BCOC 135 Free Solved Assignment
BCOC 135 Free Solved Assignment Jan 2022
Q-1 What is an illegal association? What are its consequences?
ANS- An illegal Association is governed by Section 464 of the Companies Act. Section 464 of the Act provides that no company, association or partnership consisting of more than 50 persons be formed to carry on any business for gain unless it is registered under Companies Act or any other Indian law.
It is not necessary that such an association must be registered under the Indian Companies Act. It may be registered under some other Indian law.
For example, a limited liability partnership formed for carrying on business for gain by professionals, registered under the Limited Liability Partnership Act, 2008 is a legal body
There is no limit to the maximum number of members in such a limited liability partnership. BCOC 135 Free Solved Assignment
The objective of such an association must be to carry on a business for gain. Section 464 does not apply to Non-Profit-Organizations or Charitable Associations because the objective is not to earn the profit.
Section 464 further provides that the above restriction as to number of persons shall, not apply to a Hindu Undivided Family (HUE) carrying on any business or an association or Partnership formed by Professionals who are governed by special Acts (e.g., Limited Liability Partnership Act, 2008).
The consequences of an illegal association are as follows:
- Every member shall be personally liable for all liabilities incurred in such business.
- An illegal association cannot sue to recover any of its debts or any other property. Likewise, no suit can be filed against an illegal association to recover money lent to it.
Though, a suit can be filed against every member of an illegal association. A suit cannot be filed even if the association is subsequently registered as a company.
- Every person who is a member of such an association shall be punishable with fine which may extend to one thousand rupees.
- An illegal association cannot be wound up under the Companies Act.
- No suit can be filed through any member for partition, dissolution or for taking account of an illegal association. BCOC 135 Free Solved Assignment
Q-2 Define a private company. State its privileges and exemptions.
ANS- Section 2(68) of Companies Act, 2013 defines private companies. According to that, private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them.
This is the basic criterion that differentiates private companies from public companies.
The Section further says private companies can have a maximum of 200 members (except for One Person Companies).
This number does not include present and former employees who are also members. Moreover, more than two persons who own shares jointly are treated as a single member.
Privileges of a private company-
(1.) No need to prepare a report for annual general meetings.
(2.) Only 2 minimum directors required.
3. No need to appoint independent directors.
4. They can adopt additional grounds for the disqualification of directors and vacation of their office.
5. They can pay greater remuneration to their directors than compared to some other types of companies. BCOC 135 Free Solved Assignment
Exemptions of a private company-
Exemption regarding right issue: A private company need not offer shares to its existing shareholders whenever it intends to increase its subscribed capital. (Sec. 81)
Exemption regarding share capital: Restrictions applicable to public companies regarding kinds of share capital, voting rights, and issue of shares with disproportionate voting rights and termination of disproportionate excessive rights do not apply to private companies.
(Sec. 85-90) Further, a private company can give financial assistance for the purchase or subscription of its own shares or its holding company.
Exemption regarding directors: (i) A private company may have 2 directors, (ii) All the directors may be appointed by a single resolution. (Sec. 255).
Exemption regarding managerial remuneration:The provisions of the Act regarding fixing or increasing the remuneration of managerial personnel of the company are not applicable to private companies. (Sees. 198, 309, 310 & 311).
Q-3 Explain and illustrate doctrine of indoor management. What are the exceptions to this rule?
ANS- The doctrine of indoor management, also known as Turquand rule is a 150-year old concept, which protects the outsiders against the actions done by the company.
Any person who enters into a contract with the company shall ensure that the transaction is authorised by the articles and memorandum of the company.
There is no requirement to look into the internal irregularities, and even if there are any irregularities, the company shall be held liable since the person has acted on the grounds of good faith. BCOC 135 Free Solved Assignment
Abc received a cheque from Xyz company. The Articles of Association of Xyz company provided that cheques issued by the company need to be signed by two directors and countersigned by the secretary.
The directors nor the secretary who signed the cheque was appointed properly and thus the cheque issued was not valid. Abc sued the company for the irregularities in the procedure. Is Abc liable for relief?
