CSP122002

FINAL EXAMINATION
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COMPANY SECRETARIAL PRACTICE

(Guideline Answers)
INTERMEDIATE EXAMINATION
DECEMBER 2002
Time allowed : 3 hours Maximum marks : 100
NOTE : Answer SIX question including Question No. 1 which is COMPULSORY.
Question 1
a. Specify in detail the steps to be taken for incorporation and commencement

of business of a public limited company having share capital. (12 marks)
b. Following documents were placed for approval as per agenda before the
Board meeting, attended by all the directors and auditors of XYZ Ltd.:
l Draft directors’ report.

l Balance sheet for the year ended 31st March, 2002.
l Draft auditors’ report as prepared by auditors based on the audit
conducted for the year ended 31st March, 2002 and to be singed by the
auditors soon after the annual accounts are approved by the Board and
duly signed.
l Statement in lieu of advertisement to be filed with the Registrar of
Companies in connection with public deposits.
XYZ Ltd. has seven directors comprising of a chairman and managing director
(CMD), a whole-time director, a finance director (FD) and four independent
directors. While discussing these documents at the meeting, one of the directors
suggested as follows :
i. CMD and Company Secretary to sign the directors’ report;

ii. CMD, FD and Company Secretary to sign the balance sheet;
iii. FD or Company Secretary to countersign the auditor’s report; and
iv. The directors present at the meeting to sign the statement in lieu of
advertisement.
As the Company Secretary of the XYZ Ltd., comment on the above suggestions.
(8 marks)
Answer 1(a)
The steps, which are required to be taken for incorporation and commencement of
business of a public limited company having share capital, are as follows :
1. Select name of the Company and ascertain its availability from ROC:
Promoters are required to select at least four names for the proposed company and
secure the name availability by making an application to the Registrar of Companies
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FINAL EXAMINATION
of the State in which they want to have the proposed company incorporated. The
application is required to be made in Form No.1A as prescribed in the Companies
(Central Government’s) General Rules and Forms, 1956 along with the prescribed
application fee of Rs. 500/-.
The names of the proposed company are to be given in Form No.1A in the order of the
promoter’s preference so that if the first name is not available, the Registrar may
consider the other names in the order of preference given. The proposed names should
not be identical with, or too closely resemble, the names by which a company in
existence has been previously registered.
2. Revalidation of Name availability
Where the Registrar of Companies informs the promoters of the company that the
changed name or the name with which the proposed company is to be registered, as
the case may be, is not undesirable, such name shall be available for adoption by the
promoters of the proposed company for six months from the date of intimation by the
Registrar.
If within the stipulated period of six months, the company is not incorporated by the
name made available by the Registrar or if the existing name of the company is not
changed to the new name made available by the Registrar, the validity period of the
name expires. In order to have the name revalidated for a further period of six months,
the promoters will have to make an application explaining therein the reasons for not
having availed the name within the validity period. The application shall be delivered
in the office of concerned Registrar of Companies and on receipt of his approval, the
name may be availed during the extended period of time.
3. Drafting and Printing of Memorandum and Articles
On receipt of a communication from the Registrar of Companies intimating

availability of the name applied for, the promoters of the company are required to get
the Memorandum and Articles of Association for the proposed company drafted and
printed.
Before getting the Memorandum and Articles printed, it is advisable to have their
drafts vetted by the concerned Registrar of Companies to avoid unnecessary
expenditure of time and money in getting them printed and reprinted after
incorporating modifications etc. that may be suggested by the Registrar.
A public limited company need not necessarily prepare and get its Articles of
Association registered along with its Memorandum of Association. In such case, Table
“A” of Schedule I to the Companies Act, 1956 shall apply. However, as a matter of
practice, every company gets the articles prepared, to suit its individual requirements,
and registered along with the Memorandum of Association.
4. Stamping and Signing of Memorandum and Articles
After incorporating the suggestions made by the Registrar during informal vetting of
the documents, the Memorandum and Articles should be got printed and stamped by
the appropriate State Authority (Collector of Stamps) under the Indian Stamp Act.
Thereafter, the Memorandum and the Articles should be signed by at least seven
subscribers.

FINAL EXAMINATION
Each subscriber to the Memorandum shall write in his/her own hand, his/her name,
his/her father/husband’s name, occupation, address and the number of shares,
subscribed by him/her. The signatures of all the subscribers shall also be witnessed.
The witness shall also sign and write in his own hand, his name, his father’s name,
occupation and address.
5. Dating of Memorandum and Articles
The Memorandum and Articles are then dated, but the date must be a date of stamping
or later than the date of their stamping and not, in any event, a date prior to the date of
their stamping.
6. Preparation of other Documents
The following documents are also required to be prepared by the promoters in

