Secretarial Practice चिटणिसाची कार्यपद्धती

Quick summary

A secretary is the person who handles correspondence, records and the day-to-day administrative work of a person or an institution. This chapter covers where the word comes from, its meaning and definitions, the features and importance of a secretary, the types of secretary (personal and institutional), and their functions and qualities.

Key points

• Origin: the word comes from the Latin Secretarius, meaning a confidential writer or officer who is trusted with secrets. Secretum/secretus means secret. In Roman times a Scribae was a professional letter writer. In ancient India the secretary was called Amatya, Sachiva or Chitnis.
• Companies Act 2013, Section 2(24): a company secretary is a company secretary as defined in the Company Secretaries Act, 1980 who is appointed by a company to perform the functions of a company secretary.
• Features: an employee or officer, works in a confidential capacity, acts as a link between management and others, keeps records and handles correspondence, needs special knowledge and skills, works under the employer's directions.
• Importance: keeps records, handles correspondence, links management, members and outsiders, ensures legal compliance, saves the employer's time and supports decision-making.
• Personal secretary: works for a single individual such as a minister, doctor or businessman. Duties include correspondence, appointments, managing the diary, travel, accounts and confidential matters.
• Institutional secretary: works for a non-profit association, a co-operative society, a joint stock company or a government department.
• Company secretary functions are statutory (filing returns with the ROC, keeping registers, convening meetings, drafting minutes), administrative (office management, staff) and advisory (legal and procedural advice to directors).
• Qualities: general education and professional qualification (CS), knowledge of law and accounts, loyalty and the ability to keep secrets, tact, punctuality, communication skills, computer skills, leadership.

Important terms

• Secretarius – Latin word for a confidential officer.
• Statutory functions – duties required by law.
• Institutional secretary – the secretary of an organisation rather than of one person.
• ROC – Registrar of Companies.

Formats and formulas

5 important questions

Q1. Explain the origin of the word 'Secretary'.

It comes from the Latin Secretarius, a confidential writer or officer trusted with secrets. In Rome the Scribae wrote letters, and in India the role was called Amatya, Sachiva or Chitnis.

Q2. Define a company secretary according to the Companies Act 2013.

Section 2(24): a company secretary as defined in the Company Secretaries Act, 1980, appointed by a company to perform the functions of a company secretary.

Q3. State the functions of a personal secretary.

Handling correspondence, fixing appointments, keeping the diary, arranging travel, keeping personal accounts and maintaining confidentiality.

Q4. Explain the types of institutional secretary.

The secretary of a non-profit association, of a co-operative society, of a joint stock company and of a government department.

Q5. State any four qualities of a secretary.

Professional knowledge, loyalty and secrecy, communication skills and punctuality.

Exam tip

Learn the Section 2(24) definition word for word. Definitions earn full marks only when they are exact.

Quick summary

Business organisation has developed over time from sole traders to large companies. This chapter traces that development: sole trading concern, Joint Hindu Family business, partnership, LLP, co-operative society and joint stock company. It then explains the meaning, definition, features and types of joint stock companies under the Companies Act, 2013.

Key points

• After the Industrial Revolution (England, 1760), large-scale production needed huge capital. Sole traders and partnerships could not supply it, so joint stock companies grew.
• Limited Liability Partnership (LLP): governed by the LLP Act, 2008. It is a separate legal entity, partners have limited liability, and it needs at least 2 partners.
• Section 2(20): "Company means a company incorporated under this Act or under any previous company law."
• Features of a company: incorporated association, artificial legal person, separate legal entity, limited liability, perpetual succession, common seal (now optional), transferable shares, separation of ownership and management, capital divided into shares, run by a Board of Directors.
• Types based on number of members: private company (minimum 2 and maximum 200 members, restricts the transfer of shares, cannot invite the public), public company (minimum 7 members, no maximum, can invite the public), One Person Company (Section 2(62), a single member, a kind of private company).
• Types based on liability: limited by shares, limited by guarantee, unlimited company.
• Other types: government company (at least 51% of capital held by government), holding and subsidiary companies, listed and unlisted companies, foreign company, small company, Section 8 (non-profit) company.
• Profit distributed among shareholders is called a dividend.

Important terms

• Artificial person – created by law. It can sue and be sued in its own name.
• Perpetual succession – the company continues even when its members change.
• Holding company – a company that controls another company (its subsidiary).
• OPC – One Person Company.

Formats and formulas

5 important questions

Q1. Define a company under the Companies Act, 2013.