Answer: Abc is entitled to relief and the company has to pay the amount of the cheque since the appointment of directors is a part of the internal management of the company and a person dealing with the company is not required to enquire about it.
Exceptions To The Rule –
Knowledge of Irregularity: – The first and the most obvious restriction is that the rule has no application where the party affected by an irregularity had actual notice of it.
Knowledge of an irregularity may arise from the fact that the person contracting was himself a party to the inside procedure.
As in Devi Ditta Mal v The Standard Bank of India, where a transfer of shares was approved by two directors, one of whom within the knowledge of the transferor was disqualified by reason of being the transfer himself and the other was never validly appointed, the transfer was held to be ineffective.
Suspicion of Irregularity: – The protection of the “Turquand Rule” is also not available where the circumstances surrounding the contract are suspicious and therefore invite inquiry. BCOC 135 Free Solved Assignment
Suspicion should arise, for example, from the fact that an officer is purporting to act in matter, which is apparently outside the scope of his authority.
Where, for example, as in the case of Anand Bihari Lal v. Dinshaw & co., the plaintiff accepted a transfer of a company’s property from its accountant, the transfer was held void.
The plaintiff could not have supposed, in absence of a power of attorney, that the accountant had authority to effect transfer of the company’s property.
Forgery: – Forgery may in circumstances exclude the ‘Turquand Rule’. The only clear illustration is found in the Ruben v Great Fingall Consolidates; here in this case the plaintiff was the transferee of a share certificate issued under the seal of the defendant’s company.
The company’s secretary, who had affixed the seal of the company and forged the signature of the two directors, issued the certificate.
Representation through Articles: – The exception deals with the most controversial and highly confusing aspect of the “Turquand Rule”.
Articles of association generally contain what is called ‘power of delegation’. Lakshmi Ratan Lal Cotton Mills v J.K. Jute Mills Co. explains the meaning and effect of a “delegation clause”. BCOC 135 Free Solved Assignment
Acts outside apparent authority: – Lastly, if he act of an officer of a company is one which would ordinarily be beyond the power of such an officer, the plaintiff cannot claim the protection of the
“Turquand rule” simply because under the articles power to do the act could have been delegated to him. In such a case the plaintiff cannot sue the company unless the power has, in fact, been delegated to the officer with whom he dealt.
Q-4 Who can be a director? State the modes of appointment of directors.
ANS-A Director can be-
• The person must have completed the age of eighteen or above.
• Nationality can be that of Indian or otherwise.
• The person should have his own Digital Signature Certificate (DSC) through which Director’s Identification Number (DIN) shall be obtained.
• The person has to furnish a written declaration expressing his consent to act in the position of Director and he is not a person who falls under the category of disqualified members. BCOC 135 Free Solved Assignment
• There is no academic qualification that needs to be held by the person who is desirous of obtaining the directorship of a company.
The modes of appointment of directors are:
(1.Appointment of Directors by Signatures to the Memorandum(Sec.254): The Articles of a company usually name the first directors by their respective name or prescribe the method of appointing them.
(2. Appointment of Directors by Company in the General Meeting(Sec.255): This means one-third of the total number of directors can be permanent directors.
The remaining directors in the case of any such company and all the directors in the case of private company not being a subsidiary of the public company may be appointed as provided in the Articles.
In the absence of any regulation in the Articles of the company, these directors shall be appointed by the company in general meeting.
(3.Appointment of Directors by Third Parties (Sec. 255): The articles may permit the third parties for the appointment of director as their nominee, but the number of directors so appointed should not exceed one- third of the total number of directors and they are not liable to retire by rotation.
The third party means the Vendor, Banking Company, Finance Corporation and Debenture holders. BCOC 135 Free Solved Assignment
(4.Appointment of Directors by Proportional Representation (Sec. 265): Directors are appointed individually either by show of hands or by ballot unless the Articles otherwise provide.
If the Articles permit, a system of proportional representation may be adopted for the appointment of directors.
The appointment may be made by the single transferable vote or by a system of cumulative voting. In this system, the minority shareholders may become in a position to have their representation in the Board of Directors.
