COMPANY LAW

Time allowed : 3 hours Maximum marks : 100

NOTE :

1. Answer ALL Questions.

2. All references to sections relate to the Companies Act, 2013 unless stated otherwise.

PART I

Question 1

Comment on the following :

(a) The Companies Act, 2013 does not provide statutory recognition to the doctrine of lifting of
corporate veil. Only judicial interpretations disregard the concept of separate personality.

(b) The provisions of the Companies Act, 2013 relating to compromises and arrangements are
uniformally applicable to all companies.

(c) An unregistered charge shall be void against the liquidator and other creditors of the company.

(d) Certain members of a company are allowed to offer for sale their shareholding in the company to the
public, such offer document is deemed to be a prospectus issued by the company.

(5 marks each)

Attempt all parts of either Q. No. 2 or Q. No. 2A

Question 2

(a) ‘‘If a company does not receive minimum subscription, it should refund money received from
applicants within such time as may be prescribed’’. Explain the above statement with suitable
comments. (3 marks)

(b) What are the requirements as to the maintenance of Register of Postal Ballot ? (3 marks)

(c) Explain whether a Floating charge attached to the company’s property generally remains dormant till
it crystallizes or becomes fixed. (3 marks)

(d) Who is a ‘‘related party’’ as defined in Section 2 (76) ? (3 marks)

(i) Any allotment of shares.

(ii) Any allotment of debentures. What is the punishment in case of default committed in the above
cases ? (3 marks)

OR (Alternate question to Q. No. 2)

Question 2A

(i) Who is a ‘Significant Beneficial Owner’ under the Companies Act, 2013 ? Is Significant Beneficial
Owner required to file BEN-1 to the reporting company ?

(ii) Can a contributory file a petition for winding up of the company ? Discuss.

(iii) IOL, a manufacturing company, issued partly convertible debentures with ` 6 crore few years back.
The convertible option is only for 50% of the issue and debentures are redeemable in the current
financial year. What is the quantum of Debenture Redemption Reserve (DDR) required to be created by
the company now and how much should be deposited or invested by the company ?

(iv) ‘‘The Companies Act, 2013 attempts to maintain a balance between the rights of majority and
minority shareholders.’’ Discuss.

(v) Reels India Ltd. is a wholly owned subsidiary of Wheels India Ltd. The auditor of Wheels India Ltd.
has intimated the Board of directors that the company will not be required to prepare consolidated
financial statements if provisions of section 129, Companies Act, 2013 are complied with. As a company
secretary give your comments in this regard. (3 marks each)

Question 3

(a) Ram is a practising Chartered Accountant and partner of two audit firms namely PYMG and YE. In the
immediately preceding financial year, PYMG has completed its two terms of five consecutive years in
Gayatri Pvt. Ltd. having paid-up share capital of `60 crore. Now Gayatri Pvt. Ltd. is considering
appointing YE firm as its statutory auditors. Can Gayatri Pvt. Ltd. appoint YE firm as its auditors ? What
will be your answer in the following cases ? (i) If appointing company is a one person company; (ii) If
appointing company is a small company. (5 marks)

(b) Vijay is an auditor of XYZ Ltd, a listed public company having paid-up share capital of `10 crore.
Advise him as to whether he can render the following services, keeping in mind, the relevant provisions
of Companies Act, 2013 ? (i) Vijay wants to conduct internal audit of XYZ Ltd. He also wishes to provide
actuarial services to XYZ Ltd. (ii) Vijay wishes to ‘‘design and implement one financial system’’ and offer
management services to ABC Ltd, the holding company of XYZ Ltd. (iii) What will be your answer in the
above two cases if services are provided to PQR Ltd, a subsidiary company of XYZ Ltd. ?

(c) A public limited company has only seven shareholders. Being all the shares paid in full, one such
shareholder purchased all the shares of another shareholder in a private settlement between them
reducing the no. of shareholders to six. The company continues to carry on its business thereafter.
Discuss with reference to the Companies Act, 2013 the implications of this transaction on the
functioning of the company. (5 marks each)

PART II

Question 4

(a) Anil, a shareholder holding 9% equity shares of the company, who is not holding any directorship
wants to stand for directorship in Pritam Ltd. in its next annual general meeting. State the procedure for
appointment of Anil as per the provisions of the Companies Act, 2013. (5 marks)

(b) Articles of Reality Ltd. provides that directors participating through audio-visual means in its Board
meetings shall always be counted for quorum. Examine the validity of this provision with reference to
the Companies Act, 2013. (5 marks)

(c) Logical Solutions Ltd., a listed company, is having a Corporate Social Responsibility (CSR) committee
constituted with the following members : Rohan — Whole-time director & Chairman of CSR committee
and Board Sohan — Non-executive director Mohan — Independent director Can company constitute a
Nomination and Remuneration committee consisting of same three members of CSR committee with
same composition ? Discuss. (5 marks)

(d) Jolly Retails Ltd. issued a notice for the meeting of its Board of directors scheduled for on 5th June
2019 at its corporate office. One of the directors intimated that he would be participating in the meeting
through video conferencing. The Secretary contended that the meeting cannot be participated through
video conferencing and that the concerned director cannot insist that the company should provide video
conferencing facilities for attending the board meeting. Is the contention of the Secretary tenable as per
the provisions of the Companies Act, 2013 ? Discuss with relevant case laws, if any. (5 marks)

