If you are looking for BCOC-135 IGNOU Solved Assignment solution for the subject Company Law, you have come to the right place. BCOC-135 solution on this page applies to 2022-23 session students studying in BCOMG courses of IGNOU.
BCOC-135 Solved Assignment Solution by Gyaniversity
Assignment Code: BCOC-135/TMA/2022-23
Course Code: BCOC-135
Assignment Name: Company Law
Verification Status: Verified by Professor
Maximum Marks: 100
Note: Attempt all the questions.
Q1) Discuss types of company on the basis of liability. (10)
Ans) The types of company on the basis of liability are:
On the basis of liability, an incorporated company may either be:
Company Limited by Shares: A business that is "limited by shares" [Section 2 (22)] has the responsibility of its members restricted by the memorandum to the amount, if any, unpaid on the shares individually held by them. Although the corporation's liability is never limited, the liability of its members is what is restricted in such a firm, which is why it is sometimes referred to as a limited liability company.
Members' obligations may be enforced at any point throughout the operation of the company as well as during its dissolution. Since the face value of the shares determines how much liability there is, such a firm must have share capital. However, there is no obligation to pay any outstanding balance on the shares other than in response to calls that have been properly made in accordance with the law and the articles while the company is still operating or in response to calls that have been made in the event of the company's winding up.
Company Limited by Guarantee: A company limited by guarantee is one that has its members' liability restricted by the memorandum to the amount that each member may agree to pay to the company's assets in the case of the company's dissolution [Section 2 (21)].
A firm of this type might or might not have share capital. When a company limited by guarantee is established without any share capital, the members would only be responsible for the guaranteed sum when the company is liquidated. The members are furthermore responsible for paying the unpaid balance on their shares if the company limited by guarantee was founded with share capital. However, the guaranteed sum can only be accessed at the company's dissolution.
Unlimited Company: A firm is considered unlimited if the members' liability is unrestricted [Section 2(92)]. As a result, each member of an unlimited liability business is responsible for the whole amount of the firm's obligations and liabilities. It is possible to observe that the liability of members of an unlimited corporation is comparable to that of partners, but unlike partners' liability, members' liability cannot be pursued directly. The claims can only be used against the firm because it is a distinct legal entity. As a result, in order to pursue their claims, creditors must start the winding-up of the corporation. However, the official liquidator has the right to demand that all members pay all obligations and liabilities.
Share capital may or may not be present in an unlimited corporation. A limited liability company that has been registered as an unlimited corporation may later change its status under Section 18. Any obligations, liabilities, applications, or agreements made before the conversion with respect to the unlimited liability firm or made on its behalf will not be impacted.
Q2) Define a private company and explain the procedure of converting a private company into public company. (10)
Ans) A private company is one whose articles of association restrict the transfer of shares, cap the number of members at 200 (excluding current and former employees), forbid inviting the public to subscribe for the company's shares or debentures, and forbid inviting or accepting deposits from anyone besides the members, directors, and members' immediate families. Two members are needed to create a private corporation as a minimum.
According to Section 14, the following procedures must be followed in order to transform a private firm into a public one:
Special Resolution: By changing its articles of organisation, a private corporation can become a public one. In this regard, Section 14 of the 2013 Companies Act stipulates that a private company may alter its Articles for the purpose by passing a special resolution. A private business can therefore turn into a public company in cases where a special resolution is adopted, therefore removing the legislative conditions outlined in Section 2 (68) of the Act that define a firm as a private company. As a result, whenever the articles of a private company are changed to allow for more than 200 members, the free transferability of shares, or to invite the public to subscribe to the company's shares, debentures, or other securities, the private company is transformed into a public one as of the date of the change. As a result, the firm will no longer be eligible for the benefits and exemptions granted to private companies, and the requirements of the Companies Act would apply to it just like they would to a public company.
Increase in Membership: If there are fewer than seven members, the number must be increased [Section 3].
Increase in Number of Directors: If there are less than three directors, the number must be increased [Section 149].
Dropping word ‘Private”: The word ‘private’ will be dropped from the name (Sec. 13).
Filling of Altered Articles: Every modification to the articles required by this section must be submitted to the Registrar in Form No. INC. 27 within fifteen days in the manner specified by the Registrar, who will then register the change.
Alteration to be Noted in Every Copy: Every change to a company's articles of incorporation must be mentioned in every copy of the documents [Section 15 (1)].
If the aforementioned rule is not followed, the company and any official who is in default are both subject to fines that may amount to one thousand rupees for each copy of the articles published without the necessary adjustment [Section 15 (2)].
Q3) Explain the doctrine of ultra vires. What are the effects of ultra vires transactions? (10)
Ans) Ultra vires a firm translates as "beyond a corporation's powers." The doctrine of extra vires exists to safeguard the interests of creditors, outsiders, and members. They are:
The company's members are aware of the uses to which the company may put their funds.