Q-5 Who can be appointed as an auditor of a company? What are the disqualifications of an auditor?
ANS- According to Provisions of Section 141(2) of the Companies Act, 2013, a person shall be appointed as an auditor of a company if he is chartered accountant within the meaning of Chartered Accountants Act, 1949 and holding valid certificate of practice and acting in capacity as
b) Partnership Firm
c) Limited Liability partnership
Disqualification of Auditor-
a) A body corporate other than LLP registered under the LLP Act, 2008.
b) An officer or employee of the company.
c) A person who is partner or who in the employment, of an officer or employee of the company.
d) A person or a firm who (whether directly or indirectly) has business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company. BCOC 135 Free Solved Assignment
e) A person whose relative is a director or is in the employment of the company as a director or key managerial personnel.
f) A person who has been convicted by a court of an offence involving fraud and a period often years has not elapsed from the date of such conviction.
g) Any person whose subsidiary or associate company or any other form of entity is engaged as on the date of appointment in consulting or specialised services in reference to provision of Section 144 of the Companies Act, 2013.
Section – B
Q.6 What books of accounts are to be kept by a company?
ANS- Books of account to be kept by a company-
(1) Every company shall keep at its registered office proper books of account with respect to:
(a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure take place ;
(b) all sales and purchases of goods by the company ;
(c) the assets and liabilities of the company ; and
(d) in the case of a company pertaining to any class of companies engaged in production, processing, manufacturing or mining activities, such particulars relating to utilization of material or labor or to other items of cost as may be prescribed, if such class of companies is required by the Central Government to include such particulars in the books of account :
Provided that all or any of the books of account aforesaid may be kept at such other place in India as the Board of directors may decide and when the Board of directors so decides,
the company shall, within seven days of the decision, file with the Registrar a notice in writing giving the full address of that other place.
(2) Where a company has a branch office, whether in or outside India, the company shall be deemed to have complied with the provisions of sub-section
(1), if proper books of account relating to the transactions effected at the branch office are kept at that office and proper summarized returns, made up to dates at intervals of not more than three months, are sent by the branch office to the company at its registered office or the other place referred to in sub-section (1). BCOC 135 Free Solved Assignment
(3) For the purposes of sub-sections (1) and (2), proper books of account shall not be deemed to be kept with respect to the matters specified therein,
(a) if there are not kept such books as are necessary to give a true and fair view of the state of the affairs of the company or branch office, as the case may be, and to explain its transactions ; and
(b) if such books are not kept on accrual basis and according to the double entry system of accounting.
(4) The books of account and other books and papers shall be open to inspection by any director during business hours.
(4A) The books of account of every company relating to a period of not less than eight years immediately preceding the current year together with the vouchers relevant to any entry in such books of account shall be preserved in good order :
Provided that in the case of a company incorporated less than eight years before the current year, the books of account for the entire period preceding the current year together with the vouchers relevant to any entry in such books of account shall be so preserved.
(5) If any of the persons referred to in sub-section
(6) fails to take all reasonable steps to secure compliance by the company with the requirements of this section, or has by his own willful act been the cause of any default by the company thereunder, BCOC 135 Free Solved Assignment
he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both :
Provided that in any proceedings against a person in respect of an offence under this section consisting of a failure to take reasonable steps to secure compliance by the company with the requirements of this section,
it shall be a defense to prove that a competent and reliable person was charged with the duty of seeing that those requirements were complied with and was in a position to discharge that duty:
Provided further that no person shall be sentenced to imprisonment for any such offence unless it was committed willfully.
(6) The persons referred to in sub-section (5) are the following, namely :
(a) where the company has a managing director or manager, such managing director or
manager and all officers and other employees of the company; and;
(b) [Omitted] (c) [Omitted] BCOC 135 Free Solved Assignment
(d) where the company has neither a managing director nor manager, every director of the company. (e) [Omitted]
(7) If any person, not being a person referred to in sub-section (6), having been charged by the managing director, manager or Board of directors, as the case may be, with the duty of seeing that the requirements of this section are complied with, makes a default in doing so,
he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both.
