Appointment of First Auditors

Appointment of Auditors in a company is a vital part in the running of a company. Without Auditors, we could not able to get our accounts audited and filed with Registrar of companies as per the compliance of Section 220 of the Companies Act,1956.

O.K.Let's move to our topic.

As per Section 224(5), the first Auditor or Auditors of a company shall be appointed by the Board of Directors by passing a Board resolution within one month of the date of Incorporation of the Company; and the auditor or auditors so appointed shall hold office until the conclusion of the First Annual General Meeting.

If the Board of Directors fail to appoint the Auditors within one month,they have to appoint the Auditors in the company General Meeting.There is notneed to file Form 23B for the appointemnt of First Auditor.

The Appointed First Auditor shall not suffer any disqualifications Covered U/s.226(3) of the Companies Act,1956  and the Auditor or Auditors so appointed shall hold office until the conclusion of the First Annual General Meeting.

MEMBERSHIP OF THE COMPANY

A Company is composed of members,though it has its own entity distinct from members.The Members of a company are the persons who,for the time being,constitute the company, as a corporate entity.


According to section 41 of the Companies Act,1956 defines who are the members as follows:

(1) The Subscribers of the memorandum of a company shall be deemed to have agreed to become members of the Company, and on registration, shall be entered as members in its register of members;
(2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members shall, be a member of the company;
(3) Every person holding equity share capital of a company and whose name is entered as beneficial owner in the records of a depository shall be deemed to be a member of the concerned company

In Case of a company limited by shares, the shareholders are the members.Generally speaking, every shareholder is a member and every member is a shareholder.But there is an exception to this statement,a person may be a holder of shares by transfer but would not become its member until the transfer is registered in the books of the company in his favour and his name is entered in the register of members.

Who can become a Member?

In Addition to an Individual, the following may also become a Member of the company

(i) A Company -it must have powers in MOA & AOA to make investments in other Body Corporates

(ii) A registered Co-operative Society

(iii) A Non-resident Indian- No shares can be  issued or transferred to him without the General or Special Approval of Reserve Bank of India and he cannot be admitted as Member of the Indian company without the General or Special Permission of the Reserve Bank of India.

(iv) Minor-Minor is incapable to enter into the contract for being a Member but the Guardian of the Minor could apply for the issue of shares on behalf of the Minor  and the company can allot shares to the guardian.When the minor attains the age of majority,he becomes entitled for the dividend and other benefits of the shareholder.

(v) HUF : Hindu Undivided Family is represented by its Karta.In case of HUF,the shares can be allotted to the name of the Karta in HUF.

(vi) Registered Trade Unions

(vii) Joint Shareholders


Who cannot become a Member?
1.Partnership Firm

2.Legal Representative

3.Pawnee

4.Public Office

5.Membership by a Subsidiary Company to its Holding Company


CESSATION OF MEMBERSHIP:

A person may cease to be a member on the following grounds:

(i) on surrender of shares

(ii) on transfer of shares

(iii) on Buyback of shares

(iv) on death of member

(v) By rescission  of contract of Membership on grounds of misrepresentation or mistake.

(vi) on forfeiture of shares

(vii) on bankrupcty of member/

ALTERNATE DIRECTOR

The Board of Directors of a company may, if so authorized by its articles or by a resolution passed by the Company in general meeting,appoint an alternate director, in accordance with Section 313 of the Companies Act,1956 to act for a director during his absence for  a period of not less than three months from the state in which meetings of the Board are ordinarily held.

An alternate Director occupies the position of director and even though he is called an alternate director, he is a director and performs same duties and is subject to the same liabilities as of any director.However, in calculating for the purposes of number of companies in which he is a director, a company in which he is an alternate director shall not be included as per section 278(1)(d).An Alternate Director may be appointed as a Managing Director or Whole -Time Director.

An alternate Director shall not hold office as such for a period longer than that 'permissible' to the original director in whose place he has been appointed and shall vacate office as and when the original director returns to the state in which meetings of the Board are ordinarily held as per Section 313(2) of the Companies Act,1956.

If an alternate Director  appointed as Managing or Whole Time Director of the Company, he has to be  regularized  as Director by the shareholders in the General Meeting and then only his appointment of Managing or Whole-Time Director will be valid and otherwise his appointment  will be void.

Writs of Constitution of India

Writs - Provisions in Indian Constitution

 The Indian Constitution empowers the Supreme Court to issue writs for enforcement of any of the fundamental rights conferred by Part III of Indian Constitution under Article 32. Thus the power to issue writs is primarily a provision made to make available the Right to Constitutional Remedies to every citizen. The Right to Constitutional Remedies, as we know, is a guarantor of all other fundamental rights available to the people of India.In addition to the above, the Constitution also provides for the Parliament to confer on the Supreme Court power to issue writs, for purposes other than those mentioned above.Similary High Courts in India are also empowered to issue writs for the enforcement of any of the rights conferred by Part III and for any other purpose.

