Company Secretarial Practice

SUGGESTED ANSWERS

PROFESSIONAL PROGRAMME

[Module I (Paper l)l

COMPANY SECRETARIAL PRAGTIGE(PP-CSP/2010)

THE INSTITUTE OFCompany Secretaries of lndiaIil PUFSUIT OF PNOFESSIOTAL EXCELLEilCEstatutory body under an Act of Parliament

lCSl House, 22, lnstitutional Area, Lodi Road, New Delhi I I 0 003

tel 0l I -4534 1000, 4l 50 4444 fax +91-l 1 -2462 6727

email [email protected] websitewww.icsi.edu

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THE INSTITUTE OF COMPANY SECRETARIES OF INDIA

EXECUTIVE PROGRAMMEIMoDULE il (PAPER 1)l

COMPANY SECRETARIAL PRACTICE

tll$t PP-CSP12010SUGGESTED ANSWERS

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CONTENTS

TEST PAPER 1I2O1O

Answer to Question No. 1



Answer to Qu'estion No. 4



TEST PAPER 2I2O1O







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These Test Papers are the property of The lnstitute of Company Secretaries of lndia. Permissionof the Gouncil of the lnstitute is essential for reproduction of any portion of the Papers.

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TEST PAPER 3I2O1O


Answer to Question No. 2Answer tb Question No. 3Answer to Question No. 4Answer to Question No. 5Answer to Question No. 6

TEST PAPER 4I2O1O

Ahswer to Question No. 1

Answer to Question No. 2Answer to Question No. 3Answer to Question No. 4Answer to Question No. 5Answer to Question No. 6

TEST PAPER 5I2O1O


Answer to Question No. 2Answer to Question No. 3Answer to Question No. 4Answer to Question No. 5Answer to Question No. 6

These answers have been written by competent persons and the lnstitutehopes that the SUGGESTED ANSWERS will assist the students in preparingfor the lnstitute's examinations. lt is, however, to be noted that the answersare to be treated as model answers and not as exhaustive and the lnstitute isnot in any way responsible for the correctness or otherwise of the answerscompiled and published herein.

The Suggested Answers contain the information based on the Laws/Rulesapplicable at the time of preparation. However, students are expected to bewell versed with the amendments in the Laws/Rules made upto six monthsprior to the date of examination.

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PROFESSIONAL PROGRAMME

COMPANY SECRETARIAL PRACTICE

TEST PAPER 1'2010(oPTtoNAL)

(Based on Study Lessons I to 10)Time allowed: 3 hours

NOTE: Attempt ALL questions.

Question No.1

Comment on the following:

Maximum marks: 100

(a) DIN is,an unique ldentification Number,(b) Promoters are the persons, who conceive the idea or visualize a project and

then take sfeps fo execute the idea into a reality.

(c) A producer compan:y may alter its object clause specified in its memorandumof associafion by passing a special resolution.

(d) When a company rssues a share at a price lower than its nominat or parvalue, the shares are said to have been rssued at a discount.

(5 marks each)

fuisverto Question No. 1(a)

Allexistirig and any individual intending to be appointed as a director are requiredb obtain the Director ldentification Number (DlN). DIN is also mandatory for directorsof lndian Companies who are not citizens of lndia. However, DIN is not mandatory fordirectors of foreign company having branch offices in lndia. Only a single DIN isrequired for an lndividual irrespective of the number of directorships held by him.

DIN is a unique identificatibn number and once obtained is valid for life time of adirector. A single DIN is required to be obtained irrespective of the number ofdirectorships.

For obtaining DlN, directors are required to submit an application in e-form DIN-1cnline through MCA portal. A provisional DIN is generated automatically. As per theCompanies (Director ldentification) Rules, 2006, directors are required to apply to theSentral Government for a regular DIN within 60 days of the on{ine generation ofrrovisional DIN (i.e. an application with necessary enclosures as identification proofre required to be submitted physically). After the deadline for obtaining a regular DINs reached, the provisional DIN becomes invalidated. lf there are any changes in thelarticulars of directors, these are required to be intimated to MCA within 30 days of;hanges in the prescribed form (DlN4).

\nswerto Question No. 1(b)

Prornoters are the persons, who conceive the idea or visualize a project and thenrke steps to execute the idea into a reality. They convey their idea to friends,glatives or business associates, make arrangements for collecting equity and loanapital for the company, prepare a team of persons who would act as its directorsnd take all other steps for compliance with the requirements of the Companies Act,956 in respect of registration of the company.

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The Companies Act does not define the expression "promoter". Whether aperson is a 'promoter' or not, depends on the facts and circumstances of each case.As per section 62(6) the expression "promoter" means a promoter who was a parly tothe preparation of the prospectus or of the portion thereof containing the untruestatement, but does not include any person by reason of his acting in a professional

capacity for persons engaged in procuring the formation of company.

Answer to Question No. {(c)

A producer company may alter its objects specified in its Memorandum ofAssociation by passing a special resolution. Such alteration must not be inconsistentwith Section 5B1B of the Companies Act, 1956. This authority is available to theproducer company notwithstanding the provisions contained in Section 17 of the Act.

A copy of the amended memorandum, together with a copy of the specialresolution duly certified by two directors, shall be filed with the Registrar within 30

days from the date of adoption of special resolution.

Answer to Question No. 1(d)

When a company issues a share at a price lower than its nominbl or par value,the shares are said to have been issued at a discount. According to sub-section (1) ofsect'rbn 79, if any company proposes to issue any shares at a discount, it can do soonly if the conditions stipuiated in this section are fulfilled. The said conditions are asfollows:

1. The shares to be issued are of a class which has already been issued by thecompany. Therefore, the first issue of shares of a company cannot be at adiscount.

2. The issue is authorized by an ordinary resolution passed by the company ata general meeting.

3. The Company Law Board has sanctioned the issue.

4. The ordinary resolution specifies the maximum rate of a discount at which the' shares are to be issued. [Company Law Board shall not sanction a discountof more than ten per cent unless it is of the opinion that a higher percentage

of a discount is justified in the special circumstances of the casel.

5. The issue is made after one year from the date on which the companybecame entitled to commence business. [ln the case of a private company,the date of incorporation of the company will be taken as the date ofcommencement of business].

6. The shares are issued within two months of the sanction by Gompany LawBoard or within such extended time as it may allow.

Question No.2

(a) What is the procedure to register a foreign company in tndia? (8 marks)

(b) What is the procedure for changing obiects of a company? (8 marks)

Ansrnier to Question No. 2(a)

PROGEDURE TO REGISTER A FOREIGN COMPANY IN INDIA

(1) Foreign companies which, establish a place of business within lndia arerequired to file e-form 44 along with the following documents as attachments, to the

Registrar of Companies within thirty days of the establishment of the place ofbusiness,. for registration-

- Certified True copy of charter, statutes or memorandum and articles ofassociation or other instrument constituting or defining the constitution of the' company is to be attached. lf the same is not in English language then itshould be translated in English language;

- Particulars of the registered office of the Company;

- Details'of individuals' directors are to be attached, Details should containname, surname, former name-if any, residential address, occupation andother directorship, if any;

- Approval letter from Reserve Bank of lndia for the setting up of business inlndia is to be attached;

- Name and address of the persons resident in lndia who are authorised byway of Board Resolution or Power of Attorney to accept services of anynotices on the Company;

- Full address of the principal place of business in lndia;

- Director's details-in case of body corporate, details containing name andcornplete address of body corporate;

- Secretary details-if any.

The form will be digitally signed by the authorized representative of the foreigncompany.

(2) The details of directors, Secretary and body corporate should contain thefollowing particulars, that is to say :

(a) with respect to each director-(i) in the case of an individual, his present name and surname in full, any

former name or names and surname or surnames in full, his usualresidential address, his nationality, and if that nationality is not thenationality of origin, his nationality of origin, and his business occupation,if any, or if he has no business occupation but holds any otherdirectorship or directorships, particulars of that directorship or some ofthose directorships; and

(ii) in the case of a body corporate, its corporate name and registered orprincipal office; and the full name, address, nationality and nationality oforigin, if different from that nationality of each of its directors;

(b) with respect to the secretary, or where there are joint secretiaries with respectto each of them-(i) in the case of an individual, his present name and surname, any former

name or names and surname or surnames, and his usual residentiaaddress; and

(ii) in the case of a body corporate, its corporate name and registered or

principal office:

Provided that, where all the partners in a firm are joint secretaries of thrcompany, the name and principal office of the firm may be stated instead of thr^arfia'rarc mantioned in clause (b) of this Sub-sectiOn.

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Answer to Question No. 2(b)

Procedure for changing objects of a company

ln the light of the provisions of sections 17, 18 and 19 of the companies Act,1956,'a company, desirous of altering the objects clause in its memorandum ofassociation, is required to adopt the following procedure:

1. lssue notice for a Board meeting in writing to every director of the companyfor the time being in lndia and at his.usual address in lndia to every otherdirector as per Section 286 of the Act. The notice must contain time, date andvenue for the meeting and detailed agenda of the business to be transacted

,2.lT';il" Board meeting at the appointed time, date and venue to-(i) consider and to pass a resolution approving the proposed amendments

to the. objects clause of the memorandum of association of the company.(ii) consider and to pass another resolution fixing time, date and venue for

holding general meeting of the company for passing a special resolutionunder Section 17 of the Act for change of objects clause of thememorandum of association of the company.

(iii) approve notice for the general meeting and the explanatory statement tobe annexed to the notice under Section 173 (2) of the Act for the generalmeeting and to authorise the company secretary or some othercompetent officer to issue the notice on behalf of the Board.

3.' lssue notice of the general meeting to all the members of the company, itsdirectors and the auditors.

4. Send three copies of the notice to each stock exchange where the securitiesof the company are listed [Refer clause 31(c) of the Listing Agreement]. Ageneral notice of the general meeting may also be published in newspapers.

5. Hold the general meeting and pass the proposed special resolution.6. send to each stock exchange, six copies of the alterations of the

memorandum of association (one of them must be certified) as soon as theyare adopted by the company in general meeting in case of a listed company(Refer clause 33 of the Listing Agreement)

7. send to each stock exchange, a copy of the proceedings of the generalmeeting in case of a listed company (Refer clause gg or the ListingAgreement).

8. File with the Registrar of companies, e-form 23 along with a copy of thespecial resolution passed by the company with a copy of the explanatorystatement annexed to the notice of the meeting and the amended copy ofmemorandum of association attached to the d-form, within one monih otpassing of the resolution.

9. Obtain from the Registrar of Gompanies, certificate of registration of thealteration of the memorandum. Under McA-21, the user may select "Getcertified copy" and follow the procedure. once the requesis reach the, concerned MCA official, the official will takeout the printouts of thedocuments and sign it ivith seal and deliver the same in physical form.


10. Amend each copy of the memorandum of association of the companyavailable in the office or in the alternative fresh copies of memoranOum otassociation may be printed.

Question No.3(a) ABC r.s a /isfed company.

shares.Enumerate fhe sfeps involved in r.ssue of equity

(b) Dr.scuss fhe sfeps involved m rbsue of Bonus Shares.

Ansirer to Question No. 3(a)

Steps involved in issue of equity shares

The various steps involved in public.issue of shares are enumerated below:Before making any issue of capital, it is to be ensured that the proposedissue complies with the eligibility norms and other provisions of sEBl (tssueof Capital and Disclosure Requirements) Regulations, 2009.A general meeting of the shareholders (annual or extraordinary) is to beconvened for obtaining their consent to the proposed issue of shares if thearticles so require.

A copy of the Mbmorandum and Articles of Association of the company is tobe sent to the stock Exchanges where the shares are to be enlisted, forapproval [Section 73(1 )].Appoint one or more Merchant Bankers to act as managers to the publicissue. The company should enter into a memorandum of understanding withthe managers to the issue and decide the fees payable to them. lf more thanone Merchant Bankers are associated with the isiue, the inter-se allocationof responsibility of each of them shall be disclosed in the offer document.The company should in consultation with the Managers to the issue, decideupon the appointment of the following other agencies (holding a validcertificate of reg istration, wherever com pu lsory) :

(a) Registrars to the lssue; (b) collecting bankers to the lssue; (c) Advisors tothe lssue; (d) Underwriters to the lssue; (e) Brokers to the lssue; (t) printers;(g) Advertising Agents etc.To draft a prospectus in accordance with schedule ll of the companies Act,1956 and an abridged prospectus as required under section 56(3) of the Act.The prospectus should contain the disclosures as required by part A of sEBlRegulations

The draft prospectus alongwith the application form for issue of shares isrequired to be approved by the solicitors/legal advisors of the company toensure that it contains all disclosures and information as r:equired by variousstatutes, rules, notifications, etc.

submit draft prospectus complete in all respects alongwith the Due Ditigencecertificate, inter-se allocation of Responsibilities certificate and a copy otMemorandum of understanding to sEBl at least 30 days prior to-theregistering the prospectus with Registrar of Companies.The issuer shall, simultaneously while regiitering the prospectus with theRegistrar of companies file a copy thereof with the Board through the lead

(10 marks)

(6 marks)

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merchant banker.

The draft offer document filed with the Board shall be made public, forcomments, if any, for a period of at least twenty.one days from the date ofsuch filing, by hosting it on the websites of the Board, recognized stockexchanges where specified securities are proposed to be listed and merchantbankers associated with the issue.

Check that the particulars as per audited statements contained in theprospectus are not more than six months old from the issue opening date.

However, Government company's auditors' report in the prospectus shall notbe more than six months from the date of filing the prospectus with the ROCor stock exchanges as the case may be.

The Board may specify changes or issue observations, if any, on the draftoffer document.

lf the Board specifies changes or issues observations on the draft offerdocument, the issuer and lead merchant banker shall carry out such changesin the draft otfer document and comply with the'observations issued by theBoard before registering the prospectus with the Registrar of Companies orfiling the letter of offer with the designated stock exchange.

Check that the two copies of final printed copy of the final offer documenthave been sent to dealing offices of SEBI at least within three days of filingoffer document with Registrar of Companies/Stock Exchange as the casemay be.

Check that lead merchant banker has also submitted one final printed copy ofthe final offer document alongwith the computer floppy containing the finalprospectus/letter of offer to Primary Market Department, SEBI, Mittal Court, AWing, Ground Floor, Nariman Point, Mumbai.

Check that the public issue offer documents and other issue material hasbeen despatched to the various stock exchanges, brokers, underuvriters,bankers to the issue etc. in advance as agreed upon.

Check that 20 copies of the prospectus and application form has beendespatched in advdnce of the issue opening date to various lnvestorAssociations.Before filing prospectus with the Registrar of Companies, the companyshould submit an application(s) to the Stock Exchange(s) for enlistment ofsecurities offered to the public by the said issue [Section 73(1)]. The fact thatan application(s) has/have been made to the Stock Exchange(s) must bestated in the prospectus.

After receipt of the intimation from Registrar of Companies regardingregistralion of prospectus, the company should take steps to issue theprospectus within 90 days of its registration with ROC [Section 64(4) ofCompanies Actl.

lssue must be kept open for atleast 3 working days and not more than 10working days. The date of opening and closing of the subsciiption list shouldbe intimated to all the collecting and controlling bianches of the bank withwhom the company has entered into an agreement for the collection ofapplicafion forms. Further, the company should ensure that a separate bank

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account is opened for the purpose of collecting the proceeds of the issues asrequired b! Section 73 of the Companies Act and furnish to the controllingbranches the resoluticn passed by the Board of directors for opening bankaccount.

23. Minirlum subscription

For Non-underwritten Public /ssues

lf the company does not receive the minimum subscription of 90% of theissued amount on the date of closure of the issue, or if the subscription levelfalls below 90% after the closure of issue on account of cheques havingbeing returned unpaid or withdrawal of applications, the company wouldrefund the entire subscription amount received within 15 days of the closureof the issue. lf there is a delay beyond B days after the company becomesliable to pay the amount, the company is required to pay interest as perSection 73 of the Companies Act 1956.

.For Underwritten Public lssueslf the company does not receive the minimum subscription of 90% of the netoffer to public including devolvement of Underwriters within 60 days from thedate of closure of the issue, the company would refund the entiresubscription amount received within 70 days of the closure of the issue. lfthere is a delay beyond 8.days after the company becomes liable to pay theamount, the company is required to pay interest prescribed under Section 73of the Companies Act 1956.

24. A return of allotment in e-Form No. 2 of the Companies (CentralGovernment's) General Rules and Forms, 1956 should be filed with theRegistrar of Companies within 30 days of the date of allotment along with thefees as prescribed in Schedule X of the Act.

25. (i) Along with -e-Form No. 2, e-Form No. 3 showing particulars of contractsrelating to shares has also to be filed, where a company allots shares forconsideration other than cash without entering into any writtenagreement.

(ii) e-Form No. 4 containing the statement of the amount or rate percentageof the commission payable on shares together with a copy of the contractfor payment of commission, if any, should be filed with the Registrarbefore such commission is paid.

26. The refund orders for an amount exceeding Rs. 1,500 should be sent to theapplicants by registered post only; whereas those below Rs. 1,500 can besent ljnder Certificate of Posting (Deptt.'s Circutar 1/93 dated 16 3.1993).

27. As per Section 113, the company should deliver the share certificates within3 months after the allotment of shares.


Steps involved in lssue of Bonus Shares

A company issuing bonus shares should ensure that the issue is in conformitywith the regulations for bonus issue laid down by SEBI (lssue of Capital andDisclosure Requirements) Regulations, 2009.

The procedure for issue of bonus shares by a listed company is enumerated


below:

1. Ensure that bonus issue has been made out of free reserves built out of thegenuine profits or securities premium collected in cash only.

2. Ensure that reserves created by revaluation of fixed assets are notcapitalised.

3. Ensure that the company has not defaulted in payment of interest or principalin respect of fixed deposits and interest on existing debentures or principal onredemption thereof or in respect of the payment of statutory dues of theemployees such as contribution to provident fund, gratuity, bonus etc.

4. Ensure that the bonus issue is not made in lieu of dividend

5. There should be a provision in the articles of association of the companypermitting issue of bonus shares; if not, steps should be taken to alter thearticles suitably.

6. The share capital as increased by the proposed bonus issue should be wellwithin the autl'lorised capital of the company; if not; necessary steps have tobe taken to increase the authorised capital.

7. Fix the date for the Board Meeting for considering the following matters:

- To approve the bonus issue;

To approve the resolution to be passed at a general meeting;

- To approve requisite resolution for increase of the capital andconsequential alteration of the memorandum and the articles (ifnecessary)

- To decide (or authorise managing director/secretary or some other officerof the company to decide) the dates for fixing a record date.

8. lf there are any partly paid-up shares, ensure that these are made fully paid-up before the bonus issue is recommended by the Board of directors.

9. The date'of the Board Meeting at which the proposal for bonus issue isproposed to be considered should be notified to the Stock Exchange(s)where the company's shares are listed.

10. Hold the Board Meeting and get the proposal approved by the Board.

11. lntimate the decision taken at the board meeting to the Stock Exchange(s).

