Suggested answers - Corporate and other laws Inter

1(a) Person may withdraw his consent in such manner as may be prescribed:

(i) No minor shall become member or nominee of the OPC or can hold share with beneficial interest

(ii) "resident in India" means a person who has stayed in India for a period of not less than 182 days during the immediately preceding financial year.

(iii) A natural person shall not be a member of more than one OPC at any point of time and the said person shall not be a nominee of more than one OPC.

1 (b) Section 139 - (b) First auditors [Section 139(6)]: (a) Notwithstanding anything contained in sub-section (1) of Section 139 i.e. the first auditor of a company, other than a Government Company, shall be appointed by the Board of directors within 30 days of the date of registration of the company and the auditor so appointed shall hold office until the conclusion of the first AGM

Re-appointment of retiring auditor [section 139(9), (10) and (11)]:

(a) A retiring auditor may be re-appointed at an AGM if—

(1) he is not disqualified for re-appointment;

(2) he has not given the company a notice in writing of his unwillingness to be re-appointed; and

(3) a special resolution has not been passed at that meeting appointing some other auditor or providing expressly that he shall not be re-appointed.

1 (c)



Right to remuneration [Section 219]: The agent in the normal course is entitled for remuneration as per the contract. In the absence of any agreed amount of remuneration, he is entitled for usual remuneration which is customary in the business. However an agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business which he has misconducted [Section 220].



1(d) negotiable instrument act

2 (a) Share capital and debenture

2(b) if the number of members is more than 1000 but upto 5000, then the quorum shall be 15 members personally present

Adjourned Meeting due to want of Quorum–

If the quorum is not present within half-an-hour from the time appointed for holding a meeting of the company—

(a) the meeting shall stand adjourned to the same day in the next week at the same time and place, or to such other date and such other time and place as the Board may determine; or

(b) the meeting, if called by requisitionists under section 100, shall stand cancelled:

Private company Quorum - 2 members personally present

2 (c)

As per Section 19 of the Companies Act, 2013,

(1) No company shall, either by itself or through its nominees, hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void:

Provided that nothing in this sub-section shall apply to a case—

(a) where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company; or

(b) where the subsidiary company holds such shares as a trustee; or

(c) where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company:

2 (d) Nature of Surety’s liability can be summed up as (a) Liability of surety is of secondary nature as he is liable only on default of principal debtor. (b) his liability arises immediately on the default by the principal debtor (c) The Creditor has a right to sue the surety directly without first proceeding against principal debtor.

3 a

(1) The Central Government may, by notification, constitute the National

Financial Reporting Authority (NFRA) to provide for matters relating to accounting

and auditing standards under this Act.

(2) Notwithstanding anything contained in any other law for the time being in

force, the NFRA shall—

(a) make recommendations to the Central Government on the formulation and

laying down of accounting and auditing policies and standards for adoption

by companies or class of companies or their auditors, as the case may be;

(b) monitor and enforce the compliance with accounting standards and auditing

standards in such manner as may be prescribed;

(c) oversee the quality of service of the professions associated with ensuring

compliance with such standards, and suggest measures required for

improvement in quality of service and such other related matters as may be

prescribed; and

(d) perform such other functions relating to clauses (a), (b) and (c) as may be

prescribed.

Which company is required to constitute CSR committee:

(a) According to section 135(1), every company having

(1) net worth of rupees 500 crore or more, or

(2) turnover of rupees 1000 crore or more or

(3) a net profit of rupees 5 crore or more

during the immediately preceding financial year shall constitute a

Corporate Social Responsibility Committee of the Board consisting ofthree or more directors, out of which at least one director shall be an

independent director.

Provided that where a company is not required to appoint an

independent director under sub-section (4) of section 149, it shall have

in its Corporate Social Responsibility Committee two or more directors.

3(b)(ii)

“Measurement of Distances” [Section 11]: In the measurement of any distance,

for the purposes of any Central Act or Regulation made after the commencement

of this Act, that distance shall, unless a different intention appears, be measured

in a straight line on a horizontal plane.

3(d)

Section 123 (3) and also section 123 (4) contain provisions regarding interim dividend.

Following points are noteworthy:

♦ Interim dividend is declared by the Board of Directors.

♦ It can be declared during any financial year.

♦ Further, it can be declared at any time during the period from closure of the

financial year till holding of the Annual General Meeting (AGM).

♦ The declaration of interim dividend is done out of profits before the final

passing of the accounts and therefore, effectively, interim dividend is said to

be declared and paid between two AGMs.

4(a) Definition:

As per Rule 2 (1) (e) the term “eligible company” means a public company as

referred to in section 76 (1), having a net worth of not less than one hundred

crore rupees or a turnover of not less than five hundred crore rupees and which

has obtained the prior consent in general meeting by means of a special resolution

and also filed the said resolution with the Registrar of Companies before making

any invitation to the public for acceptance of deposits:

However, an eligible company, which is accepting deposits within the limits

specified under section 180 (1) (c), may accept deposits by means of an ordinary

resolution.

4(b)

When the dividend is declared at the Annual General Meeting of the

company, it is known as ‘final dividend’.

♦ The rate at which dividend needs to be declared and paid shall be

recommended by the Board of Directors in the Directors’ Report1. However,

such rate (or a lower rate) is required to be approved by the members at the

Annual General Meeting by passing an ordinary resolution since declaration

of dividend is an ordinary business2.

♦ The rate of dividend recommended by the Board cannot be increased by the

members.

Maximum Amount to be Drawn = Amount shall not exceed 1/10th of Paid up share Capital + Free Reserves. i.e. Rs. 250

4(c)

“Affidavit” [Section 3(3)]: ‘Affidavit’ shall include affirmation and declaration in the case of persons by law allowed to affirm or declare instead of swearing. 

“Good Faith” [Section 3(22)]: A thing shall be deemed to be done in “good faith” where it is in fact done honestly, whether it is done negligently or not;

4(d)

Proviso: The normal function of a proviso is to except something out of the enactment or to qualify something stated in the enactment which would be within its purview if the proviso were not there. The effect of the proviso is to qualify the preceding enactment which is expressed in terms which are too general. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment. Ordinarily a proviso is not interpreted as stating a general rule.

5(a)

Prohibition on issue of shares at discount [Section 53]

A company cannot issue shares in disregard of Section 53 of the Companies Act, 2013.

1. According to section 53, a company shall not issue shares at a discount, except in the case of an issue of sweat equity shares given under section 54 of the Companies Act, 2013. [Sub section (1)]

2. Any share issued by a company at a discount shall be void. [Sub section (2)]

3. Exception: Notwithstanding anything contained in sub-sections (1) and (2), a company may issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan or debt restructuring scheme in accordance with any guidelines or directions or regulations specified by the Reserve Bank of India under the Reserve Bank of India Act, 1934 or the Banking (Regulation) Act, 1949.

4. Where any company fails to comply with the provisions of this section, such company and every officer who is in default shall be liable to a penalty which may extend to an amount equal to the amount raised through the issue of shares at a discount or five lakh rupees, whichever is less, and the company shall also be liable to refund all monies received with interest at the rate of twelve per cent. per annum from the date of issue of such shares to the persons to whom such shares have been issued.

It is clear for the reading of section 52 and 53 that these restrictions are only on issue of shares, it could be equity or preference but not on any debt related products like bonds or debentures whose pricing is more governed by YTM (yield to maturity) considerations.