Changing the way you learn

DIRECTORS' DUTIES - ENFORCEMENT

Directors’ duties will attach to shareholders in certain circumstances
1. a director for the purposes of sections 143 to 146
  1. Where the constitution of a company requires a director or the Board to exercise or refrain from exercising a power in accordance with a decision or direction of shareholders, any shareholder who takes part in
    1. the making of any decision that the power should or should not be exercised
    2. the making of any decision whether to give a direction
2. to be a director for the purposes of sections 143, 160 and 162.
  1. Where the constitution of a company confers a power on shareholders which is exercisable by the Board, any shareholder who exercises that power or who takes part in deciding whether to exercise that power (in relation to the exercise of the power or any consideration concerning its exercise)
  2. s. 162 - Duty of directors on insolvency
Certain powers are reserved for exercised by shareholders
1. s. 103 - Exercise of powers reserved to shareholders
  1. at a meeting of shareholders pursuant to s. 115 or 116
    1. s. 115 - Annual meeting of shareholders
    2. s. 116 - Special meeting of shareholders
  2. by a resolution in lieu of a meeting pursuant to s. 117
  3. by a unanimous resolution
  4. by a unanimous shareholder agreement under s. 272
2. s. 105 - Powers exercised by special resolution
  1. the shareholders exercise a power to
    1. adopt a constitution or, if it has one, to alter or revoke the company's constitution;
    2. reduce the stated capital of the company under s. 62
    3. approve a major transaction
    4. approve an amalgamation of the company under s.246
    5. put the company into liquidation
      1. shall not be rescinded in any circumstances.
  2. may be rescinded only by a special resolution.
s. 107 - Management review by shareholders
1. the Chairperson of any meeting of shareholders shall give the shareholders a reasonable opportunity to discuss and comment on the management of the company.
  1. a meeting of shareholders may pass a resolution which makes recommendations to the Board on matters affecting the management of the company.
    1. Unless carried as a special resolution or unless the constitution so provides, any recommendation shall not be binding on the Board.
s. 272(2) - all the shareholders of a private company agree to or concur
1. the issue of shares by the company
2. the making of a distribution by the company
3. the repurchase or redemption of shares in the company
4. the giving of financial assistance by a company for the purpose of, or in connection with, the purchase of shares in the company
5. the payment of remuneration to a director (or member in the case of a small private company) or the making of a loan to a director (or member) or the conferral of any other benefit on a director (or member)
6. the making of a contract between an interested director (or member in the case of a small private company) and the company
7. the entry into a major transaction
8. the ratification after the event of any action which could have been authorized
s. 120(1) - The shareholders who are entitled
1. to receive distributions
2. to exercise pre-emptive rights to acquire shares in accordance with s. 55
  1. s. 55(1) - Subject to its constitution, where a company issues shares which rank equally with, or in priority to existing shares as to voting or distribution rights, those shares shall be offered to the holders of existing shares in a manner which would, if the offer were accepted, maintain the relative voting and distribution rights of those shareholders.
3. to exercise any other right or receive any other benefit under this Companies Act or the constitution
the right to vote at the meetings of shareholders thus influencing on the management of the compan
1. s. 116(b) - A special meeting of shareholders entitled to vote on an issue shall be called by the Board on the written request of shareholders holding shares carrying together not less than 5 per cent of the voting rights entitled to be exercised on the issue.
2. 5th Schedule (d) - At a meeting of shareholders, a poll may be demanded by
  1. not less than 5 shareholders having the right to vote at the meeting
  2. a shareholder or shareholders representing not less than 10 percent of the total voting rights of all shareholders having the right to vote at the meeting
  3. by a shareholder or shareholders holding shares in the company that confer a right to vote at the meeting and on which the aggregate amount paid up is not less than 10 percent of the total amount paid up on all shares that confer that right
  4. the chairperson of the meeting
Access to information
1. A private company may, by unanimous resolution of its shareholders, dispense with the need to keep an interests register.
  1. The resolution shall cease to have effect where any shareholder gives notice in writing to the company that he requires the company to keep an interests register.
2. s. 232 - in the case of a company having a share capital, on the application of
  1. not less than fifty shareholders
  2. shareholders holding not less than one-tenth of the issued shares
  3. debenture holders holding not less than one-fifth in nominal value of the issued debentures
  4. in the case of a company limited by guarantee, on the application of not less than one-fifth in number of the persons on the share register
  5. The Registrar where he considers that the appointment of an inspector is necessary to safeguard the interests of shareholders or creditors or is necessary in the public interest
    1. require an inspector to investigate the affairs of a company or such aspects of the affairs of a company as are specified in the instrument of appointment and in the case of a debenture agency deed, the conduct of the debenture holders' representative, and to make a report on his investigation in such form and manner as the Registrar may direct.
s. 108 - A shareholder may require a company to purchase his shares when
1. by a special resolution
