2024

Companies Act-
Assignment

RISHABH GAUR
B.COM | LL.B | ATC (ICAI)

© ALL RIGHT RESERVED. | For Educational Purpose

Rishabh Gaur 1 Co. Act - Assignment

Q1.
Particulars A Ltd. B Ltd. C Ltd. D Ltd.
Paid up capital 5 crore 4 crore 3 crore 2 crore
Equity Share of 10 each 40, 00,000 30,00,000 20,00,000 10,00,000
10% Pref. Share of 10 each 10,00,000 10,00,000 10,00,000 10,00,000
Required: State the relationship between the companies in the following cases –
a) A Ltd. holds 10,00,000 Equity Shares in B ltd. and can appoint or remove majority of directors of
B Ltd. without the consent of any other person.
b) A Ltd. holds 15,10,000 equity shares in B Ltd. which holds 10,00,000 equity shares in C Ltd.
c) A Ltd. holds 15,10,000 equity shares in B Ltd. which holds 10,10,000 equity shares in C Ltd.
d) B Ltd. holds 10,10,000 equity shares in C Ltd. and holds 1,00,000 equity shares in D Ltd. C Ltd.
holds 1,05,000 equity shares in D Ltd.
Hint A1. Unless otherwise stated, the preference shares are assumed to be non-convertible.
a) B Ltd. is a subsidiary of A Ltd. – Since as per sec. 2(87), A Ltd. can appoint or remove majority of
directors of B Ltd.
b) B Ltd. is a subsidiary of A Ltd. – Since as per sec. 2(87), A Ltd. holds more than half in nominal
value of equity share capital of B Ltd.
But, C Ltd is not subsidiary of B Ltd.
c) B Ltd. is a subsidiary of A Ltd. – Since as per sec. 2(87), A Ltd. holds more than half in nominal
value of equity share capital of B Ltd.
C Ltd. is a subsidiary of B Ltd – since B Ltd. holds more than half in nominal value of equity share
capital of C Ltd.
As per Sec. 2 (87) C Ltd. which is subsidiary of B Ltd., is also subsidiary of A Ltd.
d) C Ltd. is a subsidiary of B Ltd – since as per sec. 2(87), B Ltd. holds more than half in nominal value
of equity share capital of C Ltd.
D Ltd. is subsidiary of B Ltd. since B ltd. along with its subsidiary (C ltd.) holds more than half in
nominal value of equity share capital of D Ltd.

Q2. The Share Capital of S Ltd. is Rs. 5,00,000 divided into 50,000 equity shares of Rs. 10 each. If H
Ltd. acquires 25,000 equity shares on 1.4.2018 and 5000 equity shares on 1.7.2018 then S ltd.
becomes the subsidiary of H Ltd. on which date?
Hint A2. S Ltd becomes the subsidiary of H Ltd. on 1.7.2018 because h Ltd. holds more than 50% of
the share capital of S Ltd. on 1.7.2018.

Q3. The Share Capital of S Ltd. id Rs. 6,00,000 divided into 50,000 Equity share of Rs. 10 each and
1,000 convertible Preference shares of Rs. 100 each. If H Ltd. acquires 29,000 equity shares and 100
convertible preference shares, does S Ltd. become the subsidiary of H Ltd.?
Hint A3. No, S Ltd. does not become subsidiary of H Ltd. because H Ltd. does not hold more than 50%
of the total share capital of S Ltd. (i.e. 5,00,000 + 1,00,000)

Q4. An English company was formed for selling in England tyres produced by a German company in
Germany. The bulk of English company’s shares were held by the Germen Company. The
overwhelming majority of the shareholders and all the directors were Germen nationals residing in
Germany. The English Company filed a suit during the World war I to recover a trade debt. Could the
company be allowed to proceed with the action?
Hint A4. No, English co. is an alien co. – Corporate veil lifted – no separate legal entity – Dailmer Co.
ltd. vs Continental Tyre and Rubber Co. Ltd.

