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CASE STUDIES

Q.1 .A Public Limited Company has 15 directors, 4 of whom are not subject to retire
by rotation. Is it a validity constituted Board? Comment?

Solution
Held- It is not a validly constituted Board. According to the Companies Act, 1956, out of the total strength of the directors, only 2/3rd of the directors are liable to retire by rotation. That is 1/3rd are to be permanent directors. Out of the 2/3rd, 1/3rd must retire from the office. In this case, a Public Limited Company has 15 directors out of which 4 are permanent, that is they are not subject to retire by rotation. This is not a valid requirement as according to the Companies Act, 1/3rd of the total strength of the directors are supposed to be permanent which amounts to 5 directors and 2/3rd of the directors can retire by rotation which amounts to 10 out of the 15 directors.

Q.2 In B ltd., total numbers of directors are 15. Comment on their retirement? Solution
According to the Companies Act, 1956, out of the total strength of the directors, only 2/3rd of the directors are liable to retire by rotation, that is 1/3rd are to be permanent directors. Out of the 2/3rd, 1/3rd directors must retire from their office. In the case of B Limited, the total number of directors are 15.This means that 2/3rd that is 10 directors are subject to retire by rotation and the remaining 1/3rd directors that is 5 are permanent directors.

Q.3 Mr. Ramesh Roy is of 24 years of age. Can he be appointed as a Managing


Director of A Limited.? Comment?

Solution
Held Yes, Mr. Ramesh Roy can be appointed as the Managing Director of A Limited with the approval of the Central Government or by the consent of the shareholders. According to the Companies Act, 1956, the minimum age for an individual to become a member is 25 years of age and the maximum age for an

individual to be a director is 70 years of age. But in case an individual is competent and can efficiently manage a business when he is below 25 years of age and above 70 years of age, he may qualify as a Managing Director subject to the following. The approval of the Central Government is needed or if the shareholders signify their consent for him being capable to be a Managing Director. In our case, Mr. Ramesh Roy is 24 years of age. If he obtains the approval of the Central Government or gets the consent by the shareholders, them he may be appointed as the Managing Director of A Limited.

Q.4 Mr. Ramesh Roy is 71 years old. Can he be appointed as a managing director of A
ltd.? Comment?

Solution
Held Yes, Mr. Ramesh Roy can be appointed as the Managing Director of A Limited with the approval of the Central Government or by the consent of the shareholders. According to the Companies Act, 1956, the minimum age for an individual to become a member is 25 years of age and the maximum age for an individual to be a director is 70 years of age. But in case an individual is competent and can efficiently manage a business when he is below 25 years of age and above 70 years of age, he may qualify as a Managing Director subject to the following. The approval of the Central Government is needed or if the shareholders signify their consent for him being capable to be a Managing Director. In our case, Mr. Ramesh Roy is 71 years of age. If he obtains the approval of the Central Government or gets the consent by the shareholders, them he may be appointed as the Managing Director of A Limited.

Q.5 Mr. Bhaskar was appointed as a managing director of X ltd. He acted as a


managing director for 1 year, without acquiring the qualification shares.

Solution
Held No, it is not a validly constituted Board. According to the Companies Act, 1956, in order to become a Managing Director, an individual must first be a Director. As a Director, is it mandatory for him to purchase and pay for the qualification shares. Only when he completes these formalities can he be appointed as a Managing Director. In our case, Mr. Bhaskar was appointed as the Managing Director without acquiring the qualification shares. As this is a mandatory requirement, he

cannot be appointed as the Managing Director without being a Director who has purchased and paid for the qualification shares.

Q.6 Cherry Limited received its Certificate to Commence Business on 3rd October
2006. The Statutory Meeting of Cherry Limited was held on 2nd November 2006. Is it a valid meeting? Comment?

