Company Law Case Studies for CA/CS/CMA Examination

Q1 ABC ltd intend to issue of 10,000 bonus shares to preference shareholder as on 1 July 2016 as per the requirement of SEBI guidelines, BOD announced the issue of bonus shares as on 1 July 2016, IN MEANWHILE, ROC issued a notice to the company it is not tenable in law & against the notice company can’t withdraw its announcement after declared as specified in SEBI guidelines, explain as the provisions of companies act 2013

[HINT : as per sec 63 : company can issued bonus shares to preference shareholder, no restricting or prohibiting under such provisions]

Q2 Reliance industries ltd intend to issue of 40,000 bonus shares to preference shareholder nominal value Rs 10 each, as on 10 Sep 2016 as per the requirement of SEBI guidelines, BOD announced the issue of bonus shares as on 1 oct 2016 for it, utilised the amount of revaluation amount i.e. Rs 6 lacs from revalue the lad and building as per IND AS, explain as the provisions of companies act 2013 action of company is tenable.

[HINT : as per sec 63 : company can’t utilize the amount of revaluation reserve ]

Q3 Sohan has 4000 shares of reliance industries ltd, nominal value Rs 10 per share and Rs 190 as securities premium per share, as on 2 april 2012 he had paid application money Rs 50 and allotment money Rs 50, but fail to pay call money Rs 25, on per share, company forfeit, he objected that company can’t forfeit shares if he has paid all nominal value of shares. explain as the provisions of companies act 2013 action of company is tenable

[HINT :company can forfeit when the share already allotted and not paid up to the full extent of face value and premium if any]

Q4 Sohan has purchased 4000 shares of reliance industries ltd, nominal value Rs 10 and Rs 190 as securities premium, as on 2 april 2012, on non-payment of call money amount of Rs 30 it forfeit all the shares 1 aug 2014 and reissue to the mohan @200 per shares as on 2 april 2015. BOD announced 11 july 2015 issue of 40,000 bonus shares to existing members at a ratio 1:5 but decline to issue mohan for the reason that company didn’t allot shares but only reissue the forfeit shares so he will not eligible for bonus shares. explain as the provisions of companies act 2013

[HINT : after reissue and his name register in the register of member then he will become member and have all rights, privileges and liabilities as like other member ]

Q5 Allied International Products Ltd applied before the public issue to Bombay stock exchange, national stock exchange and Calcutta stock exchange as on 14 june 2015 made a public issue 20 june 2015 BSE AND CSE dismissed to register, ROC order to refund all application money company denied to refund on the basis NSE has granted the permission for listing. Whether reply of company is tenable in law, explain

[HINT : mandatory to register by all stock exchange, if denied to register, the filled application to C.Govt ]

Q6 shri ramchandran is the member of parliament acquires 5000 shares in the Indian oil copration & IOC intend to issue of 40,000 bonus shares to equity shareholder nominal value Rs 10 each, as on 10 sep 2016 as per the requirement of SEBI guidelines, BOD announced the issue of bonus shares as on 1 oct 2016 for it, decline to issue shri ramchandran for the reason that such acquisition is considered as office of profit as per the parliament (prevention of disqualification) act, 1959, explain as the provisions of companies act 2013 action of company is tenable.

[HINT : if name of member is in register & member fulfilled all conditions under law, company will issue bonus shares ]

Q7 Sohan has purchased 4000 preference shares of reliance industries ltd and share certificate has been issued but not any entry has been made in the register of member in accordance with sec 88, it intend to issue of 40,000 bonus shares to preference shareholder nominal value Rs 10 each, as on 10 sep 2016 as per the requirement of SEBI guidelines, BOD announced the issue of bonus shares as on 1 oct 2016 for it, but decline to issue shares to mohan as per reason that he is not a member. explain

[Hint : share certificate is the prima facie evidence that sohan is a member and company can’t denied after it is issued, if no any contrary arise]

Q8 Sohan has purchased 4000 preference shares of reliance industries ltd 1 july 2016 and applied for registered the transfer as on 1 aug 2016 which has not been register by the company and after that sohan applied for NCLT for grant a relief as on 10 oct 2016 , it objected that with the period of 90 days on the date of transfer deed required to file appeal, the appeal is time barred . explain

[Hint: 90 days considered in case of n reply from the date of delivery of transfer deed to company]

Q9 Sohan has purchased 4000 preference shares of reliance industries ltd 1 july 2016 and applied for registered the transfer as on 1 aug 2016 which has not been register by the company without any cause, received 10 aug and BOD announced the bonus shares at a ratio 1:5 as on 17 sep 2016 and on 18 sep it issued a share certificate. Whether sohan entitle to receive bonus shares

[Hint: sec 56 : mandatory to issue share certificate with in period of 1 month from date of receipt of transfer deed, otherwise liable to penalty, & bonus shares are required to be issued]

