Most Asked — 4 papers Q2Different Kinds of Company Meetings
Very Important — 3 papers Q3Prevention of Oppression & Mismanagement
Important — 2 papers Q4Corporate Social Responsibility (CSR)
Moderate — 1 paper
💡 POSITION, POWERS & DUTIES OF A DIRECTOR
Core Concept: A director is NOT an employee — they are an agent (acts for the company), a trustee (holds company property/powers in trust), and a managing partner (manages affairs alongside other directors).
👤 Who is a Director?
- Sec 2(34): Any person appointed to the Board of Directors.
- Types: Executive, Non-Executive, Independent (Sec 149(6)), Woman Director, Small Shareholder Director.
- Max limit: Can hold directorship in max 20 companies (Sec 165).
⚖️ Triple Legal Position
🏺 Agent: Acts on behalf of the company — company is bound by their acts done within authority (Ferguson v. Wilson).
🔒 Trustee: Holds company’s money and property in trust — must not misuse (Regal Hastings v. Gulliver).
🤝 Managing Partner: Collectively manages the company with other directors.
💪 Powers & Duties
1️⃣ Powers (Sec 179 & 180)
Board can exercise ALL powers of the company except those reserved for shareholders in general meeting. However, Sec 180 restricts: selling/leasing the whole undertaking, borrowing beyond paid-up capital & reserves, contributing to charities beyond 5% of net profit — these need a special resolution.
2️⃣ Duties (Sec 166)
Act in good faith for the company’s benefit • Exercise due and reasonable care • Avoid conflict of interest • Do not achieve undue gain • Do not assign your office • Be accountable for every act.
⚖️ Key Cases
Ferguson v. Wilson: Directors are agents of the company — not of individual shareholders.
Regal Hastings v. Gulliver: Directors must not make secret profits from their position — fiduciary duty breached.
🧠 Memory Hack — “A-T-M” for Position
A = Agent • T = Trustee • M = Managing Partner. A director is an ATM — they handle the company’s money (like an ATM machine!), but they must not steal from it.
- Section 2(34) defines a Director as any person appointed to the Board of Directors of a company.
- Triple legal position — a Director is simultaneously an agent, trustee, and managing partner of the company.
- Section 179 grants the Board general powers to exercise all powers of the company, subject to the Act, MoA, and AoA.
- Section 180 restricts certain powers (selling undertaking, borrowing beyond capital) requiring a special resolution.
- Section 166 codifies 6 duties: good faith, due care, avoid conflict, no undue gain, no assignment of office, accountability.
- Section 149(6) defines Independent Directors who must not have any material or pecuniary relationship with the company.
- Section 165 limits directorships to a maximum of 20 companies (including max 10 public companies).
- Section 169 allows removal of a director by ordinary resolution with special notice before the expiry of their term.
| Section | Subject | Significance |
|---|---|---|
| Sec 2(34)Defines “director” as a person appointed to the Board of Directors of a company. | Definition of Director | Foundation of who qualifies as a director |
| Sec 149(6)An independent director shall not have any material or pecuniary relationship with the company or its subsidiaries. | Independent Director | Ensures impartiality on the Board |
| Sec 152Directors are appointed by members at general meeting; first directors named in AoA. | Appointment of Directors | Democratic selection by shareholders |
| Sec 164Disqualifications for appointment as director including undischarged insolvency, conviction, etc. | Disqualifications | Bars unfit persons from directorship |
| Sec 165No person shall hold office as director in more than 20 companies at the same time. | Max Directorship Limit | Prevents over-commitment and ensures effective governance |
| Sec 166Directors shall act in good faith, exercise due care, avoid conflict of interest, and not accept undue advantage. | Duties of Directors | Core statutory obligations |
| Sec 179Board of directors shall exercise all powers of the company except those required to be exercised at general meeting. | General Powers of Board | Defines scope of Board authority |
| Sec 180Board shall exercise certain powers only with consent of company by special resolution. | Restrictions on Powers | Check on Board discretion via shareholder approval |
- ATM = Agent + Trustee + Managing Partner — the three-fold legal position of a director.
- Sec 2(34) = Definition; Sec 166 = Duties; Sec 179 = General Powers; Sec 180 = Restricted Powers.
- 6 Duties (Sec 166): Good faith • Company benefit • Due care • No conflict • No undue gain • No assignment.