12. A company which announces bonus issue after the approval of board of' directors and does not require shareholders' approval for capitalisation ofprofits or reserves for making bonus issue as per the Articles of Association,shall implement bonus issue within fifteen days from the date of approval ofthe issue by the board of directors of the company and shall not have theoption of changing the decision

However, where the company is required to seek shareholders' approval forcapitalisation of profits or reserves for making bonus issue as per the Articlesof Association, the bonus issue shall be implemented within two months fromthe date of the meeting of the board of directors wherein the decision toannounce bonus was taken subject to shareholders' approval.

13. Arrangements for convening the general meeting should then be madekeeping in view the requirements of the Companies Act, with regard to lengthof notice, explanatory statement etc. Also three copies of the notice should

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be sent to the Stock Exchange(s) concerned.

14. Hold the general meeting and get the resolution for issue of bonus sharespassed by the members. A copy of the proceedings of the meeting is to beforwarded to the concerned Stock Exchange(s).

15. Within 30 days of the date of the general mepting, file the necessaryreturns in the prescribed forms e.g. e-Form Nos. 5, 23 to thb Registrar ofCompanies

16. Fix the date for closure of register of members or record date and get thesame approved by the Board of director,s. lssue a general notice underSection 154 of Companies Act in respect of the fixation of the record date intwo newspapers, one in English language and other in the language of theregion in which the Registered Office of the company is situated.

17. Give 30 days notice to the Stock Exchange(s) concerned before the date ofbook closure/record date.

18. After the record date, process the transfers received and prepare a list ofmembers entitled to bonus shares on the basis of the register of members asupdated. This list of allottees is to be approved by the Board or anyCommittee thereof.

19. File return of allotment with the Registrar of Companies within 30 days ofallotment (Section 75 of the Companies Act). Also intimate StockExchange(s) concerned regarding the allotments made.

20. Get the share certificates printed, prepared and issued to the allottees as perthe provisions of Companies (lssue of Share Certificates) Rules, 1960.

21. Submit an application to the Stock Exchange(s) concerned for listing thebonus shares allotted.

Procedure for bonus issue by an unlisted company

1. At the Board meeting resolutions for the following purposes will be passed:

- To approve the proposal for the bonus issue

:- To approve the resolution to be passed at a general meeting

- To approve requisite resolution for increase of the capital andconsequential alteration of the memorandum and the articles (ifnecessary)To decide on fixing a record date

' 2. Ageneral meeting will be convened to pass necessary resolution/s.

3. Within 30 days of the general meeting, file the necessary returns in theprescribed forms e.g. e-Form Nos. 5, 23, etc. to the Registrar of Companies.

4. After the record date, preilare a list of members entitled to the_ bonus shareson the basis of the register of members as updated.

5. Convene Board meeting (or of a meeting of committee of drrectors) for theallotment of bonus shares and allot the bonus shares.

Under section 206A where any instrument of transfer of shares has beendelivered to a company for registration and the transfer of such shares hasnot been registered by the company, it shall keep in abeyance issue of fullypaid-up bonus shares in relation to such shares in pursuance of sub-section(3) of section 205.

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6. File a return of allotm6nt with the Registrar within 30 days of the allotment.

7. Prepare and dispatch the share certificates relating to the bonus sharesallotted within three months of the date of allotment and make entries of theshares allotted in the register of members.

Question No.4(a) Draft a specimen Board Resolution approving the registration of transfel of

shares. (4 marks)

(b) Draft a specimen resolution for variation of rights of equity shareholders.. (6 marks)

(c) What are the condition subject to which debt securities can be rolled over.(6 marks)

Answer to Question No. 4(a)

SPECIMEN OF THE BOARD RESOLUTION APPROVING THEREGISTRATION OF TRANSFER OF SHARES

"RESOLVED THAT Registration of transfer of ....... fully paid equity shares of thecompany as per details in the register of share transfers of the company entered onpage .... to ........, entries Nos......to ....... (both inclusive), as placed before themeeting and each page be initialed by the chairman of the meeting as a mark ofidentification, be and is hereby considered and approved;

RESOLVED FURTHER THAT Shri .......... Company Secretary of theCompany, be and is hereby authorised to endorse the relevant share. certificatesunder his signature, arrange for their dispatch to the transferees of the shares andmake appropriate entries in the register of members and other records of thecompany."


SPECIMEN RESOLUTIONS FOR VARIATION OF RIGHTS OF EQUITYSHAREHOLDERS (i.e. MEMBERS)

Resolution for the extension of the date of redemption of Preference Shares(for variation of rights)

'RESOLVED that consent of shareholders be and is hereby accorded to the variationof the rights attached to the Equity Shares of the Company deemed to have beencaused by reason of extension of the date of redemption and increase in rate ofinterest of 11o/o Redeemable Cumulative Preference Shares (First Series) of Rs. 100each fully paid-up, agreed to by the holders of the said Preference Shares."

Explanatory Statement

First Series of 10,000 - 11% Redeemable Cumulative Preference Shares of Rs.100 each fully paid-up issued by the Company in 1995 fell due for redemption on

200..,..... The date was extended and accordingly the shares were to beredeemed in five equal instalments of Rs. 2.00 lakhs each annually commencing from.........,....200..."..... ln the interest of the Company it has been considered expedientnot to redeem these Preference Shares immediately.

ln any case, in the absence of the required reserves it would not be possible to

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redeem the said Preference Shares in terms of Section B0 of the Companies Act,1956.The Company's request to the Preference Shareholders to give their consent tothis effect is under their consideration. A meeting of the holders of these 11%Redeemable Cumulative Preference Shares (First Series of Rs. 100 each fully paid-up) has been convened to consider the necessary resolution for extension of date ofredemption and increase in the rate of interest.

As holders of the Equity Shares, your rights are deemed to be affected from thedate of extension of redemption in respect of First Series of the Preference Shares asaforesaid.

It is, therefore, proposed that your consent be obtained to such variation of yourrights as per the resolution.

The necessary resolution for extending the date of redemption of and increasingthe rate of dividend are the 11% Redeemable Cumulative Preference Shares of thecompany is included separately in the notice.

Directors of the company are interested in the said resolution except to the extentof their shareholdings.

Answer to Question No. 4(c)

The debt securities issued.can be rolled over subject to the following conditions:(a) The roll-over is approved by a special resolution passed by the holders of

debt securities through postal ballot having the consent of not less than 75%of the holders by value of such debt securities;

(b) atleast one rating is obtained from a credit rating agency within a period of sixmonths prior to the due date of redemption and is disclosed in the noticereferred to in sub-regulation (2);

(c) fresh trust deed shall be executed at the time of such roll-over or the existingtrust deed may be continued if the trust deed provides for such continuation;

(d) adequate security shall be created or maintained in respect of such debtsecurities to be rolled-over.

The issuer shall redeem the debt securities of all the debt securities holders, whohave not given their positive consent to the roll-over.

Question No.5

(a)Exptainthegeneralstructureofane-formandthee;fitingprocess.

(b) tn the rightshares, the shareholders of a company have a Or" ","'0t,ff'fil,to subscribe to these shares. Comment.(c) Who can be a company secretary?


The general structure of an e-form dnd the e-filing process

(4 marks)

(4 marks)

Pre-fill

Pre-fill in an e-Form is used for filling automatically, the requisite data from thesystem without repeatedly entering the same. For example, by entering the CIN of

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the company, the name and address of the registered office of the company shallautomatically be pre-filled by the system without any fresh entry.

Attachment

An attachment refers to a document that is sent as an enclosure with an e-Formby means of an attached file. The objective of the attachment is to provide detailsrelevant to the e-Form for processing. While some attachments are optional, someare mandatory in nature.

Modify

Once the user has done 'Check Form', the form gets locked and it cannot beedited. lf the user wishes to make any alteration, the form can be overwritten byclicking "Modify'l button.

Radio Button

Frequent use of radio buttons has been done in the e-Form. While filling the e-Form one is required to tick applicable button out of two or more radio buttons givenagainst each point.

Gheck Box

Applicable Check box is required to tick out of the two or more boxes wherever itappears in the e-Form.

Drop Down Box

Drop down box is a box wherein at the end a downward arrow is provided. Onclicking the arrow various applicable choices appear. One is required to highlight theapplicable choice and that will be filled in the box.

Text box

Text box is meant to provide details on the relevant point by the person filling thee-form. Space provided is generally adequate for the text to be written. However, ifthe space is not sufficient for a particular matter, information can be given in theannexure to the form indicating the same in the box.

Gountry Code

Some times the applicant is required to fill up the country code in the e-Form.This is available in the instruction kit.

Stock Exchange Gode

All the stock exchanges of the country have been divided into two categories Aand B. Listed companies are required to mention the stock exchange where theshares are listed with the help of the code.

Check Form

By clicking "Check Form", the user will be in a position to find out whether themandatory fields in an e-Form are duly filled-in. For example, if the user entersalphabets in "Date of Appointment of Director" field, he/she will be asked to correctthe entered information. . '

lf the size of e-Form including attachment is of bigger size then the attachment

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S.A.-PP-CSPt

T.P.-1t2010

may be filed through an addendum. lf the size of attachment is even bigger in sizethen the details may be submifted in a floppy or compact disc at the ROC office.

Pre-Scrutiny

Pre-scrutiny is a functionality that is used for checking whether certain coreaspects are properly fitled in the e-Form. The user has to make the necessaryattachments in PDF format before submifting the e-Form for pre-scrutiny.

How to Affix Digital Signature?

Theprocessofaffixingdigitalsignatureisasfollows(a) User clicks the provision provided (signature affixing icon) on the e-Form,

against his role, to digitally sign it.(b) Utility to sign the e-Form opens, where user selects the intended certificate to

digitally sign the e-Form.(c) After selecting the certificate, utility digitally signs the e-Form with the

certificate and the certificate information gets embedded in the e-Form.

Submit

An e-Form can be submitted after it has been digitally signed. The process ofsubmission of an e-Form in case of off-line filling is presented below:

(a) User logs in to MCA2I portaland uses e-Form upload service(b) User browses the e-Form and clicks on "Submit" button

(c) User will be shown errors, if anY

(d) lf e-Form is successfully submitted, user will get confirmation message andwill lead fee payment screen.

The digital certificate is validated to ensure that the certificate has not expiredand the current status of the same is valid and that the certificate has not beenrevoked or suspended.


ln the rights shares, the shareholders of a company have a pre-emptive right tosubscribe to these shares. Where a company proposes to increase the subscribedcapital of a company by issuing further shares, the shares are offered for subscriptionto the existing shareholders of the company in a certain proportion. This is a privilegegiven to shareholders of a company to subscribe pro rata to a new issue of securities.It is a statutory right of shareholders to have offered the new shares, and to subscribeto them. The shareholders, who receive offers for subscribing to the rights shares,are also entitled to renounce this right.

Articles of association usually contain regulations on rights issue. Provisions olSection 81 of the Companies Act, 1956 are mandatory for all public companies, listedas well as unlis'ted, but optional for private companies. ln case, a private companywants to have such provision, articles of association of the company must specificallyprovide for it.


WHO CAN BE A COMPANY SECRETARY

According to Section 2(45) of the Companies Act, 1956, "Secretary" means €

Company Secretary within the meaning of clause (c) of Sub-section (1) of Section 2 o

13


the Company Secretaries Act, 1980 and includes any other individual possessing theprescribed qualifications and appointed to perform the duties which may be perfoimedby a secretary under the Act or any other ministerial or administrative duties.

^ According to clause (c) of sub-section (1) of section 2 of the companysecretaries Act, 1980, a company secretary means a person who is a member of thelnstitute of Company Secretaries of lndia.

Question No.6

Write short notes on the following:

0 Corporate ldeqtity Number(ii) Filing of Agreements with Managerial Personnel(iii) Alteration of Articles of Association of a Company(iv) Remuneration of Auditors (4 marks each)

Answer to Question No. 6(i)

Corporate ldentity Number (GtN)

Every company has been allocated a Corporate ldentity Number (ClN). CIN canbe found from the MCA 21 portal through search based on:

- ROC Registration No.

- Existing Company Name

- Old Name of Company (in case of change of name, user is required to enterold name and the system displays corresponding current name).

lnactive CIN fln case of change of ClN, the user is required to enter previous(inactive) CIN Numberl.

Answer to Question No. 6(ii)

FILING OF AGREEMENTS WITH MANAGERIAL PERSONNEL

As per the provisions of section 269 of the companies Act, 1956, every publiccompany, or a private company which is a subsidiary of a public company, having apaid-up share capital of Rs. five crores, shall have a managing or whole-time directoror a manager.

The appointment requires approval from Central Government if the conditionsspecified in Part I and ll of Schedule Xlll are not satisfied. Further, if the conditionsare satisfied, then the appointment is guided by articles of association of thecompany.

lf articles of association provide for the appointment to be made at a generalmeeting, then appointment should be made at a .general meeting thrdugh aresolution. Else, the appointment is required to be made at duly convened Boardmeeting with consent of all directors present at meeting.

_ E-form 25C is required to be filed electronically with the Registrar within 90 daysfrom the date on which a resolution was passed by the Board.

- Before filing e-form 25C, it is to be ensured that e-form 23 has already beeri filedfor registration of agreement entered with managing director. ln e-form ZSC, tfre servicerequest number of related e-form 23 which wbs-filed for registration agreement forsefting out the terms and conditions of employment is required to be given.

14

s.A.-PP-CSP T.P.-1t2010

lf Schedule Xlll is not complied with then approval of Central Government isrequired and application to the Central Government is req,uired to be made within 90days of appointment in e-form No. 25A. \

Answer to Question No. 6(iii)

ALTERATION OF ARTICLES OF ASSOCIATION OF A COMPANY

Section 31 of the Companies Act, 1956 lays down that subject to the provisionsof the Act and to the conditions contained in its memorandum, a company may, by aspecial resolution, alter its articles;

Provided no alteration made in the articles under this sub-section, which has theeffect of converting a public company into a private company, shall have effect unlesssuch alteration has been approved by the CentralGovernment.

Sub-section (2) of Section 31 states that any alteration so made shall, subject tothe provisions of the Act, be as valid as if originally contained in the articles and besubject, in like manner, to alteration by special resolution.

Where any alteration as mentioned in the proviso to Sub-section (1) has beenapproved by the Central Government, a printed copy of the articles as altered shallbe filed by the company with the Registrar within one month of the date of receipt ofthe order of approval.

A company may alter its articles in accordance with the above provisions in anyof the manners mentioned below:

(i) by adoption of new set of articles;(ii) by addition/insertion of a new article;(iii) by deletion of an article;(iv) by amendment of a specific article; or(v) by substitution of a specific article.

Answer to Question No. 6(iv)

REMUNERATION OF AUDITORS

ln accordance with the provisions of Sub-section (8) of Section 224 ot lheCompanies Act, 1956, the remuneration of the auditors of a company-

(a) in the case of an auditor appointed by the Board or the Central Government,may be fixed by the Board or the Central Government, as the case may be;

(aa) in the case of an auditor appointed under Section 619 of, the Act by theComptroller and Auditor General of lndia, shall be fixed by the company ingeneral meeting or in such manner as the company in general meeting maydetermine;and

(b) subject to clause (a), shall be fixed by the'company in general meeting or insuch manner as the company in general meeting may determine.

15

TEST PAPER 212010(oPTtoNAL)

(This Test Paper is based on Study Lesson Nos. 11 to 20)

Time allowed: 3 hours

Question No.1

Maximum marks: 100

(a) Explain the procedure for holding first meeting of the board of directors.

(b) Explain the procedure for declaration of dividend out of *rO(i3r;"i"*:"#:;j


PROCEDURE FOR HOLDING FIRST MEETING OF THE BOARD OF DIRECTORS

The procedural steps for first Board meetihg are as follows:

1. Consult the company's Articles of Association to see who can issue notice forconvening a Board meeting and follow the procedure laid down by Articles ofAssociation in this regard

ln case of Producer Companies, the Chief Executive shall give notice toevery director for the time being in lndia, and at his usual address in lndia toevery other director, at least seven days prior to the date of meeting:

The Board meeting of Producer Company may also be called at a shorternotice after recording reasons thereof in writing.

2. The Secretary or any other person so authorised shall issue notice in writingto every director of the company for the time being in lndia and at his usualaddress in lndia in case of every other director (Section 286).

3. The day of the meeting can be on a public holiday, unless the Articles ofAssociation provide otherwise, However, the adjourned Board Meeting(adjourned for the want of quorum) should not be held on a public holiday(Section 288).

4, The first meeting should be convened and held within one month from thedate of incorporation [Section 224(5)1.

5. lt is not obligatory to give agenda in the notice, but it is a good secretarialpractice to enclose the agenda to the notice of the meeting.

7. Contact and request all the directors to attend the meeting and arrange thefacilities required by them in this regard, like conveyance, location of venueetc.

8. - Before holding the meeting, welcome the directors and obtain theirsignatures on the Attendance Register.

9. lf quorum, as required under Section 287, is presenl declare the meeting inorder and inform the names of the directors who sought leave of absencefrom attending the meeting. The quorum for the meeting of ProducerCompany shall be one third of the total strength of directors, subject to aminimum of three.

10. The directors who are present at the meeting may elect one of them as theChairman of the meeting and request him to take the Chair.

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11. Help the Chairman to conduct the meeting as per the agenda.12, lf any director wants to place any other item for the discussion at the

meeting, then such item may be taken up with the permission of theChairman.

13. Decide the date, time and place of the next Board meeting.

14. After the meeting is over, prepare draft minutes of the meeting; get itreviewed by the chairman of the meeting and/or the Managing Director of thecompany.

15. Send copy of draft minutes of the meeting to each of the directors of the

. company for information and comments.

16. Contact and collect draft minutes from each of the directors with theircomments. After that, in consultation with the Chairman/Managing Directorfinaliie the minutes and enter them into the Minutes Book. All pages shouldbe consecutively numbered.

17. Such final minutes may be signed and dated by the Chairman of the meetingor by the Chairman of the succeeding meeting. All pages of the minutes areto be initialled and the last page of the minutes is to be signed and dated bythe Chairman.

Answerto Question No. 1(b)

Procedure for Declaration of Dividend out of Company's Reserues

A company,which wishes to declare dividend out of reserves in any year mustfulfil the following conditions in accordance with the Companies (Declaration ofDividend out of Reserves) Rules, 1975:

(a) The rate of dividend to be declared must not be more than the average of therates at which dividend was declared in the flve years immediately precedingthe year in which the company proposes to declare dividend out of reservesor 1Oolo of the paid-up share capital, whichever is less [Rule 2(i)];

(b) The amount to be drawn from the reserves must not be more tfran an amountequal to 1OP/o ol the aggregate of paid-up share capital and free reserves[Rule 2(ii)];

(c) lf in the year for which the company proposes to declare dividend out of thereserves, it has incurred a loss, the amount drawn from the reserves mustfirst be utilised to set off the loss before any dividend is declared for that yearon equity shares or preference shares [Rule 2(ii)l;

(d) The amount of residual reserves, i.e. the reseryes remaining in balance afterthe amount sufficient to set off the loss and declaration of dividend, must beat least 15o/o ot the paid-up share capital of the company [Rule 2(iii)].

