Company Law Solved Papers
B.Com 3rd Semester CBCS Pattern
3 SEM TDC CLAW (CBCS) NH CC 302
2 0 2 1(Held in
April–May, 2022)
COMMERCE (Non
Honours)
Paper: CC–302(Company Law)
Full Marks: 80
Pass Marks: 32
Time: 3 hours
The figures in the margin indicate full marks for the questions
1. Write True or False: 1x4=4
(a)
A company
continues to exist, though a member dies. True
(b)
An article of
Association of a company contains the rules and regulations for the management
of a company. True
(c)
Appointment
of a whole time director requires the special resolution at shareholders’
meeting. False
(d)
Only the
Board of Director can convene an extraordinary general meeting. False
2. Fill in the blanks: 1x4=4
(a)
A public
company is required to have minimum Rs. 5
Lacs as paid-up capital.
(b)
A company
secretary is merely an officer
of the company.
(c)
Share warrant
is a kind of negotiable
instrument.
(d)
A company
would up by an order of the court
is called compulsory winding-up.
3. Answer the following
questions (any four): 4x4=16
a) By what method and within what scope may the
object clause of the Memorandum of Association be altered?
Ans: Alteration of objects: A company has no unlimited
right to alter the objects clause but for the purpose of carrying on its
business more economically and efficiently it can do so. A company may alter
its objects with the passing of a special resolution. The confirmation of the
central government is not required for this purpose. Alteration of object
clause is not permitted if any company has raised money from the public by
issue of a prospectus, and any part of such money remains unutilised with the
company. A company which has not issued a prospectus can alter its objects
clause by passing a special resolution.
b) What are the different types of whistle-blowing?
Ans: Types of Whistle-blowers:
a)
Internal: Internal whistle blowing means
reporting of illegal, improper conduct or unethical practice to the employer or
officials at higher position in the organisation.
b)
External: External whistle blowing means
reporting of wrongdoings to the people outside the organisation like Lawyers,
Media, Law enforcement agencies or Watchdog agencies.
c)
Alumini:
Alumini whistle blowing means reporting of misdeeds by a former employee of the
organisation.
d)
Open: When
identity of the whistle blower is revealed, it is called open whistle blowing.
c) Write in brief the various types of meetings of a
company.
Ans: Types of Company’s Meeting
A company is an association of several persons. Decisions are made
according to the view of the majority. Various matters have to be discussed and
decided upon. These discussions take place at the various meetings which take
place between members and between the directors. Needless to say, the
importance of meetings cannot be under-emphasised in case of companies. Company
'meetings can broadly be classified as follows:
1) Meetings of Shareholders: Such
meetings are also known as general meeting of the members which are held to exercise
their collective rights. The meetings of the shareholders may again be of the
following four types:
a) Statutory Meeting; (Sec.
165 of Companies Act’ 1956 is omitted from the Companies Act, 2013)
b) Annual General Meeting; (Sec. 96 of the Companies Act, 2013)
c) Extraordinary General Meeting; and (Sec. 100 of the Companies
Act, 2013)
d) Class Meeting.
2) Meetings of Directors: The
directors are to act collectively in the form of a board, and the decisions are
taken at the meetings of the Board of directors. These meetings may again be of
two types:
a) Meetings of the Board of directors; and (Sec. 173 of the
Companies Act, 2013)
b) Meetings of the committee of directors.
3) Other Meetings: These meetings may be either of the
following:
a) Meetings of debenture-holders;
b) Meetings of creditors;
d) What is Secretarial Audit? What are the companies
in which Secretarial Audit is mandatory? 1+3=4
Ans: Secretarial Audit is an audit to check compliance of various
legislations including the Companies Act and other corporate and economic laws
applicable to the company.
The following
companies are required to obtain Secretarial Audit Report:
a) Every listed
company;
b) Every public
company having a paid-up share capital of fifty crore rupees or more; or
c) Every public
company having a turnover of two hundred fifty crore rupees or more.