Attempt all parts of either Q. No. 5 or Q. No. 5A

Question 5

(a) Jackson is a prospective candidate for the post of Managing Director of Tirubuvani Sugars Ltd.
Unfortunately, his proposed appointment could not satisfy the conditions of Schedule V of the
Companies Act, 2013. Discuss if any other option is available with the company to appoint him as the
Managing Director of the company. (4 marks)
(b) A newly joined trainee of the secretarial department would like to know details of information to be
entered in respect of resolution passed through postal ballot by the company. Advise him. (4 marks)

(c) ‘A’, a shareholder, appointed ‘X’ as his proxy for the general meeting of a company. The proxy forms
were lodged 50 hours before the meeting. The Chairman of the meeting refused to accept the proxy
stating that the proxies should be lodged at least 70 hours before the beginning of the meeting as per
articles of the company. However, despite Chairman’s refusal proxy participated in the meeting.
Meanwhile ‘A’ also rushed to attend the meeting and both ‘A’ and ‘X’ voted on a particular resolution of
the meeting. On the basis of above facts, answer the following : (i) Can ‘X’ compel the Chairman to
admit the proxy ? (ii) Since both ‘A’ and ‘X’ voted, the Chairman invalidated both the votes. Discuss
whether the Chairman acted as per the provisions of the Companies Act, 2013. (2×2=4 marks)

(d) Referring to the provision of Companies Act, 2013 advise the directors of a company in the following
matters : (i) The company wishes to obtain approval of the financial statement in a meeting held
through video conferencing. (ii) Due to urgency, the company wants to get its prospectus approved in a
meeting held through video conferencing. (4 marks)

(e) ‘S’ is a member of Institute of a Company Secretaries of India. He has defaulted in payment of annual
subscription and his name is removed from the Register of Members by ICSI on 3lst December, 2018. (i)
Can he be appointed as ‘‘Company Secretary’’ by ‘M’ Ltd. with a paid up share capital of `10 crore on 1st
January, 2019 ? (ii) If M Ltd. has paid up share capital of `2 crore and it has appointed ‘S’ as a company
secretary on part time basis, is it valid ? (4 marks)

OR (Alternate question to Q. No. 5)

Question 5A

(i) In a general meeting, a motion was put for removal of small shareholders’ director. A small
shareholder contended that only small shareholders are entitled to vote on this motion as it is related to
removal of small shareholders’ director and motion should be passed as special resolution. Is the
argument valid ? Analyse with reference to the provisions of the Companies Act, 2013. (4 marks)

(ii) On 4th September, 2018 Varun was appointed as Managing Director of Astha Ltd. by the Board of
directors subject to the approval of the members at the next general meeting. On 10th September, 2018
Varun in the capacity of managing director executed an agreement with Shabeer to purchase some
machines. On 3rd October, 2018 members in the general meeting did not approve the appointment of
Varun. Later on company refuses to accept delivery of machines from Shabeer on the ground that
agreement was executed by Varun whose appointment is not approved by the members. Is refusal of
company valid on the said ground ? Examine. (4 marks)

(iii) SRM Ltd. has paid `15 lakh as an insurance premium on behalf of its Company Secretary and
Managing Director for indemnifying any of them against any liability in respect of any negligence,
default, misfeasance, breach of duty or breach of trust for which they may be guilty in relation to the
company. Can the company pay such insurance premium ? Discuss referring to the provisions of the
Companies Act, 2013. (4 marks)

(iv) Director, Ravi, was appointed on 1st July, 2018. On 2nd July, 2018 he wrote to Managing Director of
the company to inspect the minutes of the board meeting held on 1st August, 2017. The Managing
Director refused as he was not a director at that time. Ravi attended a meeting held on 1st September,
2018 and resigned on 3rd October, 2018. On 4th October, 2018 he wrote to the Managing Director to
send him a copy of the signed minutes of the meeting held on 1st September, 2018. Again, the
Managing Director refused. Are the actions of Managing Director valid under Companies Act,
2013/Secretarial Standards ? Comment. (4 marks)

(v) On 5th January, 2018 in a general meeting a motion for removal of a director was put to vote. The
Chairman declared the motion passed as ordinary resolution by show of hands. In the next general
meeting held on 28th September, 2018, a member questioned the validity of the said resolution which
was declared as passed by the Chairman alleging that majority votes were against the motion and asked
the chairman to disclose number of votes cast in favour of and against the said resolution. Referring to
the provisions of the Companies Act, 2013 discuss if the demand of member is tenable. (4 marks)

PART III

Question 6

(a) Ragini, a practicing company secretary expressed her opinion on a report given to a business firm
called ‘‘Quick March Consultants’’. Ragini has an interest in the same to be extent of 12% of shares in
the firm. Is she guilty of professional misconduct ?

(b) How would you substantiate the view that the members of the Institute of Company Secretaries of
India (ICSI) are subject to disciplinary mechanism ? (5 marks each)

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