Management & Administration: formula sheet

Key formulas

Time to have a registered office

Within 30 days of incorporation and at all times thereafter

Section 12(1). Verification of the registered office is also due to the Registrar within 30 days of incorporation (Section 12(2)).

Display of name and address

Outside every office or place of business, in a conspicuous position, in legible letters

Section 12(3)(a). If the characters are not those of a language in general use in that locality, also use the characters of one of those languages.

Name on seal

Name engraved in legible characters on the seal, if any

Section 12(3)(b).

Particulars to be printed

Name, registered office address, CIN, plus telephone number, fax number, e-mail and website addresses (the last four if any)

Section 12(3)(c). Print on business letters, billheads, letter papers, notices and other official publications.

Name on negotiable documents

Name printed on hundies, promissory notes, bills of exchange and other prescribed documents

Section 12(3)(d).

Former name proviso

If name changed in the last 2 years, show former name(s) along with the present name

First proviso to Section 12(3). It applies to the display under clause (a) and the printing under clause (c).

One Person Company

Words 'One Person Company' in brackets below the name wherever it is printed, affixed or engraved

Second proviso to Section 12(3).

Change of situation (address)

Notice to Registrar within 30 days of the change, verified in the prescribed manner

Section 12(4). This is a notice, not a special resolution, so long as the move stays within the same city, town or village.

Shift outside local limits of the city, town or village

Special resolution required

Section 12(5).

Shift between Registrar jurisdictions within the same State

Special resolution + confirmation by the Regional Director

Proviso to Section 12(5). Regional Director communicates the confirmation within 30 days of receiving the application. Company files it with the Registrar within 60 days of confirmation. Registrar registers it and certifies registration within 30 days of filing (Section 12(6)). The change takes effect from the date of the certificate (Section 12(7)).

Shift from one State to another

Special resolution + approval of the Central Government + filing with Registrar of each State

Section 13(1), 13(4), 13(7). It is an alteration of the memorandum. The Central Government disposes of the application within 60 days (Section 13(5)). The Registrar of the new State issues a fresh certificate of incorporation. No alteration has effect until registered (Section 13(10)).

Penalty for default

₹1,000 per day of default, maximum ₹1,00,000, on the company and every officer in default

Section 12(8).

Registrar's physical verification

If Registrar has reasonable cause to believe the company carries on no business or operations, he may physically verify the office

Section 12(9). If Section 12(1) is breached, he may start action to remove the company's name from the register, besides the penalty under Section 12(8).

Minimum number of directors (s.149(1)(a))

Public company = 3; Private company = 2; One Person Company = 1

Maximum is 15 for all companies. More than 15 needs a special resolution.

Resident director (s.149(3))

At least one director who stays in India for not less than 182 days in the financial year

For a newly incorporated company, the requirement applies proportionately at the end of the year of incorporation.

Independent directors in listed public company (s.149(4))

At least 1/3 of total directors; any fraction is rounded off as one

Example: Board of 8 gives 8 ÷ 3 = 2.67, so 3 independent directors.

Term of independent director (s.149(10) and (11))

Up to 5 consecutive years per term; maximum 2 consecutive terms; cooling-off of 3 years

Re-appointment for a second term needs a special resolution and disclosure in the Board's report. During the 3 years he cannot be appointed in or associated with the company in any other capacity.

Declaration of independence (s.149(7))

At the first Board meeting he attends, then at the first meeting of every financial year, and whenever circumstances change

The declaration says that he meets the criteria of independence.

Disqualification: conviction (s.164(1)(d))

Imprisonment of 6 months or more, and 5 years not elapsed from the expiry of the sentence; if sentence is 7 years or more, disqualified in any company

The 7-year proviso has no time limit stated in the proviso itself. It bars appointment in any company.

Disqualification: unpaid calls (s.164(1)(f))

Calls unpaid and 6 months elapsed from the last day fixed for payment

Applies to shares of that company held alone or jointly.

Disqualification: default by company (s.164(2))

Director of a company that did not file financial statements or annual returns for 3 continuous financial years, or defaulted on deposits, debentures or dividend for 1 year or more: barred for 5 years

He cannot be re-appointed in that company or appointed in another company for 5 years. A person newly appointed to a defaulting company does not incur this disqualification for 6 months from appointment.

Other disqualifications under s.164(1)

Unsound mind declared by court; undischarged insolvent; pending insolvency application; disqualification order in force; s.188 conviction in last 5 years; non-compliance with s.152(3) or s.165(1)

Clauses (a), (b), (c), (e), (g), (h) and (i).

