Unit 2 Topics

1. Share Capital – Issue, allotment of shares, forfeiture of shares, demat of share, transmission of
shares, buyback of shares, share certificate, share warrant

2. Members and Shareholders – Their Rights and Duties, Shareholders Meetings, Kinds of Meetings,
Convening and Conduct of Meetings, AGM, EGM, Class Meetings

1. Share Capital – Issue, allotment of shares, forfeiture of shares, demat of

share, transmission of shares, buyback of shares, share certificate, share
warrant

Issue of Shares

There are various ways by which shares can be issued. Some of the ways are discussed below:

1. Issue of Shares at a Premium:

When shares are issued at a price above the face value they are said to be issued at a premium. For
example, a share having the face value of Rs 10 is issued at Rs 11. Here, Re 1 is the premium. The
amount of premium so collected is to be transferred to an account called the ‘Securities Premium
Account’. This account is capital in nature and can only be utilized for the purposes specified by the
Act under Section 78. These are listed below:

• Issue of fully paid bonus shares to members of the company.

• To write off preliminary expenses.
• To write off the expenses of issue, or commission paid, or discount allowed, on issue of
shares or debentures of the company.
• To provide for the payment of premium on the redemption of any redeemable preference
shares or debentures of the company.

Thus, the Securities Premium Account cannot be treated as a revenue reserve for distributing
dividends. It can only be used for the above mentioned purposes and also for buying back of
securities (section 77A).

2. Issue of Shares at a Discount:

When the shares are issued at a price below the face value they are said to be issued at a discount.
For example, a share having the face value of Rs 10 as issued at Rs 8. A company may issue shares at
a discount only when it meets the provisions specified under section 79. These conditions are:

• The shares must belong to a class of shares that have been already issued.
 • The issue of the shares at a discount must be authorised by a resolution passed by the
company in a general meeting. An approval for the same must also be obtained by the
Central Government.
• The maximum rate of discount must also be specified in the resolution. Moreover, if the rate
of discount exceeds 10%, the Central Government would not approve the same except
considering special circumstances of the case.
• A minimum of one year must have passed at the date of the issue since the date on which
the company was entitled to start its business.
• After the approval by the Central Government, the shares must be issued within two months
or within such extended time as allowed by the Central Government.
• The prospectus should contain particulars of the discount allowed on the issue of the shares
or of the amount that has not been written off. The defaulting company and every officer in
default shall have to pay a fine upto Rs 500.

3. Issue of Bonus Shares:

Normally, when the company makes profits, it distributes part of these as dividends and retains the
rest as reserves. Later, the company may utilize its reserves and surpluses to issue bonus shares to
the existing shareholders without taking any consideration from them.

Bonus issue increases the liquidity in the stocks. It also decreases the effective earnings per share
and the book value per share. The issue of bonus shares leads to capitalization of profits. According
to Article 96 of Table A, a company may give bonus to its shareholders by making partly paid up
shares fully paid or by issuing new shares to members.

Although, normally, free reserves are used for bonus issue, even share premium account and capital
redemption reserve account may be utilized. The latter two however, can only be used for the issue
of new fully paid bonus shares.

The issue of bonus shares requires a provision for the same in the Articles of the company, a
resolution of the board of directors as well as approval in a general body meeting. Further, if the
company is listed on a recognized stock exchange, then the guidelines issued by SEBI in this regard
must also be followed.

4. Issue of Sweat Equity Shares:

When a company issues equity shares to its employees or directors at a lower price or in lieu of
providing know-how or making available rights in the nature of intellectual property rights or any
value additions, such shares are referred to as ‘Sweat Equity Shares’ (Section 79A).

For the issue of these shares the following conditions must be satisfied:

• The shares must belong to a class of shares that have been already issued.
• The company in its general meeting must have passed a special resolution to issue sweat
equity.
• The resolution must describe the details about the issue including the number of equity
shares being issued as sweat equity, their current market price, consideration to be
 received, if any, and the class or classes of directors or employees who are being given the
sweat equity.
• On the date of the issue, a minimum of one year should have passed since the date on which
the company was entitled to start its business.
• If the company is listed on a stock exchange, then it must comply with the provisions of SEBI
while issuing sweat equity.