- Sec 180 needs Special Resolution: Sell whole undertaking, borrow beyond capital + reserves, contribute >5% to charity.
- Types: Executive, Non-Executive, Independent (149(6)), Woman Director, Small Shareholder Director.
- Max 20 companies (Sec 165) including max 10 public companies.
- Removal: Sec 169 — Ordinary resolution + special notice.
- Cases: Ferguson v. Wilson (agent) • Regal Hastings v. Gulliver (fiduciary duty / no secret profit).
A Director is defined under Section 2(34) of the Companies Act, 2013 as any person appointed to the Board of Directors. A director occupies a triple legal position: he is an agent of the company (Ferguson v. Wilson), a trustee of the company’s property and powers, and a managing partner who collectively manages company affairs with other directors. The powers of directors are contained in Section 179, which grants the Board all powers of the company except those reserved for general meetings, and Section 180, which restricts certain powers like selling the whole undertaking or borrowing beyond paid-up capital to special resolution. Duties under Section 166 include acting in good faith, exercising due care and diligence, avoiding conflicts of interest, and not accepting undue advantage. Directors may be executive, non-executive, or independent (Sec 149(6)), and no person can hold office in more than 20 companies (Sec 165). Appointment is under Sec 152 and removal under Sec 169 by ordinary resolution with special notice. In Regal Hastings v. Gulliver, it was held that directors must not make secret profits from their fiduciary position.
1. Introduction
A company, being an artificial legal person, cannot act on its own. It requires natural persons to manage its affairs and take decisions. These persons are the Directors, who collectively form the Board of Directors. Under Section 2(34) of the Companies Act, 2013, a “director” means a director appointed to the Board of Directors of a company.
2. Legal Position of a Director
The legal position of a director is unique. A director is not merely an employee or officer — he simultaneously occupies three positions:
(a) Director as an Agent
A company, being an artificial person, can only act through its agents. Directors act as agents of the company and bind the company by their acts done within the scope of their authority. In Ferguson v. Wilson (1866), the court held that directors are agents of the company and not of individual shareholders. The company is the principal and directors are its agents.
(b) Director as a Trustee
Directors are considered trustees of the company’s property and money. They hold the company’s assets and powers in trust for the company and its shareholders. They must not misuse company funds or make secret profits. In Regal (Hastings) Ltd v. Gulliver (1967), the House of Lords held that directors must account for any profit made by virtue of their position, even if the company suffered no actual loss.
(c) Director as a Managing Partner
Directors collectively manage the affairs of the company, similar to partners in a partnership firm. However, unlike partners, individual directors have no independent authority — they must act collectively through board resolutions.
3. Types of Directors
- Executive Director — involved in day-to-day management (e.g., Managing Director, Whole-Time Director).
- Non-Executive Director — not involved in daily management but participates in Board meetings.
- Independent Director — defined under Section 149(6); must have no material or pecuniary relationship with the company.
- Woman Director — mandatory for prescribed class of companies.
- Small Shareholder Director — elected by small shareholders holding shares of nominal value not exceeding Rs. 20,000.
4. Powers of Directors
(a) General Powers — Section 179
Under Section 179, the Board of Directors is entitled to exercise all such powers and do all such acts as the company is authorized to exercise and do, subject to the provisions of the Act, the Memorandum, and Articles of Association. Specific powers include: making calls on shareholders, issuing securities, borrowing money, investing funds, granting loans, approving financial statements, and appointing internal auditors.
(b) Restrictions on Powers — Section 180
Section 180 restricts the Board from exercising certain powers except with the consent of the company by special resolution:
- Selling, leasing, or disposing of the whole or substantially the whole of the undertaking.
- Borrowing money in excess of paid-up share capital and free reserves.
- Contributing to charitable and other funds not directly relating to the company’s business, amounts exceeding 5% of average net profit of the preceding three financial years.
5. Duties of Directors — Section 166
Section 166 of the Companies Act, 2013 codifies the following duties:
- Act in accordance with the Articles of the company.
- Act in good faith to promote the objects of the company for the benefit of its members as a whole, employees, the community, and for the protection of the environment.
- Exercise duties with due and reasonable care, skill, and diligence.
- Shall not involve in a situation in which there is a conflict of interest (direct or indirect) with the company.