“Turnover” means
the aggregate value of the realisation of amount made from the sale, supply or
distribution of goods or on account of services rendered, or both, by the
company during a financial year. [Section 2(91)]
e) What do you mean by share allotment and share
forfeiture?
Ans: Share allotment: Share allotment is the
process of apportionment of shares to the applicants who applied for new shares
during an Initial Public Offering (IPO). Such allotment of shares increases the
share capital of the company.
Forfeiture of shares: A
company has no inherent power to forfeit shares. The power to forfeit shares
must be contained in the articles. Where a shareholder fails to pay the amount
due on any call, the directors may, if so authorized by the articles, forfeit
his shares. Shares can only be forfeited for non-payment of calls. An attempt
to forfeit shares for other reasons is illegal. Thus where the shares are
declared forfeited for the purpose of reliving a friend from liability, the forfeiture
may be set aside.
f) Write the importance of a company promoter.
Ans:
Importance of Company Promoter:
1. Discovery of Idea: It is the first stage in the formation of a
company. Promoter is the person who discovered the idea to start a new business
or expansion of an existing business. Promoter analyse the capital requirement
and risk involved in his business idea.
2. Detailed investigation: After discovery of idea and analysis of
risk involved in the business, promoter makes a detailed enquiry regarding
production process, sources of raw materials, demand of the product,
profitability of the products etc. He can also take the help of experts who
helps him in deciding the plant location and layout.
3. Assembling of resources: After detailed investigation of idea
and verification of that idea from the specialists, the promoter starts
collecting all the resources such as capital, land, labour, machine and
equipments etc. to form a company.
4. Preparing necessary documents: After assembling various factors
of production necessary to start a company, the promoter prepares preliminary
documents such as Memorandum of association, articles of association and
prospectus which is required at the time of registration of a company.
5. Entering into preliminary contracts: Promoter is the person who
enters into contract with various parties prior to incorporation of a company
for which he is personally liable in case company is not incorporated.
6. Naming a company: The promoter has to select a name of the company.
While selecting the name the promoter keeps in mind that the name should not be
identical to the name of any other company.
4. (a) What do you mean
by one-person company? Explain the special advantages of this company. 2+10=12
Ans: One Person company (OPC) [Sec. 2(62)]: It means a company which has only one person as a
member. All the provisions of a private company are also applicable to this
company. It provides benefit of both forms of business – proprietorship and
company. With formatting of a one-person company business can be run in same
way as a proprietorship but by complying with laws.
Special Advantages of One-Person
Company
Only for the buyers of DTS Guide. Available in Our Mobile Application
Or
(b) Discuss the various
stages of a company formation. 12
Ans:
Various stages in Formation and
Incorporation of a Company
Since a company is an artificial person, it has to be formed
according to legal provisions. In India, these legal provisions have been
provided in the Companies Act, 2013. Formation
of a company involves various stages which are as follows:
1. Promotion
stage.
2. Incorporation
stage.
3. Capital
subscription stage.
4. Commencement
of business stage.
All these stages are relevant to forming a public company. For
forming a private company, only the first two stages and a part of the third
stage are relevant as it can commence business immediately after incorporation
and receiving money from signatories to documents who have agreed to subscribe
to the specified number of shares. Therefore, business commencement stage is not
relevant to a private company. Further, such a company cannot invite the
general public for subscribing to its shares. Therefore, a part of capital
subscription stage is not relevant to it. Let us go through all these stages.
1. Promotion Stage: The term ‘promotion’ refers to the sum total
of activities by which a business enterprise is brought into existence. At the
promotion stage of a company, the promoters conceive the idea of promoting a
company and the type of activities that it intends to undertake. It is
discovery of business opportunities and subsequent organisation of funds,
property and managerial ability into a business concern for the purpose of
making profits therefrom. The people who undertake the task of promotion are
called promoters.
