ICSI FINAL – NEW SYLLABUS

ADVANCED COMPANY LAW AND PRACTICE

December 2005

Answer six questions including Q No. 1 which is compulsory.

Q 1. Comment on any four of the following : (i) The provisions of the Companies Act, 1956 totally exempt the managing director of the company and his relatives from the regulatory provisions of section 314 in the matters of holding office or place of profit in the company (ii) Petitions under sections 397, 398 and 433 are not simultaneously maintainable (iii) A liquidator in a compulsory winding-up of a company need not obtain court’s approval for every act he is required to perform as liquidator of the company (iv) The general principle of law that the ‘authority in whom the power to appoint vests is competent to remove the incumbent from office’ is applicable both to the removal of director and removal of auditor before expiry of their respective tenures of office (v) Preference shareholders’ right to receive the dividend irrespective of the profitability of the company is undeniable (5 x 4 = 20 marks).

Q 2. (a) As a shareholder of Piyush Ltd. having its registered office in Kolkata,  West Bengal, you intend submitting a petition to the Company Law Board relating to matter specified in section 409. To which Bench of the Company Law Board would the petition be filed? (b) Your company has a paid-up capital of Rs. 200 crore and is engaged in power generation business and has not paid any dividend for several years due to paucity of earnings. Since the shareholders are clamouring for returns, your company intends to declare a dividend of 10% although there is a net profit of only 2 crore after providing for depreciation of Rs. 75 crore. How can this be done? (c) A proceeding has been initiated against your company for dealing in securities of Zebra Ltd., which is in possession of unpublished price sensitive information. What are the possible defences that you can advance in such a situation? (d) Bimal, the transferee, submitted a share transfer form duly executed, dated and stamped in June, 2004 to Daisy Ltd., which did not register it till October, 2004. Bimal submitted a petition for winding-up of the company in December, 2004. Will the petition succeed? (4 x 4 = 16 marks)

Q 3. (a) A notice issued by the Company Law Board and sent to a director of a company by registered post is returned by the postal authorities with the remark ‘refused’. What further action needs to be taken in respect of such a notice? (b) What are the powers of the court to grant relief to an officer of the company from his liability in respect of his acts of omission and commission? (c) Can a company and its authorised officers obtain a copy or carry out an inspection of the report submitted by an inspecting officer under section 209A? (d) What are the circumstances in which it will be deemed that proper books of account have not been kept by a company in respect of which winding-up order has been passed? (4 x 4 = 16 marks).

Q 4. (a) Give a list of businesses to be transacted by a listed company only through postal ballot (b) As the Secretary of Adroit Ltd., draft a resolution for making an application to the Court for taking cognizance of the offences committed by Sneaky Ltd., of which your company is a member (c) What documents should accompany a petition under section 17 for change of company’s registered office from one State to another? (d) Drat a notice of an extra-ordinary general meeting for transacting the only business of obtaining consent of the company to buy-back its shares  (4 x 4 = 16 marks).

Q 5 (a) Highlight any five major changes contemplated by the concept paper seeking amendments in company law (b) Discuss the jurisdiction of courts relating to winding-up of a company (c) A company got the approval of the company court to a scheme of internal reconstruction. While the scheme was under implementation, the company prayed for a declaration by the court that no income-tax would be payable by the company till the expiry of three years of working of the reconstructed company. Can the court accede to this prayer? (5+5+6 = 16 marks)

Q 6 (a) Prepare a draft resolution to be passed by the Board of Directors of your company authorising Divakar, a director of your company, to act as representative of your company at the general meeting of Harsha Ltd. in which your company is a shareholder (b) Your company has received a letter from the Joint Director (Inspection) advising that an inspection of the company will be conducted shortly. What are the duties of directors, other officers and employees of the company in relation to such inspection? (c) With reference to decided cases, set out the various principles that emerge in the matter of ‘inability to pay debts’ as the ground for compulsory winding-up of a company (4+4+8 = 16 marks).

Q 7. (a) On a petition, the Company Law Board fixes a date for hearing on which one of the parties does not appear. What action can the Bench of the Company Law Board take in such a situation? (b) Prepare an application to the Central Government for obtaining prior approval for entering into contracts for sale, purchase or supply of any goods, materials or services pursuant to the proviso to section 297(1) (4+12 = 16 marks).

