We four co-founder (A, B, C and D (me)) started a private limited company on 13 August 2014. Co-founder hold 31% (now 34%), B 23% (now 26%), C 23% (now left company) and D 23% (now 23%). All were also director in the company. But partner C left the company 2 month after incorporation. His 23% was bought back by others three in equal proportion. Later 14% share was sold at face value 10 Rs fper share and 1664 Rs premium per share.
- Co-founders A and B are brother and hold together : 60% and also director. They also directors
- Co-founder D (me) is also board of directors and holds 26%
- Out of 14%, 11% is held by family members of D. So all together D+his family holds 37% of the total.
- Partner D was in India, when company was opened and now reside aboard.
Important to mention all co-founder put around 260,000 Rs at start up and committed to give their time and agreed not to take salaries until company become profitable.
Then a dispute arise, because cofounder B (who is brother of A) was not contributing/performing in the business. When this mentioned to A by partner D, then both brother cum directors started taking the control on the business.
- They held AGM for 2014 - 15 but did not invited the D (me), third partner and director or any other company member.
- Open a new bank account with informing 3rd director D (me).
- Did Not share with him any bank statement or sale + expense ledger.
- Did BoD meeting and did not notified 3rd director D (me).
- And issue a notice to remove 3rd director from BoD.
3rd Director D went to CLB - Delhi for asking justice to cancel removal from board and ask company account and bank statements.
Recently decision came :
- my removal is cancel, so I am still a director
- Court asked to share account books and bank statement.
After getting court order I got few bank statements, but they refused to give copy of sales and expenses ledger and told I can only at company office, but no copy will be provided. I am outside India and How can I get a copy.
- Also in last BoD held and AGM held this year, they verbally refused on the day of meeting to open video conference, where as I had notified them 15 days advance that I will be joining by Skype online as I am outside India. They are asking under which law I am asking to join video conference.
- For the year 2015-16 , they credit my salary and expenses which I did for company out of my pocket (bill submitted). But no reply when this amount will be paid. For themselves they are taking salaries and expenses money from account.
After all the above context , I need you advise :
1. As a company director cum shareholder of 26%, can I ask copy of books, as I am residing outside India.
2. Can I ask copy of bank statements ?
3. Can I freeze the bank account which is open without my consent and without notifying me ?
4. What can I do about the BoD decision taken without inviting me in the meeting?
5. Can I join the BoD /AGM/EGM by video conference in the future, as I am residing outside India ?
6. Can a private limited company sell share at high premium, without having and client or market sale ?
7. What minor shareholder who bought shares at high price can do, as they feel cheated, because major shareholders did not put money and they have taken out much more money as salaries and expenses? Can they launch fraud case on company directors ???? There was no evaluation presented to them for such a high premium.
Please advise. Thanks a lot in advance.
Asked in Business Law from United States
there is general circular 27/2011 issued by govt of India ministry of corporate affairs bearing no 17/95/2011-CL.V wherein it has been clarified that shareholder can participate in general meeting through electronic mode ie video conferencing facility
2) it mentions that notice of meting must inform shareholders of participation in meeting through video conferencing
3) you are entitled to take inspection of books of accounts , bank statements
4) you would need court order for freezing of bank accounts of the company
5) at time of purchase of shares minor share holders ought to have got the valuation of shares done before purchase of shares of the company . if there is misappropriation of funds by directors in charge of day to day management minor shareholder will have to file FIR against the said directors for fraud , criminal breach of trust
1. It is up to the Board whether they will post you the statements/documents asked by you or not but they can not restrict your access to the Company's books of accounts and other records.
2. They may not agree to take the trouble of doing the extra job of sending the bank statement to your address but your access to the said statement kept at the Company's office can not be denied. you can authorise your representative to have access to the said statement and any other statement/document kept at the office of the Company.
3. You should have added this prayer while approaching the CLB and with CLB order cpi;d have frozen the said Bank account,
4.BOD meeting can not be held without properly convening the meeting of the BOD. If any such meeting is held, you shall have to report the matter to the registrar of Companies and can approach CLB for appropriate order.
5. There should not have been any pbjection for your taking part in the meeting through video conferrencing but is is clear that A & B jointly with ulterior motive are putting hurdles in your functioning as a director of the company.
6. It can place its shares to any body at premium fixed/decide by the Company.
7. They can also file a case before the CLB for the said irregularities seeking relief.
Thanks a lot for your response. One more question my last years salary and out of pocket expenses for company is not paid by other two directors, it has been shown in 2015 -16 statement, but not paid as of now, whereas other two director who are holding the account taking their current year salaries plus ongoing out of pocket company expense from company account. What can I do to get paid outstanding salary and expenses ??
Asked 7 months ago
1. Do they have your Bank account for remitting your salary?
2. Did you ever go to your Company and asked for your salary cheques from the appropriate employee of your Company?
3. If not then they will take the plea that you have not yet collected your salary.
4. send them a letter asking them to remit your salary to your given Bank Account.
1) issue legal notice to company to pay your salary and out of pocket expenses
2) if company fails to pay you can file summary suit under order XXXVII of CPC to recover your outstanding dues
3) in the alternative file winding up petition against the company
1. You have an indefeasible right to seek books of accounts and bank statements. It is not clear to me if this prayer was included in the petition filed by you in CLB. A comprehensive prayer, which could have been made, was seemingly not made. If it was not included then a fresh petition may be filed.
2. You can plead to the CLB to order the freeze of the bank account opened without your consent.
3. The decisions taken in the meeting of BOD without inviting you can be set aside by the court on your petition. Interim you can seek injunction on the decisions taken therein.
4. To participate in the meeting of BOD through video conferencing you should have obtained specific orders from the court.
5. The sale of shares by private limited company is subject to AOA and MOA.
6. To recover the arrears of your salary a suit for recovery of money in the civil court is the remedy.
1. You are entitled to have a copy of the company's account details as well s books of accounts.
2. You can very well verify the bank statements
3. You can file a injunction petition before court to stay the operation of company accounts if it was opened in contravention to the bye-laws or standing rules in this regard.
4. you can give a legal notice stating that the meeting held and the decision taken in your absence is ultra vire or agaisnt the law, you may quote the relevant portion of law in the legal notice and communicate that the decision will not be binding on you hence it need to be cancelled.
5. If there is a provision for this in the bye-laws, you can very well include the same in the agenda of the meeting.
6. It depends on the situation the prevailing circumstance in accordance to the existing laws in this regard.
7. If you suspect fraud play and being cheated you can very well initiate a criminal complaint also against the said shareholders.
One more question my last years salary and out of pocket expenses for company is not paid by other two directors, it has been shown in 2015 -16 statement, but not paid as of now, whereas other two director who are holding the account taking their current year salaries plus ongoing out of pocket company expense from company account. What can I do to get paid outstanding salary and expenses ??
You can demand the same by sending a written representation to the company, if it is not being responded then you may aproach court for recovery of your dues in the company.