Subject Code: IMT-54

Subject Name : BUSINESS

LAW

1. All contracts are agreements but all agreements are not contracts. Explain this statement and also give essential elements of a valid contract.

Ans : A contract is a legally binding agreement or relationship that exists between two or more parties to do or abstain from performing certain acts. A contract can also be defined as a legally binding exchange of promises between two or more parties that the law will enforce. For a contract to be formed an offer made must backed acceptance of which there must be consideration. Both parties involved must intend to create legal relation on a lawful matter which must be entered into freely and should be possible to perform. An agreement is a form of cross reference between different parties, which may be written, oral and lies upon the honor of the parties for its fulfillment rather than being in any way enforceable. All contracts are agreement because there must be mutual understanding between two parties for a contract to be formed. All parties should agree and adhere to the terms and conditions of an offer. The following cases illustrate ways in which all contracts are agreements; In the case of invitation to treat, where an invitation to treat is merely an invitation to make an offer. When a firm's offer is accepted it results into a contract provided other elements of contracts are accepted. Considering person A buying a radio on hire purchase from person B who deals with electronics and its appliances. Both parties must come to an agreement on payment of monthly installment within specified period of time. Such an agreement result to specialty contract which a contract under seal. All contracts are agreement until avoided for example, avoidable contract where one of the parties can withdraw from it if s/he wishes. This occurs due to minor agreement and misrepresentation or undue influence. Considering a case where person A make contract with person B but during the contract period B realizes that he was engaged to perform an agreement under undue influence.
2. Define the term offer and acceptance. Explain the rules regarding valid offer and acceptance.

Ans : As has already been emphasised, a contract is based on an agreement between the parties. This is simple to state but there could be situations where it is not obvious whether agreement has occurred. In fact, this might be the very dispute between the parties, with one saying that agreement has been reached and the other denying this is the case. It is no use asking the parties themselves whether they have agreed on something because, depending on who is asked, a different answer would be forthcoming. Any system of law must include a mechanism for determining the presence of agreement. Common law and civil law both invoke the concepts of offer and acceptance. Here, if one party (the offeror) makes an offer to do (or not to do) something which is accepted by the other (the offeree), that concludes the agreement. Again, this may seem an idea of childlike simplicity but applying it in practice is not always so straightforward. Where large amounts of money are at stake, disputes can arise at every turn and the approach to dealing with these is not necessarily the same in every legal system.

An offer matures into a contract when it is accepted. Generally, there must be some external evidence of the offerees intention to accept; as a general rule mere silence will not suffice. Take the following example: X writes to Y offering to buy Ys Ferrari sports cars for 500, adding that if I do not hear from you by 6.00 p.m. this Friday, I will assume you have accepted my offer. If the deadline passes without Y making contact, X might start celebrating on the assumption that the car in question is now his. Such celebrations, however, would be premature because it is highly unlikely that any system of law would regard a contract of sale to have been concluded between X and Y. The reasons for this are not difficult to see. To begin with, Ys silence is equivocal; he might not have received Xs letter or, even if he had, he might have regarded it as a joke and ignored it. Either way, his silence does not evidence an intention to accept. Moreover, if it were otherwise, the law would effectively require Y to take steps to prevent a contract being concluded even though he might not have invited it in the first place. A law such as this would only encourage unscrupulous marketing strategies such as inertia selling, whereby a sales operator, having farmed addresses from a telephone directory or something similar, dispatches goods to unsuspecting consumers stating that they will be liable for the price unless the goods in question are returned.
3. What do you understand by capacity to contract? What is the effect of agreements made by persons not qualified to contract?

Ans : The capacity of both natural and artificial persons determines whether they may make binding amendments to their rights, duties and obligations, such as getting married or merging, entering into contracts, making gifts, or writing a valid will. Capacity is an aspect of status and both are defined by a person's personal law:

for natural persons, the law of domicile or lex domicilii in common law states, and either the law of nationality or lex patriae, or of habitual residence in civil law states; for artificial persons, the law of the place of incorporation, the lex incorporationis for companies while other forms of business entity derive their capacity either from the law of the place in which they were formed or the laws of the states in which they establish a presence for trading purposes depending on the nature of the entity and the transactions entered into.