Q 8. (a) Discuss the role of auditors in corporate management in Japan. (b) What is the Board procedure recommended by Kumar Mangalam Birla Committee on corporate governance and what information must be made available to the Board as per the said Committee’s recommendations? (6+10 = 16 marks)

June 2005

Answer 6 questions including Q No. 1 which is compulsory.

Q 1 Comment on the following (i) Appeal, application, petition and reference can be used interchangeably in the context of Company Law Board proceedings. (ii) Trading window is a software. (iii) Requisite majority to approve a scheme of arrangement or compromise under section 391(2) is three-fourths of the total value of the shareholders/creditors of the company concerned. (iv) It is mandatory for all companies to make management discussion and analysis report as a part of the Board’s report to the shareholders. (v) A receiver is an agent of the company (vi) Liquidation, winding-up and dissolution are equivalent terms (3+3+3+3+4+4 = 20 marks).

Q 2 (a) On joining Zig Zag Ltd. as its Company Secretary, you found that the balance sheet as at 31^st March, 2003 and the annual return related thereto have not been filed with the Registrar of Companies. What steps would you initiate to avoid commencement of penal proceedings? (b) An order has been passed by the Company Law Board under section 397 against your company which is considered inappropriate by the management. What action would you take in such a situation? (c) A large block of shares has been purchased in your company by a group which is in a business in direct competition with a line of business undertaken by your company. What action can you take to prevent registration of such shares in the name of the acquirers? (d) What are the circumstances under which there is an effective reduction of capital, but no confirmation of the court is required?  (4 x 4 = 16 marks)

Q 3 State, with reasons, whether the following statements are correct or incorrect: (i) Inspection under section 209A and investigation under section 235/237 are the same (ii) ‘Insider’ cannot deal in the shares of the company concerned. (iii) Public limited company is the most appropriate form of organisation for business (iv) The trend of concentration of equity ownership in the hands of institutional investors is harmful for corporate entities (4 x 4 = 16 marks).

Q 4 (a) Briefly discuss the recommendations of the Naresh Chandra Committee Report on compulsory audit partner rotation. (b) Explain the powers of the High Court under the Companies Act, 1956 to carry out the compromise or arrangement between the companies (c) The Central Government is vested with various functions for ensuring proper development and efficient functioning of the corporate sector as prescribed under the provisions of the Companies Act, 1956. Elaborate these functions (5+5+6 = 16 marks).

Q 5 (a) Roxy Ltd. proposes to take disciplinary action against its secretarial officer whom the company alleges of disclosure of certain information during the course of investigation ordered by the Company Law Board (CLB). The CLB decides to object the same. Clarify the procedure to be adopted by the CLB and remedy available to the company. (b) State whether a company can avail exemption from preparation of accounts in format other than prescribed under Schedule VI of the Companies Act, 1956. Answer with reasons. (c) Describe the procedure for registration of an existing company under Part-IX of the Companies Act, 1956 (5+5+6 = 16 marks).

Q 6 (a) State the circumstances under which the Registrar of Company can seize the books and papers of a company. (b) A few days after a scheme of arrangement filed by Tarzon Ltd. is sanctioned by the court, majority of the directors/promoters of the company concerned are indicted by the SEBI of certain wrong doing jeopardising the implementation of the scheme. advise. (c) Draft a resolution to be passed at a general meeting authorising the Board of directors to buy-back shares of your company. (you may assume circumstances, sources and quantum.) (4+4+8 = 16 marks)

Q 7 (a) Humlog Ltd., a shareholder in Biglog Ltd., challenges in the court, compounding of an offence under section 211 being punishable with imprisonment or fine or with both by Biglog Ltd., by filing a petition to the Company Law Board (CLB) under section 621A on the ground that CLB should have taken the court’s permission before compounding? (b) UR Ltd. has secured the approval of members for a compromise with its institutional lenders and is in the process of filing necessary papers with the court. Shramik, who is employed in UR Ltd.’s factory and is in the process of lodging a transfer of 100 shares for registration in his name, wants to intervene. Advise him. (c) Mention the salient features of the Sarbances-Oxley Act, 2002 of the United States of America (5+5+6 = 16 marks).

