QUESTION PAPER SEMESTER III [CBCS] a B. COM. Il YEAR-2016 COMPANY LAW ~ poo ee 8 Attempt Al the questions, : All questions carry equal Marks. 1. (a) ‘A company is an artificial person : me jon and a common seal.’ Conmene on orm - aa ans. ‘A company is an artificial person created by law with a perpetual on and a common seal.’ : See Q. 1. [Chapter 1] [Page 1]. @) Define a private company and state the special privileges enjoyed by it )eder the Companies Act, 2013. j Ans, Private Company : See Q. 1. [Chapter 2] [Page 12]. Privileges enjoyed by a Private Company : See Q. 1. [Chapter 2] [Page 12]. (Q What are preliminary contracts ? State the legal position of such oe oe Ans, Preliminary Contracts : See Q. 2. (a) [Chapter 3] [Page 23]. legal position of Preliminary Contracts : See Q. 2. (2) [Chapter 3] [Page 23]. OR (a) What is lifting of corporate veil ? State the statutory, provisions under which porate veil may be lifted. o Ans. Lifting of ‘Corporate Veil’ : See Q. 7. [Chapter 1] [Page 7]. : Statutory provisions under which corporate veil of a company may be lifted: Q7. [Chapter 1] [Page 12]. : ©) Define public company. State the procedure for conversion ofa Be Pany into private company. Ans, Public Company : See Q. 2. [Chap' 05.4 lure for conversion of a Public . [Chapter 2] [Page 14]. 0 Few friends purchased a property. Later; bd Fe nee this property to the company and made huge secret © oters. company recover this profit from the prom 4 4s. See Practical Problem 1 : [Chapter 2] [Page Bi é “o ©. 1) Explain the law related to alteration ofname clause ter 2] [Page 12). Company into a Private Company :186 SATISH : Delhi University Series (c) Write a note on dematerialization of shay dite Ans. Dematerialization of Shares : See Q. 5. [Chapter 11] [Page 78]. OR i (@) What is Doctrine of Indoor Management ? Discuss the exceptions to the ! Doctrine of Indoor Management. Ans. Doctrine of Indoor Management : See Q. 2. (b) [Chapter 5] [Page 40}, Exceptions to the Doctrine of Indoor Management : See Q. 2. (6) [Chapter 5} | Ans. See Q. 2. (b) [Page 182]. [Page 40]. : (b) Explain the concept of sweat equity shares. o- Ans. Sweat Equity Shares : See Q. 4. (b) [Chapter 8] [Page 59}. d (c) X purchased from Y 1,000 shares of ABC Ltd. on the basis of a misleading ! Prospectus. What remedies are available to X against the company ? © Q. 3. (a) Who can be a director ? State the various modes of appointing directors of public company. e Ans. Who canbe a director ? : See Q. 6. (2) [Chapter 12] [Page 88]. Modes of appointing directors of a public company : See Q. 3. [Chapter 12] _ [Page 85). (®) Explain the provisions of th. Social Responsibility Committee. Ans. Corporate Social Resp. [Page 101]. e Companies Act, 2013 regarding Corporate - @. onsibility Committee : See Q. 18. [Chapter 12] _ light of the Companies Act, 2013 regarding DIN. Ans. A person can not be a [Page 94}. (b) Who is an Independent Director 2 Explain the p Act, 2013 related to Independent Director? ene2016 ~ 8. Com, [cBcs) ns. Annual Gene: ; ras seni ea ee ee a tay pter 13] [Page 111] [Point gj,” AMMY#! General Meeting : See Q. 2. (b)‘An individual can constitute a meeting.’ Comment, ane, Co, * P aa constitute a meeting ? ; See Q. 1, [Chapter m3 (co) What is the diffe b tction ? rence between Ordinary Resolution and fue ane. Distinction between Ordinary Resolution and Special Resolution : see Q. 8. [Chapter 13] [Page 118}. OR (a) Discuss the requisites of a valid meeting. 6) Ans. Requisites of a Valid Meeting : See Q. 1. [Chapter 13] [Page 107]. (b) Under what circumstances special resolution becomes necessary? (5) Ans. Circumstances under which Special Resolution becomes necessary : See Q. 7. [Chapter 13] [Page 116] [Point B]. (c) Whatis the difference between Annual General Meeting and Extra-ordinary General Meeting ? ©) Ans. Annual General Meeting : See Q. 2. [Chapter 13] [Page 111]. Extra-ordinary General Meeting : See Q. 3. [Chapter 13] [Page 113]. Distinction between Annual General Meeting and Extra-ordinary General Meeting Basis of Annual General Extra-ordinary General | Distinction Meeting Meeting i i Obligatory on the part of | Not obligatory on the Ber olsine of meets the ene: part of the company. 2. When to be con-| Conducted every year | No time period fixed for ducted? conducting this ee Number of Extra-ordi- nary General Meetings in a calendar year may be more than one. ; GM must beheld by EGM can be held at a} ae at its regis- | place other than the reg- tered office or at some | istered office of theo other place in the same or village . Number of meetings | Only one ina calender year |. Place of conducting the meeting 3S. By whom called? situated, The Central Government may exempt any company from this provision subject to such conditions as it may im- (a) By the Board of Directors or (0) By the Tribunal. (a) By the Board o Directors or 7 ©) By the Board of Directors on Requisition of the Members or (©) By the Requisition- ists or 6. Type of business conducted 7. Penal provisions The business to be trans- acted at the Annual Gen- eral Meeting is usually ordinary business. Spe- cial business can also be conducted at such meet- ing. If default is made in hold- ing a meeting of the company in accordance with Section 96, or in complying with any di- rections of the Tribunal, company and every of- ficer of the company who is in default, shall be punishable with fine which may extend to one lakh rupees and in the case of a continu’ default, with a further fine which may extend to five thousand2016 ~ 8 Com. (cagg) 5.(a) State the law Telating tothe appok 189 Ans. Appointment of Auditors See Pointment of auditors, © 1 o Write a note on e-filing of document * [Chapter 16) [Page 138), . ans. “E-filing of documents ? E-filing a | iaistry of Corporate affairs, 8 is 6) The major be cet XY feature of the MCA.21 t of Mi citizens and elmpai'e Papete wet of e-filing are the ease of Tadic | Ved through electronic med ane The - ia or th Notified new e-forms ma | jer the Companies Act, rough any other computer readable media de (i) The payment of filing fees can also be ; ! credit card/internet b; anking is ‘© be made over the internet through ¢ : P ‘out queuing up at the banks, (i) The filing will be vaild only when filing fee is Ba (iv) Pre-scrutiny of filled-up forms is done in the portals before final submission. (v) Many of these e-forms Tequire certification by CA/CWA/CS (in whole time practice). Certification must be done by signing digitally. (vi) DIN (Directors Identification Number) is compulsory for all directors. | (vii) Every signatory of e-form must obtain DSC (Digital Signature Certificate). the Process of e-filing : ees ee (i) Download a blank e-form from the MCA-21 portal. ci 0 et (#) Fill up the e-form offline using software that is free and widely available. ! (ii) Optionally carry out electronic pre-scrutiny in which the system will verify whether the form has been completed in all PaPeC (2) The form to be digitally signed by one or me sien ies. (?) Submit the e-form for processing to the MCA-21 po! yet hp ea (i) Make necessary payments to complete the transactio! authorised bank branch or through internet banking. i vantages of e-filing : ionals : (A) Advantages to Corporates and Yoni ROC office. () Documents can be filed we deat filing documents or paying (#) There is no need to stand in lo filing fees, basis. This afford! tit Filing wi ona24x7 a eee it the it of .. this work at one's conten done in the portale alt ae point () Pra-scrutiny of forme St ‘maar tetas mnaern to rectify, deficiencies in sling? Yl °° only ofice/home using credit ) Fiting fees can be paid from the : . card/internet banking is one the flexibility to do190 SATISH : Delhi University Series fh the portal offers inspection of (B) Advantages to the Public : To the public, , documents filed by companies on a 24 x 7 basis from the comforts of one's home/ office. (C) Advantages to the Government : as (i) Better utilisation of existing staff and space resources. ; " (i) The DIN (which is compulsory for all existing and prospective directors to obtain) will help enforce accountability of ean (ii) Time and energy spent in accepting