2. Incorporation Stage: Incorporation or registration stage
involves putting an application for registering the company before the
concerned Registrar of Companies and getting it registered. Under Section 3 of
the Companies Act’ 2013, 7 or more persons in case of public company, 2 or more
persons in case of private company and 1 person in case of OPC may form an
incorporated company for a lawful purpose by subscribing their names to the
memorandum of association. Steps for incorporating a company are:
a) Before submitting documents for registration, DIN (Directors
Identification Number) and Digital Signatures of the Promoters has to be
obtained. Both DIN and Digital Signatures will be registered with the Ministry
of Corporate Affairs (MCA) portal. After registration of DIN and Digital
Signatures the next steps will be taken.
b) The next step for incorporation is to find out the availability
of the proposed name of the company from the registrar of companies. Sec 4 of
the Companies Act provides that a company cannot be registered by a name which
is undesirable in the opinion of the Central Government. Promoters are required
to select at least 6 alternative names in the order of preference to the
registrar of companies for approval.
c) After getting the approval of name, an application in the
prescribed form along with the prescribed fee and necessary documents shall be
submitted to the registrar of the state in which the registered office of the
proposed company is to be situated. Memorandum of Association, Articles of
Association or declaration of accepting Table A which is a model set of
Articles of Association, written consent of proposed Directors, certificate of
approval of the company’s name, agreement entered with the proposed Managing
Director, statutory declaration that all legal requirements for registration
have been completed and documentary evidence of payment of registration fees.
d) Scrutiny of the application and documents by the Registrar of
Companies.
e) Registering the company by the Registrar if all requirements
are fulfilled and entering the name of the company in the relevant register.
f) Issue of Certificate of Incorporation by the Registrar of
Companies. On issue of the Certificate of Incorporation, the company comes into
existence as an artificial person. The certificate of incorporation is
conclusive evidence that the requirements of the Act have been complied with.
3. Capital Subscription Stage: After a company is registered, it
proceeds to get money through allotment of share capital to members. Initially,
shares are allotted to persons who are signatories to documents and have agreed
to subscribe to the prescribed number of shares. After this, a private company
may start its business while a public company is required to get the Certificate
of Commencement of Business from the concerned Registrar of Companies. The
procedure for subsequent allotment of shares varies for a private company and a
public company. In a private company, subsequent shares are allotted through
personal contacts. In a public company, shares may be allotted through public
issue of shares. The usual procedure
for this is as follows:
a) Filing of prospectus with Securities and Exchange Board of
India (SEBI).
b) Getting approval from SEBI.
c) Appointing managers, underwriters and registrar to the issue.
d) Appointing bankers for receiving applications for shares along
with money and brokers for promoting the issue.
e) Inviting the general public (including institutions) for share
subscription.
f) On receiving the minimum prescribed subscription, allotting the
shares in consultation with the concerned stock exchange where the shares are
to be listed for trading.
However, it may be mentioned that it is not necessary for a public
company to offer its shares to public; it has only eligibility for public issue
but not a compulsion. When a public company issues its shares to the public, it
is called a publicly-held company. When it does not issue its shares to the
public, it is called a closely-held company.
4. Commencement of Business Stage: All the companies without share
capital can start its business immediately after getting the certificate of
incorporation. Such company is not required to get certificate of commencement
of business.
As per Sec 11 of the Companies Act’ 2013, all the public and
private companies having a share capital would be required to obtain
certificate of commencement of business from the registrar of companies before
commencing the business or exercise of borrowing powers. For this purpose, the company is
required to submit the following documents:
a) A declaration that the shares to be subscribed on cash basis
have been allotted.
b) A declaration that all the Directors have paid in cash for the
shares subscribed by them.
c) A declaration, signed either by a Director or Secretary of the
company, that the above requirements have been complied with.
The Registrar of Companies scrutinises the above documents and
issues the Certificate of Commencement of Business if all requirements are as
per the provisions of the Companies Act.
5. (a) Explain the
procedures of alteration of the (1) name clause and (2) registered office
clause of memorandum of a company. 6+6=12
Ans:
Alteration of name Clause:
A company may change its name at any time by passing a
special resolution and with the prior approval of the Central Government. The
company shall file with the registrar a copy of special resolution and a copy
of the order of the central government approving the change of name. The
registrar shall enter the new name of the company in the register of companies
and issue a fresh certificate of incorporation to the company. The change in
the name shall become complete and effective from the last date of issue of
fresh certificate of incorporation.