Q 8 (a) “Maintaining good investor relations is the need of the day.” Comment. (b) Inspection of the books of accounts of Joy Ltd. revealed that certain statutory provisions of the Companies Act, 1956 were violated and hence a notice was issued to that effect. Joy Ltd. pleaded that violation was not wilful. However, a further notice was issued to Joy Ltd. to show cause why action should not be taken against it pursuant to section 628. Joy Ltd. filed a petition to the court praying for relief under section 633. Will the court grant relief? (c) Fly High Ltd., a listed company, forfeited 15,000 equity shares of Rs. 10 each on which only Rs. 2.50 towards application and allotment has been paid, for non-payment of call money due thereon and now proposes to re-issue the said shares to the promoters at Rs. 7.50 per share. What would be the issues involved in implementing the proposal? (4+4+8 = 16 marks).

ADVANCED COMPANY LAW AND PRACTICE

December  2004

Answer 6 questions including Q No. 1 which is compulsory.

Q 1 Examine the following statements: (i) Technical experience of a shareholder is not the experience of the company. (ii) Members may die, but a company never dies – with reference to sanctity of subscription clause (iii) Though a company cannot be a citizen, yet it has nationality, domicile and residence. (iv) Corporate governance is  the current buzz in India as well as world over (5 x 4 = 20 marks).

Q 2 “A foreign company though recognised under the Companies Act, 1956, based on certain criteria is a body corporate and not a company under the aforesaid Act.” Analyse this statement with reference to the provisions of the Companies Act, 1956 and state briefly the requirements to be met by a foreign company so recognised under the provisions of the Companies Act, 1956 (16 marks)

Q 3 (a) A Joint-Hindu family consisting of a father and five major sons and another family consisting of a father, five major sons and one minor son carried on banking business as owners thereof. Discuss if the organisation requires registration under the Companies Act, 1956 (b) Legal representative of a deceased member of a company alleged oppression and mis-management. He made a complaint to Company Law Board for relief. The management of the company is of the opinion that he has no locus standi since he is not a member. The register of members still shows the name of the deceased as member. Will the complaint of representative of the deceased member be entertained by the Company Law Board? (c) Is it necessary to file the letter of offer for renounciable rights shares with the Registrar of Companies? Explain. (d) The Official Liquidator of Bright Dental Multi-Speciality Hospital Ltd. in liquidation instituted misfeasance proceedings against the managing director of the company. During the pendency of proceedings, the managing director passed away. Examine the extent to which the legal representatives of the deceased managing director can be held liable (4 x 4 = 16 marks)

Q 4 (a) Distinguish between the removal and retirement of a statutory auditor and state the procedure to be followed in these regard (b) Do you think that a statutory auditor will suffer disqualification in the following circumstances in the light of provisions of the Companies Act, 1956: (i) The statutory auditor of a company acquired 100 debentures of a company in a public issue when he was not the statutory auditor and continues to hold them even after his appointment as the statutory auditor (ii) When in a five partner firm of chartered accountants, one of the partners dies and as per the partnership deed the firm gets reconstituted in terms of the original partnership deed (iii) Where one of the managers, who is the audit in-charge of a firm of chartered accountants, buys a colour television on credit from the company for which the firm is the statutory auditor, under a guarantee by one of the partners of the firm (c) When a company has been directed to maintain records under section 209(1)(d) of the Companies Act, 1956, would the requirement of audit of such records under section 233B of the said Act arise concurrently? (6+6+4 = 16 marks)

Q 5 (a) Mrs. And Mr. Raghu desire to incorporate a private limited company which will takeover their existing partnership business. They have engaged Teja, a Practising Company Secretary to draft the ‘memorandum’ and ‘articles of association’ of the proposed company. In order to reduce the cost of printing, the Practising Company Secretary was advised to include only the legally essential clauses in the articles of association of the proposed company. Draft the said clauses of the articles of association keeping in view the instructions of the promoters (b) Due to inadvertence, the Secretary of a company failed to send notice to sixteen members out of 10,000 members of the company in respect of a special resolution to be passed at an annual general meeting. The special resolution was passed at that meeting. State with reasons whether the resolution is valid? (10+6 = 16 marks).