connection with the incorporation of public limited company :-
a. Power of Attorney: With a view to fulfilling various formalities that are required
for incorporation of a company, the promoters may execute a power of attorney
in favour of any one of them or an advocate or some other professional like the
Chartered Accountant or the Company Secretary. The Power of Attorney should
be prepared on a non-judicial stamp paper of a value prescribed by the Stamp
Act of the concerned State.
b. Consent of the directors: As per Section 266 of the Companies Act, 1956, in the
case of a public limited company having share capital, a person cannot be
appointed as a director by its Articles of Association unless, he has, before the
registration of the Articles, either himself or through his agent, signed and filed,
with the registrar his consent in writing to act as director. The consent must be
filed in Form No. 29 of the Companies (Central Government’s) General Rules
and Forms, 1956.
c. Form No. 32: Where the company by its articles appoints any person(s) as a
director, manager, or secretary, it may file their particulars in duplicate, in Form
No. 32, with the Registrar at the time of incorporation. However, Form No. 32
can also be filed within 30 days of incorporation of the company or appointment
of the first directors.
d. Statutory declaration: Section 33(2) of the Act requires a declaration to be filed
with the Registrar of Companies along with the memorandum and the articles.
This is known as “Statutory Declaration of Compliance”. It can be made by an
advocate of Supreme Court or of a High Court; or an Attorney or a pleader
entitled to appear before a High Court; or a Company secretary, or a Chartered
Accountant practicing in India and engaged in the formation of the company or
by a person named in the articles as a Director, manager, or Secretary of the
company. Any of the aforesaid persons has to declare that all the requirements
of the Companies Act, 1956 and the Rules there under have been complied with
in respect of registration and matters precedent and incidental thereto.
The aforesaid declaration should be on a non-judicial stamp paper of appropriate value

with reference to the State in which the office of the Registrar of Companies is situate.
Alternatively, non-judicial special adhesive stamps may be affixed to the declaration.
7. Filing of documents for registration
The next step is filing of all documents with the Registrar for registration of the

FINAL EXAMINATION
company. The documents are required to be filed with the Registrar of Companies of
the State in which the company is proposed to be incorporated, along with the
prescribed registration and filing fees.
8. Minimum Paid-up Capital
It must be ensured that the minimum paid-up capital of the company is five lakh
rupees or such higher paid-up capital as may be prescribed.
9. Issue of Certificate of Incorproation
On receipt of the aforesaid documents, the Registrar of Companies will scrutinize

them and if they are found complete in all respects, the Registrar will enter the name
of the company in the Register of Companies. The Registrar will issue under his hand
and seal of his office, the Certificate of Incorporation under his signature in token of
the registration of the company on the date noted on it, in the name of the company.
The date given by the Registrar in the Certificate of Incorporation will be the date of
incorporation of the company, on which date the company will be considered to have
come into existence as a legal entity separate from its subscribers.
A private company can commence business immediately after receiving the Certificate
of Incorporation. However, a public company having a share capital cannot do so.
Such company is required to obtain another certificate known as the Certificate to
Commence Business, before it can start its business. Section 149(1) of the Companies
Act, 1956 lays down that a public company having a share capital and which has
issued a prospectus inviting public to subscribe for its shares shall not commence any
business or exercise any borrowing powers unless -
a. shares held subject to the payment of the whole amount thereof in cash have
been allotted to an amount not less than in the whole than the minimum
subscription;
b. every director of the company has paid to the company on each of the shares
taken or contracted to be taken by him and for which he is liable to pay in cash,
a proportion equal to the proportion payable on application and allotment on the
shares offered for public subscription;
c. no money is or may become, liable to be repaid to applicant for any shares or
debentures which have been offered for public subscription by reason of any
failure to apply for, or to obtain permission for the shares or debentures to be
dealt in on any recognised stock exchange;
d. there has been filed with the Registrar a duly verified declaration by one of the
directors or the secretary, or where the company has not appointed a secretary, a
secretary in whole-time practice, in the prescribed form that clauses (a), (b) and
(c) of this sub-section have been complied with.
Where a company having a share capital has not issued a prospectus inviting the
public to subscribe for its shares, the company shall not commence any business or
exercise any borrowing powers, unless -
a. there has been filed with the Registrar a statement in lieu of prospectus;
b. every director of the company has paid to the company on each of the shares
taken or contracted to be taken by him and for which he is liable to pay in cash,
a proportion equal to the proportion payable on application and allotment on the
shares payable in cash;

FINAL EXAMINATION
c. there has been filed with the Registrar a duly verified declaration by one of the
directors or the secretary, or where the company has not appointed a secretary, a
secretary in whole-time practice, in the prescribed form that clause (b) of this
sub-section has been complied with.
The Registrar shall, on filing of a duly verified declaration in accordance with the
provisions of Sub-section (1) or (2), as the case may be, and in the case of company
which is required by Sub-section (2) to file a statement in lieu of prospectus, also of
such a statement, certify that the company is entitled to commence business and that
certificate shall be conclusive evidence that the company is so entitled to commence
its business.
Answer 1(b)
i. In terms of Section 217(4) of the Companies Act, 1956, the directors’ report of
the company is required to be signed by its chairman if he is authorized in that
behalf, by the Board and where he is not so authorized the report shall be signed
by its manager or secretary, if any and by not less than two directors, one of
whom shall be managing director, where there is one. In the present problem,
CMD may sign the directors’ report if he is authorised in that behalf by the
Board. Where he is not so authorised the directors’ report shall be signed by
secretary and two directors one of whom shall be managing director.
ii. Section 215(1)(ii) of the Companies Act, 1956 requires every balance-sheet and
every profit and loss account of the company to be signed on behalf of the
Board of directors, by its manager or secretary, if any, and by not less than two
directors of the company, one of whom shall be a managing director where there
is one. Therefore suggestion for signing the balance-sheet by CMD, FD and
Company Secretary is correct.
iii. As per Section 229 of the Companies Act, 1956, only the person appointed as
auditor of the company or a partner in the firm, where a firm is so appointed in
pursuance of proviso to Section 226(1), may sign the auditors’ report.
Therefore, suggestion in the given case, is not correct as there is no necessity for
countersigning auditors’ report either by FD or Company Secretary.
iv. In terms of Rule 4(4) of the Companies (Acceptance of Deposits) Rules,1975,
the statement in lieu of advertisement is required to be signed by majority of the
directors on the Board of Directors of the company as constituted at the time the
Board approved the advertisement or their agents, duly authorized by them in
writing. Thus, statement in lieu of advertisement has to be signed by majority of
directors and not by all directors.
Question 2
As the Company Secretary of Big Brothers Ltd., an Indo-Swedish joint venture