Types of Writs :

There are five types of Writs - Habeas Corpus, Mandamus, Prohibition, Certiorari and Quo warranto.

1.      Habeas Corpus:

"Habeas Corpus" is a Latin term which literally means "you may have the body." The writ is issued to produce a person who has been detained , whether in prison or in private custody, before a court and to release him if such detention is found illegal.

2.      Mandamus:

Mandamus is a Latin word, which means "We Command". Mandamus is an order from the Supreme Court or High Court to a lower court or tribunal or public authority to perform a public or statutory duty. This writ of command is issued by the Supreme Court or High court when any government, court, corporation or any public authority has to do a public duty but fails to do so.

3.      Certiorari:

Literally, Certiorari means to be certified. The writ of certiorari can be issued by the Supreme Court or any High Court for quashing the order already passed by an inferior court, tribunal or quasi judicial authority. There are several conditions necessary for the issue of writ of certiorari

1.      There should be court, tribunal or an officer having legal authority to determine the question with a duty to act judicially.

2.      Such a court, tribunal or officer must have passed an order acting without jurisdiction or in excess of the judicial authority vested by law in such court, tribunal or officer.

3.      The order could also be against the principles of natural justice or the order could contain an error of judgment in appreciating the facts of the case.

4.      Prohibition:

The Writ of prohibition means to forbid or to stop and it is popularly known as 'Stay Order'. This writ is issued when a lower court or a body tries to transgress the limits or powers vested in it. The writ of prohibition is issued by any High Court or the Supreme Court to any inferior court, or quasi judicial body prohibiting the latter from continuing the proceedings in a particular case, where it has no jurisdiction to try. After the issue of this writ, proceedings in the lower court etc. come to a stop.

Difference between Prohibition and Certiorari:

1.      While the writ of prohibition is available during the pendency of proceedings, the writ of certiorari can be resorted to only after the order or decision has been announced.

2.      Both the writs are issued against legal bodies.

5.      The Writ of Quo-Warranto:

The word Quo-Warranto literally means "by what warrants?" or "what is your authority"? It is a writ issued with a view to restrain a person from holding a public office to which he is not entitled. The writ requires the concerned person to explain to the Court by what authority he holds the office. If a person has usurped a public office, the Court may direct him not to carry out any activities in the office or may announce the office to be vacant. Thus High Court may issue a writ of quo-warranto if a person holds an office beyond his retirement age.

Writs in brief

Type of Writ	Meaning of the word	Purpose of issue
Habeas Corpus	You may have the body	To release a person who has been detained unlawfully whether in prison or in private custody.
Mandamus	We Command	To secure the performance of public duties by lower court, tribunal or public authority.
Certiorari	To be certified	To quash the order already passed by an inferior court, tribunal or quasi judicial authority.
Prohibition	-	To prohibit an inferior court from continuing the proceedings in a particular case where it has no jurisdiction to try.
Quo Warranto	What is your authority?	To restrain a person from holding a public office which he is not entitled.

Additional Director

As per section 260 of the Companies Act, 1956, Additional director can be appointed by passing Board Resolution. He will be vacate his directorship in forthcoming Annual General Meeting.

HOLDING AND SUBSIDIARY COMPANIES

Holding  and subsidiary companies are relative terms. A company is holding company of another if the other is its subsidiary.

According to the section 4, a company shall be deemed to be subsidiary of another, if and only if

i)  that other controls the composition of Board of directors ; 

Explanation: Company A(holding company) controls the composition of the board of directors of Company B(subsidiary company). Company A can appoint or remove all or majority of directors of the Company B.

                                                or

ii) where the first mentioned company is any other company, holds more than half in the nominal value of its equity share capital ;

Explanation:Company A(holding company) holds more than 51% of  equity shares(voting power)  of Company B(subsidiary company) or more than 50% of voting powers through preferential shares.

Here any shares held by virtue of the provisions of any debentures of the first mentioned company (company A) or of a trust deed for securing issue of such debentures shall be disregarded.

                                               or

iii) the first mentioned company is a subsidiary of any company which is the other's subsidiary

Explanation: Company B (subsidiary company)  is a subsidiary of company C which is subsidiary of company A, then the company B is also a subsidiary of company A.

RELEVANT SECTIONS: SECTION 4, SECTION 41, SECTION 42.

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