Transmission of Shares
• Transfer of shares on account of operation of law is termed transmission of shares.
• Transmission of shares occurs in case of death, insanity or insolvency of an individual
member or, if the member is a company, on its liquidation.
• In all such cases the legal representative, administrator or the official assignee or receiver
respectively shall be entitled to the shares.
• It also includes devolution of title of the shares on account of constitutional changes.
• The person claiming the title to the shares has to make an application to the company for
transfer of shares in his name.
• Formal instrument of transfer is not required but the company may ask for probate,
succession certificate, letter of administration, certificate of death etc.
• In case of death of a member, his legal representatives can validly transfer these shares to
any person, although he may not himself be a member on the date of execution of the
transfer deed.
• He is also entitled to dividends declared by the company, but he is not entitled to vote at the
meetings of the company. However, if the company’s articles permit, the directors may
withhold payment of dividend to compel a legal representative to elect whether he will or
will not be a member of the company.
• A company can refuse to register a transmission if there is a provision to that effect in the
Articles. But the power must be exercised by the directors in good faith. The aggrieved party
can appeal to the Company Law Board (Tribunal) under Section 111 for the registration of
transmission or for rectification of the company’s register of members.
Buy Back of Shares of a Company
Buy-back is one amongst the numerous provisions of the Companies Act, 2013 that permits a
company to buy its own shares or other securities- with inherent advantages to the corporate and its
shareholders. In this article, we look at the reasons for buy back of shares, methods of buy-back and
other necessary provisions related to share buy-back schemes.

Role of Buy-Back

A share buy-back program can help a company achieve the following:

• Achieve a specified capital structure;

• Return surplus money to shareholders/security holders;

• Ensure the underlying price of shares/security is correctly reflected;

• Control unwarranted fall in share or security value

Methods of Buy-Back

Funds for buy-back of shares are usually from free reserves or securities premium account. Shares
can be bought back from existing shareholders on an impartial basis or open market transaction.

Pre-requisites

1. The buy-back must be permitted by Articles of Association of the company.

2. A special resolution has been passed enabling the corporate authorizing buy-back. However
if the buy-back is 100% or less of the paid Capital and Free Reserves, the board resolution
can fulfil the same.

3. The buy-back is 25% or less of the combination of paid up capital and free reserves of the
corporate. As long as the buy-back of equity shares in any fiscal year shall not exceed 25% of
its total paid up equity capital in the fiscal year.

4. The magnitude in relation to the combination of secured and unsecured debts owed by the
corporate and isn’t over double the paid capital and its free reserves once the buy-back.

5. All the shares or different given securities for buy-back are totally paid up.

Other Necessary Provisions

1. Each buy-back ought to be completed about one year from the date of passing of Special
Resolution or Board Resolution as the case may be.

2. Once the completion of buy-back the corporate cannot create from now on issue of same
shares for a period of six months. However, there’s no prohibition for issue of bonus shares
or issue of shares within the discharge of subsisting obligations like conversion of warrants,
options, equity or conversion of preferred stock or debentures into equity shares.
 3. The corporate that has been licensed by a special resolution shall, before the buyback of
shares, file with the ROC a letter of offer in Form No. SH. 8.

4. File with the ROC a declaration of economic condition signed by a minimum of one director
of the corporate, one amongst whom shall be the MD, if any, in Form No. SH. 9.

5. Provision for buy-back shall stay open for a period of not less than fifteen days and not letter
thirty days from the date of dispatch of the letter of offer.

6. No provision of Buy-back shall be created about one year from the closure of preceding Buy-
back.

7. Extinguish and physically destroy the shares or securities therefore bought back about seven
days of the last date of completion of buy-back.

8. Maintain a register of the shares or securities therefore bought, where one has obtained the
shares or securities bought back, the date of cancellation of shares or securities, the date of
extinction and physically destroying the shares or securities in Form No. SH. 10.

9. File with the ROC a return in Form No. SH. 11 within a period of about thirty days of the
completion of Buy-back.

Prohibitions Relating to Buy-back of Shares

A company shall not purchase its shares or different securities:

1. Through any company, together with its own subsidiary company;

2. Through any investment trust or cluster of investment companies;

3. If a default, is created by the corporate, within the reimbursement of deposits accepted,

interest payment on it, redemption of debentures or preferred stock or payment of dividend
to any stockholder, or reimbursement of any term loan or interest collectable on it to any
financial organization or financial institution. However, buy-back isn’t prohibited, if the
default is remedied and after a period of 3 years has completed once such default has
ceased to subsist.

4. If it’s not complied with the provisions of section 92, 123, 127 and section 129 of the
Companies Act, 2013.
Share Certificate
A Share Certificate is a registered evidence of title to the shares issued by a company under its
common seal, duly stamped and signed by one or more directors or by the company secretary as per
the Articles.

