Topic wise Case Laws:

1. Topic: Company – Registration, Corporate Personality, Lifting of Corporate Veil

Pertinent Case Law: Solomon V. Solomon & Co

Summary: Solomon Sold his boots business to a newly formed company for $30, 000. His wife, one daughter
and four sons took up one share of $ 1 each. S took 23, 000 shares of $ 1 each and $ 10, 000 debentures in the
company. The debentures gave S a chargeover the assets of the company as the consideration for the transfer of the
business. Subsequently when the company was wound up, its assets were found to be worth $6, 000 and its liabilities
amounted to $ 17, 000 of which $ 10, 000 were due to S (secured by debentures) and $ 7, 000 due to unsecured
creditors. The unsecured creditors claimed that S and the company were one and the same person and that the
company was a mere agent for S and hence they should be paid in priority to S. Held, the company was, in the eyes of
the law, a separate person independent from S and was not his agent. S, though virtually the holder of all the shares
in the company, was also a secured creditor and was entitled to repayment in priority to the unsecured creditors.
Solomon & Co. was a Company as it fulfilled all the legal requirements of an incorporated Company; it was a juristic
person different from its subscribers. Its liability is therefore limited.

Company a separate legal entity Kandoli tea company Ltd(1886) Certain persons transferred their properties in the
name of company on which tax was payable. Petitioners claimed exemption from such tax on the ground that the
transfer was from them individually to themselves in another name. Judgment: Company is separate from its
shareholders and this should be treated as transfer.

Lee Vs. Lee's Farming Co. Ltd. (1960)- Lee incorporated a company of which he was the managing director. In
that capacity he appointed himself as a pilot of the company. While on the business of the company he was
lost in a flying accident. His widow claimed compensation for personal injuries to her husband while in the
course of his employment. It was argued that no compensation was due because L & lee's Air Farming Ltd.
were the same person. Judgment- [Link] was separate person from the company he formed and
compensation was payable. 2. His widow recovered compensation under the Workmen's Compensation Act
3. A member of a company can contract with a company of which he is a shareholder. 4. The directors are not
precluded from being an employee of the company for the purpose of workmen's compensation legislation.

Enemy Company: Daimler Co. Ltd. Vs. Continental Tyre & Rubber Co. Ltd. (1916) Facts- In a company incorporated in
England for the purpose of selling tyres manufactured in Germany by a German Company, all the shares except one
was held by the German subjects residing in Germany. The remaining one was held by a British. Thus the real control
of English Company was in German hands. Question arose whether the company had become an enemy company due
to war&should be barred from maintaining the action. Judgment- 1.A Company incorporated in United Kingdom is a
legal entity, a creation of law with the status & capacity which the law confers. [Link] is not a natural person with mind or
conscience. It can neither be loyal nor disloyal. It can be neither friend nor enemy. But it can assume enemy character
when persons in defacto control of its affairs are residents in any enemy country or whenever resident, are acting
under the control of enemies. [Link] that company was an enemy company for the purpose of trading and therefore it
was, barred from maintaining the action.

The corporate veil is lifted in the following cases;  Determination of the character  Where company is a mere cloak
or sham  Where the company is acting as an agent of the shareholders  Protection of revenue

To find out the enemy character of the Company. This means, during war the Courts may lift the screen to know the
persons inside and their character. If they belong to enemy State, the company also has the enemy character. Hence,
it will be banned (Dailmer Co. V. Continental Tyre & Rubber Co.)
2. Ultra Vires: It is applicable only to acts done in excess of the legal powers of the doer. A company has the power to
do all such things as are – 1. Authorized to be done by the companies act, 2. Essential to the attainment of its
objects specified in the memorandum, 3. Reasonable and fairly incidental to its objects.
Ashbury Railway Carriage V. Riche: The M/A stated the objectives ........ to make and sell ......... Railway
Wagons.......... and General Contractors..... The co. entered into a Contract with Riche, to finance a Railway line in
 Belgium. The company. later repudiated stating it as ultra vires. Riche sued for damages. Held, the contract was ultra
vires and hence void. It has no powers to finance railway line. The ambits were prescribed in the M/A. The limits
were defined. Hence, even the majority cannot ratify to validate the transaction, the court observed. The M/A is the
area beyond which the action of the company cannot go; inside that any regulation may be made.
Laxmanaswami Mudaliar V. L.I.C. Facts : The business of an Insurance Company was taken over by L.I.C. The
Directors of the Company, as per the resolution of the shareholders, paid Rs.2 lakhs for promotion of education in
Commerce and Insurance. The payment was held ultra vires. As the Company's assets were under acquisition, it had
no object to promote and hence, the donation was ultra vires.