Q 6 (a) Aastha Ltd., a listed company, desires to dispose of one of its undertakings. Set out the procedure and draft the requisite resolution (b) Kajol Ltd. transferred dividend to a special dividend account and also posted dividend warrants to the shareholders within 30 days from the date of declaration of dividend. The Registrar of Companies on inspection found that the company has failed to transfer the unpaid dividend amount to a special account within the stipulated time under section 205A(1) of the Companies Act, 1956. The Registrar of Companies proceeded against the company and its directors after one year from the date of inspection. The company and its directors approached the High Court contending that it had deposited the entire dividend amount in a separate dividend account and despatched dividend warrants within the stipulated time limit. It also contended that the complaint was time barred. Is the company’s contention right? (12+4 = 16 marks)

Q 7 (a) Golden Tea Estates Ltd. had taken a term loan of Rs. 50 lakh from a bank secured by some of its assets. The company has defaulted in the matter of payment of two installments of term loan amounting to Rs. 5 lakh as per the terms of the loan agreement. The bank filed winding up petition in the court. The company opposed the petition for winding up on the ground that it has employed 500 workers, paid their salaries regularly and that it has paid all the taxes due to the Government. The company requested for some time to repay the loan installments. The company is also supported by some major creditors. Explain the circumstances under which a company be ordered to be would up by the Court on the ground of inability to pay its debts and whether the bank will succeed in this case  (b) What is ‘Indian Depository Receipt’ (IDR) and state who are eligible to issue such receipt? (10+6 = 16 marks)

Q 8 (a) Describe the powers of the Central Government to grant exemptions under section 25 to companies from the provisions of the Companies Act, 1956 (b) What do you understand by ‘takeover bid’ or ‘takeover offer’? What are the types of takeover bid/offer? (c) State any eight exceptions to the doctrine of ultra vires. (8+4+4 = 16 marks).

ADVANCED COMPANY LAW AND PRACTICE

June 2004

Answer 6 questions including Q No. 1 which is compulsory.

Q 1 (a) Citizen Ltd., a company of which you are the secretary, has been debarred by the Securities and Exchange Board of India (SEBI) from accessing the capital market for a period of two years on the ground of indulging in price manipulation and fraudulent practices. Advise your managing director regarding the action the company should take in respect of this order (b) Your company has a 40% foreign shareholding completely owned by a US company. Information has been received by the directors of your company that the US Company intends to transfer its entire holding to an individual in India with a reputation for asset stripping. What action can be taken by the directors of your company? (c) Binod, a preference shareholder of Zora Ltd. holding 12% of the issued preference share capital, has come to know that the company intends to reduce the rate of dividend from 10% as fixed at the time of issue to 8%. Advise Binod as to how he can safeguard himself against the proposed reduction (d) What are the circumstances in which a company shall be deemed to be unable to pay its debts? Will a simple dishonour of an accepted bill of exchange, without a demand or levy of execution, tantamount to proof of inability to pay its debts? (e) What remedy is available to a depositor whose deposit has not been re-paid on maturity despite repeated reminders and how is this remedy enforced? [4 x 5 = 20 marks]

Q 2 (a) Enumerate the various modes of service of notice and process by which a Bench of the Company Law Board can direct for service of notice or process upon the parties (b) Your company has passed a resolution to issue shares at a discount. Now you have to make an application to the Company Law Board. What are the documents to be accompanied with the application under section 79(2) of the Companies Act, 1956? (c) Discuss with reference to case law and state what do you mean by the expression the ‘latest auditor’s report on the accounts of the company’ occurring in the proviso to sub-section (2) of section 391 of the Companies Act, 1956 [6+5+5 = 16 marks].

