Corporate Law Solved
Question Paper 2022 (June/July)
Dibrugarh University
Solved Question Paper
COMMERCE (Core)
Full Marks: 80
Pass Marks: 32
Time: 3 hours
The figures in the margin indicate full marks for the questions
In this Post You will Get Corporate Law Solved Question Paper 2022 for Dibrugarh University.
1. Write True or False: 1x8=8
(a) A company being a legal person and having independent existence
enjoys the fundamental rights given to the citizens under the Constitution of
India.
Ans: False, a Company is not a Citizen
(b) A certificate of incorporation cannot be challenged on any
ground.
Ans: True
(c) Any act which is ultra vires of the company is void and without
any legal effect.
Ans: True
(d) The ‘Doctrine of constructive notice’ protects a company against
the outsiders.
Ans: True
[DTS Hint: Doctrine of Indoor management projects the third parties
against the company.]
(e) A person must have Director Identification Number (DIN) to be
appointed as director.
Ans: True
(f) A change in company’s name may be effected by passing an
ordinary resolution.
Ans: False, Special Resolution
(g) The dividend is always declared by the Board of Directors.
Ans: True, and approval from shareholders is also necessary
(h) The power to order winding-up of a company has been vested in
the Tribunal instead of Court under the Companies Act, 2013.
Ans: True
2.
Write short notes on any four of the following: 4x4=16
(a)
National Company Law Tribunal (NCLT).
Ans: National Company Law Tribunal
(NCLT): After
Companies Act’ 2013 the Company Law Board has been abolished and a Tribunal
known as the National Company Law Tribunal has been constituted. The powers
which are earlier under the jurisdiction of the Company Law Board have been
transferred to Central Government and some of this is transferred to NCLT by
the central government. It consists of a president and such number of judicial
and technical members as may be deemed necessary. Its main functions are:
Registration of companies, converting public limited company into private
company and settlement of disputes arises amongst the companies.
(b)
One Person Company (OPC).
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.
One-person company (OPC): According
to Sec. 2(62) of the Indian Companies Act, 2013, one-person company means a company which has only one person as a member.
Sec. 3 of the Companies Act, 2013 classify OPC as private company and all the
provisions of a private company are also applicable to this company.
Features of OPC:
1. There is only one director.
2. It can have only one member.
3. The word OPC is mentioned in the bracket with the name
of the company.
4. OPC is exempted from conducting annual general meeting
and board meeting.
(c)
Doctrine of constructive notice.
Ans:
The memorandum and articles of a company are public documents and available for
inspection by anyone on payment of nominal fee. Therefore, every person who is
entering into a contract with a company is deemed to have a “constructive
notice” of the contents of its memorandum and articles. In other words, person
entering into contract with the company know the powers of the company or
directors and also aware about the restrictions imposed on the powers of the
company or limit set on the authority of the directors. Consequently, if a
person enters into a contract with the company which is beyond the powers of
the company or outside the limits set on the authority of the directors, he
cannot, as a general rule, acquire any rights under the contract against the
company. For example, if the articles provide that a bill of exchange to be
effective must be signed by two directors, a person dealing with the company
must see that it is so signed; otherwise he cannot claim under it.
Outsiders
dealing with incorporated bodies are bound to take notice of limits imposed on
the corporation by the memorandum or other documents of constitution. Nevertheless,
they are entitled to assume that the directors or other persons exercising
authority on behalf of the company are doing so in accordance with the internal
regulations as set out in the Memorandum & Articles of Association.
(d)
Transmission of shares.
Ans: When the shares are transferred under the operation of law it
is called transmission of shares. Transmission of shares takes place:
(i)
When the
registered shareholder dies.
(ii)
When he is
declared insolvent.
(iii)
In case where
the shareholder is the company, it goes into liquidation.
In case of
the death of registered shareholders, his
legal representative becomes the care taker of the shares. The legal
representative if he can sell the shares without being registered, if he does
not want to become the member of the company. In case he wants to become the
member of the company, he should send a written and signed notice to the
company disclosing his decision.
In case of
the insolvency, the official
assigner has the power to take the decision regarding selling of the shares,
transferring of the shares or getting himself registered as a member.
In case where a shareholding company goes into liquidation then the
liquidator of the company may sell and transfer the shares.
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(e)
Qualification of directors.
Ans: Qualifications of a Director:
As regards to the qualification of directors, there is no direct
provision in the Companies Act, 2013.But, according to the different provisions
relating to the directors; the following qualifications may be mentioned:
1. A director must be a person of sound mind.
2. A director must hold share qualification, if the article of
association provides such.
