Practical Problems

1. A public limited company has only seven shareholders, all the shares being paid up in full. All the shares of one shareholder are sold by the Court in an auction and purchased by another shareholder. The company continues to carry on its business, thereafter. Discuss the liabilities of the shareholders of the company.

2. In a private limited company it is discovered that there are in fact 54 members. On an enquiry it is ascertained that 6 of such members have been employees of the company in the recent 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.

3. The objects clause of the MOA of a company empowers it to carry on distillery business and any other business that is allied to it. The company wants to alter its MOA so as include the cinema business in its objects clause. Advise the company.

4. Advise ‘Asiatic Government Security Life Insurance Co ltd’ whether it can seek an injunction against ‘The New Asiatic Insurance Co Ltd which was subsequently formed restraining it form having in its name the word ‘Asiatic’ on the ground that it has caused confusion and can deceive the public.

5. The main object of the company is to manufacture cement. Seeing the potential for new business, the BOD decided to go in for manufacture of steel and steel related products. These are included in the Other objects of the company. Can the company undertake the aforesaid new business? Discuss.

6. A limited company is formed with its Articles stating that one Mr. Srivastava shall be the solicitor for the company and that he shall not be removed except on the ground of misconduct. Can the company remove Mr. Srivastava from the position even though he is not guilty of misconduct.

7. X Co ltd intended to buy rubber estate in Peru. Its prospectus contained extracts from an expert’s report giving the number of rubber trees in the estate. The report was inaccurate. Will any shareholder buying the shares of the company on the basis of the above representation have any remedy against the company. Can the person authorizing the issue of the prospectus escape the liability.

8. The shareholders at an AGM of a public limited company unanimously resolved for payment of dividend though the BODs did not recommend payment of any dividend. State the legal position.

9. M/S JAD Ltd has paid up equity capital of Rs.1.5 crore. The company decides to buy raw materials from XYZ Private Ltd to the extent of Rs.3 lakhs on credit. M, one of the directors of JAD Ltd is also a director of XYZ Private Ltd.

What procedure must JAD Ltd follow to execute the deal? And What duty does the Companies Act impose upon Mr. M the director of JAD Ltd who is also the director of XYZ Private Ltd.

10. Mr. X who was appointed as a Director at the last AGM resigned. The Board filled up the casual vacancy by appointing Mr. Y. But within a few days of his becoming Director, Y died. The board wishes to fill up the casual vacancy by appointing Mr. Z in place of Mr Y in the Board meeting. State the legal position.

11. X, an employee of ABC Ltd was appointed as an alternate director. In the meantime, the original director returned and wanted to attend the Board meeting. Advise.

12. In a meeting of the BODs, only 3 directors were present out of 11 directors. None of the 3 directors was interested in any of the items of the agenda. Examine the validity of the meeting.

13. In another meeting of the BODs, though 7 directors were present, only 2 directors were not interested in one of the transactions. How should the meeting deal with the matter?

14. In a meeting of the BODs, one of the directors did not disclose his interest in a matter which was approved. What are the consequences?