EXAMINATION OF ARTICLED CLERKS PAPER II CORPORATE LAWS 31st October, 2012 TIME : 3 HOURS [1:00 P.M.

TO 4:00 PM] (Total Marks 100) Note. (1)

Short and precise answers will be appreciated. Please do notexceed thespecified number of bullet points.

(2) Case situations should be analysed by providing your reasoning. If you know any case law which covers the situation, please do cite such case law.

1.

Attempt any two of the following:(1) Babble Partners, a private equity fund, acquires 20% equity holding in Pallonji Realtors Limited, an unlisted public limited company, which inserts the provisions of the Shareholders Agreement in its Articles of Association, including a provision stipulating that no quorum shall be constituted at a Board meeting unless a nominee director of Babble is present. Babbles director (one out of total six directors) does not attend two Board meetings and contends that there being no quorum, resolutions passed at these two meetings are invalid. Advise Pallonji and its promoters. Laluprasad Dairy Limited (LDL), as the transferor company, is amalgamated into Salman Dairy Limited, pursuant to a scheme of amalgamation sanctioned by the Mumbai High Court under Section 394 of the Companies Act, which orders dissolution of LDL, without winding up. Nitish& Co. are creditors of LDL. AdviseNitish& Co., as to their rights and remedies. Unision Telecom Private Limited has a paid-up share capital of Rs.50 crores. Mr. Padhye, its managing director, enters into a contract, on behalf of Unision, without the consent of its Board, with a partnership firm in which his former wife is a partner, for the purchase of cement from the firm, on credit. The Board later wishes to avoid this contract. Advise the partnership firm.

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(2)

(3)

2.

Write fivebullet points analysingany threeof the following:(i) (ii) (iii) (iv) (v) Remuneration of directors of a public company. Political Contributions by a company. Proportional representation for appointment of directors. Audit and Auditors. Doctrine of Ultra Vires.

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3.

Write ten bullet points on either of the following:Amalgamation of two or more companies; or Investigation of the affairs of a company.

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4.

Please write TRUE or FALSE against the following statements:(no reasoning required) (a) (b) A private company is bound to restrict the right to transfer its shares. If A is a subsidiary of B, and C is a subsidiary of A, then C automatically becomes a subsidiary of B. The expression officer in default includes the company secretary. From an order of the Company Law Board, an appeal lies, as of right, to the High Court. A company may, by special resolution and approval of the Central Government, change its name. All share capital, which is not preference share capital, is equity share capital. Appointment of auditors is deemed special business at an AGM (annual general meeting). An auditor is disqualified if he holds debentures in excess of Rs. One

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(c) (d)

(e)

(f)

(g)

(h)
2

crore in a company, which he audits. (i) A private company can appoint a managing director for a term of 10 years. Workmens dues are an overriding preferential payment in a winding up of a company.

(j)

5.

Attempt any three of the following:(a) Mr. Modi, a director of Golmal Limited, is convicted of an offence under the Indian Penal Code and sentenced to five months imprisonment. Golmal contends that Mr. Modi has ceased to be a director. Advise Mr. Modi. The Board of directors of Short Circuit Engineers Ltd., unanimously passes resolutions by circulation to issue debentures, invest the funds of the company and make loans. Mr. Kejriwal, a shareholder of Short Circuit, challenges the validity of these Board decisions. Advise Short Circuit and its directors. The Official Liquidator is appointed as provisional liquidator of NPA Bank Limited. Mr. Sardesai files a suit against NPA. Advise the Official Liquidator. Mr. KurushDresswala, Chief Accountant of Liberal Perks Private Limited, is given a service occupancy of a residential flat. Six months later, his services are terminated, but he refuses to vacate the flat. Advise Liberal Perks Private Limited.

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(b)

(c)

(d)

6.