Solution
Held No, it is not a valid meeting. According to Sec 165 of the Companies Act, 1956, a Statutory Meeting must be held once in the lifetime of the Company. This meeting must be held after 1 month and within or before 6 months of receiving the Certificate to Commence Business or the Trading Certificate. Every Public Limited Company and company guaranteed by Shares must fulfill this requirement. In our case, Cherry Limited received its Certificate to Commence Business on 3 October 2006.As per the Companies Act, the Statutory Meeting should be held on or after 3rd November and on or before 30th April. As the Statutory Meeting of Cherry Limited was held on 2nd November 2006, it is an invalid meeting.
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Q.7 Sunrise Limited received its Certificate to Commence Business on 3rd October
2006. The Statutory Meeting of Sunrise Limited was held on 4th April 2007. Is it a valid meeting? Comment?

Solution
Held- No, the meeting is not a valid one. According to Sec 165 of the Companies Act, 1956, a Statutory Meeting must be held once in the lifetime of the Company. This meeting must be held after 1 month and within or before 6 months of receiving the Certificate to Commence Business or the Trading Certificate. Every Public Limited Company and company guaranteed by Shares must fulfill this requirement. In our case, Sunrise Limited received its Certificate to Commence Business on 3rd October 2006. As per the Companies Act, the Statutory Meeting should be held on or after 3rd November and on or before 2nd April. As the Statutory Meeting of Sunrise Limited was held on 2nd November 2006, it is an invalid meeting.

Q.8 Rose Limited was incorporated on 1st September 2006. The first Annual General
Meeting of the company was held on 1st March 2008. Is it a valid meeting? Comment. When should the next general meeting be held?

Solution
Held- The meeting is invalid. According to Sec 166 of the Companies Act, 1956, the 1st Annual General Meeting must be held within 18 months of the Date of Incorporation and subsequent Annual General Meetings must be held once a year. The gap between two Annual General Meetings must not exceed 15 months. An Annual General Meeting must be held not later than 6 months from the close of the financial year. In our case, Rose Limited was incorporated on 1st September 2006, and as per the Companies Act, 1956, the 1st Annual General Meeting should be held on or before 29th February2008 from the Date of Incorporation. The subsequent Annual General Meeting must be held for the year 2009 in 2010.

Q.9 Default has been made in holding the Annual General Meetings of Mickinson
Limited within the prescribed time. What can be done under these circumstances by a member who wishes that the meeting should be held? Comment?

Solution
According to the Companies Act, 1956, if any default has been made in holding the Annual General Meetings of the Company, then the Company Law Board may intervene. It may direct the calling an Annual General Meeting. At such a meeting, even 1 member, present in person or by Proxy shall constitute the Quorum. In this case, default has been made in holding the Annual General Meetings of Mickinson Limited within the prescribed time. So a member who wishes that the meeting should be held must appeal to the Company Law Board for the same.

Q.10 The meeting of the Board of Directors of Jasmine Limited was held on the
following dates: (a) 1st January 2007 (b) 30th June 2007 (c) 1st July 2007 (d) 31st December 2007 Are the requirements of the Companies Act met?

Solution Yes, the requirements of the Companies Act are met.

According to the Companies Act, 1956, a Board Meeting is one of the directors to decide policy matters. It is compulsory for all Companies to hold a Board Meeting at least 4 times in one financial year, that is 1 Board Meeting in every quarter of the year. In our case, the meeting of the Board of Directors of Jasmine Limited was held on 1st January 2007, 30th June 2007, 1st July 2007 and 31st December 2007.Thus in every quarter of the financial year a Board Meeting has been held. Hence the requirements of the Companies Act are met.

Q.11 Mr.Satish Shah who is a shareholder of X Limited, after appointing Mr.Prakash


as his Proxy for the General Meeting, himself attended the meeting and voted on a particular resolution. Mr. Prakash thereafter claimed to exercise his vote. Comment on his claim?

Solution
Held Mr. Prakash, who is the proxy of Mr. Satish Shah, cannot exercise his vote. According to the Companies Act, 1956, even if a member who has given a proxy is personally present, it is not an implied revocation. If a man is present and allows another to act for him, he approves of what the other does. However if he has casted his vote, his vote, the vote of the proxy will not be valid. In this case, Mr. Satish Shah is a shareholder of X Ltd. For the general meeting, he appointed Mr. Prakash as his proxy but for the scheduled meeting he himself was present at the meeting and voted on the motions. Mr. Prakash thereafter claimed to exercise his vote. And hence according to the Companies Act, Mr. Prakash cannot exercise his vote.

