MODEL PAPER

ICMA.

CORPORATE LAWS AND

SECRETARIAL PRACTICES (LA-403)

Pakistan
Time Allowed: 03 Hours

SEMESTER-4
Maximum Marks: 100

Roll No.:

(i)

Attempt all questions.

(ii)

Answers must be neat, relevant and brief.

(iii)

In marking the question paper, the examiners take into account clarity of exposition, logic of arguments,
effective presentation, language and use of clear diagram/ chart, where appropriate.

(iv)

Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper.

(v)

Use of non-programmable scientific calculators of any model is allowed.

(vi)

DO NOT write your Name, Reg. No. or Roll No. anywhere inside the answer script.

(vii)

Question Paper must be returned to invigilator before leaving the examination hall.

Marks

CASE
Q. 1

You have been working as a Corporate Consultant for Little Star Company which is a listed
company. The companys financial year ended on June 30, 2012. In the recent past the
company experienced huge staff turnover, particularly in the Finance Department and
therefore it was very difficult to get the audit completed in time. The companys ordinary
shares also experienced massive price fluctuation in the last two years. The company was
also not able to pay any dividend to its ordinary shareholders during those two years. In the
previous two annual general meetings (AGMs) shareholders raised many objections and
there were unpleasant situations. The Board of Directors (BOD) decided to hold a specific
meeting in March, 2012 to consider matters which they require to take to the annual general
meeting and also to work out an action plan for its smooth conduct. The Chairman also
wanted to obtain an extension in the time period for holding the AGM. However three
directors out of six were in support of this idea whereas the remaining three directors did not
want to delay the AGM. The directors also wanted to take the matter relating to increase in
authorized share capital to the shareholders in the forthcoming AGM.
Mr. Ahmed, the Company Secretary has been working with the company for the last six
months and does not seem to be aware of numerous practical problems being faced by the
company. In order to respond to directors queries he contacts you regularly to seek your
professional advice. He has also requested you to be available during the AGM for the year
ended 30th June, 2012 so that if needed, shareholders can be apprised of the relevant legal
provisions. The companys shareholding consists of the following;
80 million ordinary shares of Rs.10/- each.
20 million (12% cumulative) preference shares of Rs.10/- each.

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The following are the borrowing position taken from the companys accounts for the
half year ended December 31, 2011:
Particulars

Rupees in million

Long term finance from banks

100

Long term loans from Sponsors/Directors

100

The directors were also considering options for curtailing or reducing the financial cost
on the above borrowings.
As a Corporate Consultant you were asked questions relating to matters discussed in
the Board of Directors (BOD) meeting, the matter arising during AGM and matters
arising after the conclusion of the AGM. The matters on which your advice was sought
are listed for the above three situations in the paragraphs (a), (b) & (c) narrated below.
(a)

A specific meeting of BOD was held on March 16, 2012 and Mr. Ahmed was asked to
apprise the directors for the legal provisions in respect of the following:

Required:
(i)

(a) Mention the last date by which the Little Star Company can hold its AGM
under the following circumstance:
If the AGM is held within the normal time period.
If the extension is taken and AGM is held during the extended period.
(b) Briefly state the legal provisions relating to time period of first and
subsequent annual general meetings.

06

Can an extension be requested by the Little Star Company in the time period for
holding the AGM on account of delay in finalization of audit? If yes, then what
documents needs to be attached with the application?

03

(iii) Since the directors were of the mixed opinion for obtaining extension for AGM,
how the final decision in this regard can be made?

02

(iv) What are the legal requirements for conversion of the borrowings mentioned
above into equity by the issuance of the ordinary shares of the company? Up to
what extent the Little Star Company can issue ordinary shares against its long
term borrowings?

05

(ii)

(v)

(b)

How the information relating to increase in authorized share capital would be

communicated to the shareholders of the company through notice of AGM?