3. Indoor Management British Bank V. Turquand

The outsiders dealing with the company are entitled to assume that as far as the internal proceedings of the
company are concerned, everything has been regular done. They are presumed to have read these documents and
to see that the proposed dealing is not inconsistent therewith, but they are bound to do more; they need not inquire
into regularity of the internal proceedings as required by the memorandum and the articles. They can presume that
all is being done regularly. This limitation of the doctrine of constructive notice is known as the “Doctrine of Indoor
Management”.
Royal British Bank V. Turquand : Directors borrowed money from the Plaintiff. The M/A of the Company had
provided that the Directors might borrow, on bond, such sums as are authorised by the shareholder's resolutions.
The shareholders contended that there was no such resolution and hence not liable. The Court rejected this and held
that the company was liable. This is called the 'Turquand Rule'. The court held, that when there is a provision to
borrow there is a presumption, that the formalities have been observed by the directors, hence, they are acting
lawfully (in bonam part em). Though the M/A and A/A are open for inspection by the public, the details of internal
procedure are not so open. Hence, an outsider cannot know the day-to-day internal matters as he has no access to
them. The doors are closed to him. Hence, the courts have evolved the rule of 'Indoor Management'.

4. Constructive Notice:
The Memorandum and Articles of association of every company are required to the register with the registrar of
companies. On registration they become public documents and are open for public inspection on payment. Everyone
dealing with the company, whether a shareholder or an outsider, is presumed to have read the two documents. This
deemed knowledge of the two documents their contents is known as the constructive notice memorandum and articles.
eg: Howard V. Patent Ivory Company. The directors of a company could borrow any amount up to $ 1, 000 without
the approval of the shareholders in general meetings. But for any amount beyond $ 1, 000 they had to obtain the
consent of the shareholders in the General Manager. The directors themselves lent to the company an amount in
excess of the borrowing powers of the company without the consent of the shareholders in General manager. Hence
the company was liable to them only for $ 1, 000
5. Shares : Raman Bhai V. Ghasiram
Forfeiture of Share” Pramila V. Wearwell Cycle Co. Ladies Press Assn. v. Pulbroo
Reduction of shares: Marwari Stores Ltd. V. Goenka
6. Directors: Cook V. Decks ( Also for Oppression & Mgmt, Majority Rule)
The Directors diverted a contract of the Company to themselves. They had 3/4 majority voting power and hence got
a majority resolution. Held that the benefit of the contract belonged in equity to the Company and hence the
Directors were held liable.
7. Prospectus:
Derry Vs. Peek : Directors issued a prospectus stating that the Company, had powers to use steam for propelling
their tram cars. In fact such a grant was subject to the consent of the Board of trade. The Company had believed that
the consent of the Board was a mere formality. The board refused to give its consent. In consequence, the Company
was wound up. P as shareholder sued for deceit. Held no Deceit. There was an honest mistake in stating that the
consent of Board was a formal procedure. The false statement made carelessly and without reason to believe to be
true was not fraud.
8. Company Meetings: Meetings of Members-Shareholders.: AGM & BOD, Meetings of Directors/Board Meetings
Ill. Other Meetings: debenture-holders. Meeting of creditors, Meeting of contributories. Sri Meenakshi Mills
Co ( Problems based on Quorum, Proxy attending)
Sri. Meenakshi Mills C. Ltd. V Asst. Registrar the co. was prosecuted for not holding its Annual General meeting.
valid meeting (Section 97 and 98)

