Case studies Case 1 *In course of administration of the affairs of a limited company, Chairman of its Board of Directors came

across a matter, which required the approval by say of a board resolution. In the prevailing circumstances, it is not possible to convene and hold a Board Meeting. The Chairman approaches you to advise him of the way and the relevant procedure to obtain such approval without holding the Board Meeting. *You are required to advise him on the matter as per the provisions of the Companies Act, 1956. Case 2 *The Articles of Association of a company provide that the meeting of the Board of Directors of the company will be held on the last Friday of every month. The Secretary of the company as a result does not serve the notice to the individual directors of the company. Consequently, a meeting of the Board of Directors was held on 19th October 2010. The meeting was attended by all the directors with the exception of two directors out of a total of 10 directors and certain resolution were passed. The two absentee directors object to the meeting and the proceedings of the meeting for want of notice. *Referring to the provisions of the Companies Act, 1956, decide Whether the objection raised by the two absentee directors is valid? Case 3 *The Board meeting of Fortune Ltd. has the following schedules for the year 2010: 1st Meeting 1st January, 2010 2nd Meeting 30th June, 2010 3rd Meeting 1st July, 2010 4th Meeting - 31st December, 2010 *State whether the Board Meetings schedules are as per compliance with the provisions of the Companies Act, 1956. *What would be your views if the meeting to be held on 30th June, 2010 is adjourned due to lack of quorum? Case 4 *The articles of ABC Limited provided that only those shareholders would be entitled to vote whose names have been there on the Register of Members for two months before the date of the meeting. X, a member, of the ABC Limited was holding 200 equity shares of the company. X transferred his shares to Y before one month from the date on which the meeting was due. The name of Y could not be entered in the Register of Members as the application of transfer of shares was pending. X attended the meeting but he was prohibited by the company from exercising his voting right on the ground that he has not held his shares for specified period as provided in the articles before the date of the meeting. *State whether X can exercise his voting right in the meeting ? *State also the grounds upon which X may be excluded from exercising his voting rights in the meeting of the shareholders. Case 5 *XYZ Limited has its subsidiary company PRM Ltd, which is formed to carry out some of the objectives of XYZ Limited. XYZ Limited suspends one of its several businesses, by passing a resolution at the companys extraordinary general meeting, with effect from Ist January 2010. The business so suspended continues to be suspended until March 2010. On Ist April 2008, a group of shareholders of XYZ Limited file a petition in the court for winding of the company on the ground of suspension of business by the company. Referring to the provisions of the Section 433 of Companies Act, 1956, decide:

*(i)

Whether

the

shareholders

contention

shall

be

tenable?

*(ii) What would be your answer in case XYZ Limited suspends all its business? Case 6 *Alpha Ltd. and Beta Ltd. entered into a scheme of amalgamation by which Alpha Ltd. would transfer its entire undertaking to Beta Ltd. However, the Central Government raised an objection that unless the objects clause of the companies are similar, and memorandum empowers to do so, the scheme of amalgamation cannot be permitted. *Is the contention of the Central Government correct? Case 7 *A scheme of merger of XYZ Ltd with ABC Ltd was approved by the shareholders at an extraordinary general meeting and the exchange ratio of 3 shares of ABC Ltd for 20 shares in XYZ Ltd was approved. The proposal was also okayed by a lending financial institution which held 45% shares in XYZ Ltd. The valuation was carried out by one of the directors of XYZ Ltd who is a member of the Institute of Chartered Accountants of India. The valuation was affirmed by three independent valuers nominated by the shareholders in general meeting. However, certain leaseholder properties, under license, which were not transferable, were not taken into account in the valuation. While the scheme was awaiting the Court's sanction, it was challenged by certain shareholders on the ground that the exclusion of leasehold assets in the valuation made the scheme 'Unfair'. Decide giving reasons: (i) Whether the contention of the shareholders is tenable? (ii) What factors would the Court take into account in approving the exchange ratio? Case 8 *In a public company the total number of directors are 12 and 2 office of the directors have fallen vacant. Referring to the relevant provisions of the Companies Act, 1956. *(a) What would be the quorum for the Board meeting *(b) Can the articles of a company fix the quorum (higher or lower) for the Board meeting? *(c) Assuming if there are 15 directors in the company and of which 13 happen to be interested directors, what would be the quorum? Case 9 *Out of the powers exercisable by the Board under Section 292, the board wants to delegate to the Managing Director of the company the power to borrow monies otherwise than on debentures. Advise whether such a delegation is possible? Would your answer be different, if the delegation is given to the manager or any other principal officer including a branch officer of the company? Case 10 *The Board of Directors of Sun Star Ltd. are contributing every year to a charitable organization a sum of Rs.1 lac. In a particular year, the company suffered losses and the directors are contemplating to contribute the said amount in spite of the losses. *Considering the restrictions placed under Section 293 in this connection, state whether the directors can do so? Case 11 *The Board of Directors of ABC Private Limited having a paid-up share capital of Rs. 1 Crore consists of two directors, one of them, viz, Mr. S possesses membership of the Institute of Company Secretaries of India. The company desires to appoint him as a company secretary also. State the legal position. Case12 *J held 100 partly paid up shares of LKM Limited. The company asked him to pay the final call money on the shares. Due to some unavoidable circumstances he was unable to pay the

