Section 102 Statement to be annexed to notice – Companies Act 2013

Amended and updated notes on section 102 of Companies Act 2013. Detail discussion on provisions and rules related to statement to be annexed to notice.

Amended and updated notes on section 102 of Companies Act 2013. Detail discussion on provisions and rules related to statement to be annexed to notice.

Chapter VII (Sections 88122) of the Companies Act, 2013 (CA 2013) deals with the provisions related to management and administration. Section 102 of CA 2013 provides for statement to be annexed to notice.

Recently, we have discussed in detail section 101 (Notice of meeting) of CA 2013. Today, we learn the provisions of section 102 of Companies Act 2013 read with the Companies (Management and Administration) Rules, 2014.

Section 102 of the Companies Act, 2013 has been notified by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O. 2754(E) issued dated 12.09.2013. This notification shall come into force from 12th September, 2013 i.e. the commencement date of section 102 is 12-09-2013.

Section 102 of the Companies Act, 2013 is corresponding section 173 of the Companies Act, 1956. It also identical in all respects except the nature of concern or interest in the particular item of business shall be given not only of directors and managers, but also of every other Key Managerial Personnel (KMP) and their relatives.

With effect from 12th September, 2013, the date from which Section 102 of the Companies Act, 2013 has come into force, all notices which are to be issued by a company for any General Meeting (GM) will be required to have additional disclosures as Explanatory Statement. This explanatory statement shall be with regard to the special business to be transacted at that general meeting.

Name of ActThe Companies Act 2013
Enacted byParliament of India
Administered byMinistry of Corporate Affairs (MCA)
Number of Chapters29
Number of Sections484 (470-43+57)
Number of Schedules7
You are reading:
Chapter No.VII
Chapter NameManagement and Administration
Section No.102
Section NameStatement to be annexed to notice
Monthly Updated EditionCompany Law PDF

Material Facts of Special Business for Explanatory Statement [Section 102(1)]

The following material facts concerning each item of special business shall be annexed to the notice calling a general meeting in accordance with sub-section (1) of Section 102 of the Companies Act, 2013:

  1. Nature of concern or interest (financial or otherwise) of every director, Manager, Key Managerial Personnel and their relatives; and
  2. Any other information which facilitates better understanding of the businesses to be transacted and enable members to take decision thereon.

Did you know? A copy of every resolution or any agreement, in respect of matters specified in section 117(3) together with the explanatory statement u/s 102 shall be filed with the Registrar within 30 days.

Special Business for Explanatory Statement annexed to Notice [Section 102(2)]

As per the provision of section 102(2)(b), all business shall be deemed to be special in the case of any general meeting. However, in the case of an Annual General Meeting (AGM), following business shall not be considered as special:

  1. Consideration of Financial Statements;
  2. Consideration of Report of the Board of Directors;
  3. Consideration of Auditors Report;
  4. Declaration of any Dividend;
  5. Appointment of Directors in place of those retiring;
  6. Appointment of Auditors; and
  7. Fixing of the Remuneration of the Auditors.

In other words, the above mentioned businesses to be transacted at AGM of any company shall be regarded as ordinary business. Did you know? Such ordinary businesses shall be transacted as per section 122(3) in case of One Person Company.

Shareholding Interest of Key Managerial Personnel [Proviso Section 102(2)]

Note that if any item of special business relates to or affects any other company then it also be set out in the statement to be annexed to Notice calling general meeting. However, there is no need to disclose such matters of special business if there is less than 2% shareholding interest in that other company of every promoter, director, manager and of other key managerial personnel. Two per cent shall be calculated on the paid-up share capital of that other company.

Did you know? In section 173 of the Companies Act, 1956, the percentage was 20% of the paid up share capital of the other company.

Documents to be made available for Inspection [Section 102(3)]

According to the provisions of section 102(3), if any item of business refers to any document, then the time and place where such document can be inspected must be specified in that explanatory statement.

As per section 2(36) the term “document” includes summons, notice, requisition, order, declaration, form and register, whether issued, sent or kept in pursuance of this Act or under any other law for the time being in force or otherwise, maintained on paper or in electronic form.

Non-disclosure of Material Facts in Explanatory Statement [Section 102(4)]

Promoter, Director, Manager or any other KMP or their relatives should hold in Trust for the company any benefits which accrued to them as a result of non-disclosure or insufficient disclosure of such material facts of special business in statement as discussed above.

You should note that such person shall also be liable to compensate the company to the extent of the benefit received by him in addition to any other action being taken against him under any other law. Accordingly, a civil or criminal action may be initiated for the breach of trust/ cheating or misappropriation etc.

Penalty for non-compliance of Section 102

If any default is made in complying with the provisions of Section 102, every promoter, director, manager or other KMP who is in default shall be punishable with fine which may extend to ₹50,000 or five times the amount of benefit accruing to the promoter, director, manager or other key managerial personnel or any of his relatives, whichever is more.

The provisions of section 102 has come into force on 12th September, 2013 vide Notification No. S.O. 2754(E) dated 12.09.2013 read with the Companies (Management and Administration) Rules, 2014.

You may see extract of notice to EGM and AGM along with explanatory statement for illustrative purpose in compliance with the provisions of section 102 of the Companies Act, 2013.