Additional disqualifications by private company (s.164(3))

A private company may by its articles provide for disqualifications in addition to those in s.164(1) and (2)

Separately, the proviso to s.164(3) says the disqualifications in clauses (d), (e) and (g) of s.164(1) continue to apply even if an appeal or petition is filed against the order of conviction or disqualification.

Maximum term of MD/WTD/manager

Term ≤ 5 years at a time

Re-appointment cannot be made earlier than one year before the term expires (section 196(2)).

Age limits for MD/WTD/manager

21 years ≤ age < 70 years

A person aged 70 or more can be appointed by a special resolution with a justification in the explanatory statement. Another route exists: if votes in favour exceed votes against and the Central Government is satisfied the appointment is most beneficial, it may be made.

Who must have whole-time KMP (section 203)

Listed companies + public companies with paid-up capital ≥ ₹10 crore

They need MD or CEO or manager (or a WTD in their absence), company secretary and CFO.

Filling a KMP vacancy

Board fills the vacancy within 6 months

Applies to the vacancy of any whole-time KMP (section 203(4)).

Penalty for default under section 203

Company ₹5,00,000; each officer in default ₹50,000; plus ₹1,000 per day after the first, total daily penalty not above ₹5,00,000

The daily penalty applies to continuing default.

Overall managerial remuneration (adequate profit)

Total to all directors and manager ≤ 11% of net profit

Net profit is computed under section 198. Sitting fees are outside this limit.

Limit for MD/WTD/manager

One such person: ≤ 5% of net profit. More than one: ≤ 10% of net profit in total

These amounts sit inside the 11% overall cap.

Limit for other directors

With an MD/WTD/manager: ≤ 1% of net profit. Without one: ≤ 3% of net profit

Sitting fees are not counted in this limit.

Schedule V Part II (inadequate profit) by effective capital

Below ₹5 crore: ₹60 lakh a year. ₹5 crore to below ₹100 crore: ₹84 lakh. ₹100 crore to below ₹250 crore: ₹1.2 crore. ₹250 crore and above: ₹1.2 crore + 0.01% of effective capital above ₹250 crore

Applies when the company has no profit or inadequate profit. Conditions in Schedule V must also be met. Check the table in your current study material.

Board meeting quorum (section 174(1))

Quorum = higher of (⅓ × total strength, rounded up) and 2

Total strength excludes vacancies. Video conferencing participation counts.

Quorum when interested directors are many (section 174(3))

If interested directors ≥ ⅔ × total strength, quorum = non-interested directors present, minimum 2

'Interested director' means one within section 184(2).

Adjournment for want of quorum (section 174(4))

Same day, same time and place, next week (next non-holiday day if it is a national holiday)

Applies unless the articles provide otherwise.

Continuing directors (section 174(2))

If directors fall below quorum: act only to fill up to quorum or summon a general meeting

No other business is allowed.

Resolution by circulation (section 175)

Draft and papers to all directors + approval by majority of directors entitled to vote; if ≥ ⅓ of total directors require, decide at a meeting

Must be noted at the next Board or committee meeting and made part of the minutes.

Minutes (section 118)

Record in minute books with consecutively numbered pages within 30 days of the meeting

Default penalty: ₹25,000 on the company and ₹5,000 on each officer in default. Tampering: imprisonment up to 2 years and fine ₹25,000 to ₹1,00,000.

Nomination and Remuneration Committee (section 178(1))

3 or more non-executive directors, at least ½ independent

Required for every listed public company and prescribed classes. The company chairperson may be a member but cannot chair it.

Stakeholders Relationship Committee (section 178(5))

Required if security holders exceed 1,000 at any time in the financial year; chairperson must be a non-executive director

It resolves grievances of security holders.

Board meeting frequency and notice

At least 4 meetings a year; gap between meetings ≤ 120 days; notice at least 7 days; at shorter notice, at least one independent director (if the company is required to have one) must be present, otherwise decisions are final only on ratification by at least one independent director

Learn any exemptions for particular classes of companies from your study material.

AGM frequency and gap (s. 96)

One AGM every year; for AGMs after the first, gap between two AGMs ≤ 15 months

Not applicable to a One Person Company. The 15-month gap needs a previous AGM, so it does not apply to the first AGM. The Registrar may, for special reason, extend time for an AGM other than the first by up to 3 months.

