as “formal expression of the decision of a meeting on any motion / proposal
before it.
Types of resolution are

i.Ordinary resolution:
As per the co-‘act it is one which is passed by simple majority of votes of
members present in the meeting or more than 50% of voting right shareholders
ii.Special resolution:
At least 75% of voting right share holders presented in the meeting
iii.Resolution requiring special notice;
To appoint auditors, retiring of auditor, removal of the director before the date
of expiry of his period & appointment of new director in the place of removed director.
10.Minutes of meeting
It refers to the written record of the business transacted & discussions arrived at
meeting
Secretarial work relating to statutory meeting:
Page 19 of 26
Functions before the meeting:

a. Maintaining time for statutory meeting,
b. Preparing statutory statement or report,
c. Drafting a notice for the meeting,
d. Collecting the auditor’s certificate,
e. Selection the place of the meeting,
f. Preparing agenda of the meeting,
g. Listing the name of members who will attend the meeting,
h. Calling on board of directors meeting,
i. Preparing final notice of the meeting.
j. Serving the notice to the concerned members.
Functions at the meeting:

a. Determining the quorum of the meeting,
b. Stating or reading the agenda,
c. Supply of the necessary explanations,
d. Giving the explanations,
e. Writing the rough minutes
Functions after the meeting:

a. Preparing final minutes and resolutions,
b. Submitting the statutory report
Duties of the secretary relating to Board Meeting

Duties before the Meeting
a. To decide the date, time, place and agenda of the Board meeting in consultation
with the Chairman,
b. To prepare the agenda and the notice of the Board meeting.
c. To serve notice along with agenda of the meeting to all the directors.
d. To issue invitation letters to persons such as the Chief Accountants, Branch
Manager, Solicitor, Auditors etc., depending upon the nature of business to the
transacted in the meeting.
e. To intimate the date of meeting to the stock exchange .in case if the company
proposes to recommend the payment of dividend there at.
f. To prepare directors Attendance book.
g. To keep ready all relevant reports to be submitted.
h. To collect necessary documents, contracts, pending transfers and the related
certificates for sealing and signing by the directors.
i. To keep ready the company’s seal, copies of memorandum and Articles of
association and other documents likely to be required at the meeting.
j. To make suitable arrangements for the boarding and lodging for directors and
for the necessary seating arrangements, stationary, etc., for the Board meeting.
Page 20 of 26
Duties at the Meeting

1. To obtain the signatures of the directors and special invites, if any, present in the
Director’s Attendance Book.
2. To help the Chairman in ascertaining the quorum.
3. To check whether the disinterested quorum is available to deal with that item in which
one or more directors are interested in any item of business to be transacted and to
note the names of interested directors for recording in the minutes.
4. To read the notice of the meeting and the minutes of the last meeting.
5. To report any request for leave of absence received from directors and note them for
recording in the minutes.
6. To report notice of disclosure of interest, if any, received from directors under section
184.
7. To assist the chairman or the inboard on any point of procedure and to supply necessary
explanations when required.
8. To take full notes of proceedings of the meeting.
9. To arrange for the payment of sitting fees and travelling allowances to directors as per
provisions of the Articles and the Act.
Duties after the Meeting

1. To draft the minutes of the meeting on the basis of notes taken by him and the
Chairman.
2. To carry out the orders and instructions of the Board.
Duty of the Secretary at the Annual General Meeting:

Before the Meeting:
1. He is to see that the Annual Accounts are prepared according to the provisions of the
Act and duly audited and certified by the Auditors of the company.
2. He is to prepare the agenda in consultation with the Chairman and issue notices of the
Board Meeting held just before the Annual General Meeting.
3. He is to prepare the Annual Report of the Directors in consultation with the Chairman.
4. He is to send the notice of the Annual General Meeting to all members along with
necessary forms.
5. He is to prepare the Chairman’s speech in consultation with the Chairman.
6. He is to receive, scrutinize, countersign and register all proxies received before the fixed
time.
7. He is to close the Share Transfer Register and prepare the dividend lists and warrants.
B. At the Meeting:
1. He is to see that no unauthorized person enters the General Meeting.
2. He is to help the Chairman to ascertain whether a quorum is present or not.
3. He is to read the notice convening the meeting.
4. He is to help the Chairman by supplying necessary information.
5. He is to help the Chairman to conduct the meeting.
6. He is to take notes of the proceedings.
C. After the Meeting:
Page 21 of 26
1. He is to prepare the Minutes and get it signed by the Chairman.