However, it should be noted that no approval of central government will
be required if the change consists merely addition or deletion of the word
“private” consequent on the conversion of a public company into a private
company or vice versa.
Alteration
of registered office clause:
A company may change the place of its registered office
from one state to another state by passing a special resolution and obtaining
approval of central government. For
obtaining the approval of central government (CG), the company shall make an
application to CG in such form and manner as may be prescribed. CG shall
dispose of the application within 60 days. Before passing any order, CG shall
satisfy itself that the creditors and lenders have consented to such
alterations. After obtaining the approval, the company shall file with the
registrar a copy of special resolution and a copy of the order of the central
government approving the change of the address. The registrar shall enter the
new address of the company in the register of companies and issue a fresh
certificate of incorporation to the company. The change in the address shall
become complete and effective from the last date of issue of fresh certificate
of incorporation.
Or
(b) What do you mean by
Articles of Association? Distinguish between Articles of Association and
Memorandum of Association. 2+10=12
Ans:
Articles of Association: The Articles contain rules and
regulations for the internal management of the company. They are framed with
the object of carrying out the aims and object of the memorandum of association
and also to monitor that the same are carried as prescribed.
Section 2 (5) of the
Companies Act, 2013 defines articles as “Articles means Articles of Association
of a company as originally framed or altered from time to time in pursuance of
any previous law or of this act including so far as they apply to the company
the regulations contain as the case may be in Table A to Schedule I of this
act”
The
difference between Memorandum of Association & Article of Association is
given here:
|
BASIS OF
DISTINCTION |
MEMORANDUM
OF ASSOCIATION |
ARTICLE OF
ASSOCIATION |
|
MEANING |
It
is a charter of a company .It sets the constitution .It defines limits
,powers and objects of the company |
It
contains rules and regulation for the internal management of the company |
|
OBJECTIVES |
It
governs relationship with the external world i.e. creditors, sellers, buyers
& debtors |
It
governs internal relationship between the members of the company. |
|
STATUS |
It
is the primary document. It is the foundation of the company. |
It
is the secondary document & it is based on the memorandum of association. |
|
ALTERATION |
It
is an unalterable document. Alteration can only be done by the permission of
court |
It
can be stitched according to the management a resolution is to be passed and
it is within the limits of Memorandum of Association |
|
Ultra Vires
Actions |
It
lays down the boundaries beyond which a company cannot work. All such acts
are illegal and they are called ultra vires acts. |
The
articles are controlled by the memorandum Within it the shareholders and the
directors may make such regulations as they feel fit for internal management. |
6. (a) Briefly discuss
the provisions of the Companies Act regarding the removal of directors. 12
Ans:
Removal of directors
A director of a company can be removed by
(a) Shareholders (Sec. 169)
(b) The Tribunal (Sec. 242)
(a) Removal by shareholder: Section
169 empowers the company to remove a director by ordinary resolution before the
expiry of his period of office except in the following cases:
(1) A director appointed by the tribunal under sec. 242;
(2) A nominee director of a public financial institution which is
by its charter empowered to nominate a person as a director or to remove him
notwithstanding any power contained in any other act;
(3) Director appointed in accordance with the principal of
proportional representation, under section 163. This is to ensure that the
directors appointed by the minority are not removed by a bare majority.
Special notice is required of any resolution to remove a director
or to appoint somebody in his place at the meeting at which he is removed. On
receipt of such notice, the company will immediately send a copy thereof to the
director concerned. He may make any representation in writing and the copy of
such representation may be sent by the company to every member. Where the copy
of the representation is not sent to the members, in that case the director
concerned may require the representation to be read at the meeting.
A vacancy created by the removal of a director as aforesaid can be
filled up at the meeting at which he is removed provided special notice of the
proposed appointment was also given. The director so appointed shall hold
office till the date the director removed would otherwise have hold office. If
the vacancy is not filled, it shall be filled up as casual vacancy except that
the director removed shall not be re-appointed. The director so removed is
entitled to claim compensation or damages for branch of contract.
