Source: 3)b)i)4m,MDTP5, 3(b)(i)4m,MTP1,Sept2024, Sim,6(iii)3m,MTP1,June2023, 6)c)3m,MTP2,June2021, 1)ii)4m,MTP1,June2020, RTP,June2019, 6)c)3m,MTP1,June20193 Marks
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Question Scenario

Powertech Limited was registered as a public company. There are 230 members in the company as noted below:

a) Directors and their relatives 190

b) Employees 15

c) Ex-Employees (Shares were allotted when they were employees) 10

d) 5 couples holding shares jointly in the name of husband and wife (5*2) 10

e) Others 05

Core Legal Challenge

The Board of Directors of Powertech Limited proposes to convert it into a private company. Also advise whether a reduction in the number of members is necessary.

Estimated Writing Time: 5 mins Try in Practice Mode

Suggested Answer

1. Provisions of the Act / Applicable Law

According to section 2(68) of the Companies Act, 2013, "Private company" means a company having a minimum paid-up share capital as may be prescribed, and which by its articles, except in case of One Person Company, limits the number of its members to two hundred.

2. Analysis & Application of Facts

However, where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member.

It is further provided that –

A) persons who are in the employment of the company; and

B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased,

shall not be included in the number of members.

In the instant case, Powertech Limited may be converted into a private company only if the total members of the company are limited to 200.

Total Number of members

i) Directors and their relatives 190

ii) 5 Couples (5*1) 5

iii) Others 5

Total 200

3. Conclusion & Verdict

Therefore, there is no need for reduction in the number of members since existing number of members are 200 which does not exceed maximum limit of 200.

Exam Strategy Tip

When answering law questions in the CA Foundation exam, follow the "Provision -> Facts -> Conclusion" structure for maximum marks. Ensure to state the relevant sections where applicable to earn bonus marks from the evaluator.

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