TEST SERIES

COMPANY LAW TEST 1

NOTE- Answer ALL Questions.

QUESTION 1

A. MNP Ltd., a public company, has the power to borrow money as per its Memorandum of Association.
However, the Articles of Association require prior approval of the shareholders by way of a special
resolution for borrowings exceeding ₹10 crores. Without obtaining such approval, the Board of Directors
borrowed ₹15 crores from QRS Bank for working capital purposes. The bank was unaware of the internal
restriction and advanced the loan in good faith based on past transactions and board resolutions.
Q1: Discuss whether MNP Ltd. is liable for the borrowing made by its directors beyond their authority. (3
Marks)
Q2: Explain the role of the Doctrine of Indoor Management in protecting QRS Bank in this situation. (2
Marks)

B. ABC Ltd. is a listed public company with a paid-up share capital of ₹55 crores and turnover of ₹275
crores. It has a material unlisted subsidiary, XYZ Pvt. Ltd., incorporated in India. During the preparation
of its annual report for FY 2023–24, the Board of Directors is reviewing statutory compliance
requirements under the Companies Act, 2013 and SEBI (LODR) Regulations, 2015.

1. As a Company Secretary, advise ABC Ltd. regarding its obligation to obtain and annex the
Secretarial Audit Report under the Companies Act, 2013.(3 Marks).
2. Also advise whether ABC Ltd. and its subsidiary XYZ Pvt. Ltd. are required to comply with
Regulation 24A of SEBI (LODR) Regulations, 2015. (2 Marks)

QUESTION 2 (5 Marks Each)

A. XYZ Ltd., a listed entity, constituted a Risk Management Committee (RMC) consisting of three members:
two senior executives of the company and one independent director from the board. The Chairperson of
the committee is a senior executive, not a board member. In the previous year, the committee held only
one meeting in June. The next meeting was held in February of the following year, with just two senior
executives attending.

Based on the above facts, answer the following:

1. Whether the composition and Chairperson of the Risk Management Committee of XYZ Ltd. are compliant
with SEBI regulations?

2. Whether the meeting frequency and quorum requirements were met?

B. The Board of Directors of ZYX Ltd., a public company, proposes to appoint Mr. Prakash Mehra as the
Managing Director of the company. Mr. Mehra, an experienced industrialist, recently turned 72 years old.
The Board believes that his leadership will be immensely valuable for the company’s expansion plans. A
special resolution was proposed in the general meeting to appoint Mr. Mehra. However, the resolution

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could not be passed as a special resolution since it did not receive the required three-fourths majority.
Still, the votes cast in favour were more than those against the motion

The Board now seeks your advice on whether Mr. Mehra can still be appointed as Managing Director
under the Companies Act, 2013. Also state if there is any alternate route available under the law in such
a case.

C. MNO Ltd., a public company, proposes to grant a loan of ₹2 crore to XYZ Pvt. Ltd., a private company in
which Mr. Rajiv, one of the directors of MNO Ltd, is also a director and holds 30% of the equity share
capital. The loan is intended to be used by XYZ Pvt. Ltd. for expanding its business operation.

The Board of MNO Ltd. seeks to know:

1. Whether the loan can be legally granted under the Companies Act, 2013?

2. If yes, what conditions must be complied with before advancing the loan?

D. LMN Ltd., a public company, has reported the following financials for the financial year 2023-24

• Net worth: ₹510 crore

• Turnover: ₹950 crore

• Net profit: ₹4.2 crore

The Board of LMN Ltd. currently consists of 6 directors, including 2 independent directors. The company
is assessing whether it is required to constitute a Corporate Social Responsibility (CSR) Committee for
the upcoming year, i.e., FY 2024–25.

You are required to examine whether LMN Ltd. is obligated to form a CSR Committee. If yes, how should
the committee be constituted in accordance with the Companies Act, 2013, considering the presence of
two independent directors?

QUESTION 3 (5 Marks Each)

A. Brightline Ltd., a listed company, is ranked among the top 1000 listed entities by market capitalization as
per the financial year ending March 31, 2024. The Board of Directors of the company comprises eight
members, including five non-executive directors. The chairperson of the board, Ms. Rhea Kapoor, is a
non-executive director and also a relative of the promoter. However, the board includes only two
independent directors, one of whom is a woman.

You are required to:

1. Examine whether Brightline Ltd. is complying with Regulation 17 of SEBI (LODR) Regulations, 2015
regarding board composition.

2. Suggest corrective steps, if any, to bring the company into compliance.

B. JKL Ltd., a public unlisted company, is engaged in manufacturing electronic components and providing
software development services. The company has a paid-up share capital of ₹120 crore and an annual
turnover of ₹1,100 crore as per the latest audited financial statements. As per its Articles of Association,
Mr. Arjun has been appointed as the Chairperson of the company.

