Section 173 Frequency of BM Video conferencing

(Board Meetings) - 1st meeting within 30 days of incorporation Directors may participate through video conferencing except
- 4 meetings in every calendar year + max. gap of 120 days for the following –
b/w 2 meetings
- Section 8 company Approval of annual financial Approval of Board's
2 meetings in every 6 calendar months statements report
- Following companies to hold 2 meetings in every 6 calendar Audit committee meeting to Approval of prospectus
months + min. gap of 90 days consider financials
Approve merger, demerger, etc.
Small Dormant
Note – If quorum physically present, remaining director can
OPC Start-up participate through video conferencing even for these businesses
Notice

Section 174 For section 8 company

(Quorum) 1/3rd of its total
whichever 8 members, or
strength, or
2 directors
} is higher 25% of total strength } whichever is
less
BUT ≥ 2 members

If directors fall below quorum If interested directors < Meeting adjourned for the want of quorum
1/3rd of total strength - Unless AOA specifies, adjourned to next week,
continuing director may continue to act
only for Non-interested directors same day, same time & place
- Increasing the directors to quorum, or (being ≥ 2) shall be quorum - If national holiday, to next succeeding day (not
- Calling GM being a holiday)
Section 175  Resolution to be circulated in draft to ALL the directors at  Resolution to be moved at MEETING if 1/3rd directors
(Resolution by their registered address require the same
Circulation, RBC)
 Approved by MAJORITY of directors ENTITLED to vote  Resolution passed by RBC to be noted at subsequent
meeting
Section 176 Past acts of directors not to be invalid if it is subsequently However, once notice, then future acts will not be valid
(Defects in notice that appointment was invalid because of
appointment - defect - disqualification - termination - AOA
Section 177 Companies required to appoint Audit Committee Composition of Audit Committee
(Audit committee  Min. 3 directors  I.D. forming majority
& Vigil Mechanism)
Similar to that prescribed for Independent director (I.D.)  Majority members + Chairman  must be able to read
& understand financials
Functions/ Roles of Audit Committee Powers of Audit committee
 Call comments of auditor on internal control, scope of
Appointment & Monitor auditor’s Examine audit, financial statement etc.
remuneration of Auditor independence financials &  Discuss related issues with auditor or management
audit report
End use of funds raised Scrutinize inter- Valuation  Authority to investigate
in Public offer corporate loans  Authority to seek any professional advise

Internal financial Approve RPT*

controls Transactions other than 188
may be referred to Board
*Note – Directors can enter RPT ≤ 1 crore and get it subsequently
ratified by Audit Committee
*Note – No approval for RPT with WOS (other than transactions
referred in section 188)
Vigil mechanism – Formed by following companies Objectives
 Listed; or  Mechanism for directors/ employees to report concerns
 Accepting Public deposits; or  Safeguard against victimisation
 Borrowings from Banks/ FI > INR 50 crore  Direct access to Chairman in exception cases

Section 178 NRC Composition of NRC Functions of NRC

Companies required to appoint Audit Committee  Min. 3 Non-executive  Identify persons qualified to become
directors  ≥ 50% I.D. director
 Chairperson of company  Lay down criteria for qualifications &
NRC Similar to that prescribed for I.D. & Audit independence
can be member but shall
Committee not chair NRC  Formulate remuneration policy
 Policy disclosed in Board’s report
SRC
Constituted by companies Headed by Chairperson being Non-executive Objective
having >1,000 security-holders director and other members as decided by Board Resolving grievances of security-holders

CA HARSH GUPTA (I.G.P.) Meetings of Board & its Powers

Section 179  Powers of Board are co- Following powers to be exercised only at Board MEETING
(Powers of Board) extensive with that of the
company (a) Making calls on shareholder
 Power does not exercise (b) Authorising Buy-back
powers reserved for GM (c) Issue securities
(d) Borrow monies
Exemption to Banking (e) Invest funds
company Can be delegated
(f) Grant LGS
- Accepting deposits
repayable on demand (g) Approve financials & Board report
(h) Diversify business
- Placing deposits with
other banks (i) Approve amalgamation, merger etc. Note – For O/D & C/C, borrowing
(j) Approve takeover means availing such facility &
- Taking loans from other not their day-to-day operation
banks (k) - political contribution – Appoint/ remove KMP
- appoint internal or secretarial auditor
Section 180 Special Resolution is required for Safeguard
(Restriction on
Powers of Board)  Buyer who acquired undertaking in good faith
 Sale or lease of undertaking in normal course of
Not applicable to business
Private company  Debt incurred in excess of prescribed limit will be
valid  if lender gave the loan in good faith

Section 181  Donation ≤ 5% of Average Net profits of past 3 years – Board resolution
(Charitable
donantions)  > 5% Average Net Profits of past 3 years - Ordinary Resolution
Section 182 Cases covered Companies excluded Limit
(Political Donation to Political party  Any purpose Max. 7.5% of Average Net Profits for last 3 years 
contribution)  Government
company by passing resolution at BM
Donation to Any person  Political purpose  Company been in Note – This limit has been removed by FA, 2017
existence < 3 years
Section 183  Board can contribute ANY amount to National Défense Fund or any other fund approved by CG for national defence
(NDF)
Section 184 (1) – Disclosure of interest by Director (2) – No Participation by director if interest in a
(Disclosure of Sub- Applicability Every director shall disclose his concern contract/ arrangement
interest by section or interest in any body corporate or
Director) (1) Public +  With a Body corporate in which such director holds
association in > 2% or is a Promoter, manager, CEO
Private Co.  First BM
(2) Public Co.  With other entity in which such director is partner,
 First BM every in FY owner or member
 Change in disclosures If contract still entered  voidable at the option of
the company
Section 185 Excpetions to sub-section (1) & (2)
(LGS to Directors 185(1) 185(2)
etc.) LGS - NOT ALLOWED LGS – ALLOWED if
 SR passed + Loand to MD/  Condition of service; or
WTD  Scheme approved by SR
 used for principal business
1. DIRECTOR of Co. 1. PRIVATE COMPANY of which such LGS in ordinary Minimum interest charged as
Director of Holding Co. director is Director or member course of business per 1/ 3/ 5/ 10 years
Partner or Relative of 2. BODY CORPORATE – director government security
such director together with other holds ≥ 25%
of voting power LGS to WOS Used for principal business
activities
2. FIRM in which such 3. BODY CORPORATE – directors of
director or relative is which accustomed to act
GS to subsidiary  Against loan taken from
partner bank or financial
institution
Note – Prescribed Private companies are exempt from this section  Used for principal business
activities
Note – Sale of flat on instalment basis to a director
is NOT a loan (Fredie Ardshire Mehta)

