Corporate Law

 

Corporate Law Q1.A Ans: The first directors are appointed by the subscribers to the memorandum and are named on form IN01 which is registered at Companies House when the company is formed. They automatically take office on the date of  incorporation: sec16 (6) CA 2006. Their names and other details should be entered in the register of directors once the company is formed: CA 2006, sec162. Subsequent directors are appointed in accordance with the company's articles. The Model Articles (for companies registered after 1.10.2009) 1.10.200 9) prescribe that: Any person willing to be appointed by a director, and permitted by law to do so can be appointed by ordinary resolution of a general meeting or by resolution of the directors. (Article 17)  Table A, A, (for companies registered pre-1.10.20 pre-1.10.2009 09 provides that the general meeting may appoint directors (but note the procedures in TA 76-77). The directors may appoint a director under Article 79 of Table Ta ble A, but such an appointee holds office only until the next AGM. (Article 78) By CA 2006, sec161(1), in a PLC, separate resolutions are required for each director, unless a resolution to appoint two or more persons by single resolution has been agreed by the meeting without any vote cast against it.

Q1.B Ans: Unless the Articles provide otherwise, any Director of a company may, and the Manager or Secretary on the requisition of a Director should, at any time, summon a Meeting of the Board.

Q2.A Ans: No company can appoint or employ, at the same time, or, continue the appointment or, employment at the same time, of a Managing Director, as well as a Manager.

 

But, there is no legal prohibition against having a Whole Time Director and Manager, simultaneously, or, Managing Director and whole-time Director, simultaneously. Again, there is no prohibition on a company having more than one Managing Director.  This section applies to all companies, companies, public and private. As per provisions provisions of  this section a company cannot apply both managing director and manager at the same time. The term “managing director" and "manager" has been defined in section 2(26) and 2(24) respectively. "Managing director is a director who is entrusted with "substantial" powers of management which would not otherwise be exercisable by him. From the definition of managing director it appears that the company may entrust "substantial" power of  management to one or more directors and therefore a company may have more than one managing director.Further the expression MANAGING DIRECTOR shall also include a director occupying the position of managing director, by whatever name called. For instance, President, CEO, chief  operating officer, etc. in the case of MNCs shall be considered as the MANAGING DIRECTOR for the purpose of COMPANIES ACT, although they are not designated as such. Q2 B Ans: Yes, Company is allowed appointing a part time secretary instead of a whole- time Secretary. Companies having. In India every company having a paid up share capital of Rs. 5 crores or more are required to appoint a qualified person as Company Secretary. A qualified Company Secretary should be a member of Institute of Company Secretaries of India headquartered in New Delhi. A company having not less than Rs. 10 lacs paid up capital and not required to appoint a full time company Secretary should file with Registrar of Companies, a compliance certificate signed by a practicing Company Secretary. Section 383A of the Companies Act, 1956 provides for the mandatory appointment of a whole time secretary where the paid up capital of the Company exceeds Rs. 5 crores. In case where the capital is less than Rs. 5 crores, the company is required to obtain a secretarial compliance certificate and attach the same to the Directors' Report and file it with the Registrar of  Companies. Statutory declarations of compliance under various other provisions of the Companies Act, 1956 are also to be certified by practicing company secretaries. Under the MCA 21 e filing regime several forms (including some,

 

exclusively)) are required to be pre-certified by practicing company exclusively secretaries. In the case of companies listed on recognized stock exchanges, the annual returns are to be signed by a practicing company secretary. Further, the Securities and Exchange Board of India (SEBI) also recognizes the Company Secretary as the Compliance Officer and the practicing company secretary to issue various certificates under its Regulations. Further, the practicing Company Secretaries are also authorized to certify compliance of conditions of corporate governance in case of listed companies. Q3. A Ans: The first auditor auditors s of the Company ar are e appointed by the Board of  Directors and the Board only fixes the remuneration of the First Auditors. However, the auditor is appointed or re-appointed by the general meeting, the remuneration is fixed by the general meeting, or it may be fixed in any manner as determined by a general meeting. Q3. B Ans: Prohibition on drawl of Foreign Exchange. ---Drawl of foreign exchange by any Person for the following purpose is prohibited, namely:   A. a transaction specified in the Schedule I; or B. a travel to Nepal and/or Bhutan; or C. a transaction with a person resident in Nepal or Bhutan. Provided that the prohibition in clause (c) may be exempted by RBI subject to such terms and conditions as it may consider necessary to stipulate by special or general order. Q4. A Ans: Every public com company pany must have at least 3 dir directors ectors and every priv private ate company must have at least 2 directors. This is the minimum legal requirement as to the number of directors. The Articles of a company may, and usually do, fix the minimum and maximum number of directors of its Board. A company in general meetingwithin may, by resolution, increase or reduce the number of its directors theordinary limits fixed in that behalf by