Time limit for AGM (s. 96)

First AGM: within 9 months from close of first financial year (no 15-month test); other AGMs: within 6 months from close of financial year and within 15 months of the previous AGM

If the first AGM is held on time, no AGM is needed in the year of incorporation.

Time and place of AGM (s. 96(2))

Business hours: 9 a.m. to 6 p.m.; not a National Holiday; registered office or place in the same city, town or village

An unlisted company may hold it anywhere in India if all members consent in advance in writing or by electronic mode.

Quorum, public company (s. 103(1)(a))

Members ≤ 1,000: 5; more than 1,000 up to 5,000: 15; more than 5,000: 30 (members personally present)

Articles may provide a larger number. Counted by members as on the date of the meeting.

Quorum, private company (s. 103(1)(b))

2 members personally present

Articles may provide a larger number.

No quorum (s. 103(2) and (3))

Wait half an hour; meeting stands adjourned to same day next week, same time and place, or as the Board decides (s. 103(2)(a)); if quorum is again missing after half an hour at the adjourned meeting, the members present form the quorum (s. 103(3))

A meeting called by requisitionists under s. 100 stands cancelled if there is no quorum at the first meeting (s. 103(2)(b)). There is no adjourned meeting in that case, so s. 103(3) applies only to meetings adjourned under s. 103(2)(a). Not less than 3 days' notice of the adjourned meeting is needed, whether or not the day, time or place is changed. It may be given individually or by advertisement in one English and one vernacular newspaper.

Proxy basics (s. 105)

Proxy cannot speak; can vote only on a poll

Unless articles provide otherwise, proxy rules do not apply to a company without share capital. The Central Government may prescribe classes of companies whose members cannot appoint a proxy. Under s. 105(2), the notice calling a meeting of a company with share capital must carry a prominent statement that a proxy need not be a member.

Proxy limit and deposit (s. 105)

One proxy acts for not more than 50 members and for such number of shares as prescribed; any articles requiring a longer deposit period than 48 hours before the meeting are treated as requiring 48 hours

If articles ask for a longer period, it is treated as 48 hours.

Proxy instrument (s. 105(6))

In writing; signed by the appointer or authorised attorney; a body corporate: under its seal or signed by an authorised officer or attorney

Members may inspect proxies lodged from 24 hours before the meeting until it ends, on 3 days' written notice to the company.

Ordinary resolution (s. 114(1))

Votes in favour > votes against

Notice must be duly given. The Chairman's casting vote, if any, counts.

Special resolution (s. 114(2))

Votes in favour ≥ 3 × votes against

The notice must state the intention to propose it as a special resolution.

Ordinary resolution

Votes FOR (incl. Chairman's casting vote, if any) > Votes AGAINST

Section 114(1). Only votes cast by members entitled to vote count, with the required notice duly given.

Special resolution

Votes FOR ≥ 3 × Votes AGAINST

Section 114(2). The notice must also state the intention to propose it as a special resolution.

Special notice

Notice of intention to move the resolution is given to the company by members holding not less than 1% of total voting power, or holding shares on which an aggregate sum not exceeding ₹5 lakh (as prescribed) has been paid up

Section 115. The company then gives members notice of the resolution in the prescribed manner. Read the two limbs as the Section words them, not as fixed standalone limits.

Filing of resolutions

File with Registrar within 30 days of passing (Section 117)

Applies to special resolutions, all-member resolutions that would otherwise need a special resolution, and MD appointment-related Board resolutions, among others listed in Section 117(3).

Penalty for late filing (Section 117(2))

Company: ₹10,000 + ₹100 per day after the first, max ₹2,00,000. Officer in default: ₹10,000 + ₹100 per day after the first, max ₹50,000

The first day carries only the ₹10,000. The daily ₹100 starts from the second day.

Keeping minutes

Prepare, sign and keep within 30 days of the conclusion of the meeting or passing of postal ballot resolution, in books with consecutively numbered pages

Section 118(1). Covers general meetings, class meetings, creditors' meetings, Board and committee meetings.

Penalty for default in minutes (Section 118(11))

Company: ₹25,000. Each officer in default: ₹5,000

Applies for default in respect of any meeting.

Tampering with minutes (Section 118(12))

Imprisonment up to 2 years and fine ₹25,000 to ₹1,00,000

This is a punishment for the person found guilty.

Resolution by circulation (Section 175)

Draft + papers circulated to all directors; approved by a majority of directors entitled to vote; if ≥ 1/3 of total directors want a meeting, it must be decided at a meeting

Must be noted at the next Board or committee meeting and made part of its minutes.

