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Month: March 2023

Proxy under Company Law Act 2013

Meaning

”Proxy” means an instrument in writing signed by a Member, authorizing another person, whether a Member or not, to attend and vote on his behalf at a Meeting and also where the context so requires, the person so appointed by a Member.

Black’s Law Dictionary [9th Edition, Page 1346] defines the term “proxy” as

“1.One who is authorized to act as a substitute for another; esp., in corporate law, a person who is authorized to vote another’s stock shares.

2. The grant of authority by which a person is so authorized.

3. The document granting this authority.”

Proxy Applicable Provisions: Section 105 of Companies Act, 2013 Rule 19 of Companies (Management and Administration) Rules, 2014 defined “A person who can attend and vote in general meeting on behalf of the member of the company”.

Appointment:

CG may notify the class or classes of company /companies that shall not have right to appoint Form MGT 11 to be filed by the member. Further, it needs to be in writing and signed by the member and any other format is not admissible. Form shall be deposited within 48 hours or it may require any longer period prescribed in Article before commencement of the meeting at Registered Office. A person can become proxy for maximum 50 members and their holding is in aggregate of 10% of Share Capital carrying voting rights. In case of Section 8 company, only the member of such section 8 company is entitled to become proxy for another member. Company, at its own expense cannot invite to its member for appointing proxy. If invited, fine up to Rs. 50,000 will be imposed to every officers of the company who issues the invitation. Provided the officer is not liable by reason if proxy form and list of persons provided who are willing to appointed as proxy on the direction of members.

Benefits of Proxy

Management ensures that ownership interests are fully represented by encouraging shareholders that are unable to attend annual meetings to vote by proxy. Before the annual meeting, each shareholder is issued a proxy card, allowing them to state their votes in writing or designate a third party to vote on their behalf. proxy voting allows shareholders to vote on the composition of the company’s board, the compensation of its officers, and the company’s accounting firm. It also allows voting on shareholder proposals. During corporate elections, the board of elections will recommend their preferred candidates or choices, but the final decision is up to each voter.

Proxy Statements

Before the annual shareholder meeting, all shareholders receive a packet of information containing the proxy Statement. The proxy documents provide shareholders with the information necessary to make informed votes on issues important to the company’s performance. A Proxy statement offers shareholders and prospective investors insight into a company’s  governance and management operations

Rights of the proxy:

  1. Attending meeting.

2. Voting on poll.

Disabilities of proxy:

A person appointed as proxy shall not have the right to give views on the agenda for which meeting is conducted at the meeting. A proxy cannot vote on a show of hands. A proxy is not counted for the purpose of quorum He cannot vote by show of hands Disclosure in Notice of GM: In every notice of general meeting the company shall state that a member who is entitled to attend and vote can appoint proxy on his behalf and that proxy need not to be a member (except in the case of Section 8 company). If there is any default made in compliance with this provision, penalty of Rs.5000 will be imposed.

Inspection:

Any member is entitled to inspect proxy forms within 24 hours prior to the general meeting to the conclusion of such general meeting. Notice for inspection required to be given by the member at least 3 days before the commencement of meeting. Additional Points: If member attends the meeting, after appointment of proxy, the rights of proxy shall be revoked.

Conclusion:

A proxy is an agent legally authorized to act on behalf of another party or a format that allows an investor to vote without being physically present at the meeting. Shareholders not attending a company’s  annul general meeting (AGM) may vote their shares by proxy by allowing someone else to cast votes on their behalf, or they may vote by mail. Management ensures ownership interests are fully represented by encouraging shareholders who are unable to attend annual meetings to vote by proxy. Proxy’s appointment is valid for both, the original and the adjourned GM, and he should carry a valid identity proof while attending such GMs. A proxy’s authority can be revoked in writing anytime before the GM. In case a member who had appointed a proxy also attends the GM, the proxy’s authority automatically stands revoked.

Elements of Crime

Meaning of Crime:

An action committed or omitted, which constitutes an offence and is punishable by law, is a crime. A crime is an unlawful act that is forbidden and punished by the state or the law. In other words, anything that is injurious to the public’s welfare is a crime. It is a ‘Crime ‘ is a public wrong. It is an offence against the community or society as a whole. It causes a threat to social security and creates social disorder. Actually, crime does not have a properly and precise definition. However, many attempts were made to define the term ‘Crime’ prominent among them are given below:

According to Blackstone’s Definition: Sir William Blackstone, in his ‘Commentaries on Law of England’, defines ‘Crime’ as an act committed or omitted in violation of public law forbidding or commanding it.

“Crime is an act, that is both forbidden by law and revolting against the moral sentiments of society, as” defined by Sir James Stephen.