Section 2(20): a company incorporated under this Act or under any previous company law.

Q2. Explain any four features of a joint stock company.

It is an artificial person, it is a separate legal entity, its members have limited liability and it has perpetual succession.

Q3. What is a One Person Company?

Under Section 2(62), it is a company with only one person as member. It is a type of private company.

Q4. Distinguish between a private and a public company.

Compare the minimum and maximum members, the minimum directors, share transfer and invitation to the public (see the table above).

Q5. Explain the types of companies on the basis of liability.

Companies limited by shares, companies limited by guarantee, and unlimited companies.

Exam tip

Quote section numbers such as 2(20) and 2(62) in your answers. They show precision and fetch marks.

Quick summary

A company is an artificial legal person. It comes into existence only when it is registered under the Companies Act, 2013. This chapter explains the three stages in forming a company: promotion, incorporation and commencement of business. It also covers the documents, forms and numbers involved, such as DSC, DIN, RUN and CIN.

Key points

• Formation of a company means registering it with the Registrar of Companies (ROC) of the state where its registered office will be.
• Section 3(1): a company must be formed for a lawful purpose. It needs at least 7 promoters for a public company, 2 for a private company and 1 for an OPC, and all of them must subscribe to the Memorandum.
• Promotion: the first stage. The promoters find a business idea, check its feasibility, gather resources and take steps to form the company. Section 2(69) defines a promoter. A promoter can be an individual, a firm, a company or a syndicate.
• Incorporation (registration) steps: (1) obtain a Digital Signature Certificate (DSC) for e-filing; (2) obtain a DIN for the proposed directors through SPICe form 32 (a DIN is a unique 8-digit number); (3) reserve the name through form RUN (Reserve Unique Name) with the Central Registration Centre; (4) draft the Memorandum and Articles of Association; (5) prepare the other documents and fix the registered address; (6) make the statutory declaration; (7) file the application and documents with the ROC; (8) obtain the Certificate of Incorporation, the company's birth certificate.
• CIN (Corporate Identity Number): a 21-character code. It shows whether the company is listed (L) or unlisted (U), its industry code, state, year of incorporation, type (PLC/PTC/OPC) and registration number.
• Commencement of business: public and private companies with share capital incorporated after 2 November 2018 need a certificate of commencement of business. To get it, a director files a declaration that every subscriber has paid for the shares they agreed to take. Companies without share capital can start right after incorporation.

Important terms

• Promoter – the person who conceives the idea of a company and takes steps to form it.
• Certificate of Incorporation – conclusive proof that the company is registered.
• DIN – Director Identification Number.
• RUN – Reserve Unique Name (the name approval form).

Formats and formulas

CIN example (from the textbook): L27100MH1907PLC000260. Here L = listed, 27100 = industry code, MH = state, 1907 = year of incorporation, PLC = public company, 000260 = registration number.

5 important questions

Q1. Who is a promoter?

A person who conceives the idea of forming a company and takes the necessary steps to form it. Section 2(69) of the Companies Act, 2013 defines the term.

Q2. Explain the stages in the formation of a company.

Promotion, then incorporation (registration with the ROC), then commencement of business.

Q3. Explain the steps in the incorporation of a company.

Obtain the DSC and DIN, reserve the name through RUN, draft the MoA and AoA, file the documents with the ROC and obtain the Certificate of Incorporation.

Q4. What is a certificate of commencement of business?

A certificate from the ROC that companies with share capital incorporated after 2 November 2018 need before they start business or borrow. It is issued after a director declares that the subscribers have paid for their shares.

Q5. What is the Certificate of Incorporation?

The ROC's certificate showing the company is registered. It is the company's birth certificate and carries its CIN.

Exam tip

Practise decoding a CIN. 'Identify the type of company' questions are easy marks.

Quick summary

Two documents must be filed with the Registrar of Companies when a company is incorporated: the Memorandum of Association (MoA) and the Articles of Association (AoA). A public company that raises money from the public must also issue a prospectus. This chapter explains these three documents, their contents and the differences between them.