2. He is to execute the decisions and resolutions passed at the meeting.
3. He is to file necessary documents with the Registrar.
4. He is to incorporate the alterations, if any, made in the Memorandum or the Articles of
Association passed in the meeting.
Resolution
As per the Companies Act 2013, for taking any decision or executing any transaction, the
consent of the shareholders, the Board of Directors and other specified is required. The
decisions taken at a meeting are called resolutions. In other words a motion, with or without
the amendments which is put to vote at a meeting and passed with the required quorum
becomes resolution.
Kinds of Resolution
There are broadly three types of resolutions, namely ordinary resolution, special
resolution and resolution requiring special notice.
Ordinary Resolution:
An ordinary resolution is one which can be passed by a simple majority. i.e. if the
members of votes cast by members, entitled to vote in favour of the resolution is more than
the votes cast against the resolution.
Ordinary Resolution is required for the following Matters
(i) To change or rectify the name of the company
(ii) To alter the share capital of the company
(iii) To redeem the debentures
(iv) To declare the dividends
(v) To approve annual accounts and balance sheet
(vi) To appoint the directors
(vii) To increase or decrease the number of directors within the limits prescribed
(viii) To remove a director and appoint another director in his place
(ix) To make inter corporate investment, within the limits
(x) To approve voluntary winding up if the articles authorise
(xi) To fill up the vacancy in the office of liquidator, etc.,
Special Resolution
A special resolution is the one which is passed by a not less than 75% of majority. The
number of votes, cast in favour of the resolution should be three times the number of votes
cast against it. The intention of proposing a resolution as a special resolution must be
specifically mentioned in the notice of the general meeting.
Special Resolution is required for the following Matters

(i) To change the registered office of the company from one state to another
(ii) To change the objectives of the company
(iii) To change the name of the company
(iv) To alter the Articles of Association
(v) To reduce the share capital subject to the confirmation of the court
(vi) To commence any new business
Page 22 of 26
(vii) To appoint the auditor for the company

(viii) To appoint the sole selling agents in specified cases
(ix) To determine the remuneration of the Director and the Managing Director
Resolution requiring Special Notice:

There are certain matters specified in the Companies Act, 2013 which may be discussed
at a general meeting only if a special notice is given at least 14 days before the meeting. The
intention to propose any resolution must be notified to the company. The following matters
require special notice before they are discussed in the meeting:- (i) To appoint an auditor, a
person other than a retiring auditor (ii) To provide expressly that a retiring Auditor shall not be
reappointed (iii) To remove a director before the expiry of his period of office (iv) To appoint a
director in the place of a director so removed.
Page 23 of 26
UNIT - V
WINDING UP
Meaning of Winding up
Winding up of a company is defined as a process by which the life of a company is
brought to an end and its property administered for the benefit of its members and creditors.
In words of Professor Gower, “Winding up of a company is the process whereby its life is ended
and its Property is administered for the benefit of its members & creditors. An Administrator,
called a liquidator is appointed and he takes control of the company, collects its assets, pays its
debts and finally distributes any surplus among the members in accordance with their rights.”
Modes of Winding up of a Company

As per section 270 of the Companies Act 2013, the procedure for winding up of a
company can be initiated either:
i. By the tribunal or,
ii. Voluntary.
Winding up by the tribunal:

As per new Companies Act 2013, a company can be wound up by a tribunal in the below
mentioned circumstances:
1. When the company is unable to pay its debts
2. If the company has by special resolution resolved that the company be wound up by
the tribunal.
3. If the company has acted against the interest of the integrity or morality of India,
security of the state, or has spoiled any kind of friendly relations with foreign or
neighboring countries.
4. If the company has not filled its financial statements or annual returns for preceding
5 consecutive financial years.
5. If the tribunal by any means finds that it is just & equitable that the company should
be wound up.
6. If the company in any way is indulged in fraudulent activities or any other unlawful
business, or any person or management connected with the formation of company
is found guilty of fraud, or any kind of misconduct.
Filling up winding up petition:

Section 272 provides that a winding up petition is to be filed in the prescribed form no 1,
2 or 3 whichever is applicable and it is to be submitted in 3 sets. The petition for compulsory
winding up can be presented by the following persons:
i. The company
ii. The creditors; or
iii. Any contributory or contributories
iv. By the central or state govt.
v. By the registrar of any person authorized by central govt. for that purpose.
Final Order and its Contents:

The tribunal after hearing the petition has the power to dismiss it or to make an interim
order as it think appropriate or it can appoint the provisional liquidator of the company till the
Page 24 of 26
passing of winding up order. An order for winding up is given in form 11.
Voluntary winding up of a company:

The company can be wound up voluntarily by the mutual decision of members of the
company, if:
i. The company passes a Special Resolution stating about the winding up of the company.
ii. The company in its general meeting passes a resolution for winding up as a result of
expiry of the period of its duration as fixed by its Articles of Association or at the
occurrence of any such event where the articles provide for dissolution of company.
Duties of Company Secretary in respect of Compulsory winding up

i. To help the directors in drawing up the petition in case the company presents the
petition for winding up.
ii. To see that a certified copy of order of winding up be filed with the registrar within 30
days of such an order.
iii. To assist in the preparation of statement of affairs for submission to the Official
Liquidator within 21 days from the date of the winding up order.
iv. To ensure that the same has been duly signed and verified by an affidavit.
v. To render all necessary assistance and furnish all necessary information relating to
the affairs of the company when called upon by the Tribunal during the course of
winding up.
vi. To see that every business letter, document, invoice, or order issued by the company
after winding up order has been passed, contains a statement that the company is being
wound up. This may be done by adding the words’ in liquidation’ after the name of the
company.
Duties of secretary in respect of member’s Voluntary winding up

