Company Law Solved Paper May' 2021 CBCS Patter Semester Exam, Dibrugarh University B.Com 3rd Semester Non Hons CBCS Pattern

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.

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Also Read: Company Law Question Papers (Non-CBCS Pattern)

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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