When the law limits or bars a person from engaging in specified activities, any agreements or contracts to do so are either voidable or void for incapacity. Sometimes such legal incapacity is referred to as incompetence. For comparison, If the CCB determines that the claim made against a contractor or subcontractor was made in bad faith or was false, the person filing the bad faith or false claim shall be placed on the list of persons who have been determined not to be qualified to hold or participate in public contracting for a public improvement. House Bill 2895 (1999) also significantly changes other aspects of public contracts. The bill requires every public contract to contain certain clauses or conditions that affect the rights and responsibilities of both contractors and public agencies performing public improvement. ORS 279.029(3) mandates the Oregon Department of Administrative Services (DAS) to publish a list of states that give preferences to in-state bidders with the percent increase applied in each state. Public contracting agencies may rely on the names of states and percentages to determine the lowest responsible bidder.
4. Explain the following statements: (a) It is not only the consent of the parties which is necessary for making the contract binding.

Ans : Ans A contract is a legally binding exchange of promises or agreement between parties that the law will enforce. Contract law is based on the Latin phrase pacta sunt servanda (pacts must be kept).[1] Breach of contract is recognised by the law and remedies can be provided. Almost everyone makes contracts every day. Sometimes written contracts are required, such as when buying a house.[2] However, most contracts can be and are made orally, like buying a law textbook, or a coffee at a shop. Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations (along with tort, unjust enrichment or restitution). According to legal scholar Sir John William Salmond, a contract is "an agreement creating and defining the obligations between two or more parties" In common law, there are five key requirements for the creation of a contract. These are offer and acceptance (agreement), consideration, an intention to create legal relations, Capacity and Formalities. In civil law systems the concept of consideration is not central. In addition, for some contracts formalities must be complied with under what is sometimes called a statute of frauds.
(b) No Consideration No Contract

Ans Consideration is a controversial requirement for contracts under common law (for example money). It is not necessary in civil law systems,[7] and for that reason has come under increasing criticism. The idea is that both parties to a contract must bring something to the bargain. This can be either conferring an advantage on the other party, or incurring some kind of detriment or inconvenience. Three rules govern consideration.

Consideration must be sufficient, but need not be adequate. For instance, agreeing to buy a car for a penny may constitute a binding contract.[8] While consideration need not be adequate, contracts in which the consideration of one party greatly exceeds that of another may nevertheless be held invalid for lack of sufficient consideration. In such cases, the fact that the consideration is exceedingly unequal can be evidence that there was no consideration at all. Such contracts may also be held invalid for other reasons such as fraud, duress, unequal bargaining power, or being contrary to public policy. In some situations, a collateral contract may exist, whereby the existence of one contract provides consideration for another. Critics say consideration can be so small as to make the requirement of any consideration meaningless. Consideration must not be from the past. For instance, in Eastwood v. Kenyon,[9] the guardian of a young girl raised a loan to educate the girl and to improve her marriage prospects. After her marriage, her husband promised to pay off the loan. It was held that the guardian could not enforce the promise as taking out the loan to raise and educate the girl was past consideration, because it was completed before the husband promised to repay it. Consideration must move from the promisee. For instance, it is good consideration for person A to pay person C in return for services rendered by person B. If there are joint promisees, then consideration need only to move from one of the promisees.

Civil law systems take the approach that an exchange of promises, or a concurrence of wills alone, rather than an exchange in valuable rights is the correct basis. So if you promised to give me a book, and I accepted your offer without giving anything in return, I would have a legal right to the book and you could not change your mind about giving me it as a gift. However, in common law systems the concept of culpa in contrahendo, a form of 'estoppel', is increasingly used to create obligations during pre-contractual negotiations.[10] Estoppel is an equitable doctrine that provides for the creation of legal obligations if a party has given another an assurance and the other has relied on the assurance to his detriment. A number of commentators have suggested that consideration be abandoned, and estoppel be used to replace it as a basis for contracts.[11] However, legislation, rather than judicial development, has been touted as the only way to remove this entrenched common law 3

doctrine. Lord Justice Denning famously stated "The doctrine of consideration is too firmly fixed to be overthrown by a side-wind

5. Write short notes on: (a) Quasi-Contract.

Ans : A quasi-contract, also an implied-in-law contract, is a legal substitute for a contract. A quasi-contract is a contract that should have been formed, even though in actuality it was not. It is used when a court wishes to create an obligation upon a non-contracting party to avoid injustice. Quasi-contracts are defined to be "the lawful and purely voluntary acts of a man, from which there results any obligation whatever to a third person, and sometime a reciprocal obligation between the parties." [1] In contracts, it is the consent of the contracting parties which produces the obligation; in quasi-contracts no consent is required, and the obligation arises from the law or natural equity, on the facts of the case. These acts are called quasi-contracts, because, without being contracts, they bind the parties as contracts do. The defendant's liability under quasi-contract is equal to the value of the benefit conferred by the plaintiff. The value is the fair market value of the benefit and not necessarily the subjective value that the defendant enjoys. For example, accountant prepares tax-payer's taxes, finding a way to get him an unusually large refund. Taxpayer doesn't pay accountant. Assuming a court finds no contract, tax-payer is only liable for the fair market value of tax preparation services, which is not inflated up to account for the unusually large refund he enjoyed.
(b) Contingent Contract Ans : Although it is generally better