- Shall not achieve or attempt to achieve any undue gain or advantage, and if found guilty, shall be liable to pay an amount equal to the gain.
- Shall not assign his office as director; any such assignment is void.
6. Appointment, Qualification & Removal
Appointment: Under Section 152, directors are appointed by members at a general meeting. The first directors are named in the Articles of Association.
Qualification: Under Section 164, a person is disqualified if they are of unsound mind, undischarged insolvent, convicted of an offence and sentenced to 6+ months imprisonment, or have not obtained a Director Identification Number (DIN).
Maximum directorships: Under Section 165, no person shall hold office as director in more than 20 companies at the same time, of which not more than 10 shall be public companies.
Removal: Under Section 169, a company may remove a director before the expiry of his period of office by passing an ordinary resolution after giving him a reasonable opportunity of being heard, with special notice of at least 14 days.
7. Conclusion
Directors are the brain of the company and play a pivotal role in corporate governance. Their position as agent, trustee, and managing partner imposes high standards of conduct. The Companies Act, 2013 has strengthened the duties framework under Section 166 and introduced stricter accountability. The balance between their powers (Sec 179) and restrictions (Sec 180) ensures that directors act within their authority while being answerable to the shareholders.
💡 KINDS OF COMPANY MEETINGS
Core Concept: Meetings are where decisions happen in a company — Board Meetings for directors, General Meetings for shareholders, Class Meetings for specific groups.
💼 Board Meetings (Sec 173)
- Minimum 4 meetings per year
- Gap between two meetings: not more than 120 days
- 7 days notice required
- Quorum: 1/3 of total directors or 2, whichever is higher
📣 General Meetings
- AGM (Sec 96): Mandatory every year, within 6 months of FY end
- EGM (Sec 100): Called for urgent matters between two AGMs
- Class Meeting: For a particular class of shareholders
📋 Key Rules for All Meetings
| Notice | 21 clear days (Sec 101) |
| Quorum (Public) | 5 members personally present (Sec 103) |
| Quorum (Private) | 2 members personally present (Sec 103) |
| Ordinary Resolution | Simple majority (>50%) |
| Special Resolution | 75% majority (Sec 114) |
⚖️ Key Principle
Proxy (Sec 105): A member entitled to attend and vote may appoint another person as proxy. A proxy need not be a member of the company. Proxy cannot vote on a show of hands but can vote on a poll.
🧠 Memory Hack — “BACE” for Types of Meetings
B = Board Meeting • A = AGM • C = Class Meeting • E = EGM. Remember: “Before Any Company Event” — you need proper notice and quorum!
- Board Meetings (Sec 173): Minimum 4 per year with a gap not exceeding 120 days between consecutive meetings.
- AGM (Sec 96): Must be held every year within 6 months from the close of the financial year; the gap between two AGMs shall not exceed 15 months.
- EGM (Sec 100): Can be called by the Board or on requisition of members holding at least 1/10th of voting power.
- Class Meeting: Held when the rights of a particular class of shareholders (e.g., preference shareholders) are proposed to be varied.
- Quorum (Sec 103): 5 members personally present for a public company and 2 members for a private company.
- Notice (Sec 101): 21 clear days’ notice is required for calling a general meeting, specifying place, date, time, and business.
- Resolutions: Ordinary resolution requires simple majority; Special resolution (Sec 114) requires 75% majority of votes cast.
- Proxy (Sec 105): Any member entitled to attend and vote may appoint a proxy; the proxy need not be a member of the company.
| Section | Subject | Significance |
|---|---|---|
| Sec 96Every company shall hold an AGM every year. Not more than 15 months shall elapse between two AGMs. | Annual General Meeting | Mandatory yearly shareholder meeting |
| Sec 100Board may call an EGM; members with 1/10th voting power can requisition one. | Extraordinary General Meeting | For urgent/special business between AGMs |
| Sec 101A general meeting may be called by giving not less than 21 clear days’ notice. | Notice of Meeting | Ensures members have time to prepare |
| Sec 103Quorum: 5 members personally present for public company, 2 for private company. | Quorum | Minimum attendance for valid meeting |
| Sec 104The Chairman of the Board shall preside at every general meeting. If absent, members elect a chairman. | Chairman of Meeting | Presiding officer ensures orderly conduct |
| Sec 105A member entitled to attend and vote may appoint another person as proxy. Proxy need not be a member. | Proxies | Enables representation at meetings |
| Sec 114A special resolution requires 75% of votes cast by members present in person or by proxy. | Special Resolution | Higher threshold for important decisions |
- BACE: Board (Sec 173) • AGM (Sec 96) • Class • EGM (Sec 100).