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The Board now proposes to re-appoint Mr. Arjun as the Managing Director of the company while
continuing him as the Chairperson as well. However, the company has appointed separate Chief
Executive Officers (CEOs) for both its business segments.

You are required to examine whether Mr. Arjun can be appointed as both Chairperson and Managing
Director of the company under Section 203(1) of the Companies Act, 2013.

C. ABC Ltd. is a public company with 4,800 members. The company has scheduled its Annual General
Meeting (AGM) for 15th July 2024. On the day of the meeting, only 12 members arrive at the venue.

Based on the quorum rules, answer the following questions:

1. Is the quorum sufficient for the AGM of ABC Ltd. on 15th July 2024?

2. What should the company do if the quorum is not met at the scheduled time?

3. If the meeting is rescheduled, what steps must the company take to inform the members?

4. What happens if the quorum is still not met at the rescheduled meeting?

D. ABC Ltd., a company listed on the stock exchange, is holding a Board of Directors meeting to discuss
an urgent financial matter. The Board consists of 10 directors, out of which 6 directors have a personal
interest in the matter being discussed.

The Chairman of the meeting is unsure whether the quorum is valid, considering that the majority of the
Board members are interested in the agenda. The meeting has 4 non-interested directors, and all of them
are present in person for the meeting.

The Articles of Association of ABC Ltd. mention that a quorum for a Board meeting is at least 5 directors
present in person, which is higher than the minimum quorum required by law.

Questions:

1. Is the quorum for the Board meeting of ABC Ltd. valid as per the Companies Act, 2013 and its Articles of
Association?

2. How should the quorum be determined, considering the number of interested directors?

OR

QUESTION 3A (5 Marks Each)

A. Mr. Ravi Khanna was appointed as an Independent Director of Trumax Infotech Ltd., a listed public
company, for a term of 3 years starting from 1st April 2016. He was reappointed for a second consecutive
term of 3 years from 1st April 2019 to 31st March 2022. After completing his two consecutive terms
(totaling 6 years), he stepped down.

Now, in April 2024, the Board proposes to appoint him again as an Independent Director for a term of 2
years. He has not held any position or been associated with the company in any capacity since his last
tenure ended.

Examine whether Mr. Ravi Khanna is eligible for reappointment as an Independent Director in April 2024.
What legal requirements under the Companies Act, 2013, are applicable in this case?

B. XYZ Ltd. is a listed company with 2,000 members. The company is scheduled to hold its Annual General
Meeting (AGM) on 25th September 2024. One of the members, Mr. A, who holds 12% of the company's
share capital, is unable to attend the AGM due to personal reasons and wishes to appoint a proxy to vote
on his behalf.

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Mr. A intends to appoint his friend, Mr. B, as his proxy. Mr. B is not a member of the company but is willing
to act as a proxy. Mr. A also wants to know if there are any restrictions on Mr. B acting as a proxy for
other members of the company.

Based on the provisions of the Companies Act, 2013, answer the following:

1. Can Mr. A appoint Mr. B as his proxy? Explain the requirements for appointing a proxy.

2. Is Mr. B allowed to act as a proxy for other members of the company? What are the restrictions on acting
as a proxy?

3. What is the time limit for submitting the proxy form, and what happens if the proxy form is submitted late?

C. Mr. Rajiv Verma served as a Director on the Board of Bluebeam Technologies Pvt. Ltd. from April 2020
to March 2024. In June 2024, after his resignation, Mr. Verma requested access to the signed minutes
of the Board meetings held both during his tenure and also before he became a director. At the same
time, Mr. Sunil Rao, a shareholder of the company, approached the company secretary requesting to
inspect the minutes of a recent Board meeting, citing the need for transparency.

The Company Secretary seeks advice on the validity of these requests.

You are required to advise:

1. Whether Mr. Verma, as an ex-director, is entitled to inspect and receive copies of the Board meeting
minutes requested.

2. Whether a shareholder/member is entitled to inspect the Board meeting minutes.

D. RST Ltd., a public company engaged in manufacturing, proposes to raise funds by issuing secured
debentures with an option to convert them into equity shares at the time of redemption. The company
plans to issue these debentures for a period of 15 years and is considering passing an ordinary resolution
at the upcoming general meeting. Additionally, the Board is evaluating the option of attaching voting rights
to these debentures to make them more attractive to investors.

As the Company Secretary, advise the Board on the legal compliance and validity of the proposed issue
of debentures, with reference to applicable provisions of the Companies Act, 2013 and related rules.

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