3. A director must be an individual.
4. A director should be a solvent person.
5. A director should not be convicted by the Court for any
offence, etc.
(f)
Prospectus.
Ans:
Section 2(70) of the Companies Act, 2013 defines a prospectus as ““A prospectus
means Any documents described or issued as a prospectus and includes any
notices, circular, advertisement, or other documents inviting deposit from the
public or documents inviting offer from the public for the subscription of
shares or debentures in a company.” A prospectus also includes shelf prospectus
and red herring prospectus. A prospectus is not merely an advertisement. A
document shall be called a prospectus if it satisfies two things:
a) It
invites subscription to shares or debentures or invites deposits.
b) The
aforesaid invitation is made to the public.
Contents
of a prospectus:
a) Address
of the registered office of the company.
b) Name
and address of company secretary, auditors, bankers, underwriters etc.
c) Dates
of the opening and closing of the issue.
d) Declaration
about the issue of allotment letters and refunds within the prescribed time.
e) A
statement by the board of directors about the separate bank account where all
monies received out of shares issued are to be transferred.
f)
Details about underwriting of the
issue.
g) Consent
of directors, auditors, and bankers to the issue, expert’s opinion if any.
h) The
authority for the issue and the details of the resolution passed therefore.
i)
Procedure and time schedule for
allotment and issue of securities.
j)
Capital structure of the company.
3.
(a) Define a Private Company. What are the privileges and exemptions enjoyed by
a private company? 4+8=12
Ans: Private company [Sec.2
(68)]: A private company is
normally what the Americans call a ‘close corporation’. According to Sec.2 (68), a private company
means a company which has a minimum paid-up capital as may be prescribed, and
by its Articles:
a.
Restricts the right to transfer its shares, if any. The restriction is
meant to preserve the private character of the company.
b.
Except in case of one-person company, limits the number of its members to
200 not including its employee-members. Joint shareholders shall be counted as
one member only.
c. Prohibits any invitation to the public to
subscribe for any securities. In other words, a private company shall not make
a public issue of its securities.
Special Privileges and
Exemptions of a private company
a)
Members: A Private Company can be
formed with only two members.
b)
Minimum subscription is not
required.
c)
A private company is not required
to issue prospectus.
d)
A private company can commence
business immediately after its incorporation.
e)
It need not have an index of
members.
f)
It need not required to hold a
statutory meeting
g)
Unless the articles otherwise
provide, two members personally present shall form quorum.
h)
A Private Company must have at
least two directors. All the directors may be appointed by single resolution.
i)
The directors of a private company
need not retire by rotation.
j)
Directors need not file their
written consent to act as directors or to take up their qualification shares.
k)
For appointment of a new director,
a special notice is not required.
l)
Directors of a private company can
vote on a contract in which they are, interested.
m) A
private company is exempted from restrictions regarding managerial remuneration.
n)
No person other than the members
of an independent company is entitled to inspect, or obtain copies of the
profit and loss account of the company under.
o)
The provision that the written
consent of directors should be filed with registrar is not applicable to an
independent private company.
p)
An independent private company may
by its articles, provide additional disqualification for appointment of
directors.
q)
An independent private company may
be its articles provide special grounds for vacation of office of a director.
r)
Provision regarding prohibition of
loan to director, etc. in not applicable to an independent private company.
s)
The restrictions as to number of
companies of which a person may be appointed managing director and prohibition
of such appointment for more than five years at a time to not apply to it.
t)
The restructures regarding loans
to company's loans to companies under the same management do not apply to it.
u)
The provision prohibiting the
subscription purchase or otherwise, the shares of other companies in the same
group do not apply to it.
Or
(b)
Describe the various stages for incorporation of a public limited company. 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.
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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.
4.
(a) What is Memorandum of Association? What are its important clauses? 4+8=12
Ans: Memorandum of Association
Memorandum of association is the document which contains the rules
regarding constitution and activities and objects of the company. It is
fundamental charter of the company. Its relation towards the members and the
outsiders are determined by this important document.
Section 2 (56) of the
Companies Act, 2013 defines Memorandum as “Memorandum means the Memorandum of
association of a company as originally framed or as altered from time to time
in pursuance of any previous companies’ law or of this act”.
One of the essentials for the registration of
a company is memorandum of association. It is the first step in the formation
of a company. Its importance lies in the fact that it contains the fundamental clauses
which have often been described as the conditions of the company’s
incorporation.