Key points

• Memorandum of Association: the charter of the company. It sets out the company's objects, powers and the scope of its activities, and its relationship with outsiders.
• Clauses of the MoA: Name clause, Registered office (address) clause, Object clause, Liability clause, Capital clause and Association/Subscription clause.
• Doctrine of Ultra Vires: any act beyond the powers in the MoA is void, even if all members agree to it. Members can get an injunction against it, and the directors are personally liable. Its purpose is to protect shareholders, creditors and other stakeholders.
• MoA formats are prescribed as Tables A to E (for example, Table A is for a company limited by shares).
• Articles of Association: the internal rules for managing the company. They cover share capital, transfer of shares, meetings, voting, directors, dividends and accounts. The AoA is subordinate to the MoA.
• Model Articles are given as Tables F to J (Table F is for a company limited by shares).
• Prospectus (Section 2(70)): any document issued as a prospectus, including a red herring prospectus, shelf prospectus, notice, circular or advertisement inviting offers from the public for securities.
• Types of prospectus: abridged (a short version attached to the application form), shelf (valid for several issues over a period), red herring (does not give the full price or quantity details), letter of offer and offer letter (for private placement).
• The prospectus must contain true and full disclosures. Mis-statements lead to civil and criminal liability.

Important terms

• Ultra vires – beyond the powers of the company.
• Doctrine of constructive notice – outsiders are presumed to know the contents of the MoA and AoA.
• Doctrine of indoor management – outsiders may assume that internal procedures have been followed.
• Red herring prospectus – a prospectus without complete details of price or quantity.

Formats and formulas

5 important questions

Q1. Explain the clauses of the Memorandum of Association.

The name, registered office, object, liability, capital and association/subscription clauses.

Q2. Explain the Doctrine of Ultra Vires.

Any act beyond the MoA's powers is void and cannot be ratified even by all members. Directors are personally liable, and members can stop it through an injunction.

Q3. What are the Articles of Association? State their contents.

The internal rules of the company. They cover share capital, transfer of shares, meetings, voting, directors, dividends and accounts.

Q4. Define a prospectus and explain any two types.

Section 2(70) defines it. An abridged prospectus is a short version attached to the application form. A shelf prospectus is used for several issues over a period.

Q5. Distinguish between the MoA and the AoA.

The MoA is the charter and governs the company's relations with outsiders. The AoA contains the internal rules. Acts ultra vires the MoA are void, while acts beyond the AoA can be ratified.

Exam tip

Learn the six clauses of the MoA in order and the Doctrine of Ultra Vires. Both are favourite long-answer questions.

Quick summary

Members are the owners of a company. This chapter explains who a member is and how a member differs from a shareholder, who can become a member, the ways of acquiring membership, how membership ends, and the rights, duties and liabilities of members.

Key points

• Member: a person whose name is entered in the Register of Members. It also includes a holder of equity shares entered as a beneficial owner in the records of a depository (NSDL or CDSL).
• Member vs shareholder: the two words usually mean the same thing, but not always. A person can be a member without being a shareholder: a seller (transferor) remains a member until their name is removed, a deceased member's name stays until transmission, and an insolvent member remains a member. A buyer (transferee), a legal heir or an Official Receiver can hold shares without being a member yet. In a company limited by guarantee without share capital, there are members but no shareholders.
• Eligibility: any person who is sui juris, meaning legally competent to contract. A minor cannot be a member directly, but a guardian can buy shares on the minor's behalf. An insolvent or insane person cannot be a member. A company or body corporate can be a member. A partnership firm holds shares in the partners' names.
• Acquiring membership: by subscribing to the MoA, by application and allotment, by transfer (buying shares), by transmission (inheritance), by holding shares as a beneficial owner in a depository, by taking qualification shares as a director, or by estoppel (allowing one's name to stay on the register).
• Cessation of membership: transfer of shares, death (until transmission), forfeiture or surrender of shares, buy-back, redemption of preference shares, insolvency, winding up of the company, or rescission of the contract on the ground of fraud.
• Rights: to receive a share certificate, transfer shares, attend and vote at meetings, appoint a proxy, receive dividends, inspect registers and receive the annual report, get rights and bonus shares, apply to the NCLT against oppression and mismanagement, and share in surplus on winding up.
• Duties and liabilities: pay calls on shares, follow the MoA and AoA, act in the company's interest, and bear liability limited to the unpaid value of their shares.

Important terms

• Sui juris – legally competent to manage one's own affairs.
• Transmission – shares passing to a legal heir on a member's death.
• Beneficial owner – the investor who owns securities in electronic (demat) form.
• Depository – NSDL or CDSL, which hold securities electronically.

Formats and formulas

5 important questions

Q1. Who is a member of a company?

A person whose name is entered in the Register of Members, including a beneficial owner in the records of a depository.

