CA INTERMEDIATE
CORPORATE AND OTHER LAWS
PART – I: COMPANY LAW
CLASS TEST - UNIT 3
Maximum Marks: 50
Maximum Time: 1.5 Hrs
Division A: Case Scenario
Golden Oak Plaza Limited (GOPL) is a public company, dealing in designer items made
from Oak wood. The objects clause in the memorandum empowers the company to give
guarantee in respect of loans made to subsidiary or associate companies, but the Articles of
Association has not delegated this power to the board of directors and reserves the power
with members. The Board of Directors of GOPL passed board resolution to provide
guarantee for one of the associate companies.
GOPL is in need of capital for further expansion of business. The Board of directors of
GOPL is looking at both the options of public issue as well as private placement. Mr. Vivek
Partap who is compliance officer of the company informed Mr. Bhavey Thakur, CFO, about
the limitation associated with private placement, especially ceiling limit on the number of
persons to whom securities can be offered. Office of Mr. Thakur has lined up the names of
120 investors to whom securities can be issued if private placement takes place.
After hours of discussion and deliberation, GOPL decided to float capital through capital
market and entered in process of raising of further capital from capital market by issue of
prospectus. Prospectus is registered with the Registrar of Companies (ROC) on 10th
January 2020. GOPL hired Shark Broking Solution as underwriting agent. Underwriting
commission was agreed at rate of 4%.
Mr. Alok who invested in securities issued by company, having knowledge about the
internal irregularity in process of issue regarding title of securities; remained silent. Later
when the company denied making repayment to him due to defect in title, Mr. Alok sued
the company quoting doctrine of indoor management as defence; but company denied his
claim.
Multiple Choice Questions [2 Marks each]
1. What is the maximum number of persons to whom an offer may be made under Private
placement?
(a) Maximum of fifty persons in a particular financial year, including qualified institutional
buyers and employees of the company being offered securities under a scheme of
employees stock option;
(b) Maximum of fifty persons, in a particular financial year excluding qualified institutional
buyers and employees of the company being offered securities under a scheme of
employees stock option;
(c) Maximum of fifty persons, including qualified institutional buyers and employees of the
company being offered securities under a scheme of employees stock option; inclusive of
any such placement during previous years also;
(d) Maximum of fifty persons, excluding qualified institutional buyers and employees of the
company being offered securities under a scheme of employees stock option; inclusive of
any such placement during previous years also.
2. Assess the validity of board resolution by board of directors of GOPL to undertake
guarantee for one of the associate companies
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(a) Valid
(b) Void
(c) Voidable
(d) Void-ab-initio
3. To keep prospectus valid, within how many days GOPL is supposed to issue the
registered prospectus
(a) Within 30 days from date of registration with ROC
(b) Within 60 days from date of registration with ROC
(c) Within 90 days from date of registration with ROC
(d) Within 120 days from date of registration with ROC
4. GOPL agrees to pay underwriting commission @ 4% for shares, which of following
statement is legally valid in regard to underwriting commission offered by GOPL?
(a) Maximum underwriting commission can be 5% in case of shares
(b) Maximum underwriting commission can be 2.5% in case of shares
(c) There is no maximum ceiling limit on underwriting commission in case share
(d) Underwriter cannot appoint sub-underwriters
Multiple Choice Questions [1 Mark each]
1. In case of ‘offer of sale of shares by certain members of the company’, which of the
following options is applicable:
(a) The provisions relating to minimum subscription are not applicable
(b) Entire minimum subscription amount is required to be received within three days of
the opening date
(c) 25% of the minimum subscription amount is required to be received on the opening
date and the remaining 75% within three days thereafter © The Institute of Chartered
Accountants of India
(d) 50% of the minimum subscription is required to be received by the second day of the
opening date and the remaining 50% within next three days after the second day
2. When a copy of the contract for the payment of underwriting commission is required to
be delivered to the Registrar:
(a) Three days before the delivery of the prospectus for registration
(b) At the time of delivery of the prospectus for registration
(c) Three days after the delivery of the prospectus for registration
(d) Five days after the delivery of the prospectus for registration
3. Shripad Religious Publishers Limited has received application money of ` 20,00,000
(2,00,000 equity shares of ` 10 each) on 10th October, 2019 from the applicants who
applied for allotment of shares in response to a private placement offer of securities
made by the company to them. Select the latest date by which the company must allot
the shares against the application money so received.
(a) 9th November, 2019
(b) 24h November, 2019
(c) 9th December, 2019.
(d) 8th January, 2020
4. Being in need of further capital, Rimsi Cotton-Silk Products Limited opted to offer 50
lacs equity shares of ` 1 each to 50 identified persons on ‘private placement’ basis and
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accordingly a letter of offer accompanied by application form was sent to them after
fulfillment of due formalities including passing of special resolution. One of the
applicants Rajan made a written complaint to the company highlighting the fact that the
offer letter was incomplete as well as illegal, as it did not contain ‘renunciation clause’
as he wanted to exercise his ‘right of renunciation’ in favour of one of his son Uday. By
choosing the correct option, advise the company in this matter.