Memorandum of association is divided into 5 clauses/contents [Sec. 4 of the
Companies Act, 2013]:
1.
Name clause
2.
Situation or
Registered office clause
3.
Objects
clause
4.
Liability
clause and
5.
Capital
clause
6.
Subscription
or Association Clause
1. Name clause: This clause state the name of the company. Name of
every company limited by shares or by guarantee must end by the word 'Ltd.' or
'Pvt. Ltd.' except companies exempted u/s 8.
The name must not be undesirable or most not resemble the name of any
other registered company.
2. Situation or Registered office clause: Must contain the name of
state is which registered office is situated.
Actual address of registered office is notified to ROC within 30 days of
incorporation.
3. Object clause: It sets out object or vires of the company. The
objects must be legal and not be against the provision of the companies Act,
2013. It is divided into two parts:
(a) The main objects and Objects incidental or ancillary to the
main objects.
(b) Other objects.
4. Liability clause: States that liability of members is limited
to the amount unpaid on their shares and in case of company limited by
guarantee the amount which every member undertakes to contribute to the assets
of the company in the event of its winding up.
5. Capital clause: Every company having a share capital, the
amount of share capital with which the company is proposed to be registered and
the division of its shares into a fixed denomination.
6. Subscription clause: This clause shall state the number of
shares that each subscriber to member has agreed to subscribe. Every subscriber
shall agree to subscribe for at least one share.
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Or
(b)
What do you mean by Articles of Association? Discuss the contents of Articles
of Association. 4+8=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 Model
contents of the Article of association are as under:
a) the
business of the company;
b) the
amount of capital issued and the classes of shares into which the capital is
divided; the increase and reduction of the share capital;
c) the
rights of each class of shareholders and the procedure for variation of their
rights;
d) the
execution or adoption of a preliminary agreement, if any;
e) the
allotment of share; calls and forfeiture of shares for non – payment of calls;
f)
transfer and transmission of
shares;
g) company’s
lien on shares;
h) exercise
of borrowing powers including issues of debentures;
i)
General meeting, notices, quorum,
proxy, poll, voting, resolution, minutes; etc.
Alteration of Articles of Association (Sec. 14 of the Companies
Act, 2013) - Any of the clause of Articles of Association can be changed simply
by a special resolution. [Section 14(1)]. According to this section,
‘alteration' includes making any addition and omissions. Thus, scope is
available for making alterations to Articles. The restrictions are as follows:
a) Such
alteration cannot be with retrospective effect. Retrospective amendments are
permissible as long as vested rights are not adversely affected.
b) It
should not be against provisions of Memorandum of Association or Comp Act.
c) The
alteration must be bona fide for the benefit of company as a whole
d) Altered
article cannot include anything which is illegal or opposed to public.
e) Company
cannot justify breach of contract by altering the articles.
f)
Amendment cannot increase
liability of a member, unless his written consent is obtained. However, in case
of club or association where member has to recurring periodical or recurring
subscription or charges, a member is liable if he does not agree in writing to
the increase.
g) The
amendment must not constitute a fraud on minority. It cannot be oppression of
minority.
h) Articles
cannot change a public company to a private company without approval of Central
Government – sec. 2(68).
i)
Statutory powers of company to
amend the Articles cannot be curtailed.
j)
Every alteration of articles which
is registered by the registrar, shall be as valid as if is originally contained
in the articles. [Sec. 14(3)].
5.
(a) Describe the legal position of Directors in a company. 12
Ans: Position
of Directors
It is very difficult to define precisely the position of directors
in a company. The Companies Act, 2013, is also silent on this issue. Directors
have been described sometimes as trustees, sometimes as agents or sometimes as
managing partners. They have some attributes of all of them, but they are
neither trustees nor managing partner in full sense of the term. The legal
position can be discussed as under:
1. Directors as Agent: Directors are, in the eyes of law, agents
of the company for which they act. The company itself cannot act; it can act
only through directors and by the reason of which a relation of principal and
agent is established between the company and the directors. Wherever as agent
is liable those directors would be liable; where the liability would attach to
the principal and principal only, the liability is the liability of the
company.
Where the directors make contracts on behalf of the company, they
incur no personal liability provided they act within the scope of their
authority. In such a case, the company alone would be liable. Directors incur a
personal liability in the following circumstances:
a) Where
the contract in their own names.
b) Where
they use the company’s name incorrectly.
c) Where
directors exceed their powers.