Kenny defines crime as “wrongs whose sanction is punitive and in no way remissible by any private person, but is remissible by the Crown alone, if remissible at all.

an offence takes place in two ways 1. commission of an act; and 2. omission of an act. Therefore, all acts and omissions are described as offences under the penal code. Crime is public wrong in the sense; any member of the public can institute criminal proceedings against the person accused of an offence.

the fundamental principal of criminal liability is that there must be a wrongful act combined with wrongful intention. This Principle is laid down in the Maxim “Actus Non Facit Reum Nisi Mens Sit Rea,” which means intent and act both must concur to constitute a Crime.

Elements of Crime:

  1. Human being
  2. Mens Rea (mental element or evil intent)
  3. Actus Rea (Act or Omission)
  4. Injury
  1. Human being: The first element of crime is that it must have been committed by a human being. The IPC makes every person liable for punishment for every act or omission contrary to law. ” Person” means a natural person, i.e., a human being. In ancient days, the theory of retribution was in vogue. ” A tooth for a tooth and an eye for an eye” was the law. Hence, animals were punished. it means if a dog kills a child or a horse kicks a man, the animal could be punished. At present, its owners is subject to civil or tortuous liability.
  2. Mens Rea (mental element or evil intent): The second constituent of crime is Mens rea, guilt of mind, or evil intent. the mental element is necessary for element of a Crime. An act itself is no crime, unless it is coupled with evil intent or guilt of mind. a) mens rea (guilty mind); b)  Actus reus ( guilty act ). Motive and Intention are both aspects in the field of law and justice both are very important. They are also associated with the purpose of proving or disproving a particular case or crime. A wrong motive with guilty intention is necessary to prove criminal liability. The word ‘mens rea’ has never been used in I.P.C but it applied in two different ways to avoid confusion.

a) The actual intent required for the offence was used in defining the offence.

b) The expression was fraudulent. dishonestly, unintentionally, etc., are used in definition to indicate the criminal intent.

Although mens rea is an essential element of crime, some offences can occur without it. For example, Section 304-A of IPC makes death by negligence a criminal offence. In such cases, a “negligent act” would not include the intention to cause death. However,  negligence or mistake itself is sufficient to constitute a crime.

3. Actus Rea (Act or Omission): The third element, ‘Actus Reus’ denotes ‘Physical Act’ Actus reus basically refers to an act or omission which leads to the completion of an offence. Both mens rea, as well as actus reus, are important to create an offence. Actus reus can be a positive act, such as stabbing a person to cause his death. It can also be an omission (failure) to perform an action. An act also includes omissions. A man is also held liable if some duty is imposed upon him by law, and he omits to discharge that duty. An omission must be a breach of a legal duty. The act committed must be one that is forbidden or punished by the law. Omission as a subset of Act. All omissions are acts, but not all acts are omissions.

4. Injury: The fourth requirement of a crime is injury to another person or to society at large. It means a cause must be illegal. The injury should be illegally caused to any person’s body, mind, reputation, or property. ‘Injury’ has been defined in Section 44 of the I.P.C. as ‘any harm whatever illegally caused to any person in body, mind, reputation, or property.

Conclusion:

Elements of crime are a set off acts that must be shown in order for a defendant to be convicted of a crime. Criminal elements are defined in criminal statutes or cases in jurisdictions where common law crimes are permitted. Mens Rea embodies the essence of the crime. It is not a crime in the eyes of the law if there is no intent to act in such a way that it causes harm to another person or property. Mens rea is also employed in some civil disputes, requiring the defendant to have been aware of the consequences of their conduct in order for civil culpability to arise, but in most cases of civil liability, the Actus Reus takes precedence.

Prospectus

In general parlance prospectus refers to an information booklet or offer document on the basis of which an investor invests in the securities of an issuer company. It has been defined under section 2(70) so as to mean any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate.

Matters to be stated in prospectus[Section 26]
(1) Dated: Every prospectus must be dated. The date appearing on the prospectus is deemed to be date of publishing prospectus
(2) Registered: The prospectus must be registered with ROC on or before issue of prospectus to public
(3) Issued: The prospectus must be issued to public within 90 days of registration with ROC. Any issue of securities under the prospectus which is issued beyond 90 days shall be deemed to be an issue without a prospectus.
(4) Contents of the prospectus: Every prospectus issued by or on behalf of a public company either with reference to its formation or subsequently, or by or on behalf of any person who is or has been engaged or interested in the formation of
a public company, shall be dated and signed and shall state such information and set out such reports on financial information as may be specified by the Securities and Exchange Board in consultation with the Central Government:
General Information ,Financial Information & Statutory Information

Red Herring Prospectus

The Red Herring Prospectus does not include the full particulars of the price of the securities. A company planning to make an offer of securities can issue a red herring prospectus before the issue of the prospectus. The companies file the red herring prospectus with the RoC at least 3 days before the opening the offer. The obligations of this are similar to that of any of the prospectus. The variations in the red herring prospectus from the other prospectus are highlighted. While closing an offer, the companies file the prospectus with the RoC and SEBI . It contains the information of the total capital raised whether, by share capital or debt, the closing price of the offer and the other details left out in the red herring prospectus.