Q2. Can a person be a member without being a shareholder?

Yes. A transferor whose name has not been removed, a deceased member before transmission, an insolvent member, and members of a guarantee company without share capital.

Q3. Explain the modes of acquiring membership.

Subscribing to the MoA, application and allotment, transfer, transmission, holding shares as a beneficial owner, qualification shares and estoppel.

Q4. State the circumstances in which membership ends.

Transfer, death, forfeiture, surrender, buy-back, redemption, insolvency and winding up.

Q5. Explain any four rights of a member.

The right to receive dividends, to vote at meetings, to transfer shares and to inspect statutory registers.

Exam tip

The 'member without being a shareholder' cases are a favourite reasoning question, so learn all of them.

Quick summary

In a company, ownership and management are separate. Shareholders own the company, and directors manage it as a Board. This chapter explains directors: their appointment rules, DIN, qualifications, types, powers, duties, liabilities, legal position, remuneration and removal. It also covers Key Managerial Personnel (KMP): the Managing Director, Whole-time Director, Manager, Company Secretary and Chief Financial Officer.

Key points

• Only an individual can be a director. A body corporate or firm cannot.
• Minimum directors: public company 3, private company 2, OPC 1. Maximum: 15, or more by special resolution.
• Prescribed companies must have at least one woman director. At least one director must have stayed in India for 182 days in the financial year. Listed public companies must have one-third independent directors.
• A person can be a director of at most 20 companies, of which at most 10 can be public companies.
• Every director must have a DIN (Director Identification Number), a unique 8-digit number.
• Types of directors: first directors (named by the promoters, in office till the first AGM), rotational, additional, alternate, woman, nominee, executive (whole-time), non-executive, independent (term up to 5 consecutive years) and small shareholders' director.
• Legal position: directors act as agents, trustees and officers of the company. They are also called managing partners.
• Duties: act in good faith, follow the AoA, use due care and skill, avoid conflicts of interest, not assign their office, and attend Board meetings.
• Managing Director (MD): holds substantial powers of management and is appointed for up to 5 years at a time. Disqualified if under 21 or over 70 years of age (above 70 needs a special resolution), an insolvent, or convicted with a sentence of more than 6 months.
• KMP: the CEO/MD/Manager, the Whole-time Director, the Company Secretary and the CFO (Chief Financial Officer).
• Removal: shareholders can remove a director by an ordinary resolution in a general meeting after giving special notice and allowing the director a hearing.

Important terms

• DIN – Director Identification Number.
• Independent director – a non-executive director with no material relationship with the company.
• Nominee director – appointed by a financial institution or major shareholder to protect its interests.
• KMP – Key Managerial Personnel.

Formats and formulas

5 important questions

Q1. State the provisions regarding the number of directors.

Minimum 3 for a public company, 2 for a private company and 1 for an OPC. Maximum 15, or more by special resolution. A person can hold at most 20 directorships, including at most 10 public companies.

Q2. What is a DIN?

A unique 8-digit Director Identification Number allotted to a person who wants to become a director.

Q3. Explain any four types of directors.

First directors, additional directors, nominee directors and independent directors (see the key points).

Q4. State the disqualifications of a Managing Director.

Being under 21 or over 70 years of age (over 70 needs a special resolution), being an undischarged insolvent, having suspended payments to creditors, or being convicted with a sentence of more than 6 months.

Q5. Who are Key Managerial Personnel?

The MD/CEO/Manager, the Whole-time Director, the Company Secretary and the Chief Financial Officer.

Exam tip

Numbers matter in this chapter: 3/2/1 minimum directors, 15 maximum, 20/10 directorships, 182 days, and ages 21 and 70. Make a table and revise it.

Quick summary

Shareholders own a company but cannot manage it every day, so important decisions are taken at meetings. A meeting is valid only if it is properly convened, properly constituted and properly conducted. This chapter explains each of these three essentials: proper authority, notice, agenda, quorum, chairman, proxy, motion, voting, resolution and minutes.