The third parties who do business with the company are aware of the goals for which it was established and limit their dealings with it to pursuing only those goals. Similar to this, the creditors are guaranteed that the company's assets won't be put at risk in unapproved operations.
Thus, the business's operations are restricted to the goals stated in the memorandum of association in order to safeguard the interests of the owners and third parties who enter into contracts with the firm. It cannot go beyond the scope of the objects clause, and if it does, it will be deemed ultra vires and void from the start.
Ultra vires acts can be divided into the following three categories:
Ultra vires he Companies Act,
Ultra vires the Memorandum of Association, and
Ultra vires the Articles of Association.
Effects of Ultra Vires Transactions
Void ab-Initio: An act that violates the firm's rights is void and cannot be used against the company.
No Ratification: Even the entire body of shareholders cannot approve an ultra vires the corporation transaction.
Not Enforceable: Not only outsiders can enforce ultra vires transactions against the company, the company can also not enforce such transactions against third parties.
Injunction: Any member of the company may seek an injunction from the Court to prevent the company from carrying out ultra vires activities if such an act has already been done or is about to be done Personal Liability of Directors: Any damage brought on by an extra vires transaction may be held personally accountable by the company's directors.
Any action that violates the company's rights is unlawful and unenforceable. Therefore, it is ultra vires for a company to borrow money above its authorised limit, and the lender has no recourse against the company for the loan.
Q4) What are sweat equity shares? Discuss the conditions for issuing the sweat equity shares. (10)
Ans) According to Section 2(88), "sweat equity shares" refers to equity shares that a company issues to its directors or employees at a discount or in exchange for something other than cash in exchange for their expertise or for making available rights in the form of intellectual property rights or value additions. A permanent employee of the company who has worked in India or outside of India for at least the past year is defined as an "employee" under Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014. Additionally, it covers an employee of the company's holding company or one of its subsidiaries, whether they are based in India or elsewhere. A full-time director of the company, together with other directors of the company, its subsidiary, or holding company, whether based in India or not, are all considered directors. Only shares from a class of already-issued shares may be issued as sweat equity by a firm.
As for the issue of sweat equity shares, Section 54, among other things, mandates that:
A special resolution adopted by the corporation has authorised the issue. The amount of shares, the current market price, any applicable consideration, and the class or classes of directors or employees to whom such equity shares are to be distributed must all be specified in the special resolution. In accordance with Rule 8, the special resolution allowing the issuance of sweat equity shares must be passed within a year of the date of the allotment in order to be effective. The sweat equity shares are issued in line with the SEBI regulations enacted in this regard for listed companies, and according to any additional requirements that may be established for unlisted companies.
According to Rule 8, a corporation may not issue sweat equity shares for more than 15% of the paid-up equity share capital currently in existence in a year or for shares with an issue value of Rs. 5 crores, whichever is higher. No more than 25% of the paid-up equity capital of the company may ever be issued as sweat equity shares in the company.
When granted to directors or employees, sweat equity shares are locked in and non-transferable for three years following the date of allocation. The term of the lock-in period and the fact that the share certificates are subject to it must be stamped in bold or otherwise made clear on the share certificate.
The price at which the sweat equity shares will be issued must be assessed by a registered valuer as the fair price while providing support for such valuation.
A registered valuer must carry out the valuation of any intellectual property rights, knowledge, or value additions for which sweat equity shares are to be granted, and they must submit a proper report to the board of directors that includes the explanation for the valuation.
The rights, restrictions, and limitations that apply to equity shares also apply to sweat equity shares.
Q5) Explain the duties of a company secretary. (10)
Ans) Depending on the size, management structure, and personal capabilities of the secretary, the duties of a corporate secretary differ from one organisation to the next. In India, the corporate secretary typically performs legal, administrative, and management roles in addition to secretarial activities in the private and joint sectors. There are different managers in charge of the tasks related to accounting, law, and personnel, among other things, in large-sized firms. Even in these situations, the company secretary's function as the coordinator should not be undervalued. It can be said that the company secretary serves in three roles: as the Board of Directors' agent, as the person in charge of the business's secretarial duties, and as the top administrative officer.
Following are the statutory duties of the company secretary under the Companies Act:
Signing of any paperwork or procedures that the business is required to certify under (Section 21).
Filing of required paperwork with the Registrar of Companies, such as the return of share allocation, yearly returns, annual accounts, etc (Section 39).
Giving the Registrar notice of the increase in share capital (Section 64).
The share certificate must be delivered within two months of the allocation or within one month of the registration of the transfer (Section 56). (4).
Charges must be filed with the Registrar of Companies (Section 77).
Getting the company's name painted outside of each office or place of business and having it etched on the seal, if one exists (Section 12).