Abridged Prospectus

Abridged Prospectus is a memorandum which has salient features of the prospectus. There shall be no form of application for issuing any securities unless it has the abridged prospectus. It has four exceptions like:

  • When the company does not offer the securities to the public
  • The offer is to the members or debenture holders of the company with or without the right to renounce
  • The company makes an offer concerning the bonafide invitation to a person. This is to enter into an underwriting agreement concerning the securities
  • The shares or the debentures offered should be uniform and similar to the shares and debentures that are already issued

If a person requests a copy of the prospectus, he will be given before the closing of the offer and subscription list. If the company does not comply with any of these provisions, then they will be liable to pay an amount of Rs.50,000 for each default.

Shelf Prospectus

A shelf prospectus is a type of prospectus issued by companies making multiple issues of bonds for raising funds. A prospectus is a notice, advertisement or any other document inviting the public to subscribe for securities. It is compulsory for ;Public limited companies to issue a prospectus before issuing securities. A shelf prospectus can be issued by any public limited company raising funds through multiple issues of bonds. Companies which issue a shelf prospectus should file an Information Memorandum in Form PAS-2.

The advantage of a shelf prospectus is that a new prospectus need not be issued every time the company issues securities. A maximum of four issues of securities can be made using a shelf prospectus. A shelf prospectus should be used within a maximum of one year.

A shelf prospectus can be filed only by companies issuing non-convertible debt bonds (these are bonds which cannot later be converted into  share capital). The procedure for raising funds using a shelf prospectus is the same as for raising debt funds. The only additional requirement is to file an Information Memorandum.

A substantial amount of public money is involved when a company goes in for a public issue of bonds. Therefore, any public issue is governed by the rules and regulations developed by the Securities and Exchange Board of India (SEBI).

Applicability

The following kinds of companies are eligible to issue a shelf prospectus:

  • Public Financial Institutions (PFIs) (PFIs are companies whose paid-up share capital is held by the Central Government to the extent of more than 51 per cent. Examples are the Life Insurance Corporation of India, Infrastructure Development Finance Company Limited, Industrial Credit and Investment Corporation of India Limited, Industrial Finance Corporation of India, and Industrial Development Bank of India.)
  • Public sector banks
  • Non-Banking Financial Companies.
  • Listed companies [A listed company has its securities listed with the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) or Calcutta Stock Exchange (CSE)]

Conditions

These are the conditions that should be followed by a company opting to issue a shelf prospectus:

  • The company’s net-worth should be more than Rs.500 crores.
  • The company should have had distributable profit during the preceding three years.
  • An arrangement should be made for dematerialisation of securities. The arrangement must be made with a depository registered with the SEBI.
  • A merchant banker should be appointed for the issue. The merchant banker must be registered with the SEBI.
  • In case debentures are issued, a debenture trustee should be appointed.
  • Credit rating should be obtained. The securities issued should have a credit rating of AA- or more (Credit ratings are accepted only from credit rating agencies registered with the SEBI).
  • The company’s directors or promoters should not have been faced with any regulatory action.
  • The company should not have defaulted in repayment of deposits during the preceding three years.
  • The company should have honoured its listing agreement during the preceding three years.

Remedies for Untrue Statement or Mis-statement

If a company issues a prospectus, then it is responsible for the statement in it.The Companies Act, 2013 provides remedies for civil liability and criminal liability.

Civil Liability for Mis-statement

If a subscribed person of the securities suffers any loss or damage because of a misleading statement in the prospectus, then the company is liable to pay for the compensation to every subscribed person of the securities. Every director and promoter of the company is liable to pay for the compensation. The person who authorises the issue of prospectus and the expert who issues the statement is also responsible for paying the compensation. The directors of a company are not liable to the punishment if they have withdrawn from the post before the issuance of the prospectus or if the prospectus was issued without his knowledge and he proves it by public notice. The expert can also escape the liability by proving that after giving consent to the copy, he withdrew before it was delivered to the RoC.

Criminal Liability for Mis-statement

The persons responsible for the issue of such a prospectus that has untrue statements will be liable under Section 447. This section provides that any person who is guilty of fraud will receive imprisonment for 6 months which may extend to 10 years. They shall also pay a fine of an amount not less than that involved in the fraud; this may extend up to three times. If the fraud involves the interest of the public, then the imprisonment period will not be less than 3 years. If the person authorised the issue without prior knowledge and if he proves it, then he is not liable to imprisonment

Conclusion:

A prospectus is an essential disclosure document that a company has to issue at the time of issuing investment securities to the public. These formal documents provide detailed information to prospective investors about mutual funds, bonds, stocks, and other investment offerings to the public. A prospectus is an advertisement or an invitation from a company to the general public to subscribe or purchase shares or debentures issued by the company. This invitation to purchase shares is also known as the initial public offering (IPO), through which a public company can raise the funds it requires.