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Corporate law

Hasan (Student MBA) (44 Points)

18 September 2012

A company served a notice of a general meeting upon its members. The notice stated that a resolution to increase the share capital of the company would be considered at the meeting. A shareholder complains that the amount of the proposed increase was not specified in the notice.

Is the notice valid? Give legal Reasons?

Can you help me by answering this question?

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4 Replies

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 19 September 2012

Yes, amount is to be mentioned, with explanatory statements. Every special business is to be explained. and proposed resolutions are also requied to be mentioned in the notice. It would contain all the details.

Charu Srivastava (Company Secretary) (4210 Points)
Replied 20 September 2012

Yes the Shareholder is right in asking about the proposed increase in the Authorised Capital.

Rightly said by Mr Ankur, Every resolution passed in the EGM and resolution under special business passed in the AGM must be accompanied by explantory which should set out the material fact of the resolution.

Smriti Dhawan (Company Secretary ) (347 Points)
Replied 20 September 2012

Section 173 of the Companies Act, 1956 require a Company to annex an explanatory statement for every meeting of Company at which some special business is to be transacted. This explanatory statement is to bring to the notice of members all material fact relating to each item of special business. Thus objection of Shareholder is valid since detail on items to be considered are lacking. The information about the amount is a material fact with refernce to proposed increase of Share Capital.

The notice is not valid notice under Section 173 of Companies act as righty mentioned by Mr. Ankur and Ms. Charu.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 20 September 2012

Furthermore, it is also to share that except in case of four General Business, in relation to all Special Business RESOLUTIONS are to be circulated along with their explanatory statements.