The procedure is as follows:(1) Give notice as per Section 286 of the Companies Act, 1956 to all the

directors of the company for holding a Board meeting. ln the meeting, takedecision to declare dividend out of company's reserves because ofinadequacy or absence of profits and also fix the date, time and place of theAnnual General Meeting. Authorize the Company Secretary or anycompetent person if company does not have a company secretary to issue

17

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S.A.-PP-CSP T.P.-2t20'to

the notice of the AGM on behalf of the Board of directors of the company toall the members, directors and auditors of the company and other personsentitled to receive the same.

(2) Ensure that the Companies (Declaration of Dividend out of Reserves) Rules,1975 are complied with.

(3) Ensure that while computing the amount of profits, the amount transferredfrom the Development Rebate Reserve is included and all items of

. capital reserves including reserves created by revaluation of assets areexcluded.

(4) ln the case of listed companies, inform the Stock Exchange with which theshares of the @mpany are listed within 15 minutes of closure of Boardmeeting about decision to recommend declaration of dividend out ofCompany's Reserves. [Clause 20 of listing agreement]

(5) lssue notices in writing at least 21 days before the date of the AnnualGeneral Meeting and hold the meeting and pass the necessary resolution.

(6) ln the case of listed companies, forward three copies of the notice and a copyof the proceeding of the general meeting to the Stock Exchange.

(7) Open a bank account for making dividend payment and credit the said bankaccount with the total amount of dividend payable within five days ofdeclaration of dividend.

(8) lssue dividend warrants within 30 days from the date of declaration ofdividend.

Question No.2'

Write short notes on -(a) Powers to be exercised only at Board Meeting

(b) Secretarial Standard - 3(c) Register of charges(d) Role check requirement (4 marks each)


Powers to be exercised only at Board Meetings

Secfion 292 provides that the following powers of company shallbe exercised bythe board by means of resolution passed at the meeting of Board:-

(a) to make calls on shareholders in respect of money unpaid on their shares;

(b) to issue debentures;

(c) to borrow moneys otherwise than on debentures;(d) to invest funds of the company;(e) to make loans; and

(f) to buy back securities.

The Act has also prescribed certain other items of business which can betransacted by the Board only at Meetings. An illustrative list of such items is given'below:

(i) approval of the fixed deposits advertisement (Section 58A);

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S.A.-PP-CSP T.P-2t2010

(ii) registration of trensfer in the absence of the instrument of transfer [proviso toSection 108(1)l;

(iii) filling casualvacancies on the Board (Section 262);

(iv) making contribution to a political party or for political purposes [Section2e3A(2)l;approving contracts in which any Director or his relative, firm, privatecompany of which he is a member or Director is interested (Section 297);

recording disclosure of interest of Directors (Sections 299 and 305);

receiving notice of disclosure of Directors' shareholdings [Section 308(2)];

appointment as a Managing Director or Manager of a person who is alreadythe Managing Director or Manager of another'company (Sections 316 and386);

investments in shares, etc. (Section 372A); and

filing a declaration of solvency (Section 488).


Secretarial Standard on Dividend (SS-3)

Declaration and distribution of dividends is a complicated task involving bothfinancial and non-financial considerations. Recognizing the relevance of the topic,Secretarial Standard Board formulated the Secretarial Standard on Dividend.

The Secretarial Standard lays down a set of principles in relation to thedeclaration and payment of dividend, interim dividend, treatment of unpaid Dividend,revocation of dividend as well as the preservation of dividend warrants, maintenanceof dividend registers, disclosure requirements and matters incidental thereto. TheStandard, by stipulating requirements in regard to all allied and significant matterssuch as intimation to members before transferring unpaid dividend to lnvestorEducation and Protection Fund, preservation of dividend Registers, validity ofdividend warrants etc. attempts to giive the right direction to the corporate sector,promote uniformity of practices and ensure effective corporate governance.


Register of Charges

Section 143 of the Act, provides that every company shall keep at its registeredoffice a register of charges and enter therein all charges specifically affecting propertyof the company and all floating charges on the undertaking or on any property of thecompany, giving in each cases-

(i) a short description of the property charged;

(ii) the amount of the charge; and(iii) except in the case of securities of bearer, the names of the persons entitled

to the charge.

It requires the entries to be made in the register in respect of all the chargesspecifically affecting property of the company as well as all floating charges on theundertaking or on any property of the company. The requirement under this section

19

(v)

(vi)

(vii)

(viii)

(ix)

(x)


has nothing to do with the filing or non-filing of, or the registration or non-registrationof charges. lt is also not concerned with whether a certificate of registration of acharge has been issued by the Registrar or not.

The register of charge kept at the registered office of the Company shall beavailable for inspection by creditors / members of the Company without any fee fornot less than two hours in each day.


Role Gheck Requirement

'Role Check'functionality envisages that MCA21 System shall verify whether thedigital signatures affixed on the e-Form actually belong to signatory of the companyand/or of a practising professional (if applicable).

Directors, Managers and Secretary of the Company and practising professionalsi.e. CA, CS & CWA are required to register their DSC on MCA portal, On registr"ationof DSC, MCA system will capture the details of the said persons' DSC against theirDIN/PAN, as the case may be. The MCA21 System verifies the credentials of theperson(s) signing the e-Form from the data-base of the companies created on thebasis of DIN/PAN of Directors/Manager & Secretary submitted through Form DIN-3by the companies. Similarly, particulars of professional certifying the form is verifiedfrom the data-base of 'Practising Professionals' created on the basis of data providedby Professional I pstitutes.

ln case of mis-match, system will throw error message and the form will not beaccepted. For 'Role Check' purpose, Fqrm DIN 3/Form 32 must be filed by thecompany for all the signatories (director, manager, secretary) of the company. lf thecompany has not filed Form DIN 3 / Form 32, the company will not be able to file anye-Form on the MCA portal, as the system shall not have the details of the signatoriesof the company.

Question No.3

Draft specimen resolution for the following along with requisite explanatorystate me n t w h e reve r n ecessa4f-

(a) Approving Directors Report(b) Keeping and maintaining btooks of accounts at a place other than the

registered office(c) Confirming Board Resolution of giving guarantee(d) Making loan to another company. (4 marks each)


SPECIMEN BOARD RESOLUTION FOR APPROVAL OF THEDIRECTORS REPORT

"RESOLVED that the draft Directors' Report to the Shareholders of the companyfor the year ended 31st March 2008 prepared in accordance with the provisions ofSection 217 of the Companies Act, 1956 together with its Annexures and alsocontaining suitable explanation and fullest information on every reservation,

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qualification or adverse remarks contained in Auditors reports, as submitted to themeeting, be and is hereby approved.'

RESOLVED FURTHER That Shri... Chairman of the company,Shri......,............. Managing Director and Shri..,.. Director be and are herebyjointly authorized to sign the Directors' Report for and on behalf of the Board of theCompany."


SPECIMEN BOARD RESOLUTION FOR KEEPING AND MAINTAINING BOOKSOF ACCOUNTS AT A PLACE OTHER THAN THE REGISTERED OFFICE

"RESOLVED THAT pursuant to the proviso to Section 209(1) of the CompaniesAct, 1956, approval of Board of Directors of the Company be and is hereby accordedto keep the books of acCounts of the company at the company's head office at

....... with effect from

RESOLVED FURTHER That the company secretary, Mr. ............, be andis hereby authorized to file electronically E-Form No. 23AA with the Registrar ofCompanies .. at .......,... with the requisite filing fees within theprescribed time of seven days hereof."


SPECTMEN OF SPECIAL RESOLUTTON CONFIRMING BOARD RESOLUTION OFGIVING GUARANTEE

"RESOLVED that pursuant to Section 372A and other applicable provisions, ifany, of the Companies Act, 1956 or any modification or re-enactment thereof, theguarantee of the company for Rs. 5 crore furnished by the Chairman & ManagingDirector of the Company as per the resolution passed in the meeting of the Board ofdirectors of the company held on . to The Hongkong and ShanghaiBanking Corporation Ltd., New Delhi, for the Banking facilities granted to WML Ltd.,in lieu of the guarantee for Rs. 5,61,66,250.00 furnished earlier by the company, beand is hereby confirmed and approved."


The Board of directors of the company at its meeting held on .............discussed the request of WML Ltd. promoted by the company for giving its corporateguarantee for Rs. 5 crore to The Hongkong and Shanghai Banking Corporation Ltd.,New Delhi for the banking facilities granted to WML Ltd., in lieu of the guarantee ofthe company for Rs. 5 crore furnished earlier by the company.

The Board was satisfied with the existence of the exceptional circumstances i.e.emergent need of funds by WML Ltd., prevented the company from obtainingprevious authorisation by a Special Resolution to be passed in a General Meeting forgiving such guarantee. Accordingly, the Board authorised the Chairman & ManagingDirector of the company to furnish the guarantee as requested by WML Ltd.

The Board of directors recommends the resolution as set out in the notice forconfirmation of the shareholders.

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None of the directors save and except shri L.K.. and. shri A.K. who are also

did;;;;; d;i;;rd ;lwut tto, are conberned or interested in the resolution'


spEcrMEN"r|,flff ,s'^T,Ei3br#3I38ilT?ft

":rNGBoARDro.RESOLVED that pursuant to section 372A and other applicable provisions' if

"nv,'oiii"-corpr"i"l Act 1956 or any.modification or re-enactment thereof and

subject to the upproJJS oi in" fin"ncial lnstitutions, if any, as may be required'

approval of the .orp"nv n""nu i. hereby accorded to,the Board of Directors of the

;;;;y -for

directty-oi inOirectly making of inve.stmentl .bV way of subscription'

purchase or otherwise in equity sharei of, andlor making loans and/or giving

il;;iil "nd/ot" pt*iaing-t';iurities in, connection with loan(s) made/to be made

by any bank, comp;;t;Gi.t t:'. the following companies promoted by and

assoctated with the ;;p;.ifoi tt't" tot"t sum not eiceeding Rs' 2,600'00 lakh from

il;';i tii" "onp-rnyllni"rn"r

accruals, over and above the existing investments

in shares/deuentureJioinel t".uiit-i"", loans and guarantees made or given by the

company, as under:- (Rs. rn lacs)

Company lnvestment inEquity shares

Loans GuaranteelSecuritY

Overalllimit

WML Ltd.

SPP Ltd.

1000.00Nil

400.00100.00

1200.00350.00

2200.00400.00

2600.00

RESOLVED further that the Board of directors of the company be and. is. hereby

authorised to make invesiments/loan.s, give guarantee(s), provide security(ies), for

the amount as specifled LUouu, as it may-be deem fit and proper and to authorise any

iffilG;';;ii";';;n";;Gt '"1 the tompany to finarise the terms of such

investment(s), toan(sj,' gr;-/."t".ts), security(i6.s) .as the case may be and .sign

necessary papers on'be-naf of the company'airO laf<e all necessary steps for giving

effect to this resolution."


As on date the aggregate amount of the investments in shares/debentures, lo-ans

"rO'gr"r".G"tliL"liiityGi t"Oe, given, op pr:ovided ty. the company to other

bodies corporate "*"""0!'ind

limits pr6vided in Section 372A.of the Companies Act

igSO.-Th"'.ompany,titt t1"u" to make investments/loans from its internal accruals to'

and/or provide gu"r"ni""itioi securit(ie9) for the loan(s) made to WML Ltd' and

spp-rtb., from-ot"o oy "i

6 associateb'with the company to meet their temporary

working caPital requirements'

The Board of Directors at its meeting held or...........:...- decided to recommend

tne SpecLf nesolution as set out in the notice for approval of the shareholders'

t


None of the directors save and except shri.......... and shri............ who are alsoDirectors on the Board of WML (Ltd.) are concerned or interested in the resolution.

Question No.4

(a) What are the conditions when a document or form r.s sard to be defective?A/so, sfafe the penalty for filing false documents with registrar.

(b) Briefly describe the procedure for condonation of detay in relation to fiting ofdocuments with ROC?

(c) Briefly exptain the scope and functions of the Secretarialsfandards Board.(d) state the conditions when a person is deemed to be a connected p)erson.

(4 marks each)Answer to Question No. 4(a)

A form or document is defective for any one of the following reasons:(i) The form or document does not contain the neiessary enclosures;(ii) Certain important particulars in the document or form have been left unfilled;(iii) Certain particulars apparent on the face of it seem false;

.

(iv) The document is not filed in time;(v) The document is not properly signed or certified.

lf a document is not found to be in order for any of the reasons stated above theRegistrar will not register the document until the particulars left unfilled are filled orthe error is rectified by the company. For this purpose, facility of resubmission isavailable under MCA-21 portal. However, resubmission can be made, only when theROC requires that the company resubmit the form with corrections. lf witl'rin the datedocument is required to be corrected or rectified, the blank is not filled in or theapparent error is not corrected, then the Registrar is at liberty to launch prosecutionagainst the company and its officers for default in filing the document. lf the defect isone-which requireS filing of a revised document, then, in certain cases, the Registrarof Companies may accbpt the revised form on payment of additional fee wh'rch hemay determine in terms of Section 61 1(2) of the Companies Act, 1956.

Penalty for Filing False Documents/Statements with the RegistrarAccording to section -628, if in any return, report, certificate, balance sheet,

prospectus, statement or other document, required by or: for the purposes of any ofthe provisions of this Act, any person makes a statement which is false in lnymaterial particular, knowing it to be false; or which omits any material fact, knowing itto be material, he shall, except when othenivise expressly provided in this Act,

-be

punishable with imprisonment for a term which may exterld to two years and sllallalso be liable to fine.

Answer to Question No. a(b)

Procedure for Condonation of Delay by CentralFiling of Documents with Registrar of Companies

The Company Secretary should follow the procedure as laid below:(1) Convene a Board Meeting and pass a resolution for seeking condonation of

delay in filing the document.

Government in Relation to

r


(2) Submit an application to the Central Government, in pdf format, asattachment to electronic form no. 65, to this effect indicating along with thereasons for such delay. The application should be accompanied by a copy ofthe Board Resolution seeking condonation of delay, latest audited balancesheet and profit and loss account, certified copy of the memorandum andarticles of association and filing fees.

(3)The Central Government may for reasons to be recorded in writing, condone thedelay.


SCOPE AND FUNCTIONS OF THE SECRETARIAL STANDARDS BOARD

The scope of SSB is to identify the areas in which Secretarial Standards need tobe issued by lCSl and to formulate such Standards, taking into consideration the

. applicable laws, business environment and best secretarial practices. SSB alsoclarifies issues arising out of such Standards and issues guidance notes for thebenefit of members of lCSl, corporate and other users.

The main functions of SSB are:

(i) Formulating Secretarial Standards;

(ii) Ctarifying issues arising out of the Secretarial Standards;

(iii) lssuing Guidance Notes; and

(iv) Reviewing and updating the Secretarial Standards/Guidance Notes atperiodic intervals.

Answer to Question No. 4 (d)

Person is deemed to be a connected person if such person-(i) is a company under the same management or group or any subsidiary

company thereof within the meaning of section (18) of section 370, or sub-section (11) of section 372, of the Companies Act, 1956 (1 of 1956) or sub-clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act,1969 (54 of 1969) as the case may be; or

(ii) is an intermediary as specified in section 12 of the Act, lnvestment company,Trustee Company, Asset Management Company or an employee or directorthereof or an otficial of a stock exchange or of clearing house or corporation;or

(iii) is a merchant banker, share transfer agent, registrar to an issue, debenturetrustee, broker, portfolio manager, lnvestment Advisor, sub- broker,lnvestment Company or an employee thereof, or is a member of the Board ofDirectors of the Asset Management Company of a mutual fund or is anemployee thereof who have a fiduciary relationship with the company;

(iv) is a member of the Board of Directors, or an employee, or a public financialinstitution as defined in Section 44 of the Cornpanies Act, 1956; or

(v) is an official or an employee of a self regulatory organization recognized'orauthorized by the Board of a regulatory body; or

(vi) is a relative of any of the aforementioned persons;

'

i

I

I

I

t

t

I


(vii) is a banker of the company;(viii) relatives of the connected person;(ix) is a concern, firm, trust, Hindu Undivided Family, company or Association of

Persons wherein any of the connected persons mentioned in Clause 3(i)above of this regulation or any of the persons mentioned in sub-clauses 1vi1,(vii) or (viii) herein above has have more than 1O% of the holding or interest.'

Question No.5

(a) Explain the role of company secretary in compliance requirements.(B marks)

(b) Briefly explain the JJ lrani committee Report and the new conceptsintroduced by it. (B marks)


Under clause 47 of the listing agreement, a listed company has to appoint theCompany Secretar:y to act as i compliance officer who'witi ne responsible formonitoring the share transfer process and reporting to the Board in its each meeting.The compliance officer will directly liaise with the authorities such as SEBI, StoCkExchanges, Registrar of companies etc. and investors with respect toimplementation of various clauses of the listing agreement, rules, regulations andother directives of such authorities and investor services and complaints on relatedmatters.


Dr. J J lrani Expert Committee on Company Law had submitted its report chartingout the road map for a flexible, dynamic and user-friendly new company law. TheReport of the Committee had also sought to bring in multifarious, progressive andvisionary concepts and endeavored a significant shift from the "Governm-ent ApprovalRegime'to a "shareholder Approval and Disclosure Regime".

The Expert Committee had recommended that private and small companies needto be given flexibilities and freedom of operations and compliance at a low cost.Companies with higher public interest which access capital from public need to besubjected to a stricter regime of Corporate Governance. Further, Governmentcompanies and public financial inStitutions be subject to similar parameters with respectto disclosures and corporate Governance as other companies are subjected to.

The Government considered the recommendations of lrani Committee and afterdetailed discussions and deliberations has finalized the companies Bill, 2009.

New Concepts introduced by Dr. J J trani Committee in its report(1) One Person Company (OPC)

[3i :,;iflff,iil"J"'..nership (LLP)(4) lndependent Directors(5) Key managerial personnel(6) Directors and Officers (D&O) lnsurance


(7) Rights and liabilities of independent and ndn-executive directors(8) Freeing the Managerial Remuneration of limits(9) Recog n ition to joint venture/shareholders' agreements

(10) Tracking and Treasury Stocks(11) Perpetual Preference Shares(12) Single Window Clearance for Mergers(13) Contractual Mergers(14) Time-bound proceedings for restructuring and liquidation(15) lnsolvency Practitioners(16) The insolvency fund

Question No.6

(a) Write shoft notes on -(1) One person company(2) Contractualmerger

(b) Distinguish between:(1) SS-7 and SS-2(2) eharge and mortgage

(4 marks each)

(4 marks each\

Answer to Question No. 6(a)(1)

One Person Company

"One Person Company" means a company which has only one person as amember. A company may be formed for any lawful purpose by one person, where thecompany to be formed is to be a One Person Company, by subscribing his name to amemorandum in the manner prescribed and complying with the requirements of thisAct in respect of registratron.