NOTICE

Notice is hereby given that the Sixth Annual General Meeting (or an Extra Ordinary General Meeting) of the members of (Name of Limited/ Private Limited company) will be held on (Date of Meeting) at (Time of Meeting) at the Registered Office of the company at (Place of Meeting) to consider and transact the following business:

SPECIAL BUSINESS:

To consider and if thought fit, to pass with or without modification(s), the following resolutions

Item No. 1: Special Resolution for approval of the limits for the Loans and Investment by the Company in terms of the provisions Section 186 of the Companies Act, 2013

RESOLVED THAT pursuant to the provisions of Section 186 of the Companies Act, 2013, read with The Companies (Meetings of Board and its Powers) Rules, 2014 as amended from time to time and other applicable provisions of the Companies Act, 1956 (including any amendment thereto or re-enactment thereof for the time being in force), if any, the approval of the members of the Company be and is hereby accorded to the Board to…….

RESOLVED FURTHER THAT ……

RESOLVED FURTHER THAT ……”

By Order of the Board
(Company Name)

SD/-
(CS Name)
Company Secretary

Date:
Place:

Registered Office:

(Address of Registered Office)

NOTES:

  1. …………
  2. …………
  3. …………
  4. The relative Explanatory Statement pursuant to Section 102 of the Companies Act, 2013 in respect of the special business under Item No. 1 of the Notice, is annexed hereto.
  5. …………
  6. …………
  7. …………

EXPLANATORY STATEMENT
PURSUANT TO SECTION 102(1) OF THE COMPANIES ACT, 2013

The following is the Explanatory Statement as required by Section 102 of the Companies Act, 2013, sets out all material facts relating to Special Business mentioned in the accompanying Notice for convening the Extra-Ordinary General Meeting of the members of the Company:

Item No. 1

In order to make optimum use of funds available with the Company and also to achieve long term strategic and business objectives, the Board of Directors of the Company proposes to make use of the same by making investment in other bodies corporate or granting loans, giving guarantee or providing security to other persons or other body corporate or as and when required.

Pursuant to the provisions of section 186(3) of the Companies Act, 2013 and rules made there under, the Company needs to obtain prior approval of shareholders / members by way of special resolution passed at the General Meeting in case the amount of investment, loan, guarantee or security proposed to be made is more than the higher of sixty percent of the paid up share capital, free reserves and securities premium account or one hundred percent of free reserves and securities premium account.

Accordingly, the Board of Directors of the Company proposes to obtain approval of shareholders by way of special resolution as contained in the notice of Sixth Annual General Meeting (or the Extra-Ordinary General Meeting) for an amount not exceeding INR (Indian Rupees … Only) outstanding at any time notwithstanding that such investments, outstanding loans given or to be given and guarantees and security provided are in excess of the limits prescribed under Section 186 of the Companies Act, 2013.

The Directors therefore, recommend the Special Resolution for approval of the shareholders.

None of the Directors, Key Managerial Personnel of the Company or their relatives or any of other officials of the Company as contemplated in the provisions of Section 102 of the Companies Act, 2013 is, in any way, concerned or interested, financially or otherwise, in the proposed resolution.

The Board commends the Special Resolution set out at Item No. 1 of the Notice for approval by the shareholders.

By Order of the Board
(Company Name)

SD/-
(CS Name)
Company Secretary

Date:
Place:

Section 102 of Companies Act 2013: Statement to be annexed to notice

Section 102 shall come into force on 12th September, 2013 vide Notification No. S.O. 2754(E) dated 12.09.2013.

(1) A statement setting out the following material facts concerning each item of special business to be transacted at a general meeting, shall be annexed to the notice calling such meeting, namely: —

  • (a) the nature of concern or interest, financial or otherwise, if any, in respect of each items of—
    • (i) every director and the manager, if any;
    • (ii) every other key managerial personnel; and
    • (iii) relatives of the persons mentioned in sub-clauses (i) and (ii);
  • (b) any other information and facts that may enable members to understand the meaning, scope and implications of the items of business and to take decision thereon.

(2) For the purposes of sub-section (1), —

  • (a) in the case of an annual general meeting, all business to be transacted thereat shall be deemed special, other than—
    • (i) the consideration of financial statements and the reports of the Board of Directors and auditors;
    • (ii) the declaration of any dividend;
    • (iii) the appointment of directors in place of those retiring;
    • (iv) the appointment of, and the fixing of the remuneration of, the auditors; And
  • (b) in the case of any other meeting, all business shall be deemed to be special:

Provided that where any item of special business to be transacted at a meeting of the company relates to or affects any other company, the extent of shareholding interest in that other company of every promoter, director, manager, if any, and of every other key managerial personnel of the first mentioned company shall, if the extent of such shareholding is not less than two per cent of the paid-up share capital of that company, also be set out in the statement.

(3) Where any item of business refers to any document, which is to be considered at the meeting, the time and place where such document can be inspected shall be specified in the statement under sub-section (1).

(4) Where as a result of the non-disclosure or insufficient disclosure in any statement referred to in sub-section (1), being made by a promoter, director, manager, if any, or other key managerial personnel, any benefit which accrues to such promoter, director, manager or other key managerial personnel or their relatives, either directly or indirectly, the promoter, director, manager or other key managerial personnel, as the case may be, shall hold such benefit in trust for the company, and shall, without prejudice to any other action being taken against him under this Act or under any other law for the time being in force, be liable to compensate the company to the extent of the benefit received by him.

(5) Without prejudice to the provisions of sub-section (4), if any default is made in complying with the provisions of this section, every promoter, director, manager or other key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees or five times the amount of benefit accruing to the promoter, director, manager or other key managerial personnel or any of his relatives, whichever is higher.

Exception/ Modification/ Adaptation:

1) In case of Private company, section 102 shall apply unless otherwise specified in this section or the articles of the company provide otherwise. – Notification No. G.S.R. 464(E) dated 5th June, 2015.

2) Section 102 shall apply in case of a Specified IFSC public company, unless otherwise specified in the articles of the company. –Notification No. G.S.R. 08(E) dated 4th January, 2017.


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