Q5. The paid up share capital of SOMY Private Limited is Rs. 1 Crore, consisting of 8 lakhs Equity
Shares of Rs. 10 each, fully paid up and 2 Lakh Cumulative Preference Shares of Rs. 10 each, fully paid
up. Pumpum Pvt. Ltd. and PooPoo Pvt. Ltd. are holding 3 lakhs Equity Shares and 50,000 Equity Shares

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Rishabh Gaur 2 Co. Act - Assignment

respectively in SOMY Private Limited. Pumpum Pvt. Ltd. and PooPoo Pvt. Ltd are the subsidiary of
Fidato Pvt. Ltd. Examine whether SOMY Private Limited is a subsidiary of Fidato Pvt. Ltd.? Would your
answer be different if Fidato Pvt. Ltd. has 8 out of 9 Directors on the Board of SOMY Private Limited?
Hint A5. SOMY Private Limited is not subsidiary of Fidato Pvt. Ltd. However, if Fidato Pvt. Ltd has 8
out of 9 Directors on the Board of SOMY Private Ltd. i.e. controls the composition of the Board of
Directors, Fidato Pvt. Ltd. will be treated as the holding company of SOMY Private Limited.

Q6. H was appointed the managing directors of A&Co. on the terms that he must not, at any time
during the tenure of his office as such, or afterwards, entice away the customers of A&Co.
subsequent to the cessation of H’s employment under an agreement he set up a business in the name
of H&Co. which solicited the customers of A&Co. Evidence showed that H&Co. was formed to enable
H to commit a breach of his covenant against solicitation. Could H&Co. and H be restricted from doing
so?
Hint A6. Yes, Gilford Motor Co. Ltd. vs Horne – Corporate veil lifted for the prevention of fraud or
improper conduct.

Q7. AK Private Limited has borrowed 36 crore from BK Finance Limited. However, as per memorandum
of AK Private Limited, the maximum borrowing power of the company is 30 crore. Examine whether
AK Private Limited is liable to pay this debt? State the remedy, if any available to BK Finance Limited.
Hint A7. Borrowing of 36 crore, being ultra vires the Memorandum of Association and thereby is
void. AK Private Limited is not liable to pay the debt.
BK Finance limited may take action against the directors of AK Private Limited as it is the personal
liability of its directors to restore the borrowed funds. Besides, BK Finance Limited may take recourse
to the remedy by means of ‘Injunction’, if feasible.

Q8. Pickachoo LLC incorporated in Singapore having an office in Pune, India. Analyze whether
Pickachoo LLC would be called a foreign company as per the provisions of the Companies Act, 2013?
Hint A8. Yes, as per sec. 2(42).

Q9. HP Polytech Limited has a paid-up share capital divided into 6,00,000 equity shares of 100 each.
2,00,000 equity shares of the company are held by the Central Government and 1,20,000 equity shares
are held by the Government of Maharashtra. Explain with reference to relevant provisions of the
Companies Act, 2013, whether HP Polytech Limited can be treated as a Government Company.
Hint A9. The holding of equity shares by both government is 3,20,000 which is more than 51% of total
paid up equity shares. Hence, HP Polytech Limited is a government company – Sec. 2(45)

Q10. Nolimit Private Company is incorporated as unlimited company having share capital of 10,00,000.
One of its creditors, Mr. Samuel filed a suit against a shareholder Mr. Innocent for recovery of his debt
against Nolimit Private Company. Mr. Innocent has given his plea in the court that he is not liable as he
is just a shareholder. Explain, whether Mr. Samuel will be successful in recovering his dues from Mr.
Innocent?
Hint A10. Mr. Samuel cannot directly claim his dues against the company from Mr. Innocent, the
shareholder of the company even though the company is an unlimited company. Mr. Innocent is liable
for upto his share capital. His unlimited liability will arise when official liquidator calls the members for
their contribution towards the liabilities and debts of the company at the time of winding up of
company – Sec. 2(92)

Q11. XYZ pvt. Ltd. is incorporated as under Companies Act.

The paid up share capital of the company is held by others is as under –
Govt. of India 20%
LIC 8%

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Rishabh Gaur 3 Co. Act - Assignment

Govt. of Maharashtra 10%

Govt. of Punjab 10%
PQR Ltd. (owned by Govt. Co.) 15%
Whether XYZ pvt. Ltd. be called as Govt. co. as per the companies act 2013?
Hint A11. No, share holding of Govt. all together is below 51%

Q12. Flora Fauna 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 10
they were employees)
(d) 5 couples holding shares jointly in the 10
name of husband and wife (5*2)
(e) Others 5
The Board of Directors of the company propose to convert it into a private company. Also advise
whether reduction in the number of members is necessary.
Hint A12. Total no. Of members are 190 (directors ) + 5 (couple) + 5 (others) = 200
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.