Section 184(1): general disclosure

Disclose at: first Board meeting as director + first Board meeting of every financial year + first Board meeting after any change

Covers concern or interest in companies, bodies corporate, firms or associations, including shareholding.

Section 184(2): interested in a contract

Interest > 2% shareholding, held alone or in association with any other director (or promoter/manager/CEO), of a body corporate, or partner/owner/member of a firm → disclose at the Board meeting + do not participate

If he becomes interested after the contract is entered into, he discloses forthwith or at the first Board meeting after that. Holdings of directors in association are added together for the 2% test.

Section 184(3), (4) and (5)(b): consequences and exemption

Contract without disclosure or with participation = voidable at the option of the company; director's penalty = ₹1 lakh

Section 184 does not apply between two companies (or bodies corporate) where the directors of one, individually or together, hold not more than 2% of the paid-up share capital of the other.

Section 188(1): Board consent

Related party contract on the 7 listed matters → Board resolution at a meeting; above prescribed limits → also prior company resolution

Related-party members cannot vote on the company resolution. The vote bar does not apply where 90% or more of members are relatives of promoters or related parties.

Section 188 exemptions

No approval resolution needed for (a) ordinary course of business at arm's length; (b) holding company and wholly owned subsidiary whose accounts are consolidated and placed before shareholders

Ordinary course alone is not enough. A transaction not on an arm's length basis is not exempt.

Section 188(3): ratification

Contract without consent or approval → ratify within 3 months, else voidable at the option of the Board or shareholders

If the contract is with a related party to any director, or authorised by any other director, the directors concerned indemnify the company against loss.

Section 188(5): penalty

Listed company: ₹25 lakh. Any other company: ₹5 lakh. Imposed on the director or employee who entered into or authorised the contract

Section 188(2) also requires the contract to be referred to in the Board's report with the justification.

Section 185(1) and (2)

Loan/guarantee/security to director, partner or relative, or a firm in which they are partners = prohibited. To a person in whom a director is interested = special resolution + use for principal business activities

Interested persons include a private company where the director is a director or member, and a body corporate where he controls 25% or more of the voting power.

Section 185(4): penalty

Company: fine ₹5 lakh to ₹25 lakh. Officer in default: up to 6 months' imprisonment or fine ₹5 lakh to ₹25 lakh. Borrowing director/person: up to 6 months' imprisonment or fine ₹5 lakh to ₹25 lakh, or both

Penalties are on the company, the officer in default, and the person who got the loan.

CSR applicability thresholds

Net worth ≥ ₹500 crore OR Turnover ≥ ₹1,000 crore OR Net profit ≥ ₹5 crore (in the immediately preceding financial year)

Any one condition is enough. Test the immediately preceding financial year, not any year.

CSR Committee composition

3 or more directors, at least 1 independent director; if no independent director is required under section 149(4), 2 or more directors

If the CSR amount to be spent does not exceed ₹50 lakh, no committee is needed and the Board discharges its functions.

Minimum CSR spend

CSR spend ≥ 2% × Average net profit of the 3 immediately preceding financial years

Net profit is calculated as per section 198 and excludes prescribed sums. If the company is under three years old, use the immediately preceding years completed.

Unspent CSR: ongoing project

Transfer to Unspent CSR Account within 30 days from the end of the financial year; spend within 3 financial years from transfer; else transfer to Schedule VII Fund within 30 days from completion of the third financial year

Applies only to amounts relating to ongoing projects meeting prescribed conditions.

Unspent CSR: not ongoing project

Board's report states reasons; transfer unspent amount to a Schedule VII Fund within 6 months of the expiry of the financial year

Reasons go in the Board's report under section 134(3)(o).

CSR default penalty

Company: lesser of 2 × amount required to be transferred or ₹1 crore. Officer in default: lesser of 1/10 of that amount or ₹2 lakh

Always compute both limbs and pick the lower.

Annual return filing time

Within 60 days from the date of the AGM (or the date the AGM should have been held, with reasons if no AGM)

Filed with the Registrar with prescribed fees or additional fees.

Annual return signing

Signed by a director and the company secretary (or, if none, a company secretary in practice). OPC and small company: signed by the company secretary, or if none, by the director

Abridged form may be prescribed for OPC, small company and other classes.

Annual return certification

Listed company, or company with prescribed paid-up capital or turnover: return certified by a company secretary in practice

Certificate states the return discloses facts correctly and adequately and the company has complied with all provisions of the Act.