documents, filing them, corresponding with companies will be drastically reduced and channelised towards taking action against errant corporates. (c) Explain the following terms: 6) (@ Declaration of Solvency. (ii) Official Liquidator. Ans. (i) Declaration of Solvency : See Q. 4. [Chapter 17] [Page 147]. (ii) Official Liquidator : After the winding-up order has been made, the assets of the company have to be realised and distributed amongst the debentureholders, — preference shareholders, creditors and the equity shareholders. To perform this for the winding up of the company, the liquidator shall be appointed by the Tribunal and such liquidator is known as Official Liquidator. ; The Official Liquidator performs such duties as the Tribunal may specify in relation to winding up of the company. Sometimes, after the presentation of a winding-up petition but before the making of a winding-up order, the Tribunal jwe may appoint the Official Liquidator, as the liquidator provisionally. Such liquidator (3 enjoys the same powers as enjoyed by the Official Liquidator. The Provisional Liquidator or the Company Liquidator, as the case may be, f yn shall be appointed from a panel of professionals maintained by the Central j, Government. The panel consists of the names of Chartered Accountants, Advocates, Company Secretaries, Cost Accountants or firms or bodies corporate of such professionals, having at least ten years’ experience in company matters. ‘ The terms and conditions of appointment and remuneration of the Provisional _ Liquidator and Company Liquidator shall be specified by the Tribunal. On appointment as Provisional Liquidator or Company Liquidator, as the case may be, such liquidator is required to file a declaration within seven from the date of appointment disclosing conflict of interest or lack of independence in respect of his appointment. The Company Liquidator must act as per the order of the Tribunal and comp! the liquidation process within the time frame set out by the Tribunal. He is req to submit a report to the Tribunal within 60 days of his appointment. OR i ae (a) Explain the composition and powers of National Company Law (NCLT). 38 ¢ of Ans. “Composition of National Company Law Tribunal : T! consist of a President and such number of judicial and tech: 3 (2 a2016 ~ B. Com, [CBCs] 191 central beets may deem necessary, to be appointed by it. The President of the ncLT shall be a person who is or has been a Judge of a High Court for five years. powers of National Company Law Tribunal : a The Tribunal shall have the same powers as are vested in a civil court ynder the Code of Civil Procedure, while trying a suit in respect of the following matters, namely : (a) summoning and enforcing the attendance of any person and examining him on oath; | () requiring the discovery and production of documents; (Q receiving evidence on affidavits; (d) subject to the provisions of Sections 123 and 124 of the Indian Evidence Act, 1872, requisitioning any public record or document or a copy of such record or document from any office; (e) issuing commissions for the examination of witnesses or documents; (f dismissing a representation for default or deciding it ex parte; (g) setting aside any order of dismissal of any representation for default or any order passed by it ex parte; and (» any other matter which may be prescribed. (2) The Tribunal shall have the same jurisdiction, powers and authority in respect of contempt as the High Court has and may exercise, for this purpose, the powers under the provisions of the Contempt of Courts Act, 1971. (3) The Tribunal also has the power to seek assistance of Chief Metropolitan Magistrate, Chief Judicial Magistrate or the District Collector to take into custody or under its control all property, books of account or other documents in any proceeding relating to a sick company or winding up of any other company. (b) What is forfeiture of shares ? Discuss its consequences. 6) Ans. Forfeiture of Shares : See Q. 2. [Chapter 10] [Page 72]. Consequences of Forfeiture of Shares : See Q. 2. [Chapter 10] [Page 72] under the heading ‘Effects of a Valid Forfeiture.’ (0) At the Annual General Meeting of ABC Ltd., the shareholders approved the dividend of 10 per equity share. Subsequently, the management proposed convene an extraordinary general meeting to consider and pass a resolution for er declaration of dividend of 5 perequity share on ie ee a previously Surplus profits were not correctly computed. Some o the ef ae objected ‘othe further declaration of dividend. Advise the management in this regard.(5) Ans, The rate of dividend is recommended and declared by the Board of Directors in the Annual General Meeting: The sharebolceeannn meee: on either laration of dividend or on increasing, the ae ad by ihe Directors. may, however, lower the rate of een s a lee Where the shareholders of @ ne ik oe és = ccearah te cate Proper course of action would Pe Wr th rate of dividend and adoption of Board of Directors’ meeting for increas192 SATISH : DELHI UNIVERSITY SERIES [SEMESTER-II] 2016 — B. COM. [CBCS] COMPANY LAW aren ts revised accounts, and then hold the adjourned annual general meeting for declaration of dividend. In this case, the annual general meeting has not been adjourned. Therefore, the management cannot convene an Extra-odinary General Meeting to consider and ms pass a resolution for further declaration of dividend of 75 perequity share. on ooQUESTION PAPER No. 7853 SEMESTER [11 ICBCS] ; galtowed :3 hours $e Maximum Marks :75 sie eee Altempt All the ‘questions. cae All questions carry equal marks. aR « chee an J 0.1. (0) A Company in law isa different person altogether from its members” omment. ra Ans. ‘A Company in Law isa Diffe i Q.1. [Page 11. rent Person Altogether From its Members’ : (p) Distinguish between private and public company. 6) Ans. Distinction between Private and Public Company : See Q. 3. [Page 13]. (0 What is the legal position of a promoter of a company ? © Ans. Legal Position of a Promoter of a Company : See Q. 1. [Page 22]. OR (a) What is an illegal association ? State its consequences. 6 Ans. Illegal Association : See Q. 8. [Page 9]. Consequences of an Illegal Association : See Q. 8. [Page 9]. (b) ‘Conclusiveness of certificate of incorporation cannot be disputed on any Jyound whatsoever.’ Comment. ©) Ans. ‘Conclusiveness of Certificate of Incorporation’ : See Q. 5. [Page 27]. (0) X, on the instructions of the promoters of a proposed company, prepared and articles of association and got the company registered. X y. The company refuses to pay. Will X succeed ? 6) le memorandum laims his costs from the compan Ans. See Practical Problem 5 [Page 30]. Q. 2. (a) Discuss the doctrine of ultra vires. What are the effects of ultra us sactions ? Ans, Doctrine of Ultra-vires :See Q. 5. [Page 36). Effects of Ultra-vires Transactions? See Q.5. [Page 36]. m (0) Write a note on buy-back of shares: ~ Ans, Buy-back of Shares + See Q. 4. Seas e we ee (© Distinguish between transfer a smission of Securities :See Q. 3. Ans. Distinction between Transfer #76), (193)194 SATISH : Delhi University Series oR " (@) What is memorandum of association? Explain the law relating to alterat of objects clause. 6) Ans. Memorandum of Association ; See Q. 1. [Page 31]. Law Relating to Alteration of Objects Clause : See Q. 4. [Page 35]. (b) Explain the remedies available against the company to an allottee who has bought shares on the basis of misleading prospectus. 6) Ans. Remedies Available Against the Company to an Allottee Who has Bought Shares on the Basis of Misleading Prospectus: See Q. 3. [Page 48]. (c) List the purposes for which securities premium account may be used as pe: the Companies Act. 6) Ans. Purposes for Which Securities Premium Account May be Used: SeeQ.2. (2) [Page 57]. Q.3. (a) Can the Central Government appointa director in a public company? Explain. 