to first sell before buying another home, sometimes the market conditions are right to buy before you sell. Home buyers who decide to buy before selling often write a contingent contract to purchase, meaning the buyer's home must sell before the buyer is obligated to complete the purchase transaction. Because contingent contracts are most often a good deal for a buyer and a riskier solution for a seller, many state Realtor associations have devised legal documents that sellers and buyers can use to address contingent contract situations and protect the rights of both parties.

PART B
1. Discuss: (a) Remedies for breach of a contract Ans : A minor breach, a partial breach

or an immaterial breach, occurs when the non-breaching party is unentitled to an order for performance of its obligations, but only to collect the actual amount of their damages. For example, suppose a homeowner hires a contractor to install new plumbing and insists that the pipes, which will ultimately be sealed behind the walls, be red. The contractor instead uses blue pipes that function just as well. Although the contractor breached the literal terms of the contract, the homeowner can only recover the amount of his damages. Since no damages were inflicted, the homeowner receives nothing. A material breach is any failure to perform that permits the other party to the contract to either compel performance, or collect damages because of the breach. If the contractor in the above example had been instructed to use copper pipes, and instead used iron pipes which would not last as long as the copper pipes would have, the homeowner can recover the cost of actually correcting the breach - taking out the iron pipes and replacing them with copper pipes.This is also known as a partial breach 4

(b) How a contract can be discharged.

Ans : Contract theory is the body of legal theory that addresses normative and conceptual questions in contract law. One of the most important questions asked in contract theory is why contracts are enforced. One prominent answer to this question focuses on the economic benefits of enforcing bargains. Another approach, associated with Charles Fried, maintains that the purpose of contract law is to enforce promises. This theory is developed in Fried's book, Contract as Promise. Other approaches to contract theory are found in the writings of legal realists and critical legal studies theorists.
2. Differentiate between the following: (a) Contracts of Indemnity and Guarantee.

Ans: A Mortgage Indemnity Guarantee (MIG) is an insurance policy designed to protect the lender (mortgagee) against loss in the event of defaulting and ceasing to repay the mortgage. The policy may be insisted on by the lender at the start of the loan, but it is usually the borrower (mortgagor) who pays the premium. Some mortgage lenders have in the past been criticized for not explaining clearly enough that the policy is for their benefit, not that of the borrower. The premium payable is determined by the level of perceived risk to the home lender of you defaulting on the loan. In such circumstances, the lender would repossess and sell the property, possibly at a loss. So for example, if the property you are buying is valued at 100,000, the lender may demand you take out indemnity insurance if you are borrowing more than 75% of its value. So a home loan of 80,000 representing 80% of the property's value will leave you with an indemnity premium to pay. If you choose to borrow 90,000 (90%) of the loan, there's deemed to be a greater risk to the lender of financial loss, so the premium payable by you will be higher. Similarly, if you're looking for a 100% mortgage (and are lucky enough to find one available on reasonable terms), the chances are you'll then have to pay a hefty indemnity premium. These premiums are based on the percentage you wish to borrow above a certain threshold set by the lender.

(b) Sale and Agreement to Sell.

Ans : SALE - An agreement by which one of the contracting parties, called the seller, gives a thing and passes the title to it, in exchange for a certain price in current money, to the other party, who is called the buyer or purchaser, who, on his part, agrees to pay such price. This contract differs from a barter or exchange in this, that in the latter the price or consideration, instead of being paid in money, is paid in goods or merchandise, susceptible of a valuation. It differs from accord and satisfaction, because in that contract, the thing is given for the purpose of quieting a claim, and not for a price. An onerous gift, when the burden it imposes is the payment of a sum of money, is, when accepted, in the nature of a sale. When partition is made between two or more joint owners of a chattel, it would seem, the contract is in the nature of a barter. An agreement to sell is just that. A promise if you will, that you will sell something to someone.

A sales contract is far more important and far more legal. If for example you want to purchase a new car, this contract that you and the dealer fill out is called a Sales Contract, and both parties are bound by what this contract says.
3. Give highlights of the following: (a) Competition Act, 2002.