listed on the stock exchange and with 70% Swedish equity participation, advise
the Board of directors on the following matters :
i. Appointment of Smart, a member of the company’s Board of

directors and an expatriate, as the managing director of the
company. Smart has been sent to India by the Swedish
company only about a fortnight back, after concluding a
memorandum of understanding with the Indian joint venture
partner;
ii. Acceptance of public deposits;
iii. Appointment of Kapil as an additional director; and

FINAL EXAMINATION
iv. Retiring auditor not seeking re-appointment. (4 marks each)
Answer 2(i)
Mr. Smart is already a member of the Board of Directors of Big Brothers Ltd., having
been nominated by the company’s Swedish collaborators. Subject to the provisions of
Articles of Association of Big Brothers Ltd., Mr. Smart can be appointed as Managing
Director of the company. His appointment to the post of Managing Director would
require the approval of members at general meeting. Further Mr. Smart, being an
expatriate, his appointment as Managing Director would also require the approval of
Central Government. For this purpose a general notice shall be given to the members
about the proposed appointment in accordance with the provisions of Section 640B
and an application in Form No. 25A shall be submitted to the Central Government
with a copy of aforesaid notice. Thereafter an agreement shall be executed between
Mr. Smart and the company, as approved by the Central Government.
Answer 2(ii)
For acceptance of public deposits, a company is required to comply with the

provisions of Sections 58A, 58AA and 58AAA of the Companies Act, 1956 and the
Companies (Acceptance of Deposits) Rules, 1975. The term ‘deposit’ has been
defined in Rule 2(b) according to which it excludes, inter alia, institutional and bank
borrowings, inter company deposits, security deposits, subscription to shares, bonds,
debentures pending their allotment, loans from Directors and loans from shareholders
in the case of private company. Public deposits shall not be invited without issuing an
advertisement containing financial position of company which include the profits and
dividends of the company.
The overall limit on Deposits is 25% of the paid-up capital and free reserves of the
company plus an additional 10% of the paid-up share capital and free reserves. The
period of the deposit shall not exceed 3 years. Failure to repay deposits and/or interest
thereon attracts penalties on the Company as well as the Director.
Answer 2(iii)
According to Section 260 of the Companies Act, 1956 the Board of Directors may
appoint additional Directors within the strength of the Board stipulated in the Articles.
However the total number of directors and additional directors shall not exceed the
maximum strength of directors fixed for the Board by the Articles of the company. In
the given problem, Kapil may be appointed by the Board of directors by passing
resolution either at its meeting or by circulation, provided the Articles of Big Brothers
Ltd. company contain a provision regarding the appointment of additional directors. If
the articles do not contain provision in this respect, the Articles have to be altered to
insert therein, a regulation empowering the Board to appoint additional director. It
should be ensured that the proposed appointee does not suffer from any
disqualification under Sections 274, 275 and 278 of the Act. The consent of Kapil in
Form 29 and the prescribed particulars in Form 32 shall be filed with the ROC within
30 days of his appointment. Kapil shall hold office till the next AGM of the company.
Answer 2 (iv)
Section 224(2) of the Companies Act, 1956 provides that the retiring auditor shall be
reappointed unless any of the circumstances specified in clauses (a) to (d) thereof

FINAL EXAMINATION
exist. Since the retiring auditor is not seeking reappointment, there is no obligation on
the part of company to reappoint the retiring auditor and the company may proceed to
appoint as auditor, any person other than retiring auditor, having requisite
qualifications. Under Section 225 of the Act, a special notice is required for appointing
a person other than the retiring auditor. Thus general meeting should be duly convened
and the necessary resolution should be passed to appoint an auditor other than the
retiring auditor.
Question 3
Explain the purpose, contents, time limit for filing and other relevant aspects, if
any, relating to the filing of the following forms under the Companies Act, 1956:
1. Form No. 8 (3 marks)

Answer 3(i)
Form No. 8
Purpose: Registration of particulars of charges created or modification of particulars of

charges
Contents:
i. Name of the Company, Registration number, Nominal capital;

ii. Date and description of the instrument creating charge;
iii. Amount secured by charge/amount owing on security of the charge;
iv. Short particulars of property charged. If the property acquired is subject to
charge, date of acquisition of property should be given;
v. Gist of the terms and conditions and the extent and operation of the charge;
vi. Names, addresses and description of persons entitled to charge;
vii. Date and brief description of instrument modifying charge;
viii. Particulars of modification specifying terms and conditions or the extent or
operation of the charge in which modification is made, and the details of
modification.
Time Limit: Within 30 days after date of creation of charge or modification thereof.
Other relevant aspects:
i. Three copies of Form No.8 have to be submitted to the Registrar of Companies

along with a forwarding letter addressed to the Registrar of Companies.
ii. Form 8 has to be accompanied by document evidencing payment of fees, copy
of instrument or deed creating charge duly verified in triplicate and Form No.13
duly filled-in in triplicate with a fee of Rs.50/-.

