CA Inter Suggested Answers | May 24 Corporate Laws
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Question : 1
(A) MNO Limited has the following equity share capital
| Class-1 : Equity Share Capital 3,00,000 equity shares of ₹ 10 each. | 30,00,000 |
| (1 voting right for every 1 share) | |
| Class-2 : Equity Share Capital - 50,000 equity shares of ₹ 10 eaçh | 5,00,000 |
| (1 voting right for every 5 shares) |
At the time of issue, the company had fulfilled all the conditions related to the issue of equity share capital.
The company wants to vary the voting rights of class 2 equity share capital -1 voting right for every 5 shares to l voting right for every 10 shares.
The Company's Memorandum and Articles of Association have given the company the power to make the variation. The. holders of 40,000 equity shares have given their consent in writing for this variation.
Out of dissenting shareholders, the holders of 4,500 equity shares want to apply to the Tribunal against the company's action.
Examine, with reference to the relevant proyisions of the Companies
Act, 2013 -
i) Whethera company can change the rights of its shareholders ?
(ii) Whether the dissenting shareholders can apply to the Tribunal ?
Answer:
(B) BBQ Ltd., with its registered office in Hyderabad, has two branch offices, one located in Delhi and the other in London. The accounting transactions of the branches are recorded and all books of account are maintained in the branches. The branch accountant of the Delhi branch sent monthly and the branch accountant of London sent quarterly summarized trial balance, profits and loss account and balance sheet to the Hyderabad office. .One of the assistants. of the audit team, Mr. Naveen, raised the issue that the branches of the company maintain its books and records at branches., so it defaults on not maintaining the proper books of account at the registered office. Mr. Naveen further objected to the fact that the London branch sent their summarised returns on a quarterly basis instead of a monthly basis. You are requested to analyse and decide the validity of both the objections of Mr. Naveen relating to the place of maintaining the books of account and sending summarised returns thereof to the registered office by the branch offices of the company referring to the provisions of the Companies Act, 2013.
Answer:
(C) Mr. L was employed as a fashion designer in Elegant Textile Ltd., a public limited company in Gurugram, India during the financial year 2023-24. He had efficiently provided his services for 183 days during the above said period. On 01.04.2024 Mr. H. the Human Resource Manager of Jeff Fashion Ltd., Paris (a foreign country) offered him a better employment opportunity in such company.
On 02.04.2024, Mr. L left India for. taking up employment as a production controller at Jeff Fashion Ltd. in Paris. On 30.04.2024 he flew back to India for a 10 day family function in Manali, India.
In light of the provisions of the Foreign Exchange Management Act, 1999 elucidate: The residential status of Mr. L -
(i) On his return for attending the family function on 30.04.2024.
(ii) In case, instead of vacation, he joins an employment in an Indian company after arriving on 30,04.2024.
Answer:
Question : 2
(A) Referring to the provisions of the Companies Act, 2013, answer the following queries :
(i) What is the type of resolution to be passed and maximum number of persons to whom an offer by private placement in a financial year be made ?
(ii) Explain the consequences of non-allotment of shares within the stipulated timeline.
(ii) In case the shares were allotted within the requisite allowed time, when can the company start utilizing the funds received by it from such private placement ?
Answer:
(B)
(i) In the circumstance where Mr. M and Mr. P, joint shareholders of Primal Private Limited holding 500 equity shares, have conflicting views on one special business (relared to proposed changes in the Aticles of Association) at the extra-ordinary general meeting, Mr. M is endorsing the resolution, and Mr. P is dissenting. Determine the procedure for casting the vote in the event of such a situation, as per the guidelines. outlined in the Companies Act, 2013.
(ii) Okara Limited, a company, having a net worth of 110 crores and a turnover of 450 crores, wants to accept deposits from the public. Referring to the provisions of the Companies Act, 2013, decide, whether the above company can accept the deposits from the public.
Answer:
(i) The voting in case of joint shareholders is done in the order of seniority, which is determined on the basis of the order in which their names appear in the register of members. The joint-holders have a right to instruct the company as to the order in which their names shall appear in the register of members. Accordingly, in case of Mr. M and Mr. P, it is to be seen as to whose name appears first in the register of members; and then to decide whether the vote is casted in favour of resolution or against it.