Key points

• Properly convened: the meeting must be called by the proper authority (usually the Board of Directors), with proper notice and an agenda.
• Notice: states the day, date, time, place and agenda, and that a member may appoint a proxy. For a general meeting, 21 clear days' notice is needed (the day of sending and the day of the meeting are excluded). For a Board meeting, 7 days' notice. Special business needs an explanatory statement.
• Agenda: the list of business to be transacted, in order. There are two types: bare statement agenda and draft minutes agenda.
• Properly constituted: the quorum (Section 103) must be present from the start to the end of the meeting, and a proper chairman (Section 104) must preside.
• Quorum for general meetings of a public company: up to 1000 members needs 5; 1000 to 5000 members needs 15; more than 5000 members needs 30. Private company: 2 members present in person. Board meeting: one-third of the total directors or 2, whichever is higher.
• Properly conducted:
• Proxy (Section 105): a person who attends and votes on behalf of a member. A proxy need not be a member, cannot speak, and votes only on a poll. The proxy form must be deposited 48 hours before the meeting. There is no proxy for Board meetings.
• Motion: a written proposal placed before the meeting. It can be amended before it is adopted.
• Voting methods: voice, division, show of hands, ballot, electronic voting (Section 108), postal ballot (Section 110) and poll.
• Resolution: a motion that has been adopted. An ordinary resolution (Section 114) needs a simple majority of more than 50%. A special resolution needs a 75% majority (votes in favour at least three times the votes against) and must be filed with the ROC within 30 days, for example to change the company's name or alter the AoA. Some resolutions need special notice (Section 115).
• Minutes (Section 118): a concise, accurate record of the decisions taken. They are prepared by the secretary within 15 days (as per the textbook), written in the past tense, and signed by the chairman.

Important terms

• Quorum – the minimum number of members who must be present.
• Proxy – a representative who votes on behalf of a member.
• Motion – a proposal placed for discussion.
• Resolution – a motion passed by the meeting.

Formats and formulas

5 important questions

Q1. State the essentials of a valid meeting.

It must be properly convened (authority, notice, agenda), properly constituted (quorum, chairman) and properly conducted (proxy, motion, voting, resolution, minutes).

Q2. Explain the provisions regarding quorum.

For a public company: 5 members (up to 1000 members), 15 (1000 to 5000) or 30 (above 5000). For a private company: 2. For a Board meeting: one-third of the directors or 2, whichever is higher.

Q3. What is a proxy? State the legal provisions.

A person who votes on behalf of a member. A proxy need not be a member, cannot speak, votes only on a poll, and the proxy form must be lodged 48 hours before the meeting.

Q4. Distinguish between an ordinary and a special resolution.

Compare the majority needed, filing with the ROC and examples (see the table above).

Q5. What are minutes?

A concise and accurate record of the decisions taken at a meeting, written in the past tense and signed by the chairman.

Exam tip

'Properly convened, constituted and conducted' is the backbone of this chapter. Arrange every answer under these three heads.

Quick summary

Companies hold different types of meetings: shareholders' meetings (AGM, EOGM and class meetings), directors' meetings (Board and committee meetings) and creditors' meetings. This chapter explains each type with its legal provisions and the secretary's duties before, during and after the Annual General Meeting.

Key points

• Annual General Meeting (AGM) – Section 96: a meeting of equity shareholders held once every financial year to review progress, adopt the financial statements, declare a dividend, appoint directors and auditors, and fix the auditors' pay.
• AGM timing: the first AGM must be held within 9 months of the close of the first financial year. Later AGMs must be held within 6 months of the end of the financial year. The gap between two AGMs cannot exceed 15 months. The ROC can grant an extension, but not for the first AGM. 21 clear days' notice is required, and the annual report is sent with the notice.
• Extraordinary General Meeting (EOGM) – Section 100: held between two AGMs for special or urgent business, such as altering the MoA or AoA, removing a director or auditor before the end of their term, or voluntary winding up. It is called by the Board, on requisition by members, or by the NCLT.
• Class meeting – Section 48: a meeting of one class of shareholders (for example, preference shareholders) to approve changes to their rights. A special resolution is usually passed.
• Board meeting – Section 173: a meeting of the directors to take management decisions. The first Board meeting is held within 30 days of incorporation. There must be at least 4 Board meetings a year, with no more than 120 days between two meetings. 7 days' notice is required, and no proxy is allowed.
• Committee meeting: committees appointed by the Board (such as the audit committee) meet and report to the Board.
• Creditors' meeting: a meeting of debenture holders, depositors, bankers and other creditors, for example to change interest rates or security terms, or when the company is in financial difficulty.
• Secretary's role at the AGM: before – fixing the date with the Board, sending notices and annual reports, preparing the agenda and arranging the venue. During – checking the quorum and proxies, assisting the chairman and noting the proceedings. After – preparing the minutes, filing returns and resolutions with the ROC and paying dividends.

