1) Concept of legal entity with case law

Ans) Legal entity is an artificial person and not a natural person hence, it cant do any activity by
himself so, the natural person as a director, shareholders, and managers etc. take care of activity of
the legal entity.
Case law 1. Kondoli tea company limited 1886 case reading Calcutta high court even before the
famous case of Solomon.
In this case certain person transferred tea estate to another company and claim exemption from ad
valorem duty. Stating that their also shareholder of the company to whom they estate has been
sold. It is just transfer from one name to another name however, the ownership remains same but
court rejected the appeal stating that the legal entity has been changed to one to another which is
separate legal entity.
Therefor the company should pay ad valoren duty.

Case law 2. Solomon vs Solomon 1895 to 1899, Solomon was prosperous lether merchant, he
converted the business into Solomon ltd. The company has 20007 shares, 20001 shares has been
held by Solomon himself the 1 share held by his wife and remaining 5 shares held by his children.
When he converted his business into Solomon company ltd, the purchase consideration was GBP
39000 that can be converted as follows, GBP 10000 debenture held by Solomon himself GBP 20000
of fully paid GBP 1 per share and balance in cash i.e. GBP 9000.
The company is run less than one year and came into liquidation the assets of the company are not
sufficient to discharge the debenture (completely held by Solomon) and nothing was left for
unsecured creditors.
Balance sheet
Debenture GBP 10,000.00
Unsecure creditors GBP 7,000.00
TOTAL ASSETS GBP 6,000.00
Explanation of above.\

Unsecured creditor claim to pay first them because Solomon is the director of the company and
20001 shares held by Solomon as equity and he also held the 10,000 as debentures. And as per
companies act the shareholder must hold the single and not mentioned the maximum number of
shares.

Lee vs Lee Lees Air farming company limite.

Share capital 3000 gbp,

2900 GBP owned by lee himself and he also sole governing director and he also has unrestricted
over the affairs of the company. Lee was also a qualified pilot and He appointed himself of chief
pilot of the company under the articles.
He also get salary from the company. He died while serving the company. The worker of the
company are entitled compensation for death or injury.
Lees wife claimed the compensation from the company, the argument in the court was he was a
director hence he cannot get compensation which worker used to get however, he is a chief pilot as
well and he used to get salary as per articles hence, his widow was liable to get the compensation
due to all above facts.

Q. 09) MANAGEMENT DECISION AND ANALYSIS REPORT

1) OVERVIEW: A section of a company's annual report in which management discusses numerous
aspects of the company, both past and present.

MANAGEMENTS DISCUSSION AND ANALYSIS (MD&A)

The MD&A should introduce the basic financial statements and provide an analytical
overview of the governments financial activities. The MD&A provides financial
managers with the opportunity to present both a short term and long term analysis of
the governments activities. It is Required Supplementary Information (RSI) but it must
be placed BEFORE the basic financial statements. The MD&A should provide basic
financial information in a verbiage format for users of the financial statements that do
not desire to go into great detail on the various transactions and balances.
The MD&A should provide an objective and easily read analysis of the governments
financial activities based upon currently known facts, decisions or conditions. The
MD&A should include comparisons of the current year to the prior year based on the
government-wide information with emphasis being placed on the current year. The factbased analysis should discuss both the positive and negative aspects of the comparison
with the prior year. It should provide an analysis of the governments overall financial
position and results of operations to assist users in assessing whether that financial
position has improved or deteriorated as a result of the years activities. In addition, it
should provide an analysis of significant changes that occur in funds and significant
budget variances. It should also describe capital asset and long-term debt activity
during the year. The MD&A should conclude with a description of currently known facts,
decisions, or conditions that are expected to have a significant effect on financial
position or results of operation.
The MD&A should focus on the primary government. Comments in MD&A should
distinguish between information pertaining to the primary government and that of
component units. The decision to discuss matters relating to a component unit should
be based on the individual component units significance to the total of all discretely

presented component units and that individual component units relationship with the
primary government.
MD&A CONTENTS OUTLINE - The MD&A must contain the following:
a.