Section 186 Maximum 2 layers of Investment Co. is allowed

(LGSI)
Exception –
 Acquiring any company outside India where laws of
such country allows more layers
 Subsidiary can have investment subsidiary if any law
requires

CA HARSH GUPTA (I.G.P.) Meetings of Board & its Powers

 Conditions to make LGSI
1. Unanimous Resolution 3. PFI approval if term loan subsisting
2. If exceeds below limit – SR (No approval if within limit + no default)
4. ROI ≥ 1/ 3/ 5/ 10 year GOI securities’ yield
- 60% of its (PSC + FR + SP) whichever is 5. No default of deposits
or } MORE 6. Register should be maintained
- 100% of its (FR + SP)
Exemption from ALL the above conditions Exemption from passing SR
 LGSI by banking, insurance, Housing finance company
 LGS by company engaged in financing or providing  LGS to WOS or JV
infrastructure facilities  Investment in securities of WOS
 Investment by NBFC (principal business being investment)
 Investment by investment company
 Rights issue

Section 187  All investments made by company shall be in its own name Exceptions
(Investment in own  However, to meet statutory limit, shares in subsidiary can be  Securities given to bank to collect dividend/ interest
name) held in the name of nominee  Securities given to bank to facilitate transfer
 Depositing securities as a security against loan
 Holding investments in Demat form
Section 188
(RPT) Related Party Transactions covered

Director/ KMP or his Relative

Firm Where Director/ Manager/ Relative is Partner a Sale, purchase, supply of GOODS
Private Co. Where Director/ Manager/ Relative is b Sale, purchase or PROPERTY of any kind
Director/ Member c Leasing of PROPERTY of any kind
Public Co. Where Diirector/ Manager d Availing or rendering any service
 is a director; and e Appointing AGENT for a-d
 Holds with relative > 2% PSC f Office or Place of Profit (OPP)
Body Corporate Whose Board or MD or Manager is g Underwriting of securities
accustomed to act according to Director/
Manager CONDITIONS
Any Person On whose advise our Director / Manager is  Board resolution at MEETING required
accustomed to act
Body corporate Holding/ Subsidiary/ Associate/ Co-  If RPT exceeds below limits, OR also required
which is subsidiary/ Investing/ Venturer company  Interested member shall not participate except in Private
Co.
Director (other  of Holding company, or
than ID) + KMP  Interested member may participate if ≥ 90% members
 his relative are relatives of promoters or related parties
Lower of -
a+e - 10% turnover, or
Exception - INR 100 crore
 Section not applicable on transactions entered at ALP Lower of
 OR is not required in case of RPT with WOS whose accounts are b+e - 10% NW, or
consolidated - INR 100 crore
Lower of
Consequences of violation - 10% turnover, or
c - 10% NW, or
 Contract is voidable at the option of the Board - INR 100 crore
 If contract entered with a director or employee  he shall Lower of -
make good the loss d+e - 10% turnover, or
- INR 50 crore
f INR 2,50,000
g 1% NW
Section 189  Every company shall maintain a register for contracts to  Register is open to inspection by any MEMBER
(Register of
contracts in which
which 184(2) & 188 applies  Also, register is produced at every AGM
director interested)  Register shall be placed in next BM & signed by ALL directors Exceptions
Nothing applies to –
 Every director/ KMP shall within 30 days of his appointment  Sale/ purchase of goods & services ≤ INR 5 lakh in a FY
or relinquishment disclose particulars u/s 184(1)  Banking company for collection of bills

Section 190 Every company to keep at registered office –  The contract is open to inspection by any member
(Employment  Contract of service with MD/WTD  if it is in writing,  Section is not applicable to a Private company
contract with MD
or WTD)  Else, a written memorandum setting out the terms
Section 191 No director is entitled to any compensation for loss of office
resulting from Disclosed to members & their approval has been obtained
 Transfer of undertaking or property, or unless in GM
 Transfer of shares Note – Nothing affects payment to MD/ WTD/ Manager

CA HARSH GUPTA (I.G.P.) Meetings of Board & its Powers

Section 192 A company AND director of the company/ holding/ subsidiary/ associate/ Consequences of contravention
(Non-cash a person connected shall not enter into non-cash transactions unless – Contract is VOIDABLE at the option of the company
transactions  Prior approval in GM is obtained, & unless –
involving directors)
 If director of Holding Co. – approval in GM of Holding Co. also required Restitution not possible + Co. is indemnified; or
 Rights acquired bona-fide for value
Section 193  Where OPC enters into contract with sole member & it is not in writing then  Ensure terms contained in memorandum or
(Contract by OPC) recorded in first BM
 Nothing applies to transactions entered in the ordinary course of business
Section 194 ---- Omitted ----
Section 195
---- Omitted ----

CA HARSH GUPTA (I.G.P.) Meetings of Board & its Powers