9. Oppression & Mismanagement: Foss Vs. Harbottle,

Oppression means lack of probity and fair dealing in the affairs of the Company. Oppression may result from not
acting also. Hence, it may take different forms. The idea is to get power and control. In Elder V. Elder & Watson Ltd.,
the court defined oppression. The essence is that the conduct complained of should involve a visible departure from
the standards of fair dealing and a violation of the conditions of fair play. There must be an unjust and harsh or
tyrannical conduct to constitute oppression.
Bharat Insurance V. Kanhayalal : Directors were granting loans contrary to M/A. Held, the shareholder could sue.
Injunction was granted. Fraud on the Minority: When the majority acts, not in good faith and not for the benefit of
the company, ignoring the minority the suit is maintainable.
Rajamundry Electric Supply Corporation V. Nageswara Rao: ( Sec 398, Prevention of Mismanagement: An application
for relief against mismanagement should be made to the court. It must be established that the affairs are being run
prejudicial to the affairs of the Company. it was shown that the Vice-chairman had grossly mismanaged the affairs
and that a considerable amount had been drawn by him for personal use, much of the machinery was in a state of
despair and a powerful local junta was ruling the roost. It was held that there was mismanagement. The court
appointed two administrators for 6 months for the management of the company. There must be an existing and
continuing mismanagement to get the court relief.

10. Winding Up :. Muralidhar V. Bengal Steamship

Winding up of a company is a process of putting to an end to the life of a company. It is a proceeding by means of
which a company is dissolved and in the course of such dissolution its assets are collected, its members, if necessary
pay off its debts out of assets of the company or from contribution. A company may be wound up by an order of the
court. This is called compulsory winding up. Sec.433 lays down the following grounds for the winding up of a
company by the court; Winding up by the Tribunal (Section 272); or Voluntary Winding up (Section 304)
Voluntary winding up is that the company and its creditors are left to settle their affairs without going to the court,
but they may apply to the court for any directions or orders if and when necessary.

11. Majority Rule: It is basic principle of the law relating to Public companies that the court will not interfere, at the suit
of a share holder with the internal management of the company acting within its powers. In such a circumstance the
action should be brought by the company itself to recover any money or damages.
Foss Vs. Harbottle, two shareholders took proceedings against the Directors of the Company to compel them to
make good the loss sustained by the Company owing to the Directors fraud. But majority in the General Meeting had
approved of the acts of the Directors. Held, the loss was to the company and hence it may sue. There was no injury
exclusively to the plaintiffs and hence they had no locus standi. This is called the majority supremacy rule. The
essence is this where the directors commit a fraudulent act and the majority confirms it in the General Meeting, the
minority is incompetent to object to it by suing in the court. Bharat Insurance Co. V. Kanhayalal, Cook V. Decks

12. Conversion of Pvt. Co to Public Company: Cyrus Investments & another V. Tata Sons & Others
Tata Sons applied for conversion of Tata Sons Public Company to Private Company, for which NCLT approved
its conversion from public company to private company. Considering various factors like the philanthropy nature
of Tata trusts, majority rule, no malafide intentions from their part and various other factors, SC order was made
in the favour of Tata.
BRIEF NOTES ON VARIOUS CONCEPTS IN COMPANY LAW:

One person company (OPC) is a new concept in India under the Companies Act, 2013. Section 2 (62)
of the Companies Act, 2013 defines that Person Company” means a company which has only one
person as a member. One person company is required to identify in its name in bracket as “One Person
Company” after its name. Formation (Section 3 (1)1. A One Person Company (OPC) may be formed for
any lawful purpose by one person, as a private company, by subscribing his name to a Memorandum
of AssoCiation and complying with the requirements of the Act in respect of registration. Section 3 (1)
further provides that the Memorandum of Association of One Person Company shall indicate the name
of the other person who shall become the member of the company in the event of subscriber’s death
or his incapacity to contract due to insanity, etc. A written consent of such person would be required to
be filed with the Registrar of Companies at the time of incorporation along with memorandum and
articles. Such person can withdraw his consent. The name of such person can aiso be changed by the
member at any time. Any change in the name of the person nominated by the member shall be
intimated to the Registrar within such time and in such manner as may be prescribed. Any change in
the name of the nominee shall not be deemed to be a change in the memorandum of the company.