Ans : Since attaining Independence in 1947,India, for the better part of half a century thereafter, adopted and followed policies comprising what are known as Command-and-Control laws, rules, regulations and executive orders. The competition law of India, namely, the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act, for brief) was one such. It was in 1991 that widespread economic reforms were undertaken and consequently the march from Command-and-Control economy to an economy based more on free market principles commenced its stride. As is true of many countries, economic liberalisation has taken root in India and the need for an effective competition regime has also been recognised.
(b) Information Technology Act, 2000. Ans : An Act to provide legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communication, commonly referred to as "electronic commerce", which involve the use of alternatives to paper-based methods of communication and storage of information, to facilitate electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the Indian Evidence Act, 1872, the Bankers' Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters connected therewith or incidental thereto. 4. Write short notes on: (a) Creation of Agency.

Ans : The creation of a new Australian Government agency will involve obtaining a new ABN. Agencies prescribed under
the Financial Management and Accountability Act 1997 (FMA Act) or subject to the Commonwealth Authorities and Companies Act 1997 (CAC Act) should follow the procedures as outlined below: The new agency should contact the Legislative Review Branch (LRB), Department of Finance and Deregulation (Finance), via email to LRB@finance.gov.au and will need to provide Finance with appropriate proof of identification (POI).

If the agency is being created as a direct result of an Administrative Arrangements Order (AAO), then this should serve as sufficient POI. Other sufficient POI would include an establishing Act, Ministerial decision to create a new agency or some other document to prove that it is an Australian Government entity. Finance will then confirm the identity of the agency to the Australian Taxation Office (ATO) Large Multirole and Government (LMG) team, Chermside, which will process the application. In addition, Finance will also provide the ATO with contact details of the agency to facilitate its registration.

(b) Bailment.

Ans : Bailment describes a legal relationship in common law where physical possession of personal property (chattels) is transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently holds possession of the property. However, it is distinguished from a contract of sale or a gift of property, as it only involves the transfer of possession and not its ownership. In order to create a bailment, the bailee must both intend to possess, and actually physically possess, the bailable chattel.
5. Explain: (a) Dishonour of cheques for insufficiency of funds under the Negotiable Instruments Act, 1881. Ans : In India, there is reason to believe that instrument to exchange were in use from early times and we find that papers representing money were introducing into the country by one of the Mohammedan sovereigns of Delhi in the early part of the fourtheenth century. The word 'hundi', a generic term used to

denote instruments of exchange in vernacular is derived from the Sanskrit root 'hund' meaning 'to collect' and well expresses the purpose to which instruments were utilised in their origin. With the advent of British rule in India commercial activities increased to a great extent. The growing demands for money could not be met be mere supply of coins; and the instrument of credit took the function of money which they represented. Before the enactment of the Negotiable Instrument Act, 1881, the law of negotiable instruments as prevalent in England was applied by the Courts in India when any question relating to such instruments arose between Europeans. When then parties were Hindu or Mohammedans, their personal law was held to apply. Though neither the law books of Hindu nor those of Mohammedans contain any reference to negotiable instruments as such, the customs prevailing among the merchants of the respective community were recognised by the courts and applied to the transactions among them. (b) How a patent is granted?

A patent is a set of exclusive rights granted by a state to an inventor or his assignee for a fixed period of time in exchange for a disclosure of an invention.
Ans:

The procedure for granting patents, the requirements placed on the patentee and the extent of the exclusive rights vary widely between countries according to national laws and international agreements. Typically, however, a patent application must include one or more claims defining the invention which must be new, inventive, and useful or industrially applicable. In many countries, certain subject areas are excluded from patents, such as business methods and mental acts. The exclusive right granted to a patentee in most countries is the right to prevent or exclude others from making, using, selling, offering to sell or importing the invention. The term patent usually refers to a right granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof.

PART C
1. What is a Company? Explain the essential characteristics of a company.

Ans : In many ways a company is similar to a sole trader or partnership, except that it exists as a separate legal entity from the owners (who are called shareholders). This means that in most circumstances, personal assets of the owners cannot be touched to pay for the debts of the company.
an institution created to conduct business; "he only invests in large well-established companies"; "he started the company in his garage" organization of performers and associated personnel (especially theatrical); "the traveling company all stayed at the same hotel" the state of being with someone; "he missed their company"; "he enjoyed the society of his friends" small military unit; usually two or three platoons party: a band of people associated temporarily in some activity; "they organized a party to search for food"; "the company of cooks walked into the kitchen" a social gathering of guests or companions; "the house was filled with company when I arrived" caller: a social or business visitor; "the room was a mess because he hadn't expected company" a unit of firefighters including their equipment; "a hook-and-ladder company" be a companion to somebody ship's company: crew of a ship including the officers; the whole force or personnel of a ship 2. Differentiate between: (a) Memorandum and Articles of Association.