Q.7 Under what circumstances a company can be wound up.
ANS- A Company may be wound up by the court under the following circumstances:-
(a) Special Resolution of the Company: If the Company has, by special resolution resolved that the Company be wound up by Tribunal.
(b) Default: If default is made in delivering the statutory report to the Registrar or in holding the statutory meeting.
(c) Not Commencing or Suspending the Company: If the Company does not commence its business within a year from its incorporation, or suspends its business for a whole year.
(d) Reduction of Members: If the number of members is reduced in the case of a public Company to below seven and in the case of a private Company to below two.
(e) Inability to pay debts: If the Company is unable to pay its debts “See below for the circumstances under which a company is denied unable to pay its debts.]
(f) The just and equitable clause: If the Tribunal is of opinion that is just and equitable that the Company should be wound up. BCOC 135 Free Solved Assignment
Q-8 Discuss the Constitution powers of national company law tribunal.
ANS- National Company Law Tribunal (NCLT) is a quasi-judicial body which was set up to resolve the disputes which are arising in Indian Companies.
It is the successor to the Company Law Board. It is governed by the rules framed by the Central Government. NCLT is a special court where cases relating to civil court have been barred from the jurisdiction.
Powers of national company law tribunal-
• Power to seek assistance of Chief Metropolitan Magistrate.
• De-registration of Companies.
• Declare the liability of members unlimited.
• De-registration of companies in certain circumstances when there is registration of companies is obtained in an illegal or wrongful manner.
• Remedy of oppression and mismanagement.
• Power to hear grievance of refusal of companies to transfer securities and rectification of register of members.
• Protection of the interest of various stakeholders, especially non-promoter shareholders and depositors. BCOC 135 Free Solved Assignment
• Power to provide relief to the investors against a large set of wrongful actions committed by the company management or other consultants and advisors who are associated with the company.
• Aggrieved depositors have the remedy of class actions for seeking redressal for the acts/omissions of the company which hurt their rights as depositors.
• Powers to direct the company to reopen its accounts or allow the company to revise its financial statement but do not permit reopening of accounts.
The company can itself also approach the Tribunal through its director for revision of its financial statement.
• Power to investigate or for initiating investigation proceedings. An investigation can be conducted even abroad.
Provisions are provided to assist investigation agencies and courts of other countries with respect to investigation proceedings.
• Power to investigate into the ownership of the company.
• Power to freeze assets of the company. BCOC 135 Free Solved Assignment
• Power to impose restriction on any securities of the company.
• Power to alter the financial year of a company registered in India.
Q.9 Explain the provisions of companies act 2013 relating to unpaid and unclaim dividends.
ANS- Provisions regarding unclaimed/unpaid dividend :
(1) The dividend which has not been paid to the shareholders within 30 days of its declaration is called ‘Unpaid Dividend. The amount of final dividend and interim dividend may remain unpaid/unclaimed.
This dividend is transferred in a separate account called ‘Unpaid Dividend Account of……..Company Limited/Company Private Limited in any scheduled bank within 7 days after the expiry of 30 days of declaration of dividend.
(2) Penal Interest-If a company fails to deposit the amount of unclaimed dividend into a separate bank account within stipulated time period,
it is liable to pay interest on the amount not transferred at the rate of 12% p.a. Such amount of interest is paid to the members who have not been paid dividends in proportion to their dues.
(3) Transfer to Investor’s Education and Protection Fund-According to the Provision of Section 205 (A) of the Companies Act, 1956,
if the amount of unpaid dividend remains in the account for 7 years from the date of transfer to this account, a company is required to transfer such amount together with interest due on it to ‘Investors’ Education and Protection Fund, as established by the Central Government.
(4) Payment of Unpaid/Unclaimed Dividend-Any person entitled to any amount transferred in IEPF is required to make an application for refund to the authority or committee appointed by the Central Govt. BCOC 135 Free Solved Assignment
(5) Penalty—If any company commits default in compliance of above requirements, every officer of such company responsible for this lapse shall be punishable with fine up to 5,000 per day during which the defaul continues.