To make the membership registration available for inspection and to provide copies of it (Section 94).
Sending notices of general meetings to all company members (Section 101).
Certain agreements and resolutions must be filed with the Registrar (Section 117).
Keeping records of the proceedings at board meetings, public meetings, and other gatherings.
Must make a registry of directors and senior managerial staff, along with a list of their stock holdings, available for examination (Section 171).
Maintaining the company's numerous registrations and statutory books.
If the Act's duty-related provisions are not followed, the Secretary will be held accountable as an officer who has failed to do so. A secretary, among other people, has been designated as an official in default under Section 2(6).
Duties under Other Acts: A company secretary must also make sure that other Acts' obligations are followed. The secretary, who is designated as the "Principal Officer" under the Income Tax Act, is in charge of withholding income tax from employee pay and depositing it in the government coffers. The secretary is responsible for ensuring that different documents, including share certificates and transfer forms, are duly stamped in accordance with the Indian Stamp Act.
Q6) What is National Company Law Tribunal? What are its powers ? (6)
Ans) A quasi-judicial authority called the National Company Law Tribunal (NCLT) decides disputes involving Indian corporations. This was created on June 1, 2016, by the Indian government, and it was incorporated under the Companies Act of 2013. The NCLT resolves all issues arising under the Companies Act, including those involving arbitration, compromise, agreements, reconstruction, and winding up.
Powers of the National Company Law Tribunal
The Power as a Civil Court
The following subjects give the Tribunal the same authority as a civil court under the Code of Civil Procedure of 1908.
Calling someone to appear, requiring their presence, and having them submit to an oath examination.
Requiring document discovery and production
Receiving affidavit-based evidence.
Requisitioning any public record, document, or a duplicate of such record or document from any offices, as long as it complies with the requirements of sections 123 and 124 of the Indian evidence act of 1972.
Appointing commissions to examine witnesses or documents
Determining a case ex parte or dismissing a claim for default.
Section 424: Any other matter that may be stipulated (2).
Execution of an Order:
Similar to a court's ruling in a lawsuit, the Tribunal's orders may be enforced in the same ways
Power to Punish for Contempt:
According to the terms of the 1970 Contempt of Court Act, the Tribunal shall have the same jurisdiction and competence to penalise for contempt as the high court (Section 425).
Power to Seek Assistance of Chief Metropolitan Magistrate etc:
The Tribunal may seek the assistance of the Chief Metropolitan Magistrate, Chief Judicial Magistrate, etc. in any case relating to the winding up of a company or rehabilitation of a sick company for the purpose of taking custody of property, books of account, or other documents.
Q7) Differentiate between share and stock. (6)
Ans) The differences between shares and stocks are as follows:
Q8) What is book building? What are its advantages? (6)
Ans) By "book building," we mean a process by which, through the use of a notice, circular, advertisement, or other document, demand for the securities proposed to be issued by a body corporate is elicited, built up, and the price for such securities is evaluated for the determination of the quantum of such securities to be issued. It is a technique for underwriting equity.
Advantages of Book Building
A body corporate may develop and build up the demand for the security it plans to issue.
With a given amount of precision, the quantity of securities to be issued can be predicted.
It is possible to determine the price at which the issue will likely be completely subscribed.
This approach to IPO share pricing is the most effective one.
This procedure instils confidence among investors, expanding the pool of potential investors.
There are no worries over the issue's future because it has already been sold.
Q9) Who is chairman of meeting? What is his role? (6)
Ans) A meeting's chairman is the person chosen or appointed to preside over and oversee the proceedings. A meeting must have a chairperson to be efficiently run. He oversees the meeting, acts as the debate's umpire, and acts as its main authority.
Ordinarily, articles specify how a meeting's chairman will be chosen. But if the Articles don't specify anything, the members in attendance at the meeting will choose one of them to preside over it. A chairman must be elected for the purpose if a poll on the election of the chairman is sought [Section 104]. The members present at a meeting shall elect one of themselves to serve as chairman if no director volunteers to chair a meeting or if no director arrives within fifteen minutes of the scheduled meeting time.
Role of a Chairman in a Meeting
All questions that come up at a meeting and that need to be decided right away must first and foremost be decided by the chairman. He has the authority to rule on points of order, dismiss any disruptive members, adjourn the meeting if it becomes impossible to hold it without disruption, control polling procedures, and sign and date the minutes of the meeting. If the members are evenly divided for and against the resolution, the chairman may cast a tie-breaking vote, if permitted under the Articles. The meeting's chairman is responsible for ensuring that the rules are followed, that proper order is maintained, and that members have an appropriate opportunity to voice their opinions. He should oversee the fairness of the vote and the accurate determination of the meeting's sentiment about each and every motion. He must always operate honestly and in the best interests of the business.