- Board Meeting: Min 4/year, gap ≤120 days, 7-day notice, quorum = 1/3 directors or 2.
- AGM: Every year, within 6 months of FY close, gap ≤15 months.
- EGM: Board or requisition by 1/10th voting power members.
- Notice: 21 clear days (Sec 101).
- Quorum: Public = 5, Private = 2 (Sec 103).
- Resolutions: Ordinary = >50% • Special = 75% (Sec 114).
- Proxy: Sec 105 — need not be a member, can vote only on poll (not show of hands).
The Companies Act, 2013 provides for several types of company meetings. Board Meetings (Sec 173) are meetings of directors; minimum 4 must be held per year with a gap not exceeding 120 days. General Meetings are meetings of shareholders and include: (i) Annual General Meeting (AGM) under Sec 96, which is mandatory every year within 6 months from the close of the financial year for adopting accounts, declaring dividends, and appointing auditors; (ii) Extraordinary General Meeting (EGM) under Sec 100, called for urgent matters either by the Board or on requisition by members holding 1/10th of voting power; and (iii) Class Meetings for a particular class of shareholders when their rights are proposed to be varied. The quorum under Sec 103 is 5 members for a public company and 2 for a private company. Notice of 21 clear days is required (Sec 101). Resolutions are either ordinary (simple majority) or special (75% majority under Sec 114). Members can appoint proxies under Sec 105. E-voting is also permitted. The Chairman (Sec 104) presides at every general meeting.
1. Introduction
Meetings are the primary mechanism through which decisions in a company are taken. A company, being an artificial legal entity, functions through its members and directors who meet, deliberate, and pass resolutions. The Companies Act, 2013 prescribes detailed provisions regarding the types of meetings, their frequency, notice requirements, quorum, and the resolutions that can be passed.
2. Board Meetings (Section 173)
Board Meetings are meetings of the Board of Directors. Under Section 173:
- Every company shall hold a minimum of 4 Board meetings every year.
- The gap between two consecutive meetings shall not exceed 120 days.
- At least 7 days’ notice must be given (may be shorter in case of urgency).
- Quorum: 1/3 of total strength of the Board or 2 directors, whichever is higher.
- Directors may participate through video conferencing or other audio-visual means.
3. General Meetings
General meetings are meetings of the shareholders/members of the company. They are of three types:
(a) Annual General Meeting (AGM) — Section 96
Under Section 96, every company (other than OPC) must hold an AGM every year. Key rules:
- Must be held within 6 months from the close of the financial year.
- The gap between two AGMs shall not exceed 15 months.
- The first AGM must be held within 9 months from the close of the first financial year.
- Business transacted: Adoption of financial statements, declaration of dividends, appointment/reappointment of directors and auditors.
- Must be held at the registered office or within the city/town/village where the registered office is situated, during business hours on a working day.
(b) Extraordinary General Meeting (EGM) — Section 100
Under Section 100, an EGM may be called:
- By the Board of Directors on its own initiative for any urgent business.
- On requisition by members holding at least 1/10th of the total voting power. The Board must call the meeting within 21 days, and it must be held within 45 days.
- If the Board fails to call the meeting, the requisitionists themselves may call it within 3 months from the date of requisition.
(c) Class Meeting
A class meeting is held when the rights of a particular class of shareholders (e.g., preference shareholders) are proposed to be varied. Only members of that class attend and vote. This is typically required when the company proposes to alter the rights attached to a class of shares.
4. Quorum (Section 103)
Under Section 103, the minimum number of members who must be personally present to constitute a valid meeting:
- Public company: 5 members personally present.
- Private company: 2 members personally present.
If quorum is not present within half an hour, the meeting stands adjourned to the same day, time, and place in the next week.
5. Notice (Section 101)
Under Section 101, a general meeting may be called by giving not less than 21 clear days’ notice in writing or electronic mode. The notice must specify the place, date, day, and time of the meeting and the business to be transacted.
