RNB GLOBAL UNIVERSITY

ASSIGNMENT
LEGAL ASPECTS OF BUSINESS

Q1. Each member must observe the provisions of articles and

memorandum. For instance, a company has a right of lien on
member’s shares or to forfeit the shares on non-payment of calls.
Every member is bound by whatever is contained in the memorandum
and articles. In Borland’s Trustee vs steel Bros. Co. Ltd [1901] 1 Ch.
279, the articles of a company contained a clause that on the
bankruptcy of a member, his share should be sold to the other persons
and at a fixed price by the directors. ‘B’ a shareholder was
adjudicated bankrupt. His trustee in bankruptcy claimed that he was
not bound by these provisions and should be at liberty to sell the
shares at the true value. It was held that the trustee was bound by the
articles as a share was purchased by B in terms of the articles

Q2. Company shall get the Declaration of Dividend Approved by

the shareholders in the AGM .Shareholders has the right to
reschedule the amount of Divided as proposed by the Board of
Directors. However, the Shareholders has no right to increase the rate
of Dividend as originally proposed by the Directors. They can only
reduce the same.

Q3. Yes, he would succeed. As, In case of a prospectus

containing fraudulent misrepresentation as to a material fact, Ss.
 62 and 63 make the promoters, directors, etc., personally liable
not only in damages but they may even be prosecuted in terms
of fine up to 50,000 or imprisonment up to 2 years or both.

Q4. As between outsiders and the Company, Articles do not give any
right to outsiders against the Company, even though their names might
have been mentioned in the Articles. An outsider cannot take
advantage of the Articles to form a claim thereon against the Company.
Thus, in the given case, Company shall succeed in removing
Mr.Srivastava as the solicitor of the Company without incurring any
obligations.

Q5. The power of the members to effect alteration in the Articles by

passing special resolution is limited in as much as the alteration must
be bonafide and in the interest of the Company. In the given case,
alteration requires taking over the shares of only those who competed
with the Company’s business. Therefore, empowering the directors to
take over shares of such members seems to be in the general interest of
the Company as a whole and hence shall be valid. S shall be held
bound by the alteration.

Q6. The shareholder would not succeed in suing the director as

there is no fraud on the part of the director because the shares
were purchased by the shareholder by an outsider at a higher
figure.

Q7. A has a right to be registered as a shareholder or receive

Compensation from the company as a share certificate works as
estoppels against the company even if the shares were purchased
through outside party.

Q8. The given notice is not a valid notice under s.173, since the
details on the item to be considered are lacking. The information
about the amount is a material fact with reference to the
proposed increase of share capital.

Q9. The adjourned meeting in question is valid as per s.174.

Section 174 of the Act provides the quorum for a board meeting:
Section 174 of the Act provides the quorum for a board meeting.
Section 174(4) states: – In the case where the board meeting
could take due to the lack of the quorum, the board meeting
shall be adjourned.

Q10. The resolution is valid since the omission to send the

notice is not intentional, but only inadvertent. Section 172(3) in
The Companies Act, 1956 The accidental omission to give
notice to, or the non- receipt of notice by, any member or other
person to whom it should be given shall not invalidate the
proceedings at the meeting.

Q11. According to Section 165 of Company Act, 1956. The

earliest date on which the company may hold its statutory
meeting is June 1994.

Q12. : A can hold directors personally liable on a transaction

which is ultra vires the company. The company can be held
liable only if the money has been used to pay ultra vires debts of
the company or in case any assets have been purchased for the
company, these maybe attached.

Q13. Yes, the appointment is justified. As according to Section

235 in The Companies Act, 1956 empower the Central
Government to order investigation into the affairs of a company
under circumstances specified therein. The power to appoint
inspectors, to conduct investigation and to act on report of
investigation remains with the Central Government.

Q14. According to Section 288(2) in the Companies Act, 1956.

The provisions of section 285 shall not be deemed to have been
contravened merely by reason of the fact that a meeting of the
Board which had been called in compliance with the terms of
that section could not be held for want of a quorum. Hence,
there is no contravention.

Q15. Then contract may be executed by the general body of

shareholders by passing an ordinary resolution to that effect.
According to Section 299 in The Companies Act, 1956, Every
director of a company who is in any way, whether directly or
indirectly, concerned or interested in a contract or arrangement,
or proposed contract or arrangement, entered into or to be
entered into, by or on behalf of the company, shall disclose the
nature of his concern or interest at a meeting of the Board of
directors.