POQ

1) 'A' transferred certain land to 'B' on the condition that 'B' would never sell the land
to coloured persons. 'B' sold the land to a company composed exclusively of
Negros. 'A' took action for the annulment of the transfer on the ground that
property had passed to coloured persons. Will he succeed?

People Pleasure Park v Rohleder

Held that the company is a separate entity and members are different. A will not
succeed

2) During the war, all the members of a private company while in the general
meeting were killed by a bomb. Does the company cease to exist? Decide.

1) Perpetual Succession (Explain)

2) The company will survive even if all members die. “Members may come,
members may go, but Company shall continue to remain”

3) One of the objectives of company 'M' was to manufacture mechanical spares and
to market them. The company 'M' intended to manufacture gold ornaments and
sell them. Advise 'M' company.
M cannot go beyond its powers and it's not the object mentioned will the company
was formed. Ashbury Railway Carriage & Iron Company Ltd v. Hector Riche
(1875) LR 7 HL 653
4) A company's Articles provide that a member who becomes bankrupt shall offer
for the sale of his shares to other shareholders at the price fixed by the directors.
Decide the validity of the provision x2

In Borland’s Trustee vs steel Bros. Co. Ltd [1901] 1 Ch. 279, the articles of a
company contained a clause that on the bankruptcy of a member, his share should
be sold to the other persons and at a fixed price by the directors. ‘B’ a shareholder
was adjudicated bankrupt. His trustee in bankruptcy claimed that he was not
bound by these provisions and should be at liberty to sell the shares at their true
value. It was held that the trustee was bound by the articles as a share was
purchased by B in terms of the article

5) 'X' applied for shares in a company. A letter of appointment was despatched by

the company soon after. But the letter never reaches 'X'. Can 'X' be considered a
shareholder
The allotment of shares should be communicated to the applicants. Posting of a
properly addressed and stamped letter of allotment will be taken as valid
communication. Even if this letter of allotment is delayed or lost in transit, the
allottee will be liable. 'G' applied for certain shares in a company. The letter of
 allotment was despatched to him but it never reached him. It was held that 'G' was
liable as a shareholder (Household Fire Insurance Co. Ltd. v. Grant).

6) Articles of Association are altered so as to result in a breach of contract entered

into by a company with its M.D. is the alteration valid?

The alternation should be bona fide for the benefit of the company as a whole

7) 'A' is the holder of all shares, except one of a paper company. ‘A' insures the
company paper in his own name. The paper is destroyed by fire. Can 'A' recover
the loss?

Macaura Vs. Northern Assurance Co. Ltd. (1925) Facts- M was the holder of
nearly all the shares except one of a timber company. He was also a substantial
creditor of the company. He insured the company's timber in his own name. The
timber was destroyed by fire & M claimed the loss from Insurance Company.
Judgment-
1. The Insurance Company was not held liable to him.
2. A shareholder cannot insure the company's property in his own name even if he
is the owner of all or most of the company's shares

8) R was the bearer debenture holder of 'S' company. He transferred the same to 'R'.
The company refused to pay the amount with interest to him. Whether ‘R' can
claim it?

Bearer debentures, on the other hand, can be transferred by mere delivery and
hence, are payable to the bearer of the instrument. No records are maintained in
the register of debenture holders and registration of transfer is not necessary. That
is why they are also known as unregistered debentures

9) Certain directors held a meeting of the Board. But they prevented some lawfully
constituted directors from attending the meeting. A quorum was however present.
Whether the Board meeting is valid?
1) It is not mentioned clearly whether the meeting held by Board of Directors..It should
be called and convened by Board(Proper Authority), otherwise it is invalid. Here
mentions “only certain directors”
2) It should be properly convened. Here happened the irregularities in convening the
meeting. so it is not valid
3) Eventhough quorum is present, meeting should be convened properly without
irregularities

10) A company has registered in Mumbai. Due to some reasons unfavourable to the
company, it wishes to shift its registered office to Karnataka. Advise the company.
 Alteration of memorandum. – Sec 13

After special resolution

One state to another only on approval of the CG- disposal within 60 days-
alteration has the consent of the creditors, debenture-holders and other persons
concerned with the company or that the company has made the sufficient
provision either for the due discharge of all its debts and obligations or that
adequate security has been provided for such discharge- file SR and permission of
CG with Registrar- Registrar of the state where the office is being shifted to must
issues a fresh Certificate.