Q.10 Distinguish between member and shareholder.
|A person whose name is entered in the register of members of a company, is the registered member of the company||The person who owns the shares of a company is known as shareholder|
|The holder of a share warrant is not a member.||The holder of a share warrant is a shareholder|
|Every company must have a minimum number of members.||The company limited by shares can have shareholders|
|The person who signs the memorandum of association with the company becomes a member.||After signing the memorandum, a person can be a shareholder only when the shares are allotted to him.|
|there must be a minimum of 7 members. There is no such cap on the maximum number of members.||As opposed to shareholders, there is no minimum or maximum limit, in the case of a public company.|
Section – C
Q.11 How is first auditor appointed?
ANS- First auditor is appointed when-
-written consent to such appointment shall be obtained from the Auditor on or before the date of appointment.
- a certificate from the Auditor that the appointment shall be in accordance with the following conditions as stated below
- the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made thereunder
- the proposed appointment is as per the term provided under the Act
- the proposed appointment is within the limits laid down by or under the authority of the Act
- the list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct. BCOC 135 Free Solved Assignment
- The Auditor shall also have to indicate/declare in the certificate as mentioned-above that it satisfies the criteria provided in section 141 of the Companies Act, 2013. [Section 141 read with Rule 4 & 10 of the Companies (Audit and Auditors) Rules, 2014]
Consider the Qualifications and Experience of the Proposed Auditor. In case of a Company that is required to constitute an Audit Committee under section 177,
the committee, and, in cases where such a committee is not required to be constituted,
the Board, shall take into consideration the qualifications and experience of the individual or the firm proposed to be considered for appointment as auditor and whether such qualifications and experience are commensurate with the size and requirements of the Company.
While considering the appointment, the Audit Committee or the Board, as the case may be, shall have regard to any order or pending proceeding relating to professional matters of conduct against the proposed auditor before
Q.12 When can registrar refuse registration of a prospectus?
ANS- In general parlance prospectus refers to an information booklet or offer document on the basis of which an investor invests in the securities of an issuer company.
It has been defined under section 2(70) so as to mean any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice,
circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate.
A registrar can refuse registration of a prospectus: BCOC 135 Free Solved Assignment
(1.) If, A prospectus issued under sub-section (1) shall not include a statement purporting to be made by an expert unless the expert is a person who is not, and has not been, engaged or interested in the formation or promotion or management, of the company and has given his written consent to the issue of the prospectus and has not withdrawn such consent before the delivery of a copy of the prospectus to the Registrar for registration and a statement to that effect shall be included in the prospectus.
No prospectus shall be issued by or on behalf of a company or in relation to an intended company unless on or before the date of its publication,
there has been delivered to the Registrar for registration, a copy thereof signed by every person who is named therein as a director or proposed director of the company or by his duly authorised attorney.
2.Every prospectus issued under sub-section (1) shall, on the face of it,—
(a) state that a copy has been delivered for registration to the Registrar as required under sub-section (4); and BCOC 135 Free Solved Assignment
(b) specify any documents required by this section to be attached to the copy so delivered or refer to statements included in the prospectus which specify these documents.
3.The Registrar shall not register a prospectus unless the requirements of this section with respect to its registration are complied with and the prospectus is accompanied by the consent in writing of all the persons named in the prospectus.
4.No prospectus shall be valid if it is issued more than ninety days after the date on which a copy thereof is delivered to the Registrar under sub-section (4).
5.If a prospectus is issued in contravention of the provisions of this section, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees and every person who is knowingly a party to the issue of such prospectus shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both.
Q.13 Write short note on issue of share at a premium.
ANS- When shares are issued at a price higher than the face value (also called par value or nominal value), it is called an issue of shares at a premium.
Excess of issue price over face value is the amount of premium; it is a capital profit for the company and the amount so earned has to be credited to a separate account called Securities Premium Account.