Q.12 The Articles of Association of R Limited requires the instrument appointing a


Proxy to be received by the company 75 hours before the meeting. Is it a valid requirement? Comment?

Solution
Held No, it is an invalid requirement. According to the Companies Act, 1956, a Proxy form must be duly filled, completed and stamped and must be submitted to the Company at least 48 hours before the scheduled time of the general meeting. The articles of association can provide a shorter period of submission of Proxy, but prescription of a longer period than 48 hours in the Articles of Association is invalid.

In the Company R Ltd, the Articles require the instrument of proxy to be received by the Company 75 hours before the meeting which is an invalid requirement.

Q.13 The Articles of Association of Sanorita Limited provided for 4 people personally
present to constitute the Quorum. Is it a valid number? Comment?

Solution
Held The quorum present for the meeting, that is 4, is invalid. According to the Companies Act, 1956, a Quorum means a minimum number of members which are required to be present for any meeting to take place. In case of a Public Limited Company at least 5 members should be personally present to constitute a quorum and in the case of a Private Limited Company, minimum 2 members have to be present. The Articles of Sanorita Limited provided for only 4 people to be personally present in order to constitute the quorum, which is an invalid number.

Q.14 The Articles of Association of Sun Limited Provided for 5 people present
personally or by Proxy to constitute the Quorum. Is it a valid rule? Comment?

Solution
Held - No, it is an invalid requirement. According to the Companies Act, 1956, Quorum means a minimum number of members to be personally present at the meeting In this case, the Articles of Association of Sun Limited, it provided for 5 people to be present personally or by proxy to constitute the Quorum. Therefore, according to the provisions for counting quorum, it states that a proxy cannot be counted for the purpose of fulfilling the quorum. Hence in this case 5 people should be personally present at the meeting to constitute a quorum and not by proxy.

Q.15 The Articles of Association of Moon Private Ltd provided for 1 person present
personally to constitute the Quorum. Is it a valid rule? Comment? Solution Held- It is not a valid rule for only one person to be present in order to constitute the quorum.

According to the Companies Act,1956,Quorum means a minimum number of members required to be present at the meeting In case of a Public Limited Company minimum 5 members should be personally present and in case of a Private Limited Company a minimum of 2 members should be present. The Articles of Association of a Company can provide for a larger quorum but not for a smaller number. Moon Private Limited provided for only one person present personally to constitute the quorum which is an invalid number as the minimum is 2.

Q.16 The Articles of Association of Moon Private Limited provided for 2 people
present personally or by proxy to constitute the quorum. Is it a valid rule? Comment? Solution Held- 2 people present personally or by quorum is not a valid rule. According to the Companies Act, 1956, Quorum means a minimum number of members to be present personally at the meeting In this case, the Articles of Association of Moon Private Limited provided for only 2 people present personally or by proxy to constitute the Quorum. Therefore, according to the provisions for counting quorum, it states that a proxy cannot be counted for the purpose of fulfilling the Quorum. Hence in this case 2 people should be personally present at the meeting to constitute a Quorum and not by Proxy.

Q.17 At an adjourned meeting only 1 person was present personally. Will it constitute
a valid quorum? Comment?

Solution
Held It will constitute a valid Quorum. According to the Companies Act, 1956, usually one person cannot validly constitute the Quorum. However, there are some exceptions, where a Quorum is not present at the General Meeting within half an hour of the meeting, the meeting stands adjourned to the same day in the next week at the same time and place. If at the adjourned meeting also, a Quorum is not present within half an hour of the time of the meeting, then according to Section 174, the members present will constitute the Quorum .In such a case, even 1 member will constitute the Quorum. In this case, at the adjourned meeting only 1 person was present personally which is a valid req.