However, the memorandum of a One Person Company shall indicate the nameof the person who shall, in the event.of the subscriber's death, disability or otherwise,become the member of the company.

Further, it shall be the duty of the member of a One Person Company to intimatethe Registrar the change, if any, in the name of the person referred to in thepreceding proviso and indicated in the memorandum within such time and in suchform as may be prescribed, and any such change shall not be deemed to be analteration of the memorandum.

Answer to Question No. 6(a)(2)

Contractuat Merger

The contractual mergers may be given statutory recognition in the Company Lawin lndia as is the practice in many other countries as a restructuring toolto hasten theprocess of mergers and acquisitions. Such mergers and acquisitions are in thecontract form (i.e. without the intervention of the court) and are made subject tosubsequent approval of shareholders by simple majority.

S.A.-PP-CSP T.P.-2120'tO

The recognition of such contractual mergers would eliminate obstructions tomergers and acquisitions, give ex-post facto protection and the ability to rectify them.

. Further, steps should be taken to validate contractual mergers because court-oriented process many times leads to delays. Even as judicial process is important totake care of the interest of minority shareholders, many times it is used as a tool toabuse and derail the process. ln fact, "Some very well-meaning mergers andacquisitions are taken to court by motivated shareholders with vested interests toderailthe process".

Answer to Question No. 6(b)({)

Secretarial Standard on Meetings of the Board of Directors (SS-1)

The Secretarial Standard on Meetings of the Board of Directors lays down a setof principles which companies are expected to adopt in the convening and conduct ofmeetings of the Board of Directors and committees thereof. These principles relate tofrequency of meetings, quorum, attendance, resolutions, recording and preservationof minutes etc. lllustrative lists of items to be considered at different meetings of theBoard are enunciated in the Standard. Further, the Standard seeks to enhancestakeholder's confidence by focusing on the principles relating to responsibilities ofthe Chairman of the Board, maintenance of attendance registers, preservation ofminutes, disclosures in Annual Report etc.

Secretariat Standard on Generat Meetings (SS-2)

The Secretarial Standard on General Meetings prescribes a set of principleswhich companies are expected to observe in the convening and conduct of GeneralMeetings and matters related thereto. Principles have been laid down with respect torequirements of quorum, voting, proxies, conduct of poll, withdrawal/rescinding/modification of resolutions, adjournment of meetings, recording in andpreservation of minutes as well as the duties of the Chairman and the disclosures tobe made in the Annual Reports of companies. Further, explicit principles have beenlaid down on the related critical aspects such as distribution of gifts, presence andduties of Company Secretary/Auditors in the meetings, preservation of minutes.Besides, it intends to integrate and standardize the diverse secretarial practicesprevalent in the corporate sector for conducting General meetings.

Answer to Question No. 6(b)(2)

WHAT IS A CHARGE?

A charge is a right created by any person including a company referred to as "theborrowed' on its assets and properties, present and future, in favour of a financialinstitution or a bank, referred to as "the lended', which has agreed to extend financialassistance.

Section 124 of the Companies Act, 1956 states that "charge" includes"mortgage". However, this definition is not adequate to know the exact nature of acharge. The precise meaning of the expression "charge" has to be derived fromjudicial pronouncements.


"Charge" as defined in Transfer of Property Act, 1882

According to Section 100 of the Transfer of Property Act, 1882, where animmovable property of one person is by act of parties or operation of law madesecurity for the payment of money to another and the transaction does not amount toa mortgage, the latter person is said to have a charge on the property, and all theprovisions which apply to a simple mortgage shall, so far as may be, apply to suchcharge.

WHAT IS A MORTGAGE?

A mortgage is a legal process whereby a person,'who boirows money fromanother person and secures the repayment of the borrowed money and also thepayment of intbrest at the agreed rate, by creating a right or charge in favour of thelender on his movable and/or immovable property.

Mortgage as defined in Transfer of Property Act, 1882

According to Section 58 of the Transfer of Property Act, a mortgage is thetransfer gf an interest in specific immovable property for the purpose of securing thepayment of money advanced or to be advanced by way of loan, an existing or futuredebt, or the performance of an engagement which may give rise to pecuniary liability.

CHARGE AND MORTGAGE DISTINGUISHED

There is a clear distinction between a mortgage and a charge, the former being atransfer of an interest in immoveable property as a security for the loan whereas thelatter is not a transfer, though it is nonetheless a security for the payment of anamount.

TEST PAPER 3I2O1O(coMPULSORY)

(Based on ALL Study Lessons)Time allowed: 3 hours Maximum marks: 100

NOTE: Attempt ALL guesfions.

Question No. IDraft the following:(i) Special Resolution for Altering Artictes of a private company converting it into

a public company.(ii) Resolution for conversion of shares into stock.(iii) Board resolution allofting shares for a consideration otherwise than in cash.(iv) A notice under secfrbn 6408 for the Central Government's approval to

increase remuneration of the managing director. (5 marks each)


SPECIMEN OF THE SPECIAL RESOLUTION FOR ALTERING ARTICLES OF APRIVATE COMPANY CONVERTING IT INTO A PUBLIC COMPANV

"RESOLVED THAT pursuant to the Section 44 and other applicable provisionsof the companies Act, 1956, if any, the consent of the company be and is here byaccorded to change the status of the Company form Private Limited to Public Limitedby conversion.

RESOLVED FURTHER THAT consequent to conversion to Public LimitedCompany and pursuant to Section 21 and all other applicable provisions, if any, of theCompanies Act, 1956, the name of the iompany be changed from

Private Limited to ......

RESOLVED FURTHER THAT pursuant to Section 16 of the Companies Act, 1956and other applicable provisions, if any, the existing Clause I of the Memorandum ofAssociation of the Company relating to Name of the Company be and is hereby alteredby deleting the same and substituting tne foltowing new Ciause l:

l. The name of the Cpmpany is ... Limited.

RESOLVED FURTHER THAT the name ...... privateLimited wherever it occurs in the Memorandum and Articles of Association of theCompany be substituted by the name ... ... Limited.

RESOLVED FURHTER THAT the Board of Directors of the Company be and is

lereby authorised to make an application for change the status of the Company intoP.ublic Limited Company and also for changing the name of the Company includingfiling of Statement in lieu of Prospectus as per Schedule lV of the Companies Aci,1956, with Registrar of companies and to do all such necessary acts, deeds andthings-and to sign all such papers and documents as they may deem necessary togive effect to this resolution.

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S.A.-PP-CSP T.P.-312010


. ,,RESOLVED THAT in accordance with the provisions of Section 97 and all otherapplicable provisions, if any, of the Companies Act, 1956 (including anyamendments, modifications thereof) the consent of the members be and is herebyaccorded for conversion of 1,00,000 equity shares of Rs. 10 each into stock of Rs.

10,00,000.

RESOLVED FURTHER THAT pursuant to Section 16 of the Companies Act,

1956 and other applicable provisions, if any, the existing Clause V of the

Memorandum of Association of the Company relating to Share Capital be and ishereby altered accordingly.

RESOLVED FURTHER THAT the Board or any person authorized by the Board

be and are hereby severally authorized to do all such acts, deeds, matters and things

whatsoever as may be required to give effect to this resolution."

Answer to Question No. 1(iii)

SPECIMEN OF BOARD RESOLUTION ALLOTTING SHARES FOR .ACONSIDERATION OTHERWISE THAN IN CASH

"RESOLVED THAT in terms of the agreement dated ......., 20.... entered into by

and between the company and Shri..................... for the issue of..........fully paid

equity shares of Rs...... each of the company for Rs........., which is not paid in cash

but in full satisfaction of the amount which the company owed to the said

shri.......,......... as purchase price of the piece of land situated at..................;.. sold by

the said Shri............. to the company for the purpose of constructing the

company's manufacturing unit, details whereof have been incorporated in the

agreement, be and are hereby allotted to the said Shri......."'.........'.............'.;

RESOLVED FURTHER THAT the Company Secretary, Shri ..............'.., be and

is hereby authorized to file with the Registrar of Companies, the Return of Allotmentof the shares in e-form 2 and 3 as prescribed in the Companies (Central

Government's) General Rules and Forms (Amendment) Rules, 2006, along with a

certified copy of the said agreement, in accordance with Section 75(1Xb) of iheCompanies Act, 1956 and the prescribed filing fee, within thirty days of the passing ofthis resolution; and

REEOLVED FURTHER THAT the Company Secretary, Shri ..........'......, be andis hereby authorized to issue share certificate(s) for the allotted ................ fully paid

equity shares be issued to the allottee(s) in accordance with Section 113 of theC6mb.anies Act, 1956 and the Companies (lssue of Share Certificates) Rules, 1960

under the signatures of Shri... Managing Director, Shri......'...'.".'., Directorand Shri... Company Secretary, under the common seal of thecompany, which shall be affixed in the presence of all the authorised signato;ies."


Notice under Section 6408 for Central Government's Approval to lncreaseManaging Director's Remuneration

.Limited

3e

Notice is hereby given pursuant to Section 6408 of the Companies Act, 1956 (the

S.A.-PP-CSP T.P.-3/2010

Act) that the company intends to make an application to the Central Government forits approval under Section 310 of the Act to the increase in the remuneration payableto Shri..,........rr....i.i.i, Managing director of the Company.

Registered Office: For........,...........1imited

Dated.

Secretary

Question No.2(a) Choose the most appropriate answer from the given option in respect of the

following:

(i) The instrument appointing a proxy shatt be in:(a) Oral(b) Writing(c) Non-judicial stamp paper(d) Noneoftheabove.

(ii) Companies aie required to file compliance certificate with the Registrar :' (a) Within 30 days

(b) Within 45 days(c) Within 60 days(d) Within 15 days.

(iii) A company can remove a director before the expiry of the period of hisoffice by passrng a(a) Specialresolution(b) Ordinary resolution(c) Resolution by special notice(d) Board Resolution.

(iv) Which section of Companies Act, 1956 defines Company Secretary inPractice:

@) 2U5)(b) 2(454)(c) 2(54)(d) 2(60)

(v) The auditor of a Government Company shall be appointed or re-appointed by the :(a) CentralGovernment(b) State Government

. (c) Comptroller and Auditor Generalof lndia(d) None of the above

(vi) To borrow moneys otherwise on debentures can be exercised only at:(a) Board meeting(b) Generalmeeting

31

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S.A.-PP-CSP

(b) (i)

(ii)

(iii)

(iv)

(v)

(v0

32 T.P-3t2010

(1 mark each)

(c) Either at Board meeting or at General Meeting(d) Resolution by circulation.

Every user who is required to sign an e-form for submr.ssion with MCA isrequired to obtain a.

are the persons who conceive the idea or visualize a projectand then fake steps to execute the idea into a reatity.

Secfion 143 of the Act tays down that every company shatt keep at itsregistered office a

Only fully paid-up shares can be convefted into

The declaration of bonus r'ssue in tieu of- is not permitted.

Secfion- of the Companies Act, 1956 provides for Cost Audit.

(c) Write a short-note on resignation by Managing Director. " 'i':;::::,


(i) (b) Writing

(ii) (a) Within 30 days

(iii) (bi Ordinary resolution

(iv) (b) 2(45A)

(v) (a) CentralGovernment

(vi) (a) Board meeting


(i) Digital Signature Certificate

(ii) Promoters

liiii n"sirt"r of Charses

(iv) Stock

(v) Dividend

(vi) 2338


Resignation by Managing Director

A managing director is entrusted with substantial powers of management. lf heresigns his office as managing director before the expiry of the contract period hisresignation as managing director becomes effective only when it is accepted by thecompany. His .resignation is governed by terms and conditions of his appointment.Otherwise he may be liable'to compensate the company for breach of servicecontract. However, a managing director may resign his office as managing directorand may continue to be a non-executive or part-time director on the Board. ofdirectors of the company.


Question No.3(a) Distinguish between the following:

(i) Managing Director and Whole-time Director(ii) Voidable Allotment and Void Altotment. (3 marks each)

(b) State, with reasons in brief, whether the following sfafemenfs are correct orincorrect: -

(i) Section 17 of the Act lays down that a company may, by ordinaryresolution, alter the provisions of its memorandum with respecfs fo rfsobjects.

(ii) The articles of assocrafrb n of a company contain provision andauthorizing the company to consolidafe lfs shares

(iii) A share warrant is transferred by a mere delivery of the warrants withoutexecution of any written instrument of transfer being registered by theCompany.

(iv) The increase in number of directors beyond twelve needs prior approvalby way of special resolution and authority by the Afticles of Association.

(v) A public company rfiay appoint a person as its Managing Director, if he ismanaging director of only two other companies. (2 marks each)

Answer to Question No. 3 (a)(i)

Distinction between Managing Director and Whole Time Director

The term 'Whole time director' has been used in the Act alongwith ManagingDirector. However, unlike 'Managing director', 'whole time directof has not beendefined. One may ihfer that the expression 'whole time director' has been used in theAct to suggest a director who is in the whole time employment of the company butdoes not enjoy the substantial powers of management. Besides, a managing directormay be appointed in that capacity in two or more companies at the same time but awhole time director cannot act as such in more than one company. Further, there isno restriction in terms of the tenure of appointment of a whole time director. However,a managing director cannot be appointed for more than five years at a time in case ofpublic Company.

Answer to Question No. 3 (aXii)

Distinction between Voidable Allotment and Void Allotment

Voidable Allotment' According to Section 71 of the Companies Act, 1956, an allotment made by acompany to an applicant in contravention of the provisions of Section 69, whichprohibits allotment unless minimum subscription has been received by the companyor in contravention of the provisions of Section 70, which prohibits allotment in certaincases unless statement in lieu of prospectus has been delivered to the Registrar, isirregulai allotment and shall be voidable at the instance of the applicant-

(a) within two months after the holding of the statutory meeting of the company,and not later, or

(b) in any case where the company is not required to hold a statutory meeting or

33

S.A.-PP-CSP T.P.-3/2010

where the allotment is made after holding of the statutory meeting, within twomonths after the date of the allotment, and not later. .

The allotment shall be voidable, notwithstanding that the company is in course ofbeing wound-up.

Void Allotment and its Effects

According to Sub-section (1A) of Section 73, where a prospectus states that anapplication has been made for permission for the shares or debentures offeredthereby to be dealt in one or more designated stock exchanges, such prospebtusshall state the name(s) of the stock exchange(s) and any allotment made on anapplication in pursuance of such prospectus shall, whenever made, be void if thepermission has not been granted by the stock exchange or each such stockexchange, as the case may be, before the expiry of ten weeks from the'date of theclosing of the subscription list.

Answer.to Question No. 3(b)

(i) Fatse. A company may change its objects as enshrined in its memorandum of.association in accordance with the provisions of Sections 17, 1B and 19 and anyother applicable provision"s, if any, of the Companies Abt, 1956. Section 17 of the Actlays down that a company may, by special resolution, alter the provisions of itsmemorandum with respect to its objects.

(ii) True. Section 94 of the Companies Act, 1956 provides that a companylimited by shares or guarantee and having a share capital may, if so authorised by itsarticles, alter, by an ordinary resolution, its share capital. lt may consolidate anddivide, all or any of its existing shares into a larger denomination than of its existingshares e.9., by consolidating ten shares of Rs. 10 each into one share of Rs. 100each.

(iii) True. A share warrant is transferable by mere delivery of the warrantswithout execution of any written instrument of transfer being registered by thecompany. The bearer of a share warrant is not a member of the company unlessotherwise so provided in the articles of the company in terms of Section 115(5) of theAct and, therefore, such a bearer of share warrants does not impliedly required toobserve the provision of the company's memorandum and articles.

(iv) False. As per section 258 and 259 of the Companies Act, 1956, anyincrease in number of directors beyond twelve directors needs prior approval of theCentral Government and authority by the Articles of Association.

(v) False; Under Section 316 of the Act, a public company can not appoint oremploy any person as managing director, if he/she is either the managing director orthe manager of any other company.

Question No.4(a) Draft a resolution approving commencement of newbusrness. (4 marks)

(b) Discuss the procedure for hotding subseque nt Board meetings. (4 marks)

(c) What type of information shall be mandatorily reviewed by the Audit

S.A.-PP.CSP T.P.-3/2010

(4 marks)Committee?

(d) Enumerate the scope and functions of the SecretarialSfandards Board.

Answer to euestion No. 4(d) G marks)

SPECIMEN OF BOARD RESOLUTION PROPOSING COMMENCEMENTOF NEW BUSINESS SPECIFIED IN OTHER OBJECTS

"RESOLVED that, subject to the approval of the Company. in general meeting byspecial resolution and in accordance with provisions of section 149(2A) of theCompanies Act 1956, the approval .of Board of Directors is accorded to the Companyto commence a new business mentioned in Para 16 of Sub Clause (c) of Clause (lll)of the Memorandum Of Association of the Company.

RESOLVED FURTHER THAT the Board of Directors of the Company be and ishereby authorized to take all the necessary steps required to give effect to the same."


PROCEDURE FOR HOLDING SUBSEQUENT BOARD MEETINGS

- Consult the company's Articles of Association to see who can issue notice forconvening a Board meeting

- The Secretary or any other person so authorised shall issue notice in writingto every director of the company for the time being in lndia and at his usual' address in lndia in case of every other director (Section 286).

- The day of the meeting should not, unless the Articles of Associationotherwise provide, be a public holiday

It is not obligatory to give agenda in the notice, but it is a good secretarialpractice to enclose the agenda to the notice of the meeting.

- At least half an hour before lhe meeting, the persons responsible forconducting the meeting should place the folders containing Agenda, notes toAgenda, draft minutes to agenda, statement of expenses incurred/to beincurred etc. for ready reference of all directors to enable them to deliberateand discuss on each item of the agenda in detail.

- Before holding the meeting, welcome the directors and obtain theirsignatures on the Attendance Register.

- lf quorum, as required under Section 287; is present, declare the meeting inorder and inform the names of the directors who sought leave of absencefrom attending the meeting.

- The directors who are present at the meeting may elect one of them as theChairman of the meeting and request him to take the Chair.

- Help the Chairman to conduct the meeting as per the agenda.

- lf any director wants to place any other item for the discussion atmeeting, then such item may be taken up with the permission of

- S::ll:il" date, time and prace of the next Board meetins.

- After the meeting iS over, prepare draft minutes of the meeting, get it

35

thethe


. reviewed by the chairman of the meeting and/or the Managing Director of thecompany.

- Send copy of diaft minutes of the meeting to each of the directors of thecompany for information and comments.

- Contact and collect draft minutes from each of the directors with theircomments. After that, in consultation with the Chairman/Managing Directorfinalise the minutes and enter them into tfre Minutes Book.

- All pages should be consecutively numbered.

- Such final minutes may be signed and dated by the Chairman of the meetingor by the Chairman of the succeeding meeting.

- All pages of the minutes are to be initialled and the last page of the minutesis to be signed and dated by the Chairman.