Q 3 (a) Name the authorities to whom the following powers have been delegated by the Central  Government : (i) Approving the change of name by rectification (ii) Approving alteration of articles of association for converting a public company into a private company (iii) Approving removal of an auditor before the expiry of his term (iv) Granting extension of time for calling a general meeting of the company by the liquidator in the case of creditors’ voluntary winding up (v) Approving change of name of a company being registered under Part IX of the Companies Act, 1956 where the proposed name is found undesirable by the Central Government (vi) Making an application to a judge of a High Court in his chamber requiring production and inspection of books where offence under the Companies Act, 1956 is suspected (vii) Approving a contract requiring the Central Government’s approval under section 297 of the Companies Act, 1956 (viii) Receiving a notice of application made by a company to the High Court under sections 391 and 394 of the Companies Act, 1956 (b) Specify any four powers of the Central Government which cannot be delegated to any officer or authority (c) Growmore Resources Ltd. has identified and decided on a growth strategy by acquiring an established company’s division comprising two manufacturing undertakings from another reputed company as part of a scheme of arrangement which inter alia involves (i) reduction by half in the capital of the transferor company and (ii) issue of equity shares by the transferee company to the transferor company in ratio of 10:13 (after reduction). The transferor company has over 20,000 shareholders and its equity share capital is listed at four recognised stock exchanges in India. As the company secretary of the transferor company, state the procedure and other steps involved [4+4+8 = 16 marks].

Q 4 (a) A financial institution subscribed to 15%, 2,50,000 redeemable non-convertible debentures (NCDs) of Rs. 1,000 each aggregating Rs. 25 crore placed by XL Ltd. on private placement basis. The NCDs are secured by an equitable mortgage of all the immovable properties of the company and the charge was duly registered. XL Ltd. has repaid the entire amount borrowed and the NCDs have been fully redeemed on 31^st October, 2002. Upon your appointment as the company secretary of XL Ltd. on 1^st December, 2002 you learn that the satisfaction of charge has not been filed with the Registrar of Companies. You are required to : (i) State whether the satisfaction of charge can be filed with the Registrar of Companies on payment of additional fees (ii) Having regard to your answer to (i) above, list out the steps necessary for filing the satisfaction of charge including forms, etc. (b) Zedex Enterprises Ltd.’s equity shares are listed at three recognised stock exchanges in India, and to comply with the listing requirements, it is required to appoint non-executive directors which, if made, will result in the total number of directors exceeding the maximum number of 13 provided in the articles of association of the company. What is required to be done in this regard? [10+6 = 16 marks]

Q 5 (a) Ambani purchased 200 fully paid equity shares of TAMCO Ltd. from one of his friends and the duly executed transfer deed for physical transfer of these shares in favour of Ambani was lodged with the company on 24^th June, 2003 and the company registered the transfer only on 23^rd September, 2003. On 4^th February, 2004, Ambani, as a contributory, presented a petition for winding up of the company. Advise the company about the maintainability of the petition (b) What constitutes overriding preferential payments in a winding up of company under the provisions of the Companies Act, 1956? In this context, state which of the following dues of a company in winding up will rank for overriding preferential payments and how the proceeds from disposal of assets held as security will be distributed between claimants of overriding payments (i) Dues on account of uncontested sales tax – 20,000 (ii) Municipal taxes – 30,000 (iii) Wages not paid during the three months preceding winding up order – 3,00,000  (iv) Secured creditors – 12,00,000 (v) Net aggregate amount realized on disposal of assets constituting security for creditors – 8,00,000 (c) State the contents that must be included in a statement of affairs to be submitted to the official liquidator by the directors of a company consequent upon a winding up order (d) Name the properties of a company in liquidation which can be disclaimed as onerous property by the liquidator with the leave of the court [4+6+4+2 = 16 marks]

Q 6 (a) Buy-back of  shares and securities of a company is not only restricted but also prohibited in certain cases. What are these restrictions and prohibitions? (b) When you, as the company secretary designated as compliance officer of a listed company, inform the managing director (who is also one of the promoters) that as per the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 he cannot buy/sell equity shares of the company without clearance from you, he is not amused. Explain to him why he cannot do so. Also place a broad framework of model code of conduct for adherence to by all concerned in a listed company (4+12 = 16 marks).

Q 7 Write notes on any four of the following: (i) Corporate governance through committees (ii) Secretarial standards (iii) Investor relations centre (iv) Escrow account (v) Minimum Board size as per Naresh Chandra Committee Report (4 x 4 = 16 marks).