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Question 6 (a) Top Spinners Foundation is a company registered under section 8 of the Companies Act, 2013 with a view to promote young and talented people towards becoming of world class cricketers. The foundation selects young boys and girls from different parts of the country via talent hunt competitions and other references from its members, thereby giving them proper training with residential facilities at the designated clubs opened for the purpose. The Foundation had been incorporated as a charitable institution in 2016. Currently it is having 1200 members. The Annual General meeting of the company is usually held at the club cum registered office of the company at Jaipur. The members in one of the general meetings have strongly suggested that the next Annual general meeting of the company be held at a hotel in near vicinity of the Registered office at Jaipur instead of the Club as the same has a congested sitting area. It was also decided by the foundation itself that a 15 days’ notice prior to the Annual General Meeting be given with facility of only physical voting and no E-Voting to be provided to the members. Referring to the relevant rules and provisions of the Companies Act, 2013 decide on the following: (i) Whether it is compelling upon the board to consider the directions regarding shift of the venue for the meeting? (ii) Whether a 15 days' prior notice is valid and as per the law? (iii) Whether the decision to provide the facility of only physical voting and not E-Voting valid? OR (a) Srinivas Iron and Steel Ltd. is a public sector listed company engaged in the manufacture of high-end steel sheets to be supplied to various other entities country-wide. M/s CVB & Associates, Chartered Accountants, had been appointed as the statutory auditors of the company for the term F.Y. 2023-24. Later in the year a financial fraud has come to the fore, not reported by the current auditors in their report, leading to dissatisfaction amongst a group of learned members of the company. The next Annual General Meeting is scheduled on 28.09.2024. The members comprising of Mr. H, Mr. J, Mr. K holding paid up share capital ` 1,50,000; ` 1,00,000; ` 2,50,000 respectively have collectively decided to send a special notice to the company regarding passing of the resolution at CORPORATE AND OTHER LAWS the next Annual General Meeting for appointment of an auditor other than M/S CVB & Associates as the auditor for the next term. Referring to the provisions of the Companies Act, 2013 elaborate: (i) Whether the above members can validly issue such Special Notice to the company? (ii) What will be the last date for issue of such Special Notice by the members to the company? (iii) Whether the company would have to communicate about the above Special Notice to other members after receiving the same? (b) Manish, a shareholder of a company has not claimed his dividends from the company for the last 10 years due to different reasons. He wants to know whether he will be able to recover the dividends declared by the company for all these years. Explain to him, the relevant legal provisions. (c) Referring to the provisions of the Foreign Exchange Management Act, 1999, state the meaning of the term "current account transaction".

Options

A
B
C
D
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Correct Answer

✅ Option descriptive — Correct Option

All Options:

  • A
  • B
  • C
  • D

Detailed Solution & Explanation

(a) (i) Whether it is compelling upon the Board to consider the directions regarding shift of the venue of the meeting? In the case of section 8 company, in pursuance of the second proviso to section 96(2) of the Companies Act, 2013, the time, date and place of each Annual General Meeting is required to be decided upon before-hand by the board of directors having regard to the directions, if any, given in this regard by the company in its general meeting. [Notification G.S.R. 466(E) issued by the Ministry of Corporate Affairs on the 5th June, 2015]. Hence, the directors are bound to consider the directions regarding shifting of venue for the next Annual General Meeting. Alternate Answer to Part (i) As per the facts of the question, the members, in one of the general meetings, have strongly suggested that the next AGM of the company be held near the vicinity of the Registered Office at Jaipur instead of the club as the same has congested sitting area. Since only suggestions have been given in one of the general meetings, the same cannot be construed as a compulsion on the part of the Board to act thereon. A mere suggestion will not tantamount to be a binding direction. In other words, a suggestion is just an idea or an opinion that someone proposes which need be compulsorily acted upon, while a direction is a set of instructions for where to go or what to do. So, the suggestion by the shareholders is non-binding on the Board. (ii) Whether a 15 days’ prior notice is valid as per law? Notification G.S.R. 466(E) issued by the Ministry of Corporate Affairs dated 5th June, 2015 provides that section 8 company can hold a meeting with minimum of 14 days' notice as against 21 days' notice otherwise applicable under section 101 (1) of the Companies Act, 2013. Hence, the director can validly issue a 15 days' notice being greater than 14 days as provided in the notification and the notice is as per the law. (iii) Whether the decision to provide the facility of only physical voting and not e-voting valid? Yes, as per the provision of section 108 of the Companies Act, 2013 read with Rule 20 of the Companies (Management and Administration) Rules, 2014, section 8 company, having a number of members of 1000 or more, is required to provide e- voting facility to its members at a general meeting. Hence, the decision of the foundation, to provide the facility of only physical voting and not E-voting, is not valid as section 8 Company is having 1200 members. OR (i) Whether the members Mr. H, Mr. K and Mr. J can validly issue special notice to the company? According to section 115 of the Companies Act, 2013 (the Act), where, by any provision contained in this Act or in the Articles of a company, special notice is required for passing any resolution, then the notice of the intention to move such resolution shall be given to the company by such number of members holding not less than 1% of the total voting power, or holding shares on which such aggregate CORPORATE AND OTHER LAWS sum not exceeding five lakh rupees, as may be prescribed, has been paid-up. **Rule 23** of the Companies (Management & Administration) Rules, 2014, provides that a special notice required to be given to the company shall be signed, either individually or collectively by such number of members holding not less than one percent of total voting power or holding shares on which an aggregate sum of not less than 5,00,000 rupees has been paid up on the date of the notice. As per section 140 (4) of the Act, a special resolution is required to be passed for appointment of an auditor other than the retiring auditor at an annual general meeting. Mr. H, Mr. J and Mr. K are together holding shares of (1,50,000 + 1,00,000 + 2,50,000) = ₹5,00,000,\displaystyle \text{₹}5,00,000, which is equal to the minimum required shares to be held by members for validly issuing a Special Notice. Hence, they can validly ask the company to issue the special notice. (ii) Last date for issue of Special Notice: **Rule 3** of Companies Management and Administrative Amendment Rules 2014: The notice referred to in sub-rule (1) shall be sent by members to the company not earlier than three months but at least fourteen days before the date of the meeting at which the resolution is to be moved, exclusive of the day on which the notice is given and the day of the meeting. Hence, in the above case, the special notice shall be sent by the members to the company latest by 13.09.2024. (iii) Whether the company needs to communicate the special notice to the other members after receipt of the same? Yes, the company shall immediately after receipt of the notice, give its members notice of the resolution at least seven days before the meeting, exclusive of the day of dispatch of notice and day of the meeting, in the same manner as it gives notice of any general meetings. Alternate Answer In the question, it is mentioned that Srinivas Iron and Steel Limited is a Public Sector, Listed Company, which means that, being a Public Sector Company, it is a Government Company. According to section 139(5) of the Companies Act, 2013, in the case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, the Comptroller and Auditor-General of India shall, in respect of a financial year, appoint an auditor duly qualified to be appointed as an auditor of companies under this Act, within a period of one hundred and eighty days from the commencement of the financial year, who shall hold office till the conclusion of the annual general meeting. Changing the Auditor: For changing the Auditor of a Government Company, the Auditor can be changed after seeking consent of the Board and thereafter by writing to the C&AG, New Delhi, by mentioning the reference of negligence on the part of the Statutory Auditors for not reporting the fraud committed in the Company. Thereafter, considering the request of the company, the C&AG can change the auditor or the audit firm. However, the remuneration of the auditors shall be approved by the shareholders in its general meeting on the recommendations of the Audit Committee as well the Board of Directors of the company. (b) **Section 124** of the Companies Act, 2013 contains the provisions relating to Unpaid Dividend Account (UDA). Unpaid or Unclaimed Dividend to be transferred to the Unpaid Dividend Account. Where a dividend has been declared by a company but has not been paid or claimed within 30 days from the date of declaration, the company shall, within 7 days from the expiry of the said period of 30m days, transfer the total amount of unpaid or unclaimed dividend to a special account called the ‘Unpaid Dividend Account’ which shall be opened in any scheduled bank. If any money transferred to this Unpaid Dividend Account remains unpaid or unclaimed for a period of seven years from the date of transfer of such CORPORATE AND OTHER LAWS account, it shall be transferred by the company along with interest accrued thereon to the Investor Education and Protection Fund established under section 125(1) of the Companies Act, 2013 maintained and administered by the Central Government. As per section 124(6) of the Act, all shares in respect of which the dividend has not been paid or claimed for 7 consecutive years or more shall be transferred by the company in the name of Investor Education and Protection Fund along with a statement containing the prescribed details. As per the facts of the question, Manish, a shareholder of the company has not claimed his dividends from the company for the last 10 years. Eventually, after expiry of the 7th consecutive year, the shares of Manish along with the dividends due to him for the last 10 years would have been already transferred by the company to the Investor Education and Protection Fund along with a statement containing the prescribed details. Therefore, Manish should claim his shares along with the dividends due from IEPF in accordance with the prescribed procedure and on submission of prescribed documents. (c) Meaning of the term ‘‘Current Account Transaction” As per the provision of section 2(j) of the Foreign Exchange Management Act, 1999, “Current Account Transaction” means a transaction other than a Capital Account Transaction and includes the following types of transactions: (i) Payments in the course of ordinary course of foreign trade, other services such as short-term banking and credit facilities in the ordinary course of business etc., (ii) Payments in the form of interest on loans or income from investments, (iii) Remittances for living expenses of parents, spouse and children residing abroad, and (iv) Expenses in connection with foreign travel, education and medical care of parents, spouse and children.

More Questions from Corporate and Other Laws

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