ANSWER TO Q.

NO:1

Section 173 of the Companies Act, 2013, which deals with board meetings and the
requirement of notice to be given for a board meeting to be convened, is silent on the
above situation. However, Secretarial Standards (SS-1), which deals with the best practices
for a board meeting provides specifically under clause 1.3.5 that the notice of the meeting
shall be given even if meetings are
held on pre-determined dates or at pre-determined intervals. In view of the above, Rahul
cannot take a position that no notice for the board meeting is required in the instant case. A
notice has to be issued for every meeting even though the dates of the meeting have been
pre-determined and agreed to by all the directors.
(ii) Clause 1.3.10 of the SS-1 further provides that any item of business not included in the
agenda may be taken up for a consideration with the permission of the chairman and with
the consent of a majority of the directors present in the meeting, which shall include at least
one independent director, if there is one.
Thus, where majority of the directors including one independent director consent to the
inclusion of the subject and the chairman has no objection, Rahul cannot refuse to take up
the subject to discussion.

ANSWER TO Q.NO:2

1. Quorum for Meetings of Board [Section 174( 1)]:One-third of total strength or two
directors, whichever is higher, shall be the quorum for a meeting. However the articles
of association of the company may provide for a higher Quorum.
2. The quorum shall be present not only at the time of commencement of the Meeting but
also while transacting business. A director shall not be reckoned for quorum in respect
of an item in which he is interested and he shall not be present, whether physically or
through electronic mode, during discussions and voting on such item.
3. As per the given case, Star Gen Ltd. held a meeting of its Board of Directors on 31st
October 2010 at its registered office. Though the company has 12 directors on its board,
only 5 directors were present at the commencement of the meeting. Thereafter, even while
the meeting was in progress, 2 more directors left the meeting and the remaining directors
carried on the proceedings of the meeting.

Thus, the quorum falls below the required number after 2 more directors left the meeting.
For subsequent business transacted without required Quorum is void.

ANSWER TO Q.NO:3

Sec 192 of the Companies Act 2013 insists that no company shall enter into an arrangement
with a director of the company / its holding / subsidiary / associate company / a person
connected with him, for acquiring any assets, for consideration other than cash, unless prior
approval for such arrangement is accorded by a resolution of the company in general
meeting. The notice for approval of the resolution by the company or holding company in
general meeting shall include the particulars of the arrangement along with the value of the
assets involved in such arrangement duly calculated by a registered valuer.

In the given situation,

(i) Ms.Victory Ltd. can have a transaction with Mr.Joy for consideration other than
cash, provided it is approved by the company by way of resolution in a general
meeting.
(ii) Mr. Amar, Director in Sunrise Ltd., subsidiary of Victory Ltd., can acquire second
hand machineries from the company without any consideration provided it is
approved by the company by way of resolution in a general meeting.

ANSWER TO Q.NO:4

As per Sec 177 of the Companies Act, the following companies shall have Audit committee

 Every listed Public companies;

 All public companies with a paid up capital of Rs.10 crore or more;
 All public companies having turnover of Rs.100 crore or more;
 All public companies, having in aggregate, outstanding loans or borrowings or
debentures or deposits exceeding Rs.50 crore or more.
As per Secretarial Standard 1, unless otherwise stipulated in the Act or AOA or under any
other law, the Quorum for Meetings of any Committee shall be as specified by the Board.

Since Companies Act is not prescribed any specific quorum for Audit Committee, Listed
public company shall follow the LODR regulations of SEBI.As per LODR the quorum for the
Audit Committee is 2 Members or 1/3rd of the members of the audit committee, whichever
is greater, with at least 2 independent directors.

In the given case, 2 members of the Committee present at a duly convened meeting validly
transact the business provided that 2 are independent directors as it is a listed company.

If it is unlisted public company and if AOA or Board is not specifying any quorum, the
presence of all the members of any such Committee is necessary to form the Quorum.

ANSWER TO Q.NO:5

Sec 186 of the Companies Act governs Loans and investments by company

In the given case ,

Amount of investment Rs.20 Lakhs

Limit provided under Sec 186 is 60% of Paid up share capital, free reserves and Security
premium or 100 % of free reserves and Security premium, whichever is higher.

Here, 60% of PUC+FR+SP = 60/100*(25+5+0)= 18 Lakhs or 100% of 5 Lakhs= 5 Lakhs w.e.is

higher. ie Rs.18 Lakhs. Since the proposed amount exceeds the above limit following steps
are necessary:

1) Unanimous approval of the Board is required at the meeting of the Board

2) Approval of shareholders (prior approval) by way of a special resolution passed in a
general meeting.
3) Prior approval of the public financial institution (PFI) concerned where any term loan
is subsisting. However, prior approval shall not be required if it is not a defaulting
company w.r.t repayment of loan / payment of interest. Hence in this case, prior
approval of PFI is not required.
4) Interest rate for the Loan shall not be lower than the interest prescribed by
Government for the Govt tax free Bonds.
5) Register MBP-2 shall be maintained & it shall be open for inspection by any member.
6) The entry shall be made in this register within 7 days of event and it shall be
maintained permanently.

ANSWER TO Q.NO:6

(i) As per Section 182 of Companies Act,2013, any company may contribute any amount
directly to any political party. However (a) Government Company (b) Company in
existence for less than three years, cannot contribute. If DEF Ltd is not a Government
Company it can contribute to political party. As there is no limit on the maximum
amount that can be contributed by a company to a political party is prescribed the
Act, company can contribute any percentage without any limit subject to the
following conditions:

The contribution must be authorised by board in its meeting by resolution. The

donation may be directly or indirectly. The contribution shall not be made except by
an account payee cheque drawn on a bank or an account payee bank draft or use of
electronic clearing system through a bank account. Every company is required to
disclose in its profit and loss account the total amount contributed by it.

(ii) As per Sec 181 of the Companies Act, 2013 ,the power of making contribution to
‘bona fide’ charitable and other funds is available to the board. However Prior
permission of company in general meeting is required if such contribution
exceeds five percent of its average net profits for the three immediately
preceding previous years.

As there is no limit on the maximum amount that can be contributed by a

company to a ‘bona fide’ charitable and other funds is prescribed the Act,
company can contribute upto 7.5 Crores [(100+150+200)3=150*5/100] by
passing a Board resolution and beyond 7.5 crores with the prior permission of
shareholders.