1. To arrange for a Board meeting to consider and approve the draft of declaration of
2. Insolvency as well as the draft of the resolution for winding up to be passed at the
general meeting.
3. To arrange for the report of the auditors on the profit and loss account and the balance
a. sheet of the company for the period .
4. To prepare a declaration of insolvency and get it verified by an affidavit.
5. To file a copy of declaration of solvency with the registrar along with a copy of the
report of auditors.
6. To prepare and send notice of the general meeting of the members where the special
resolutions for the winding up is to be passed.
7. To hold the general meeting within five weeks of Board Meeting making the declaration
of insolvency.
8. To see that the special resolution for members Voluntary winding up is duly passed at
the general meeting of members.
9. To see that the Liquidator is appointed and his remuneration is fixed up at the same
meeting.
10. To see that the notice of the appointment of the liquidator is given to the Registrar
within ten days of passing of the resolution, appointing the liquidator.
11. To deliver to the Liquidator all properties, books, papers and documents under his
control as and when directed to do so.
Page 25 of 26
Procedure for Voluntary Winding Up:

Conduct a board meeting with 2 Directors and thereby pass a resolution with a
declaration given by directors that they are of the opinion that company has no debt or it will
be able to pay its debt after utilizing all the proceeds from sale of its assets.
Issues notices in writing for calling of a General Meeting proposing the resolution along
with the explanatory statement.
In General Meeting the ordinary resolution is passed for the purpose of winding up by
ordinary majority or special resolution by 3/4th majority. The winding up shall be started from
the date of passing the resolution.
Meeting of creditors is conducted after passing the resolution, if majority creditors are
of the opinion that winding up of the company is beneficial for all parties then company can be
wound up voluntarily.
Within 10 days of passing the resolution, a notice is filed with the registrar for
appointment of liquidator.
Within 14 days of passing such resolution, a notice is given of the resolution in the
official gazette and also advertise in a newspaper.
Within 30 days of General meeting, file certified copies of ordinary or special resolution
passed in general meeting.
Wind up the affairs of the company and prepare the liquidators account and get the
same audited.
Conduct a General Meeting of the company.
In that General Meeting a special resolution is passed for disposal of books and all
necessary documents of the company, when the affairs of the company are totally wound up
and it is about to dissolve.
Within 15 days of final General Meeting of the company, a copy of accounts is
submitted and file an application to the tribunal for passing an order for dissolution.
If the tribunal is of the opinion that the accounts are in order and all the necessary
compliances have been fulfilled, the tribunal shall pass an order for dissolving the company
within 60 days of receiving such application.
The appointed liquidator would then file a copy of the order with the registrar.
After receiving the order passed by the tribunal, the registrar then publishes a notice in
the official Gazette declaring that the company is dissolved.
Page 26 of 26

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STUDY MATERIAL FOR B.

UNIT CONTENT PAGE Nr

I COMPANY SECRETARIAL PRACTICE 02

III ISSUE OF DEBENTURES 13

Secretary of a cooperative society:

Secretary of Government department

Qualifications of Company Secretary

a. In case of a company having a paid- up share capital of ₹5 crore or more,

Appointment of Company Secretary

By the First board of Directors:

Removal / Dismissal of Company Secretary

Legal position of the secretary

Agent of the company:

Officer of the company:

Rights and Powers of the Company Secretary

Functions/ Duties of the Company Secretary

According to Companies Act 2013

Under the Income-tax Act:

Under Indian Stamp Act:

Under the Sales-Tax Act:

Under Other Acts:

1. Functions in Relation to Directors

2. Functions in Relation to Shareholders

3. Functions in Relation to Office and Staff

Responsibilities and Liabilities of Company Secretary

Company is an artificial person. The formation of a company is a lengthy process. For

According to C.W. Grestembeg, “Promotion may be defined as the discovery of business

2.Incorporation or Registration Stage

Procedure to Get a Company Registered

B.Filing of Document with the Registrar

Capital Subscription Stage

business immediately on its incorporation. As such ‘capital subscription stage’ and

a. Appointment of the Secretary. In most cases the appointment of pre-term secretary

a. a public offer for capital subscription is to be made, and

Commencement of Business Stage

After getting the certificate of incorporation

Duties of the secretary at the Promotion stage

Duties of secretary at the Incorporation stage

Duties of the Secretary at the Capital Subscription Stage

Duties of the Secretary at the Commencement of business stage

Duties of company secretary in respect of forfeiture of shares:

On the basis of convertibility:

Non Convertible Debentures (NCD):

Partly Convertible Debentures (PCD):

Fully convertible Debentures (FCD):

Optionally Convertible Debentures (OCD):

On the basis of Security, debentures are classified into:

On the basis of Redeemably, debentures are classified into:

Perpetual or Irredeemable Debentures:

On the basis of Registration, debentures may be classified as

Duties of Secretary in issue of Debenture

Meaning of Public Deposits:

Advantages of Public Deposits:

Disadvantages of Public Deposits:

Preventing Misuse of Public Deposits

Essentials of Company meetings

Kinds of company meetings

The meetings of a company can be broadly classified into four kinds.

Meeting of the Share Holders