Q10) Discuss the provisions relating to dividend. (6)
Ans) The provisions relating to dividend are as follows:
A company may pay dividends according to the amount paid up on each share if permitted by its articles of incorporation (Section 51).
Within five days of the dividend declaration date, the full amount of the dividend, including any interim dividend, must be deposited in a designated bank in a separate account.
Only registered shareholders, those who receive his request, or his banker will receive the dividend. No dividend will be paid out unless it is in cash. Any cash dividend due may be paid by check, warrant, or other electronic means.
Preference shares always have a predetermined rate of dividend payment.
If the requirements under sections 73 and 76 relating to the acceptance of public deposits are not met, no dividend may be given.
The pay-out will be transferred to the "unpaid dividend account" if it is not claimed within thirty days of the declaration date.
Q11) What are the grounds for compulsory winding up? (5)
Ans) Winding up may be ordered by the Tribunal in following cases, which are grounds for compulsory winding up:
If a corporation has decided to be wound up by the Tribunal in a special resolution.
If the business has acted in a manner that is contrary to Indian sovereignty and integrity, state security, cordial relations with other nations, public order, morality, or decency.
If the Tribunal determines that it is appropriate to wind up the company after receiving an application from the Registrar or another person authorised by the Central Government by notification under the Act, or that the Company was formed for a fraudulent and unlawful purpose, or that anyone involved in its formation or management has engaged in fraud, misfeasance, or misconduct in connection therewith
If the company failed to file its annual reports or financial statements with the Registrar for the five fiscal years before in a row; or
If the business can't afford to pay its debts.
If the Tribunal determines that winding up the corporation would be just and equitable (Section 271).
Q12) What are the provisions relating to proxy? (5)
Ans) The provisions relating to proxy are as follows:
Appointment: Any shareholder with the right to vote and attend the meeting may designate a proxy. It should be noted that the Central Government may impose restrictions on which firms' members are permitted to designate proxies. A proxy cannot be appointed by a director for a board meeting. No proxy may be named for a minor.
Right: At the meeting, a proxy is not permitted to speak. He lacks the authority to move or second a motion. He can't ask for a vote. Only in a poll can he cast a vote.
Membership: The company does not require a proxy to be a member. A proxy might also be an outsider.
Proxy Form: At least 48 hours prior to the meeting, the correctly filled proxy form must be deposited (sent) at the company's registered office. Each meeting requires its own unique proxy form.
Inspection: A proxy has no legal authority to review the proxy forms or the meeting minutes. By giving the company at least 3 days' notice, a member may inspect the proxy form.
Q13) What is forged transfer? What are its consequences? (5)
Ans) A forged transfer is a document that has a forged copy of the transferor's signature. There is no title granted through forgery. It's because there is no consent at all when something is forged, not just a lack of free consent. Therefore, regardless of how real the transaction may seem, a forgery cannot ever grant ownership to the recipient. As a result, if a transfer is fraudulent and the company registers the transfer, the genuine owner may request that the company correct the membership register and add his names back to the register.
Consequences of Forged Transfer
Since a faked transfer is void, the original owner of the shares remains the shareholder with all attendant rights, including the entitlement to dividends, right issues, bonuses, etc. According to Barton v. N. Staffordshire Rly. , the firm is required to reinstate his name in the register of members.
The firm cannot dispute the transferee's ownership if it has issued a share certificate to him and he sells the share to an innocent buyer since the certificate prevents the corporation from doing so. Therefore, if it declines to list him as a shareholder, it will be responsible for paying him damages - Balkis Consolidated Co. Ltd. v. Fredrick Tomkinson .
Even if the individual who obtained registration operated in good faith, if the firm has suffered loss as a result of the falsified transfer, it may recover the loss from him.
Q14) What are the statutory requirements in relation to a prospectus? (5)
Ans) The statutory requirements in relation to a prospectus are:
Dating of Prospectus: A prospectus produced by or on behalf of a company or in connection with an anticipated company must be dated in accordance with section 26. The Section further states that the date on the prospectus will be taken to be the date that it was published.
Registration of Prospectus: A copy of the prospectus must be delivered to the Registrar by the time it is published, according to Section 26(1). Each individual listed as a director or proposed director on the copy of the prospectus that has been presented must sign it, or his properly appointed attorney may do so. Every prospectus issued under sub-section (1) shall, on the face of it,—
Describe how a copy has been delivered to the Registrar for registration in accordance with subsection (4).
Indicate any papers that must be included with the copy that was distributed in accordance with this section or make reference to statements in the prospectus that include these documents.
A prospectus may not be registered by the Registrar unless all parties identified in the prospectus have given their written consent and the prospectus complies with this section's registration requirements. The aforementioned standards apply to any planned or existing company. After 90 days have passed since a copy of the prospectus was provided to the Registrar, none may be released.
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