05

The annual general meeting was scheduled to be held on 25th October, 2012 at 12:30
p.m. There were 8 ordinary shareholders present including 3 joint shareholders, Mr. A,
Mr. B and Mr. C (all ordinary shareholders representing 25% voting power including
joint shareholders) and two preference shareholders holding 10% preference shares
capital. The number of shareholders turned up in the next 10 minutes and the meeting
started at 12:45 p.m., after meeting quorum requirements.
The matter relating to increase in authorized capital was debated threadbare and it
was decided to carry out a voting by show of hands. Shareholders raised a number of
objections during the meeting and Mr. Ahmed requested you to explain the legal
provisions to the shareholders for the following objections:

Required:
(i)

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Some of the shareholders said that since the meeting was not started on
scheduled time therefore this is invalid. The shareholders who were present in
time objected that they were present in time and should have been considered
as quorum. Explain the legal position with respect to shareholders objection and
also mention the Law relating to adjournment of AGM and quorum requirements
with particular reference to presence of preference shareholders and joint
holders.
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(ii)

(c)

Mr. A, Mr. B and Mr. C, three brothers and joint shareholders of the company
were also present in the meeting. Mr. B objected that why the notice of the
meeting was sent to only one of them i.e., Mr. A only and not to all three brothers
including himself, Mr. A and Mr. C?

02

(iii) There was a conflict between Mr. A, Mr. B and Mr. C as to whose vote would be
considered for show of hand. Would your answer be different, if a poll was
demanded instead of voting by show of hands?

03

The meeting was concluded however, some of the shareholders appear to be

dissatisfied. Four of them, each holding 1% of the ordinary share capital gathered at a
corner and started a discussion. One of the employees working in the companys legal
department over heard them saying that they were planning to go to the court
challenging AGMs proceedings on the following grounds:
The lunch arrangements made by the company were not proper.
There was some defect in the appointment of one of the directors and
therefore his decision at the BOD meeting was not valid.
The Chairman called Mr. Ahmed to explain the following:

Required:

Q. 2

(i)

Legal provisions relating to, challenge of AGMs proceeding in the court.

04

(ii)

Validity of the act of the Director, if the defect in the appointment is discovered.

03

As per provisions contained in the Companies (Issue of Capital) Rules, 1996 answer the
following:

Required:

Q. 3

(a)

List down any five items which are not included in computation of free reserves.

05

(b)

Specify any five conditions to be complied with by a listed company for issuing right
shares.

10

(a)

A listed company intends to purchase its own shares and therefore considering the
relevant provisions of the Companies Ordinance, 1984 and the Companies (Buy-Back
of Shares) Rules, 1999. Briefly describe the legal provisions for the following in
respect of the above:

Required:
(i)

(ii)

(b)

Q. 4

(a)

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Enumerate the contents of statement accompanied with notice of the

shareholders meeting for passing special resolution for purchase of its own
shares by the company.

05

List down any seven contents to be included in the offer by a shareholder

interested to sell his shares to the company in response to the tender.

07

As per the Single Member Companies Rules, 2008 briefly state the rule for
transfer of shares of a single member. Under what circumstances these shares
can be transferred to two or more persons?

03

Define the following terms as per the

(Establishment and Regulation) Rules, 2003:

Non-Banking

Finance

Companies

(i)

Housing Finance Services.

03

(ii)

Investment Advisory Services.

03
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(b)

Q. 5

(a)

Explain the legal provisions under the Non-banking Finance Companies

(Establishment and Regulations) Rules, 2003 for opening or closure of bank
accounts and account with a broker or branches of NBFC.

04

Ms. Ambreen is the Secretary of Moon-Light Company Limited which is a listed

company. The Chief Executive has asked you to draft Statement of Compliance with
the Code of Corporate Governance for inclusion in the annual report, 2012.

Required:

(b)

(i)

Draft the opening paragraph for inclusion in the above statement.

02

(ii)

Draft any four statements relating to directors/board of directors for inclusion in

the above statement.

08

Suppose you have been working as a Secretary of Best Foods Limited which is a
listed company. A notice has already been published for holding elections of
directors in an extra ordinary general meeting to be held on 30th June, 2013. The
following seven directors are retiring and are eligible for re-election:
(1) Ms. Abida

(5) Mr. Salman

(2) Mr. Wahab

(6) Mr. Kamran

(3) Mr. Rehan

(7) Mr. Fawad

(4) Ms. Shahida

No intentions were received by the company during the prescribed time period for
participation in the elections of directors other than the retiring directors.
Required:
Draft the notice for publication in the newspaper informing the shareholders/ general
public that only retiring directors have offered themselves for directors election.
(c)

When a listed company is required to determine a closed period as per the Code of
Corporate Governance? Discuss the restrictions imposed on the director and chief
executive officer regarding dealing in the shares of the listed company during closed
period.

THE END

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