Review of information by Audit Gommittee

The Audit Committee shall mandatorily review the following information:

1. Management discussion and analysis of financial condition and results ofoperations;

2. Statement of signifiiant related party transactions (as defined by the auditcommittee), submitted by management;

3. Management letters/letters of internal control weaknesses issued by thestatutory auditors;

4. lnternalaudit reports relating to internal controlweaknesses; and

5. The-appointment, removal and terms of remuneration of the Chief internalauditor shall be subject to review by the Audit Committee.


SCOPE AND FUNCTIONS OF THE SECRETARIAL STANDARDS BOARD

The scope of SSB is to identify the areas in which Secretarial Standards need tobe issued by lnstitute of Company Secretaries of lndia (lCSl) and to formulate suchStandards, taking into consideration the applicable laws, business environment andbest secretarial practices. SSB also clarifies issues arising out of such Standards andissues guidance notes for the benefitof members of lCSl, corporate and other users.

The main functions of SSB are:

(i) Formulating Secretarial Standards;

(ii) Clarifying issues arising out of the Secretarial Standards;(iii) lssuing Guidance Notes; and(iv) Reviewing and updating the Secretarial Standards/Guidance Notes at

periodic. intervals.

Question No.5(a) Define the procedure for preparing abidged Balance Sheef and Profit & Loss

Account by a Listed Company. (B marks)

S.A.-PP-CSP T.P.-3/2010

of Company's(8 marks)

(b) Enumerate the procedure for declaration of Dividend outReserves.


PROCEDURE FOR PREPARING ABRIDGED BALANCE SHEET AND PROFITAND LOSS ACCOUNT BY A LISTED COMPANY

(a) Convene a Board rneeting after giving a notice in writing to all the directors ofthe company as per Section 286 of the Act.

(b) Hold Board meeting and pass a res.olution for preparing annual Reports andAccounts of the company also in the abridged form as permitted underSection 21g(lXbXiv) of the Act in accordance, with Rute 7A d theCompanies (Central Govemment's) General Rules and Forms, 1956 in theprecribed form No. 23AB for the purpose

(c) At the Board Meeting while discussing, considering and approving draftaudited annual accounts of the company, the Annual Reports and Accountsprepared in abridged form should. also be apprwed and authenticated inaccordance wifh the provisions of Section 215 of the Act.

(O A conplele set of full annual reports aRd accounts should be kept forinspection at the Registered Office of the company at least twenty one daysduring working hours before the date of ensuring.annual general meeting.

(e) On a demand from a member, debentureholder sr depositor of the companya copy of the full annual report and accounts shall be sent to suchrequisitionist, free of cost, within seven days from the date of making suchdemand.

(f) Three certified true copies of the abridged annual reports and accounts arealso required to be filed with the concerned Registrar of Companies alongwith true certified copies of full annual. reports and accounts and with singlefiling fee pursuant to Section 220 of the Act. Under MCA2I e-filing system,only single copy of balance-sheet alongwith e-form 23AC and single copy ofprofit and loss account alongwiffr e-form 23ACA are required to be filed, astwo separate documents;

(g) Pursuant to clause 32 of the listing agreement, a lisled company will have to'supply a copy of the complete and full Balance Sheet, Profit and LossAccsunt and the Directors' Report to each shareholder and upon applicationto any member of the Exchange. But, the Company may supply a single copyof these documents to shareholder's residing in one household. However, onreceipt of request, the company shall supply such documents to anyshareholder residing in such household.

Angver to Question No. 5(b)

Procedure for Declaration of Dividend oul of Company's Reserues

A company which wishes to declare dividend out of reserves in any year mustfulfill the following conditions in accordance with the Cornpanies (Declaration ofDividend out of Reserves) Rules, 1975:

(a) The rate of dividend to be declared must not be more than the average of the

37

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rates at which dividend was declared in the five years immediately precedingthe year in which the company proposes to declare dividend out of reseryesor 1oo/o of the paid-up share capital, Whichever is less [Rule 2(i)];

(b) The amount to be drawn from the reserves must not be more than an amountequal to 10% of the aggregate of paid-up share capital and free reserves[Rule 2(ii)];

(c) lf in the year for which the company proposes to declare dividend out of thereserves, it has incurred a loss, the amount drawn from the reserves mustfirst be utilised to set off the loss before any dividend is declared for that yearon equity shares or preference shares [Rule 2(ii)];

(d) The amount of residual reserves, i.e. the reserves remaining in balance afterthe amount sufficient to set off the loss and declaration of dividend, must beat least 15% of the paid-up share capital of the company [Rule 2(iii)].

The procedure is as follows:

(1) Give riotice as per Section 286 of the Companies Act, 1956 to all thedirectors of the cornpany for holding a Board meeting. ln the meeting, takedecision to declare dividend out of company's reseryes because ofinadequacy or absence of profits and also fix the date, time and place of theAnnual General Meeting. Authorize the Company Secretary or anycompetent person if company does not have a company secretary to issuethe notice of the AGM on behalf of the Board of directors of the company toall the members, directors and auditors of the company and other personsentitled to receive the same.

(2) Ensure that the Companies (Declaration of Dividend out of Reserves) Rules,1975 are complied with.

(3) Ensure that while computing the amount of profits, the amount transferredfrom the Development Rebate Reserve is included and all items of capitalreserves including reserves created by revaluation of assets are excluded.

(4) ln the case of listed companies, inform the Stock Exchange with which theshares of the company are listed within 15 minutes of closure of Boardmeeting about decision to recommend declaration of dividend out ofCompany's Reserves. [Clause 20 of listing agreement]

(5) lssue notices in writing at least 21 days before the date of the AnnualGeneral Meeting and hold the meeting and pass the necessary resolution.

(6) ln the case of listed companies, forward three copies of the notice and a copyof the proceeding of the general meeting to the Stock Exchange.

(7) Open a bank account for making dividend payment and credit the said bankaccount with the total amount of dividend payable within five days ofdeclaration of dividend.

(8) lssue dividend warrants within 30 days from the date of declaration of,'dividend.

Question No.6(a) Describe the various mode of payment of fees under the MCA-21Sysfem.

3B

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t1..,,

if

S.A.-PP.CSP T.P.-312010

(8 marks)

(b) Dr'scass the fotlowing keeping in view the provisions of IJK Companies Act,2006.

(i) Treasury Sfiares(ii) A Company's Financial Year.


MODE OF PAYMENT OF FEES UNDER THE MCA-21 SYSTEM

(4 marks each)

MCA-21 system provides for the facility of payment of statutory fees throughmultiple modes i.e.

(i) OffJine payment through a challan generated by the system and payment offees at the counter of the notified bank branches through DDs/ Cash;

(ii) on-line payments through lnternet Banking and Credit Cards [Master Card/vrsAl.

OffJine method of payment of fees

ln case a, stakeholder chooses to pay through the offJine method (i.e. over thecounter in a bank branch), it normally takes about two to three days for the bank tointimate the realisation of payment to the MCA-21 system and the transaction getspassed on to the back office for processing only after payment is recognised by thebanking system. On the other hand, the on-line payment through lnternet banking/Credit Card is instant.

Online method of payment of'fees

Electronic payments through lnternet can be made either by credit card or bylnternet banking facility.

Credit Card Paymenf Process

The credit card payment process is as follows:

(a) The user selects credit card option for payment;

(b) MCA-2I system provides SRN and amount to third party (payment gateway);

(c) User is re-directed to third party providing internet payment gatewayservices. The user enters card information (card number, expiry date, etc.) asrequbsted by the payment gateway server to process the payment;

(d) On success, following payment authorization information is provided by thepayment gateway - SRN, date and time of transaction, amount paid,Authorization/Reference lD (generated by payment gateway), Credit. Authorization reference (VISA, MASTERCARD, etc.);

(e) The payment status is updated as "Paid" for the correspbnding SRN;

(f) ln case of failure in payment (due to incorrect card number, card expiration,etc.), user is displayed the error page with appropriate error message (ifreceived from payment gateway) along with payment options to restart thepayment process.

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S:A.-PP-CSP T.P.-3/2010

lnternet Banking Paymenf Process

Payments shall be made through lnternet banking facility provided by designatedbanks namely, HDFC Bank, lClCl Bank, lndian Bank, Punjab National Bank andState Bank of lndia. The lnternet banking payment process is as follows:

(1) MCA-21 system redirects the userto the bank's lnternet banking portal URL(as provided by the banking portal beforehand) and passes the necessaryinformation such as SRN and amount;

(2) User interacts with the bank portal and provides relevant information forpayment processing;

(3) After the payment processing is done, the response is sent by the bank'slnternet banking portal to MCA portal;

(4) On success, following payment authorization information is provided by bankportal:

(i) sRN;

(ii) Date & time of transaction;

(iii) Amount paid;

(iv) Authorization/Reference lD generated by bank's portal;

(v) Credit Authorization reference (VISA, MASTERCARD, etc.)

(5) SRN, date and time of transaction, Amount paid and Authorization/Reference lD (generated by bank's portal) MCA portal. Paymentauthorization information as received is Updated in the database and thepayment status is updated as "Paid" for the corresponding SRN lnternetbanking serviee is not prgvided by some of the banks 24 hours, and 7 days ina week. ln case the user opts for lnternet banking option for payment, whenthe service is not online, request for payment will be accepted by the bankportalto be processed offline.

Answer to Question No. 6(bXi)

Treasury Shares (Section 724)

Where qualifying shares are purchased by a company out of distributable profits,the company may (a) hold shares (or any of them) or (b) deal with any of them, at anytime, in accordance with the prescribed procedure for disposal and cancellation oftreasury shares. When shares are held under (a).above then the company must beentered in the register as the member holding those shares. For the purpose of theAct, references to a company holding shares as treasury shares are references to thecompany holding shares which (a) were (or are treated as having been) purchasedby it in circumstances in which this section applies, and (b) have been held by thecompany continuously since they were so purchased.

Where a company has shares of only one class, the aggregate nominal value ofshares held as treasury shares must not at any time exceed 10 per cent of thenominal value of the issued share capital of the company at that time.

S.A.-PP-CSP T,P.-312010

Answer to Question No. 6(b)(ii)

A company's financiatyear (Section 390)

A company's financia! year is determined as follows.

Its first financial !ear1(a) begins with the,first day of iis first accounting reference period, and(b) ends with the last day of that period or such other date, not more than seven

days before or after the end of that period, as the directors may determine.

. Subsequent financial years-(a) begin with the day immediately following the end of the company's previous

financial year, and(b) end with the last day of its next accounting reference period or such other

date, not more than seven days before or after the end of that period, as thed irectors may determine.

ln relation to an undertaking that is not a company, references in this Act to itsfinancial year are to any periodin respect of which a

"profit and loss account of tn"

undertaking is required to be made up (by its constitution or by the law under which itis established), whether that period is a year or not.

The directors of a parent company must secure that, except where in theiropinion there are good reasons against it, the financial year of each of its subsidiaryundertakings coincides with the company's own financial year.

41

1

I

l

il

I

TEST PAPER 4/2010(coMPULSORv)

(Based on ALL StudY Lessons)Time allowed: 3 hoturs Maximum marks: 100

NOTE: Attempl ALLguesfions.

Question No.1

Draft the following:

(i) General Notice of the Oompany becoming a Private company andconsequent change of name of the Company.

(ii) Resolution to be passed at a general meeting of a listetd company forapproval to bonus shares.

(iii) Board Resolution approving sate of faffelfed shares.

(iv) Board Resolution for shifting the Regisfered Office. (5 marks each)


SPECIMEN OF dENERAL NOTICE OF THE COMPANY BECOMING A PRMATECOMPANY AND CONSEQUENT CHANGE OF NAME OF THE COMPANY

NameoftheCompany(new).'....'.'.....'.''.'

PUBLIC NOTICE

All concerned are hereby informed that the name of the Company has been

changed from "........from ,.............. as per FRESF1 CERTIFICATE OF INCORPORATION CONSEQUENT

uPoN QHANGE OF NAME issued by the Registrar of companies, ................. on the

day of 20........

The registered office of the company continues to be situated at.

Place:

Date: .................

NOT TO BE PUBLISHED

For publication in the ....:.....:.,daily and Hindi Daily, , for........ Limited

Company Secretary

42

S.A.-PP-CSP T.P.-3/2010


SPECIMEN RESOLUTION TO BE PASSED AT A GENERAL MEETING OF ALISTED COMPANY FOR APPROVAL TO BONUS ISSUE

'RESOLVED THAT Subject to the guidelines issued by the Securities andExchange Board of lndia and subject to the Foreign Exchange Management Act,1999 for allotment and issue of new equity shares to the non-resident members andsubject to the consents of financial institutions, as may be applicable, and alsosubject to such terms, conditions, alterations, modifications, changes and variationsas may be specified while according such approval which the Board of Directors ofthe company ("the Board"), is authorised to accept, if it thinks fit, the Companyapproves capitalizing the entire amount standing to the credit of General Reserveand,..... Reserve and part of the amount standing to the credit of Share PremiumAccount in the books of the company as on..... for an aggregate amount of Rs. .....and such sum be set free for distribution among the holders of existing fully paid

equity shares of Rs. 10 each of the company, whose names will appear in theregister of members of the company on a date to be decided by the Board in thatbehalf as Record Date, as an increase of the amount of share capital of the companyheld by each such member and not as income or in lieu of dividend credited as.......fully paid-up equity shares as bonus shares in the proportion of... new equity sharesfor every.... existing fully paid equity shares held, subject to the following terms andconditions:

(a) The new equity shares to be allotted as bonus shares will be allotted subjectto the terms of the Memorandum and Articles of Association of the company;

(b) The new equit! shares shall rank pari passu in all respects with and carry thesame rights as the existing fully paid-up equity shares of the company andnotwithstanding the date or dates of allotment thereof shall be entitled toparticipate in full in any dividend to be declared in respect of the financialyear in which the allotment of the new equity shares pursuant to thisResolution is made;

No letter of allotment will be issued by the company in respect of the newequity shares. However, the equity share certificates in respect thereof will beready for delivery to the allottees within 3 months from the date of allotmentthereof;

lf as a result of implementation of this resolution, any member becomesentitled to a fraction of new equity shares to be allotted as bonus shares thecompany shall not issue any certificate or coupon in respect of suchfractional shares but the total number of such new equity shares representingsuch fractlons shall be allotted by the Board to a nominee to be selected bythe Board who would hold them as trustee for the equity shareholders whowould have been entitled to such fractions, in case the same were issued.Such nominee will as soon as possible sell such equity shares allotted to himat the prevailing market rate and the net sale proceeds of such shares afteradjusting the cost and expenses in respect thereof be distributed amongsuch members who are entitled to such fractions in the proportion of theirrespective holding and allotment of fractions thereof; and

No allotment of bonus shares or distributiorl, of proceeds in respect offractions to the non-resident lndian membersi unless the provisions of the

43

(c)

(d)

(e)

S.A.-PP-CSP T.P.-312010

Foreign Exchange Management Act, 1999 have been complied by thecompany.

RSOLVED FURTHER THAT the Board of Directors of the TThe Company be andare herby authorized to do all such acts, matters and things whatsoever includingsettling any question, doubt or difficulty that may arise with regard to or in relation tothe issue or allotment of the bonus shares and to accept on behalf of the companyany conditions, modifications relating to the issue of bonus shares prescribed by theReserve Bank of lndia or any cther authority and which the Board in its discretionthinks fit and propei'.

Answer to Question No. l(iii)

SPECIMEN OF BOARD RESOLUTION APPROVING SALE OF FORFEITEDSHARES

'RESOLVED THAT ........ equity shares of Rs......... each bearing DistinctiveNos......... to ........., both inclusive, previously registered in the name of Shri..............and forfeited on............... as per declaration duly signed by Company Secretaryplaced on the table, be and are hereby sold to Shri................ for Rs.............pershare and that, upon payment of that sum, a equity share certificate of equity sharescredited with Rs....:. paid-up per share be issued to the saidShri............ accordingly."


SPECIMEN OF BOARD RESOLUTION FOR SHIFTINGTHE REGISTERED OFFICE

"RESOLVED THAT subject to the provisions of section 17, 146(2) of theCompanies Act, 1956 and other provisions as applicable, if any, and subject to theapproval of members of the Company by Special Resolution and subject to thecohfirmation of the Company Law Board/Central Government, the consent of theBoard of directors of the Company be and is hereby accorded for shifting of theregistered office of the company from ........ to .............:..

FUTHER RESOLVED THAT the Clause No. ll of the Memorandum ofAssociation of the Company be and is hereby substituted by the following:

ll. The Registered Office of the Company shall be situated in the State of

IFURTHER RESOLVED THAT the notice of the Extraordinary General Meeting

I

alongwith the Explanatory Statement as placed before the Board duly initialed by the j

Chairman for the purpose of identification be and is hereby approved and the i

directors of the Company be and are hereby authorized to issue the notice to the i

members and are alqo.further authorized to do any act or deed or to appoint any i

other person to give effect to this mattef.

FURTHER RESOLVED THAT Mr. and Mr.Directors of the Company be and are hereby jointly and / or severally authqrized toisign the petition, application, atfidavits and such other documents as may bejnecessary in relation to the said petition.

S.A,-PP-CSP T.P.-3t201A

FURTHER RESOLVED THAT Mr. ... .....,, Practising Company Secretary,be and is hereby authorized to appear and represent the Company before theCompany Law Board/Central Government in the matter of the petition to be filed withCompany Law Board/Central Government for its .confirmation to the proposedalteration of the situation Clause of the Memorandum of Association and alsoauthorized to make such statements, furnish such information and do such things asmay be necessary in relation to the said petition.

FURTHER RESOLVED THAT pursuant to the provisions of Regulation 18(3) ofthe Company Law Board Regulation, 1991 and other applicable provisions of theCompanies Act, 1956, Mr. ... ., Company Secretary in Whole TimePractice, be and is hereby authorised to enter appearance before the Company LawBoard and to represent the Company with respect to every matter connected with theshifting of the Registered Office of the Company from to

FURTHER RESOLVED THAT Mr. ... .., is further authorised torepresent and act'on behalf of the Company and to sign all documents, papers,deeds etc., if necessary, for the aforesaid purpose."

Question No.2

(a) Choose the appropriate answer from the given options in respect of thefollowing:

(i) The Central Government has the power to order a speciat audit ofaccounts of a company in the circumsfances mentioned in Sub-section(1) of section

(ii) A member of the lnstitute of Company Secretaries of lndia mayprefix_to his name

(iii) A manager appointed by the Board of Directors of a Company may beremoved by the_.

(iv) Secfion 58A (ii) permits a depositor to make a _ in respect ofhr.s deposifs

Secfion of the Companies Act, 1956 defines debentures.

A holding a vatid certificate of registration is required to beappointed to manage fhe rssue. (1 mark each)

(b) Re-write the following sentences after filling in the blanks spaces witha p prop ri ate word (s)fiig u re(s) :(i) Application to the Central Government for exemption from attaching the

accounts of subsidiary Companies shall be in e-form

Under e-filing sysfem of MCA, Companies are required to fileCompliance Certificate on4ine with the Registrar of Companieswithin_days.'Application moneys received by companies for allotment of any securitiesand due for refunds are transferred to

Secretarial standard (SS-3) relates to.