(b) Removal by the Tribunal: On
an application to the Tribunal for prevention of oppression and mismanagement,
the tribunal may terminate or set aside or modify any agreement between the
company and the managing director, or any other director or manager. On such
termination, the director cannot serve the company in a managerial capacity for
a period of five years from the date of the order of termination, without the
permission of the tribunal. The director on removal cannot sue the company for
damages or compensation for loss of office (Sec. 243).
Removal of a non-rotational director of a government company
Directors appointed by the state government as a nominee director
can be removed by such government. The government is entitled to revoke the
nomination as a matter of right, which flows from the articles of association.
Revoking of the appointment by the government under the articles is not the
same thing as removal of a director by the company under sec. 169. Hence, if
the government revokes the nomination, there is no contravention of section
169.
Or
(b) What are the objects
of holding the Annual General Meeting? What are the consequences of not holding
such a meeting? 4+8=12
Ans:
As the term denotes, annual general meeting is the meeting under section 96
which has to be held annually. It is the meeting of the members through which
they get the opportunity to express their views on the management of the
company. Through this meeting, the shareholders can exercise control over the affairs
of the company. The ‘Annual General Meeting’ is sometimes called “Ordinary
General Meeting” as it usually deals with the so-called ‘Ordinary Business’.
The
main purpose (Objectives) to hold these meetings are:
1.
To submit the
annual account, balance sheet, director’s report and auditor’s report.
2.
To declare
the dividend.
3.
Special
business- any other business to be transacted will be deemed special business
likes:
4.
To increase
share capital
5.
To alter
Article of Association
6.
To appoint
auditors and fix their remuneration.
7.
To elect
directors are that liable to retire by rotation.
Default
in holding Annual general meeting: As mentioned earlier, every company
is required to hold this meeting according to the provision of the Companies
Act. If any company fails to hold the annual general meeting the consequences
are as follows:
A. As mentioned above, the annual general
meeting provides the opportunity to the members to express views on the
management of the company. Any member can apply to the Central Government for
the failure of the company to call the meeting. The Central Government may give
direction to the company for calling the meeting.
B. The company as well as every officer will
become liable if they fail to held the meeting and shall be punishable with
fine upto Rs. 50,000, and if the default continues, with a further fine of Rs.
2,500 for every day after the first day of default during which the default
continues.
7. (a) Discuss the
provisions relating to the payment of dividend. 10
Ans: Provisions of the Companies Act’
2013 relating to distribution of dividend:
1. General meeting resolution: Dividend to be paid to the
shareholders are recommended by the directors and declared at annual general
meeting of the company. Shareholders cannot declare dividend on shares.
2. Payment of Dividend on paid up value: Dividends are usually
paid on the paid up value shares in the absence of any indication to the
contrary in the Articles of Association.
3. Sources of Declaring Dividend: As per Section 123 of the Companies
Act, 2013 dividend may be declared out of the following three sources:
a)
Out of
Current Profits: Dividend may be declared out of the profits of the company for
the current year after providing depreciation. The company must transfer the
prescribed percentage of its profits to general reserve before declaring
dividends. This percentage depends on the percentage of dividend declared.
b)
Out of Past
Reserves: Dividend may be declared out of the profits of the company for any
previous financial year or years arrived at after providing for depreciation in
accordance with the provisions of Schedule II of the Companies Act, 2013 and
remaining undistributed. Section 123 of the Act, requires that dividend can be
declared out of the reserves only in accordance with the rules framed by the
Central Government in this behalf.
c)
Out of both
mentioned above.
d)
Out of Money
provided by the Government: A company can also declare dividend out of the
moneys provided by the Central Government for payment of such dividend in pursuance
of guarantee given by the Government.
4. Divisible Profits: The term “Divisible Profit” is a very
complicated term because all profits are not divisible profits. Only those
profits are divisible profits which are legally available for dividend to shareholders.