6) Ans. Appointment of a Director in a Public Company by the Central Government : See Q. 3. {Page 85] [Point 5]. (b) Define the term Company Secretary. What are the functions and duties of cs? &) Ans. Note : Out of Course. (c) Write a note on different types of board committees, 6) Ans. Different Ty pes of Board Committees : See Q. 17. [Page 100] and Q. 18. [Page 101]. OR (a) Explain the concept of key managerial personnel introduced by the Companies Act, 2013, Ans. Concept of Key Managerial Personnel : See Q. 11. [Page 94). (b) State the provisions relating to the removal of a director, N Ans. Provisions Relating to the Removal of a Director : See Q. 5. [Page 87]. (c) State the qualifications and disqualifications of directorand the maxi number of directorships an individual can hold? 5 ‘ Ans. Qualifications and Di: [Page 88]. Maximum Number of Directorships :See Q. 6, (b) [Page 88]. _ Q.4. (a) What is Annual General Meeting ? tribunal have the power to call an AGM? squalifications of Director: SeeQ.6.2017- B.Com. (cBcs} 198 power of the Tribunal to Call an AGM : ee Q, 2. (Page 111] [Point 9 w state the provisions regarding proxy, [Page 111] [Point 9]. ans. Proxy :See Q. 4. [Page 114]. (o Write short notes on; (p E-voting (i Poll ans. (i) E-voting : See Q. 9. (b) [Page 118}. (ji) Poll :See Q.5. [Page 115] [Point (ii)]. OR (a) What is a statutory meeting ? State the important provisions for holding a tutory meeting ? (5) ‘Ans. Deleted from the Companies Act, 2013. ( State the provisions regarding quorum. 6) Ans. Quorum : See Q. 1. [Page 107] [Point 4]. (o What type of resolution is required to transact the following businesses? © () Appointment of additional director. (i) Appointment of auditor, (ii) Amalgamation with another company. (i) Changing registered office of a company from one state to another state. (2) Declaration of dividend. Ans. (i) Appointment of Additional Director —Ordinary Resolution (i) Appointment of Auditor — Ordinary Resolution (ii) Amalgamation with Another Company — Special Resolution (iv) Changing Registered Office of a Company from one State to Another State — Special Resolution (©) Declaration of Dividend — Ordinary Resolution Q.5. (a) What amounts are required to be transferred to Investor Education Protection Fund according to the provisions of the Companies Act, 2013? Ans. * . be Transferred to Investor Education and = "Amounts Regia ints shall be credited to the Fund : lection Fund : wing amo ‘und : The following eed a (y ‘ | Gov ) the-amount given by We lament by law in this behalf for being utilised f the Fund; Fund by the appropriation ma for the purposes 0! Central Government, State ® donations given to the :196 SATISH : Delhi University Series Governments, companies or any other institution for the purposes of the Fund; (© the amount in the Unpaid Dividend Account of companies transferred to the Fund under Section 124 (5); (@ the amount in the general revenue account of the Central Government which had been transferred to that account under Section 205A(5) of the Companies Act, 1956, as it stood immediately before the commencement of the Companies (Amendment) Act, 1999, and remaining unpaid or unclaimed on the commencement of this Act, i.e. Companes Act 2013, . (e) the amount lying in the Investor Education and Protection Fund under 7 Section 205C of the Companies Act, 1956. (f the interest or other income received out of investments made from the Fund; @ the amount received under Section 38 (4); 0) the application money received by companies for allotment for any securities and due for refund; (@ matured deposits with companies other than banking companies; @ matured debentures with companies; (®) interest accrued on the amounts referred to in clauses (h) to (j). @ sale proceeds of fractional shares arising out of issuance of bonus shares, merger and amalgamation for seven or more years; Gn) redemption amount of preference shares remaining for seven or more years; and unpaid or unclaimed _ (n) such other amount as may be Prescribed. (b) What do you mean by forfeiture of shares ? Explain the requirements ofa valid forfeiture of shares by a company. a 5) Ans. “Forfeiture of Shares : It means the termination of membership of shareholder and taking away his shares by way of a penalty for not paying any call or instalment or premium on the shares. Whenever a company makes any ‘on the shares, then shareholders have to Pay the call money within a stipu If any shareholder fails to pay any such call money notices, the company has got a right, usually under its forfeit his shares. In such a case the already paid by the shareholder,2017 - B.Com, [cBes) “oF @ ri ee be given to the defaulting member requesting him to Tone (On Day SPaE lachanante ~~ notice must give at least 14 days and must event of non-payment, his shares will a aed he If the member d. ‘ Dy ass a formal ee comply with the notice, the Board of Directors will ait ution of forfeiture and a notice of the same will be served on the defaulti e forfeitare be iain ting shareholder. If this resolution is not passed, the (4) The power to forfeit shares must b af be 7 ‘ and for the benefit of the cone ae by the directors in good faith oa ; . aay Ny Fe wound up after one year from the date of forfeiture, the member 's have been forfeited cannot be held liable as a contributory. (c) Write a note on Annual Return. (5) * 5 Ans. “Annual Return.: As per Section 92, on the close of the financial year, every company is required to prepare an ‘Annual Return’ in the prescribed form containing the particulars regarding the following : {@ its registered office, principal business activities, particulars of its holding, subsidiary and associate companies; (ii its shares, debentures and other securities and shareholding pattern; (iii) its indebtedness; (iv) its members and debentureholder along with changes therein since the close of the previous financial year; 4 (v) its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year; (vi) meetings of members or a class thereof, Board and its various committees along with attendance details; (vii) remuneration of directors and key managerial personnel; (viii) penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment; ‘0 certification of compliances, disclosures as may be imatters relating t prescribed; (x) details, as may be prescribed, in respect of shares held by or on behalf of la indicating their names, addresses, i titutional Investors indicating ; eel ceareidionl registration and percentage of shareholding held by them; and rescribed. (ai tters as may be P' i i) such other mat ‘The annual return must be signed by a director i ual Ret Ba Pte oe or where there is no company secretary, by accompany Secretary in’ practice. (ix)198 SATISH : Delhi University Series Annual return of One Person Company and Small Company ios signed by the company secretary, or where there is no company secretary, director ‘of the company. Certification of Annual Return, The annual return, es bes a listed ae or, by an unlisted company having such paid-up capital an‘ it ee ie prescribed, must also be certified by a company secretary in practice in prescribed form, stating. (@ that the annual return discloses the facts correctly and adequately, and (ii) that the company has complied with all the provisions of this Act. If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this Section or the rules made thereunder, he shall be punishable with fine ranging from @ 50,000 to 5 lakh. Filing of Annual Return With ROC. Every company shall file with the Registrar of Companies a copy of the annual return, within 60 days from the date on which the Annual General Meeting is held or where no Annual General Meeting is held in any year within 60 days from the date on which the annual general meeting should have been held together with the statement specifying the reasons for not holding the annual general meeting. An extract of the annual return in such form as may be prescribed shall form part of Board's report. OR (a) Who can be an auditor ? Discuss the powers of an auditor under the Companies Act, 2013. ©) Ans. “Who Can be an Auditor ?