(ii) Acceptance of deposit from public:
According to section 76 of the Companies Act, 2013, a public company, having net worth of not less than 100 crore rupees or turnover of not less than 500 crore rupees, can accept deposits from persons other than its members subject to compliance with the requirements provided in sub-section (2) of section 73 and subject to such rules as the Central Government may, in consultation with the Reserve Bank of India, prescribe.
Provided that such a company shall be required to obtain the rating (including its net-worth, liquidity and ability to pay its deposits on due date) from a recognised credit rating agency for informing the public the rating given to the company at the time of invitation of deposits from the public which ensures adequate safety and the rating shall be obtained for every year during the tenure of deposits.
Provided further that every company accepting secured deposits from the public shall, within 30 days of such acceptance, create a charge on its assets of an amount not less than the amount of deposits accepted in favour of the deposit holders in accordance with such rules as may be prescribed.
Since, Okara Ltd. has a net worth of ₹110 crores, it is eligible to accept deposits from the public.
(C)
(i) The Board of Directors of Cool Private Limited, through resolution passed in the board meeting, granted authorization to Mr. Sharad, the CEO of the Company to appoint two employees for the procurement department. Subsequently, Mr. Sharad selected Mr. Suresh and Mr. Hemant for the positions. However, after one month, Mr. Sharad, noticing unsatisfactory performance and lack of honesty in their duties, issued dismissal orders for both employees, citing proper reasons. Mr. Suresh contested his dismissal in the court, arguing that the Board had only empowered Mr. Sharad for appointments and not for dismissals and hence the dismissal order is invalid.
Assess the validity of Mr. Suresh's argument under the provisions of the General Clauses Act, 1897.
(ii) Mr. M issued a chegue ofT 3 00.000 dated 31.12.2023 at 10 a.m. 1o Mr. N as a consideration towards the medical services provided by the later. Mr.N presented the above cheque on 31.03,2024 during the banking business hours. The cheque was dishonoured taking the plea that it was not presented within the requisite time of 3 months as provided under Section 138 of the Negotiable Instruments Act 1881. Referring to the provisions of the General Clauses Act, 1897 decide, whether the plea for dishonouring the cheque was valid.
Answer:
(i) As per the provisions of Section 16 of the General Clauses Act, 1897, the authority having for the time being power to make the appointment shall also have power to suspend or dismiss any person appointed whether by itself or any other authority in exercise of that power.
Mr. sharad was authorized in board meeting of Cool Private Limited to appoint two employees for procurement department of company. Mr. sharad appointed two employees. After one month, he issued the order of dismissal both employees. Mr. Suresh filed an application in the court challenging the validity of dismissal order with the words that Mr. sharad was authorised only for appointment of employees not for dismissal.
On the basis of above provisions and facts of the case, Mr. Suresh was not correct with his words because as per the General Clauses Act, 1897, power to appoint includes power to suspend or dismiss. Hence, Mr. Sharad has power to dismiss Mr. Suresh.
(ii)
Question : 3
(A) "A Bonus share is a distribution of capitalized undivided profit having an identity and value capable of being bought and sold." In reference to the above line elaborate the pre-requisites for issue of bonus shares as enlisted in the Companies Act, 2013.
Answer:
Pre-requisites for issue of bonus shares [Sub-section 2]
No company may capitalise its profits or reserves for the purpose of issuing fully paid-up bonus shares, if;
it complies with such conditions as prescribed by Rule 14 of the Companies (Share capital and debenture) Rules, 2014, that a company which has once announced the decision of its Board recommending a bonus issue, shall not subsequently withdraw the same
(B) Q L Ltd. is a public limited company incorporated in Surat, Gujarat with 1200 members. On 10.12.2023 a general meeting was convened in which 14 menmbers were present in person. Mr. Mohan was acting as an authorized representative of two body corporates who are members of Q L Ltd. Shyam one of the important members was absent. The Chairman Mr. Rahi adjouned the meeting, taking plea of absence of Mr. Shyam, to same day and place next week. The members present at the meeting venue waiting to attend, opposed the decision submitting that the majority of them present now shall be unavailable next week. Referring to the provisions of Companies Act, 2013 elaborate :
(i) Whether the requisite quorum to hold meeting as required in case of public limited companies is present in this case ?
(ii) Whether Mr. Rahi could adjourn the meeting in the curent scenario?
Answer:
(C) What are the differences between interpretation and construction in the legal context, and how do these two concepts relate to each other as per Interpretation of Statute ?