Dividends cannot be declared except out of profits, i.e. excess of income over
expenditure; ordinarily capital profits are not available for distribution
amongst shareholders because such profits are not trading profits. Thus,
profits arising from revaluation or sale of fixed assets or redemption of fixed
liabilities should not be available for distribution as dividend amongst
shareholders. The principles of determination of the divisible profit are given
in Sec 123 of the Companies Act, 2013. According to Section 123 of the
Companies Act, 2013 no dividends can be declared unless:
Ø Depreciation has been provided for in respect of the current
financial years for which dividend is to be declared;
Ø Arrears of depreciation in respect of previous years have been
deducted from the profits; and
Ø Losses incurred by the company in the previous years.
Ø After transferring to reserves of the company prescribed
percentage of its profits before declaring dividend.
5. Transfer to Reserves: Section 123 of the
Companies Act, 2013 provides that before any dividend is declared or paid a
certain percentage of profits for that financial year may be transferred to the
reserves of the company. The company is free to decide the percentage for such
transfer to the reserves. Mandatory transfer to specific reserves is now not
required under companies Act’ 2013.
6. Interim dividend also included in dividend:
The term dividend includes both interim and final dividend and all the provisions
of the Companies Act relating to dividend declared at the AGM shall also apply
to interim dividend.
5. Deposit of amount of dividend in a bank:
Dividend must be deposited in a bank within 5 days after declaration as per Sec
123 of the Companies Act’ 2013.
7. Declaration of dividends in case of absence
or inadequacy of profits: In the absence of profits or inadequate profits, a
company can pay dividend out of past year’s profits transferred to reserves,
provided:
a)
The rate of
dividend declared shall not exceed the average of the rate of dividend which
was declared, if any, by it in preceding 3 years,
b)
The total
amount to be drawn from such past reserves shall not exceed 1/10th
of the sum of its paid-up share capital and free reserves as per latest audited
financial statements.
c)
The balance
of reserves after such withdrawal shall not fall below 15% of the current
shareholders’ fund.
e)
Current
year’s losses and depreciation must be set off before declaring dividend out of
past reserves.
8. Default in repayment of deposit: In case of
default in repayment of deposit as per the provisions of Sec 73 and Sec 74, no
company shall declare dividend on its equity shares.
9. Mode of payment of dividend: The dividend
is to be paid in cash or by cheque or by dividend warrant or any electronic
mode to the shareholders. Also, there is no prohibition on the company for the
capitalization of profits or reserves of a company for the purpose of issuing
fully paid-up bonus shares or paying up any amount for the time unpaid on any
shares held by the members of the company.
10. Time within which dividend is to be paid:
Dividend declared must be paid to the shareholders within 30 days from the date
of its declaration (Sec. 124). In case of default, the defaulting directors of
the company is punishable with simple imprisonment upto 2 years together with a
fine of Rs. 1,000 plus interest @18% p.a. during the period for which such
default continues.
11. Unpaid or unclaimed dividend: If dividend
is not paid or not claimed within 30 days from the date of the declaration, the
company shall within 7 days from the date of the expiry of 30 days, transfer
such dividends unpaid dividend accounts. If such funds are unclaimed for 7
years from the date of such transfer, it must be transferred to the Investor
education and protection fund. After such transfer, no claim will be
entertained.
Or
(b) Briefly explain the
various modes of winding-up of a company. 10
Ans:
Meaning: Winding up of a company is defined as a process by which the life of a
company is brought to an end and its property administered for the benefit of
its members and creditors. In words of Professor Gower, “Winding up of a
company is the process whereby its life is ended and its Property is
administered for the benefit of its members & creditors. 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.”
Modes of winding up of a company
As per section 270 of the Companies Act 2013,
the procedure for winding up of a company can be initiated either:
a) By the tribunal or,
b) Voluntary.
a) Winding up by the tribunal: As per new Companies Act 2013, a
company can be wound up by a tribunal in the below mentioned circumstances:
1. When the company is unable to pay its debts
2. If the company has by special resolution
resolved that the company is wound up by the tribunal.
3. If the company has acted against the
interest of the integrity or morality of India, security of the state, or has
spoiled any kind of friendly relations with foreign or neighboring countries.
4. If the company has not filled its financial
statements or annual returns for preceding 5 consecutive financial years.