But the position of directors differs from that of the agents
because an agent can enter into a contract in his own name but a director
cannot. Again an agent may not disclose the name of his principal but a
director must disclose the name of his principal. Hence, the directors are not
agents in the true sense.
2) Directors as trustees: The directors have also been described
as trustees of the company. They are trustees of the company’s money or
property which comes into their hands or which is actually under their control
and of the powers entrusted to them. But in real sense, the position of
directors is differing from that of the trustees because a trustee can’t be an
employee of the trust but a director can be an employee of the company. Again,
an artificial person can become a trustee but an artificial person cannot
become a director. As, only individual can be a director. Hence, directors may
better be considered as quasi trustee.
3) Directors as officers: Under sec. 2(59) of the Companies Act,
they are liable to certain penalties if the provisions of the Companies Act are
not complied with. Moreover, whether or not a director is in the employment of
the company, he shall be treated as an officer of the company.
4) Directors as employees: Although directors are agents of the
company, they are not employees or servants of the company. Hence they cannot
claim their remuneration as a preferential creditor in the event of winding up
of a company under sec. 327 of the Companies Act, 2013. But where any director,
besides being a director, is also in the service or employment of the company,
such as secretary, manager, accountant or otherwise, he will be treated as an
employee. As such he will be entitled to the remuneration and other benefits
admissible to his as an employee in addition to his rights as a director to
sitting fee, etc.
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5) Directors as managing partners: The directors are also
sometimes described as managing partners because like a partner of a firm, they
manage the affairs of the company and they are also usually important
shareholders of the company. They do all proprietorial functions like allotting
shares, making calls, forfeiting shares etc.
However, all the partners of a firm act on the principal of mutual
agency. But it is not so in the case of directors. A director has no authority
to bind the other directors and shareholders. Moreover, directors are subject
to retirement by rotation whereas partners of a firm are not. Hence, the
directors are not managing partners in the full sense.
Thus, directors are described as trustees, agents or managing
partners. The board of directors is the brain and the only brain of the company
which is the body and the company can act only through them.
Or
(b)
Explain the legal provisions relating to the Annual General Meeting of a
company. 12
Ans: Provisions
of the Company’s Act relating to Annual
General Meeting: (Sec. 96 of the Companies Act, 2013)
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.
Legal
Provisions Relating to Annual General Meeting
Every company is required to hold this
meeting. But, there are certain legal provisions which have to be followed,
relating to the annual general meeting as contained in sections 96 and 97.
There are:
a. First Annual general meeting: A company may hold its first annual general meeting within a
period of 9 months from the date of incorporation. However, this should not be
more than 9 months from close of financial years.
b. Subsequent meeting: There
must be one meeting held in each year. The gap between two annual general
meetings must not be more than 15 months. Meeting must be held not later than 6
months from close of financial year.
c. Extension of time: the
registrar has the power to extend the time of 15 months by 3 more months in
special cases.
d. Day, hour and place of meeting: The meeting can be held at any working place, on any working
day and working hours. If the day scheduled for meeting is declared by the
Central Government to be a public holiday after the issue of the notice, it
shall not be deemed as a holiday.
e. Notice of the meeting: 21 clear days’ notice or any shorter notice if agreed by all
shareholders must be given.
f.
Business to be transected: At every AGM, the following matters must be discussed and decided.
Since such matters are discussed at every AGM, they are known as ordinary
business. All other matters and business to be discussed at the AGM are special
business.
The
following matters constitute ordinary business at an AGM:
a. Consideration of
annual accounts, director’s report and the auditor’s report
b. Declaration of
dividend
c. Appointment of
directors in the place of those retiring
d. Appointment of and
the fixing of the remuneration of the statutory auditors.
Ordinary business is transacted by passing
ordinary resolution.
Special Business: All matters other than ordinary business is treated
as special business at an annual general meeting. For transacting special
business at a meeting, there shall be annexed to the notice of meeting an
explanatory statement setting out:
a)
All
material facts concerning each item of such business, and
b)
In
particular, nature of the concern or interest, if any, of every director or
manager in each item.
c)
Statement
must also state time and place where document, if any, proposed for approval at
the meeting can be inspected by members.
d) The items constituting special business are
transacted either by an ordinary resolution or by a special resolution
depending on the requirements of the Companies Act 2013 or articles of the
company in respect of each particular item.
g. 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.
6.
(a) Explain the legal provisions relating to the appointment of auditors. 12
Ans: Appointment of Directors
Section 149 of the Companies Act, 2013, makes it obligatory on
every public company to have at least three directors and on every other
company to have at least two directors. The directors may be appointed in the
following ways:
1.