‘As per Sections 141 (1) & (2) only a Chartered Accountant (individual) or a firm, where majority of partners practicing in India are Chartered Accountants, can be appointed as auditor of any company, whether public or private. Where a firm including a limited liability partnership (LLP) is appointed as an auditor of a company, only the partners who are Charterd Accountants shall be authorized to act and sign on behalf of the firm, Powers of an Auditor: Pe (1) The auditor has a right of access'at all vouchers of the company, whether th the company or at any other place. (2) He can enquire from the officers of the com) about. ‘ and explanation as may be necessary for the ner? aa auditor. (3) The auditor has the right to receive all Notices and 0 relating to general meetings. He has the right to attend , ee nadion ene oa of sna : | as an auditor. a times to the Books of Accounts and ey are kept at the registered office of Hy2017 =B.Com, . (CBCS] 199 (a) The auditor of a holdin, all its subsidiaries in os terse oes the Hight of| statements aa ies in so far it relates to Ligh to the records of that of its subsidiaries. consolidation of its financial He has the ri i " ® ap ed in the ae Teceive remuneration on the completion of his work meeting or in such manner as iss be sacral (p) What is winding-up ofa olution of a campanys company ? Distinguish between winding up and 6) diss eae Ans. ‘Winding-up of aCom : Windis which the management of a aNd eee up or liquidation is the process by itsassets are realised by a iigilide i cee is taken out of its directors Be @ sation. If any balal ator, and its debts are paid out of the proceeds of realisal vy nce remains in the hand: iqui it is divi Feng the menibers Obie ; s of the liquidator, it is divided amo ; pany in accordance with their rights under the Articles. Since a company is 2 artificial legal person, its life shall be brought to an end y ss O! se ve y “ * bya Eo aw. In the words of Palmer, “A company incorporated under the Companies Act, cannot be put to an end except by winding up.” In the words of Professor Gower, “Winding up of a company is the process whereby its life is ended and its property administered for the benefit of its creditors and members. An administrator, called a liquidator, is appointed and he takes control of the company, collects its assets, pays its debts and finally distributes any surplus among the members in accordance with their rights. Distinction between Winding-up and Dissolution of a Company : Meaning of Dissolution : Dissolution means bringing an end to the existence of the company. On dissolution, the company ceases to exist. Its name is removed by the Registrar from the Register of Companies and this fact is published in the Official Gazette. Distinction between Winding-up and Dissolution of a Company: (1) Winding up of a company precedes its dissolution. It is the first step and Dissolution is the last step in the entire process which brings the life of the company to an end. (2) Winding up involves realisation of distribution of the proceedings amon distributed amongst the members. formalities are over (3) After winding UP, the legal entity of es compan’ but after dissolution, it comes to an ena a (4) Creditors of the company habe pheir.8 winding up but not after diss° 0 5 “ (c) Write a note on National Company sos : Law qribunal : Section 408 of the panies Act, Ans, *National Company 12% crment shall constitute: National Company provides that ba Central ; various assets of the company and gst creditors. If there is surplus, it is Dissolution means that all these y does not come to an end s during the process of200 SATISH : DELHI UNIVERSITY SERIES [SEMESTER-Il] B, COM, [CBCS] COMPANY LAW-2017 Law Tribunal (NCLT) by notification. by notification. ae on hee earlier entrusted to various bodies, viz. Company Law Boar A re Industrial and Financial Reconstruction (BIFR), or High Courts will now be entrusted to the ‘Tribunal’, Composition of the Tribunal. The Tribunal shall consist of a President and such number of judicial and technical members as the Central Government may deem necessary, to be appointed by it. The President of the NCLT shall be a person who is or has been a Judge of a High Court for five years. Benches of the Tribunal : The powers of the Tribunal will be exercised by the Benches, constituted:by the President of the Tribunal. Every order of the Bench would be deemed to be the order or act of the Tribunal. There would be a Principal Bench at New Delhi presided over by the President of the Tribunal. Ordinarily, every Bench of the Tribunal would consist of two members, out of whom one shall be a Judicial Member and another shall be a Technical Member. Order of the Tribunal : According to Section 420, the Tribunal may, after givit the parties to any proceeding before it, a reasonable opportunity of being heard, pass such orders therein as it thinks fit. Efforts shall be made by the Tribunal for the disposal of the proceeding within 3 months from the date of commencement of the proceeding. Appeal Against the Orders of the Tribunal : Section 421 allows an aggrieved | person to file an appeal against any decision or order of the Tribunal before the ‘National Company Law Appellate Tribunal’. The appeal should be filed within 45 . days from the date on which a copy of the Tribunal's order is received by the appellant. Efforts shall be made by the A\ Ppellate Tribunal to dispose of the appeal within 3 months from the receipt of the appeal. Appeal to Supreme Court : According to Section 423, any person who is aggrieved by any decision or order of the National Company Law Appellate Tribunal may file an appeal to the Sup reme Court within a period of 60 days from the date of communication thereof, on any question of law, oo NOTE : Publisher is not responsible for any omissions/errors, book under any circumstances. Though every Possible mez make this book up to the mark. ew eePaper ~ 3c 3.1: Com Pany La _—_ ___ NOWDEc, 291 ne Allowed :3 hours “e jie ifiveca— in : ~ Se s Maximum Marks: 75 i tempt All five questions, ast MMI questions carry equal marks, Pany is sepa Vits mem mment on the ry Separate from its members, ae ee aaa 1. Q.1.(a) The entity of com gatement citing relevant cag, Ans. The jpoint 3). (b) What do you mean by ‘One p ” plicable aan coamtee ¢ Person Company'? What are the provisions Ans. 'One Person Company’: See Q.7 (b) [Page 17] é 2 Provisions Applicable to One Person Comp: i OR (a) Under what circumstances the court may disre; ompany. 8) Ans. Circumstances Under Which the Court may Disregard Separate Legal ntity of Company : See Q. 7. [Page 7] [Point 2]. (b) Distinguish between a public company anda private company. ™ Ans. Distinction between Public Company anda Private Company : See Q.3. Page 13] Entit i nti y of Company is Separate from its Members:SeeQ. 1, [Page Se eee anies : See Q. 7 (b) [Page 17]. ee ee ee ‘gard separate legal entity of Ss eS Q.2. (a) Explain the law relating to alteration of Objects Clauseof Memorandum Association. (8) Ans. Law Relating to Alteration of Objects Clause of Memorandum of ion : See Q. 4, [Page 35]. (b) Discuss the steps in online registration of the company. (7) Ans. Steps in Online Registration of the Company : See Q. 6. [Page 28]. OR (a) What are the limitations on the power of a company to alter its ea ociation ? ea saul Ans, Limitations on the Power ofa Company to Alterits Articles of Association : Q. 1. [Page 39]. pany on the: basis of prospectus containing shares, he discovered untrue statements ilable to P against the company? — (7) Ans. Remedies for Untrue Statements (Mis-statement) in the Prospectus : See “Page 48}. isions of the Companies Act, 2013 9. 3, (a) Explain various statutory @ ing allotment of shares ? (201)202 SATISH ; Delhi University Series Ans, Various Statutory ss of the Companies Act, 2013 Allotment of Shares : See Q. 1, [Page 52]. i _ (b) What do you mean by forfeiture of shares ? What is the legal e: forfeiture ? Ans. Forfeiture of Shares : See Q. 2. [Page 72]- Legal Effect of Forfeiture : See Q, 2. [Page 72\- Ol (a) How are the auditors of a company appointed ? Ans. Appointment of the Auditors of a Company : See Q. 1. [Page 136], (0) What is bonus issue ? Explain the provisions of Companies Actonissueof bonus shares. 