Seclion

45

(v)

(vi)

(ii)

(iii)

(iv)

(v)includes

124 of the Companies Act, 1956 sfafes that "charge"

-lt'I

I s.A.-PP-CSP 46 T.P.-3/2010

(vi) An is a notified document in electronic format for filing withMCA authorities through the internet. (1 mark each)

(c) Enumerate the charges reglsfrab le under the Companies Act, 1956.

Answer to euestion No. 2(a) (4 marks)

(i) 233A

(ii) cs(iii) Board

(iv) An application [Note: ln the question, after section 58A, (ii) has beenmistakenly inserted. Error is regretted.l

(vl 2 (12)(vi) Merchant banker

Answerto Question No. 2(b)(i) 23AAB

(ii) Thirty

(iii) lnvestor Education and Protection Fund

(iv) Dividend

(v) A mortgage

(vi) E-form


Sub-section (4) of Section 125 of the Companies Act, 1956 lays down thatthe. following nine types of charges are registrable under this section:

1. a charge for the purpose of securing any issue of debentures;

2. a floating charge on the undertaking or any property of the companyincluding stock in trade;

3. a charge on uncalled share capital;

4. a charge on calls made but not paid;

5. a char:ge on any immovable property, wherever situated, or any interesttherein;

6. a charge on a ship or any share in a ship;

7. acharge on any book debt ofthe company;

8. a charge on goodwill, on a patent or a licence under a patent, on a trademark or on a copyright or a licence under a copyright; and

9. a charge, not being a pledge; on any movable property of the company.

The scope of Section 125 depends on many factors, e.g., whether the rightsacquired by a charge-holder in the assets or properties of the company constitutes acharge and if it does constitute a charge, is it one of the charges enumerated in thesection and,whether the right in the assets of the company was created by thecompany.

T.P.-3t2010S.A.-PP-CSP

Question No.3

(a) Give satient features of the fotlowing forms :

(i) Form 23(ii) Form 18

(iii) Form 32

47

(3 marks each)

(b) What are the particulars which are required to be filed with the Registrar ofCompanies?


(i) E-Form 23 - Registration of resolution(s) and agreement(s)

(7 marks)

- This form is required to be filed pursuant to section 192 of the CompaniesAct, 1956.

- The important particulars required to be filled in the form are:

- Corporate identity number (ClN) of company.

- Name of the company, address of the registered office of the company &e-mail lD of the company.

- Date of dispatch of notice for passing of resolutions(s)/postalresolution(s).

- Date of passing of resolutions / postal ballol resolution (s).

- Number of resolution(s) for which the form is being filed.

- Details of the resolution i.e. section of the Companies Act, 1956 underwhich passed, purpose of passing the resolution and subject matter ofthe resolution.

- ln case of alteration in object clause, whether there is any change in theindustrial activity of the company. lf the answer is yes, please provide themain division of new industrial activity of the company.

- ln case of voluntary winding up under section 484, provide the detailsregarding Mode of winding up, Date of commencement of winding up &Number of liquidato(s).

- Details of the agreement i.e. date of the agreement, section of theCompanies Act, 1956 under which agreement made, purpose of enteringinto the agreement & subject matter of the agreement.

- Service request numbe(SRN) of Form21 (in case of alteration in objectclause)

-The following attachments are required to be filed with form:

- Copy(s) of resolution(s) along with copy of explanatory statement undersection 173

- Altered memorandum of association

- Altered articles of association

- Copy of agreement

- Optional attachment(s) - if any.

-The form should be digitally signed by director or Managing Director or manager

ballota

S.A.-PP-CSP T.P.-312010

or liquidator or secretary of the company.

-The form is pre certified by Chartered accountant (in whole-time practice) or Cost' accountant (in whole-time practice) or Company secretary (in whole-timepractice).

(ii) E-Form 18 - Notice of situation or change of situation of registered office

- This form is required to be filed pursuant to section 146 of the CompaniesAct, 1956.

- The important particulars required to be filled in the form are:

- Form 1A reference number (Service request number (SRN) of (Form 14)or corporate identity number (ClN) of company,

- Nameof the company & address of the registerid office of the company.: Name of office of existing Registrar of Companies (ROC).

- Purpose of the forrn.

- Name of office of proposed ROC or new ROC.

- The full address of the police station under whose jurisdiction theregistered office of the company is situated.

Date of order of company law board (CLS) or any other competentAuthority.

- The following attachments are required to be filed with form :

- Optional attachment(s) - if any

- The form should be digitally signed by Managing Director or director ormanager or secretary of the company.

- The form is precertified by Chartered accountant (in whole-time practice) orCost accountant (in whole-time practice) or Company secretary (in whole-time practice).

(iii) E-Form 32 - Particulars of appointment of Managing Director, directors,manager and secretary and thechanges among them or consent of candidateto act as a Managing Director or director or manager or secretary of a companyandlor undertaking to take and pay for qualification shares.

- This form is required to be filed pursuant to section 303(2), 2M(2) or266(1)(a), 266(l Xbxiii) of the Companies Act, 1956.

The important particulars required to be filled in the form are:

- Form 1A reference number (Service request number (SRN) of Form 1A)or corporate identity number (ClN) of company.

- Name of the company & address of the registered office of the company& e-mail lD of the company.

- Number of Managing Director, directo(s) for which the form is being filed

- Details of the Managing Director or director of the company i.e. name,fatheds name, date of birth, designation, residential address etc.

The following attachments are required to be filed with form:

- Evidence of payment of stamp duty where qualification shares is involved

48

S.A.-PP-CSP r.P.-3t2010

(This will be mandatory only if the director giving consent agrees to payfor at least one share).

- Consent(s) of the appointee Managing Director, director(s).

- Declaration regarding qualiflcation shares

- Evidence of cessation

- Optional attachment(s) - if anY

- The form should be digitally signed by Managing director or director ormanager or secretary of the company.

- The form is pre certified by Chartered accountant (in whole-time practice) orCost accountant (in whole-time practice) or Company secretary (in whole-time practice).


The important particulars required to be filled in e-form 1 are as follows:

- Name of the companY.

- Name of the,state in which the company is to be registered.

- Name of the office of the Registrar of Companies in which the company is tobe registered.

- Capital structure of the company.

- Details of number of members, in case of company not having share capital.

- Main division of the industrial activity of the company.

- Particulars of Promoters.

- Particulars of payment of stamp duty

Note: ln the question 3(b), the words, "of e-form l" should have been insertedafter the word 'particular'. Error is regretted.

Question No.4(a) Write short notes on:

(i) Resignation and removal of offices under revised modet busrnessCorporation Act of USA.

(ii) Need for Secretariat Standard. (4 marks each)

(b) State with reasons in brief whether the foltowing statemenfs are correct orincorrect:

(i) The auditor of a Government Company shatt be appointed or re-appointed by the Comptroller and Auditor General of lndia.

(ii) Every public company is required to have a minimum of two directors.

(iii) Directors and Officers liabitity lnsurance provides civit and CriminalProtection for the Directors and Officers of the Company.

(iv) Pivate company may by its Article or otherwise refuse to register thetransfer or transmission of shares. (2 marks each)

49

S.A-PP-CSP T.P.-3t2010

Answer to Question No. a (a)(i)

Resignation and Removal of Officers

(a) An officer may resign at any time by delivering notice to the corporation. Aresignation is effective when the notice is deiivered unless the notice specifies a latereffective time. lf a resignation is made effective at a later time and the board or theappointing officer acce[ts the future effective time, the board or the appointing officermay fill the pending vacancy before the effective time if the board or the appointingofficer provides that the successor does not take office until the effective time. .

(b) An officer may be removed at any time with or without cause by: (i) the boardof director,s; (ii) the officer who appointed such officer, unless the bylaws or the boardof directors provide otherwise; or (iii) any other officer if authorized by the bylaws orthe board of directors.

(c) ln this section, "appointing officef'rneans the qfficer (including any successorto that officer) who appointed the officer resigning or being removed.

Answer to Question No. a (a)(ii)

NEED FOR SECRETARIAL STANDARDS

Companies today follow diverse secretarial practices. These practices haveevolved over a period of time through varied usages and as a response to differingbusiness cultures. As an illustration, the Companies Act, 1956, provides thatcompanies must convene their Board Meetings by giving notice to directors in thisregard. However, no minimum period for giving such Notice has been laid down and,companies are at liberty to give any or no length of notice for convening a BoardMeeting. Further, there is no requirement for sending Agenda for the Meeting. Somecompanies specify the business to be transacted in the Notice itself, whi.le otherssend a separate Agenda. ln addition, some companies also send detailed Notes,explaining each item on the Agenda. While some companies send the Agenda inadvance of the Meeting, others place the Agenda at the Meeting itself. Even in caseof those cornpanies which send the agenda in advance, the period varies. These'divergent practices need to be harmonised by laying down the best practices in thisregard.

A need was, therefore, felt to integrate, consolidate, harmonise and standardiseall the prevalent diverse secretarial practices, so as to ensure that uniform practicesare followed by the companies throughout the country. Such uniformity of practices,consistently applied, would result in the establishment of sound corporategovernance principles.

Answer to Question No.4(b).True. Section 6'19(2) of the Companies Act, 1956 provides that the auditorsof a Government company shall be appointed or re-appointed by theComptroller and Auditor General of lndia (CAG).

Fatse. According to section 252(1) of the Companies Act, 1956, every publiccompany other than a public company which has become such by virtue ofsection 43A of the Act shall have at least three directors.

(iii) False. Directors and Officers liability lnsuranoe normally indemnify in

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(i)

( ii)

f-


respect of damages awarded against Directors or officers anQ the companyreimbursement of the insured companies in case of a valid contractualobligation on their part to hold a director or officer harmless. Defense costsare also normally covered. Criminal behavior is excluded. ln other words,directors and officers liability insurance provides only civil protection for thedirectors and officers of the company. Criminal protection is not covered.

(iv) True. By virtue of Section 3(1xiii) of the Companies Act, 1956, a privatecompany means a company, which has a minimum paid-up capital of onelakh rupees or such higher paid-up capital as may be prescribed, and by itsarticles restricts the right to transfer its shares, if any. So, a private companymay by its articles or othenrvise refuse to register the transfer or transmissionof shares.

Question No.5(a) A Shareholder living in Kolkata senf a .transfer deed for registration of transfer

of shares in a company having /s regisfered office in Chennai. The sharecertiflcates duly endorsed in his name were not received by him even afterthe expiry of four months from the date of lodgment. He lodged a criminalcomplaint before the appropriate court dealing with economic offences at

. New Delhi. Can the Court in New Delhi enteftain th,e complaint?

(b) The shareholders at an annuat general meeting of a public limited companyunanimously resolved for payment of dividend though the Board of Directors. did not recommend payment of any dividend. Sfafe fhe legalposition.

(c) A company stafted fo sue the trade mark name of another company in thesame family as lfs corporate name and started dealing in the products.Explain with the help of a decided case law, whether this practice can beallowed.

(d) Whether failure to'obtain prior permissrbn of the Central Government forremoval of statutory auditor is a continuing offence. Explain with the help of arecent case law. (4 marks each)


According to section 113(1) bf tfre Companies Act, 1956, every company, unlessprohibited by any provisions of law or of any order of court, tribunal or other authority,shall within two months after the application for the registration of transfer of any suchshares, deliver the certificates of all shares transferred. ln the case of a listedcompany under the listing agreement this period had been reduced to one month.

Further, in the case of H.V. Jaya Ram v. l0lCl Ltd., the Supreme Court held thatcause of action for failure to deliver share certificate arises where the registered officeof the company is situated and not in the jurisdiction of the Court located in the placewhere the complainant resides. Therefore, in the present case, the Court in NewDelhi cannot entertain the complaint.


As per section 217 of lheCompanies Act, 1956, directors are required to mentionin their report to the shareholders the amount, if any, which they recommend should

51

S.A.-PP.CSP T.P.-3/2010

be paid by way of dividend. Further, unless the articles provide otherwise, declarationof dividends though a prerogative of shareholders is allowed only if the directors sorecommend.


It was held in the case of Atlas Cycles (Haryana) Ltd. v. Atlas Products Pvt. Ltd.

[146 (2008) DLT 274(DB), where the facts of the present case were similar that thecompany should be restrained from using the trade mark of another company in thesame family


ln the case of Fortunes Stones Ltd. v. Registrar of Companies [(2008) 84 SCL479 (DEL)], where the facts of the present case were similar, the perusal of thecomplaint showed that the offence was for the contravention of section 224(7) of theCompanies Act, 1956 which required a company to obtain the previous approval ofthe Central Government for removal of the auditor at general meeting. Thesubsequent obtaining of the permission of the Central Government cannot rectify thecontravention of section 224 (7) which mandate a prior approval. By the very natureof the statutory requirement, the contravention can constitute only a one time offenceand not a continuing one. The contention that the contravention in the instant casewas a continuing one was to, accordingly, reiected

Question No.6(a) Distinguish between:

(i) lnterim dividend and Finatdividend.(ii) Forfeiture and Surrender of shares.

(b) Write short nofes on;

0 Reduction of Share Capital.

(ii) Management Discussion and Analysis Report.

(4 marks each)

(4 marks each)

Answer to Question No. 6 (aXa)

Distinction between interim dividend and final dividend

Final Dividend

Final dividend is recommended by the Board of directors in its report to theshareholders, as per the requirements of Section 217 of the Comfanies Act, 1956which is attached to the balance sheet for the relevant financial year. lt is declared bythe shareholders at the annual general meeting. Usually, articles of association ofcompanies provide that the shareholders cannot increase the rate or amount ofdividend than the one recommended by the Board. The shareholders may, however,declare the payment of dividend on equity shares at a rate lower than the onerecommended by the directors in their report.

It is the discretion of the Board of directors to recommend or not to recommendthe declaration of final dividend, which has to be exercised in good faith in the interestof the company. The shareholders have no power to declare final dividend in theabsence of a recommendation of the Board of directors in this regard.

S.A.-PP.CSP T.P.-3/2010

lnterim Dividend

Section 2(144) of the Companies Act, 1956 defines'Dividend' to include interimdividend. The Companies (Amendment) Act, 2000 has amended Section 205 tomake provisions for interim dividend. The Board of directors may declare interimdividend. The interim dividend is paid between two annual general meetings of thecompany.

Prior to the coming into force of the Companies (Amendment) Act, 2000, the Actdid not contain specific provisions for payment of interim dividend. However, if thearticles of association of company authorized payment of interim dividend as perregulation 86 of the Table A of Schedule l, then the Board of directors of suchcompany could declare an interim dividend where its profits warranted such payment.A mere resolution for declaration of an interim dividend did not create any liability andcould be rescinded at any time before actual payment. This was so even if the cashto cover the proposed dividend had been placed into a separate account. Thedistinction between interim and final dividend was that, unlike interim dividend, a finaldividend once declared by the company in general meeting was a debt and createdan enforceable obligation. [Punjab National Bank v. Union of lndia (1986) 59 CompCases 35 (Del.)l

With the enactment of the Companies (AmendmenQ Act, 2000, this position haschanged. lnterim dividend stands on the same footing as that of the final dividend.Both interim and final dividend when declared become debt and are payable within30 days of declaration.

Answer to Question No. 6 (aXii)

FORFEITURE OF SHARES

To forfeit means to lose the right to, be deprived of; to lose or become liable tolose, as in consequence of fault or breach of promise or contract. lt is a penalty for abreach of contract or neglect; a fine that is imposed for not complying with thestipulated condition, obligation or duty. For example, in the case of shares of acompany, if a call money payable on a partly-paid share is'not paid by a shareholder,the company can forfeit the shares for the obligation of paying the call money notbeing fulfilled by the shareholder

A forfeited share is a partly paid share in a company that the shareholder has toforfeit because he has failed to pay a subsequent part or final payment; a share towhich the right is lost by the shareholder who has defaulted in paying call money.

The Companies Act, 1956 does not contain any provision in respect of forfeitureof shares in a company. However, articles of assoOiation of almost allthe companiescontain detailed provisions regulating forfeiture of shares. These provisions arebased on the regulations 29 to 35 in Table A of Schedule I to the Companies Act,1956 or recast based on the regulations.

SURRENDER OF SHARES

Surrender means to hand over; relinquish possession of, especially oncompulsion or demand. The Companies Act does not contain any provisionon surrender of shares. Table A in the First Schedule also does not give power to a

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company to accept surrender of its shares; it contains no regulation on this subject.

There is difference between surrender and forfeiture of shares. There is noreference in the Act to surrender of shares; but these have been admitted by thecourts, upon the principle that they have practically the same effect as forfeiture, themain difference being that the forfeiture is a proceeding against an unwilling partyand the surrender a proceeding taken with the assent of the shareholder who isunable to retrain and pay future calls on the shares. Further, surrender is voluntarywhile the forfeiture is due to breach of contract.

Answer to Question No. 6 (bXi)

Reduction of Share Capital

Reduction of capital means reduction of issued, subscribed and paid-up capital ofthe company. Section 100 of the Companies Act, 1956 provides for the reduction ofshare capital, if the arti0les of the company so authorise. lf there is no such clause inthe articles, these must be altered by a special resolution giving the company thepower to reduce capital.

A company limited by shares or a company limited by guarantee and having ashare capital may, if authorised by its articles, by special resolution, and subject to itsconfirmation by the Court on petition, reduce its share capital in any way and inparticular:

(a) by reducing or extinguishing the liability of members in respect of uncalled orunpaid capital e.9., where the shares are of Rs. 100 each with Rs. 75 paid-upreduce them to Rs. 75 fully paid-up shares and thus relieve the shareholdersfrom liability on the uncalled capital of Rs. 25 per share;

(b) by paying off or returning paid-up capital not wanted for the purposes of thecompany, e.9., where the shares are fully paid-up, reduce them to Rs. 75each and pay back, Rs. 25 per share;

(c) by paying off the paid-up capital on the condition that it may be called upagain so that the liability is not extinguished;

(d) by following a combination of any of the preceding methods;

(e) by writing off or cancelling the capital which has been lost or is underrepresented by the available assets e.g. a share of Rs. 100 fully paid-up isrepresented by Rs. 75 worth of assets. ln such a situation reality can be re-introduced by writing otf Rs. 25 per share. This is the most common methodof reduction of capital. The assets side of the balance sheet may includeuseless assets which are cancelled. On the other hand in the liability sideshare capital is reduced.

Answerto Questidn No.6 (bXii)

MANAGEMENT DTSCUSSTON AND ANALYSTS REPORT (MDAR)

The MDAR should either form a part of the Board's Report or be given as anaddition thereto in the annual report to the shareholders. The MDAR should include adiscussion on the following matters within the limits set by the company's competitiveposition:

- lndustry structure and developments

S.A.-PP-CSP T.P:-3/2010

- Opportunities and threats

- Segment-wise or product-wise performance

- ouitoot<

- Risks and areas of concern

- tnternal control systems and their adequacy

- Discussion on financial performance with respect to operational performance

- Material,developments in human resburces/industrial relations front, includingnumber of people employed.

