Section 173 of the Companies Act (Explanatory Statement to the Notice)
Section 173 of the Companies Act
(Explanatory Statement to the Notice)
For the purpose of this section
1 (a)in the case of annual general meeting all the business to be transacted at the meeting is to be treated as special except :
I. Consideration of accounts, Balance Sheet, Directors Report and Auditors report
II. The declaration of dividend
III appointment of directors in the place of those retiring
IV appointment and fixing of remuneration of Auditors
(b) I n the case of any other meeting all the business shall be deemed to be special business.
2. where any item of business to be transacted at the meeting are deemed to be special as aforesaid, there shall be annexed to the notice of the meeting a statement setting out all the material facts concerning each such item of business , including in particular (the nature of concern or interest), if any, therein, of every Director.
[provided that any item of special business as aforesaid to be transacted at the meeting of the company relates to or affects any other company the extent of interest of share holder in that company shall also be set out in the statement if the extent of such share holding interest is not less than 20%of the paid up share capital of that other company.
3. Where an item of business consists of the according of approvals to nay document by the meeting, the time and place where documents can be inspected shall be specified in the statement aforesaid.
Department view on re appointment of additional Director (section :173 ( a)(iii)) – the appointment of Director in place of retiring director is the item of ordinary business to be transacted at annual general meeting ,now the retirement of director may by influx of time rotation or otherwise there fore director who is appointed at Board of Directors meeting and retires at AGM the provision of this section shall apply section :173 ( a)(iii).
[Letter no8/53(173)/65-CL-Vdated 1-09-1965]
EGM Special Business –
In case of any GM other than AGM, all the business shall be deemed to be special business thus business to be transacted at statutory meeting and EGM is treated as special business
Explanatory Statement: shall set out
1. all material facts concerning the item of business
2. nature of concern or interest therein of every Director and manager if any shall be annexed to the notice of meeting
Business affecting others business:
If such item of special business affects any other company or if any of the Director or manager of the first company holds 20% of more of the share paid up capital of that other company, then the extent of such share holding should also be mentioned in the explanatory statement
Time and place for inspection of documents (section 173(3))
If the approval of members is necessary for any document then explanatory statement shall also mention time and place where documents can be inspected.
Requirement of the section Special Business-
Under section 173 of any item of business to be treated as special business a statement is to be annexed setting out material fact concerning such item
1. it is suggested that annexing relevant particulars is sufficient compliance with the law and no specific mention in the notice that the item is special item is necessary
2. it has been enquired whether the explanatory statement for any such special is the part of notice itself
3. Department has expressed
(i) Mention of full relevant particulars in the explanatory statement annexed to the notice would be sufficient compliance with the law
Section 173 is mandatory and not Directory
Effects of non – compliance – the provisions of section 173 of the companies Act, 1956 are mandatory, non compliance with this section will make the proceedings of this meeting in valid
General meeting of public companies –
Section 171 to 186 shall apply to the General Meeting of public companies and there subsidiaries irrespective of any provisions to the contrary in the Articles of the Company
Private Company – A private Company not being subsidiary of public company can make its own provisions by its Articles and exclude the provisions section 171 to 186.
Checklist for Section 173 check whether
1. An explanatory statement was annexed to the notice of a general meeting in respect of every business to be transacted at the meeting other then those specified as ordinary business items in case of annual general meeting
2. Such explanatory statement contains
1. all material facts concerning each such item
2. the nature of interest if any, in such business of every director or manager of
3. if the business relates to or affects any other company the extent of share holding interest of every director and manager in such other company if it was 20% or more of paid up share capital of that other company
4. if such documents require approval of members, the time and place where the documents are available for inspection of members