7 As Ans. Bonus Issue : See Q. 4 (¢) [Page 59]. Provisions of the Companies Act on Issue of Bonus Shares : See Q. 4 (e) [Page 59), Q. 4. (a) Explain the provisions of the Companies Act, 2013 relating to the “appointment of directors" by the Board of Directors. ® Ans. Provisions of the Companies Act, 2013 Relating to the ‘Appointment of Directors’ by the Board of Directors : See Q. 3. [Page 85]. (b) What do you mean by ‘proxy’ ? What are the rights of the proxy and in what circumstances a proxy is revoked ? @ Ans. Proxy : See Q. 4. [Page 114]. Rights of the Proxy : See Q. 4. [Page 114] [Points 3 & 13]. Revocation of Proxy : See Q. 4. [Page 114] [Point 11]. OR (a) When and by whom Extraordinary General Meeting may be called? (8) Ans. Extraordinary General Meeting : See Q. 3. [Page 1113]. A (b) What are the provisions relating to Audit Committee ? @ Ans. Provisions Relating to Audit Committee : See Q. 17. [Page 100]. Q.5. (a) Explain the legal provisions regarding declaration of dividend bythe companies. pa Ans. Legal Provisions Regarding Declaration of Dividend by the Conpenies Dividend refers to that portion of the profits of a company which is all th members of the company by a formal declaration in the annual general g the company. In other words, it refers to the return on shares held by a member. According to Section 2 (35), dividend includes interim dividend also. dividend is the dividend declared by the Board of Directors be general meetings of the company. Dividend implies final dividend declared at Legal Provisions Regarding Dividend : 4 ; 1. Source of Dividend : The dividend should be dee! (a) Current year’s profits of the compa p as per Schedule II of the Companies Act, 3 (b) Profits of the previous financial year/s af as per Schedule II of the Companies Act, (c) Out of both or the general mej 060: - 2018 Paper - BO 3.1 = v (# Money provided by the Central or State Governments for the payment of dividends in pursuance of the guarantee given by that Government. 2. Transfer to Reserves : A company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the company. 3. Declaration of Dividend Out of Reserves : No dividend shall be declared or paid by a company from its reserves other than free reserves. In the event of inadequacy or absence of profits in any year, a company may declare dividend out of free reserves subject to the fulfilment of the following conditions, namely : () The rate of dividend declared shall not exceed the average of the rates at which dividend was declared by it in the three years immediately preceding that year. This would not apply to a company, which has not declared any dividend in each of the three preceding financial year/s. (i The total amount to be drawn from such accumulated profits shall not exceed one-tenth of the sum of its paid-up share capital and free reserves as appearing in the latest audited financial statement. ; The amount so drawn shall first be utilised to set off the losses incurred in the financial year in which dividend is declared before any dividend in respect of equity shares is declared, : (iv) The balance of reserves after such withdrawal shall not fall below 15% of its paid up share capital as appearing in the latest audited financial statement. (2) No company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company for the current year. 4. Recommendation of the Board : The directors have the power to recommend the dividend. It is at the sole discretion of the directors to rocommend or not to recommend the dividend. The members in the annual general meeting cannot increase the rate of dividend recommended by the Board of Directors. They can either approve the same rate or lower it. 5. Declaration of Final Dividend at the Annual General Meeting : The dividend is usually declared at the annual general meeting. A company which could not declare dividend atan annual general meeting may declare the same at a subsequent general meeting. Where a company has declared a dividend at the annual general it cannot declare the final dividend again at an extraordi meeting. Thus, final dividend cannot be paid twice in the sa: 6. Depositing the Amount of Dividend Declared into a Separate Bank Account : The dividend declared must be deposited in a separate bank account within five days of its declaration and the same shall be used for Payment of dividend. meeting, nary general me year,204 SATISH : Delhi University Series 7. Dividend to be Paid in Cash : Dividend shall be paid only in cash when adjusted towards paying up unpaid amount on shares held by the members of the company. ‘The dividend payable in cash may be paid either by cheque or warrant of in any electronic mode to the shareholders entitled to the payment of dividend. i 8, Dividend to be Paid only to the Registered Shareholders and Beneficial Owners : Dividend is to be paid only to the registered holder of shares or to his order or to his banker. P Dividend shall be paid in proportion to the amounts paid up on each share, 9. Time Framework for the Payment of Dividend : A dividend, once declared at the general meeting of the shareholders, becomes a debt against the company and must be paid within 30 days from the date of its declaration: Penalty for failure to pay dividend within 30 days: Wherea dividend has been declared by a company but not paid or the warrant in respect thereof has not been posted, within 30 days from the date of the declaration, to any shareholder entitled to the payment of the dividend, every director of the company who is knowingly a party to the default, shall be punishable with imprisonment for a term which may extend to two years and witha minimum fine of one thousand rupees for every day during which such default continues. The company shall also be liable to pay simple interest at the rate of 18% per annum during the period for which such default continues, In the following cases, (@ where the dividend law; (ii) where a shareholder has give! the payment of the dividend ar directions; ai where there is a dispute regarding the right to receive the dividend; (iv) where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder; or () where, for any other reason, the failure to Pay the dividend or post the warrant within the period aforesaid was not due to any default on the part of the company. [Section 127] 10. Transfer of Unpaid or Unclai, 124 (1), where after the declarati there would not be any punishment for default: could not be paid by reason of the Operation of any n directions to the company regarding nd it is not possible to comply with those pany shall, within 7 days said period of 30 days, from the date of expiry of the amount of dividend which remains unpaid or unclaimed to a special account called the Unpaid Dividend Account. For this purpose, the company has to open Unpaid Dividend Account in any scheduled bank. In case of delay, the company would have to Pay interest @ 12% p.a,nov. / Dec. ~ 2018 Paper ~ 86 34 11. Transfer of Protection Fund ni/Unelaimed Bi tAn of a'tompany we Money transferred Hh to Investor Education and years from the q along with interest Protection Fund, Ifa company fails to com the company Ply with any of the re ‘ shall be punj : which may extend to 05 keaton ba default shall be i a punishable wi may extend to £05 ee le with a (b) Whatare thejustand equita ae equitable . 