CORPORATE GOVERNANCE, BUSINESS LAWS & ETHICS [M6] MANAGERIAL LEVEL-2 WINTER 2019 EXAMINATIONS. Thursday, the 21st November 2019 5 Minutes Cees Minutes Maximum Marks: 90 Roll No. ‘Attempt all questions, Write your Roll No. in the space provided above, Answers must be neat, relevant and brief. Itis not necessary to maintain the sequence. Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper. In marking the question paper, the examiners take into account clarity of exposition, logic of arguments, effective presentation and language. DO NOT write your Name, Reg. No. or Roll No., or any irrelevant information inside the answer script Question No. 1 - "Multiple Choice Questions” printed separately, is an integral part of this question paper. Question Paper must be returned to invigilator before leaving the examination hall. EXAMINEES ARE ADVISED TO MANAGE SOLUTIONS/ ANSWERS WITHIN PROPOSED TIME Question No. 2 Proposed Time : (a) (b) (c) Marks 0 Min. | Total Marks : 21 Shahzain Machineries Limited (SML) is a public limited company, having a paid-up share capital of Rs. 50 million. SML proposes to enter into contracts with the following parties for the supply of certain components for a period of five years with effect from January 01, 2019 () Falcon Forgings Private Limited, where Mr. Shehzad, a director of SML, is interested as a director and member. (li) Superior Casting Limited, where Ms. Kiran Khan, a director of SML, is interested as a member holding 25% of paid-up capital. Required: Considering the above scenario, state briefly the legal requirements to be complied with under section 205 (disclosure of interest by directors) and 207 (interested director not to participate or vote in proceedings of the board) of the Companies Act, 2017, to give effect to the above proposals, 10 A listed company has a power to purchase its own shares in pursuance of section 88 of the Companies Act, 2017, subject to recommendations of the board of directors and under the authority of special resolution. The shares purchased by the company may, in accordance with the provisions of this section, either be cancelled or held as treasury shares. Required: In the light of section 88 (3) and (4) of the Companies Act, 2017, answer the following: (i) The shares held by the company as treasury shares shall, as long as they are so held, in addition to any other conditions as may be specified, be subject to some conditions. Discuss the conditions. 03 (ii) Briefly explain the matters, which should be clearly specified in the decision of the board of directors regarding recommendation of purchase of company’s own shares. 03 In pursuance of section 453 of the Companies Act, 2017, every officer of a company shall endeavour to prevent the Commission of any fraud, offences of money laundering including predicated offences as provided in the Anti-Money Laundering Act, 2010 (VII of 2010) with respect to affairs of the company and is required to take adequate measures for the purpose. Required: Briefly explain the penalty provision, in case any officer fails to comply with the above mentioned requirement of section 453 and where any such officer is not liable for penal provisions. 05 CGBLEWinter 2019 10f3 PTOQuestion No. 3 Proposed Time : 25 Min. | Total Marks : 14 (a) Dawood Textile Limited (DTL) is a listed company, its 41st Annual General Meeting (AGM) will be held at 11:00 am, on Friday, November 29, 2019, at Registered Office, DTL House D-45, SITE, Karachi, to transact the ordinary businesses. Notice of AGM has already been circulated and published in newspapers on November 05, 2019. Blue Denim (Pvt.) Limited (BDL) of Lahore, having 12% shareholding in DTL, received the notice of AGM in due course. Required Answer the following situations: (i) Draft.an instrument of proxy as specified under clause 42 of the First Schedule (Table A) of the Companies Act, 2017, if Mr. Zahyan, CEO of BDL, on behalf of the board of directors authorises Mr. Noman, the Company Secretary of BDL, to attend the AGM through proxy. Draft a request letter to DTL to attend the AGM through video-link facility under section 132 (2) of the Companies Act, 2017 (Statutory time limit to be observed), if Mr. Zahyan wants to attend AGM through video-link Note: Keep the fields blank of letters, where relevant data/ information is not available, (b) One of the most important responsibility of a Company Secretary is to ensure that proper statutory books are maintained by company. List down any eight (08) statutory books required to be maintained under the Companies Act, 2017 Question No. 4 Proposed Time : 22 Min. | Total Marks : 12 (a) In pursuance of section 59 of the Companies Act, 2017, variation of rights of shareholders of any class can only be effected when a company has adopted the manner laid down under section 38 of the Act, related to alteration of Articles of the Company. Required ‘Answer the following in the light of section 38 and 59 of the Companies Act, 2017 (i) When alteration’ variation of substantive rights of class of members may be carried out under section 38? (ii) What remedy is available to the class of members