Ans : Memorandum (also more commonly memo) is a brief written record or communication, used in an office, whether business, government, education institution or legal office. The plural form is either memoranda or memorandums. A memo does not have a specific format but may be specific to a single office, level of government, or other institution. 7

The articles of association of a company, often simply referred to as the articles (and then often capitalised as an abbreviation for the official name, which is a proper noun and usually contains the company name), are the regulations governing the relationships between the shareholders and directors of the company, and are a requirement for the establishment of a company under the law of the United Kingdom and many other countries
(b) Share and Stock.

Ans : Stock typically takes the form of shares of common stock (or voting shares). As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders.[1][2] Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Shares of such stock are called "convertible preferred shares
3. Write short notes on: (a) Mis-statements in Prospectus

Ans : Criminal liability for misstatements in prospectus

(1) Where a prospectus issued after the commencement of this Act includes any untrue statement, every person who authorised the issue of the prospectus shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to 1[fifty thousand rupees], or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the issue of the prospectus believe, that the statement was true. (2) A person shall not be deemed for the purposes of this section to have authorised the issue of a prospectus by reason only of his having given-(a) the consent required by section 58 to the inclusion therein of a statement purporting to be made by him as an expert, or (b) the consent required by 2[***] sub-section (3) of section 60. (b) Shareholders Meetings.

Ans : A shareholders' meeting is a meeting, usually annually, of all shareholders of a corporation (although in large corporations only a small percentage attend) to elect the Board of Directors and hear reports on the company's business situation. In larger corporations top management hold the proxies signed over to them by many of the shareholders to vote for them.
4. Explain: (a) Shelf Prospectus and Information Memorandum.

Ans : The Information Memorandum provides important information for potential bidders in the
Digital Mobile Licensing process. Amongst other things it outlines the date for applications, prequalification criteria and the auction rules. The Information Memorandum also includes instructions for submitting questions to the Commission. Where appropriate such question and answers will be published on this site.

A prospectus is a legal document that institutions and businesses use to describe the securities they are offering for participants and buyers. A prospectus commonly provides investors with material information about mutual funds, stocks, bonds and other investments, such as a description of the company's business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties and any other material information. In the context of an 8

individual securities offering, such as an initial public offering, a prospectus is distributed by underwriters or brokerages to potential investors.
(b) Buy back of shares by the company. Ans : The provisions regulating buy back of shares are contained in Section 77A, 77AA and 77B of the Companies Act,1956. These were inserted by the Companies (Amendment) Act,1999. The Securities and Exchange Board of India (SEBI) framed the SEBI(Buy Back of Securities) Regulations,1999 and the Department of Company Affairs framed the Private Limited Company and Unlisted Public company (Buy Back of Securities) rules,1999 pursuant to Section 77A(2)(f) and (g) respectively. 5. How are directors appointed and removed in a company?

Ans : The Board of directors approve appointments and accept resignations. The articles of association govern the process for this - some companies make directors retire and be relelected at each agm (one third of the directors each year) but essentially they are not going to get voted out if they have the shareholders' support and often in small companies the shareholders and the directors are one and the same so the matter is academic. Commercially what normally happens is that you persuade a director to resign. A directors service contract is different to his employment contract/relationship with the company If there is a dispute directors can be removed under s303 of the Companies Act, with the consent of shareholders (an extraordinary general meeting has to be held) but this is usually a matter of last resort

PART D
1. Write short notes on: (a) Inter corporate loans and advances.

Ans Sections 370 and 372 have been made inoperative w.e.f. 31.10.1998 by the Companies (Amendment) Act, 1999. Instead section 372A has been introduced under which, provisions of section 370 and 372 relating to inter-corporate loans and investments etc. have been merged and a combined ceiling of 60 per cent of the aggregate of paid up share capital and free reserves or 100 per cent of the free reserves, whichever is higher, has been introduced, for exercise of powers by the Board of directors of a company.
(b) Postal Ballot.

Ans : An absentee ballot is a vote cast by someone who is unable or unwilling to attend the official polling station. Numerous methods have been devised to facilitate this. Increasing the ease of access to absentee ballots are seen by many as one way to improve voter turnout, though some countries require that a valid reason, such as infirmity or travel, be given before a voter can participate in an absentee ballot.
2. Explain: (a) Lifting of corporate veil.