The bonafide of the object to change the place of office does not matter- Bharat
Commerce and Ind Ltd vs Registrar of Companies.

Loss of revenue and employment opportunities to the State is no grounds to reject

approval of the transfer. - Orissa Chemicals and Distilleries (P) Ltd re, AIR (1962)
32 Comp Cas 497.

11) The articles of the company contained a clause to the effect that 'A' should be the
director and should not be removed until 2015. He was, however, removed much
earlier. He brings an action against the company, for damages. Will he succeed?

169. Removal of directors.

Through before the expiry of the period of his office after giving him a
reasonable opportunity of being heard- after special notice as under s 115.

S. 169 (8)(a) compensation or damages payable to him in respect of the

termination of his appointment as director as per the terms of the contract or
terms of his appointment as director.

12) The articles of a company contained a clause to the effect that 'D' should be the
director and not to be removed until 2019. He was however removed much earlier.
Advice 'D'.

169. Removal of directors.

Through before the expiry of the period of his office after giving him a reasonable
opportunity of being heard- after special notice as under s 115.

S. 169 (8)(a) compensation or damages payable to him in respect of the

termination of his appointment as director as per the terms of the contract or terms
of his appointment as director.
13) X is already director of 20 companies. Another company offers for the
directorship. Advice X.

A number of directorships. — (1) No person, after the commencement of this Act,

shall hold office as a director, including any alternate directorship, in more than
twenty companies at the same time: Provided that the maximum number of public
companies in which a person can be appointed as a director shall not exceed ten.

Explanation.— For reckoning the limit of public companies in which a person can
be appointed as director, directorship in private companies that are either holding
or subsidiary companies of a public company shall be included.

(2) Subject to the provisions of sub-section (1), the members of a company may,
by special resolution, specify any lesser number of companies in which a director
of the company may act as a director. (3) Any person holding office as director in
companies more than the limits as specified in subsection (1), immediately before
the commencement of this Act shall, within a period of one year from such
commencement,— (a) choose not more than the specified limit of those
companies, as companies in which he wishes to continue to hold the office of
director; (b) resign his office as director in the other remaining companies; and
intimate it to Registrar of companies.

Punishment 165 (6) fine which shall not be less than five thousand rupees but
which may extend to twenty-five thousand rupees for every day after the first
during which the contravention continues.

14) A company inserted an advertisement in a newspaper stating that some shares

were still available for sale according to the terms of the prospectus of the
company which could be obtained on application. Can it be considered a
prospectus

Sec 30. Advertisement of prospectus. — Where an advertisement of any

prospectus of a company is published in any manner, it shall be necessary to
specify therein the contents of its memorandum as regards the objects, the liability
of members and the amount of share capital of the company, and the names of the
signatories to the memorandum and the number of shares subscribed for by them,
and its capital structure.

2 (70) ―prospectus means any document described or issued as a prospectus and

includes a red herring prospectus referred to in section 32 or shelf prospectus
referred to in section 31 or any notice, circular, advertisement or other document
 inviting offers from the public for the subscription or purchase of any securities of
a body corporate;

It is considered a prospectus

15) A film company borrowed a sum of money on the security of all its assets
including machinery etc. now lying and that may be brought by it until the
repayment of the loan. What kind of charge is created by the company?