 

its Articles. In certain cases, the increase in number of directors also requires the approval of the Central Government. Q5. A Ans: (i) Title: An enactment would have what is known as ‘Short Title’ and also a ‘Long Title’.  The short title merely merely identifies the enact enactment ment and is chosen merel merely y for convenience. The ‘Long title’ describes the enactment and does not merely identify it.  The Long title is a part of the Act and, therefore, therefore, can be referred referred to for ascertaining the Object and scope of the Act. (ii) Preamble: It expresses the scope and object of the Act more comprehensively comprehensivel y than the Long title. The preamble may recite the ground and the cause for making a statute and or  The evil which is sought to the remedied remedied by it. The preamble preamble like the Long title can Legitimately be used for construing it. However, the preamble cannot over ride the Provisions of the Act. Only if the wording of the Act gives rise to doubts as to its proper Construction (e.g., where the words or a phrase has more than the one meaning and Doubts arises as to which of the two meanings is intended in the Act) the preamble can And ought to be referred to the arrive at the proper construction. (iii) Marginal notes: As held in CIT Ahmed Bhai Umar Bhai Company HJR 1950, SC (134, 141) marginal notes applied to the section cannot be used for construing the section. However, marginal notes appended to the Articles of the Constitution have been held to be Part of the constitution and therefore, have been made use of in construing the articles.

Q5. B

 

Ans: Vacancies caused by resignation or departure of IRB members may be filled by appointment of the Director upon recommendation of the Chair.  The appointment will be for five five (5) years. If the vacancy is not filled, filled, the remaining members shall constitute the pool on which a quorum is based. Q6. B Ans: Cla Ans: Clause use (a) to (c) of the sub-s sub-sect ection ion (1) of sec sectio tion n 20 209 9 requi require res s ev every ery company to maintain books of accounts in respect of receipts, expenditure, sales, purchase, assets and liabilities. It is based on the fundamentals of  acco ac coun unti ting ng an and d the the br broa oad d sp spec ectr trum um of pr prep epar arat atio ion n of ma mand ndat ator ory y fi final nal accounts by company. The clause (d) of the sub-section (1) refers to the books of accounts accounts in view of the cost accoun accounting ting requi requireme rements. nts. Logic Logically ally,, even the compan any y required to comply with the cost acc accounting requirements, has to maintain all the books referred to in clause (a) to (c) as there is no relaxation to any company in respect of filing of final accounts. But, what is interesting is that, the ‘proper books of account’ as referred to in the sub-section sub-section (1), has been fur further ther dealt wi with th under sub-section (3 (3). ). The subsu b-se sect ctio ion n (3 (3)) la lays ys do down wn tw two o br broa oad d co cond ndit itio ions ns fo forr co cons nstr trui uing ng that that the the company maintains the proper books of accounts. Clause (a) and (b) of subsection (3) are extracted below: (a)

if ther there e are n not ot kep keptt such bo books oks as ar are e nec necessar essary y to giv give e a tru true e and fai fairr view of the estate of the affairs of the company or branch office, as the case may be, and to explain its transactions; and (b) If such bo books oks are not kep keptt on acc accrual rual ba basis sis and ac accordi cording ng to the d double ouble entry system of accounting.

 The following persons are responsible responsible for maintaining the books of accounts of a company:1. The manag managing ing dire director ctor or m manage anager; r; 2. If the com company pany has nei neither ther a man managing aging dir directo ectorr nor manage manager, r, then every director of the company; 3. Ever Every y offic officer er and othe otherr emplo employee yee who ha has s been autho authorize rized d and to whom responsibility to maintain the books has been allotted by the Board of Directors. Q6. C Ans: 619A. A Annual nnual reports on Governme Government nt companies. (1) Where the Central Government is a member of a Government company,

 

the Central Government shall cause an annual report on the working and affairs of that company to be(a) prepared within three months of its annual general meeting before which the audit report is placed under sub-section (5) of  section 619; and (b) as soon as may be after such preparation, laid before both Houses of Parliament together with a copy of the audit report and any comments upon, or supplement to, the audit report, made by the Comptroller, and Auditor-General of India. (2) Where in addition to the Central Government, any State Government is also a member of a Government Company, that State Government shall cause a copy of the annual report prepared under sub-section (1) to be laid before the House or both Houses of the State Legislature together with a copy of the audit report and the comments or supplement referred to in sub-section (1). (3) Where the Central Government is not a member of a Government company, every State Government which is a member of that company, or where only one State Government is a member of the company, that State Government shall cause an annual report on the working and affairs of the company to be(a) prepared within the time specified in sub-section (1); and (b) as soon as may be after such preparation laid before the House or both Houses of the State Legislature with a copy of the audit report and comments or supplement referred to in subsection (1).] (4) The provisions of this section shall, so far as may be, apply to a Government Company in liquidation as they apply to any other Government company.