Important terms

• AGM – Annual General Meeting.
• EOGM – Extraordinary General Meeting.
• Requisition – a demand by members to call a meeting.
• Annual report – financial statements with the directors' and auditors' reports.

Key facts

5 important questions

Q1. State the legal provisions regarding the AGM.

The first AGM within 9 months of the end of the first financial year, later AGMs within 6 months of the year end, a gap of no more than 15 months, and 21 clear days' notice.

Q2. What is an EOGM? State its purposes.

A general meeting held between two AGMs for urgent business, such as altering the MoA or AoA, removing a director or auditor, or voluntary winding up.

Q3. Explain the provisions regarding Board meetings.

At least 4 meetings a year with a gap of no more than 120 days, the first within 30 days of incorporation, 7 days' notice, a quorum of one-third of the directors or 2, and no proxy.

Q4. Explain the secretary's functions before, during and after the AGM.

Before: notices, the agenda and arrangements. During: quorum, proxies and assisting the chairman. After: minutes, ROC filings and dividends.

Q5. What is a class meeting?

A meeting of a particular class of shareholders to approve changes to their rights (Section 48).

Exam tip

Distinguishing the AGM from the EOGM and shareholders' meetings from Board meetings are regular questions. Learn the tables.

Quick summary

Communication comes from the Latin word communis, meaning 'common'. Business communication is the exchange of information about business matters. This chapter explains the meaning of business communication, internal and external communication, the methods (verbal, non-verbal and written), the merits of written communication, the modes of electronic communication, the skills needed for effective communication, and the secretary's role in drafting letters, notices, reports and minutes.

Key points

• George R. Terry: communication is an exchange of facts, ideas, opinions or emotions by two or more persons.
• Types: internal communication takes place between departments of the organisation and supports managerial functions. External communication takes place with outsiders such as banks, suppliers, creditors and the government, and connects the firm to its environment.
• Methods: verbal (oral) – personal talks, interviews, speeches and telephone calls; non-verbal – body language, facial expressions, eye contact, silence, signs and symbols; written – letters, notices, reports, circulars and e-mails.
• Merits of written communication: it is a permanent record, serves as legal evidence and can be referred to later; it is suitable for long and complex messages; it is precise; it fixes responsibility; and it reaches many people.
• Modes of electronic communication: e-mail, websites (each with a unique URL), blogs, video conferencing, mobile/cellular phones and social media networks.
• Skills for effective communication: listening (active listening), suitable body language, being clear and concise, friendliness, confidence, empathy, open-mindedness, respect and giving feedback.
• Secretary's role: draft business letters (enquiries, orders, replies), notices of meetings (giving the date, time, place and agenda), reports (for the Board or committees, factual and clear) and minutes (an accurate record of decisions, in the past tense).
• Parts of a business letter: heading, date, reference number, inside address, subject, salutation, body, complimentary close, signature, and enclosures if any.

Important terms

• Communis – the Latin root of 'communication', meaning 'common'.
• Non-verbal communication – communication without words.
• Video conferencing – a live audio-video meeting between people in different places.
• Blog – a website for publishing informal online posts.

Formats and formulas

5 important questions

Q1. Define business communication.

Communication about business affairs between business entities or within one. George R. Terry describes communication as an exchange of facts, ideas, opinions or emotions by two or more persons.

Q2. Distinguish between internal and external communication.

Internal communication takes place within the organisation between departments. External communication takes place with outsiders such as banks, suppliers and the government.

Q3. State the merits of written communication.

It gives a permanent record and legal evidence, it is precise, it can be referred to later and it suits long messages.

Q4. Explain any three modes of electronic communication.

E-mail sends messages and files over the internet. A website is a set of web pages with a unique URL. Video conferencing allows live meetings across distances.

Q5. State the skills required for effective communication.

Active listening, good body language, clarity and conciseness, confidence, empathy and respect.

Exam tip

For the secretary's role, give one line each on letters, notices, reports and minutes. All four are expected in the answer.

Quick summary

Directors are the elected representatives of the shareholders and manage the company, but they are not always present at the office. The secretary keeps them informed through letters. This chapter covers the precautions a secretary must take when writing to directors, the situations that call for such letters, and the specimen letters.