5. If the tribunal by any means finds that it
is just & equitable that the company should be wound up.
6. If the company in any way is indulged in
fraudulent activities or any other unlawful business, or any person or
management connected with the formation of company is found guilty of fraud, or
any kind of misconduct.
Filling up winding up petition: Section 272 provides that a winding
up petition is to be filed in the prescribed form no 1, 2 or 3 whichever is
applicable and it is to be submitted in 3 sets. The petition for compulsory
winding up can be presented by the following persons:
a) The
company
b) The
creditors; or
c) Any
contributory or contributories
d) By
the central or state govt.
e) By
the registrar of any person authorized by central govt. for that purpose
FINAL ORDER AND ITS CONTENT: The tribunal after hearing the
petition has the power to dismiss it or to make an interim order as it think
appropriate or it can appoint the provisional liquidator of the company till
the passing of winding up order. An order for winding up is given in form 11.
b) Voluntary winding up of a company: The company can be wound up
voluntarily by the mutual decision of members of the company, if:
a) The
company passes a Special Resolution stating about the winding up of the
company.
b) The
company in its general meeting passes a resolution for winding up as a result
of expiry of the period of its duration as fixed by its Articles of Association
or at the occurrence of any such event where the articles provide for
dissolution of company.
PROCEDURE FOR VOLUNTARY WINDING UP:
1. Conduct a board meeting with 2 Directors
and thereby pass a resolution with a declaration given by directors that they
are of the opinion that company has no debt or it will be able to pay its debt
after utilizing all the proceeds from sale of its assets.
2. Issues notices in writing for calling of a
General Meeting proposing the resolution along with the explanatory statement.
3. In General Meeting pass the ordinary
resolution for the purpose of winding up by ordinary majority or special
resolution by 3/4th majority. The winding up shall be started from the date of
passing the resolution.
4. Conduct a meeting of creditors after
passing the resolution, if majority creditors are of the opinion that winding
up of the company is beneficial for all parties then company can be wound up
voluntarily.
5. Within 10 days of passing the resolution,
file a notice with the registrar for appointment of liquidator.
6. Within 14 days of passing such resolution,
give a notice of the resolution in the official gazette and also advertise in a
newspaper.
7. Within 30 days of General meeting, file
certified copies of ordinary or special resolution passed in general meeting.
8. Wind up the affairs of the company and
prepare the liquidators account and get the same audited.
9. Conduct a General Meeting of the company.
10. In that General Meeting pass a special
resolution for disposal of books and all necessary documents of the company,
when the affairs of the company are totally wound up and it is about to
dissolve.
11. Within 15 days of final General Meeting of
the company, submit a copy of accounts and file an application to the tribunal
for passing an order for dissolution.
12. If the tribunal is of the opinion that the
accounts are in order and all the necessary compliances have been
fulfilled, the tribunal shall pass an order for dissolving the company within
60 days of receiving such application.
13. The appointed liquidator would then file a
copy of order with the registrar.
14. After receiving the order passed by
tribunal, the registrar then publish a notice in the official Gazette declaring
that the company is dissolved.
8. (a) What do you mean
by insider trading? Discuss the provisions relating to it. 2+8=10
Ans:
Insider trading is defined as an unfair practice in which trading in securities
of the company is done by the key personnel of the company who have access to
the non-public information which can be crucial for making investment
decisions. Here key personnel include key employees or director of the company
who have access to the important information about the about which is not
available in public domain. In simple words insider trading means trading in
securities of the company by the company’s key officers on the basis of sensitive
non-public information.
Meaning of
Insider trading According to the Companies Act 2013
“Insider trading” means
i) An act of subscribing, buying, selling,
dealing or agreeing to subscribe, buy, sell or deal in any securities by any
director or key managerial personnel or any other officer of a company either
as principal or agent if such director or key managerial personnel or any other
officer of the company is reasonably expected to have access to any non-public
price sensitive information in respect of securities of company; or
ii) An act of counselling about procuring or
communicating directly or indirectly any non-public price-sensitive information
to any person. Here price-sensitive information means any information which
relates, directly or indirectly, to a company and which if published is likely
to materially affect the price of securities of the company.