6. Resolutions
Decisions at meetings are taken through resolutions:
- Ordinary Resolution: Requires a simple majority (>50%) of votes cast by members present in person or by proxy.
- Special Resolution (Sec 114): Requires at least 75% majority of votes cast. Used for important matters like altering the AoA, change of name, etc.
7. Proxy (Section 105) & Chairman (Section 104)
Under Section 105, any member entitled to attend and vote may appoint another person as a proxy. A proxy need not be a member. A proxy can vote only on a poll, not on a show of hands.
Under Section 104, the Chairman of the Board shall preside at every general meeting. If absent, the directors present shall elect one of themselves as chairman. If no director is willing, the members present shall elect a chairman.
8. E-Voting
The Companies Act, 2013 also provides for electronic voting (e-voting) to facilitate wider participation by shareholders who cannot attend meetings physically. Companies with more than 1,000 members must provide e-voting facility.
9. Conclusion
Company meetings are fundamental to corporate governance. The Act prescribes detailed procedures for Board Meetings (Sec 173), AGM (Sec 96), EGM (Sec 100), and class meetings to ensure transparency, accountability, and democratic decision-making. Compliance with notice (Sec 101), quorum (Sec 103), and resolution requirements (Sec 114) is essential for the validity of any meeting.
💡 OPPRESSION & MISMANAGEMENT
Core Concept: The law protects minority shareholders from being bullied by the majority. If the company is being run oppressively or mismanaged, affected members can go to the NCLT for relief.
👥 Who Can Apply? (Sec 241)
- Company with share capital: At least 100 members OR 1/10th of total members (whichever is less)
- Company without share capital: At least 1/5th of total members
- Central Government can also apply (Sec 241(2))
⚠️ Grounds for Application
🔴 Affairs of the company conducted in a manner prejudicial to public interest
🔴 Affairs conducted in a manner oppressive to any member(s)
🔨 NCLT Powers (Sec 242)
- Regulate the future conduct of the company’s affairs
- Order purchase of shares of any member by other members or by the company itself
- Restrict or prohibit any act complained of
- Remove or appoint directors
- Set aside or modify any agreement/resolution
- Award damages to affected members
⚖️ Key Cases
Shanti Prasad Jain v. Kalinga Tubes: Continuous acts of oppression, not merely isolated incidents, constitute “oppression” under the Act.
Needle Industries v. Needle Industries: Minority shareholders have the right to challenge oppressive acts; the court can grant effective relief even if the majority disagrees.
🧠 Memory Hack — “GRAPE” for NCLT Powers
G = Go regulate conduct • R = Remove/appoint directors • A = Award damages • P = Purchase of shares ordered • E = End (prohibit) the oppressive act.
- Sections 241-246 of the Companies Act, 2013 deal with prevention of oppression and mismanagement.
- Locus standi (Sec 241): Company with share capital — 100 members or 1/10th of total members; without share capital — 1/5th of members.
- Grounds: Affairs conducted prejudicially to public interest or oppressively to any member(s); material change in management prejudicing company.
- NCLT (Sec 242) has wide powers: regulate conduct, order share purchase, restrict acts, remove/appoint directors, set aside resolutions.
- Central Government (Sec 241(2)) can independently apply to NCLT if affairs are conducted prejudicially to public interest.
- Foss v. Harbottle exception: These provisions are a statutory exception to the majority rule, allowing minorities to seek relief.
- Oppression must be continuous — not mere isolated acts (Shanti Prasad Jain v. Kalinga Tubes).
- NCLT order is binding and must be filed with the Registrar of Companies within 30 days.
| Section | Subject | Significance |
|---|---|---|
| Sec 241Application to NCLT for relief in cases of oppression and mismanagement by members meeting prescribed thresholds. | Right to Apply | Defines who can seek protection against oppression |
| Sec 242Powers of the Tribunal to make such order as it thinks fit including regulating conduct, ordering share purchase, appointing directors. | Powers of NCLT | Wide remedial jurisdiction to correct oppression |
| Sec 243NCLT may impose restrictions on transfer of shares or prohibit any alteration in MoA/AoA without its leave. | Consequential Powers | Prevents oppressors from circumventing NCLT orders |
| Sec 244Right to apply under Sec 241 — minimum number of members required to file application. | Threshold for Application | Prevents frivolous applications by requiring minimum members |
| Sec 246Copy of every order under Sec 242 must be filed with the Registrar within 30 days. | Filing of Order | Ensures public record of NCLT intervention |
- Sections 241-246 = Oppression & Mismanagement provisions.