Q13. ABC Pvt. Ltd., is a Private Company having five members only. All the members of the company
were going by car to Mumbai in relation to some business. An accident took place and all of them died.
Answer with reasons, under the Companies Act, 2013 whether existence of the company has also
come to the end?
Hint A13. ABC Pvt. Ltd. does not cease to exist even by the death of all its shareholders. The legal
process will be for the successors of the deceased shareholders to get the shares registered in their
names by way of the process which is called “transmission of shares”.

Q14. Examine the following whether they are correct or incorrect along with reasons:
a) A company being an artificial person cannot own property and cannot sue or be sued.
b) A private limited company must have a minimum of two members, while a public limited
company must have at least seven members.
Hint A14.
a) Incorrect
b) Correct

Q15. Four of the seven signatures to the MoA of a company are forged. The memorandum is duly
presented, registered and a certificate of incorporation is issued. Can the existence of the company
be subsequently questioned on the ground that registration is void. Decide.
Hint A15. As per Sec. 9 the certificate of incorporation, once issued is conclusive evidence of the
fact that the company has been duly registered. Once the certificate is issued, no one can
question the validity of incorporation.

Q16. Akbar, an assessee, was a wealthy man earning huge income by way of dividend and interest.
He formed three Private Companies and agreed with each to hold a bloc of investment as an agent
for them. The dividend and interest income received by the companies was handed back to Akbar as
a pretended loan. This way, Akbar divided his income into three parts in a bid to reduce his tax
liability. Decide, for what purpose the three companies were established? Whether the legal
personality of all the three companies may be disregarded.

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Rishabh Gaur 4 Co. Act - Assignment

Hint A16. The three companies were formed by the assessee purely and simply as a means of avoiding
tax and the companies were nothing more than the façade of the assessee himself.
The legal personality of the three private companies may be disregarded because the companies were
formed only to avoid tax liability – Sir Dinshaw Manackjee petit

Q17. The Articles of Association of XYZ Ltd. provides that Board of Directors has authority to issue
bonds provided such issue is authorized by the shareholders by a necessary resolution in the general
meeting of the company. The company was in dire need of funds and therefore, it issued the bonds
to Mr. T without passing any such resolution in general meeting. Can Mr. T recover the money from
the company? Decide referring the relevant provisions of the Companies Act, 2013.
Hint A17. This is the doctrine of indoor management, popularly known as Turquand Rule. Since, the
given question is based on the above facts, accordingly here in this case Mr. T can recover the money
from the company considering that all required formalities for the passing of the resolution have been
duly complied.

Q18. BC Private Limited and its subsidiary KL Private Limited are holding 90,000 and 70,000 shares
respectively in PQ Private Limited. The paid-up share capital of PQ Private Limited is 30 Lakhs (3 Lakhs
equity shares of 10 each fully paid). Analyse with reference to provisions of the Companies Act, 2013
whether PQ Private Limited is a subsidiary of BC Private Limited. What would be your answer if KL
Private Limited is holding 1,60,000 shares in PQ Private Limited and no shares are held by BC Private
Limited in PQ Private Limited?
Hint A18. BC Private Limited together with its subsidiary KL Private Limited is holding 1,60,000 shares
(90,000+70,000 respectively) which is more than one half in nominal value of the Equity Share Capital
of PQ Private Limited. Hence, PQ Private Limited is subsidiary of BC Private Limited.
In the second case, the answer will remain the same.