Indicate the correct option:(writeonly the number, no reasoning required. For e.g. 13(b) or 14(c)) (1) Officer who is in default includes: (a) (b) (c) whole-time director independent director Chairman

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(2)

Any provision in the Articles is void, if:(a) repugnant to the provisions of the Companies Act

(b) (c) (3)

inconsistent with a later provision in the Articles contrary to the SEBI Act, 1992

A company formed to promote charity or religion can, with Central Government approval:(a) (b) (c) dispense with the word limited from its name may have unlimited liability exempt itself from the provisions of the Act relating to directors

(4)

Minimum number of directors for an unlisted public company is:(a) (b) (c) Two Three Five

(5)

If directors are appointed by proportional representation:(a) (b) (c) they cannot be removed by an ordinary resolution they remain in office for atleast five years they have to be whole-time directors

(6)

Schedule VI to the Act:(a) (b) (c) prescribes the form of the balance sheet lists persons who will be regarded as relatives limits the powers of the Board

(7)

In a members voluntary winding up:(a) (b) (c) declaration of solvency is a must prior Court approval is a must the company must have been in existence for atleast seven years.

(8)

Maximum period for redeeming preference shares is:(a) (b) (c) 10 years 20 years 7 years

(9)

An additional director ceases to hold office:(a) (b) (c) at the conclusion of the next AGM. upon the expiry of three years from the date of his appointment upon the expiry of the next financial year.

(10)

For reducing share capital, approval is required from the:(a) (b) (c) High Court Company Law Board Central Government

(11)

A company cannot make tax free payment to its:(a) (b) (c) Officer or employee Sole selling agent Any service provider

7.

OPEN BOOK PORTION Please write TRUE or FALSE against the following statements:(no reasoning required) (1) Succession of a stock exchange by another stock exchange, being a company, is called Corporatisation. Recognition of a stock exchange can be withdrawn by SEBI.

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(2)
5

(3) (4) (5)

Contracts in derivatives are legal, if traded on a stock exchange. Securities Appellate Tribunal has all the powers of a civil Court. Only advocates and Chartered accountants can appear before the Securities Appellate Tribunal. The threshold limit for making an open offer is 20%. Voluntary offers are not prohibited under the Takeover Code. Acquisition by inheritance is exempt from the requirement of making an open offer. There are no regulations for buy-back of securities by private limited companies. An open offer may be withdrawn at anytime before a competing offer is made. 9

(6) (7) (8)

(9)

(10)

8.

Indicate the correct option:(writeonly the number, no reasoning required. For e.g. 13(b) or 14(c)) (1) Letter of offer for buy-back of shares by unlisted company must disclose:(a) (b) pre - and post buy-back debt equity ratio. names of all persons who have been directors for the previous five years. material litigation pending against the company.

(c) (2)

Offer for buy-back must remain open for atleast:(a) (b) (c) Seven days Fifteen days Thirty days

(3)

An acquirer under the Takeover Code:(a) (b) must make an unconditional offer may make a conditional offer

(c) (4)

can obtain dispensation from the High Court

Shareholders who have tendered shares in acceptance of open offer cannot withdraw such acceptance:(a) (b) (c) during the tendering period for a period 30 days from the date of acceptance until a competing offer is made.

(5)

Open offer has to be for a minimum of:(a) (b) (c) 26% 25% 20%

(6)

Immediate relatives:(a) (b) are deemed to be persons acting in concert (PAC). can be notified by SEBI, depending upon the facts and circumstances, to be PAC. if they directly or indirectly lend monies to the acquirer, are regarded as PAC.

(c)

(7)

An appeal from the order of the Securities Appellate Tribunal, has to be filed before:(a) (b) (c) the High Court the Supreme Court the Ministry of Corporate Affairs

(8)

A stock exchange may transfer its clearing house functions to:(a) a clearing corporation

(b) (c) (9)

a SEBI registered merchant banker to another recognized stock exchange

A stock exchange:(a) may submit to SEBI a scheme for corporatisation and demutualization is bound to submit to SEBI a scheme for corporatisation and demutualization if so required by its members special resolution, shall submit to SEBI a scheme for corporatisation and demutualization

(b)

(c)

9.

Please write ten bullet points analyzing any one:(a) Procedure for making an open offer or (b) Procedure for buy-back of shares from the open market

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