Ans : The corporate law concept of piercing (lifting) the corporate veil describes a legal decision where a shareholder or director of a corporation is held liable for the debts or liabilities of the corporation despite the general principle that shareholders are immune from suits in contract or tort that otherwise would hold only the corporation liable. This doctrine is also known as "disregarding the corporate entity". 9

(b) Doctrine of indoor management.

Ans : The role of Doctrine of Indoor Management is opposed to that of the principle of Constructive Notice. The latter
seeks to protect the company against outsiders; the former operates to protect outsiders against the company. The rule of constructive notice is confined to the external position of the company and, therefore, it follows that there is no notice as to how the companys internal machinery is handled by its officers. If the contract is consistent with the public document, the person contracting will not be prejudiced by irregularities that may beset the indoor work of the company. 3. Discuss: (a) Rights and duties of an auditor of a company.

Ans : The management and an audit firm's handling of the books of accounts of ENRON have again brought to light deep rooted concerns, by members of the public and governments world-wide, about the role, rights and responsibilities of external auditors in the auditing of the books of accounts of companies, as statutorily provided and the declaration of "paper" profits by companies. These developments are also a remainder of the collapse of some financial institutions in Nigeria in the early 1990's, in spite of their public declared accounts showing massive profits. Also, the experience of Lever Brothers Nigeria Plc. in 1998 and most recently, that of another Nigerian company quoted on the stock exchange, are reminiscent of these kinds of development and concerns. It is paramount that an external Auditor is as independent as possible. For this reason, his appointment is usually by special resolution, i.e. two-thirds majority of the voting members of a company, passed at an Annual General Meeting of the company. His removal is also by the same method, i.e. special resolution. In the event of a removal, he is entitled to attend the next Annual General Meeting of the company to present his report and if necessary, to defend himself against any allegations that may have been made against him by the Board of the company. The external Auditor is also entitled, whilst carrying out his audit, to request for all necessary books of accounts kept by the company. In the event of a refusal or failure to furnish these books, he is required to state this fact in his report.
(b) What remedies are available to share holders of a company against oppression and mismanagement.

Ans : their counterparts in partnerships or in corporations whose shares are publicly traded.2 Courts recognize the rights of minority shareholders to relief, through either direct or derivative actions.3 Curiously, however, corporation statutes provide only a sliver of guidance on the issue, and a remedy-judicial dissolution of the corporation-that courts virtually always reject in favor of more realistic and satisfactory remedies that are not mentioned in the statutes.4 Although explication of the standards for shareholder oppression tends toward vague and indeterminate formulations, two general approaches account for most of the cases.5 The two overlap, both in concepts and in results, but display different perspectives. The more traditional "fiduciary duty" analysis posits that shareholders with sufficient ownership of shares to pragmatically have control over corporate decision-making owe a duty to the corporation and to the minority shareholders to avoid overreaching.6 Hence, when minority shareholders assert oppression, the analysis focuses on the business justification proffered by the majority for the conduct, to determine whether the majority breached its duty. An alternate approach that is newer, less common, but growing in acceptance, is the "reasonable expectations" analysis, adopting the perspective of the minority shareholders. Under this approach, corporate decisions may be found oppressive because they violate the expectations that the minority reasonably maintained toward 10

employment, remuneration, or control. Importantly, this approach allows for a finding of oppression, at least in the more extreme interpretations, whether or not the majority acted wrongfully and even if the minority was guilty of misconduct.7
4. How the amalgamation of a company with another company is carried out?

Ans : The Commissioner recently issued an Interpretation Statement (IS0081) concerning the impact of company amalgamations on binding rulings. A taxpayer has now asked whether the rights or obligations arising to an amalgamating taxpayer under a financial arrangement determination (determinations made under section 90, 90AC or 90A of the Tax Administration Act 1994 ("the TAA")) will pass to the amalgamated company on the amalgamation. Under section 90AB(1) of the TAA, a person who becomes, or who intends to become, a party to a financial arrangement may apply to the Commissioner for a determination to be made under section 90AC(1). This item is concerned with these taxpayer specific determinations, not with general financial arrangement determinations which the Commissioner may also make under section 90AC(1). General determinations will apply to all taxpayers within the scope of the determination, irrespective of an amalgamation.
5. What is winding up? Explain the different modes of winding up.