Q19. Y incorporated a "One Person Company (OPC)" making his sister Z as nominee. Z is leaving India
permanently due to her marriage abroad. Due to this fact, she is withdrawing her consent of
nomination in the said OPC. Taking into considerations the provisions of the Companies Act, 2013
answer the questions given below:
a) Is it mandatory for Z to withdraw her nomination in the said OPC, if she is leaving India
permanently?
b) Can Z continue her nomination in the said OPC, if she maintained the status of Resident of India
after her marriage?
Hint A19.
a) Yes, it is mandatory for Z to withdraw her nomination in the said OPC as she is leaving India
permanently as only a natural person who is resident in India shall be a nominee in OPC.
b) Yes, Z can continue her nomination in the said OPC, if she maintained the status of Resident of
India after her marriage by staying in India for a period of not less than 120 days during the
immediately preceding financial year.

Q20. MNP Private Ltd. is a company registered under the Companies Act, 2013 with a paid-up share
capital of 70 lakh and turnover of 50 crores. Explain the meaningof the “Small Company” and
examine the following in accordance with the provisionsof the Companies Act, 2013:
a) Whether the MNP Private Ltd. can avail the status of small company?
b) What will be your answer if the turnover of the company is 15 crore?
Hint A20.
a) MNP Ltd. cannot avail the status of small company , since as per sec. 2(85) turnover limit exceeds.
b) If the turnover of the company is 15 crore, then both the criteria will be fulfilled and MNP Ltd. can
avail the status of small company.

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Rishabh Gaur 5 Co. Act - Assignment

Q21. Chhavish, an Indian citizen and resident of India formed “Ekta Readymade Garments (OPC)
Private Ltd.” as One Person Company on 1st April 2018 with his wife Mrs. Jyoti as nominee. The
authorized and paid-up share capital of the company is 35 lakhs. He got in touch with a readymade
garments buyer and was expecting to receive a substantial order by August 2020 where final delivery
will be completed by December 2020. To expand the production capacity, the decided to invest an
additional capital of 10 lakhs in plant and machinery. As a result, the company’s authorized and paid-
up share capital is now 45 Lakhs. Promoter of the company seeks your advice. Considering the case
and referring the provisions of the Companies Act, 2013, advice:
a) Whether “Ekta Readymade Garments (OPC) Private Ltd.” can convert into any other kind of
company as on 1st December 2020?
b) If the company increases its paid up share capital by 30 lakhs in August, 2019, can it be converted
in any other kind of company immediately?
Hint A21.
a) OPC can voluntarily into private company.
b) The Ministry of Corporate Affairs w.e.f 1st April, 2021 has removed the condition whereby OPC
cannot convert voluntarily into any kind of company unless two years have expired from the date
of incorporation, except where the paid up share capital is increased beyond fifty lakh rupees or
its average annual turnover during the relevant period exceeds two crore rupees. Hence, Paid up
share capital and turnover is immaterial, that is why, OPC can be converted in any other kind of
Company.

Q22. Ram Pvt. Ltd. is the holding company of Laxman Pvt. Ltd. As per the last profit and loss account
for the year ending 31st March, 2023 of Laxman Pvt. Ltd., its turnover was 1.80 crore; and paid up
share capital was 80 lakh. The Board of Directors wants to avail the status of a small company. The
Company Secretary of the company advised the directors that the company cannot be categorized as
a small company. In the light of the above facts and in accordance with the provisions of the Companies
Act, 2013, you are required to examine whether the contention of Company Secretary is correct,
explaining the relevant provisions of the Act.
Hint A22. Because Laxman Pvt. Ltd. is the subsidiary of another company (Ram Pvt. Ltd.). Hence, the
contention of the Company Secretary is correct, as subsidiary co. cannot be a small co.

Q23. A Company registered under Section 8 of the Companies Act, 2013, has been consistently making
profits for the past 5 years after a major change in the management structure. Few members
contented that they are entitled to receive dividends. Can the company distribute dividend? If yes,
what is the maximum percentage of dividend that can be distributed as per provisions of the
Companies Act, 2013? Also, to discuss this along with other regular matters, the company kept a
general meeting by giving only 14 days’ notice. Is this valid?
Hint A23. A company registered under Section 8 of the Companies Act, 2013 is prohibited from the
payment of any dividends to its members.
Hence in the given case, the contention of the members to distribute dividend from the profits earned
is wrong.
Also, Section 8 company is allowed to call a general meeting by giving 14 days instead of 21 days.