FINAL EXAMINATION
Answer 3(ii)
Form No. 18
Purpose: Notice of situation/change of situation of Registered Office under

Section 146 of the Companies Act, 1956.
Contents:
i. Name of the company, Registration Number, Nominal capital;

ii. Address of Registered office of the company or any change therein.
Time Limit: Form should be submitted within 30 days of incorporation or charge

of situation of Registered Office.
Answer 3 (iii)
Form No. 23
Purpose: Registration of Resolution(s) and Agreement(s) under Section 192 of the

Companies Act, 1956.
Contents:
i. Name of the Company, Registration Number, Nominal capital;

ii. Subject-matter of resolution and agreement;
iii. Date of despatch of notice;
iv. Date of passing resolution and place of meeting.
Time Limit: Within 30 days of passing the resolution/making the agreement.
Other relevant aspects: This Form has to be submitted with the following annexures:
i. Certified true copy of resolution/agreement and Memorandum or Articles of

Association where applicable
ii. Certified true copy of explanatory statement under Section 173 where applicable
Answer 3 (iv)
Form No. 29
Purpose: Filing of Consent to act as director of company and/or undertaking to

take and pay for qualification shares.
Contents:
i. Registration Number, Nominal capital, Name of the Company;

ii. Consent to act as director of the Company;
iii. Undertaking to take and pay for qualification shares.
Time Limit: Within 30 days of appointment or at the time of incorporation of the

company.

FINAL EXAMINATION
Answer 3(v)
Form No. 32
Purpose: Filing of Particulars of appointment of directors and manager and

changes among them under Section 303(2) of the Companies Act, 1956.
Contents:
i. Registration number, Nominal capital, Name of the Company;

ii. Appointment of and changes in directors;
iii. Appointment of and changes in managership and secretaryship.
Time Limit: Within 30 days of appointment or change, as the case may be.
Other relevant aspects: Two copies of Form No. 32 have to be submitted to Registrar
of Companies along with a forwarding letter addressed to the Registrar of Companies.
Question 4
a. Explain the legal and procedural requirements in regard to poll at an

annual general meeting. (8 marks)
b. A listed company desires to buyback 9.5% of its paid-up capital and free
reserves. List out the steps to be taken to effect this decision. (8 marks)
Answer 4(a)
Section 179 of the Companies Act, 1956 provides that before or on declaration of the
result of the voting on any resolution on a show of hands, a poll may be ordered to be
taken by the Chairman of the meeting of his own motion, and shall be ordered to be
taken by him on demand made in that behalf by the person(s) specified below, viz.:
a. in the case of a public company having a share capital, by any member or

members present in person or by proxy and holding shares in the company:
i. which confer a power to vote on the resolution not being less than one-
tenth of the total voting power in respect of the resolution; or
ii. on which an aggregate sum of not less than Rs.50,000 has been paid up.
b. in the case of a private company having a share capital, by one member having
the right to vote on the resolution and, present in person or by proxy, if not more
than seven members are personally present;
c. in the case of any other company, by any member or members present in person
or by proxy and having not less than one-tenth of the total voting power in
respect of the resolution.
The demand for poll may be withdrawn at any time by the person or persons who
made the demand [Section 179(2)].
When a poll is to be taken, the following procedure shall be followed:
1. The chairman shall appoint two scrutineers to scrutinize the votes given on the
poll and to report thereon to him. One of the two scrutineers must be a member

FINAL EXAMINATION
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(not being an employee or officer of the company) present at the meeting

provided he is available and willing to be so appointed. At any time before the
result of the poll is declared, the chairman shall have the power to remove a
scrutineer from office and to fill up the vacancy in the office of scrutineer
arising from such removal or any other cause (Section 184).
2. Subject to the provisions of the Act, the chairman of the meeting, shall have the
power to regulate the manner in which the poll shall be taken. The result of the
poll shall be deemed to be the decision of the meeting on the resolution on
which the poll was taken (Section 185).
3. At the time of polling, the secretary will distribute blank ballot (voting) papers
among the members or their proxies after checking their names and voting
power in his list. The ballot papers may be of different colours if there are
different classes of shares and different voting rights.
4. The members or their proxies will then fill up the ballot papers with their name,
number and class of shares held (if he is a proxy, the name of the appointer and
the number and class of shares held by the appointer), votes cast in favour or
against and sign the ballot paper.
5. The ballot papers are then collected by the scrutineers for scrutiny and counting
of votes. Incomplete and defective ballot papers are cancelled and the rest are
scrutinized, arranged in the alphabetical order and entered in the polling list.
The names of proxies are checked with the list of proxies and the voting list.
The Secretary may assist and supervise the work of the scrutineers.
6. After checking the polling list, the scrutineers will count the votes cast in favour
and against the resolution and report the result of counting to the chairman. The
chairman will declare the result of the poll on that basis and his decision will be
final and conclusive.
Answer 4(b)
According to proviso to Section 77A(2)(b) of the Companies Act, 1956, a company

may buy-back its own shares or other specified securities, upto ten percent of its total
paid-up equity capital and free reserves, provided such buy-back has been approved by
the Board by means of resolution passed at its meeting. However, it must be ensured
that no offer of buy-back is made within next three hundred and sixty five days. Thus
the following steps are required to be taken by a listed company desirous of making
buy-back of 9.5% of its paid-up capital and free reserves:¾
1. Check whether Articles of the company authorize the buy-back of shares or

other specified securities. Otherwise complete the proceedings to alter them
accordingly.
2. Ensure that following conditions as stipulated in Section 77A of the Companies
Act, 1956 are satisfied:
i. buy-back is made only out of its free reserves or securities premium account or
the proceeds of any shares or other specified securities;
ii. buy-back is not made out of the proceeds of an earlier issue of the same kind of
shares or same kind of other specified securities;
iii. the ratio of the debt owed by the company is not more than twice the capital and
its free reserves after such buy-back except where a higher ratio has been
prescribed by the Central Government for a class or classes of company;
iv. all the shares or other specified securities for buy-back are fully paid-up;
v. the buy-back of shares or other specified securities is in accordance with the
SEBI (Buy-back of Securities) Regulations, 1998.