Ans : Winding up is a process where the companys asset will be gathered and will be used to pay all debts, and the balance for the cost of winding up will be distributed among the shareholders according to their interests in the company. Compulsory wind up is liquidating your company under a court order. A company will be wound uip if it fails to pay debts exceeding RM500 (after the court order has been served). Below is the procedure for members voluntary winding up: a. The companys directors convene a board meeting to make a declaration of solvency (Form 66) which must be signed by all the directors or where the company has more than two directors by a majority of the directors. The Form 66 must:

be made within 5 weeks before the passing of the resolution for the voluntary winding up be lodged with the CCM before the date on which the notice convening the general meeting at which the resolution of the winding up your company is to be proposed are sent out include a statements of affairs of your company showing the assets at the expected realisable value, the liabilities of the company and the estimated expenses of the winding up

a. A board meeting convene by your companys directors to decide on the date of the EGM and creditors meeting. These meeting must be held within one month from the date of statutory declaration (Form 65A) b. The directors make a statutory declaration of Form 65 (statutory declaration of inability of company to continue business and that meetings of the company and its creditors have been summoned) and lodged with the CCM. c. Your companys director shall appoint and approved liquidator to be the provisional liquidator.

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SHORT ANSWER QUESTIONS

1. An agreement requires a meeting of the minds.

Ans : Meeting of the minds (also referred to as mutual assent or consensus ad idem) is a phrase in contract law used to describe the intentions of the parties forming the contract. In particular it refers to the situation where there is a common understanding in the formation of the contract. This condition or element is often considered a necessary requirement to the formation of a contract. The reasoning is that a party should not be held to a contract that they were not even aware existed. A mutual promise between friends over simple personal matters should not be a situation where legal remedies are to be used. Equally, any such agreement where the obligation is primarily a moral one rather than a legal one should not be enforceable. It is only when all parties involved are aware of the formation of a legal obligation is there a meeting of the minds. 2. An agreement with or by a minor is voidable. Ans :
The issue of contracting with children recently came to the fore when one of the child stars of the Harry Potter films was stalling in negotiations to extend her contract for the final two films in the Harry Potter series. Whilst, happily for all those Harry Potter fans out there, Emma Watson - the child star in question - eventually agreed to appear in those films, the situation did highlight the risks that organisations face when entering into any form of contract with a child due to the special legal status that they enjoy.

3. A contract of insurance is a wagering agreement.

Ans : A wager means a promise to give money or monies worth upon the determination of an uncertain event. An essential feature of a wagering contract is that one party is to win and the other is to lose upon the determination of the event. There must also be two persons, either of whom is capable of winning or losing. Some wagering bargains are lawful and enforceable; some others are void and unenforceable while some are illegal. The final category is composed of gambling agreements, which are forbidden by law. However, it must be borne in mind that, other than those agreements which are expressly forbidden by law, all other wagering agreements are totally unenforceable.

4. The liability of the surety is co-extensive with that of the principal debtor

Ans : It turns out that liability insurance, such as you'll find as a component of a BOP, is a very different animal from a surety bond. Both serve important roles in contract businesses like construction and landscaping, and both help a prospective client feel good about a contractor by reducing the client's exposure to specific risks.

5. In a contract of bailment it is only possession that passes from bailor to the bailee and not ownership.

Ans : Bailment describes a legal relationship in common law where physical possession of personal property (chattels) is transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently holds possession of the property. However, it is distinguished from a contract of sale or a gift of property, as it only 12

involves the transfer of possession and not its ownership. In order to create a bailment, the bailee must both intend to possess, and actually physically possess, the bailable chattel

6. He who acts through an agent is himself acting. Ans : In commercial law, a principal is a personlegal

or naturalwho authorizes an agent to act to create one or more legal relationships with a third party. This branch of law is called agency and relies on the common law proposition qui facit per alium, facit per se (Latin "he or she who acts through another, acts personally"). from the seller to the buyer when the latter acquires the proprietary rights over the goods and the obligations linked thereto. 'Property in Goods' which means the ownership of goods, is different from ' possession of goods' which means the physical custody or control of the goods.

7. Property in goods means the custody or control of goods. Ans The property in the goods is said, to be transferred

8. A cheque is a species of a bill of exchange. Ans : HAVING reviewed the various forms of cash, or money here and now, for which goods and services are habitually exchanged, and for which the money market exchanges money some day or money somewhere else, we proceed to the bill of exchange, a versatile credit instrument which is often all these three forms of money in the course of its career. The complicated relations between the different kinds of money, and their habit of melting into another, are well exemplified when it is stated that the cheque, with which we are supposed to have already dealt, is actually nothing else but a bill of exchange, with which we now propose to deal. 9. There is a requirement of a woman member in all the Consumer Disputes Redressal Agencies (CDRA). Ans : Consumer Disputes Redressal Agencies

This part of the Act contains 22 sections i.e. Sections 9 to18, 18-A, 19 to 23, 24-A, 24-, 25, 26 and 27. It also makes provisions regarding the composition, jurisdiction, procedure to be followed by the District forum, State commission & National commission. Any person aggrieved by an order of the District forum may appeal to the State commission & an order of the State commission can be challenged before the National Commission. Any person aggrieved by the order of the National Commission can resort to the Supreme court as the last remedy.
10. Indian law permits international copyright and patent.