Key points

• Directors hold a key position and are the secretary's superiors, so letters to them must be careful and tactful.
• Precautions: reply promptly, be polite and courteous, take initiative (for example, arrange Board meetings and send reminders), be accurate and clear, keep confidential matters secret, be brief, follow the law, and be impartial towards all directors.
• Situations needing correspondence (as per the textbook):
• Sending the notice and agenda of a routine Board meeting.
• Asking a director to disclose personal interest in a contract.
• Reporting the proceedings of a meeting to a director who was absent.
• Reminding a director of the provision on absence from Board meetings.
• Board meeting provisions – Section 173(1): the first Board meeting must be held within 30 days of incorporation. At least 4 meetings must be held every year, with no more than 120 days between two meetings. At least 7 days' written notice and the agenda must be sent to every director by hand, post or electronic means.
• Disclosure of interest: a director who is interested in a contract or arrangement with the company must disclose that interest to the Board.
• Absence – Section 167(1)(b): if a director is absent from all Board meetings held during a period of 12 months, with or without leave of absence, the director is deemed to have vacated office.
• A report to an absent director is sent with a copy of the draft minutes.

Important terms

• Agenda – the list of business for a meeting.
• Disclosure of interest – a director's statement of personal interest in a company contract.
• Vacation of office – a director ceasing to hold office by operation of law.
• Draft minutes – minutes prepared before they are approved.

Formats and formulas

Board letters carry marks for layout: letterhead, reference number, date, inside address, subject, salutation, body, complimentary close, signature with designation, and enclosures.

Typical layout of a notice of a Board meeting: company letterhead with CIN, reference number and date, the director's name and address, subject ("Notice of Board Meeting"), salutation ("Dear Sir/Madam"), the date, time and venue, the agenda items as a numbered list, a request to attend, "Yours faithfully", and the Company Secretary's signature.

5 important questions

Q1. State the precautions a secretary should take while corresponding with directors.

Reply promptly, be polite, take initiative, be accurate, keep secrecy, be brief and follow the law.

Q2. State the circumstances in which a secretary writes to directors.

The notice and agenda of a Board meeting, disclosure of interest, a report to an absent director, and a reminder about absence from meetings.

Q3. Draft a notice and agenda of a routine Board meeting.

Use the letter layout above. The agenda includes leave of absence, confirmation of the previous minutes, the business items, and any other matter with the chairman's permission.

Q4. What is the provision regarding a director's absence from Board meetings?

Under Section 167(1)(b), a director absent from all Board meetings held during 12 months, with or without leave, is deemed to have vacated office.

Q5. Why does the secretary send a report to an absent director?

To inform the director of the decisions taken, so the director stays updated. A copy of the draft minutes is enclosed.

Exam tip

Letter questions carry 5 marks. Learn one complete format and adapt it to each situation.

Quick summary

A bank is a financial institution and an important aid to trade. A company deals with banks for accounts, payments and finance, and the secretary handles this correspondence. This chapter explains the meaning and functions of a commercial bank, the precautions a secretary must take while writing to banks, the common situations for such letters and the specimen letters.

Key points

• Primary functions of a commercial bank: accepting deposits and lending money. The bank's profit is the difference between the interest it charges on loans and the interest it pays on deposits.
• Demand deposits: savings deposits (encourage saving and limit withdrawals) and current deposits (opened by businesses, with no limit on withdrawals, generally no interest, and an overdraft facility). Time deposits: fixed and recurring deposits, repayable after a fixed period.
• Lending: loans, cash credit, overdraft (for current account holders only), and discounting of bills of exchange.
• Secondary functions: agency functions (collecting cheques, paying bills, buying and selling securities on the customer's behalf) and utility functions (letters of credit, lockers, traveller's cheques, ATM/debit cards, e-banking).
• Precautions: reply promptly, be brief, be courteous, be clear, be accurate, keep secrecy, follow legal procedure (for example, enclose a certified copy of the Board resolution), and attach the necessary documents.
• Situations for correspondence (as per the textbook):
• Opening a current account (decided by a Board resolution).
• Asking the bank to stop payment of a cheque.
• Asking the bank for an overdraft facility.
• Asking the bank to issue a letter of credit.
• Documents usually enclosed for opening a current account: a certified copy of the Board resolution, the MoA and AoA, the Certificate of Incorporation, the account opening form and specimen signatures of the authorised signatories.

Important terms

• Overdraft – permission to withdraw more than the balance in a current account.
• Letter of credit – a bank's guarantee of payment to a seller on behalf of a buyer.
• Stop payment – an instruction to the bank not to honour a particular cheque.
• Demand deposit – a deposit repayable whenever the depositor asks for it.