4 deer ae up of compa? aaa the Tibunal may onde ns. Just and Equitable Ground, Re is Under whi Compulsory Winding up of Company : See Q. 1. [P. Write short on € short notes on any three of the following: () Women Director. = ise (i) National Company Law Tribunal (NCLT). (iii) Abridged Prospectus. (iv) Investor Education and Protection Fund. (v) Quorum. Ans. (i) Women Director : See Q. 7 (a) [Page 90]. (ii) National Company Law Tribunal (NCLT) : Section 408 of the Companies f} Act, 2013 provides that the Central Government shall constitute. National Company Law Tribunal (NCLT) by notification. by notification. The powers which were earlier entrusted to various bodies, viz., Company Law Board (CLS), or Board and Financial Reconstruction (BIFR), or High Courts will now be ‘quirements of Section 124, imum fine of 75 lakhs but every officer of the company who is in minimum fine of 7 1 lakh but which ich the Tribunal may Order ‘age 143]. }} of Industrial entrusted to the ‘Tribunal’. Composition of the Tribunal. The Tribunal shall consist of a President and umber of judicial and technical members as the Central Government may pointed by it. The President of the NCLT shall be a person of a High Court for five years. ; Benches of the Tribunal : The powers of the Tribunal will be ete os Benches, constituted by the President of the Tibuna) a i io Bed se would be deemed to be th ct of the Tribunal. The! Tribunal. Ordinarily, Bench at New Delhi presi ' : te . Ori ai ery Bench of the Tribunal would consist of ba met sprain | Il be a nical i i ici smber and another sha 7 rn ga ee Tribunal : According to Section oe ie na % giving es , proceeding before it a reasonal ; oppor eae ms ee as ee thinks fit. Efforts shall me ss such ort Tribunal rein as it ‘ ee disposal of ome within 3 months from the ispos i proceeding. such deem necessary, to be ap| who is or has been a Judge e order or a t ded over by the President o!Ss SATISH : Delhi University Series unal ; Section 421 allows an aggrieved Appeal Against the Orders of the Trib yor order of the Tribunal before the person to file an appeal against any decisio id befitedvithireae ‘National Canbany aw Appellate Tribunal’. The appeal shoul! Tril i ler is received by the days trom the date on which a copy of ihe Te ado pert anal appellant, Efforts shall be made by the Appel iH within 3 months from the receipt of the appeal. Section:43) arty pene aggrieved by any decision or order o} ational } Tribunal Pay file an appeal to the Supreme Court within a period of 60 days from the date of communication thereof, on any question of Jaws : (iii) Abridged Prospectus : ‘Abridged Prospectus’ means a Mae tum containing such salient features of a prospectus as may be specified by the ecurities and Exchange Board of India by making regulations in this behaif. [Section 2(1)]. It is a brief version of the information contained in the ‘prospectus’ so that cost of public issue of capital may be reduced. Section 33 (1) states that every application form for the purchase of any of the securities of a company should be accompanied by an abridged prospectus. However, the full prospectus is to be made available to a person who makes a request for it before the closing of the subscription list. If a company violates this provision, it shall be punishable with a fine of fifty thousand rupees for each default. Exceptions : There are, however, certain exceptions to the above provision, where ‘an abridged prospectus’ containing all the prescribed details need not accompany the application forms sent out. These exceptions (a) in case of bonafide underwriting agreement; (b) when shares or debentures are not offered to the public, (0) in relation to rights issue of shares or debentures, (@) in respect of shares or debentures similar to those already issued and dealt in on a recognized stock exchange, 3 (iv) Investor Education and Protection Fund : Section 125 of th i : 0) es, Act 2013 provides for the establishmer ars nt of Investor Education i peer iei cation and Protection Fund are: The following amounts shall be credited to the Fund : (@) the amount given by the Central Government b punt 1 'y way of grants after due appropriation made by Parliament by law in this b ing utili for the purposes of the Fund; hei fon binges (b) donations given to the Fund by the Cent: ral G Governments, companies or any ott he eee Rae Ner institution for the Purposes of the (c) the amount in the Unpaid Dividend Account Of ci ii ferred the Fund under Section 124 (5); wR e (d) the amount in the general revenue account of the C Government eI which had been transferred to that account under Sareea of the Companies Act, 1956, as it stood immedi: ately befo; mencement of the Companies (Amendment) Act, 1 ‘. re these 999, and remainii or unclaimed on the commencement of this Act oe Le. Companes Act 2013. ( ,By. 1 000» = BONY Paper = BC 3.1. (@ the amount lying in the Investor Edi ; Ie aOEC of te CofpunlesAcecneety. et ane under mi} re or other income received out of investments made from the (® the amount received under Section 38 (4). (i) the application money received by companies for allotment for any securities and due for refund; 4 () matured deposits with companies other than banking companies; () matured debentures with companies; (k) interest accrued on the amounts: referred to in clauses (11) to (/). (D sale proceeds of fractional shares arising out of issuance of bonus shares, merger and amalgamation for seven or more years; (m) redemption amount of preference shares remaining unpaid or unclaimed for seven or more years; and (n) such other amount as may be prescribed. Utilization of Fund : The Fund shall be utilised, in accordance with such rules as may be prescribed for : (a) the refund in respect of unclaimed dividends, matured deposits, matured debentures, the application money due for refund and interest thereon; (b) promotion of investors’ education, awareness and protection; (0) distribution of any disgorged amount among eligible and identifiable applicants for shares or debentures, shareholders, debentureholders or depositors who have suffered losses due to wrong actions by any person, in accordance with the orders made by the Court which had ordered disgorgement; (@) reimbursement of legal expenses incurred in pursuing class action suits under Sections 37 and 245 by members, debentureholders or depositors as may be sanctioned by the Tribunal; and (e) any other purpose incidental thereto. The person whose amounts referred to in clauses (a) to (d) have been transferred to Investor Education and Protection Fund, after the expiry of the period of seven years as per provisions of the Companies Act, 1956, shall be entitled to get refund out of the Fund in respect of such claims in accordance with rules made under this — section... Be (v) Quorum : It means the minimum number of members required to be present at the meeting, If this minimum number of members isnot present, the E id and no business can be transacted at it. "Articles of Association of the company wherein the require! scified regarding various meetings whether it is Bo of the members. ee is required to beB. COM. Il YEAR PAPER - BC 3.1: COMPANY LAW—NOV/DEC. 2018 i isi i rol Section 103 of the Companies Act contains provisions relatng to number of members which would constitute quorum for As per Section 103, unless, the Atticles of the number 4 meeting of the company. company provide for a larger (@) incase of a public company, ~ (0 five members personally present if the number of members as on the date of meeting is not more than one thousand; (ii) fifteen members pe 208 SEMESTER III [CBCS] ‘ : ! | tsonally present if the number of members as on the date of meeting is more than one thousand but less than or equal to five thousand; id thirty members pe date of the mee! (0) in the case rsonally present if the number of members as on the ting is more than five thousand; of a private company, two members person, be the quorum for a Meeting of the company. Ifthe quorum is not present within half-an-hour for holding the meeting of the company— (a) the Meeting shall stand Same time and place, or to such other date as the Board may determine; or (0) the meeting, if called by re ally present, shall . from the time appointed adjourned to the same day in the next week at the and such other time and place ‘quisitionists shall In the case of an adjourned mee meeting, the company shall members eithe 'stand cancelled. ting or of a change of day, time or place of Sive not less than three days notice to the * individually or by publishing an advertisement in the ® newspapers (one in English and one in vernacular language) which is in circulation at the place where the registered Office of the company is situated, Ifat the adjourned Meeting also, a quorum is not present within half-an- hour from the time appointed for holding the meeting, the members Present shall be the quorum, Can one person constitute a quorum 2 Ordinarily, one person present in the Under the following circumstances, quorum for a general meeting, (@ When the Tribunal calls or dire it may meeting can not form a ven one quorum, Person pre: No, am on Je ut Sent may form the tr cts the calling of ' company that one member a 'd to constitute a