CA INTER

CORPORATE AND OTHER LAW

Test-3 Chapter-7,8,9

Solution

MCQ’s

1. B (The company shall ensure to spend in every financial year, at least 2% of the average
gross profits of the company made during the 3 immediately preceding financial years.)
2. D (They have to keep all the documents and information relating to incorporation of
their company at the registered office only.0
3. C (Every member of the company, to every trustee for the debenture-holder of any
debentures issued by the company, and to all persons other than such member or
trustee, being the person so entitled.)
4. C (C Limited, whose preference shares (the company is having both equity as well as
preference shares), are listed on a recognized stock exchange.)
5. A (Mr. P & Mr. V)
6. A (Latest by 29th September, 2019)
7. C (Grants or donation to the central government for the purpose of investor’s education
and trading.)

(7 x 2 = 14 marks)

A-1

(a) In case of Nidhi company –

Section 136 (1) of the Companies Act, 2013, shall apply, subject to the modification that, in the
case of members who do not individually or jointly hold shares of more than one thousand
rupees in face value or more than one per cent, of the total paid-up share capital, whichever is
less, it shall be sufficient compliance with the provisions of the section if an intimation is sent by

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public notice in newspaper circulated in the district in which the Registered Office of the
company is situated stating the date, time and venue of AGM and the financial statement with
its enclosures can be inspected at the registered office of the company and the financial
statement with enclosures are affixed in the notice board of the company and a member is
entitled to vote either in person or through proxy.

Here, Upkaar Nidhi Ltd. was only required to send such notice of AGM and other relevant
documents to members who individually or jointly hold shares of more than Rs. 1,000 in face
value or more than 1%, of the total paid-up share capital, whichever is less. Accordingly, Upkaar
Nidhi Ltd. would have send notice and other relevant documents to only following category of
members:-

(i) Two members jointly holding shares with face value of Rs. 1,600 which amounted to 0.32%
of the total paid-up share capital

(ii) All the remaining members holding individually more than 1.2% of the total paid –up share
capital of the company.

For the category of members mentioned in Sr. no. 1 & 3, of the aforesaid table given in case
scenario, it would have been sufficient compliance if an intimation for the AGM was sent in the
newspaper as per the provisions, as aforesaid, and there was no need to send the notice of
AGM along with relevant documents to such category of members personally.

(5 Marks)

(b) Normally, general meetings are to be called by giving at least 21 clear days’ notice as
required by section 101 (1) of the companies Act, 2013.

As an exception first proviso to section 101 (1) states that a general meeting may be called after
giving shorter notice than that specified in sub-section (1) of section 101, if consent, in writing
or by electronic mode, is accorded thereof in the case of any other general meeting (i.e. other
than annual general meeting), by members of the company-

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 a) Holding, if the company has a share capital, majority in number of members entitled to
vote and who represent not less than ninety-five per cent. of such part of the paid-up
share capital of the company as gives a right to vote at the meeting; or
b) Having, if the company has no share capital, not less than ninety-five per cent. of the
total voting power exercisable at that meeting.

Second proviso to section 101 (1) clarifies that where any member of a company is entitled to
vote only on some resolution or resolutions to be moved at a meeting and not on the others,
those members shall be taken into account for the purposes of sub-section (1) of section 101 in
respect of the former resolution or resolutions and not in respect of the latter.

In view of the above provisions, Shilpkaar constructions limited is permitted to call the requisite
general meeting by giving a shorter notice. However, the members holding at least ninety-five
per cent of the paid-up share capital of the company which gives them a right to vote at the
meeting must consent to the shorter notice.

Thus, if the meeting is called after obtaining the consent from members holding at least ninety-
five per cent of the paid-up share capital of the company which gives them a right to vote at the
meeting must consent to the shorter notice.

(5 marks)

A-2

(a)

i. The given problem is based on the proviso provided in the section 127 (d) of the Companies
Act, 2013.

As per the law where the dividend is declared by a company and there remains calls in arrears
and any other sum due from a member, in such case no offence shall be deemed to have been

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committed where the dividend has been lawfully adjusted by the company against any sum due
to it from the shareholder

As per the facts given in the question, Mr. A is holding equity shares of face value of 10 Lakhs
and has not paid an amount of 1 lakh towards call money on shares.

Referring to the above provision, Mr. A is eligible to get Rs. 1.20 lakh towards dividend, out of
which an amount of 1 lakh can be adjusted towards call money due on his shares. Rs. 20,000
can be paid to him in cash or by cheque or in any electronic mode.

According to the above mentioned provision, company can adjust sum of Rs. 1 lakh due
towards call money on shares against the dividend amount payable to Mr. A.

ii. According to section 123(5), dividend shall be payable only to the registered shareholder of
the share or to his order or to his banker.

Facts in the given case state that Ms. N, the holder of equity shares transferred the shares to
Mr. R whose name has been registered on 20th May 2017.

Since, he became the registered shareholder before the declaration of the dividend in the
Annual general meeting of the company held on 20th September 2017, so, Mr. Raj will be
entitled to the dividend.