• It is an acknowledgement of the shares issued to the shareholder

• It contains the details about the class of shareholder, distinctive number of share and
amount paid on the share.

A Share Certificate must be issued within 3 months after the allotment of the shares or 2 months
after the application for the registration of the transfer. It contains the following details:

Contents

1. Name of the Company

2. Name and address of shareholder
3. Share certificate number
4. Common seal
5. Stamp and signature of two directors and counter signature of the company secretary.

In case of loss a duplicate share certificate is issued. In case of fraud issue of certificate there is a fine
up to Rs. 10,000 and imprisonment up to 6 months.

Share Warrant
A Share Warrant is a document issued under the common seal of the company stating that the
bearer has the number of shares specified there in it is a negotiable instrument and it can be
transferred by mere delivery.

• A Public Company limited by shares can issue share warrant if they are fully paid up.
• It can be only issued if there is a provision in articles of association for issuing share warrant.
• It requires approval of Central Government before it is issued.
• A Private Company cannot issue a share warrant.
• The bearer of the Warrant is not a member of the company.
• It does not contribute towards qualification shares held by the directors.
• It can be transferred but it does not require any stamp duty.
2. Members and Shareholders – Their Rights and Duties, Shareholders
Meetings, Kinds of Meetings, Convening and Conduct of Meetings, AGM,
EGM, Class Meetings

Members and Shareholders

“Every shareholder of a company is known as a member while every member may not be known as a
shareholder”. This statement can be justified by analyzing the following differences between the
two:

1) Subscriber to the Memorandum: A person, who subscribes to the memorandum, becomes a

member immediately, even though no shares are allotted to him. In such a case, till the shares are
allotted to him, he is a member but not a shareholder.

2) Transfer of Shares: A transferor (or seller) who has transferred his shares ceases to be a holder of
those shares as from the date of the transfer but he continues to be a member till such time the
transfer is registered in the name of the transferee (buyer) in the books of the company (i.e. the
register of members of the company).

3) Company without Share Capital: Companies limited by guarantee and having no share capital,
and unlimited companies without share capital, can only have members, but not the shareholders
because such companies do not have share capital.

4) Holder of a Share Warrant: A holder of a share warrant* is a shareholder of the company but not
a member, as his name is struck off the register of members. This means a person can be a holder of
shares without being a member of the company.

5) Insolvency: When a person becomes insolvent, his shares vest in his Official Receiver or Official
Assignee. However, he continues to be a member of the company, even though he is no longer a
shareholder.

6) Transmission (in case of death): A legal representative of a deceased member becomes a

shareholder immediately on the death of the member but he is not a member until he gets his name
entered in the register of members.

7) Forfeiture / Surrender of Shares: A person who has surrendered or the one whose shares are
forfeited by the company is no longer a shareholder of the company. However, he may be held liable
like a member to contribute towards the assets of the company, if winding up commences within
one year of his ceasing to be member.

8) Member by Estoppel: A person who knowingly, allows his name to appear in register of
members, even though he knows he is not a shareholder is called as Member by Estoppel or an
Estopped member. Such a person cannot deny his liability as a member of the company.
Table Distinction between a Member and a Shareholder

Basis Member Shareholder

Registration A registered member may not be a A registered shareholder is a

shareholder because the company member of the company.
may not have a share capital

Share Warrant Holder of a share warrant is not a A person who holds a share
member as his / her name is struck warrant is a shareholder.
off the register of members.

Legal Representative A legal representative of a deceased A legal representative of a

member is not a member until he / deceased member is a
she applies for registration. shareholder even though his
/ her name does not appear
in the register of members.

Subscriber to Memorandum A person, who subscribes to the Till shares are allotted to the
memorandum of association, subscriber to the
becomes a member immediately, memorandum, he / she is just
even though no shares are allotted a member but not a
to him / her. shareholder.

Forfeiture/Surrender A person may be held liable as a A person who has

member to contribute towards the surrendered his / her shares
assets of the company, if the or his / her shares have been
winding-up commences within one forfeited is no longer a
year of his / her ceasing to be a shareholder of the company.
member.

Member by Estoppel A person who knowingly, allows his / A person held member by
her name to appear in the register of estoppel is not a shareholder.
members, without being so, shall be
held liable like a member.