A brief discussion of the basic financial statements. This should include the
relationships of the statements to each other and the significant differences in the
information they provide. This discussion should include analyses that assist readers in
understanding why measurements and results reported in fund financial statements
either reinforce information in government-wide statements or provide additional
information.

b.

Condensed financial information derived from government-wide financial

statements comparing the current year to the prior year. At a minimum, the MD&A
should present the information needed to support the analysis of financial position and
results of operations as required in item c below. The MD&A should include the
following elements:

total assets, distinguishing between capital and other assets.

total deferred outflows of resources.

total liabilities, distinguishing between long-term liabilities and other

liabilities.

total deferred inflows of resources.

total net position, distinguishing amount amounts invested in capital;

restricted amounts; and unrestricted amounts.

program revenues, by major source.

general revenues, by major source.

total revenues.

program expenses, at a minimum by function.

total expenses.

excess (deficiencies) before contributions to any term and permanent

endowments or permanent fund principal, special and extraordinary items, and
transfers.

c.

contributions.

special and extraordinary items.

transfers.

the change in net position.

the ending net position.

An analysis of the governments overall financial position and the results of

operations. This should assist users in assessing whether financial position has
improved or deteriorated as a result of the years operations. This analysis should
address:

both governmental and business-type activities as reported in the

government-wide financial statements, and should further include reasons for
significant changes from the prior year and not just the amounts or percentages
of changes.

In addition, important economic factors, such as changes in the tax base,

that significantly affected operating results for the year should be discussed.
d.

An analysis of balances and transactions of individual funds. This analysis should

address:

the reasons for significant changes in fund balances or fund net position,

and whether restrictions, commitments, or other limitations significantly

affect the availability of fund resources for future use.
e.

An analysis of significant variations between the original and final budget amounts
and between final budget amounts and the actual budget results for the General Fund.
This analysis should include any currently known reasons for these variations that are
expected to have a significant effect on future services or liquidity.

f.

A description of significant capital asset and long-term debt activity during the year.
This should include a discussion of:

commitments made for capital expenditures,

any changes in credit ratings,

and debt limitations that might affect the financing of planned facilities or
services.
g.

A discussion of the modified approach to reporting some or all of the infrastructure

assets, if applicable. This will not be applicable to very many, if any South Dakota local
governments since this option will not be selected by them since such an approach
requires a massive amount of effort to accomplish. If this were applicable to a
government, it would need to include:

significant changes in the assessed condition of eligible infrastructure

assets from the previous condition assessments

how the current assessed condition compares with the condition level that
the government has established

any significant differences from the estimated annual amount to maintain

or preserve eligible infrastructure assets compared with the actual amounts
spent during the current period.
h.

A description of currently known facts, decisions, or conditions that are expected to

have a significant effect on financial position or the results of operations (meaning
revenues, expenses and other changes in net position). For the purposes of the MD&A,
GASB 34 defines "currently know facts" as information that management is aware of as
of the date of the independent audit's report. Therefore, any matters (known facts) that
arise between the preparation of the MD&A by the government and the field work date
of the actual audit report, must be analyzed for possible modification of the MD&A.

Q.6) AGM: PROVISION OF LAW FOR AGM

I)

Period within which AGM to be held:

st

1 AGM
Within 18 months of incorporation
Or within 9 months of closing financial year
Following AGM
Each calendar year
Within 15 months of last AGM
Within 6 months of closing financial year
II)
Venue (time, place and date)
During business hours (time)
Held on a date i.e. not a public holidays (Day)
Registered office of the company or someother place within city, town or village in
which registrar office is registered.( place)

III) Extension of time if accounts are not prepared

The accounts (B/S, P/L account) of every financial year shall be laid in AGM within 6
months of closing of financial year.
AGM must be called whether or not the annual accounts are ready for consideration at
meeting.
If the accounts are not ready AGM should be held and adjourned to a some future date.
An adjourned meeting is continuation of a original meeting. The statutory required of
laying accounts before AGM would be satisfied.
AGM shall not be invalid merely because of reason the accounts are not laid down at
AGM
If AGM is not conducted the CBL call AGM
If AGM is not conducted in a stipulated period a company and a defaults officer of a
company shall be liable to pay penalty of Rs. 50000 (max) or 2500 per day.