UNIT TEST 3

CHAP 4 SEC. 43 TO 72

All questions carry 4 marks – 1.5 hours time

1. Rishi Limited’s share capital is divided into different classes. Now, Rishi Limited intends to
vary the rights attached to a particular class of shares. Advice Rishi Limited as to obtaining
consent from the shareholders in relation to variation of rights.
2. Kat Pvt. Ltd., is an unlisted company incorporated on 2.6.2012. The company have a share
capital of rupees fifty crores. The company has decided to issue sweat equity shares to its
directors and employees on 5.7.2021. The company decided to issue 10% sweat equity shares
(which in total will add up to 30% of its paid up equity shares), with a locking period of five
years, as it is a start-up company. How would you justify these facts in relation to the
provisions for issue of sweat equity shares by a start-up company, with reference to the
provisions of the Companies Act, 2013? Explain.

3. Mr. Nirmal has transferred 1000 equity shares of Perfect Private Limited to his sister Ms.
Mana. The company did not register the transfer of shares and also did not send a notice of
refusal to Mr. Nirmal or Ms. Mana within the prescribed period. Discuss as per the provisions
of the Companies Act, 2013, whether aggrieved party has any right(s) against the company?

4. As per the financial statement as at 31.03.2021, the Authorized and Issued share capital of
Manorama Travels Private Limited (the Company) is of ` 100 Lakh divided into 10 Lakh equity
shares of ` 10 each. The subscribed and paid-up share capital on that date is ` 80 Lakh divided
into 8 Lakh equity shares of ` 10 each. The Company has reduced its share capital by cancelling
2 Lakh issued but unsubscribed equity shares during the financial year 2021-22, without
obtaining the confirmation from the National Company Law Tribunal (the Tribunal). It is
noted that the Company has amended its Memorandum of Association by passing the
requisite resolution at the duly convened meeting for the above purpose. While filing the
relevant e-form the Practicing Company Secretary refused to certify the form for the reason
that the action of the Company reducing the share capital without confirmation of the
Tribunal is invalid.

In light of the above facts and in accordance with the provisions of the Companies Act, 2013,
you are requested to (i) examine, the validity of the decision of the Company and contention
of the practicing Company Secretary and (ii) state, the type of resolution required to be passed
for amending the capital clause of the Memorandum of Association.

5. VRS Company Ltd. is holding 45% of total equity shares in SV Company Ltd. The Board of
Directors of SV Company Ltd. (incorporated on January 1, 2007) decided to raise the share
capital by issuing further Equity shares. The Board of Directors resolved not to offer any
shares to VRS Company Ltd, on the ground that it was already holding a high percentage of
the total number of shares already issued, in SV Company Ltd. The Articles of Association of
SV Company Ltd. provides that the new shares be offered to the existing shareholders of the
company. On March 1, 2007 new shares were offered to all the shareholders except VRS
 Company Ltd. Referring to the provisions of the Companies Act, 2013 examine the validity of
the decision of the Board of Directors of SV Company Limited of not offering any further
shares to VRS Company Limited.

6. Silver Oak Ltd. has following balances in their Balance Sheet as on 31st March, 2021:

Rs.
1 Equity shares capital (3.00 lakhs equity shares of Rs. 10 each) 30.00 lacs
2 Free reserves 5.00 lacs
3 Securities Premium Account 3.00 lacs
4 Capital redemption reserve account 4.00 lacs
5 Revaluation Reserve 3.00 lacs
Directors of the company seeks your advice in following cases:

(i) Whether company can give bonus shares in the ratio of 1:3?

(ii) What if company decide to give bonus shares in the ratio of 1:2? ?

7. MNO Private Limited, a subsidiary of PQR Limited, decides to give a loan of Rs. 4,00,000 to
the HR (Human Resource) Manager, who is not a Key Managerial Personnel (KMP) of MNO
Private Limited, drawing salary of Rs. 30,000 per month, to buy 500 partly paid-up Equity
Shares of Rs. 1000 each in MNO Private Limited. Examine the validity of company's decision
under the provisions of the Companies Act, 2013.

8. Board of Directors of PQR Limited wants to create a ‘Debenture Redemption Reserve (DRR)’
for the redemption of debentures issued by the company under the provisions of the
Companies Act, 2013. Explain the provisions of the Companies (Share Capital and Debenture)
Rules, 2014 in this regard.

9. ABC Company Limited at a general meeting of members of the company pass an ordinary
resolution to buy-back 30% of its Equity Share Capital. The articles of the Company empower
the company for buy-back of shares. The company further decide that the payment for buy-
back be made out of the proceed of the company’s’ earlier issue of equity shares. Explaining
the provisions of the Companies Act, 2013, and stating the sources through which the buy-
back of companies own shares be executed. Examine.

(i) Whether company’s proposal is in order?

(ii) Would your answer be still the same in case the company instead of 30% decide to buy-
back only 20% of its Equity Share Capital?