Q24. ABC Limited has allotted equity shares with voting rights to XYZ Limited worth 15 crores and
convertible preference shares worth 10 crores during the financial year 2022-23. After that the total
share capital of the company is 100 crores.
Comment on whether XYZ Limited would be called an Associate Company as per the provisions of the
Companies Act, 2013? Also define an Associate Company.
Hint A24. It can be assumed that the convertible preference shareholders are having voting rights and
due to this, XYZ Limited is holding overall 25% paid up share capital in ABC Limited (with voting rights).

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Rishabh Gaur 6 Co. Act - Assignment

Hence, XYZ limited is having significant control over ABC Limited and therefore XYZ is an Associate
company of ABC Limited. Sec. 2(6)

Q25. In a private limited company it is discovered that there are, in fact 204 members. On an enquiry,
it is ascertained that 6 of such members have been employees of the company in the resent past and
that they acquired their shares while they were still employees of the company. Is it necessary to
convert the company into a public limited company.
Hint A25. Since employee member and ex employee member are to excluded from counting of 200
members, therefore there is no need for conversion.

Q26. Roma along with her six friends has incorporated Roma Trading Ltd. in May 2019. The paid-up
share capital of the company is 30 lacs. Further, in April 2020, she noticed that in the last financial year,
the turnover of the company was well below 20 crores. Advise whether the company can be treated
as a ‘small company’.
Hint A26. No, as it is a public co. it cannot enjoy benefits of ‘small company’.

Q27. Abhilasha and Amrita have incorporated a ‘not for profit’ private limited company which is
registered under Section 8 of the Companies Act, 2013. One of their friends has informed them that
their company can be categorized as a ‘small company’ because as per the last profit and loss account
for the year ending 31st March, 2019, its turnover was less than 20 crores and its paid up share capital
was less than 2 crores. Advise.
Hint A27. Status of ‘small company’ cannot be bestowed upon a ‘not for profit’ company which is
registered under Section 8 of the Companies Act, 2013.

Q28. Anupam incorporated a ‘One Person Company’ (OPC) with his sister Alpana as the nominee and
about three years have passed satisfactorily. Anupam does a number of charitable works and is
associated with three NGOs. His business under his OPC has also flourished. Now he is planning to
convert the OPC into a Section 8 company (i.e. a company formed with charitable objects). Choose the
correct option.
Hint A28. There is specific prohibition on converting OPC into a Section 8 company; otherwise it can be
converted into a private or public company without any hindrance.

Q29. Rajesh has formed a ‘One person company with his wife Roopali as nominee. For the last two years
his wife Roopali is suffering from terminal illness and due to this hard fact he wants to change her as
nominee. He has trusted and experienced friend Ramnivas who could be made nominee or his (Rajesh)
son Rakshak who is of seventeen years of age. Whom should he nominate as nominee in place of his
wife.
What will be your answer in the following case –
a) Since blood relation can only be appointed as nominee in case of OPC, Rajesh need to appoint his
son Rakshak as nominee.
b) Since Roopali is not agreeable to the proposal of Rajesh and hence, she did not give her consent,
Rajesh cannot change her as the nominee.
c) Rajesh can appoint his friend Ramnivas as nominee in his OPC
Hint A29.
a) No, there is no such provision that only blood relation can be nominee in companies act, since
Rakshak is minor, he cannot be appointed as nominee.
b) Roopali consent is important in case of appointment and not in case of change. Hence, Rajesh can
change nominee.
c) Yes, if he is Indian Citizen or residing for minimum 120 days in India.

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Rishabh Gaur 7 Co. Act - Assignment

Q30. List out the exceptions of doctrine of indoor management.

Hint A30. Knowledge of irregularity, Forgery, Negligence

This Home Work Assignment, in no way, is a substitute to the Study Material issued by ICAI. It is only a
humble effort to help the students to revise their Companies Act syllabus.
Every effort has been made to avoid errors or omissions in this publication. Any mistake, error or
discrepancy noted may be brought to our notice which shall be taken care of in next edition.

Wish you all the best in your study endeavors. Happy Learning!

Rishabh Gaur
B.com | LL. B | ATC (ICAI)
Educator Since 2009
CA / CMA – Foundation & Inter Laws

8527-931-436 t.me/rishabhgaurinstitute rishabhgaureducator

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