- Threshold: 100 members or 1/10th (with share capital) • 1/5th (without share capital).
- GRAPE for NCLT powers: Go regulate • Remove/appoint directors • Award damages • Purchase shares • End oppressive acts.
- Grounds: Prejudicial to public interest OR oppressive to members.
- Central Govt can also apply under Sec 241(2).
- Foss v. Harbottle = majority rule; Sec 241-246 = exception for oppressed minorities.
- Shanti Prasad Jain: Oppression = continuous, not isolated acts.
- Needle Industries: Court can order purchase of shares at fair value to end oppression.
Sections 241-246 of the Companies Act, 2013 contain provisions for prevention of oppression and mismanagement. Under Sec 241, members may apply to the NCLT if the affairs of the company are conducted in a manner prejudicial to public interest or oppressive to any member(s). The threshold for filing is: for a company with share capital, at least 100 members or 1/10th of total members (whichever is less); for a company without share capital, at least 1/5th of members. The Central Government can also apply under Sec 241(2). The NCLT’s powers under Sec 242 are wide: it can regulate future conduct, order purchase of shares by other members, restrict or prohibit any act, remove or appoint directors, set aside modifications, and award damages. In Shanti Prasad Jain v. Kalinga Tubes, the Supreme Court held that oppression must be continuous, not isolated acts. In Needle Industries v. Needle Industries, minority rights were upheld and the court ordered effective relief. These provisions are a statutory exception to the majority rule established in Foss v. Harbottle, protecting minority shareholders from tyranny of the majority.
1. Introduction
In every company, the will of the majority prevails. However, this rule of majority can sometimes be abused by those in control, leading to oppression of minority shareholders or mismanagement of the company’s affairs. The principle established in Foss v. Harbottle (1843) states that the proper plaintiff for wrongs done to a company is the company itself. To protect minorities from potential abuse, the Companies Act, 2013 provides statutory remedies under Sections 241-246.
2. Who Can Apply (Section 241 & 244)
Under Section 241, any member of a company who complains that the affairs of the company are being conducted in a manner prejudicial to public interest or oppressive to any member(s) may apply to the National Company Law Tribunal (NCLT).
The minimum threshold prescribed under Section 244 is:
- Company with share capital: Not less than 100 members or not less than 1/10th of the total number of members, whichever is less; or members holding not less than 1/10th of the issued share capital, subject to having paid all calls and other sums due.
- Company without share capital: Not less than 1/5th of the total number of members.
Under Section 241(2), the Central Government may also apply to the NCLT if it is of the opinion, after receiving a report of the inspector or otherwise, that the affairs of the company are being conducted in a manner prejudicial to public interest.
3. Grounds for Application
The application can be filed on the following grounds:
- That the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members.
- That a material change has taken place in the management or control of the company, and by reason of such change, it is likely that the affairs will be conducted in a manner prejudicial to the company or its members.
4. Powers of the NCLT (Section 242)
If the NCLT is satisfied that the application is well-founded, it may make such order as it thinks fit under Section 242, including:
- Regulation of conduct: Direct how the affairs of the company shall be conducted in the future.
- Purchase of shares: Order the purchase of shares of any member by other members or by the company itself (and consequent reduction of share capital).
- Restrictions on acts: Restrict or prohibit any act complained of.
- Appointment/removal of directors: Remove existing directors or appoint new ones.
- Set aside modifications: Set aside or modify any agreement, transaction, or resolution.
- Any other order as may be just and equitable.
5. Consequential Orders (Section 243)
Under Section 243, the NCLT may also:
- Impose restrictions on the transfer of shares.
- Prohibit any alteration in the MoA or AoA without the leave of the Tribunal.
- Provide that no resolution passed at any general meeting shall have effect unless approved by the Tribunal.
6. Important Case Laws
Needle Industries (India) Ltd v. Needle Industries Newey (India) Holding Ltd (1981): The Supreme Court held that the minority shareholders are entitled to protection against oppressive acts. The court can order any relief that is just and equitable, including purchasing minority shares at a fair value.
Foss v. Harbottle (1843): Established the rule that the proper plaintiff for wrongs to the company is the company itself (majority rule). Sections 241-246 are a statutory exception to this rule, allowing individual members to directly seek relief.