There are no restrictions on issue of shares at a premium and the power to issue shares at a premium need not be taken in the Articles of Association. But there are restrictions on the ways securities premium can be used. BCOC 135 Free Solved Assignment
According to Section 78 of the Companies Act, securities premium may be applied by the company for;
(i) Issuing to members of the company fully paid bonus shares; or
(ii) Writing off the preliminary expenses of the company; or
(iii) Writing off the expenses of, or the commission paid or discount allowed on issue of shares or debentures of the company; or
(iv) Providing for the premium payable on the redemption of any redeemable preference shares or debentures.
Illustration- Thus, the company has $4,500 in equity capital. Of this $4,500, only $3,000 is share capital.
The remaining $1,500 is share premium, representing funds generated from shareholders as a return for their partial ownership of the company.
The $1,500 appears on company’s balance sheet in the share premium account.
Q.14 Explain the provisions of companies act 2013 with regard to proxy.
ANS-The provisions of companies act 2013 with regard to proxy are-
(1)Member may appoint proxy Section 105(1) : Member of the company entitled to attend the meeting and vote at the meeting shall have a right to appoint another person as a proxy to attend and vote at the meeting on his behalf.
(2) 1st Proviso to section 105(1) : Proxy shall have not any right to speak at the meeting and shall have right to vote except on a poll. BCOC 135 Free Solved Assignment
(3) 2nd Proviso to section 105(1) : Unless AOA of the company otherwise provided, Section 150(1) shall not applicable of company having no share capital
(4) Limits for appointment as a proxies 3rd Proviso to section 105(1) :
Person appointed as a proxy shall act on behalf of such no. of member(s) not more than 50 members.
(5) Rule 19 of the Companies (Management and Administration) Rules, 2019 :
a. In case of Section 8 Company no member of this company shall have right to appoint proxy unless shall other person is also member of such company
b. Maximum 50 No. of members on behalf of whom the a person can be appointed as a proxy and holding in aggregate maximum 10% of total share capital carrying voting rights.
C. Proxy form shall be in form MGT-11.
(6) Statement in the Notice of Meeting Section 105(2) : A prominent reasonable statement that a member entitled to attend and vote have right to appoint a proxy, or where that is allowed, one or more proxies, to and vote instead of himself and a proxy need not to be a member
(7) Penalty in case of contravention Section 105(3) : In case of contravention of section 105(2), then every officer in default of the company shall be punishable with Penalty which shall not be less than Rs. 5000
(8) Deposit of Form Section 105(4) : 48 hrs before the company, for depositing with the company or any other person any instrument appointment a proxy or any other document showing the validity or otherwise relating to appointment may be effective at such meeting shall have effect as if a 48 hrs had been specified in or required by such provision for such deposit BCOC 135 Free Solved Assignment
(9) Invitation to appoint Proxy Section 105(5) : At the expenses of the company, invitation to appoint proxy a person or no. of person specified in the invitation are issued to any member entitled to have a notice of the meeting sent to him and to vote thereat by proxy,
every officer of the company who knowingly issues the invitations as aforesaid or willfully authorizes or permits their issue shall be punishable with fine which may extend to Rs. 1.00,000
(10) Proviso to section 105(5) : An officer shall not be punishable under this subsection by reason only of the issue to a member at his request in writing of a form of appointment naming the proxy,
or of a list of persons willing to act as proxies, if the form or list is available on request in writing to every member entitled to vote at the meeting by proxy
(11) Relevant points to be consider Section 105(6) : Document appointing proxya.
a. shall be in writing;
b. signed by the member appointing proxy or his attorney duly authorized by him or in case appointer is any body corporate, be under its seal or be signed by an officer or an attomey duly authorized by it. BCOC 135 Free Solved Assignment
c. Proxy form shall be in form MGT-11
(12) Proxy forms Section 105(7) : Proxy form shall be in form MGT-11.
(13) Inspection of Proxy Form Section 105(8) : During the period beginning 21 hours before the time fixed for the commencement of the meeting and ending with the conclusion of the meeting, inspect the proxies forms filed,
at any time during the business hours of the company provided not less than three days’ notice in writing of the intention so to inspect is given to the company
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