Holding Company : “Holding company in relation to one or more companies means a company of
which such companies are subsidiary (Section 2 (46)1 companies.” Thus, a holding company is the
company which has one or more subsidiary company/companies. In simple words, where a company
has direct or indirect control over another company or other companies, the controlling company is
known as the holding company. Thus a company which controls other company or companies is called
a holding company.

Subsidiary Company: The companies Act states that a subsidiary company means a company in which
the holding company has control in any of the following ways :

(i) Control the composition of the Board of directors.

(ii) Exercises control on more than one-half of its total share capital either at its own or together with
one or more of its subsidiary companies. It should be noted that a company shall be deemed to be a
subsidiary company of a holding company even if the control is exercised by the (Section 2 (87)1
another subsidiary of the holding company.

Foreign companies: As per Section 2 (42) of the Companies Act, 2013 ‘foreign company’ means a
company incorporated outside India which-

(a) has a place of business in India whether by itself or through an agent, physically or through
electronic mode, and

(b) Conducts any business activity in India in any other manner. However, where not less than 50 per
cent of the paid-up share capital of a company incorporated outside India and having an established
place of business in India, is held by one or, more citizens of India or by one or more bodies corporate
incorporated in India, whether singly or in the aggregate, such company shall be regarded as if it were
a company incorporated in (Section 379) India.
 ‘Public Company: According to Section 2 (71) of the Companies Act, 2013, ‘Public Company’ means a
company which is not a private company. It can invite the public to subscribe its shares and does not
have any restriction on the transfer of shares. The minimum number of persons required to form a
company is seven and there is no maximum limit. Subsidiary of a public company whether constituted
as a private company or public company shall be regarded as public company. It is worth mentioning
that prior to the commencement of the Companies (Amendment) Act, 2015, there existed a
requirement of minimum paid up share capital of 5 lakhs for incorporation of a public company. The
Amendment Act has omitted this requirement which would mean ease in incorporation of companies.

Private Company: As defined by section 2 (68) means a company having a minimum paid-up share
capital as may be prescribed and by its articles of association

(i) Restricts the right of the members of the company to transfer its shares

(ii) Except in case of one person company, limits the number of its members to 200, excluding
members who are or were in the employment of the company.

(iii) Prohibits any invitation to the public to subscribe for any securities of the company name of a
private company must end with words ‘Private Limited’.

It is worth mentioning that prior to the commencement of the Companies (Amendment) Act, 2015,
there existed a requirement of minimum paid up share capital I lakh for incorporation of a private
company. The Amendment Act has omitted this requirement so that there may be ease of doing
business.

Differences between a Private and a Public Company: Distinction between a Private and a Public
Company Following are the main points of distinction between a private and a public company:

1. Minimum number of members. The minimum number of members required to form a private company is 2,
whereas for a public company at least 7 members are needed.
2. Maximum number of members. The maximum number of members in a public company is unlimited. But a
privage companycannot have more than 200 members excluding the past and present employees of the
company.
iii. Invitation to public. A private company is prohibited to invite public to subscribe to its share capital. it
need not issue a prospectus. But a public company can invite the public to subscribe to its shares or
purchase its shares. Transferability of shares. Articles of Association of a private company impose restrictions
on the transfer of shares. But the shares of a I Section 2 (68) public company are freely transferable.

‘Promoter’: Section 2 (69) of the companies Act, 2013 defines the term (a) Who has been named as
such in a prospectus or is identified by promoter as a person .

(a) the company in the annual return; or

(b) Who has control over the affairs of the company, directly or indirectly whether as a shareholder,
director or otherwise; or
(c) In accordance with whose advice, directions or instructions the Board of Directors of the company is
accustomed to act. This shall, not apply to a person who is acting merely in a professional capacity.