amount of call money to the company. At a general meeting of the shareholders, the chairman disallowed him to cast his vote on the ground that the articles do not permit a shareholder to vote if he has not paid the calls on the shares held by the him. J contested the decision of the chairman. Referring to the provisions of the Companies Act, 1956 decide whether the contention of J is valid. Case 13 *A Company wants to provide financial assistance to its employees to enable them to subscribe for fully paid shares of the company. Does it amount to purchase of its own shares. If, in the instant case, the company itself purchasing to redeem its preference shares, does it amount to acquisition of its own shares? Case 14 *The auditor of Trilok Ltd. did not report on the matters specified in sub-section (1A) of Section 227 of the companies Act, 1956, as he was satisfied that no comment is required. Advise. Case 15 *The Agenda for a meeting of the Board of ABC LTD was held for approving the annual accounts of the Company included recommending of dividend. It becomes apparent during the meting that the profits for that year would not be adequate to declare dividend. The Board was, however, keen on declaring dividend @20% as in the previous year so as to maintain the image of the Company. The company has some accumulated profits of the previous years transferred to the reserves. Advise how the Company has to go about its objective to pay dividend @ 20% Case 16 *E Ltd, whose financial year ended on 31 st March, 2010 held its annual general meeting on 30th September 2010. The meeting transacted all other business except the accounts as they were not ready and adjourned the meeting to 20th December 2010, for consideration of accounts. The Registrar of Companies issued a show cause notice for violation of section 210 of the Companies Act, 1956. Advise. Case 17 *Shareholder, Mr, A, controls 51% of the share capital of X Ltd. The Company has not declared dividends for the past 5 years on the ground that it is incurring a loss. There are allegations that all the three directors who manage the Company are siphoning off funds of the Company. Mr. A sends a notice to the Management that he will inspect the books of accounts and verify the allegation. Examine the right of Mr. A to carry out the inspection. Case 18 *The Balance sheet of X ltd as on 31.03.11 disclose the following position *Share Cap 100 cr *Res. & Surpl 300 cr *Secured Loans 150 crs *Unsecured Loans 100 crs *Current Liab. 70 crs The Managing director of the Company Mr X approaches ABC Bank for a secured loand of 600 crs. Banks seeks your advise whether it can grant the loan on the application of the Managing Director. Advise the Bank having regard to the provisions of the Companies Act 1956 Case 19 *The Directors of A Ltd deliberate upon the widespread nature of the business and decide to appoint distributors. In order to maintain a good control, it was decided that the Company route all its sales through these distributors one appointed for each region which would also ease the administrative hassles. It would also save the Company costs

associated with maintaining a sales organizations in each of these four regions. Advise in keeping in mind the provisions of the Companies Act 1956