Statement to notice of meeting ‑ Statement not disclosing material facts pertaining to resolution - Companies Law - No. 1(38)‑CL‑VI/65,

Circular : No. 1(38) ‑ CL ‑ VI/65, dated 21 ‑ 10 ‑ 1965. Subject:- Statement to notice of meeting ‑ Statement not disclosing material facts pertaining to resolution The Board has recently come across some instances where the letter and spirit of law in regard to the proper compliance of the provisions of section 173(2) which provide that where any items of special business are to be transacted at the annual general meeting or any other meeting, an explanatory statement setting out the material facts concerning each such item of business, shall be attached to the notice of the meeting, have not been observed by the company managements. It has been noticed that important material facts such as those relating to the quantum of remuneration payable, academic/technical qualifications and business experience of the proposed appointee, the necessity of his appointment, etc., were not set out in the respective explanatory statements attached to the notices of the meetings at which the appointments of managing/whole‑time/technical directors or payment of remuneration to them were to be considered. It has also been noticed in some cases that instead of disclosing the details of the quantum of remuneration payable in the explanatory statement itself, the latter merely indicated that relevant documents/agreements relating to the appointments and/or remuneration were available for inspection at the registered office of the companies concerned. The Company Law Board is of the view that such explanatory statements which do not give a sufficiently full disclosure of the important facts material to the proposed resolution cannot be said to conform to the provisions of the law and are in any case contrary to good company practice. It is hardly necessary to emphasize that notices for general meetings which are not accompanied by proper explanatory statements defeat the very purpose for which such statements were prescribed by law.