Definition of Member
A member of a company is a person who contributes to the investment of a company. This person is
registered as such and has certain rights. The original subscribers to a company’s constitution are
considered to have agreed to become a member of that company. Their names must also be entered
into its register of members upon registration. Anyone else, who agrees to become a member of a
company, must enter their name into the company’s register of members.
Register of Members

Every company must keep a register of their members within the country at either their registered
office or their main place of business. This register is open to inspection to every member of the
company free of charge and the any member of the public on payment of the relevant fee. The
register of members must contain the following particulars:

• Name & Address

• Amount of Shares held by each member

• Date on which each person was entered in the register as a member

• The date on which each person ceased to be a member of the company

What is a Shareholder?

A shareholder is an individual who holds at least one share in a company. When their name has been
input into the register of members they then become a member of the company. It is important to
understand that a shareholder will not become a member of a company until their name has been
input into the register. Depending on the nature of the company, a member’s rights and
responsibilities will vary.

Duties of Members and Shareholders

The main duty of a member who is a shareholder is to pay the company the sum which remains
outstanding for the agreed amount of the share(s) that have been issued. This sum becomes payable
by the shareholder when requested by the company or on payment date(s) that have been
prearranged.

The liabilities are limited to the amount of shares held by them in the case of a company having
share capital while in the case of a company limited by guarantee the liability is limited to the
amount of guarantee given by them. But, in the case of an unlimited company the members have to
contribute from his personal assets to pay the debts.

Rights and Powers of Members and Shareholders

The Companies Act and the constitution of a company normally set out the powers of members and
those powers which are delegated by the members to the directors of the company. The Companies
Act provides that the business of the company is managed by its directors, who may exercise all such
powers of the company that are not required by the Companies Act or by the constitution to be
exercised by the company members in a general meeting. Below is a list of the Rights/Powers of a
Member and Shareholder:
• Transfer of Shares

• Dividend and Distribution

• Shareholders Pre-emption Rights

• Right to Participate in a Winding-Up

• Rights Regarding Members’ Meetings

• Members’ Right to Information

• Members’ Powers where the Company is in Default

• Right of Members to Apply for the Restoration of a Company

• Members’ Right to Seek an Investigation of a Company

• Right to Petition for the Winding-up of a Company

• Right to Petition for Relief in Cases of Oppression

Shareholders Meetings and Kinds of Meetings
A company is an association of several persons. Decisions are made according to the view of the
majority. Various matters have to be discussed and decided upon. These discussions take place at
the various meetings which take place between members and between the directors. Needless to
say, the importance of meetings cannot be under-emphasised in case of companies. The Companies
Act, 1956 contains several provisions regarding meetings. These provisions have to be understood
and followed.

For a meeting, there must be at least 2 persons attending the meeting. One member cannot
constitute a company meeting even if he holds proxies for other members.

These are meetings where the members / shareholders of the company meet and discuss various
matters. Member’s meetings are of the following types :-

• Statutory Meeting
• Annual General Meeting
• Extra-ordinary General Meeting

A. Statutory Meeting :
A public company limited by shares 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.

The purpose of the meeting is to enable members to know all important matters pertaining to the
formation of the company. 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. A notice of at least 21 days before the meeting must be given to members
.

The Board of Directors must prepare and send to every member a report called the “Statutory
Report” at least 21 days before the day on which the meeting is to be held.

B. Annual General Meeting

• Must be held by every type of company, public or private, once a year.

• Every company must in each year hold an annual general meeting.

• Not more than 15 months must elapse between two annual general meetings.

• A notice of at least 21 days before the meeting must be given to members.

• The notice must state that the meeting is an annual general meeting.

• The time, date and place of the meeting must be mentioned in the notice.
 • The notice of the meeting must be accompanied by a copy of the annual accounts of the
company, director’s report on the position of the company for the year and auditor’s report
on the accounts.

• Companies having share capital should also state in the notice that a member is entitled to
attend and vote at the meeting and is also entitled to appoint proxies in his absence.

• A proxy need not be a member of that company. A proxy form should be enclosed with the
notice. The proxy forms are required to be submitted to the company at least 48 hours
before the meeting.

• The AGM must be held on a working day during business hours at the registered office of the
company or at some other place within the city, town or village in which the registered
office of the company is situated.

Business to be Transacted at Annual General Meeting :

At every AGM, the following matters must be discussed and decided. Since such matters are
discussed at every AGM, they are known as ordinary business. All other matters and business to be
discussed at the AGM are special business.