aggrieved by the variation of their rights under section 59 of the Act regarding variation of shareholders rights. (b) Under the provisions of section 9 of the Companies Act, 2017, briefly explain the obligation to register certain associations, partnerships as companies. Also explain the types of business which are specifically excluded to register under aforesaid provisions of the Companies Act, 2017. Question No. 5 Proposed Time : 30 Min. | Total Marks : 15 (a) Mr. Almeer and Mr. Shahmeer as promoters, intend to incorporate a private limited company under the provisions of the Companies Act, 2017. The proposed name of the company is “The Prestige Intemational (Private) Limited”. They came to know that already a limited liability partnership company i.e. “The Prestige LLP”, is registered under the Limited Liability Partnership Act, 2017. Required ‘As a Corporate Consultant, guide the promoters specifically in the given scenario to proceed for registration of the proposed name under the Regulation 4 of the Companies (Incorporation) Regulations, 2017 related to: (i) Prohibition of certain names (ii) Names which are considered undesirable under the aforesaid regulations (b) Mr. Khan is recently appointed as Chief Executive Officer (CEO) of SHB Textile Limited, which is a listed company. Under the Regulation 14 of the Listed Companies (Code of Corporate Govemance) Regulations, 2017, he is responsible to place significant issues for the information, consideration and decision, as the case may be, of the board of directors or its committees. Required Being CEO of SHB Textile Limited, elucidate any five (05) issues as specified under the aforesaid regulation CGBLEWinter 2019 203 Marks 06 04 04 02 03 07 02 04 05(c) A person is not eligible for appointment as a director of a company, if he/ she is not a member of a company. Briefly explain the conditions where a non-member person may be a director of a company as specified under section 153 of the Companies Act, 2017. Question No. 6 Proposed Time : 30 Min. | Total Marks : 15 (a) A Modaraba floated either for a fixed period or for a specific purpose shall be wound up by the Modaraba Company itself on the expiry of the period fixed for the Modaraba or the accomplishment of the purpose as the case may be. However, Modaraba Company is required to fulfil some conditions to proceed winding up of Modaraba voluntarily Required Briefly explain the aforesaid conditions as described under section 22 of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, (b) Define the term “Deposit taking NBFC" and briefly explain the requirements for creation of reserve fund by a deposit taking lending NBFC, as prescribed under the Regulation 16 of the Non-Banking Finance Companies and Notified Entities Regulations, 2008. (c) The Court may, on a reasonable cause being shown including but not limited to lack of independence or lack of impartiality, remove the official liquidator on any of the grounds as specified under section 316 of the Companies Act, 2017. Required Briefly explain the stated grounds and what action the Court may take against the official liquidator, where the Court is of opinion that the liquidator is responsible for causing loss or damage to the company due to the stated grounds. Question No. 7 Proposed Time : 23 Min. | Total Marks : 13 (a) The board of directors of Crystal Steel, a listed company, in a meeting held on September 26, 2019, recommended cash dividend to the shareholders for the approval in upcoming Annual General Meeting (AGM) scheduled on October 28, 2019. To ascertain the entitlement of the dividend, the Company is required to announce closure of share transfer books. Required In pursuance of clause 5.5.14 (closure of share transfer books) in Pakistan Stock Exchange Rule Book, briefly explain the following: (i) Statutory time period and relevant suggested date for communicating notice of closure of books to PSX, if the closure starts from October 20, 2019 Minimum and maximum time period at a time and in a year as a whole for closure of share transfer books, (iii) How lodgement of transfer of shares request shall be treated, if a shareholder lodged share transfer request on October 20, 20197 Is he entitled to the dividend? (i (b) A Cost and Management Accountant may be faced with a conflict of interest when undertaking a professional activity. A conflict of interest creates a threat to objectivity and may create threats to the other fundamental principles. Briefly explain the following in the light of “Ethical Conflicts and Resolution” as guided in the Code of Ethics issued by ICMA Pakistan’ Required (i) What factors a Cost and Management Accountant may consider resolving a conflict in complying with the fundamental principles? After having considered aforesaid relevant factors and having consult with other appropriate persons within the firm or employing organization for help in obtaining resolution, if a significant conflict could not be resolved, what is/ are other option(s) a Cost and Management Accountant may consider to resolve the conflict? (i THE END CGBLEWinter 2019 30f3 Marks 04 05 04 06 02 03 02 03 03