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1. Convene a Board meeting after issuing notices to the directors in accordance

with Section 286 of the Act, to consider and to take decision for the proposed
buy-back.
2. The buy back must be completed within 12 months from the date of passing of
the special resolution.
3. The buy back may be from the following:
a. from the existing security holders on proportionate basis;

b. from the open market;
c. from odd lots of shares in case of listed securities;
d. by purchasing shares issued under Employees Stock Option
Scheme or sweat equity.
3. A declaration of solvency in the prescribed form shall be filed with the Registrar
of Companies and SEBI before making the buy back. This declaration has to be
given by the Board of Directors to the effect that they have made a full inquiry
into the affairs of the company and have formed an opinion that the company is
capable of meeting its liabilities and will not be rendered insolvent within a
period of one year of the date of declaration. This declaration is to be signed by
any two directors one of whom shall be the managing director, if any.
4. The securities so bought back must be physically destroyed within seven days of
the last date of completion of buy back.
5. After completion of buy back, the company shall not make a further issue of the
same kind of securities (including right shares under Section 81) within a period
of 6 months
. The only exception to this clause is:
a. issue of bonus shares.

b. discharge of subsisting obligations such as conversion of warrants, stock option,
sweat equity, or conversion of preference shares or debentures into equity
shares.
3. A register containing all prescribed particulars shall be maintained.

4. A return, containing details of the buy-back, shall be filed with Registrar of
Companies and SEBI within 30 days of its completion.
Question 5
a. What are the steps involved in ‘dematerialisation’ and ‘rematerialisation’

of shares? (8 marks)
b. What are ‘registerable charges’ ? Explain the procedure for registration of
charges under the Companies Act, 1956. (8 marks)
Answer 5(a)
The steps involved in dematerialisation of shares are as follows:
a. By Company
i. The Articles of Association of the company should contain a regulation which

authorizes the company to have its securities dematerialized. If the articles of
the company do not contain such a provision, the articles must be altered by

FINAL EXAMINATION
passing a special resolution in general meeting in accordance with the

provisions of Section 31 of the Companies Act, 1956 so as to include such a
provision. The provisions of the Depositories Act,1996 and the SEBI
(Depositories and Participants) Regulations, 1996 for dematerialisation of its
securities must also be complied with.
ii. The company, desirous of dematerializing its securities, will have to approach a
depository for the dematerialisation of its shares. The depository shall enter into
an agreement with the company in respect of securities that are to be declared as
eligible to be held in dematerialized form.
iii. In case the company has appointed a Registrar to the issue, in case of a new
issue, or share transfer agent for transfer/transmission of its existing shares, who
has been granted certificate of registration by SEBI under Sub-section (1) of
Section 12 of the Depositories Act, 1996, then the depository shall enter into a
tripartite agreement with the company and the registrar to the issue or share
transfer agent, in respect of the securities to be declared by the depository as
eligible to be held in dematerialized form.
iv. The shareholders shall surrender their share certificates to the company and the
company shall inform the depository accordingly. Section 6(2) of the
Depositories Act, 1996, provides that the company, on receipt of the share
certificates, shall cancel the certificates, and substitute in its records, the name
of the depository as the registered owner in respect of all those shares and
accordingly inform the depository.
v. On receipt of the information from the company, the depository shall enter the
names of the shareholders in its records as the beneficial owners of the shares
and inform the company, who shall in turn inform the shareholders that their
shares have been dematerialized.
b. By Shareholders
i. A Dematerialisation Request Form (DRF) issued by the Depository

Participant is to be filled and deposited with the concerned DP
together with certificates after writing “Surrendered for
Dematerialisation” on the face of each certificate.
ii. The Depository Participant will send DRF along with the
certificates to the concerned company for confirmation of its
genuineness simultaneously to Share Transfer Agents electronically
through the Depository (NSDL or CDSL, as the case may be).
iii. After checking the genuineness of the certificates and DRF the
company/ Share Transfer Agents shall destroy the certificates and
send a conformation to the NSDL pr CDSL which, in turns, confirm
the dematerialisation of securities to Depository Participant.
iv. Depository Participant on receipt of such conformation shall inform
the investor accordingly.
Steps involved in Rematerialisation of shares
The steps involved in rematerialisation of shares are as follows:
i. Beneficial owner sends request to DP (Depository Participant).

ii. DP intimates Depository (NSDL or CDSL) of such request
electronically.
iii. Depository (NSDL/CDSL) confirms rematerialisation request to the
company’s Share Transfer Agents.
iv. Share Transfer Agent updates accounts and prints certificates and

FINAL EXAMINATION
confirm the Depository (NSDL/CDSL).