MDAR should be considered and approved by the Board in a meeting of theBoard and not through resolution passed by circulation. lt is desirable that MDAR issigned in the same manner as in thecase of the.Board's Report.

TEST PAPER 5I2O1O(coMPULSORY)

(Based on ALL Study Lessons)Time allowed: 3 hours Maximum marks: 100

NOTE: Attempt ALL guesflons.

Question No.1

Draft the following resolutions stating the authority that can pass rt and also thetype of resolution.

(i) Resolufions authoizing fhe issue of duplicate share ceftificates.(ii) Alteration of articles of the company to include an afticle authorizing the

company to have ifs secunties dematerialized.(iii) Rqsolution authorizing a director to discharge certain responsibility on behatf

of the Board.

(iv) Resolution for appointment of Compliance Officer. (5 marks each)

Answer to Question No. {(i)

SPEGIMEN OF BOARD RESOLUTION AUTHORISING THE ISSUE OFDUPLICA]t SHARE CERTIFICATES

"RESOLVED THAT a equity share certificate No. for .....,.... fully paid equityshares of Rs........ each of the company bearing distinctive numbers ....... to .......(both inclusive) after stating on the face thereof the words "Duplicate issued in lieu ofshare certificate No......................u be issued in the name of Shri ...............in lieu oforiginal share certificate No...... reported to have been lost by him, under thesignatures of the Shri .......... Managing Director, Shri ..........Director, and the Shri ................,. Company Secretiary, under the common seal of thecompany to'be affixed thereto in the.presence of ine directors and the CompanySecretary, who shall sign the share certificate."


SPECIMEN OF SPECIAL RESOLUTION FOR ALTERATION OF ARTICLES OFTHE COMPANY TO INCLUDE AN ARTICLE AUTHORISING THE COMPANY TO. HAVE ITS SECURITIES DEMATERIALISED

"RESOLVED THAT pursuant to Section 31 of the Companies Act, 1956, thearticles of association of the company be and are hereby altered by inserting thearticle No............after the Article No.,.........,so as to include the provisions withrespect to the Dematerialisation of Securities;

After article No..., the following be inserted as article ... :

Article ... Dematerialisation of Securities

A. Definitions:

For the purpose of this article:-

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'Beneficial Owner'.means a person or persons whose name is recorded as suchwith a depository.

'SEBI' means the Securities and Exchange Board of lndia.

'Depository' means a company formed and'registered underthe Companies Act,1956, and which has been granted a certificate of registration to act as a depositoryunder the Securities and Exchange Board of lndia Act, 1992; and

'security' means such security as may be specified by SEBI from time to time.

B. Demderialisation of Secunfi'es

Notwithstanding anything contained in these articles, the company shall beentitled to demateria[ise its securities and to offer securities in a dematerialised formpursuant to the Depoiitories Act, 1996.

C. Options for investors

Every person subscribing to securities otfered by the company shall have theoption to receive security certificates or to hold the securities with a depository. Sucha person who is the beneficial owner of the securities can at any time opt out of adepository if permitted by the applicable law in respect of any security in the mannerprovided by the Depositories Act, and the company shall, in the manner and withinthe time prescribed, issue to the beneficial owner the required certificates ofsecurities.

lf a person opts to hold his security with a depository, the company shall intimatesuch depository the details of allotment of the security andior transfer of securities inhis name and on receipt of the information, the depository shall enter in its record thename of the allottee andlor transferee as the beneficial owner of the security.

D. Securities in Depositories to be in Fungible Form

All securities held by a depository shall be dematerialised and be in fungibleform. Nothing contained in Sections 153, 153A, 153B, 1878,187C and 372A of theAct shall apply to a depository in respect of the securities held by it on behalf of thebeneficial owners.

E. Distinctive Numbers of Securifies held in a Depository

Nothing contained in the Act or these articles regarding the necessity of havingdistinctive numbers for securities issued by the company shall apply to securities heldwith a depository.

F. Rights of Depositories and Beneficial Qwners(i) Notwithstanding anything to the contrary contained in the Act or these

articles, a depository shall be deemed to be the registered owner for thepurposes of effecting transfer of ownership of security on behalf of thebeneficial owner.

(ii) Save as otherwise provided in (a) above, the depository as the registeredowner of the securities shall not have any voting rights or any other rights inrespect of the securities held by it.

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(iii) Every person holding securities of the company and whose name is enteredas the beneficial owner in the records of the depository shall be deemed tobe a member of the company. The beneficial owner of securities shall beentitled to all the rights and benefits and be subject to all the liabitities inrespect of his securities which are held by a depository.

G. Seruice of Documents

Notwithstanding anything to the contrary contained in the Act or these articles,where securities are held in a depository, the records of the beneficial ownership maybe served by such depository on the company by means of electronic mode or bydelivery of floppies or discs.

H. Transfer of Secunfi'es

Nothing contained in Section 108 of the Act or these articles shall apply to atransfer of securities effected by a transferor and transferee both of whom areentered as beneficial owners in the records of a depository.

l. Allotment of Securities Dealf in a Depository

Notwithstanding anything contained in the Act or these articles, where securitiesare dealt in a depository, the company shall intimate the details thereof to thedepository immediately on allotment and/or registration of transfer of such securities.

J. Register and lndex of Beneficial Owners

The register and index of beneficialowners maintained by a depository under theDepositories Act, 1996, shall be deemed to be the register and index of members andsecurity holders for the purposes of these articles."

RESOLVED FURTHER THAT the Board of Directors of the Company be and ishereby authorized to do atl such acts and deeds like filing of necessary documentswith ROC etc so as to give effect to this resolution.

Answerto Question No. 1(iii)

SPECIMEN RESOLUTION AUTHORISING A DIRECTOR TO DISCHARGECERTAIN RESPONSIBILIW ON BEHAI.F OF THE BOARD

'RESOLVED that Shri A, Director, be and is hereby authorised to sign andexecute counter guarantees in favour of the State Bank of lndia on behalf of thecompany whenever the company has to get guarantees issued by the said Bank forthe purpose of giving quotations against the tenders floated by the agencies ofCentral or State Government andtny other company."

Answer to Question No. 1(ivf

BOARD RESOLUTION FOR APPOINTMENT OF COMPLIANCE OFFICER

"RESOLVED that the company do hereby appoint Mr. ............ DeputyCompany Secretary of the company who has ten years experience in ListedCompanies, as Compliance Officer of the company who shall be responsible formonitoring the share transfer process (both physical and demat mode) and report to


the Board in its each meeting and liaise directly with the authorities of the SEBI,Stock Exchanges, Registrar of Companies etc, the shareholders of the company andinvestors with respect to implementation of various clauses, rules, regulations andother directives of such authorities and investors services and complaints relatedmatters and in compliance with the provisions of the Companies Act, 1956, ListingAgreement and Rules and Regulations framed thereunder."

Question No.2

(a) Rewrite the following sentences after filling-in the blank spaces witha p p ro p riate wo rd (s/fig ures(s) :

(i)whether the .............. affixed in the eForm actually belong to signatoryof the company and/or of a practicing professional.

(iil By viftue of section 12 (2) (c) of the Companies Act, 1956, ancompany is a company not having any limit on the .............. of /smembers.

(ii| The power to make calls can be exercised onty by the . . . . . ... by means ofa resolution passed at a duly convened meeting.

(iv) According to section ......... of the Companies Act, a company isrequired to file a return of allotmenf of shares and not for ......... offorteited shares.

(v) Section 117C of the Act requires every company to create a .......... to. which adequate amount shall be out of its profits every year.

(vi) According to section 297 of the Companies Act, 1956, sanctionis required for ceftain contracts in which any ........... ts interested.

(1 mark each)

(b) State, with reasons in br'tef, whether the fottowing sfafemenfs are correct orincorrect:

(i) After the company is incorporated, it may acquire the assefs andliabilities of any running buslness.

(ii) Shares offered to the existing shareholders of a company are calledbonus shares.

(iii) Section 1178 was insefted by Companies (Amendment) Act, 20A2.

(iv) The totat number of directors and additional directors can exceed themaximum strength of directors fixed for the Board by the articles of thecompany.

(v) Section 224(1) provides that every company must appoint auditor orauditors at each annual general meeting to hold office from the date ofthat annual general meeting till the date of the next annual generalmeeting.


(i) Role Check; Digitatsignature(ii) Unlimited; Liability

(iii) Board; Board

(iv) 75; Reissue

(2 marks each)

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(v) Debenture Redemption Reserve ; credited(vi) Board's; Dlrector


(i) True. After a company is incorporated, it becomes a legal entity separate fromthe persons who constituted it. Therefore, it may acquire the assets and liabilities ofany running business in its own name.

(ii) Fatse. Shares offered to the existing shareholders of a company are called'rights shares'. Section 81 of the Companies Act, 1956 contains provisions on "furtherissue of capital", and enacts the principle of pre-emptive rights of shareholders of acompany to subscribe to new shares of the company.

(iii) False. Section 1178 was inserted'by the Companies Amendment Act, 2000w.e.f. 13-12-2000.

(iv) False. According to section 260 of the Companies Act, 1956, the totalnumber of directors and additional directors shall not exceed the maximum strengthof directors fixed for the Board by the articles of the company.

(v) True. According to Section 224(1) of the Companies Act, 1956, everycompany shall, at each annual general meeting (AGM), appoint an auditor or auditorsto hold office from the conclusion of that meeting until the conclusion of the nextannual general meeting.

Question No.3

(a) Choose the most appropriate answer from the given options in respect of thefollowing:(i) The minimum paid up capital for private limited company r.s Rs. -

(a) 1,00,000(b) 2,00,000(c) 3,00,000(d) 4,00,000

(ii) Secfion 31 of the Companies Act, 1956 lays down that subiect to theprovisions of the Act and to the conditions contained in its memorandum,a company may, by a ........., alter its articles.(a) ordinary resolution(b) special resolution(c) resolution by special notice(d) board resolution

(iii) The power to convert shares into stock and reconvert stock rnfo shares lsconferred on a company by(a) section 91(b) section 92(c) section 93(d) section 94

(iv) Section 2(27) excludes a bearer of a share-warrant of the company to bea .........-...

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(a) member(b) sharehotder(c) director(d) none ofthe above.

(v) The first auditor of a company may be removed, ii the company at ageneral meeting appoints another auditor, of whose nomination [,v "nimember, notice has been given to the members nof tess thai.....-..

before the meeting(a) ten days(b) twelve days(c) fourteen days(d) twenty-one days

(vi) Any general meeting helct between two annual generat meetings witt becalled(a) an extraordinary general meeting.(b) a board meeting.(c) A statutory meeting.(d) A class meeting. (1 mark each)

(b) You are the ,cgmpany secretary of Maritime containers Ltd., a tistedcompany, and the Managing Director of your company wants to know theprocedure for changing the name of the ampany. prepare a note for him.

Answerto euestion No.3(a) fto marks)

(i) (a) 1,00000(ii) (b) Speciat Resotution(iii) (d) Section g4

(iv) (a) member(v) (c) fourteen days(vi) (a) an extraordinary general meeting.


To

The Board of DirectorsXYZ Limited.

Sub: - Procedure regarding change of name of the companyA company has to take the following procedural steps for its change of name:

1. lssue notice in.writing.to gv.ery director of the company for the time being inlndia and at his usual address in lndia to every'other director as p"iin"provisions of section 296 of the companies Act, 1956. The noticb mustcontain time, date and venue for the meeting and detailed agenda of nebusiness to be transacted thereat

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2. Hold the Board rneeting to -

62 T.P.-3/2010

Consider and approve the proposed name by passing a resolution.Considering that the proposed name may not be made available by theconcerned Registrar of Companies (ROC), the Board must consider anddecide at least five more names in order of their preference. Thesenames are required to be given in the application for availability of nameto be made.to the Registrar of Companies in e-form 1A, as prescribed inthe Companies (Central Government's) General Rules and Forms(Amendment) Rules, 2006, for his consideration. lf the proposed name isnot available, the five additional names may be considered by theRegistrar and whichever of those names is available, the same isreserved for the company. A formal Board resolution is required to bepassed at the meeting.

to authorise the Company Secretary/Director to make the requiredapplication to the Registrar of Companies in e-form 1A for seekingavailability of the proposed name and pay the prescribed application feeof Rs.500/-.

3. The application in e-Form 1A, accompanied by a fee of rupees five hundredto the Registrai of Companies should have the following documents asattachment:

ln case of change of name of an existing company, a copy of Boardresolution;

Trademark or authorization to use trade mark, if the name of thecompany is based on trade mark or application for deed of assignment;

lf change is due to a direction received from the Central Government,then a copy of such direction;

Optional attachment(s) - if any.

The Registrar is required to inform the applicant, about the availability orotherwise of the name applied for, within three days of the receipt of theapplication vide rule 4A(1).

lf the proposed name is available, the same should be adopted, that is tosay, the adoption of such name should be effected, within sixty days fromthe date of intimation by the Registrar vide rule A(2Xa). The applicantmay apply for extension for retention of such name for a further period ofthirty days on payment of fifty per cent of the fee prescribed for theapplication at the initial stage, no further extension will be granted afterexpiry of ninety days from the date the name is allowed in the firstinstance. The name allowed shall lapse after expiry of sixty or ninetydays, as the case may be, from the date it is allowed first.

On filing e-form 14, the system will process and generate a ServiceRequest Number (SRN) which shall be used for tracking the status ofname clearance.

4. On receipt of approval of name, the Company Secretary/Director must, inconsultation with the Chairman of the Board meetings, fix time, date andvenue for holding another Board meeting for transacting the followingbusiness:

(i)

(ii)

1

3.

4.

s.A.-PP-CSP T.P.-3t2010

(i) To take note of the approval received from the ROC.(ii) To fix time, date and venue for holding a general meeting (annual or

.extraordinary) of the shareholders of the company-(a) for passing a special resolution required under Section 21 of the Act

for changing the name of the company; and(b) for passing another special resolution under Section 16 of the Act for

altering clause I (name clause) in the memorandum of association ofthe company in accordance with Section 16 of the Act.

(iii) To approve notice of the general meeting and the explanatory statementto be annexed to the notice under Section 173 (2) of the Act for thegeneral meeting and to authorise the Company Secretary/Director toissue the notice on behalf of the Board.

5. lssue notice of the general meeting to all the members of the company, itsdirectors and the auditors.

6. ln the case of listed companies, send three copies of the notice to each stockexchange where the securities of the company are listed (Refer Clause 31 ofthe Listing Agreement).

7. A general notice of the general meeting may also be published in news-papers.

L Hold the general meeting and pass the resolutions as contained in the notice.

9. Send to each stock exchange, six copies of the alterations of thememorandum (one of them must be certified) soon after the conclusion of thegeneral meeting, in case shares of the company are listed (Refer ListingAgreement).

10. Send to each stock exchanges, a copy of the proceedings of the generalmeeting in case shares of the company are listed (Clause 33 of the ListingAgreement)

11. File with the ROC e-form 23 with a certified true copy of each specialresolution passed at the general meeting along with the explanatorystatement under Section 173 and altered iopy of Memorandum ofAssociation and Articles of Association and prescribed filing fee.

12. Make an application to the concerned Registrar of Companies alongwith theprescribed application fee, for obtaining Central Government's approval tothe change cf name of the company. New e-form 1B has been prescribed forthis purpose. The attachments with e-form 1B are as below:

1. Minutes of the members' meeting;

2. Certified copy of the order for condonation of delay;

3. Optional attachment(s) - if any.

13. On receipt of the Central Government's approval to the change of name, thecompany should surrender to the ROC, the existing Certificate oflncorporation with a request for the issue of a Fresh Certificate oflncorporation consequent upon change of name of the company.

14. lssue a general notice in newspapers informing all concerned, about the

,,, i*:::",,l:n:""J*";::ffiH*hor*.s about the changed name or the

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Company, particularly the Stock Exchanges, National Securities DepositoryLtd., Central Depository Services (lndia) Ltd., Central Excise Authorities,Sales{ax Authorities in various States, Customs Authorities, Chief lnspectorof Factories, Regional Provident Fund Commissioner, suppliers of rawmaterials, customers, banks etc.

Arrange for a new Common Seal and have the same adopted at a meeting ofthe Board of directors and keep both the old and the new Common Sealsunder lock and key.

Get stationery printed with the hew name and/or affix rubber stamp of thenew name on allthe existing stationery including the blank share certificates.

Get the new name of the Company painted on all the signboards whereverthey are displayed.

Correct all records, registers including the Register of Members, sharecertificates, every copy of Memorandum and Articles of Association.

sd/-Company Secretary

Question No.4

(a) Total strength of the Board of Directors of your company in ten. How manydirectors are liable to retire by rotation at the next annual general meeting?

(5 marks)

(b) Your compapy has total twelve directors as under:Non-retiring directors 3Retiring directors 5Additionaldirectors 4

Staf e the number of directors liable to retire by rotation at the Annual GeneralMeeting and the total number of directors who shall vacate the office at theAGM. (5 marks)

(c) The Board of Directors of a public company met on three times in theprevious year, the fourth meeting though called could not be held for want ofquorum on two occasions successive/y. Dr.scuss whether any provisions ofthe Companies Acf have been contravened. (6 marks)


According to section 255(1) of the Companies Act, 1956, unless the articlesprovide for the retirement of all directors at every annual general meeting, not lessthan two-thirds of the total number of directors of a public company, or of a privatecompany which is a subsidiary of a public company, shall be persons whose period ofoffice is liable to determination by retirement of directors by rotatiori.

Further, as per section 256 of the Companies Act, 1956, at the first annualgeneral meeting of a public company, or a private company which is a subsidiary of apublic company, held next after the date of the general meeting at which the firstdirectors are appointed in accordance with section 255 and at every subsequentannual general meeting, one-third of such of the directors for the time being as areliable to retire by rotation, or if their number is not three or a multiple of three, then,the number nearest to one-third, shall retire from office.

64

16

19.

17.

18.

S.A..PP-CSP T.P.-3/2010

After interpreting section 255 and 256 of the Act, the numbers of directors liableto retire by rotation at the next annual general meeting are as follows:-

Total number of directors 10

Non-retiring diregtors 3

Retiring directors 7

So, persons liable to retire at the next AGM 2


According to section 255(1) of the Companies Act, 1956, unless the articlesprovide for the retirement of all directors at every annual general meeting, not lessthan twothirds of the total number of directors of a public company, or of a privatecompany which is a subsidiary of a public company, shall be persons whsse period ofoffice is liable to determination by retirement of directors by rotation.

While calculating the limit of 2l3rd , Additional Directors will not be taken intoaccount. As per section 260 of the Companies Act, 1956, additional directors shallhold office only up to the date of the next annual general meeting of the company.

As per section 256 of the Companies Act, 1956, at the first annual generalmeeting of a public company, or a private company which is a subsidiary of a publiccompany, held next after the date of the general meeting at which the first directorsare appointed in accordance with section 255 and at every subsequent annualgeneral rneeting, one{hird of such of the directors for the time being as are liable toretire by rotation, or if their number is not three or a multiple of three, then, thenumber nearest to one-third, shall retire from office.

ln the given case, according to Section 255 of the Act, 2/3rd of 8 directors (asadditional directors will not be taken into account) will be 5.33 but the same will betaken as 6.