Annual return default penalty

Company and every officer in default: ₹10,000 plus ₹100 per day after the first day; maximum ₹2,00,000 for the company and ₹50,000 for an officer

Certifying company secretary in practice who certifies wrongly: penalty of ₹2 lakh.

Quick revision

• Every company keeps a register of directors and KMP at its registered office, including their securities held in the company, its holding, subsidiary and associate companies.
• A return of directors and KMP is filed with the Registrar within 30 days of appointment and within 30 days of any change.
• Minutes of every general meeting, postal ballot resolution, Board meeting and committee meeting must be kept within 30 days in consecutively numbered pages.
• Minutes must contain a fair and correct summary. For Board meetings, they must also name directors present and any dissenting directors.
• The Chairman has absolute discretion to leave out defamatory, irrelevant or immaterial matter, or matter detrimental to the company's interests.
• Properly kept minutes are evidence of the proceedings. Until the contrary is proved, the meeting is deemed duly called and held.
• Minutes fall under the secretarial standards of the Institute of Company Secretaries of India. Default in minutes: penalty of ₹25,000 on the company and ₹5,000 on each officer in default.
• Tampering with minutes: imprisonment up to 2 years and fine of ₹25,000 to ₹1,00,000.
• Annual return is filed within 60 days of the AGM date, or of the date the AGM should have been held. It is signed by a director and the company secretary.
• Annual return of a listed company, or a company with prescribed paid-up capital or turnover, is certified by a company secretary in practice. A wrong certification attracts a ₹2,00,000 penalty.
• Related party contracts in listed categories need Board consent by a resolution at a meeting. Related members cannot vote on the shareholders' resolution.
• Unratified related party contracts within 3 months are voidable. The penalty on a director or employee is ₹25,00,000 for a listed company and ₹5,00,000 for any other company.

Common mistakes

• Saying a special resolution is needed for any change of the registered office address. Fix: A special resolution is needed under Section 12(5) only when the shift is outside the local limits of the city, town or village. A change within those limits needs notice to the Registrar within 30 days.
• Writing that the Tribunal or NCLT approves a shift of the office to another State. Fix: Under Section 13(4), the Central Government approves a shift from one State to another. The Regional Director confirms a shift between Registrar jurisdictions within the same State.
• Writing that a person convicted of any offence is disqualified for 5 years. Fix: Check the sentence. A fine only, or imprisonment under 6 months, does not attract section 164(1)(d). The 5 years run from the expiry of the sentence.
• Treating the 7-year proviso as a 5-year bar. Fix: If the sentence is 7 years or more, the person is not eligible to be a director in any company. Read this as a separate rule.
• Saying an MD and a manager can both be appointed if the Board approves. Fix: Section 196(1) is absolute: no company can appoint or employ an MD and a manager at the same time.
• Treating age 70 as a complete bar. Fix: Add the exception: a person who has attained 70 can be appointed by a special resolution with a justification in the explanatory statement.
• Counting vacant seats in the total strength. Fix: Section 174 says total strength excludes vacancies. Use the number of directors actually in office.
• Not rounding the fraction up. Fix: The Explanation to section 174 says any fraction is rounded off as one. So 2.67 becomes 3.
• Saying the first AGM must be held within six months of year end. Fix: Remember: first AGM is nine months from the close of the first financial year. Every other AGM is six months from financial year close.
• Confusing the six-month limit with the fifteen-month gap. Fix: For AGMs after the first, apply both tests. The AGM must be within six months of year end and no more than fifteen months after the previous AGM. For the first AGM, apply only the nine-month limit, as there is no previous AGM.

Exam tips

• Write the section number first (Section 12 for office and display, Section 13(4) for the State shift). It earns marks and shapes your answer.
• Learn the ladder of changes by heart. Most scenario questions test whether you pick the right rung.
• Learn the main numbers: 30 days, 60 days, and ₹1,000 per day up to ₹1,00,000. Also remember the two-year period for former names. MCQs tend to swap these figures.
• In a written answer, always close with the consequence: the penalty on the company and every officer in default.
• Watch for One Person Company and name-change facts. Each triggers a proviso to Section 12(3).
• Learn the numbers as a table in your head: 3/2/1 minimum, 15 maximum, 182 days, 6 months, 5 years, 7 years, 3 years, 1 year. Most MCQs test these figures.
• In written answers, write the section number only when you are sure. The safe sections from this topic are 149, 164, 152(3), 165(1) and 188 as cross-references.
• Practise the independent director count with different board sizes. Always round up any fraction.