Ans : Indian law provide Comprehensive India Trademark Search facility where we conduct a search in the India Trademark Registry covering India Trademark Database that includes all Trademarks issued and Pending Trademark Applications whether they are published in the official journal or unpublished. This low cost paid comprehensive India Trademark Search is conducted in the database of trade marks and service marks that are registered and advertised before acceptance in the Trade mark Journal published by the Trade Mark Registry.
11. The competition law in India prohibits competition.

Ans : As the Indian economy moved from a regulated regime towards an open market regime, there was an urgent requirement to enact a legislation for fostering competition and preventing anti-competition activities. In line with the international trend and to cope with changing realities, the existing Monopolies and Restrictive Trade Practices Act, 1969 was reviewed and the Competition Act, 2002 was enacted. 13

12. Foreign exchange can be procured from an authorized person.

Ans : The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex and related markets currently is over US$ 3 trillion.
13. The life of a company comes to an end with the death of all its members in a mishap.

Ans : The mutual reserve life association known as the Life Union seems to be about entering upon

the throes of dissolution. Last night a report of a committee of policy holders was sent out to all of the members of the Union recommending that they reinsure in the United Life Insurance Association, a company organized upon the same basis as the Life Union and employing practically the same principles of management
14. An act ultra-vires the articles can not be ratified.

Ans : In corporate law, ultra vires describes acts attempted by a corporation that are beyond the scope of powers granted by the corporation's Charter or in a clause in its Memorandum of Association; in the laws authorizing its formation, or similar founding documents. Acts attempted by a corporation that are beyond the scope of its charter are void or voidable. Even though dicta supporting the view that ultra vires acts were totally void appeared in many cases, most courts adopted the view that such acts were voidable rather than void.
15. A statutory meeting must discuss the statutory report.

Ans : Under the Financial Administration Act, statutory annual reports can be discontinued by Order-inCouncil when they contain the same or less information than the corresponding estimate document (DPR or RPP) or Public Account. For the purpose of consolidation, information contained in the DPR is compared to that contained in the annual statutory report to determine whether the latter may be discontinued.

16. A firm cannot be appointed as a director in a company.

Ans : This notes sets out the requirements for the incorporation of private limited companies, public limited companies and un-limited companies. The note refers to the major differences between types of company, the documents required for their formation, shareholders, capital and officers and secretary. It does not look in detail at the question of company names.
17. A member can demand a copy of the minutes of a board meeting Ans : The minutes of the board meetings are the official record of the board meeting proceedings; adoption of proposed policies, regent resolutions, or formal board actions. Board meeting minutes are available after approval at the following meeting of the board. The board meeting agendas are the outline of the topics to be discussed at each meeting. Following the meeting, the agendas note which board action items were approved at the meeting.

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18. The dividend warrants must be posted within 45 days of its declaration at the annual general meeting.

Ans : Companies that earn a profit can do one of three things: pay that profit out to shareholders, reinvest it in the business through expansion, debt reduction or share repurchases, or both. When a portion of the profit is paid out to shareholders, the payment is known as a dividend. The declaration date is the day the Board of Directors announces their intention to pay a dividend. On this day, the company creates a liability on its books; it now owes the money to the stockholders. On the declaration date, the Board will also announce a date of record and a payment date.
19. A committee of inspection is appointed in all types of winding up.

Ans : The Committee of Inspection was the most radical and intrusive of the organizations within the New York network of revolutionary-era committees of correspondence. It poked into the efforts of elite merchants to evade colonial boycotts. Led by radical Whigs Alexander McDougall and Isaac Sears, the committee was particularly active in discouraging merchants from paying the tea tax of 1773 and in protesting the Intolerable Acts of the following year.
20. In creditors voluntary winding up a declaration of solvency is made by the company.

Ans : A company may , voluntary wind up it's affairs, if it is unable to carry on it's business, or if it was formed only for a limited purpose, or if it is unable to meet it's financial obligation, and etc. A company may voluntary wind up itself, under any of the two modes: A. Members voluntarily winding up B. Creditors voluntarily winding up A company may voluntarily wind up itself, either by passing : An ordinary resolution, where the purpose for which the company was formed has completed, or the time limit for which the company was formed, has expired.

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