Prohibition on
insider trading of securities – Sec 195 of the Companies Act’ 2013
Insider trading is considered to be unfair
practice and it is prohibited by the Company’s Act 2013. Provisions of the
Company’s Act relating to insider trading are given below:
(1) No person including any director or
key managerial personnel of a company shall enter into insider trading:
Provided that nothing contained in this sub-section shall apply to any
communication required in the ordinary course of business or profession or
employment or under any law.
(2)
If any person contravenes the provisions of this section, he shall be
punishable with imprisonment for a term which may extend to five (5) years or
with fine which shall not be less than five lakhs (Rs. 5, 00,000) rupees but
which may extend to twenty-five crores (Rs. 25 Crores) rupees or three times
the amount of profits made out of insider trading, whichever is higher, or with
both.
Or
(b) Discuss in details
the provisions relating to appointment of auditor of a company. 10
Ans: Provisions of the Companies Act relating to Appointment of a
Company Auditor:
According to Section 224 of the Companies Act,
every company whether private or public must appoint an Auditor or auditors to
audit the final accounts. The provisions relating to the appointment of auditor
are as follows:
1. Appointment
of First Auditors:
(a) In case of a Non-Government Company [Sec. 139(6)]: The first
auditor of the company is to be appointed by BOD within 30 days from the date
of incorporation of company. Note here that this is not from the date of
commencement of business. First auditor shall hold office upto the conclusion
of first AGM. If BOD fails to appoint the first auditor, it shall inform the
members of the company. The members of the shall within 90 days at an
extraordinary general meeting appoint the auditor.
(b) In case of a Government Company [Sec. 139(7)]: In case of any government
company or any other company which is owned or controlled by central or state
government either directly or indirectly, the first auditor shall be appointed
by the Comptroller and Auditor General (CAG) of India within 60 days from the
date of registration of the company. In case the CAG does not appoint such
auditor within the above period, the Board of directors of the company shall
appoint such auditor within next 30 days.
2. Appointment
of Subsequent auditors:
(a) In case of Non-Government Company [Sec.
139(1)]: Every company shall, at the first AGM appoint an individual or firm as
an auditor who shall hold office form the conclusion of that meeting till the
conclusion of its 6th AGM and thereafter till the conclusion of
every 6th meeting. The following points need to be noted in this
regard:
a. The company shall place the matter relating
to such appointment by member at every annual general meeting.
b. Before such appointment is made, the
written consent of the Auditor to such appointment and a certificate should be
obtained. The certificate shall also indicate whether the auditor satisfies the
criteria provided in sec. 141.
c. The company shall inform the auditor
concerned of his or its appointment.
d. The company shall also file a notice of such
appointment with the registrar within 15 days of such appointment.
(b) In Case of Government Companies [Sec.
139(5)]: In case of any government company or any other company which is owned
or controlled by central or state government either directly or indirectly, the
Comptroller and Auditor General (CAG) shall in respect of a financial year,
appoint an auditor duly qualified to be appointed as an auditor of companies
under this act, within a period of 180 days from the commencement of the
financial year, who shall hold office till the conclusion of the AGM.
3. Filling of
Casual Vacancies [Section 139(8)]:
In
the case of a company other than a company whose accounts are subject to audit
by an auditor appointed by the CAG of India:
(a)
Any Casual Vacancy due to reasons other than resignation: Any casual vacancy in
the office of an auditor shall be filled by the board of directors within 30
days.
(b)
Any Casual vacancy due to resignation: Such appointment shall also be approved
by the company at a general meeting convened within 3 months of the
recommendation of the board and he shall hold the office till the conclusion of
the next annual general meeting.
In
the case of a company whose accounts are subject to audit by an auditor
appointed by the CAG of India:
(a)
Any casual vacancy in the office of an auditor shall be filled by the CAG of
India within 30 days.
(b) In case the CAG of India does not fill the vacancy within the
given period, the board of directors shall fill the vacancy within next 30
days.
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