7. Filing of Order (Section 246)
A certified copy of every order passed under Section 242 must be filed with the Registrar of Companies within 30 days of the making of the order.
8. Conclusion
The provisions relating to oppression and mismanagement (Sections 241-246) are a vital safeguard for minority shareholders. They represent a statutory exception to the rule in Foss v. Harbottle, ensuring that the majority cannot abuse its power unchecked. The wide powers of the NCLT under Section 242 allow flexible and effective remedies. These provisions balance the principle of majority rule with the need to protect minority rights, ensuring fair and equitable corporate governance.
💡 CORPORATE SOCIAL RESPONSIBILITY (CSR)
Core Concept: Big companies must give back to society — at least 2% of their profits must go to social causes like education, healthcare, and environment.
🎯 Who Must Comply?
Any company in any financial year having:
- Net worth ≥ Rs 500 crore, OR
- Turnover ≥ Rs 1000 crore, OR
- Net profit ≥ Rs 5 crore
💰 How Much to Spend?
- At least 2% of average net profits of preceding 3 financial years
- If unspent → transfer to Fund specified in Schedule VII within 6 months
- 2021 Amendment: Made spending mandatory (no more “comply or explain”)
🌱 Schedule VII Activities (What qualifies as CSR?)
- Eradicating hunger, poverty, and malnutrition
- Promoting education and skill development
- Gender equality and empowering women
- Environmental sustainability and ecological balance
- Healthcare, sanitation, and safe drinking water
- Protection of national heritage, art, and culture
- Rural development projects
🛠️ CSR Committee
Minimum 3 directors (at least 1 must be independent director). The committee formulates the CSR policy, recommends expenditure, and monitors implementation.
🧠 Memory Hack — “5-10-5-2”
500 crore (net worth) • 1000 crore (turnover) • 5 crore (net profit) • 2% spending. Easy numbers: 5, 10, 5, 2!
- Section 135 of the Companies Act, 2013 is the foundational provision for Corporate Social Responsibility (CSR).
- Applicability: Companies with net worth ≥ Rs 500 crore, or turnover ≥ Rs 1000 crore, or net profit ≥ Rs 5 crore in any financial year.
- CSR Committee: Minimum 3 directors including at least 1 independent director; formulates CSR policy and monitors implementation.
- Spending mandate: At least 2% of average net profits of the preceding 3 financial years must be spent on CSR activities.
- Schedule VII lists permissible CSR activities: hunger, education, gender equality, environment, healthcare, heritage, rural development.
- Unspent amount: Must be transferred to a Fund specified in Schedule VII (like PM National Relief Fund) within 6 months of the financial year end.
- 2021 Amendment: Made CSR spending mandatory, replacing the earlier “comply or explain” approach with penal consequences.
- Penalty: Company fined up to Rs 1 crore; every defaulting officer can face imprisonment up to 3 years or fine up to Rs 5 lakh or both.
| Section | Subject | Significance |
|---|---|---|
| Sec 135Every company meeting prescribed thresholds shall constitute a CSR Committee and spend at least 2% of average net profits on CSR activities. | CSR Obligation | Core provision establishing CSR mandate |
| Schedule VIILists activities that qualify as CSR: hunger, education, gender equality, environment, healthcare, heritage, rural development, etc. | Permissible Activities | Defines what counts as valid CSR expenditure |
| Sec 135(6)-(8)Inserted by 2021 Amendment. Unspent CSR amount to be transferred to Fund in Schedule VII within 6 months. Penalty for non-compliance. | Penalty & Transfer | Enforces mandatory compliance with penal consequences |
- Section 135 = CSR provision of Companies Act, 2013.
- Thresholds (5-10-5-2): Net worth ≥500cr • Turnover ≥1000cr • Profit ≥5cr • Spend 2%.
- CSR Committee: Min 3 directors + 1 independent. Formulates policy, recommends spend, monitors.
- 2% of average net profits of preceding 3 financial years on Schedule VII activities.
- Schedule VII activities: Hunger, Education, Gender equality, Environment, Healthcare, Heritage, Rural dev.
- Unspent → transfer to Schedule VII Fund within 6 months.