(a) As the ‘Right of Renunciation’ cannot be denied, the company needs to rectify its
mistake by including the same in the offer letter and the application form.
(b) The company is prohibited from providing ‘Right of Renunciation’ so the offer letter
and the application form need not include any such clause.
(c) Instead of absolute prohibition, the company can provide ‘Right of Renunciation’
limited to twenty five percent of offering.
(d) Instead of absolute prohibition, the company can provide ‘Right of Renunciation’
limited to fifty percent of offering.
5. Anupam got incorporated ‘One Person Company’ with his sister Alpana as the nominee
and about three years have passed satisfactorily. From time to time Anupam does a
number of charitable works and is associated with three NGOs. In the meantime his
business under his OPC has also flourished. Now he is contemplating to convert the
OPC either as a Section 8 company (i.e. formation of companies with charitable
objects). Choose the correct option.
(a) Since company belongs to Anupam, he has full discretion to convert the OPC either
as a Section 8 company or as a private or public company
(b) Since the company was formed as a private company, the only option available with
Anupam is to convert it into a public limited company.
(c) There is specific prohibition on converting OPC into a Section 8 company;
otherwise it can be converted into a private or public company without any hindrance.
(d) Since Anupam does a lot of charitable works there is no prohibition to converts his
OPC into a Section 8 company (companies formed with charitable objects).
6. Vinay and Sanjay made a name reservation application accompanied by requisite fee to
the Registrar for forming a new private company. The Registrar accorded its approval
for reservation of most preferred name Vinanjay Softwares Private Ltd. on 7th July,
2018. By which date necessary documents for incorporation of the company must be
submitted to the Registrar so that the reserved name does not get lapsed.
(a) Latest by 20th July, 2018
(b) Latest by 27th July, 2018
(c) Latest by 4th August, 2018
(d) Latest by 4th September, 2018
7. Swara Musical Instruments Private Limited was incorporated on 10th October, 2018 by
converting existing partnership firm into company. Sohini and Mohini became the
promoters of the company. Sohini’s premises which was rented out to the partnership
firm was to be used as the registered office. Mention the documents which need to be
filed with the Registrar of Companies (ROC) for verification of registered office.
(a) A notarised copy of rent agreement along with rent receipt which is not older than
one month.
(b) A copy of the public notice published in a local newspaper that the premises is
rented out to the company along with certified copy of rent agreement.
(c) A notarised copy of rent agreement along with rent receipt which is not older than
two months.
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(d) A notarised copy of rent agreement only.
.
Division B: Descriptive Questions
1. Kapoor Builders Limited decides to pay 2.5 percent of the value of debentures as
underwriting commission to the underwriters but the Articles of the company authorize
only 2.0 percent underwriting commission on debentures. The company further decides
to pay the underwriting commission in the form of flats. Examine the validity of the
above arrangements under the provisions of the Companies Act, 2013. (5 Marks)
2. Green Ltd. was dealing in export of rubber to specified foreign countries. The company
was willing to purchase rubber trees in A.P. State. The prospectus issued by the
company contained some important extracts of the expert report and number of trees in
A.P. State. The report was found untrue. Mr. Andrew purchased the shares of Green
Ltd. on the basis of the expert’s report published in the prospectus. However, he did not
suffer any loss due to purchase of such shares. Will Mr. Andrew have any remedy
against the company? State also the circumstances where an expert is not liable under
the Companies Act, 2013. (5 Marks)
3. Keya Limited decides to issue 1,00,000 securities of the company. The company
decides to publish an advertisement of the prospectus. Enumerate to the company about
necessary contents of its memorandum to be specified therein. (4 Marks)
4. The Board of Directors of Ramesh Ltd. proposes to issue the prospectus inviting offers
from the public for subscribing the shares of the Company. State the reports which shall
be included in the prospectus for the purposes of providing financial information under
the provisions of the Companies Act, 2013. (5 Marks)
5. Vintage security equipments limited is a manufacturer of CCTV cameras. It has raised `
100 crores through public issue of its equity shares for starting one more unit of CCTV
camera manufacturing. It has utilized 10 crores rupees and then it realized that its
existing business has no potential for expansion because government has reduced
customs duty on import of CCTV camera hence imported cameras from china are
cheaper than its own manufacturing. Now it wants to utilize remaining amount in
mobile app development business by adding a new object in its memorandum of
association. Does the Companies Act, 2013 allow such change of object. If not then
what advise will you give to company. If yes, then give steps to be followed. (6 Marks)
6. Modem Jewellery Ltd. decides to pay 5% of the issue price gap of shares as
underwriting commission to the underwriters, but the Articles of the company authorize
only 4% underwriting commission on shares. Examine the validity of the above
decision under the provision of the Companies Act, 2013. (2 Marks)
7. Explain various instances which make the allotment of securities as irregular allotment
under the Companies Act, 2013. (4 Marks)
8. The Board of Directors of Chandra Ltd. proposes to issue the prospectus inviting offers
from the public for subscribing the shares of the Company. State the reports which shall
be included in the prospectus for the purposes of providing financial information under
the provisions of the Companies Act, 2013. (4 Marks)
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