Answer:
Question : 4
(A) Long Boots Ltd. a listed company is engaged in the manufacturing of shoes and related accessories, The Business is set on a recovery mode by the induction of the new production Manager Mr. A. The Board of Directors of the company haS recommended the declaration of a dividend of 50 lakhs after a gap of eight years during which profits were inadequate to distribute the same.
The dividend thus proposed is to be met partially out of the current year profit of ? 16 lakhs. Accumulated profits during the past eight years were 170 lakhs which is 25% of the total share capital of the company. Referring to the provisions of the Companies Act, 2013 decide, whether the conditions with regard to declaration of dividend in case of inadequate profit are met ? You are requested to support your answer with requisite calculations.
Answer:
(B) A dispute among the partners of Limited Liability Partnership (the LLP) jeopardized the stability of the busines. Out of two partners, one due to a quarrel, left the LLP. The other partner alone continued the business of the LLP. You are being expert in law is requested to explain the provisions governing the LLP being operated by a single partner and its winding up by the Tribunal as per the provi_ions of the Limited Liability Partnership Act, 2008.
Answer:
Minimum number of Partners [Section 6]
Circumstances in which LLP may be wound up by Tribunal [Section 64]:
A LLP may be wound up by the Tribunal:
(C) Explain the term "Generalia specialibus non derogant", in connection with Interpretation of Statues.
Answer:
Question : 5
(A) Stallworth Ltd. a listed company having a paid up share capital of 11 crores with a turnover of 100 crores had appointed an Audit Committee which recommended M/S ANC & Associates, a firm of Chartered Accountants having such qualifications and experience as is required for appointment as the auditor of the company, The next Annual General Meeting (the AGM) was due on 30,09.2023. The Board disagreed with the said recommendation of the committee and refer back to it for reconsideration. The Audit Committee was adamant on appointing the above firm of the chartered accountants.
Discuss in the light of the Companies Act, 2013 :
(i) The course of action for Böard of Directors to resolve the above eadlock. What would be your answer, if above situation was that of filling the casual vacancy of auditors ?
(ii) The steps to be taken by the Board of Directors for appointment of auditors in case there was no requirement of Audit Committee in the company ?
Answer:
(B)
(i) Explain the protection available for the whistleblowers" in the context of the Limited Liability Partnership Act, 2008.
(ii) Describe the consequences of making a false statement in any return, statement or other document under Section 37 of the Limited Liability Partnership Act, 2008.
Answer:
(i) Whistle blowing [Section 31]
(1) The Court or Tribunal may reduce or waive any penalty leviable against any partner or employee of a LLP, if it is satisfied that—
(2) No partner or employee of any LLP may be discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against the terms and conditions of his LLP or employment merely because of his providing information or causing information to be provided pursuant to sub-section (1)
(ii) Penalty for false Statement [Section 37]
If in any return, statement or other document required by or for the purposes of any of the provisions of this Act, any person makes a statement—
he shall, save as otherwise expressly provided in this Act, be punishable with imprisonment for a term which may extend to 2 years, and shall also be liable to fine which may extend to 5 lakh rupees but which shall not be less than 1 lakh rupees.
(C) State the provisions of the General Clauses Act, 1897 relating to 'gender and number'.
Answer:
“Gender and number” [Section 13]: In all legislations and regulations, unless there is anything repugnant in the subject or context-
In accordance with the rule that the words importing the masculine gender are to be taken to include females, the word men may be properly held to include women, and the pronoun
‘he’ and its derivatives may be construed to refer to any person whether male or female. So, the words ‘his father and mother’ as they occur in Section 125(1) (d) of the CrPC, 1973 have been construed to include ‘her father and mother’ and a daughter has been held to be liable to maintain her father unable to maintain himself.
But the general rule in Section 13(1) has to be applied with circumspection of interpreting laws dealing with matters of succession. Thus, the words “male descendants” occurring in Section 7 and Section 8 of the Chota Nagpur Tenancy Act, 1908 were not interpreted to include female descendants.
Where a word connoting a common gender is available but the word used conveys a specific gender, there is a presumption that the provisions of General Clauses Act, 1897 do not apply. Thus, the word ‘bullocks’ could not be interpreted to include ‘cows’.