Meeting, sive direction to the or by proxy shall be deeme: (ii) In case of class meetings, if all the shares 0: one person, he shall constitute the quorum. (iii) If there is only one creditor or del for the creditors’/deben turehol, an Annual General Meeti Present in person fa particular class are held by bentureholder, he shall constitut orum i a re ders’ Meeting. a under any any, + Though every possible measures nv this book up to the mark. occurred in this book © been taken :Serta, [CBCs] 7 » COM. II YEAR per~BC 3.1; Company Law NOV/DEC, 2019 qime Allowed : 3 Hours Maximum Marks : 75 Attempt all five questions, All questions carry equal marks, Q. 1. (a) The entity of ¢ ‘ompany ii i ‘on the statement with relevant Gate AO wate ee Ans. i ns. Separate Legal Entity of Company : See Q. 1. [Page 1] [Point 3]. (b) Define Private Com, any. < ‘ company into a Public pe State the process of converting Private * = Q Ans. Private Company : A: . : As Companies (Amendment A a per Section 2 (68), as amended by the i A ct, 2015, a private company means a com hich has minimum paid-up share capital i ee Articles of Association : pital as may be prescribed, and which by its (a) restricts the right of the members to transfer Shares; (b) limits the number of its members to 200 excluding its employees or ex- employees who continue to be its members; (c) prohibits the company to invite public to subscribe to its sh: debentures. However, if two or more persons hold shares in joint names, regarded only as one single member. The minimum number of members requi two. A private company shall add the words name. Conversion of a Private Company into a Public Company : A private mpany may, at any time, pass a special resolution deleting from its articles e three compulsory restrictions as to membership, transfer of shares and ublic subscription, and from the date of alteration, it becomes a public mpany. Within 30 days of passing the resolution, a copy of special resolution, ether witha printed copy of altered articles must be filed with the Registrar. x ; il ii the ming a public company, the company will have to increase Re re nee to at least seven and that of its directors to at leas A A i he statutory minimum required in case ee, if their number is fewer than t t oh! $ public company. Upon becoming a public company, the word ‘Private’ will deleted from the name of the company: i The Registrar of Companies shall, onan application made by the company, ‘ew certificate of incorporation. i mean by Preliminary Contra ir Pre-incorporation Contra‘ ers of the company enter int ares OF then they are red to form a private company is ‘Private Limited’ at the end of its ct ? State its validity. cts: During promotion of ‘0 various contracts with — le a ni (c) What do you - *Aans, Preliminary ° company the promot (209)210 third parties e.g, purchasing some property professionals like lawyers, technicians, ete. Legally, binding on the company after it is incorporated. es ‘All such contracts which are entered into by the promoters incorporation of the company are called ‘Preliminary Contracts.’. can neither sue nor it can be sued on the basis of such contracts because the company was not a party to such contracts. A company cannot even ratify or adopt such contracts to get the benefit of such contracts. Features of Preliminary Contracts 1. These contracts are entered into by the promoters on behalf of the company which is yet to be incorporated. Company is not bound by pre-incorporation contracts. Company cannot sue on the basis of such contracts. 4. Promoters, themselves, remain personally liable on all such contracts, unless a new contract on the same terms as that of the old one is made by the company after incorporation. Company, after its incorporation, cannot even ratify such contracts. Specific performance of such contracts can be enforced by other parties against the company if such contracts are for the purposes of the company and are warranted by the terms of incorporation of the company. This is 50 provided under the provisions of Specific Relief Act, 1963. For this, company has to adopt such contracts in writing, after its incorporation and communicate such acceptance to the other party to the contract. However, whether a contract is for the purposes of the company depends upon the facts of each case. OR (a) Under what circumstances may the court disregard separate legal entity of a company ? Ans. Circumstances under Which the Court may Disregard Separate Entity of a Company : See Q. 7. [Page 7]. (b) What do you mean by One Person Company ? What are the pi enjoyed by one person company ? *Ans, One Person Company (OPC) : Section 2 (62) defines ‘One Person Company’ (OPC) as a company which has only one natural person as a member. It is incorporated as a Private Company. The words ‘One Person Com shall be mentioned in brackets below the name of the company, w1 printed, affixed or engraved. Characteristics of OPC : 1. It has only one member. It has at least one director. The maximum It is registered as a private company. i The Memorandum of One Person oe i 3 4.,/Dec. - 2019 i Paper~ Bc 3.4 other person who sh; subscriber dies, If Nake Memorandum, 5, Only a natural person wh India y 10 is an Indi can incor, ene member. poms OPC. Same applies to the nomieae of ReeaTe a 6. A person can incorporate only one OPC. en ; 7. The ae capital should not be more than & 50 lakhs and the average annual turnover should not be exceed & 2 crores, ae co 8. OPC may be incorporated a: atts Sa Ci i i limited by guarantee or an ulimited enna — (c) Few friends purch: and sold the ropes ia ihe hoe - ot ie | ade n n ge profits without adequate disclosure. Can the company receive the profit from the casted a Ans. See Practical Problem 1 [Page 29]. Q. 2. (a) What are the limitations on the power of a company to alter its articles of association ? Ans. Limitations on the Power of a Company to Alter its Articles of Association: See Q. 1. [Page 39]. ' (b) P applied for 200 shares of a company on the basis of prospectus s. After the allotment of shares, he discovered medies are available to P against s containing untrue statement ; itrue statements in the prospectus. What rei . company ? | Ans. Remedies for Untrue [Page 48]. (c) Discuss the steps in onlin *ans, On-Line Registration © Tegistration of a new company are as follows: ; : 1, Director Identification Number (DIN) : All existing and intending directors have to obtain DIN within prescribed time by foll the procedure laid down in this regard. i = 2, Acqui d Register a Digital Signature Ce 0 ow i ee a i Digital Signatures on ed orm and for obtaining the Digital Signatures: the compa a } ~~ sed signatories, a ‘ icensed Certifying ‘shorty which s Statements in the Prospectus : See Q. 3. e registration of the company. fa New Company : The steps for on-line submitted i Certificates (D make an applica a Digital Signatures: ai After acquiring the proposed com212 SATISH : Delhi University Series 3. New User Registration : The authorised representatives of a ee ii i ‘i themselves as a user in the relevant companies are required to register 2 ae user category, such as registered user or business ra a 4. Get the Proposed Name of the Company eee eee — want to form a company should find out the availability of the Proposed: name from the Registrar of Companies. ae oes 6 the Company Incorporated : After getting the propos: ame 7. haere ne piopesed cone has to file various adie oe forms for the incorporation of the company. After approva of the forms by the official of the Ministry of Corporate Affairs, the applicant gets an e-mail regarding the approval and the new company gets incorporated by way of an online process. OR (a) Explain the Doctrine of Indoor Management. State its exceptions, *Ans. Doctrine of Indoor Management : As against the doctrine of ‘Constructive Notice’, the doctrine of ‘Indoor Management’ states that an outsider is not bound to look into the formalities of company’s own internal functioning or the company’s internal management. So, he is not affected by any irregularity in the internal management of the company’s functioning. This is known as doctrine of ‘Indoor Management’. This