Certificate in Accounting and Finance Stage Examination

23 July 2024
90 minutes – 53 marks
Additional reading time – 05 minutes

CAF 7 – COMPANY LAW [TERM TEST – 2]

Instructions for Candidates
1. Answer ALL EIGHT questions, in BLACK pen only.
2. After attempting, convert your answer script to PDF using CamScanner and upload on your LMS.
3. Take CLEAR pictures, in sequence i.e. first Q. 1 then Q. 2. First part a then part b.

Q. 1 The board of directors of Sunshine Limited want to remove existing chief executive officer of the company
and wish to replace him with Mr. Nazim, as chief executive officer.
Mr. Nazim is a competent and visionary employee holding foreign degree in Business Administration. The
board is agreed to appoint Mr. Nazim as chief executive officer.

Required:
Explain the following in the light of the provision of the Companies Act, 2017:
(i)How can the existing chief executive officer of the company be removed before the expiry of his term of
office? (02)
(ii)Who is authorized to appoint Mr. Nazim as chief executive officer of the company and what would be
the tenure for which he may be appointed? (02)
(iii) What would be the minimum number of shares required to be acquired by Mr. Nazim? Whether it
would be necessary to obtain members’ approval for the terms and conditions being offered to him? (02)

Q. 2 Mr. Hameed, who is a director in ABC Limited, a listed company, is planning to move to Europe for one
year to set up his own business. In the light of Companies Act, 2017 you are required to:
(a) Respond to his request for advice, as regards his responsibilities, under the Companies Act 2017, in
respect of:
(i) attending the annual general meeting of the company. (02)
(ii) attending the board meetings of the company. (02)

(b) Discuss the conditions under which he may be allowed to assign his office to another person. (02)

(c) State the procedure and the conditions to be complied with if the company wants to remove Mr.
Hameed from the directorship of the company, under each of the following assumptions:
(i) He was elected as a director of the company.
(ii) He became the director of the company by subscribing to the memorandum of association of the
company. (04)

Q. 3 An Extraordinary General Meeting of Zain Technologies Limited (ZTL), a listed company, was scheduled
to be held on October 31, 2014. The quorum of the meeting was not present within fifteen minutes of the
scheduled time.

Required:
Based on the provisions of the Companies Act 2017, you are required to comment on the following:
(i) What decision should be taken by the directors with regard to the adjournment of the meeting in the
above case, assuming if the meeting was called: (03)
• upon the requisition of the members.
• by the directors.
(ii) What would be the impact of the adjournment on the validity and rights of proxies which were
deposited with the company before adjournment? (02)
(iii) Discuss the validity of the resolution to be passed at the adjourned meeting. (02)
 Company Law Page 2 of 2

Q. 4 Companies Act 2017 imposes restrictions on investments in associated companies and undertakings except
under the authority of a special resolution. Describe the following in this regard:
(i) What aspects of the investment are required to be mentioned in the special resolution when authorizing
the investment? (03)
(ii) Is there any condition prescribed for the return on investment in the form of loan? If yes, then briefly
state. (02)
(iii) Is there any restriction on the size of the aggregate investment in associated companies? (01)
(iv) Whether trade credit would fall under the ambit of the investment? (01)

Q. 5 Two companies may be regarded as associates of each other, ‘If a person who is a director of the company
or holder of shares carrying voting power of 20% or more in that company is also the director or holder of
shares carrying voting power of 20% or more in the other company’.

Under the provisions of the Companies Act, 2017 briefly describe the circumstances under which the above
relationship may not qualify the Companies to be regarded as ‘Associated Companies’. (04)

Q. 6 Platinum Ceramics Limited (PCL), incorporated on 5 March 2022 as an unlisted company, appointed all six
subscribers as directors. On 15 November 2023, PCL's board convened an urgent meeting to address a fire
incident at the office building. During this meeting, the chief executive reported:

All financial records were lost, and data from the backup server have not yet been restored. The IT team
expects to restore the data by next week.

The audit of PCL’s financial statements for the fiscal year ending 30 September 2023 is pending. Due to the
fire, the audit cannot be completed before 20 January 2024, delaying the annual general meeting (AGM)
initially scheduled for 10 December 2023.

Under the provisions of the Companies Act, 2017, delineate the responsibilities and obligations of PCL's
directors in this context. (07)

Q. 7 Arif Khan has been the executive director of Stellar Industries Limited (SIL), a listed company. On 15
January 2022, on behalf of SIL’s management, Arif Khan entered into a two-year contract with Nova
(Private) Limited (NPL) for the supply of raw material on 30 days credit.
On 10 June 2022, Arif Khan’s father acquired 15% shares in NPL.

Under the provisions of the Companies Act, 2017, briefly explain the responsibilities of Arif Khan
concerning the above situation for the entire term of the contract. (06)

Q. 8 The Directors of Benevolent Limited (BL), a listed company, have recommended a dividend equal to 45%
of BL’s undistributed profits. However, in the annual general meeting, the shareholders demanded that 65%
of the undistributed profits should be distributed as a dividend.

Under the provisions of the Companies Act, 2017, explain the following:
(i) Whether the shareholders are justified in their demand. (02)
(ii) Whether the directors’ recommendation is appropriate if 75% of the undistributed profits comprise
unrealized gain on investment property. (02)
(iii) Consequences if the directors fail to pay the dividend within the stipulated time. (02)

(THE END)