This definition is purely a legal one. It ‘does not reveal the nature and role of a promoter in formation
Of a company. It therefore, becomes imperative to go through certain other definitions of the term
‘promoter’. A few other definitions are as under : Justice C. Cockburn described a promoter as ‘ ‘one
who undertakes to form a company with reference to a given project and to set it going, and who
takes the necessary steps to accomplish that purpose. ‘ According to Palmer, “A person who originates
a scheme for. the formation of the company, has the Memorandum and the Articles prepared,
executed and registered and finds the first directors, settles the terms of preliminary contracts and
prospectus (if any) and makes arrangement for advertising and circulating the Prospectus and placing
the capital is a promoter.

Functions of a Promoter: The Promoter performs the following functions:

1. a) To conceive an idea of starting a business

2. b) To collect the requisite number of persons,
3. c) To decide about the name, object and capital,
4. d) To get the documents of the proposed company,
5. e) Consent of directors,
6. f) To enter into preliminary contracts with the vendors,
7. g) To arrange for filing the necessary documents with the registrar, 48. Preparation and
filing of prospectus,
8. h) To arrange the minimum subscription.

Joint Stock Company: According to Prof. Haney :- A company is an artificial person created by law,
having separate entity, with a perpetual succession and a common seal.

According to Justice James:- company is an association of persons united for a common object.

Section 2 (2()) of the Companies Act, 2013 define a company as “a company incorporated under
this Act or under any previous company law.” A company incorporated under any previous
company law means an existing company.

Features of a Joint Stock Company:A few significant characteristics of a company are as follows:

1. Artificial Legal Person: A company is an artificial person as against a natural person. It

is created by a process of law.
2. Separate Legal Entity: A Company has a separate and distinct legal entity from its
shareholders/ members. It can enter into contracts, sue and be sued in its own name by
its members as well as outsiders.
3. Limited Liability: The liability of the members for the debts of the company is limited to
the amount unpaid on their shares howsoever heavy losses the company might have
suffered.
4. Transferability of Shares: The shares in a public company are freely transferable subject
to conditions prescribed by its articles. However, a private company has to restrict the
right to transfer its shares by its articles.
Memorandum of Association: The Memorandum of Association is the most important document of
the company. In fact, it is the foundation on which the structure of a company is based. It is the charter
of a company which contains the fundamental conditions upon which alone the company can be
incorporated. It defines the company’s relations with the outside world. It lays down the powers and
objects of a company and the scope of operations beyond which cannot do anything. Any action
outside the scope of the Memorandum of Association will be ultra vires (beyond powers) of the
company and so void.

Contents/clauses or subject-matter of Memorandum of Association: Sec 4 of Companies Act, 2013

prescribes the contents of the memorandum. Memorandum of Association contains following clauses :

(i) Name clause

(ii) Registered office clause or Situation clause,
(iii) Object clause,
(iv) Liability clause,
(v) Capital clause,
(vi) Association clause or Subscription clause.

Articles of Association:Articles of Association is an important document of a [Link] contains

rules, regulations and bye-laws for the internal administration of the company. Articles regulate the
internal management of the company and also govern the relationship between the company and its
constituent members by prescribing their rights and obligations. In short, the articles of association of
a company contain the rules relating to the management of its intemal affairs. Section 2(5) of the
Companies Act, 2013 defines articles of association as follows: “Articles means the articles of
association as originally framed or as altered from time to time in pursuance of any previous company
law or of this Act.”

Prospectus :- Meaning And Definition of Prospectus After the certificate of incorporation has been
obtained, the promoters of a Public Company will have to take steps to raise the necessary capital for
the company. A public company may invite the public to subscribe to its shares or debentures. This is
done by issuing a document called prospectus’. The object of a prospectus is to arouse the interest of
the potential investors in the company and induce them to invest in its shares and debentures.
According to Section 2 (70) of the Companies Act, 2013, ‘Prospectus means any document described or
issued as a prospectus and includes a red herring prospectus (referred to in Section 32) or shelf
prospectus referred to in Section 31 or any notice, circular, advertisement or other document inviting
offers from the public for the subscription or purchase of any securities of a body corporate”. In simple
words, a prospectus is any document which is described or issued as a prospectus by a body corporate
for inviting offers from public for subscription or purchase of its securities.