- 2021 Amendment: Mandatory (not comply-or-explain). Penalty: company ≤Rs 1 crore; officer imprisonment ≤3 years / fine ≤Rs 5 lakh.
- India was first to mandate CSR spending by law.
Corporate Social Responsibility (CSR) is governed by Section 135 of the Companies Act, 2013. It applies to companies having net worth ≥ Rs 500 crore or turnover ≥ Rs 1000 crore or net profit ≥ Rs 5 crore. Such companies must constitute a CSR Committee of minimum 3 directors including at least 1 independent director. The committee formulates the CSR policy and recommends expenditure. The company must spend at least 2% of the average net profits of the preceding 3 financial years on CSR activities listed in Schedule VII, which include eradicating hunger and poverty, promoting education, gender equality, environmental sustainability, and healthcare. If the amount remains unspent, it must be transferred to a Fund specified in Schedule VII within 6 months. The 2021 Amendment made CSR spending mandatory, replacing the earlier “comply or explain” regime. Non-compliance attracts a penalty on the company of up to Rs 1 crore, and officers in default may face imprisonment up to 3 years or fine up to Rs 5 lakh. India was among the first countries to mandate CSR spending by statute.
1. Introduction
Corporate Social Responsibility (CSR) refers to the obligation of companies to contribute to the welfare of society and the environment beyond mere profit maximisation. India became one of the first countries to mandate CSR spending through Section 135 of the Companies Act, 2013, read with Schedule VII and the Companies (CSR Policy) Rules, 2014.
2. Applicability (Section 135(1))
CSR provisions apply to every company (including foreign companies having a branch or project office in India) which, during the immediately preceding financial year, has:
- A net worth of Rs 500 crore or more, OR
- A turnover of Rs 1000 crore or more, OR
- A net profit of Rs 5 crore or more.
Meeting any one of the above thresholds triggers the CSR obligation.
3. CSR Committee (Section 135(1))
Every qualifying company must constitute a CSR Committee of the Board consisting of:
- Minimum 3 directors, of whom at least 1 shall be an independent director.
- The Committee shall formulate and recommend a CSR Policy to the Board.
- It shall recommend the amount of expenditure to be incurred on CSR activities.
- It shall monitor the CSR policy and its implementation from time to time.
4. CSR Spending (Section 135(5))
The Board shall ensure that the company spends, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its CSR Policy.
5. Permissible Activities (Schedule VII)
Schedule VII lists the activities that qualify as CSR expenditure:
- Eradicating hunger, poverty, and malnutrition; promoting healthcare, sanitation, and safe drinking water.
- Promoting education, including special education and employment-enhancing vocational skills.
- Promoting gender equality, empowering women, and setting up homes and hostels for women and orphans.
- Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, and conservation of natural resources.
- Protection of national heritage, art, and culture; restoration of buildings of historical importance.
- Measures for the benefit of armed forces veterans, war widows, and their dependants.
- Rural development projects.
- Contributions to technology incubators located within academic institutions approved by the Central Government.
6. Unspent CSR Amount
If the company fails to spend the prescribed amount:
- If the unspent amount relates to an ongoing project, it shall be transferred to a special account (Unspent CSR Account) within 30 days of the end of the financial year and must be spent within 3 financial years.
- If the amount is not related to any ongoing project, or remains unspent after 3 years, it must be transferred to a Fund specified in Schedule VII (such as the PM National Relief Fund, PM CARES Fund, etc.) within 6 months from the end of the financial year.
7. 2021 Amendment — Mandatory Compliance
The Companies (Amendment) Act, 2021 inserted sub-sections (6), (7), and (8) in Section 135, introducing:
- Mandatory CSR spending — the earlier “comply or explain” regime was replaced with a penalty-backed mandate.
- Penalty for non-compliance: The company shall be punishable with a fine which shall not be less than the unspent amount or Rs 1 crore, whichever is less. Every officer in default shall be punishable with imprisonment for a term up to 3 years or fine up to Rs 5 lakh or both.
8. Conclusion
Section 135 of the Companies Act, 2013 represents India’s pioneering effort to embed social responsibility into corporate law. By mandating a minimum 2% spending on Schedule VII activities, requiring a dedicated CSR Committee, and imposing penalties for non-compliance (post-2021 Amendment), the provision ensures that large corporations contribute meaningfully to societal development. CSR is no longer voluntary philanthropy but a legally binding obligation.