CS Final :: Advanced company law & practice : June 2004

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..

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 ?

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.

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?

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 ?

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 pr ocess upon the parties.

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 ?

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.

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Name the authorities to whom the following powers have been delegated by the Central Government : /tr>

(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.

Specify any four powers of the Central Government which cannot be delegated to any officer or authority.

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.

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 31st 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 :

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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 ?

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 24lh June, 2003 and the company registered the transfer only on 23rd September, 2003. On 4th February, 2004, Ambani, as a contributory, presented a petition for winding up of the company. Advise the company about the maintainability of the petition.

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 taxes30,000
(iii)	Wages not paid during the three monthspreceeding winding up order 3,00,000
(iv)	Secured creditors12,00,000
(v)	Net aggregate amount realised ondisposal of assets constituting security for creditors 8,00,000

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.

Name the properties of a company in liquidation which can be disclaimed as onerous property by the liquidator with the leave of the court.

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Buy-back of shares and securities of a company is not only restricted but also prohibited in certain cases. Wha t are these restrictions and prohibitions '?

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.

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.

Considering even the federal nature of the States in the USA, the Securities Exchange Commission plays a vital role in the affairs of a company incorporated in that country.Prepare a brief note for your Board of directors on this.

Adroit Ltd. did not hold its annual general meeting for the year 2002. Sajag, who is a member of Adroit Ltd., wants to approach the Company Law Board for an order directing the Adroit Ltd. for calling the meeting. Discuss the procedure for making such an application to the Company Law Board.

Ketan, a shareholder in two companies (first applicant and second applicant), approached the Company Law Board (CLB) stating that by (i) allotment of equity shares by the directors of the second applicant company to their relatives in the second applicant company; and (ii) by a chain of other events, he had been reduced to a minority in the second applicant company and after going into complaint of oppression and mismanagement, CLB using its discretionary powers pursuant to the sections 397 and 402 passed an order asking the companies concerned to be run independently. Advise the aggrieved respondent companies about the further course of action.