Appointment of First Directors (Sec. 152): First
directors mean the director of the company who assumes office from the date of
incorporation of the company. The first directors of a company may be named in
its articles of association and if it is not mentioned, then the subscribers of
the memorandum of association who are individual, shall be deemed to be the
first directors of the company, until the directors are not appointed in
accordance with Section 152.
In case of public company, if the article provides any share
qualification, only such subscribers as possess the necessary share
qualification shall be deemed to be directors. The articles at the time of
registration may contain the names of the first directors until directors are
appointed in the first general meeting.
2. Appointment of Directors
by Members in the General Meeting (Sec. 152(2): Except for the first
director, the subsequent directors are appointed by the company in the general
meeting. Sec. 152(2) provides that not less than 2/3 of the total number of
directors of a public company, or of a private company which is subsidiary of a
public company must be appointed by the company in general meeting. These
directors must be subject to retirement by rotation. The remaining directors of
such a company and a purely private company are appointed by the company in
general meeting
3. Appointment
by Board of Directors: The directors are appointed in the
general meeting by the members. But, the Board of Directors may also appoint
the directors, in the following way:
a. Additional Directors: Section 161, of the Act, lays down that
the Board may appoint additional directors if the article of association of a
company empower the Board of Directors to do so. Such additional directors
shall hold office only up to the date of the next annual general meeting. If
the annual general meeting is not held, then such additional director vacates
his office on the last day on which the annual general meeting should have been
held in terms of Section 166. The additional directors are exempted from the
requirement of filing consent to act as directors.
b. Casual Vacancies: Section 161 empowers the Board of Directors
to appoint the directors in the casual vacancy which may occur due to any
reasons like, death, resignation, insanity, insolvency etc. of the directors.
Such casual vacancy may be filled according to the regulations and procedure
prescribed by the articles of association. A person appointed to fill a casual
vacancy will hold office only till the date up to which the directors in whose
place, he is appointed would have held office.
c. Alternate Directors: The Board Meeting may be held at a time
when a director is, absent for a period of more than three months from the
state and in such a situation, an ‘alternate director’ is appointed. The Board
of Directors can appoint the additional director in the absence of a director
if so authorized by articles or by a resolution passed by the company in
general meeting. The alternate director shall work until the original director
return or up to the period permitted to the original director. The provision of
the Act not applicable to the alternate director is as:
A. The appointment of an alternate director is not considered as
an increase in the strength of the Board of Directors.
B. Alternate Directorship held by a person cannot be counted for
the maximum number of directorship, which a person can hold.
C. An alternate director is not required to hold any qualification
shares.
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4.
Appointment of Directors by Central Government: At least
100 members of the company or the members of the company who hold at least
one-tenth of the total voting power, approach the Central Government for
appointing a director to safeguard the interest of the company or its members
or the public or to curb the oppressive and mismanagement of company’s affairs.
The term of appointment of the directors by the Central Government
should not exceed 3 years and he may be removed by the Central Government for
appointing another person to hold the office.
5.
Appointment of Directors by Third-Parties if the Article provides (Sec. 152):
A company may have ‘nominee directors’ which is permissible in a company if the
articles of association gives power to such third parties to appoint their
nominee on company’s board. Here the third party may be debenture holders,
financial corporation, banking companies who have advanced loan to the company
to safeguard their interests that the money is only used for the purpose for
which it was borrowed.
6.
Appointment of Directors by small shareholders if the article provides:
The Small Shareholders, in case of a public company having:
i) A paid-up capital of five cores rupees or more, and
ii) one thousand or more small shareholders.
may have a director elected by such small shareholders in the
manner as may be prescribed.
The directors are appointed by ordinary resolution i.e. through the majority of
the shareholders. The minority of the shareholders does not get the opportunity
to send representative in the Board of Directors. But, through proportional
representative voting, the shareholders can get that opportunity.
7.
Appointment of directors by professional representation (Sec. 163):
The Directors of a company are generally appointed by simple majority. As a result,
majority shareholders controlling 51% or more votes may elect all directors and
a substantial minority of 49% may not find any representation on the board. This
section gives power to the minority shareholders to elect directors through
single transferable vote and cumulative voting.
Or
(b)
State the various modes of winding-up of a company. 12
Ans:
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.
7.
(a) State the rights of depositories and beneficial owner under the
Depositories Act, 1996. 8
Or
(b)
Explain the legal provisions relating to penalty for various defaults under the
Depositories Act, 1996. 8
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