But in the given situation the retiring directors are only 5 and hence Section 255is not being complied. Hence, the Company is required to add one more retiringdirector to comply with the provisions of Section 255 of theAct.

Otherwise as per Section 256 of the Act, the number of directors liable to retireby rotation at the AGM is two. Further, the total number of directors who shall vacatethe office at the AGM is six (four additional directors and two retiring directors).


ln the case of every company, a meeting of its Board of directors shall be held atleast once in every three months and at least four such meetings shall be'held inevery year. But, section 288(2) provides that where a meeting is called but could notbe held for want of quorum, there is no contravention of section 285. Thus, as per thefacts in the present case, there has been no contravention of any provisions of theCompanies Act, 1956.

Question No.5(a) State the practical aspecfs which should be considered while drafting agenda

and notes on agenda. (10 marks)

65

(b) The Board of Directors ot ABC Ltd. constituted an audit committee

S,A.-PP.CSP T.P.-3t2010

comprising 6 members but did not fix the quorum. Can two members of thecommittee present at a duly convened meeting validly transact fhe buslness?

(6 marks)


DRAFTING OF AGENDA AND NOTES ON AGENDA_ PRACTTCAL ASPECTS

1. While preparing the Agenda and notes thereon, good drafting is one of theessential aspects. While part of the Agenda consists of routine items, thedrafting of which does not pose any problem, where there are important ornon-routine items, the Agenda has to be prepared carefully, employing notonly good drafting skill but also an understanding of commercialconsiderations and the business environment. For the purpose:

(a) Divide the Agenda into two parts: - the first part containing usual orroutine items and the second part containing other items which canfurther be bifurcated as (i) items for approval; and (ii) items forinformation/noting.

(b) For each item of the Agenda give an explanatory note followed by a draftof the Resolution, if any, proposed to be passed. The explanatory noteshould give sufficient details of the proposal, including the proposedResolution, if any, with references to the provisions of the CompaniesAct, the Memorandum and Articles of Association, other relevantdoc.uments, decisions of previous Board or general meetings, statutoryenactments, case laws, etc. For the purpose, the note should be draftedunder the following heads:

(i) Background (or lntroduction);

(ii) Proposal;

(iii) Provisions of Law;

(iv) Decision(s) required; and

(v) lnterest, if any, of any Directors.

2. The Secretary should specify a date by which items requiring approval/noting by the Board should be given to him by the concerned Departmentsfor inclusion in the Agenda and a deadline for furnishing papers in support ofeach such item.

. 3. The Secretary should refer to the Agenda of previous Meetings, to seewhether any items had been deferred and should include them for discussionat the ensuing Meeting.

4. The Secretary should also refer to the Minutes of the Meeting held during thecorresponding period of the previous year to see whether there are any

. recurring periodic items (e.9. interim/final dividend, quarterly results).

5. The Secretary should flnalise the Agenda in consultation with theChairman/Managing Director.

6. Notes on policy matters should present clear-cut issues in order to facilitatedue deliberations and precise decisions at the Meeting.

7. Circulation of draft Resolutions to.be passed at the Meeting would enableDirectors to know in advance as to what they are required to consider and

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save time at the Meeting, facilitate discussion and simplify the preparation ofminutes of the Meeting.

The names of those persons who will be attending the Meeting as inviteesshould be given in the notes to the relevant items of the Agenda. e.g-. if thereis an item for approval of the Capital Budget, the note thereon should statethat Mr. A, Chief Financial Officer, will make a presentation on the Budget.

As a good corporate secretarial practice, the Secretary should keep, inaddition to a record of matters to be discussed, a separate folder of all suchcorrespondence, notes and documents which need to be dealt with at theMeeting. tn preparing the Agenda, the Secretary should refer to this folder toenswe that all items which require the decision of the Board are included inthe Agenda.

A separate Agenda item number should be given for items which are broughtforward for discussion from a previous Meeting rather than placing themunder the omnibus Agenda item of "matters afising from previous Meetings"for example :

"ltem No. 9. DISINVESTMENT MANDATE

To note the appointment of the Company as advisors for the disinvestmentprocess of ABC Limited

(Referto ltem No. 18 of the minutes of the Meeting held on.......)."' 11. A few extra copies of the Agenda should always be kept available at the

Meeting.


As per clause 49 (ll) (B) of the listing agreement, the quorum of the meeting ofaudit committee shall be either two members or one-third of the members of the auditcommittee whichever is greater, but there should be a minimum of two independentdirectors present.

Therefore, assuming that ABC Ltd. is a listed company, two members of the auditcommittee present at a duly convened meeting can validly transact the businessprovided both the directors are independent.

Question No.6(a) Describe the procedure for passing of resolutions by postal baltot. (8 marks)

(b) Outline the procedure for inter-corporate loans and investments. (8 marks)

Answer to Question No;6(a)

Procedure for passing of resolutions by postal ballot

1. For any item of business identified to be transacted through voting by Postal '

Ballot, the first step is to convene a meeting of the Board for the purposes of:

(i) approval of Notice of the Resolution along with draft Resolution sought to bepassed through voting by Postal Ballot and the explanatory statementthereof;

(ii) authorising a Managing or Whole-time Director and the Company Secretaryor, where there is no such Managing or Whol+'time Director, any other

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Director and the Company Secretary to supervise and control the entirePostal Ballot process;

(iii) approving the appointment of the Scrutinizer and fixing,the duration of hisappointment as well as his remuneration, or authorising the Chairman/Managing Director or a Whole-time Director or any other Director to fix hisremuneration;

(iv) determining the date for reckoning voting rights and ascertaining thoseshareholders to whom the Notice and postal ballot form should be sent;

(v) specifying a time timit within which the postal ballot forms should bedespatched;

(vi) specifying a time limit within which the postal ballot forms, duly completed,should be returned by shareholders to the Scrutinizer;

(vii) identifying the person who will retain custody of the postal ballot formsreceived from the Scrutinizer after the Scrutinizer has submitted his Reporton the scrutiny to the Chairman (such person could be the CompanySecretary);

(viii) determining the date of the announcement of the result of Postal Ballot by thecompany;

(ix) approval of calendar of events

2. The Scrutinizer appointed by the Board should not be in the employment ofthe company.

3. The Board should ascertain whether the person to be appointed as aScrutinizer is willing to act as such and should obtain the cons6nt of the Scrutinizer.The appointment of the Scrutinizer can also be made through a Resolution passed bycirculation. Within seven days of his appointment, the Scrutinizer should be intimated,of such appointment.

4. ln addition to the remuneration to be paid to the Scrutinizer, he should bereimbursed out of pocket expenses incurred by him for the purpose of scrutiny.

5. The Scrutinizer may appoint one or more assistants to help him in the processof scrutiny.

6. The Managing or Whole-time Director or, if there is no such Managing orWhole- time Director, any other Director together with the Company Secretaryentrusted by th_e Board with the responsibility for the entire Postal Ballot processshould regularly monitor the action taken for conduct of the process for voting byPostalBallot.

7. A copy of the Board Resolution authorizing the process for obtaining approvalof shareholders through voting by Postal Ballot should be sent to the Registrar ofCompanies within one week of passing of such Resolution and should beaccompanied by a copy of the calendar of events. No filing fee is required to be paidin this connection

8. Notice in writing of every Resolution required to be passed through voting byPostal Ballot should be given to every Member of the company, holding equity orpreference shares, on a date as close to the date of despatch of the Notice as may

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be fixed by the Managing or whole-time Director and the company secretaryauthorized to supervise the Postal Ballot process. Notice should also be given to theDirectors and Auditors of the company, to every stock Exchange on which thesecurities of the company are listed and, where applicable or so iequired, to otherpersons srjch as debenture holders, trustees foi'debenture holders, banks andfinancial institutions. For such persons, the postal ballot form should be marked"specimen" and should not have any serial number. lf the company accidentally omitsto send the Notice or if an eligible Member does not receive the postal ballot formsent to him, this will not invalidate the Resolution passed or the result of the PostalBallot.

9. The Notice should specify that it is being issued pursuant to Section 192A (2)of the Act. lt should contain the draft Resolution proposed to be passed throughvoting by Postal Ballot and should be accompanied by the necessary explanatorystatement explaining the reasons therefor and setting out all material facts as wouldenable a Member to take a considered decision on the matter. The Notice shouldalso specify the day, date, time and venue where the result of the voting by PostalBallot will be announced.

10. The Notice should state that only a Member entitled to vote can fill in thepostal ballot form and send it to the Scrutinizer, and that any recipient of the Noticewho has no voting rights should treat the Notice as an intimation only.

11. The Notice should specify the last date and time on or before which the dulyfilled in postal ballot form should reach the Scrutinizer, such date being thirty dayifrom the last date of despatch of Notice.

12. The'Notice should be accompanied by the postal ballot form with thenecessary instructions for filling, signing and returning the same. ln the case ofshareholders who are resident and have an address in lndia, a self-addressedbusiness reply envelope in the name of the Scrutinizer should accompany the Notice.The envelope should either be prepaid or specify that postage shall be paid, onreceipt, by the addressee (i.e. the company! even where such envelopes are pre-addressed to the Scrutinizer).

13. The date of despatch of Nbtice shall be deemed to be the date on which thedespatch of all Notices, postal ballot forms and other related papers is completed.This date is hereinafter referred to as the cut-off date.

14. An advertisement intimating the despatch of postal ballot forms should bepublished in a leading English newspaper and in one vernacular newspapercirculating in the state in which the registered office of the company is situated.

15. The advertisement should indicate the last date on or before which the postalballot forms should reach the Scrutinizer ahd should state that Members may obtainduplicate postal ballot forms, if so required.

16. lt should be made clear to any shareholder requesting for a duplicate postalballot form that the time limit of thirty days for receiving the duly filled in postal batlotform would be counted from the cut-off date and not from the date of issue of theduplicate Notice and duplicate postal ballot form.

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17. Voting rights of every Member should be verified and reckoned as on thecut-off date.

lllustrattion: lf Notice has been despatched to a shareholder on 1Oth May 2009but the date when despatch of all Notices has been completed is 1st June 2009 and ifthe shareholder has sold all his shares on 25th May 2009, he has no right to vote onthe Resolution by Postal Ballot. Similarly, if a person becomes a Member after thedate of commencement of despatch of the Notice but before the cutoff date, hewould be entitled to obtain a postal ballot form from the company and vote on theResolution by Postal Ballot.

18. The postal ballot brms should be serially numbered, have distinguishingmarks or bar coding or other security features unique to the company.

19. The company should fill in the details at items 1,2,3 and 4 of the postalballot form regarding the shareholder's name, address, folio number and number ofshares held before sending the postal ballot form. A single postal ballot form mayprovide for multiple items of business to be transacted. A postal ballot form shall bevalid only for the items of business of the Notice to which it relates.

20. The postal ballot form should contain instructions as to the manner in whichthe form is to be completed and may also specify the instances in which the postalballot form shall be treated as invalid.

21. The last date for receiving the duly completed postal ballot forms bytheScrutinizer should also be mentioned in the form along with a statement that formsrecetved after this date will be treated as if the reply from the Mernber has rrct beenreceived.

22.The postal ballot forms, duly filled and signed by the shareholders, should besent{o the Scrutinizer.

23. Duly filled in postal ballot forms should be received by the Scrutinizer not latelthan thirty days from the cut-off date. lf the last date fixed for receipt of postal balloforms is subsequently declared a public holiday, the last date fixed should brconstrued as the immediately following working day.

24. The Scrutinizer, personally or through his authorised representative, shoulrmark a serial number for identification, on the envelopes received by him, affix a dat,stamp on such envelopes for the date of receipt and put such envelopes, unopenecin a sealed box to be kept safely till the envelopes are opened.

25. The Scrutinizer, personally or through his authorised representative in hipresence, should:

(i) open the envelopes only after the last date for receipt of postal ballot forms;

(ii) initial each postal ballot form to ensure authenticity of the process andfacilitate identification ;

(iii) check the validity of the postal ballot forms;

(iv) separately number the valid and invalid postal ballot forms consecutively; at

(v) determine:(a) the total number of postal ballot forms received;

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(b) the number of invalid postal ballot forms received;(c) the number of valid postal ballot forms received.

26. Before verifying any other particulars, the Scrutinizer, personally or throughhis appointed representative, should verify the signature of the shareholder in thespace provided for that purpose.

27. ln case there are two items of business to be transacted by Resolutions to bepassed through Postal Ballot, if a Member has given assenVdissent for one item andnot for the other, the postal ballot form should be treated as valid for the item forwhich the decision has been conveyed and invalid for the item for which no decisionis indicated.

28. The Scrutinizer should submit his report as soon as possible after the lastdate of receipt of postal ballot forms to facilitate declaration of the result on thespecifled date. The Scrutinizer's Report must be addressed to the Chairman andshould contain details of thq complete process of scrutiny. lf a compBny has issuedshares with differential'voting rights, the Report should also deal separately withvoting by shareholders having differential voting rights. The Report snouH be iignedand dated by the Scrutinizer.

29. The Chairman should, on the basis of the Scrutinizer's Report, declare theresult of the voting on the Resolution sought to be passed by Postal Ballot on thedate, time and vqnue specified in the Notice. The result should be in the form of asummary of number of votes cast for and against the Resolution, indicating also thevotes rejected.

30. The Resolution and a brief report thereon, including the result of the voting onthe Resolution declared by the Chairman and a summary of the Scrutinizerls Report,shall be recorded in the Minutes Book containing Minutes of proceedings of generalmeetings, which should be signed by the Chairman within thirty days from the date ofdeclaration of the result of the Postal BaHot.

31. The resultof the Postal Ballotshould be displayed on the notice board of thecompany at its registered office and its corporate/head office, if such office is situatedelsewhere, and also placed on the website, if any, of the company. The result shouldalso be fur:nished to every stock exchange on which the securities of the companyare listed and announced by way of a preis release. The Resolution shall be deemeito have been passed on the date on which the result,of the Postal Ballot has beendeclared. The result of the Postal Ballot, once declared, shall be final,

32. A Resolution passed by Postal Ballot should not be rescinded othenrise thanby a Resolution passed subsequently through Postal Ballot.

The postal ballot forms and all other related records should be kept in the safecustody of the Scrutinizer till the Chairman signs the Minutes Book in which theresult of the voting by Postal Ballot is recorded. The Scrutinizer shall thereafterreturn the postal ballot forms, the register and any other related documents orrecords to the designated person of the company for safe-keeping until theResolution has been implemented.

33. A Resolution shall be deemed to have been implemented if anything is to be

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done thereon when it is so accomplished, or if any document is to be filed with theRegistrar or any other authority, when it is so filed.

34. A copy of the Resolution which has been passed, together with a copy of theNotice under Section 192A (1) of the Act containing the draft Resolution and thestatement of material facts annexed thereto should, within thirty days from thepassing of the Resolution, be duly certified under the signature of an officer of thecompany and filed with the Registrar of Companies.


PROCEDURE FOR INTER.CORPORATE LOANS/INVESTMENT/GIVING GUARAN.TEE/PROVIDING SECURITY

A company which proposes to make loan/give guarantee/provide security/makeinvestment in another body corporate must follow the procedure detailed below:

1. lssue notibe for Board meeting in writing to every director for the time beingin lndia and to every other director at his usual address in lndia as per theprovisions of Section 286 of the Companies Act.

2. Hold Board meeting to consider the proposal to give loan/guarantee orprovide security/make investment and-(i) if the aggregate amount of proposed loan/guarantee/security/ investment

is within the limits specified in the first proviso to Sub-section (1) ofSection 372A of the Act, then pass the resolution with all the directorspresent at the meeting consenting specifying the limit for suchloa n/g uarantee/secu rity/i nvestment.

(ii) if the aggregate amount of proposed loan/guarantee/security/ investmentexceeds the specified limits under Section 372A then fix time, date andvenue for holding general meeting to pass the special resolution thereatin that regard.

lf your company is a listed company then have the Special Resolutionmentioned above passed through postal ballot for giving loans or extendingguarantee or providing Security. [Section 192A read with Rule 4(g) of theCompanies (Passing of the Resolution by Postal Ballot) Rules, 20011

3. Draft the notice of the special resolution indicate therein clearly thefollowing-(a) specific limits;(b) particulars of the body corporate in which the investment is proposed to

be made or loan or security or guarantee is to be given;(c) the purpode of investment, loan, security or guarantee;(d) specific sources of funding;(e) other details.

4. Get the aforesaid notice and its relevant Explanatory Statement approved bythe Board.

5, lssue notice in writing at least twenty one clear days before the date of the- General Meeting proposing the special resolution with suitable explanatorystatement.

6. ln case of listed companies, send three copies of the notice to each Stock

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exchange, where shares of the company are listed.

7. Hold the General meeting and pass the special resolution.8. ln case of listed cornpany, forward to the Stock exchanges where the shares

of the company are listed, copy of the proc€edings of the general meeting.9. File the special resolution in e-form 23 along with the explanatory statement

with the concerned Registrar of companies within thirty days of passing theSpecial Resolution after paying the requisite fee prescribed under ScheduleX to the Companies Act, 1956.

Specifically indicate in the Explanatory Statement to the resolution thespecific Securities in which the company is proposed to invest the amount.

10. Ensure that approiql of the Public Financial lnstitution(s) has been obtaine.dbefore implementing the proposal if the company has taken any term loan

' from any one of the financial institutions referred to in Section 44 and that"term loan is subsisting except in the following situation:(i) where the aggregate of the loans and investment so far made, the

amounts for which guarantee or security so far provided to for in all otherbodies corporate, alongwith the investments, loans, guarantee or securityproposed to be made does not exceed the limits of 60% as specified inSub-section (1); and

(ii) there is no default in repayment of loan instialments or payment ofinterest thereon as per the term and condition of such loan to the PublicFinancial I nstitution.

11. Ensure that company has not defaulted in complying with the provisions ofSection 58A of the Companies Act, 1956.

Also ensure that loan to any body corporate is not made at the rate of interestlower than the prevailing bank rate of interest being the standard rate madepublic under Section 49 of the. Reserve Bank of lndia Act, 1934.

Follow the guidelines/rules, if any, prescribed by the Central Government forthe purposes of Section 372A.

The officers authorised for this purpose should comply with all formalities likeexecution of documents, remittance of money etc.

Enter the following particulars in respect of every investment or loan made,guarantee given or security provided by the company in relation to any bodycorporate in a register kept for such purpose in chronological order:(i) the name of the body corporate;

(ii) the amount, terms and purpose of the investment or loan or security orguarantee;

(iii) the date on which the investment or loan has been made;(iv) the date on which the guarantee has been given or security has been

provided in connection with a loan.

16. The above said entries are to be made within seven days of the making ofsuch investment or loan or the giving of such guarantee or the provision ofsuch security

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Company Secretarial Practice

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