Doctrine of Ultra-Vires”: The word a/tra’ means ‘beyond’ and the word ‘vires’ means powers. Thus
ultra vires’ a company means ‘beyond the powers of a company.’ The memorandum of a company
defines its powers. Any activity of a company beyond its Memorandum is, therefore, ultra vires the
comp any. Such an act is void and cannot be ratified even by unanimous resolution of all the
shareholders. The doctrine of ultra vires has been established to provide security to the shareholders
and creditors of the company. By it shareholders are assured that their investment is not spent on
activities which they did not have in mind when they invested in the company. It also safeguards the
interests of the creditors as the property of the company cannot be diverted to unauthorised objects.

‘Doctrine of Indoor Management’:The ‘doctrine of indoor management’ lays down that the persons
dealing with the company are bound to see that the proposed deals are in accordance with the
provisions of the memorandum and articles 0 the company. But they are not bound to enquire into the
regularity o internal procedure of the company. They are entitled to assume that everything has been
in accordance with the procedure prescribed by the company’s articles. If the proposed deal is within
the scope of these two documents, the company will be bound by the deal and the rights of the
dealing parties will not be adversely affected in any way by the irregularity of the internal procedures.
This rule was laid down in Royal British Bank Vs. Turquand. Therefore, this rule is also known as the
‘Turquand rule’. Illustration: The articles of a bank provided that the directors can borrow by issuing
bond provided they were authorised by a resolution at the general meeting. The directors of the bank
issued a bond to T without being authorised. Held, the Bank was bound by the bond and T was entitled
to assume that the necessary resolution had been passed. (Royal British Bank vs. Turquand, (1856)

‘Doctrine of Constructive Notice?

Ans:- When the memorandum and articles of association, have been registered with the Registrar of
Companies, they are deemed to be public documents. Any person can examine these particulars and
get their copies by paying the requisite fee, It is, therefore, assumed that any person who deals with
the company is familiar with the contents of these documents. This is known as constructive notice.
Under the doctrine of ‘constructive notice’, every person dealing with or proposing to enter into a
contract with the company is assumed to have constructive notice of the contents of the memorandum
and the articles of the company. Every person will be presumed to know the contents of the
memorandum and articles of association. legal effect of this doctrine is that if a person deals with a
company in a manner which is inconsistent with the provisions contained in its memorandum or
articles (i.e. if a person enters into a contract which is beyond the powers of the company), he will not
acquire any right under the contract against the company. For example, if the articles provide that a bill
of exchange must be signed by two directors, a person who has a bill signed by only one director
cannot claim payment upon such bill.

‘Corporate Veil’: One of the fundamental principles of company law is that a company has personality
that is distinct from that of its shareholders. once a company is formed and registered under the Act, it
is a separate legal entity distinct from its members. It can sue and be sued in visit own [Link] rule
was laid down by the House of Lords in Salomon v. Salomon & Co., in 1897 in which it was held that
even if one individual held almost all the shares and debentures in a company, and if the remaining
shares were held on trust for him, the company is not to be regarded as a mere shadow that individual.
The principle of separate entity is regarded as a curtain, a veil, or shield between the company and its
members, thus protecting the later from the liability of the former. The veil is impassable as an iron
curtain. This theory of corporate entity is still the basic principle on which the whole law of
corporations is based.