Question : 6
(A) LKJ Ltd. is a company having paid up share capital of 12.50 crores with total number of members being 3500. The board of directors have called a general meeting (the meeting) to be conducted on 06.05.2023 at 2.00 pm. On the date of the meeting the required quorum was not present within half an hour and hence was adjourned to the next week on 13.05.2023 on same day at same venue. In reference to the aboye scenario in light of the relevant provisions of the Companies Act, 2013 elucidate upon the following queries of the company :
(i) What will be the fate of the meeting in case two members, in person, were present at the adjourned meeting held on 13.05.2023 ?
(ii) In case, on 06.05.2023 a total of. 16 members were present but the chairman owing to the unruly behaviour of some members during the meeting had adjourned the same to 13.05.2023 and at the adjourned meeting' only 3 members, in person, are present. What will be the fate of such adjourned meeting?
(iii) In case, where such meeting was called by the requisitionists under Section 100 of the Act and at such meeting the quorum was not present, what will be the fate of such meeting ?
Answer:
Quorum means the minimum number of members who must be personally present in order to constitute a valid meeting. Section 103 of the Companies Act, 2013 states that unless the articles of the company provide for a larger number, the quorum for the meeting shall be as follows –
Public company
(i) Fate of the adjourned meeting on 13.05.2023 if two members are present:
As per sub section 3 of section 103 If at the adjourned meeting also, a quorum is not present within half-an-hour from the time appointed for holding meeting, the members present shall be the quorum.
(ii) Fate of the adjourned meeting on 13.05.2023 if two members are present:
As per sub section 3 of section 103 If at the adjourned meeting also, a quorum is not present within half-an-hour from the time appointed for holding meeting, the members present shall be the quorum.
(iii) Fate of the meeting called by requisitionists under Section 100 if quorum was not present:
As per clause (b)of sub section 3 of section 103, the meeting, if called by requisitionists under section 100, shall stand cancelled
OR
(A) The Income Tax Authority (the statutory body) has gathered some information and is of the view that there has been a manípulation of accounts of FGH Ltd, reflecting an incorrect financial position of the company. The statutory body intends to get the accounts reopened to reflect correct financial position of the company. In light of the Companies Act, 2013 elucidate
(i) the statutory provisions governing the issue of re-opening of accounts by the Income-Tax Authority.
(ii) the voluntary revision of financial statements or board's report by the directors.
(iii) For how many preceding financial years the board of directors may revise the financíal statements ?
Answer:
(B)
(i) Who will sign the audít report in case ofa proprietorshíp concern or the firm of the auditors and how the qualification/s in the audit report will be dealt with by the auditor at the annual general meeting of the company as per the provisions of the Companies Act, 2013 ?
(ii) Explain the provisions relating to expert's conset inckuded in the prospectus to be issued în India by the companies íncorported outside India as per the provisions of the Companies Act, 2013
Answer:
(i)
(ii) Provisions as To Expert’s Consent And Allotment [SECTION 388]
According to this section:
(i) No person shall issue, circulate or distribute in India any prospectus offering for subscription in securities of a company incorporated or to be incorporated outside India, whether the company has or has not been established, or when formed will or will not establish, a place of business in India,—
(ii) For the purposes of this section, a statement shall be deemed to be included in a prospectus, if it is contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.
(C) Explain the rules relating to the rermittances made by peraons other than individuals requiring approval of RBI as provided in Schedule II to the Foreign Exchange Management (Current Account Transactions) Rules, 2000 issued under the Foreign Exchange Managetnont Act,1999 in respect of the following :
(i)Commission to the agents abroad for sale of residential flats or commercial plots in India.
(ii)Rermittances for consutancy services procured trom outside India.
(iii) Remittances by way of reimbursement of pre-incorporation expenses.
Answer:
Schedule III
Facilities for persons other than individual—The following remittances by persons other than individuals shall require prior approval of the Reserve Bank of India
(i) Commission to the agents abroad for sale of residential flats or commercial plots in India:
Commission, per transaction, to agents abroad for sale of residential flats or commercial plots in India exceeding USD 25,000 or five percent of the inward remittance whichever is more
Rermittances for consutancy services procured trom outside India.:
Remittances exceeding USD 10,000,000 per project for any consultancy services in respect of infrastructure projects and USD 1,000,000 per project, for other consultancy services procured from outside India
(iii) Remittances by way of reimbursement of pre-incorporation expenses:
Remittances exceeding five per cent of investment brought into India or USD 100,000 whichever is higher, by an entity in India by way of reimbursement of pre-incorporation expenses
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