  1. adoption of a constitution or, if it has one, to alter or revoke the company's constitution
  2. approving a major transaction
  3. approving an amalgamation of the company under s. 246
2. the shareholder cast all the votes, attached to shares registered in his name and for which he is the beneficial owner against the resolution
3. where the resolution to exercise the power was passed under s.117, did not sign the resolution
4. Procedure - ss. 109 - 113
  1. 14 days from resolution
  2. Company may purchase or arrange for purchase by 3rd party
  3. • Shareholder not happy with price stated by Board has 14 days to give written notice to company, which shall refer price determination to arbitration and pay a provisional price in respect of each share.
s. 143(5)(b) - Without prejudice to any other action with regard to the same matter that is lawfully available, including an action under s. 170, any member or debenture holder, as the case may be, may apply to the Court for
1. a declaration that an act of transaction, or proposed act of transaction, by the directors or any director or former director constitutes a breach of any of their duties under the Companies Act
2. an injunction to restrain the directors or any director or former director from doing any proposed act of transaction in breach of their duties
3. s. 170 - Derivative actions
s. 169 - Injunctions
1. The Court may, on an application, make an order restraining a company that, or a director of a company who, proposes to engage in conduct that would contravene the constitution of the company or the Companies Act from engaging in that conduct.
  1. An application may be made by a director or shareholder of the company
  2. it may also grant such consequential relief as it thinks fit
  3. The Court may, at any time before the final determination of an application , make, as an interim order, any order that it is empowered to make
    Annotations:
    - a temporary order of the court pending a hearing, trial, a final order, or while awaiting an act by one of the parties.
s. 174 - Personal actions by shareholders against directors
1. A shareholder or former shareholder may bring an action against a director and in the case of section 91, a secretary, for breach of a duty owed to him as a shareholder.
s. 175 - Personal actions by shareholders against company
1. Any shareholder of a company may bring an action against the company for breach of a duty owed by the company to him as a shareholder.
s. 94 - The secretary shall take reasonable steps to ensure that the share register is properly kept and that share transfers are promptly entered on it in accordance with section 88.
1. shall commit an offence and shall, on conviction, be liable to a fine not exceeding 200,000 rupees.
s. 148 - A director of a company shall, forthwith after becoming aware of the fact that he is interested in a transaction or proposed transaction with the company, cause to be entered in the interests register where it has one, and, where the company has mote than one director, disclose to the Board of the company
s. 156 - has a relevant interest in any shares issued by the company shall forthwith - (i) disclose to the Board the number and class of shares in which the relevant interest is held and the nature of the relevant interest; and (ii) ensure that the particulars disclosed to the Board are entered in the interests register.
s. 176 - the Court may, on the application of a shareholder of a company, if it is satisfied that it is just and equitable to do so, make an order requiring the company or its Board or a director of the company to take any action that is required to be taken by the constitution of the company or the Companies Act and, on making the order. The Court may grant such other consequential relief as it thinks fit.
s. 170 - Derivative Actions
1. s. 170 (1) - Must obtain leave from the Court to bring proceedings in the name and on behalf of the Company or to intervene in proceedings on behalf of Company
2. s. 1703) - Must satisfy Court that the Company that it is in the interest of the company that leave be granted and that those who control and/or manage the company do not intend to act diligently to protect the company’s interest.
  1. Applicant would therefore be expected to have prompted the company to act either by making a request to the Board and/or convening a meeting of Shareholders.
3. 170(2) - Applicant will be required to serve notice on the Company (s.170(4)) and the Court will be required to have regard to the matters
4. Can be initiated by a Shareholder or a Director
5. Where a shareholder initiates proceedings to enforce the Company’s rights.
s. 171 - order that the whole or part of the reasonable costs of bringing or intervening in the proceedings, including any costs relating to any settlement, compromise, or discontinuance approved by derivative actions, shall be met by the company unless the Court considers that it would be unjust or inequitable for the company to bear those costs.
s. 172 - The Court may, at any time, make any order it thinks fit in relation to proceedings brought by a shareholder or a director or in which a shareholder or director intervenes
1. make an order authorising the shareholder or any other person to control the conduct of the proceedings
2. give directions for the conduct of the proceedings
3. make an order requiring the company or the directors to provide information or assistance in relation to the proceedings
4. make an order directing that any amount ordered to be paid by a defendant in the proceedings shall be paid, in whole or part, to former and present shareholders of the company or its subsidiary instead of to the company or the related company
s. 173 - No proceedings brought by a shareholder or a director or in which a shareholder or a director intervenes, as the case may be, with leave of the Court under section 170, may be settled or compromised or discontinued without the approval of the Court.

Next up

DIRECTORS' DUTIES - ENFORCEMENT

Description

Resource summary

Similar

	Created by Darshan Roopun about 11 years ago