Body Corporate:Sub-section (11) of Section 2 of the companies Act, 2013 defines the expression
‘body corporate’ as follows, “body corporate” or “corporation” includes a company incorporated
outside India, but does not include

1. A co-operative society registered under any law relating to co-operative societies

 2. Any other body corporate (not being a company as defined in the Act) which the Central
Government may notify. Thus, the words ‘body corporate’ are not equivalent to the
words ‘incorporated company’. An .incorporated company is a body corporate but many
bodies corporate are not incorporated companies. The expression ‘body corporate’ or
‘corporation’ is, thus, wider than the word ‘company’. The term ‘body corporate’ includes
the following:
3. Foreign companies.
4. Corporations formed under Special Act of Central Government or State Government.
5. Public Financial Institutions under Section 2 (72), e.g., LIC, CICI,t IDBI, GIC, Power Finance
Corporation Ltd., Rural Electrification brporation Ltd., Infrasfructure Development Finance
Company Ltd., etc.
6. Nationalized Banks
7. Limited Liability Partnership formed and registered under the Limited Liability
Partnership Act, 2008.
8. One Person Company.

Differences between a Managing Director and a Whole-time Director Basis

1. a) Power
2. b) Number of Companies
3. c) Manager in Director
A managing director is entrusted with substantial powers of management. A person can be a
managing director of more than one company. Managing director and a be cannot manager appointed
in one company at the same time. Whole-time Director A whole-time director does not have any
discretionary power to take decisions re ardin olic matters. A person cannot be in the whole-time
employment of more than one company at a time. Therefore, a person cannot have more than one
whole-time directors A company can have a manager and, whole-time director, both at the same time.

Independent Director: The concept of “independent director” is being introduced for the first time in
Company Law by the Companies Act, 2013. The purpose of appointing “independent director” on the
Board of Directors of listed companies is to ensure adherence to good corporate governance
standards. They are expected to ensure that Promoters/Management do not enrich themselves
through unfair means, With a view to achieving this objective it is essential that “independent director”
must be men of outstanding merit and integrity having no pecuniary relationship with the company, or
its promoters or directors, so that they can really act independently and need not blindly to the line
suggested by promoters/management.

Meetings of a company may be classified as follows .

I. Meetings of Members-Shareholders.: The members’ meetings may be of the following kinds.

[Link] general meeting.
2. Extra-ordinary general meeting.
3. Class meetings of shareholders/members.

Il. Meetings of Directors/Board Meetings

Ill. Other Meetings : [Link] of debenture-holders., Meeting of creditors, and of contributories.
Quorum: – Minimum number of members required to constitute a valid meeting and to transact
business there in is called ‘quorum’. No meeting can be valid without quorum. Any resolution passed at
a meeting without quorum shall be invalid.

Section 103 (l) of companies Act, 2013 provides as follows: Unless the articles of the, company
provide for a larger number:-

(a) In case of a public company:-

(i) 5 members personally present if the no of members as on the date of meeting is not more than
1,000;

(ii) 15 members personally present if the number of members as on the date of meeting is more than
1,000 but up to 5,000;

(iii) 30 members personally present if the no of members as on the date of the meeting exceeds 5,000;

(b) in the case of a private company, 2 members personally present, shall be the quorum for a
meeting of the company.

Can a single member constitute a valid meeting? Or When can one person constitute the
quorum of company meeting?

Ordinarily, a single member present cannot form a quorum, as a single member cannot constitute a
meeting. This is because meeting prima facie means coming together of two or more than two
persons. The Companies Act also uses the expression “members” which shows that more than one
member is expected to be present at the meetings. However, under the following circumstances even a
single member present may constitute the quorum and, therefore, a valid meeting:

1. When the Tribunal calls or directs the calling of a general meeting, it has the authority to
direct that one member present in person or by proxy shall be deemed to constitute a
valid meeting (Section 97 and 98).
2. When a class of members or creditors consists of one person, that member alone can
constitute the meeting of that class and can pass a resolution by signing it, e.g., when all
the shares of a particular class are held by one person only.

‘Proxy’:- The term ‘Proxy’ has two meanings:

(a) a personal representative of the member at a meeting i.e. the person authorized to act or vote for
another at a meeting of the company, and

(b) the instrument by which a person is appointed to act for another at a meeting of the company,
since a representative can be appointed only in writing.