v. Depository(NSDL/CDSL) updates accounts and downloads the
details to the DP.
vi. Share Transfer Agent dispatches certificates to holder thereof.
vii. The DP also send intimation about rematerialisation to its agent.
Answer 5(b)
Section 125(4) of the Companies Act, 1956 lays down the following nine types of
charges that are registerable under the Act:
i. a charge for the purpose of securing any issue of debentures;

ii. a charge on uncalled share capital of the company;
iii. a charge on any immovable property, wherever situated, or any
interest therein;
iv. a charge on any book debts of the company;
v. a charge, not being a pledge, on any movable property of the
company;
vi. a floating charge on the undertaking or any property of the
company including stock-in-trade;
vii. a charge on calls made but not paid;
viii. a charge on a ship or any share in a ship;
ix. a charge on goodwill, on a patent or a licence under a patent, on a
trade mark, or on a copyright or a licence under a copyright.
If the charge falls under any of the aforesaid categories, the following procedure will
have to adopted for the registration of such charge:
1. File particulars of the charge with the concerned Registrar of Companies within
thirty days of creating the charge in Form No.8 in triplicate and attach the
following documents with such Form:
i. a certified true copy of the instrument or deed by which the charge

is created or evidenced.
ii. document evidencing payment of requisite filing fee as per
Schedule X of the Companies Act, 1956.
2. If the particulars of charge cannot be filed within thirty days due to unavoidable
reasons, then file the same within sixty days of creating the charge after
satisfying the Registrar of Companies the reasons for delay and after payment of
additional fee.
3. In case the charge has been created outside India and it comprises solely of
property situated outside India then file the particular of the charge in Form
No.8 in triplicate within thirty days after the date on which the instrument
creating or evidencing the charge or copy thereof could, in due course of post
and if despatched with due diligence, have been received in India.
4. Verify the copy of the instrument or deed before filing, in the following manner:
i. if the instrument or deed creating the charge relates solely to

property situated outside India, by a certificate either under the seal
of the company or under the hand of the director or manager or
secretary of the company or under the hand of some person
interested in the mortgage or charge on behalf of any person other

FINAL EXAMINATION
than the company, stating that it is true copy.

ii. if the instrument or deed creating the charge relates whether wholly
or partly to property situated in India, by a certificate of the
director, manager or secretary of the company stating that it is a
true copy or by a certificate of a public officer given under and in
accordance with the provisions of Section 76 of the Indian
Evidence Act, 1872.
5. Along with Form No.8, forward to the concerned Registrar of Companies ,the
particulars of charges in Form No.13 in triplicate with a fee of Rs.50/- in cash
for being entered in the register of charges. Form Nos. 8 and 13 and the
instrument evidencing charge in triplicate should be signed by both the company
and the creditor.
6. On receipt of the Forms, the concerned Registrar of Companies will endorse on
all the three copies including the accompanying instrument by rubber stamp
with the impression “Certified that the charge above is Registered” and sign the
same.
7. The company and creditor will get back the duplicate and triplicate copies while
first copy is retained by the ROC for his record.
Question 6
Draft specimen resolutions for transacting any four of the following items of
business indicating the kind of meeting at which each resolution is to be passed
and the type of resolution with majority required :
i.To lease an undertaking of a listed company.

ii.To appoint an alternate director.
iii.To increase the number of directors from existing 8 to 15 directors.
iv. To borrow in excess of the paid-up capital and free reserves, where free
reserves constitute just 15% of the paid-up capital.
v. To change the name of the company. (4 marks each)
Answer 6(i)
Kind of Meeting: General Meeting
Type of resolution: Ordinary resolution
“RESOLVED that pursuant to the provisions of Section 293(1)(a) of the

Companies Act,1956 consent of the company be and is hereby given to the Board of
Directors to lease an undertaking of company, located at New Delhi with all the lands,
buildings, plant and machinery, furniture, fixtures and fittings for a period of five
years with effect from 25th November, 2002 in term of the agreement to be entered
into between the company and M/s ABC Ltd. a draft whereof submitted to this
meeting and initialled by the Chairman thereof for the purpose of identification which
is hereby considered and approved and that the Board of Directors be and is hereby
authorized to execute the said agreement on behalf of the company under the common
seal of the company”.
Answer 6(ii)
Kind of Meeting: Board Meeting

FINAL EXAMINATION
Type of Resolution: Resolution by simple majority
“RESOLVED that pursuant to the provisions of Section 313 of the Companies

Act, 1956, read with Article II of the Articles of Association of the company, Shri
Ajay be and is hereby appointed as an alternate Director to Shri Mahesh during the
latter’s absence for a period of not less than three months from the State of Rajasthan
and that the alternate director shall vacate his office as and when Shri Mahesh returns
to India.”
Answer 6(iii)
Type of Resolution: Ordinary Resolution
“RESOLVED that pursuant to the provisions of Sections 258 and 259 of the
Companies Act, 1956 and subject to the approval of the Central Government, the
number of directors of the company be increased from eight to fifteen.“
Answer 6(iv)
Type of Resolution: Ordinary Resolution
“RESOLVED that pursuant to the provisions of Section 293(1)(d) of the

Companies Act, 1956, the Board of Directors of the company be and are hereby
authorized to borrow from time to time moneys (apart from temporary loans obtained
from the company’s bankers in the ordinary course of business) for the purpose of the
company in excess of the aggregate of the paid-up capital of the company and its free
reserves (that is to say, reserves not set apart for any specific purpose), provided that
the total amount of such borrowings together with the amounts already borrowed and
outstanding shall not exceed Rs.____ .”
Answer 6(v)
Type of Resolution: Special Resolution
“RESOLVED that pursuant to provisions of Section 21 of the Companies Act,