Q10 Sohan has purchased 4000 preference shares of reliance industries ltd 1 july 2016 and applied for registered the transfer as on 1 aug 2016 which has not been register by the company because stay has been granted by court which unaffected as on 15 sep, received 10 aug and BOD announced the bonus shares at a ratio 1:5 as on 17 sep 2016 and on 18 sep it issued a share certificate. Whether sohan entitle to receive bonus shares

[Hint: sec 56: mandatory to issue share certificate with in period of 1 month from date of receipt of transfer deed except stay on issue by court]

Q11 Sohan has purchased 4000 preference shares of reliance industries ltd 1 july 2016 and applied for registered the transfer as on 1 aug 2016 and company issued a share certificate as on 25 aug on which mukesh, which general manger has signed, company issued a bonus shares as on 14 sep at ratio 1:5 and notices as on 17 sep that wrong share certificate has been issued to sohan so for it bonus shares shall not be issued to the sohan for it. Explain

[Hint: share certificate signed by unauthosied officer is void but such officer is liable to pay damages bear by sohan or if co. ratify then required shall issued bonus shares]

Q12 Sohan has purchased 4000 preference shares of reliance industries ltd 1 july 2016 and after that company issued bonus equity shares at a ratio 1:5 as on 10 dec 2016, as on 17 feb 2017 company decided to raise capital through issue made to existing shareholder, company decided to offer to both equity and preference shareholder. ROC objected on it? Explain

[Hint: sec 62: company can increase further capital only offer made to existing equity shareholder ]

Q13 rohit has purchased 2000 preference shares of reliance industries ltd 1 july 2016 and rohit transfer such shares to mukesh as on 2 aug but company denied to register such transfer because debt on rohit, which is took as loan, amount of Rs 5 lacs after that company issued bonus equity shares at a ratio 1:5 as on 10 dec 2016, and declined to issue to rohit in proportion of shares held, explain validity of company action?

[Hint: if authorized by AOA company can do so otherwise not ]

Q14 harish has purchased 2000 preference shares of reliance industries ltd 1 july 2016 and harish transfer such shares to mukesh as on 2 aug but company denied to register such transfer because debt on harish, which is took as loan, amount of Rs 5 lacs after that company decided to raise capital through issue made to existing shareholder as on 8 nov 2016 but no such offer being made to harish, explain validity of company action?

[Hint: if authorized by AOA company can do so otherwise not ]

Q15 harish has purchased 2000 preference shares of reliance industries ltd 1 july 2016 and he died as on 14 july 2016 his assets transmitted including the shares to his son, rohan and rohan decided to transfer such shares but company denied to transfer because harish has indebt of company Rs 5 lacs, rohan contended that lien on shares apply only upto life of shareholder not after his death. Explain as per provisions of companies act 2013

[Hint: after death lien apply on legal hiers or legal rep. ]

Q16 rohan is the subscribers of MOA of DEF LTD but his name is not entered in the register of member, as on 1 july 2016 company decide to raise capital through the issue to the existing member of the company and company made offer letter to all existing member except the rohan, rohan objected he is also a member whether his name is not entered in the register of member. Explain

[Hint: subscriber is member whether his name entered or not in register]

Q17 During the financial year 2015-16, Deepak was holding 20% of the paid-up share capital in CML Ltd. He wants to increase his shareholding further by 10%, so that he becomes entitled to exercise more than 25% voting rights. Deepak seeks your advice on the obligations to which he and the company be subject to in this regard.

[Hint: further issue of shares to existing shareholder i.e. right issue]

Q18 Board of directors of Western Ltd. decides to issue equity shares to the extent of 10 crore on private placement basis. Explain the procedure the company should follow to give effect to the Board’s proposal.

Q19 Referring to the provisions of the Companies Act, 2013, examine whether a member of the company ceases to be the member thereof in the following situations :

1. A member whose shares are under Lien with a company and the company exercises lien on these shares and the shares are sold.
2. A member whose company has gone in winding-up and the winding-up proceedings have commenced.

Give reasons in support of your answer

Q20 The Board of directors of Wise Ltd., a company incorporated under the Companies Act,2013 and listed at Bombay Stock Exchange, at its meeting resolves to issue certain number of shares with differential dividend and voting rights. The Board of directors presents the following information :

1. The Board has decided to keep the shares with differential dividend and voting rights at 51% of the paid-up share capital.
2. As per the track record, the company has a record of distributable profits for the last two years only; before that the company had suffered heavy losses. Examining the provisions of the Companies Act, 2013 and the rules framed there under, stating the conditions, if any, decide whether the company can proceed with the execution of Board’s resolution for issue of shares with differential rights in respect of dividend and voting.