Formats and formulas

Board letters carry marks for layout: letterhead, reference number, date, inside address, subject, salutation, body, complimentary close, signature with designation, and enclosures.

5 important questions

Q1. Explain the primary functions of a commercial bank.

Accepting demand and time deposits, and lending money through loans, cash credit, overdrafts and discounting of bills.

Q2. State the precautions a secretary should take while corresponding with banks.

Reply promptly, be brief, be courteous, be clear, be accurate, keep secrecy and follow legal procedures.

Q3. Draft a letter to a bank for opening a current account.

Use the layout above. Mention the Board resolution and enclose a certified copy of it, the MoA, AoA, Certificate of Incorporation and specimen signatures.

Q4. Draft a letter asking a bank to stop payment of a cheque.

Give the cheque number, date, amount and payee, the reason (for example, the cheque was lost), and ask the bank to stop payment immediately.

Q5. Distinguish between a loan and an overdraft.

Compare who can get it, how the amount is given and how interest is charged (see the table above).

Exam tip

In bank letters, always mention the account number and enclose a certified copy of the Board resolution. Examiners check for it.

Quick summary

Companies must follow the Companies Act, 2013 and other laws, which are administered by statutory authorities. This chapter introduces the Ministry of Corporate Affairs (MCA), the Registrar of Companies (ROC), the National Company Law Tribunal (NCLT), the National Company Law Appellate Tribunal (NCLAT) and SEBI. It also covers the precautions a secretary must take when writing to these authorities and the specimen letters.

Key points

• MCA: the Central Government has given it the power to regulate the corporate sector. It administers the Companies Act 2013, the Partnership Act 1932, the LLP Act 2008, the Competition Act 2002 and others, and supervises professional bodies such as the ICAI and ICSI.
• ROC: appointed by the Central Government to register companies and administer the Companies Act in a state. ROCs examine the documents filed by companies, register companies and can grant an extension of up to 3 months for holding an AGM.
• NCLT: a quasi-judicial body set up in June 2016 to decide corporate civil disputes and grant approvals under the Act. It works through benches of a judicial member and a technical member, with its Principal Bench at New Delhi.
• NCLAT: set up in June 2016 to hear appeals against orders of the NCLT, the National Financial Reporting Authority, the Insolvency and Bankruptcy Board of India and the Competition Commission of India. It is headed by a chairperson and has at most 11 members.
• SEBI: a statutory body set up in 1992 (as per this textbook), with its head office in Mumbai. It regulates the securities market, stock exchanges and intermediaries, and protects investors.
• Precautions: reply promptly, follow the legal requirements (enclose the required documents), be accurate, be clear, be brief and be courteous.
• Specimen letters in the textbook:
• To the ROC, seeking an extension of time to hold the AGM (for example, because of a strike, a raid or financial statements not being ready).
• To the MCA, raising a service ticket or a technical complaint about e-filing on the MCA portal.
• To an investor, replying to a complaint about not receiving the annual report, with a copy to SEBI.
• To the NCLT, seeking an extension of time to repay public deposits (deposits are accepted for at most 36 months).

Important terms

• Statutory authority – a body created by law to administer it.
• Quasi-judicial – having powers like a court.
• Bench – a group of tribunal members who hear cases.
• Public deposits – money accepted by a company from the public as deposits.

Formats and formulas

Board letters carry marks for layout: letterhead, reference number, date, inside address, subject, salutation, body, complimentary close, signature with designation, and enclosures.

5 important questions

Q1. State the functions of the Registrar of Companies.

Registering companies, examining the documents filed, administering the Companies Act in the state and granting extensions (for example, up to 3 months for holding an AGM).

Q2. Write a note on the NCLT.

A quasi-judicial body set up in June 2016 to decide corporate disputes under the Companies Act. It works through benches of judicial and technical members, with its Principal Bench in New Delhi.

Q3. What is the role of SEBI?

It regulates the securities market and stock exchanges, controls intermediaries and protects investors.

Q4. State the precautions a secretary should take while corresponding with statutory authorities.

Reply promptly, follow the law, be accurate, be clear, be brief and be courteous.

Q5. Draft a letter to the ROC seeking an extension of time to hold the AGM.

Use the letter layout above. Give the reason (for example, a strike or the accounts not being finalised), ask for an extension of up to 3 months, and enclose the supporting documents.

Exam tip

Learn the full forms and set-up years (NCLT and NCLAT in June 2016, SEBI in 1992). They are common objective questions.