The following matters constitute ordinary business at an AGM :-

a. Consideration of annual accounts, director’s report and the auditor’s report

b. Declaration of dividend

c. Appointment of directors in the place of those retiring

d. Appointment of and the fixing of the remuneration of the statutory auditors.

In case any other business ( special business ) has to be discussed and decided upon, an explanatory
statement of the special business must also accompany the notice calling the meeting.

C. Extraordinary General Meeting

• Every general meeting (i.e. meeting of members of the company) other than the statutory
meeting and the annual general meeting or any adjournment thereof, is an extraordinary
general meeting.

• Such meeting is usually called by the Board of Directors for some urgent business which
cannot wait to be decided till the next AGM.

• Every business transacted at such a meeting is special business.

• An explanatory statement of the special business must also accompany the notice calling the
meeting.
 • All general meetings of a company in India except the statutory meeting and the annual
general meetings are called an extraordinary general meeting.

• There is a gap of around a year or 18 months between two annual general meetings.
Therefore, if an important business arises in between two annual general meetings that
require shareholders approval, then an extraordinary general meeting can be called.

Function of Extraordinary General Meeting

The Companies Act, 2013 provides that all business that are considered in an extraordinary general
meeting (EGM) shall be considered as special business. The function of an EGM is two-fold.

• First, an EGM is used to provoke them to know about certain important matters pertaining
to the company and if necessary, makes them attend the meeting personally whenever
possible.

• Secondly, the EGM places a duty on the company to provide to the shareholders more
information about the business to be transacted at the EGM in the form of an explanatory
statement.

The explanatory statement attached to the notice to extraordinary general meeting usually contains
information like:

1. The nature of concern or interest, financial or otherwise, if any.

2. Information and facts that may enable members to understand the meaning, scope and
implications of the items of business and to take decisions.

Holding an Extraordinary General Meeting

An extraordinary general meeting can be called on any day other than a national holiday. The articles
of association of the Company would detail the procedure for calling for or holding an extraordinary
general meeting.

Extraordinary General Meeting on Requisition of Members

An extraordinary general meeting can be convened on the requisition of members whether having
share capital or not. However, to call and hold an extraordinary general meeting, the requisition
must be signed by holders of not less than one tenth of paid-up share capital. The requisition for
extraordinary general meeting must be submitted at least 21 days prior to the proposed date of the
extraordinary general meeting. If the company fails to proceed within 21 days and to call the above
said meeting within 45 days then the members may call themselves a meeting within a period of 3
months from the date of deposit of requisition to the company and after expiry of 45 days.
Notice of General Meeting
A meeting cannot be held unless a proper notice has been given to all persons entitled to attend the
meeting at the proper time, containing the necessary information. A notice convening a general
meeting must be given at least 21 clear days prior to the date of meeting. Notice of every meeting of
company must be sent to all members entitled to attend and vote at the meeting. Notice of the
AGM must be given to the statutory auditor of the company.

Where notice is sent by post, service is effected by properly addressing, pre-paying and posting the
notice. A notice calling a meeting must state the place, day and hour of the meeting and must
contain the agenda of the meeting. If the meeting is a statutory or annual general meeting, notice
must describe it as such. Where any items of special business are to be transacted at the meeting, an
explanatory statement setting out all materials facts concerning each item of the special business.

Proxy
Any member of a company entitled to attend and vote at a meeting of the company shall be entitled
to appoint another person (whether a member or not) as his proxy to attend and vote instead of
himself. Every notice calling a meeting of the company must contain a statement that a member
entitled to attend and vote is entitled to appoint a proxy and that the proxy need not be member of
the company.

A member may appoint another person to attend and vote at a meeting on his behalf. Such other
person is known as Proxy. The member appointing a proxy must deposit with the company a proxy
form at the time of the meeting or prior to it giving details of the proxy appointed. The proxy form
must be in writing and be signed by the member.

A proxy is not entitled to vote except on a poll. Therefore, a proxy cannot vote on show of hands.

Quorum
Quorum refers to the minimum number of members who must be present at a meeting in order to
constitute a valid meeting. A meeting without the minimum quorum is invalid and decisions taken at
such a meeting are not binding. The articles of a company may provide for a quorum without which
a meeting will be construed to be invalid. Unless the articles of a company provide for larger
quorum, 5 members personally present (not by proxy) in the case of a public company and 2
members personally present (not by proxy) in the case of a private company shall be the quorum for
a general meeting of a company.