Q21 Board of directors of Clever Ltd., listed at Madras Stock Exchange, decides to issue equity shares to persons who are neither the existing shareholders nor the employees of the company. The articles of association of the company are silent on this issue. You being the corporate practitioner are approached by the Board to examine whether the Board’s decision is valid

[hint : private placement basis]

Q22 Well Spun Synthetics Ltd. has made allotment of shares. It was completed on 18Th February, 2014. The ten weeks’ time-limit shall expire on 24Th April, 2014. When would the liability of the company to refund the excess amount begin, 18th February, 2014 or 24th April, 2014 ?

Q23 Ganesh, who possesses valid share certificate of a company covering 1,000 equity shares is claiming title to the shares but his name is not recorded in the Register of members of the company. Ganesh also has the document evidencing the payment of call money against the above shares. But against the shares held by him, Suresh is recorded as a member in the Register of members. Advise the remedy available to ganesh as per provisions of companies act 2013

Q24 Sprint Ltd., a listed company, wants to implement buy-back of shares. Its financials as at June, 2016 are as under :

Paid-up equity share capital (20,00,000 shares of 10 each) :200 lakh

Preference share capital (redeemable in December, 2031) :100 lakh

Free reserves :200 lakh

10% Debentures :200 lakh

Loans from IDBI :300 lakh

Compute the quantum of equity capital of the company eligible for buy-back of shares by citing relevant provisions of the Companies Act 2013

Q 25 X Ltd. received valid share transfer deed together with the requisite documents for transferring 1,000 equity shares of the company from Ram to Shyam. Advise the company in the following cases :

1. Ram dies before the transfer is effected by the company
2. Shyam dies before the transfer is effected by the company.

Assume that the company has no information about the death in both the cases

Q26 An employee of a company purchased certain shares of his company through a member of a stock exchange and lodged with the company an application for transfer of shares in his (employee’s) name. The company refused to execute the transfer on the suspicion that the employee, if admitted as a member of the company, will create nuisance in general meetings and seek access to the records of the company. Decide giving reasons —

1. Whether the company’s contention shall be tenable; and
2. What is the remedy available to the employee in the given case ?

Q27 In view of the provisions of the Companies Act, 2013 relating to ‘securities premium’, state whether the amount lying in securities premium account of a company can be used :

1. For issuance of bonus shares; and
2. For payment of dividend declared by the company at its general meeting

Q 28 Board of directors of Pious Ltd. gives you the following information extracted from the company’s financial statements as at 31stMarch, 2015 :–

Authorised equity share capital …. 10 crore

(1 crore shares of 10 each)

Paid-up equity share capital …. 5 crore

General reserve …. 5 crore

Debenture redemption reserve …. 2 crore

Board of directors by a resolution passed at its meeting decides to go for buy-back of shares to the extent of 20% of the company’s paid-up share capital and free reserves. Examine the validity of the Board’s resolution with reference to the provisions of the Companies Act, 2013

Q29 On receipt of 85% of the minimum subscription stated in the prospectus, Little Stars Ltd. allotted 200 shares to Ranjit and the money was deposited in a scheduled bank. Later on, it was revealed that 40% of the amount withdrawn was for acquisition of fixed assets for the company. Ranjit, knowing these facts, refused to accept the allotment contending that the allotment was irregular under the provisions of the Companies Act, 2013. As an expert on company law advise Ranjit

[Hint : consider sec 39 of companies act 2013]

Q30 Jaltarang motels limited , mr atul is a promoter, a public issue of 32,38,100 equity shares of Rs. 10 each cash at par aggregating to Rs. 323.81 lakhs and had applied the BSE and NSE FOR LISTING, which is the recognized stock exchange, but BSE denied to listing the company as per compliance company required to refund the all application money but such amount diverted to sister concern jaltarang club, mr atul made deposit 123.81 lakhs to SEBI and give personal undertakings 150 lakhs but on his account 130 lacs. SEBI required to create charge on assets purchase by sister concern from diverted fund, specify validity of action

[Hint : Action is valid, Can Create Charge Jaltarang Motels Limited vs UOI ]

Q31 Kadri Mills Limited, which is listed in the Bombay stock exchange, issued a 4 crore shares on private placement basis to promoter group to increase the share holding from 40 % to 60 %, price decided as per sebi guidelines on private placement, one the member objected that there is not transparency in issue that shareholding can be increase through right issue of shares. Explain the validity of objection?

[Hint : action is not tenable, T.N.K. Govindaraju Chetty vs Kadri Mills (Cbe) Limited case]

Q32 Kadri Mills Limited, which is not listed in any stock exchange, issued a 4 crore shares on private placement basis to promoter group, at a price at par i.e. Rs 10 per share, price as per valuer i.e. Rs 400 per share, to increase the share holding from 40 % to 60 %, one the member objected that there is not transparency in issue that shareholding through private placement Rs 400 per share. Explain the validity of objection?

[Hint : action is not tenable, if BOD pass resolution and in general meeting approve & also it is not ]