1)A charge is a right created by any person including a company referred to as

“the borrower” on its assets and properties, present and future, in favour of a
financial institution or a bank, referred to as “the lender”, which has agreed to
extend financial assistance. Section 2(16) of the Companies Act, 2013 defines
charges as to mean interest or lien created on the property or assets of a company
or any of its undertakings or both as security and includes a mortgage The
following are the essential features of the charge which are as under 1. There
should be two parties to the transaction, the creator of the charge and the charge
holder. 2. The subject matter of the charge, may be current or future assets and
other properties of the borrower. 3. The intention of the borrower to offer one or
more of its specific assets or properties as security for repayment of the borrowed
money together with payment of interest at the agreed rate should be manifested
by an agreement entered into by him in favour of the lender, written or otherwise.
Companies Act, 2013 details the procedure for the creation, modification and
satisfaction of a charge.
2)Fixed charge is created in machineries and other fixed assets and floating charge
is created in floating assets like stock-in trade, shares, inventory etc
2)As a prospected company secretary, you are expected to advise the management
on the subject and ensure compliance with the same.

16) M' incorporated a company of which he was the Managing Director. ln, that
capacity he appointed himself as a pilot of the company. While in the business of
the company he died in a flying accident. His widow claims compensation. will
she succeed?

Lee vs Lee Air Farming Ltd (1960) 3 All ER 42

17) ln, a train accident all the 10 members of a private company died. Does the
company cease to exist because all the members have died? Give reasons.

Men may come, men may go, but I remain forever(“Members may come,
members may go, but Company shall continue to remain”)- perpetual
existence(not affected by death insolvency, lunacy, and retirement of members-
the separate legal entity
18) A company was incorporated for manufacturing chemicals as its business. lt
donated Rs. 10 lakhs to universities and scientific institutions for scientific and
educational research. Is it valid?

CSR and 181. Company to contribute to bona fide and charitable funds, etc.—
The Board of Directors of a company may contribute to bona fide charitable and
other funds: Provided that prior permission of the company in general meeting
shall be required for such contribution in case of any amount the aggregate of
which, in any financial year, exceeds five per cent. of its average net profits for
the three immediately preceding financial years.

19) 'M' was a wealthy man having huge dividends and income. He formed four private
companies and all his income was credited to the accounts of four companies and
get back his amount as a pretended loan for the purpose of tax evasion. Will the
Court order for lifting the corporate veil of those four companies?

Re Dinashaw Maneck Ji Petit Bari

20) Mr. 'R', was the transferee of a share certificate issued under the seal of the 'G'
company. The certificate was issued by the company secretary, who had fixed the
seal of the company and forged the signature of two directors. Whether the share
certificate is valid?
In the case of Ruben v. Great Fingall Ltd.[1906]

The Plaintiff was a transferee of the share certificate issued under the seal of the
defendant company. The certificate was issued by the Company’s secretary who
forged the signature of the two directors of the company and affixed the seal of
the Company. The plaintiff, in this case, had contended that whether the signature
was forged or genuine comes under the purview of the internal management of the
company, therefore the company shall be held liable for the same, But it was held
by the court that the doctrine of Indoor Management has never extended to cover a
forgery.

21) N' a minor was registered as a shareholder. After attaining the majority, he
continues to receive dividends from the company. Subsequently, the company
went into liquidation 'N' denies liability as a shareholder. Decide.
Minor can't be a shareholder as he can't enter into a contract..minor's contract is
void ab initio..he will not incur liabilities. Can mention Mohiri Bibee Case.

22) One company called an annual general meeting in December 1999. This was
adjourned to March 2ooo and then held. a subsequent meeting was held in
February 2001. The company contended that a meeting was held that year. Is the
contention of the company, correct?
meeting adjourned to next year does not become the meeting of that year
Sree Meenakshi mills co. ltd v. Assistant registrar of joint stock companies
23) 'S' had subscribed to the memorandum of a company for 200 shares. The company
was duly registered but he ultimately took only 20 shares. At the winding up the
company asked to pay for all 200 shares. ls 'S' is liable to pay
S is liable to pay coz subscribers will incur a contractual liability and it is binding
on Subscribers

24) The directors of a company by two resolutions resolved to make a call. But neither
resolution has specified the date and amount of payment. Is the call valid?
The call is not valid coz the time of payment and the exact amount must be
mentioned in the notice
E and W Insurance Co.ltd v.Kamala Mehta