(4 Marks)

(b) In the given question, the company is intending to declare dividend out of current year
profits and past year’s profits. As per provisions of section 123 of the companies Act, 2013,
where in any year, there are no adequate profits for declaring dividend, the company may
declare dividend out of the profits of any previous year transferred by it to the free reserves
only in accordance with the procedure laid down in Rule 3 of the companies (Declaration and
payment of dividend) Rules, 2014.

Conditions of Rule 3:

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Condition 1: The rate of dividend declared shall not exceed the average of the rates at which
dividend was declared by the company in the immediately preceding three years.

Condition 2: The total amount to be drawn from such accumulated profits shall not exceed 10%
of its paid-up share capital and free reserves as appearing in the latest audited financial
statement.

Condition 3: The balance of reserves after such withdrawal shall not fall below 15% of its paid-
up share capital as appearing in the latest audited financial statement.

Calculations for each condition

Condition 1: This condition shall not apply if the company has not declared any dividend in each
of the three preceding financial year. Thus, condition 1 shall not be applicable on the company
in question as it has not declared dividend in last 5 years.

Condition 2: As per the facts, the Board proposes a payment of dividend of Rs 30 lakhs i.e., 30%
on the paid up capital.

So, the paid-up share capital of the company = Paid-up capital + free reserves

= 100 + 75 = Rs 175 lakh 10% thereof

= 17.5 lakh

Hence the dividend to be declared is to be restricted to Rs 17.5 lakh.

Condition 3:

Here free reserves = Rs 75 lakh

Proposed withdrawal for declaration of dividend Rs 17.5 lakh

Balance of reserves = Rs 75 lakh-17.5 lakh = Rs 57.5 lakh

This (balance of reserve) is more than 15% of paid-up capital (i.e 15% of Rs 100 lakh) i.e. Rs 15
lakh.

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Thus, the company can declare a dividend of Rs 17.5 lakh i.e., at a rate of 17.5% on its paid-up
capital Of Rs 100 lakhs.

Hence, the proposal of company for payment of dividend of Rs 30 lakh i.e., 30% the paid up
capital in the current year in which I has earned a profit of Rs 12 lakh, is invalid.

(4 marks)

A-3

(a) According to section 135(1) of the companies Act, 2013, every company having net worth of
rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net
profit of rupees five crore or more during the immediately preceding year shall constitute a
corporate social responsibility committee of the board.

Further, according to section 135(5), the board of every company referred to in sub-section (1),
shall ensure that the company spends, in every financial year, at least two per cent, of the
average net profits of the company made during the three immediately preceding financial
years or where the company has not completed the period of three financial years since its
incorporation, during such immediately preceding financial years, in pursuance of its corporate
social responsibility policy.

Here, the “Net profit” shall not include such sums as may be prescribed, and shall be calculated
in accordance with the provisions of section 198.In the instant case,

1. Net profit before tax of Red Limited for the FY 2021-22 is Rs 7 crore, hence, Red Limited is
required to constitute a CSR committee during FY 2022-23 as the Net profit before tax for the
FY exceeds Rs 5 crore.

2. Minimum contribution towards CSR will be: 2% of average net profits since incorporation
(Red Limited was incorporated on 1.4.2020)

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Average Net profit since incorporation: (Rs 5 crore + Rs 7 crore) / 2 = Rs 6 crore

Minimum contribution towards CSR will be: 2% of Rs 6 crore = Rs 0.12 crore or Rs 12 lacs

(4 marks)

(b)

(1) Preparation of revised financial statement or revised report on the approval of Tribunal: If
it appears to the directors of a company that—

(a) The financial statement of the company; or

(b) The report of the Board,

do not comply with the provisions of section 129 or section 134, they may prepare revised
financial statement or a revised report in respect of any of the three preceding financial years
after obtaining approval of the Tribunal on an application made by the company in such form
and manner as may be prescribed and a copy of the order passed by the Tribunal shall be filed
with the Registrar:

Tribunal to serve the notice: Provided that the Tribunal shall give notice to the Central
Government and the Income tax authorities and shall take into consideration the
representations, if any, made by that Government or the authorities before passing any order
under this section:

Number of times of revision and recast: Provided further that such revised financial statement
or report shall not be prepared or filed more than once in a financial year:

Reason for revision to be disclosed: Provided also that the detailed reasons for revision of such
financial statement or report shall also be disclosed in the Board’s report in the relevant
financial year in which such revision is being made.

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(2) Limits of revisions: Where copies of the previous financial statement or report have been
sent out to members or delivered to the Registrar or laid before the company in general
meeting, the revisions must be confined to—

(a) The correction in respect of which the previous financial statement or report do not comply
with the provisions of section 129 or section 134; and

(b) The making of any necessary consequential alternation.

(3) Framing of rules by the Central Government in relation to revised financial statement or
director’s report: The Central Government may make rules as to the application of the
provisions of this Act in relation to revised financial statement or a revised director’s report and
such rules may, in particular—

(a) Make different provisions according to which the previous financial statement or report are
replaced or are supplemented by a document indicating the corrections to be made;

(b) Make provisions with respect to the functions of the company’s auditor in relation to the
revised financial statement or report;

(c) Require the directors to take such steps as may be prescribed.

(4 Marks)

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