It has been held by Courts that unless the articles otherwise provide, a quorum need to be present
only when the meeting commenced, and it was immaterial that there was no quorum at the time
when the vote was taken. Further, unless the articles otherwise provide, if within half an hour from
the time appointed for holding a meeting of the company, a quorum is not present in the person,
the meeting :-

a. if called upon the requisition of members, shall stand dissolved;

b. in any other case, it shall stand adjourned to the same day in the next week, at the same time
and place, or to such other day and time as the Board of Directors may determine.
If at the adjourned meeting also, the quorum is not present within half an hour from the time
appointed for holding the meeting, the members present shall a quorum.

Kinds of Resolutions
Resolutions mean decisions taken at a meeting. A motion, with or without amendments is put to
vote at a meeting. Once the motion is passed, it becomes a resolution. A valid resolution can be
passed at a properly convened meeting with the required quorum. There are broadly three types of
resolutions :-

1. Ordinary Resolution :
An ordinary resolution is one which can be passed by a simple majority. I.e. if the votes (including
the casting vote, if any, of the chairman), at a general meeting cast by members entitled to vote in
its favour are more than votes cast against it. Voting may be by way of a show of hands or by a poll
provided 21 days notice has been given for the meeting.

2. Special Resolution :
A special resolution is one in regard to which is passed by a 75 % majority only i.e. the number of
votes cast in favor of the resolution is at least three times the number of votes cast against it, either
by a show of hands or on a poll in person or by proxy. The intention to propose a resolution as a
special resolution must be specifically mentioned in the notice of the general meeting. Special
resolutions are needed to decide on important matters of the company. Examples where special
resolutions are required are :-

a. To alter the domicile clause of the memorandum from one State to another or to alter the
objects clause of the memorandum.

b. To alter / change the name of the company with the approval of the central government

c. To alter the articles of association

d. To change the name of the company by omitting “Limited” or “Private Limited”.

Adjournment
Adjournment means suspending the proceedings of a meeting for the time being so that the
meeting may be continued at a later date and time fixed in that meeting itself at the time of such
adjournment or to decided later on. Only the business not finished at the original meeting can be
transacted at the adjourned meeting.
The majority of members at a meeting may move an adjournment motion at a meeting. If the
chairman adjourns the meeting, ignoring the views of the majority, the remaining members can
continue the meeting. The chairman cannot adjourn the meeting at his own discretion without there
being a good cause for such an adjournment. Where the chairman, acting bona fide within his
powers, adjourns the meeting as per the view of the majority, the minority members cannot to
continue with such meeting and, if they do the proceedings there will be null and void.

An adjourned meeting is merely the continuation of the original meeting and therefore, a fresh
notice is not necessary, if the time, date and place for holding the adjourned meeting are decided
and declared at the time of adjourning it. If a meeting is adjourned without stipulation as to when it
will be continued, fresh notice of the adjourned meeting must be given.

Postponement
Postponement of a meeting means defering the holding of the meeting itself at a later date.
Postponement is done by the Board of Directors or by the person convening the meeting. In case of
adjournment, it is the decision of the majority of the members present at the meeting itself.

Procedure for Convening and Conduct of General Meetings :

The business at a meeting is said to have been “validly transacted” if the members of
the organisation or body concerned, whether or not they were present, are bound by the
decision made there at. They cannot be so bound unless the meeting is validly held. The essentials
of a valid meeting are that the meeting should be:

(a) Properly convened:, i.e. a proper notice must be sent by the proper authority to every person
entitled to attend.

(b) Properly constituted, i.e. the proper person must be in the chair, the rules as to quorum must be
observed, and the regulations governing the meeting must be complied with.

(c) Properly conducted, i.e. the chairman must conduct the proceeding in accordance with the law
relating to general meetings as per the Companies Act (Sections 101 to 109 of the Companies Act,
2013), the Company’s own Articles of Association or, in respect of any specific matter, by the
common law relating to meetings.

Class Meeting
• Class meetings are meetings which are held by holders of a particular class of shares, e.g.,
preference shareholders.
• Such meetings are normally called when it is proposed to vary the rights of that particular
class of shares.
• At such meetings, these members dicuss the pros and cons of the proposal and vote
accordingly. (See provisions on variations of shareholder’s rights).
• Class meetings are held to pass resolution which will bind only the members of the class
concerned, and only members of that class can attend and vote.
• Unless the articles of the company or a contract binding on the persons concerned
otherwise provides, all provisions pertaining to calling of a general meeting and its conduct
apply to class meetings in like manner as they apply with respect to general meetings of the
company.