1956 and subject to the approval of the Central Government the name of the company
be changed from ‘ABC Company Limited’ to ABC (INDIA) Company Ltd’.
RESOLVED FURTHER that the name ‘ABC Company Limited’ wherever it

occurs in the Memorandum and Articles of Association of the Company be substituted
by the new name ‘ABC (INDIA) Company Limited’ “.
Question 7
a. PQR Ltd., having paid-up capital of Rs.50 lakh, entered into a contract
with company XYZ Ltd., in which director Dev was holding 20% shares.
The director did not disclose his interest at the time of approval of the

FINAL EXAMINATION
contract by the Board. How would you deal with this situation ?
b. Anand, who was appointed as an additional director of a public limited
company for the first time, filed his consent with the company. He also
signed his consent in the prescribed form and delivered the same to the
company for filing it with the Registrar of Companies. Due to inadvertence,
the said form was not filed within the stipulated time limit. State the course
of action that you would take in this regard.
c. Director-X and Director-Y of A Ltd. hold 0.5% and 1.25% of paid-up
capital of B Pvt. Ltd. respectively. Z, a relative of Director-X, also hold in
aggregate 0.5% paid-up capital of B Pvt. Ltd. Other than these, no other
director/relative of director of A Ltd. holds shares in B Pvt. Ltd. When A
Ltd. considers a proposed contract with B Pvt. Ltd., advise whether
Director-X or Director-Y or both the directors should disclose interest.
d. Mohan and Sohan jointly hold 5% of equity shares of Kirtiman Ltd., a
public unlisted company which has adopted Table-A as its articles. They
appointed P1 and P2 respectively as proxies to attend the 26th annual
general meeting of the company. How do you propose to deal with these
two proxies in the annual general meeting? (4 marks each)
Answer 7(a)
According to Section 299(1) of the Companies Act, 1956 every director of a company
who is in any way whether directly or indirectly concerned or interested in a contract
or arrangement or proposed contract or arrangement, entered into, or to be entered
into, by or on behalf of the company, shall disclose the nature of his concern or
interest at a meeting of Board of Directors. In the case of a proposed contract or
arrangement the disclosure, referred to above, shall be made at the meeting of the
Board at which the question of entering into contract or arrangement is first taken into
consideration or at the first meeting of the Board held after he becomes so interested
or concerned. Further under Section 300 of the Act, an interested director is prohibited
to take part in the discussion or vote on any contract or arrangement entered into by or
on behalf of the company where he is directly or indirectly interested in it.
In the present case, Dev is an interested director. He should have, therefore, disclosed
his interest in XYZ Ltd. Non-disclosure of interest by Dev will subject him to a
penalty of an amount which may extend to Rupees 5,000 as stipulated in Section 299
(4) of the Act. Further in accordance with the provisions of Section 283(1)(i) of the
Act, Dev will have to vacate his office. Failure to disclose interest renders the contract
voidable at the option of the Board.
Answer 7(b)
Section 264 of the Companies Act, 1956 deals with filing of consent by a director.
Under Sub-section (1), it is provided that every person proposed as a candidate for the
office of a director of a public company shall sign and file with the company, his
consent in writing to act as a director, if appointed. In the given situation, this
requirement has been duly complied with.
Sub-section (2) of said Section requires that a person shall not act as a director of the
company unless he has within thirty days of his appointment signed and filed with the
Registrar his consent in writing to act as such director. However, an additional director
is exempted to file such consent in case of his appointment as a director or re-
appointment as additional director immediately on the expiry of his term of office. In
the given case appointment being for the first time, non-filing of the consent within

FINAL EXAMINATION
thirty days shall result in non-compliance of Section 264(2). However, it has been
clarified by the Department of Company Affairs that failure to file the consent with
the Registrar, shall not result in the vacation of office of the Director. The only
consequence shall be that penalty under Section 629A would become attracted. Thus
such consent of Anand may be filed after the expiry of thirty days on payment of
additional fee as contemplated under Section 611(2) of the Act.
Answer 7(c)
According to Section 299(6) of the Companies Act, 1956, nothing in this section shall
apply to any contract or arrangement entered into or to be entered into between two
companies where any of the directors of one company or two or more of them together
holds or hold not more than two percent of the paid-up share capital in other company.
In the given case X and Y hold 0.5% and 1.25% of paid-up capital of B Pvt. Ltd
respectively, which does not exceed 2% of the paid-up capital of B Pvt. Limited.
Therefore, X and Y are not required to disclose their interest for the proposed contract.
However, in terms of Section 299(1), X is having indirect interest for the proposed
contract as his relative i.e. Z holds 0.5% of paid-up capital of B Pvt. Ltd. Therefore, X
will have to disclose his interest for the proposed contract and Y is not required to
disclose his interest for the same.
Answer 7(d)
Regulation 57 of Table A to Schedule I of the Companies Act, 1956 provides that in

the case of joints holders, the vote of the senior who tenders a vote, whether in person
or by proxy, shall be accepted to the exclusion of the votes of other joint holders. The
seniority, for this purpose, shall be determined by the order in which the names stand
in the register of members. Therefore, in the given case, the proxy of the senior
member (i.e. Mohan or Sohan in given problem) shall be entitled to attend and vote at
the annual general meeting of the company.
Question 8
State the points to be taken care of, including the listing requirements, in drafting
the directors’ report of Sunrise Engineering Ltd., a listed company which has
been in business for 25 years and has a paid-up capital of Rs.75 crore for the year
ended 31st March, 2002. (16 marks)
Answer 8
In terms of Section 217 of the Companies Act, the information on the following
matters is required to be included in the Directors’ report:
i.the state of the company’s affairs.