doctrine was laid down in famous case of Royal British Bank vs. Turquand. In this case, a bond had been issued by Company’s Directors to Mr. Turquand (T). Company’s Articles of Association provided that bonds could be issued only if Directors were authorised by a resolution at the Company’s Board Meeting. In the present case, no such resolution had been passed. However, court decided in favour of T and he was entitled to have assumed that such resolution had been Passed. So, whereas the doctrine of ‘Constructive Notice’ helps to Protect the company, the doctrine of ‘Indoor Management’ helps to Protect the persons (outsiders) dealing with the company. The latter is based on the principle of justice and public convenience as internal formalities of the company are not open to the public or outsiders, Exceptions to the Do doctrine of indoor management is of great practical utility and has also been applied in a variety of cases involving rights and liabilities of the companies and the outsiders, yet it has the following exceptions, i.e., a person dealing with the company cannot take the benefit of this doctrine in the following situations: ctrine of Indoor Management : No doubt that the 1, Knowledge of irregularity: Where a In the case of Howard vs, Patent Ivo: company could borrow on behalf of th 1,000 and for any amount beyond £ a the consent of the members in ry Co., the Directors of the, © company any amount upto £ 000 they were required to obtain eneral ia ee Paper~ BC 3.4 : themselves lent to the compan: ‘ an i the consent of the members. Held then excess of £ 1,000 without i internal irregularity and hence the ~ rectors had notice of the for £ 1,000. ompany was liable to them only o 2 Suspicion of irregularities: 5, company has some suspicion of nee cae var management, In such ca pf irregularity regarding the internal of indoor management, Somerina Sea the enelit of tha abel contract are suspicious which invite joa ate ae surrounding the person dealing with the company should sabe In this situation, the In the case of Underwood vs, Bank of ie e ne ow the company paid into his own account oe , = sole Director of the company. Held, the bank was liable as it crak tae = ae ba cael we the account of the Director oS ae 3. No knowledge of Articles : Thi ; Z person who did not aa the Monona oa = not rely on them. sand te 4, Where there is forgery : If an outsider relies or acts on a forged document, then also the rule of indoor management does not ae This doctrine only applies to matters involving irregularities mini to those involving illegalities. Ina case, the company’s secretary had issued a share certificate forging the signatures of two Directors as required under the Company's Articles of Association. Held, the shareholder’s claim to the member was turned down. 5. Acts which are beyond or outside apparent authority : In such cases also, the company is not liable. So where a person had accepted transfer of company’s property from its accountant, the transaction was held to be just null and void as it was outside the apparent authority of an accountant [Anand Bihari Lal vs. Dinshaw & Co.]. of the Companies Act regarding shifting of to another within the same State. {fice from One City to Another within the | _ () Explain the provision | teistered office from one city | Ans. Shifting of Registered O: ime State : See Q. 5. [Page 66]- / (0) Distinguish between Rights shares and Bonus shares. “Ans, theinatl Rights Shares and Bonus SharesBonus shares are issued to the existing members free | 214 SATISH : Dethi University Series Basis of Rights Shares Distinction 2. Payment — for | It only provides privilege the Shares to the existing members to subscribe for the shares | of charge. offered by way of rights. However, the members have to pay for the shares accepted. 3, Fully Paid/ Rights shares may be | Bonus shares are always Partly Paid partly paid. fully paid. 4, Minimum Minimum subscription is | There is no condition of | Subscription to be raised. minimum subscription. 5. Money to be Money received on issue | This is not relevant to Keptina should be kept in a | bonus shares. Separate Bank | separate bank account. Account 6. Right to Rights shares may be | No such facility is available Renounce renounced by a member in | in respect of bonus shares favour of any other person. | as it is like a gift. | He may renounce all or part of the shares offered to him, 7. Purpose Purpose of right shares is to raise funds for the | to company. 8, Applicability | Right shares are mandatory. (. 3. (a) What do you mean by buy-back of shares 2 provisions of Companies Act with regard to buy-back of Ans, Buy-back of Shares : See Q. 4 (a) [Page 89). 8 (b) How are the auditors of a co . ‘Ans, Appointment of Compa’ uyor 1026. = 2019 Paper ~BC 3.4 215 o Distinguish between Managing Director and Manager. Ans. Distinction between Managing Director and Manager Basis of pistinction fy powers of the Management Entrusted. Managing Director Entrusted with substantial powers of the management. Manager Has the management of the whole or substantially the whole of the affairs of the company. jp Number of Posts A company may have more than one managing director. A company cannot have more than one manager 3, Requirement asto bea Director A managing director must bea director A manager may or may not bea director, 4, Method of Appointment May be appointed by (i) virtue of an agreement with the company, or (ii) resolu- tion passed by the company in the general meeting, or (iii) Board of Directors, or (iv) by virtue of Articles of Association of the company. May be appointed under a contract of service or by way of a resolution passed by the company in the general meeting. 5. Maximum Remunera- tion Payable Where there are more than one Managing Director, 10% of the net profits. 5% of the net profits. 5 called 2 Ans, Legal Position (0) Write a note on Shelf prospectus. Ans. Shelf Prospectus : See Q. 4 (iii) Q. 4. (a) When and by who Ans. Extraordinary (b) What are the p’ Ans, Provisions Relating to OR (a) What are Sweat equity shares ? Discuss the provisions regarding issue of Sweat equity shares. Ans. Sweat Equity Shares: See Q. 4 (b) [Page 59]. i iti i f the company ? (b) What is the legal position of directors o: of Directors of the Company : See Q. 8. [Page 90]. [Page 50]. m may Extraordinary General Meeting be General Meeting : See Q. 3. [Page 113]. rovisions relating to Audit Committee ? Audit Committee : See Q. 17. [Page 100].re EMESTER-I1 [CBCSI B. COM. II YEAR PAPER - BC 3.1: COMPANY BAW (©) Write a note on E-voting. Ans, E-voting : See Q. 9 (b) [Page 118}. OR (a) Explain the rovisions relating to proxy: Ans. me cistons Relating to Proxy : See Q. 4. [Page aay ae (b) Explain the legal provisions regarding declaration of dividend by the companies. ; Ans, Legal Provisions Regarding Declaration Companies : See Q. 1. [Page 126]. (©) How are the auditors of a company appointed ? Ans. Appointment of Company Auditors : See Q. 1. [Page 136]. £ Directors to appoint directors of of Dividend by the Q. 5. (a) Explain the powers of Board o! a company. ‘Ans. Powers of Board of Directors to appoint directors of a company; See Q. 3. [Page 85] [Point 3). (b) What are the just and equitable grounds under which the tribunal may order compulsory winding up of a company ? Ans. Just and Equitable Grounds Under Which the Tribunal may Order Compulsory Winding Up of a Company : See Q. 1. [Page 143). (c) Write a short note on Corporate Social Responsibility Committee. Ans. Corporate Social Responsibility Committee : See Q. 18 (c) [Page 101]. OR Write short notes on any three of the following : (a) National Company Law Tribunal (NCLT) (b) Producer Company (c) Independent Director (d) Investor Education and Protection Fund. ‘Ans. (a) National Company Law Tribunal (NCLT) : See Q. 2. {Page 150}. (b) Producer Company : See Q. 7 (a) [Page 17]. (c) Independent Director : See Q, 1, [Page 80] [Point 11]. (d) Investor Education and Protection Fund ; See Q. 4. [Page 129). A Note: Publisher is not responsible for an; issi * this book under any Seine Tee x been taken to make this book upto the meat ny sq/june 2020." F NOV/DEC. 2019