Saturday, April 11, 2015

Provisions of The Indian Companies Act Relating to Statutory Meeting

Provisions of the Company’s Act relating to Statutory Meeting (Sec. 165 of the Companies Act, 1956 – This section is not included in the new Companies Act, but due to absence of proper notification, this section should also be studied)
Statutory Meeting: A public company limited by shares or a guarantee company having share capital is required to hold a statutory meeting. Such a statutory meeting is held only once in the lifetime of the company. Such a meeting must be held within a period of not less than one month or within a period not more than six months from the date on which it is entitled to commence business i.e. it obtains certificate of commencement of business. In a statutory meeting, the following matters only can be discussed:
Ø  Floatation of shares / debentures by the company
Ø  Modification to contracts mentioned in the prospectus
The purpose of the meeting is to enable members to know all important matters pertaining to the formation of the company and its initial life history. The matters discussed include which shares have been taken up, what money has been received, what contracts have been entered into, what sums have been spent on preliminary expenses, etc. The members of the company present at the meeting may discuss any other matter relating to the formation of the Company or arising out of the statutory report also, even if no prior notice has been given for such other discussions but no resolution can be passed of which notice have not been given in accordance with the provisions of the Act.
A notice of at least 21 days before the meeting must be given to members unless consent is accorded to a shorter notice by members, holding not less than 95% of voting rights in the company. A statutory meeting may be adjourned from time to time by the members present at the meeting.
Provisions Relating to Statutory Report

1. Companies which can hold such meeting: A company limited by shares and a company limited by guarantee & having share capital are the companies which can hold statutory meeting.
2. Companies which need not hold the meeting:
Private company whether independent or subsidiary of a public company.
A public company not having share capital
An unlimited public company.
A public company limited by guarantee and not having share capital
A Government company.
3. Time limit for the meeting: A statutory meeting may be held within a period of Not less than one month not more than 6 months From the date of receiving the certificate of commencement of business.
4. Notice of the meeting: A minimum of 21 clear days notice is to be given.
5. Object: The main purpose of the meeting is to enable the members of the company to know at an early date the financial position and the prospects of the company and also to provide them an opportunity to discuss on various matters arising out of promotion and formation of the company.
6. Importance: this meeting is held only once during the life time of the company and is the first meeting of the company.
7. Adjournment of Statutory meeting: The statutory meeting may be adjourned from time to time according to the provision of the companies Act, 1956 and the power to adjourn vests in the hand of the shareholders.
8. Penalties: If default is made complying the requirement of section 165, every person responsible shall be punishable with a fine extended to Rs. 5,000/-. If the company fails to call a statutory meeting then it becomes a sound ground for the winding up of the company.