ii.the amounts proposed to be transferred to reserves.
iii.the amounts recommended to be paid as dividend.
iv. material changes and commitments, if any, affecting the financial position of the
company which have occurred between the end of financial year to which
balance sheet relates and the date of report.
v. the conservation of energy, technology absorption, foreign exchange earnings
and outgo in prescribed manner.
vi. changes occurred in the nature of company’s subsidiaries or in name of business
carried on by them.

FINAL EXAMINATION
vii. the particulars of Employees as per the Companies (Particulars of Employees)

Rules, 1975.
As per Sub-section (2AA) of Section 217 of the Act, the Board’s report shall also
include a Directors’ Responsibility statement, indicating therein -
i. that in the preparation of the annual accounts, the applicable accounting

standards had been followed along with proper explanation relating to material
departures;
ii. that the directors had selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and prudent
so as to give a true and fair view of the state of affairs of the company at the end
of the financial year and of the profit or loss of the company for that period;
iii. that the directors had taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the Act for
safeguarding the assets of the company and for preventing fraud and other
irregularities;
iv. that the directors had prepared the annual accounts on going concern basis.
The Board’s report shall also specify the reasons for failure if any, to complete the
buy-back within the time specified in Section 77A(4). The Board shall also be bound
to give the fullest information and explanations in its report aforesaid, or, in cases
falling under the proviso to Section 222, in an addendum to that report, on every
reservation, qualification or adverse remark in the auditor’s report.
As Sunrise Engineering Ltd. is a listed company, it will have to issue a Management

discussion or analysis report, either as a part of the Directors’ report or in addition
thereto, providing discussion on the following matters within the limits set by the
company’s competitive position:
i. Industry structure and management;

ii. Opportunities and threats;
iii. Segment-wise or product-wise performance;
iv. Outlook;
v. Risks and concerns;
vi. Internal control system and their adequacy;
vii. Discussion on financial performance with respect to operational performance;
viii. Material developments in Human resources;
Industrial Relations front, including number of people employed.

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FINAL EXAMINATION

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COMPANY SECRETARIAL PRACTICE

Time allowed : 3 hours Maximum marks : 100

NOTE : Answer SIX question including Question No. 1 which is COMPULSORY.

a. Specify in detail the steps to be taken for incorporation and commencement

l Draft directors’ report.

i. CMD and Company Secretary to sign the directors’ report;

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2. Revalidation of Name availability

3. Drafting and Printing of Memorandum and Articles

On receipt of a communication from the Registrar of Companies intimating

4. Stamping and Signing of Memorandum and Articles

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5. Dating of Memorandum and Articles

6. Preparation of other Documents

The following documents are also required to be prepared by the promoters in

The aforesaid declaration should be on a non-judicial stamp paper of appropriate value

7. Filing of documents for registration

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8. Minimum Paid-up Capital

9. Issue of Certificate of Incorproation

On receipt of the aforesaid documents, the Registrar of Companies will scrutinize

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As the Company Secretary of Big Brothers Ltd., an Indo-Swedish joint venture

i. Appointment of Smart, a member of the company’s Board of

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iv. Retiring auditor not seeking re-appointment. (4 marks each)

For acceptance of public deposits, a company is required to comply with the

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1. Form No. 8 (3 marks)

Purpose: Registration of particulars of charges created or modification of particulars of

i. Name of the Company, Registration number, Nominal capital;

Other relevant aspects:

i. Three copies of Form No.8 have to be submitted to the Registrar of Companies

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Purpose: Notice of situation/change of situation of Registered Office under

i. Name of the company, Registration Number, Nominal capital;

Time Limit: Form should be submitted within 30 days of incorporation or charge

Purpose: Registration of Resolution(s) and Agreement(s) under Section 192 of the

i. Name of the Company, Registration Number, Nominal capital;

Time Limit: Within 30 days of passing the resolution/making the agreement.

i. Certified true copy of resolution/agreement and Memorandum or Articles of

Purpose: Filing of Consent to act as director of company and/or undertaking to

i. Registration Number, Nominal capital, Name of the Company;

Time Limit: Within 30 days of appointment or at the time of incorporation of the

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Purpose: Filing of Particulars of appointment of directors and manager and

i. Registration number, Nominal capital, Name of the Company;

a. Explain the legal and procedural requirements in regard to poll at an

a. in the case of a public company having a share capital, by any member or

When a poll is to be taken, the following procedure shall be followed:

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(not being an employee or officer of the company) present at the meeting

According to proviso to Section 77A(2)(b) of the Companies Act, 1956, a company

1. Check whether Articles of the company authorize the buy-back of shares or

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1. Convene a Board meeting after issuing notices to the directors in accordance

a. from the existing security holders on proportionate basis;

. The only exception to this clause is:

a. issue of bonus shares.

3. A register containing all prescribed particulars shall be maintained.

a. What are the steps involved in ‘dematerialisation’ and ‘rematerialisation’

The steps involved in dematerialisation of shares are as follows: