mohit educomp pvt. ltd. main centre- 59 jatindra mohan … scanner.pdf · 2019-01-19 · (b)...

CHAPTERS NAME Jun-09Dec.

2009Jun-10

Dec.

2010Jun-11

Dec.

2011Jun-12

Dec.

2012Jun-13

Dec.

2013Jun-14

Dec.

2014Jun-15

Dec.

2015Jun-16 Total Average

Secretarial Audit and

Secretarial Standards- An

Overview- 10 7 10 9 4 - 8 - - 20 15 15 13 10 121 8.07

Checklist for Secretarial

Audit/Co. Law37 60 15 53 57 42 50 43 97 77 40 35 35 42 35 718 47.87

Deu diligence-An Overview15 - 8 11 - 8 7 4 - 14 3 14 7 8 11 110 7.33

Issue Of Securities 25 11 41 28 20 16 37 51 12 16 13 15 20 18 36 359 23.93

Depositary Receipts Due

Diligence36 16 16 11 30 20 14 7 28 14 10 8 13 8 8 238 15.87

Deu Diligence- Mergers and

Amalgamations- 8 3 - - 5 14 5 10 9 22 5 12 - 105 7.00

Compatition Law Due

Diligence6 7 5 3 13 13 5 6 14 13 5 10 8 10 17 137 9.13

Legal Due Deligence 6 4 9 - 7 5 - - 4 - - - 8 - 5 48 3.20

Due Deligence for Banks - - - - - - - - - 6 8 10 8 8 5 45 3.00

Enviromental Due Deligence6 - - - - - - - - - 3 5 13 8 8 40 2.67

Search/Status Reports - 5 12 12 6 11 5 4 6 5 10 - - 10 - 87 5.8

Compliance management 5 19 5 6 1 11 14 9 4 6 12 3 5 3 - 103 6.87

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SECRETARIAL AUDIT COMPLIANCE MANAGEMENT AND DUE DILIGENCE

1/2017/SACMDD P.T.O.

332

: 1 :

Roll No......................................

Time allowed : 3 hours Maximum marks : 100

Total number of questions : 6 Total number of printed pages : 7

NOTE : Answer ALL Questions.

PART — A

Attempt all parts of either Q. No. 1 or Q. No. 1A

1. (a) Raj Mani Hadlooms Ltd., an unlisted Public Company, having paid-up Capital of Rs.

18 Crore, has seven Members. Shri Raj and Shri Mani are the Promoters of the company

and their aggregate holding in the paid-up Capital is 95%. Now the promoters want

to invest 2 Crore more in the paid-up capital. On 30th March, 2017, the Company

has received Rs. 1 Crore each from promoters through RTGS as advance share capital

money.

Discuss - Whether it is mandatory for the company to make a rights issue to implement

the capital raising programme ? Can the company use the share capital advance prior

to completing the allotment of shares ? State whether it is mandatory to determine fair

price of shares if a preferential allotment were to be made to Promoters alone ?

(b) As a Secretarial Auditor, design a check list for being applied to verify the compliance

of applicable provisions of the Act with respect to the variation of rights of preference

shareholders carried out by RAM Company Limited. Assume there is no clause in the

Articles of Association of the Company with respect to variation and terms of issue does

not prohibit variation of the terms.

1/2017/SACMDD Contd. ........

332

: 2 :

(c) While conducting a Secretarial Audit, what particulars and records have to be verified

to audit the corporate guarantee given by Subse Mehanga Textile Garments Limited to

Universal Textile Clothing Limited, if Universal Textile Clothing Limited is a wholly owned

subsidiary of Subse Mehanga Textile Garments Limited.

(d) What is meant by Board Process ? What are the major decisions to be taken as

part of the Board Process leading to an in principle decision to go for an initial public

offer ?

(e) Next Annual General Meeting of Apolo Ltd., a BSE Listed Company, is scheduled to

be held on 14th September, 2016. The Notice was sent to all the members, Stock Exchange,

Directors and Auditors through email as well as by speed post on 12 August, 2016.

The Notice was also uploaded on the website of the Company. You are the Company

Secretary. In the evening of 13th September, 2016, Shri Manish Vaid, Managing Director

instructed you to withdraw the Agenda item concerning the proposed issue of bonus shares

to members. Explain in brief, what you would have done.

(5 marks each)

OR (Alternate question to Q. No. 1)

1A. (i) The Director (HR) of ABC Ltd. has desired for renovation and modernization of Admin

Building situated at Bric Complex, New Delhi. There was special instruction for transfer/

destroy of bulky records to facilitate more space. The Secretarial Department of the Company

keeps and maintains all Secretarial Records permanently which has occupied huge space.

As a Secretarial officer, prepare a check list for Preservation of Secretarial Records.

(5 marks)

(ii) SCP II a Mauritius body corporate intends to transfer all its shares in System Automation

India Private Limited, Hyderabad to Orchard III, a body corporate having its registered

office in Singapore. Please advise steps to be followed by the transferor, transferee and


332

: 3 :

the Indian Company in carrying out the transaction under the Companies Act, 2013 and

the Foreign Exchange Management Act, 1999 and rules and regulations therein.

(5 marks)

(iii) The object clause of Vikram Engineering Ltd. was changed in year 2016-17. The company

had made an initial public offer in the year 2015-16. Enumerate the list of documents

to be checked in this regard while conducting secretarial audit for 2016-17.

(5 marks)

(iv) Rohan Ltd., a public company is having a paid up capital Rs. 40 crore and a turnover

of Rs. 490 crore. Advise whether the company is required to go for Internal Audit and

briefly explain the areas that will come under within the scope of Internal Audit.

(5 marks)

(v) Say True or False :

(a) Issuing Foreign Currency Convertible Bonds (FCCBs) under Automatic Route

with attached warrants is not permitted.

(b) For the purpose of issue of Depository Receipts, a special resolution passed

under section 62 of the Companies Act, 2013 is not sufficient to satisfy

the special resolution required to be passed under section 41 of the Companies

Act, 2013.

(c) Unless the size of money invested by foreign investors through Global Depository

Receipts exceeds the limits for Foreign Direct Investment under Automatic Route,

no approval of Government of India is required as such investments are considered

as Foreign Direct Investment.

(d) The proceeds of issue of ADRs/GDRs under a scheme of sponsored ADRs/GDRs

need to be repartriated to India within a period of one year.

(e) Overseas Custodian Bank is a Indian Commercial bank established in the Public

Sector by the Government of India.

(1 mark each)

1/2017/SACMDD Contd. ........

332

: 4 :

PART — B


2. (a) Explain the Intitutional Placement Programme.

(5 marks)

(b) Explain the persons who are qualified to act as debenture trustees for a series of non-

convertible unsecured debentures proposed to be issued by Company going to be listed

under SEBI (Issue and Listing of Debt Securities) Regulations, 2008.

(5 marks)

(c) Mention the important conditions to be followed by the Directors of the Target Company

under Regulation 24 of the Securities and Exchange Board of India (Substantial Acquisitions

and Take Overs) Regulations, 2011 ?

(5 marks)


2A. (i) The Annual Financial Statements of Shri Ram Textiles Ltd. for the Financial Year 2015-

16 were approved on 17th May, 2016. The Auditors’ Report on Financial Statements

was received on 14th June, 2016. The Annual General Meeting was held on 5th September,

2016. As quorum was not present, the meeting stood adjourned to 12th September,

2016. The Director (Finance) declared on 10th September, 2016 a final dividend. Actually

there was no provision for proposed dividend in the Financial Statements.

Can he do so in light of provision of the Act ?

(5 marks)


332

: 5 :

(ii) Briefly explain ‘reservation on competitive basis’ under SEBI (ICDR) Regulations 2009.

Mention the conditions subject to which the reservation on competitive basis could be

made under the above Regulations.

(5 marks)

(iii) Sunlight Ltd. and Moonlight Ltd. have entered into a Joint Venture Agreement (JVA).

Pursuant to provisions of JVA, a Joint Venture Company (JVC) shall be incorporated

to run the Software Development Business in South Asia. Apart from Capital Investment,

both the party will provide knowhow and intellectual assistance including business secrets

to JVC. In this regard, Sunlight Ltd. and Moonlight Ltd. need to enter in a Non-Disclosure

Agreement.

What are the points to be incorporated in Undertaking Clause and Exception Clause

of Non-Disclosure Agreement ? Explain briefly.

(5 marks)

3. (a) OK Tyre Co. Ltd. is planning to set up a plant for manufacturing of Tyres in Singur

at Hugli district, West Bengal. As a member of team of Senior Management, can you

prepare a note on Environment Impact Assessment (EIA) and the basic factors that should

be addressed by EIA, which would be forming part of Agenda to be put up in ensuing

Board meeting.

(8 marks)

(b) Explain the role of the Board of Directors in doing their oversight function on the subject

of Compliance Management. How Company Secretary of the Company could play a

significant role in helping the Board in institutionalizing an adequate and effective Compliance

Management System ?

(7 marks)

1/2017/SACMDD Contd. ........

332

: 6 :

4. (a) Explain the points to be observed in relation to Liquid and Solid Wastes as per

Environmental Management Plan (EMP).

(4 marks)

(b) State the time limit under the SEBI (Listing Obligations and Disclosure Requirements)

2015 for submitting a statement to the stock exchanges showing holding of specified securities

and shareholding pattern separately for each class of securities and guide the managing

director of FY Industries Limited who are going for reclassification of some of their promoters.

(6 marks)

(c) ADLAP Infra Project Ltd. is in process of Initial Public Offer of Rs. 450 Crore.

M/s SPMG, is being appointed for due diligence in respect of Project of ADLAP.

As the Company Secretary, prepare a Checklist for such due diligence to provide Project

related information and records.

(5 marks)

5. (a) Write short notes on the following :

(i) National Green Tribunal Act, 2010

(ii) Checklist for Compliance of Terms of Insurance in Due Diligence for Banks

(iii) Risk Management Committee.

(3 marks each)

(b) Define the following terms :

(i) Wilful default

(ii) “Specified Securities” under SEBI (ICDR) Regulation, 2009.

(3 marks each)


332

: 7 :

6. (a) Stable Ltd. is being merged in Growing Ltd. As a Practicing Company Secretary, what

are the information required to check if there is cross holding of Directors of the Transferee

and Transferor Companies ?

(5 marks)

(b) Hindustan Zinc Ltd. has issued the tender for developing Compliance Software for the

Company. Webscroll Co. Ltd. was the sussessful bidder giving lowest price bid. As a

Compliance Solution provider, what are the approaches to be adopted by Webscroll

Co. Ltd.

(5 marks)

(c) The Competition Commission of India has received a complaint that the combination proposal

of Tina Ltd. and Meena Ltd. is going to have an appreciable adverse effect on competition.

Explain the factors to be considered to evaluate the effect of Combination under the

Competition Act, 2002.

(5 marks)

————— o —————


332

: 1 :

Roll No......................................




PART — A


1. (a) Mr. Alok Kumar, retired Chairman of South Bank Ltd., is recently appointed as Independent

Director of Trans Power Limited, a Listed Company for the period of 3 years. While

submitting the declaration under section 149 of the Companies Act, 2013, he asked about

the requirements of Secretarial Audit, periodicity of the Secretarial Audit Report and its

reporting requirements. Prepare the brief note.

(b) You are recently appointed as Secretarial Auditor of Alloy Tools Limited, an unlisted

public company for Secretarial Audit for financial year 2017-18. What are the specific

events / actions having major bearing on the company's affairs in pursuance of the applicable

laws, rules, regulations, guidelines, standards etc. are required to be reported while preparing

Secretarial Audit Report.

(c) During the Secretarial Audit, it was pointed out that Shri S.R. Upadhay, the shareholder

of the Company, holds shares as nominee of Bhaumik & Co. LLP, a Limited Liability

Partnership Firm. What are the check points to be observed to check the particulars

of Beneficial Interest ?

2/2017/SACMDD Contd. ........

332

: 2 :

(d) How would you identify, check and verify the compliance of applicable statutory provisions

adherence to good corporate governance during the Secretarial Audit of S.S. Telecom

Company Ltd., an unlisted public company.

(e) The Board of Directors of MCM Ltd. has appointed M/s Famine Supply Ltd. as contractor

to supply the meal packages to its workers of the Steel Plant, through resolution passed

by circulation. The accent of Directors was received within 3 days except Shri S. S.

Singh, the non-executive Director. He has given some observations on this appointment.

Being a Company Secretary, what would you do to record this resolution?

(5 marks each)

OR (Alternative question to Q. No. 1)

1A. (i) Shriram Power Limited has signed a Power Supply Agreement with Government of

Maharashtra. While applying for Environment Clearance, the Ministry of Environment and

Forest has issued the instruction to expend the fund for Corporate Social Responsibility

(CSR). As a Company Secretary, write a brief note on applicability of provisions of

CSR and also specify the eligibility criteria for carrying out the CSR activity by an entity.

(5 marks)


332

: 3 :

(ii) With respect to Secretarial Standards on General Meeting (SS 2), prepare the check

points of Secretarial Audit for followings :

(1) Withdrawal of Resolution

(2) Rescinding of Resolution

(3) Modifications to Resolution.

(5 marks)

(iii) While conducting Secretarial Audit, how would you verify that the constitution of Board

of Directors is proper and well balanced ?

(5 marks)

(iv) The Board of Directors of ABC Ltd., an unlisted public company, has decided to issue

and allot the 500000 Equity Shares of Rs. 10 each to XYZ Housing Finance Ltd. at

a premium of Rs. 30/- each. What are the check points to be included in the explanatory

statement to be annexed to the notice of General Meeting pursuant to section 102 of

the Companies Act, 2013 ?

(5 marks)

(v) TMT Lab (India) Limited invested Rs. 240 Crore in various mutual funds. Though this

investment was made through TMT CPF Trust and the investments are not hold in the

name of the Company. Prepare the check list with respect to Register of Investments

while conducting the secretarial audit of TMT Lab (India) Limited.

(5 marks)

2/2017/SACMDD Contd. ........

332

: 4 :

PART — B


2. (a) Elaborate the environmental, economic and social factors, which are to be recognized

while setting up an Industry.

(5 marks)

(b) List out the points to be checked in case of due diligence of delisting of Indian Depository

Receipt.

(5 marks)

(c) All businesses have a duty to act lawfully, particularly compliance with Competition Law,

is the most important aspect for growing economy. In light of this, explain the need for

Competition Compliance Programme.

(5 marks)


2A. (i) Super Product Agro Ltd. is proposed to be merged in Geetanjali Ayurved India Ltd.

What are the check points to be observed in due diligence with respect to payment

of consideration for merger and amalgamation.

(5 marks)

(ii) What are the documents / aspects to be looked into while carrying out legal due diligence

with respect to followings :

(1) IPR / Patent / R&D Details

(2) Material Contracts.

(5 marks)


332

: 5 :

(iii) What are the restrictions on allotment of securities under Regulation 86 of the SEBI (ICDR)

Regulations, 2009.

(5 marks)

3. (a) The Equity Shares of Bharat Coal Ltd. are held by Central Government through its concerned

ministry, Ministry of Coal. The Joint Secretary of coal, who is the Chairman of the Company

also, while reviewing the financial data of the Company, has desired that Company may

again declare the dividend even after critical changes in the economy. The Director (Finance)

informed that due to inadequacy of profit during the period under consideration, the dividend

would be given out of free reserves.

Study the following particulars and ascertain the amount that can be drawn towards dividend

applying the Companies (Declaration of Dividend out of Reserves), Rules 2014 :

Amount in Rs.

35,00,000 Equity Shares of Rs. 10/- each 3,50,00,000

87,500, 9% Preference Shares of Rs. 100/- each 87,50,000

Securities Premium 17,50,000

Profit and Loss Account 3,15,000

General Reserve 1,05,00,000

Net Profit for the year 17,85,000

Capital Reserve on revaluation of Factory Premises 17,50,000

The rate of dividend for last five years was Nil, 10%, Nil, 20% and 10% respectively.

(8 marks)

2/2017/SACMDD Contd. ........

332

: 6 :

(b) Prepare a detailed note on Data Room and advantage of Virtual Data Room.

(7 marks)

4. (a) Define the Cultural Due Diligence. How would you address the cultural difference during

the merger ?

(4 marks)

(b) “The objective of Compliance Programme Template is to help the secretarial auditor in

evaluating the critical aspects of compliance management.” Explain.

(6 marks)

(c) Compliance under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,

2011 includes event bases/continual disclosures; and opening of an Escrow Account is

one of important event. Explain the compliance required to be done for this purpose.

(5 marks)

5. (a) Write the short notes on following :

(i) Need of Legal Due Diligence

(ii) When Dominance gets abused

(iii) Scheme of Sponsored ADRs/ GDRs.

(3 marks each)


(i) Corporate Culture

(ii) SME Exchange.

(3 marks each)


332

: 7 :

6. (a) What are the areas to be avoided while setting up an industry as per guidelines issued

by Ministry of Environment and Forest ?

(5 marks)

(b) What is the Search and Status Report. What are the points to be considered while finalizing

the Search and Status Report ?

(5 marks)

(c) What information should be given in the Public announcement under regulation 15 of SEBI

(Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

(5 marks)

————— o —————


332

: 1 :

Roll No......................................




PART — A


1. (a) Anil Kumar, Practicing Company Secretary of ABC Ltd. while conducting the Secretarial

Audit of the Company, has found that a fraud involving ` 2 crore has been committed

against the company by one of its officers. The said officer has made dummy account

identity in the SAP while making entries. Enumerate the procedure for reporting of fraud

by Secretarial Auditor.

(b) Vivek Goel, one of the Shareholders of J.K. & Company Ltd., an unlisted public company,

holds 100 Equity Shares in the Company bearing Share Certificate No. 17 having distinctive

number from 1101 to 1200. During the settlement of financial claim in the family, it was

decided that these shares will be transferred to his younger brothers Animesh Goel and

Sudhesh Goel equally. The fair market value of the Share is ` 156 each share. Draft

the checklist for Secretarial department of J.K. & Company Ltd. while ensuring the approval

of this transfer.

(c) M/s Sagar Tripathi & Co., Company Secretaries, a Practicing Company Secretary Firm,

is selected by NFSL Transportation Ltd. (BSE Listed Company) on basis of giving lowest

bid in the Express of Interest. One of the Partners, Mrs. Neha S. Agrawal, while conducting

Secretarial Audit for Financial Year 2017-18, gone through various Registers maintained

under Companies Act, 2013. She also checked the non-statutory, but statistical in nature,

Registers. List out these types of any 3 Registers which may require the comments of the

Secretarial Auditors, though giving qualification for non-compliance may be at her discretion.

1/2018/SACMDD Contd. ........

332

: 2 :

(d) SAI Shradha Technology Ltd. called its 51st Annual General Meeting on 8th August,

2017. Total Members of the Company were 213. The Shareholders present in the Annual

General Meeting were 7 out of which 4 were proxies. The Chairman adjourned the Meeting

wants of quorum. All shareholders present objected the decision of the Chairman. As

a Company Secretary, list out the checklist for adjournment of meeting as per Secretarial

Standard 2.

(e) Shrandhanjali Hotels (India) Ltd., a NSE Listed Company, wants to raise the fund of

USD 800 Million for spreading its business in all over India. Arnave Sodi, Chairman

of the Company, suggested for External Commercial Borrowing. The Company Secretary

has opined that the same requires the Approval of the RBI under Approval Route. Describe,

whether the fund can be raised under Automatic Route or not ? Also enumerate the

Check point for arrangement of the fund through External Commercial Borrowing in this

case.

(5 marks each)


1A. (i) Vishesh Sewa Aayog, a NGO for promoting professionalism in India invites you to make

a presentation on objectives and functions of Secretarial Standard Board (SSB). Prepare

a brief note on captioned topic.

(5 marks)

(ii) You are appointed as a Secretarial Auditor of Vikram Coal & Gas Ltd., a BSE Listed

Company, for conducting Secretarial Audit for Financial Year 2017-18. During the Audit,

you find that few resolutions were passed through postal ballot. What is the Website

disclosures requirement under the Companies Act, 2013 in such case ?

(5 marks)

(iii) The dynamic demand of business environment necessitates the changes in the contents

of basis and internal charters of the Company, the Articles of Association and the

Memorandum of Association. When there is such a change, indicate the documents to

be checked by the Secretarial Auditor in this regard.

(5 marks)


332

: 3 :

(iv) As a gesture of democratic management concept, the shareholders have a right to remove

a director from his office. If done so by the shareholders, enumerate the steps to be

undertaken by a Company Secretary to check the removal of a Director.

(5 marks)

(v) The Chairman of the Board of Directors of AQR Ltd. has desired to call a Board Meeting

in the next week. Accordingly, the Notice and Agenda Notes were sent to all Directors

9 days prior to the date of the Board Meeting. The Company Secretary, in the morning

when the Board Meeting is scheduled, informed the Chairman that due to serious accident,

he is unable to attend the Board Meeting. KS Das, the Dy. Company Secretary, who

recently joined, is asked to conduct the Board Meeting. KS Das has successfully conducted

the Board Meeting. The Company Secretary joins the office 32 days after the Board

Meeting. Till date, KS Das has finalized the Minutes.

List out the check points to be observed in the Minutes by Company Secretary as per

Secretarial Standard 1 with respect to following :

(a) Contents

(b) Recording in the Minutes

(c) Finalization

(d) Entry

(e) Signing and dating

(5 marks)

PART — B


2. (a) List out any 5 (five) features of Depository Receipts Scheme, 2014.

(5 marks)

(b) The funds collected through public issue cannot be kept in Bank Account forever, without

intended allotment. Comment.

(5 marks)

1/2018/SACMDD Contd. ........

332

: 4 :

(c) M/s S.Core Advisory Services Pvt. Ltd. has submitted its bid invited through International

Bidding Process by RE Textiles & Yarns Ltd. Being a lowest bid, the letter of award

was issued in favour of M/s S.Core Advisory Services Pvt. Ltd. for providing consultancy

services to set up a Knitting Fabric Plant at Maharashtra. M/s S.Core Advisory Services

Pvt. Ltd. is already providing consultancy services to various organizations in India and

outside India. RE Textiles & Yarns Ltd. asks M/s S.Core Advisory Services Pvt. Ltd.

to enter into a Non Disclosure Agreement. The Agreement is proposed to be signed

at Mumbai. The Management of RE Textiles & Yarns Ltd. wants to include the following

clauses in the Agreement :

(1) No Title to Use

(2) No Obligation to Disclose, No Representations

Prepare a brief note on above two clauses required to be included in the Non-Disclosure

Agreement.

(5 marks)


2A. (i) The SEBI (ICDR) Regulations, 2009 have various provisions on the aspects and activities

of a Public Issue by a Company. As a Secretarial Auditor, how will you verify the Time

Limits followed by the Company in regard to opening the issue to the Public.

(5 marks)

(ii) The scope of Due Diligence Process is wider than a Financial Audit Process. Elucidate.

(5 marks)

(iii) In the process of issue of the Indian Depository Receipts (IDRs), various Agencies are

required to be engaged. Prepare a brief note.

(5 marks)

3. (a) UB Power Inc., a Company registered in United Kingdom, through its Indian Subsidiary,

is proposing to set up a Thermal based Power Plant at Angul, in state of Odisha. The

local people are protesting the proposed plant which may be injurious to their health


332

: 5 :

and Environment. The Company engaged various professionals to submit the Draft Feasibility

Report. In this report, the Risk Analysis is one of the important aspects. Prepare a Risk

Analysis Matrix for the project.

(8 marks)

(b) The Report of the Official Liquidator in a Scheme of Amalgamation is the route map

in any Amalgamation process, which requires ample information from the parties involved

in a Corporate Amalgamation. Provide the list of information to be furnished by them

respectively to Auditor appointment by the Official Liquidator.

(7 marks)

4. (a) You are engaged by a Bank for conducting the due diligence on behalf of the bank and

submission of Diligence Report. What are the check points to be observed which may

be concluded as Suggested alerts.

(4 marks)

(b) The significant of the Competition Law lies in aiming at promoting competition rather than

focusing on curbing monopolies. Explain.

(6 marks)

(c) Competition is one of the major factors for merging of business besides to sustain and

excel, though such merger is not free from its own negatives with reference to competition.

Highlight the factors to be considered while evaluating the appreciable adverse effect on

competition of Combination of Business.

(5 marks)

5. (a) Write short notes on the following :

(i) Breaking legal due diligence hurdles

(ii) Charges requiring Registration

(iii) Compliance Risk

(3 marks each)

1/2018/SACMDD Contd. ........

332

: 6 :


(i) Level I ADRs

(ii) Corporate Compliance Committee

(3 marks each)

6. (a) Merger and Amalgamation aims at stability, development and expansion of business prospects,

the decision being based on a prudent Due Diligence process. Draft a Due Diligence

Process in a tabular form involving buyer and seller.

(5 marks)

(b) What are the Auditing Limited Review to be disclosed by a Listed Entity who has listed

its Indian Depository Receipts as per Part B of Schedule IV of SEBI (LODR) Regulations,

2015 ?

(5 marks)

(c) X Ltd. received a quotation from the brokers contemplating for ` 10 Crore of Commission

to procure a subscription for its public issue of Equity Shares with a nominal value of

` 100 Crore at an issue price of ` 150 Crore. The Articles of Association of X Ltd.

permits to pay only 4% commission for the same. As a Company Secretary, advise on

the issue. Would your answer differ, if the issue price is ` 250 Crore ?

(5 marks)

————— o —————

Appendix i

awPoint'sCS Solutions

Professional ProgrammeSecretarial Audit, Compliance Management and Due Diligence

Modulet.Paper2Jun e 2017 Examination Paper's Solution

NOTE : Answer ALL Quesflons.

PART. AAttempt all parts of either Q. IUo. I or Q. No. 1A

Question 1

(a) Raj Mani Hadlooms Ltd., an unlisted Public Company, having paid-up Capital of ( 18 Crore, has seven Mem-

bers. Shri Raj and Shri Mani are the Promoters of the company and their aggregate holding.. in the paid-up

Capital is 95%. Now the promoters want to invest 2 Crore mora in the paid-up capital. On 30th Match,2017,

the Company has recelved t 1 Crore each from promoters through RTGS as advance share capital money.

Discuss-Whether it is mandatory for the company to rnake a rights issue to implement the capital raising pro-

gramme? Can the company use ths share capital advance prior to completing the allotment of shares? State

whether it is mandatory to determine fair price of shares if a preferential allotment were to be made to Pro-

moters alone? (5 marks)

Ans. No, it is not mandatory for cornpany to make rights issue to implement the capital raising programme.

The company may go for other methods of raising the capita! like private placement, preferential allotment etc.

ln case of allotment by private placement of shares, the proviso under section 42(6)of the Companies Act,

2013 provides thatthe monies received on application shall be kept in a separate bank account in a sched-

uled bank and shall not be utilised for any purpose other than (a) for adjustment against allotment of secur!

ties; or (b)for the repayment of monies where the company is unable to allot securities.

Such provision, however, does not apply to rights issue. lf the ccmpany plans preferential allotment of shares

or private placement of shares, the amount received by way of application money cannot be utilised prior to

allotment. tf the shares are not allotted, the money is to be returned.

For the purpose of issuing securities on a preferential aliotment basis to the promoters alone, it is mandatory

that fair price of the shares must be determined.

(b) As a Secretarial Auditor, design a check list for being applied to verify the compliance of applicable provisions

of the Act with respect to the variation of rights of preference shareholders carried out by RAM Company Lim-

ited. Assume there is no clause in the Articles of Association of the Company with respect to variation and

terms of issue does not prohibit variation of the terms. (5 marks)

Ans. The following is the check iist for variation of rights of shareholders in accordance with section 48 of the

Companies Act, 2013 and the rules made thereunder:(a) Whether the memorandum and articles of association of the company provides provisions for with respect

to variation of sharehoiders rights.(b) Whether the terms of issue prohibit variation of rights.(c) Whether consent of 3i4th members has been obtained.

{d} Whether the above consent is in writing.(e) Whether the consent is nct in writing, whether special resoiution has been passed at a separately con-

vended meeting of the shareholders of that class.(f) Whether the variation in rights would effect other kinds of shareholders, and if so, whether consent of 3/4th

of such rnembers have been obtained.(g) Whether not less than 10% of th6 shareholders of that ciass have dissented to such variation.

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(h) Whetter any dissent shareholders has moved to NCLT within 21 days of obtaining consent of sharehold-

ers objecting to such variation.(i) Whether NCLT has confirmed the variation on such objection.

U) Whether copy of the NCLT order has been filed with ROC.

(c) While conducting a Secretarial Audit, what particulars and records have to be verified to audit the corporateguarantee given by Subse Mehanga Textile Garments Limited to UniversalTextile Clothing Limited, if UniversalTextile Clothing Limited is a wholly owned subsidiary of Subse Mehanga Textile Garments Limited. (5 marks)

Ans. Corporate guarantee given by a holding company to its wholly owned subsidiary company is exempted

from the provisions of section 185 and 186 of the Companies Act, 2013 and the rules made thereunder. How-ever, the secretarial auditor shall ensure the following:(a) The proposal has been approved by the Board of Directors with the amount of guarantee to be given.(b) The company has filed Form No. MGT.14 within 30 days of the approval.(c) The company has disclosed the guarantee in its financial statements.(d) Prior approval of the financial institutions where any term loan subsists have been obtained.(e) Entries in the register have been made.

(d) What is meant by Board Process? What are the major decisions to be taken as part of the Board Processleading to an in principle decision to go for an initial public offer? (5 marks)

Ans. Board process means the entire process leading to the decisions making by the board of directors withrespect to any matter placed before them. The Secretarial Standard - 1 plays a significant role in the etfectiveboard process from issuance of notice to the recording in the minutes.ln case of initial public offer the board first to finalise a capital raising programme and identify an internal teamor committee requiring them to give a complete road map. The board must make it known from such commit-tee what it expect from them for decision making. Capital market intermediaries be appointed like merchantbanker, legal advisor, bankers to the issue, undenrvriters, registrar and share transfer agents etc. On the ba-sis of information the board shall arrive at the decision for commencing the initial public offer.The board process must be leading to decision to make IPO and such decision must be consistent with theobjectives of the company and the applicable regulations.

(e) Next Annual General Meeting of Apolo Ltd., a BSE Listed Company, is scheduled to be held on 14th Septem-ber, 2016. The Notice was sent to all the members, Stock Exchange, Directors and Auditors through email aswell as by speed post on 12 August, 2016. The Notice was also uploaded on the website of the Company.You are the Company Secretary. ln the evening of 13th September, 2016, Shri Manish Vaid, Managing Direc-tor instructed you to withdraw the Agenda item concerning the proposed issue of bonus shares to members.Explain in brief, what you would have done. (5 marks)

Ans" As per para 10 of the Secretarial Standard 2, resolutions for items of business which are likely to affectthe market price of the securities of the company shall not be withdrawn. However, any resolution proposedfor consideration through e-voting shall not be withdrawn.As per Rule 14 of the Companies (Share Capital and Debentures) Rules, 2014,[he company which has onceannounced the decision of its board recommending a bonus issue, shall not subsequently be withdrawn. Asper rule 20(xviii) of the Companies (Management and Administration) Rules, 2014 a resolution proposed to beconsidered through +voting shallalso not be withdrawn.The view of the managing director in the given case is in contravention of the above provisions. Therefore, theagenda cannot be withdrawn.The decision of the bonus issue is likely to affect the market price of the share of the company and has al-ready effected. As a listed company, e-voting is compulsory for the company. As such, the resolution cannotbe withdrawn.

June 2017

OR (Alternate question fo Q' No' 1)

Question 1A(i) The Director (HR) of ABC Ltd. has desired for renovation and modernization of Admin Building situated at Bric

Complex, New Delhi, There was special instruction for transfer/destroy of bulky records to facilitate more

space. The Secretarial Department of the Company keeps and maintains all Secretarial Records permanently

which has occupied huge space. As a Secretarial officer, prepare a check list for Preservation of Secretarial

Records, F marks)

Ans. Section 120 of the companies Act, 2013 read with the rules made thereunder and secretarial stan-

dards 1 and 2 provides provisions for preservation of minutes and other records by a company' Based on the

provislons, following is the check list for preservation of secretarial records:

ia) Minutes of all tie meetings shall be preserved permanently in physical or electronic means'

(b}Whereanyarrangementofamalgamationormergerismade,minutesofallmeetingsofthetransferorcompany handed-over to the transferee company inatt Ue preserved permanently by the transferee com-

pany.(c) Copies of notices, agenda, notes on agenda and other related papers shall be preserved so long as they

remain current or B financial years whichever is later and may be destroyed thereafter with approval of the

Board.(d) Copies of notices, agenda, notes on agenda and other related papers of the transferor company shall be

preserved so long as they remain curient or 8 financial years whichever is later and may be destroyed

thereafter with ap"provat of tne Board and permission of the Central Government where applicable'

(e) Minute books shall be kept in the custody of the company secretary or where there is no secretary' with

any director duly authorised by the Board'

(ii) SCp ll a Mauritius body corporate intends to transfer all its shares in System Automation lndia Private Lim-

ited, Hyderabad to orchard lll, a body corporate having its registered office in Singapore' Please advise steps

to be followed by the transferor, transferee and the lndian company in carrying out the transaction under the

Companies Act, 2013 and the Foreign Exchange Management Act, 1999 and rules and regulations therein'

{5 marks)

Ans. As per Foreign Exchange Management (Transfer or lssue of any Security by a person resident outside

lndia) Regulations, 2000 a person resident outside India may transfer shares- of lndian companies without

prior permission of RBI to a person resident in lndia. unless the proposed transfer is by way of gift approval of

RBI is not required. ln case of sale of shares by a person resident outside lndia to a person resident outside

lndia, only reporting will be made to the RBI by 15th July every year'

The transferor and the transferee have to execute the transfer deed ih Form SH'4 and company with the pro-

visions of section 56 of the companies Act, 2013. The transfer shall be approved by the Board of Director or

the share transfer committee and entry be made in the register of members and endorsement of the share

certificates.

(iii) The object clause of Vikram Engineering Ltd. was changed in year 2016-17 ' The company had made an initial

public offer in the year 20.t5-16. Enumerate the list of documents to be checked in this regard while conduct-

ing secretarial audit tor 2016-17. F marks)

Ans. Where the company has raised money from public through issue of prospectus and has any unutilised

amount out of the money so raised, it shall not change the objects for which the money so raised is to be ap-

plied untess a special resolution is passed through postat naitot. The notice of the meeting shall contain the

particulars as prescribed in rule 32 of the companies (lncorporation) Rules, 2014'

The following documents are to be checked:

(a) Memorandum of Association.(b) Articles of Association.

Lawpoint's CS So/ufions - SACMDD

(c) Notice convening the general meeting with explanatory statement.(d) Minutes of the general meeting.(e) Annual Return.(0 Financialstatements.(g) Return of deposits"(h) Advertisement for change of objects.

(iv) Rohan Ltd., a public company is having a paid up capital { 40 crore and a turnover of { 490 crore. Advise

whether the company is required to go for lnternal Audit and briefly explain the areas that will come under

within the scope of lnternalAudit. (5 marks)

Ans. As per section 138 of the Companies Act, 2013 read with rule 13 of the Companies (Accounts) Rules,

2014 the following class of companies shall be required to appoint an internal auditor which may be either an

individual or a partnership firm or a body corporate:-(a) Every listed company;(b) Every unlisted public company having-

(i) paid up share capital of t50 crore or more during the preceding financial year; or(ii) turnover of {200 crore or more during the preceding financial year; or(iii) outstanding loans or borrowings from banks or public financial institutions exceeding {100 crore or

more at any point of time during the preceding financial year; or(iv) outstanding deposits of t25 crore or more at any point of time during the preceding financial year.

in the given case, Rohan Ltd. has turnover (490 crore which is more than the ceiling, and hence it is required

to conduct internal audit.The Board of directors shall determine the scope of the internal audit which includes policies and procedures

adopted by the company for smooth functioning of the company. lt shall cover both financial and non-financialtransactions or matters including safeguarding the assets, prevention and detection of frauds and errors,timely presentation of information etc.

(v) Say True or False : (1 mark each)

(a) lssuing Foreign Currency Convertible Bonds (FCCBs) under Automatic Route with attached warrants is

nct permitted.

Ams. True. lssue of FCCBs under Automatic Route with attached'warrants is not permitted.

{b} For the purpose of issue of Depositcry Receipts, a speciai resolution passed under section 62 of the

Companies Act, 2013 is not sufficient to saiisfy the special resoiution to be passed under section 41 of theCompanies Act,2013.Ans. False. As per proviso to rule aQ) af the Companies (lssue of Global Depository Receipts) Rules,

2A14 far the purpose of issue of Depository Receipts, a special resolution passed under section 62 of theCompanies Act, 2013 is sufficient to satisfy the speciai resolution to be passed under section 41 of theAct.

(c) Unless the size of money invested by foreign investors through Global Depository Receipts exceeds thelirnits for Foreign Direct lnvestment under Automatic Route, no approval of Government of lndia is re-quired as such investments are considered as Foreign Direct lnvestment.

Ans. True. GDR issue shall not exceed the sectoral cao of FDI is required and if exceeds, permission ofthe FIPB is required..

{d} The proceeds of issue of ADRs/GDRs under a scheme of sponsored ADRs/GDRs need to be repatriatedto inciia within a period of one year.

Ans. False. The proceeds of issr:e of ADRs/GDRs under a scheme of sponsored ADRs/GDRs need tobe repatriatecj to lndia within a period of one month.

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(e) Overseas Custodian Bank is a lndian Commercial bank established in the Public Sector by the Govern-

ment of India.

Ans. False. Overseas Custodian Bank means a banking company established in a country outside lndia

and acts as custodian for equity issues by companies against which IDR are issued'

PART - B

Attempt all parts of either Q. No- 2 or Q. No. 2A

Question 2

(a) Explain the lnstitutional Placement Programme. (5 marks)

Ans. When a listed cornpany makes a further public offer of equity shares, or offer for sale of shares by its

promoter in which, the offer and allotment of such shares is made only to QlBs for the purpose of achieving

minimurn public shareholding it is called an lnstitutional Placement Programme (lPP).

SEBI vide its notification dated January 30,2012 has amended the lssue of Capital and Disclosure Require-

ments Regulations, 2009 whereby Chapter Vlll-A - lnstitutional Placement Programme (lPP) has been in-

serted. The provisions of this Chapter shall apply to issuance of fresh shares and or offer for sale of shares in

a listed issuer for the purpose of achieving minimum public shareholding in terms of Rule 19(2)(b) and 19A of

the Securities Contracts (Regulation) Rules, 1957. An institutional placement programme may be made only

after a special resolution approving the institutional placement programme has been passed by the share-

holders of the issuer. No parfly paid-up securities shall be offered. The issuer shall obtain an in-principle ap-

proval from the stock exchange(s).

(b) Explain the persons who are qualified to aet as debenture trustees for a series of non-convertible unsecured

debentures proposed to be issued by Company going to be listed under SEBI (lssue and Listing of Debt Se-

curities) Regulations, 2008. $ marks)

Ans. As per section 71(5) of the Companies Act, 2013, no company shall issue a prospectus or make an of-

fer or invitation to the public or to its members exceeding 500 for the subscription of its debentures, unless the

corfipany has, before such issue or offer, appointed one or more debenture trustees. SEBI (lssue and Listing

of the Debt securities) Regulation, 200g provides that the issuer shall appoint one or more debenture trustees

in accordance with section 71 of the Companies Act, 2013 and SEBI (Debenture Trustees) Regulations, 1993.

As debt securities are proposed to be listed as per regulation 7 of the said regulations, the following persons

are entitled to be appointed as debenture trustees:

(i) A schedule bank carrying on commercial activities;

iii) n puOtic financial institution within the meaning of section 2(72) of the Companies Act, 2013;

(iii) An insurance comPanY;

(iv) A body corPorate.

(c) Mention the important conditions to be followed by the Directors of the Target Company under Regulation 24

of the Securities and Exchanges Board of lndia (Substantial Acquisitions and Takeovers) Regulations, 2011?- (5 marks)

Ans. Regula tio6 24 of the Securities and Exchanges Board of lndia (Substantial Acquisitions and Takeovers)

Regulations, 2011 provides the following provision for compliance with by directors of target company:

(i) During the offer period, no person representing the acquirer or any person acting in concert with him shall

be appointed as director on the board of directors of the target company, whether as an additional director

or in a casual vacancy.(ii) After an initial period of fifteen working days from the date of detailed public statement, appointment of

persons representing the acquirer or persons acting in concert with him on the board of directors may be

effected in the evenithe acquirer deposits in cash in the escrow account, 100% of the consideration pay-

able under the oPen offer.

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6 Lawpoint's CS Solufions - SACMDD

(iii) Where the acquirer has specified conditions to which the open offer is subject, no director representingthe acquirer may be appointed to the board of directors of the target company during the offer periodunless the acquirer has waived or attained such conditions and complies with the requirement of deposit-ing cash in the escrow account.

(iv) Where an open offer is made conditional upon minimum level of acceptances, the acquirer and personsacting in concert shall not be entitled to appoint any director representing the acquirer or any person act-ing in concert with him on the board of directors of the target company during the offer period.

(v) During the pendency of competing offers, there shall be no induction of any new director to the board ofdirectors of the target company. ln the event of death or incapacitation of any director, the vacancy arisingtherefrorn may be filled by any person subject to approval of such appointment by shareholders of the tar-get company by way of a postal ballot.

(vi) In the event the acquirer or any person acting in concert is already represented by a director on the boardof the target company, such director shall not participate in any deliberations of the board of directors ofthe target company or vote on any matter in relation to the open offer.


Question 2A(i) Th_e Annual Financial Statements of Shri Ram Textiles Ltd. for the Financial Year 2015-16 were approved on

17th May, 2016. The Auditors' Report on Financial Statements was received on 14th June, 2016. The AnnualGeneral Meeting was held on sth September, 2016. As quorum was not present, the meeting stood adjournedto 12th September, 2016. The Director (Finance) declared on 10'h September, 2016 afinal dividend. Actuallythere was no provision for proposed dividend in the Financial Statements. Can he do so in light of provision ofthe Act? (5 marks)Ans. Section 103(2) of the Companies Act,20'13 provides that if the quorum is not presentwithin half-an-hour from the time appointed for holding a meeting of the company the meeting shall stand adjoumed to thesame day in the next week at the same time and place, or to such other date and such other time and placeas the Board may determine. As per SS 2 at the adjourned meeting, only the unfinished business of the origi-nal meeting shall be considered.ln the given case, the Annual Financial Statements of Shri Ram Textiles Ltd. forthe Financial Year2015-'16were approved on 17th May, 2016. The Auditors'Report on Financial Statements was received on 14th June,2016. The Annual General Meeting was held on 5th September, 2016. As quorum was not present, the meet-ing stood adjourned to 12th September,2016. The Director (Finance)declared on 1Oth September, 2}fi afr-nal dividend. lt appears that there was no provision for declaration of dividend in the originalAGM and there-fore, the Director (Finance) declared the final dividend on 1Oth September, 2016. No new business for declara-tion of dividend can be taken up at the adjourned meeting. The company therefore cannot declare the finaldividend at the AGM.

(ii) Briefly explain 'reservation on competitive basis' under SEBI (ICDR) Regulations 2009. Mention the conditionssubject to which the reservation on competitive basis could be made under the above Regulations. (5 marks)Ans.The term "reseryation on competitive basis" means reservation wherein specified securities are allottedin proportion of the number of specified securities applied for in respect of a particular reserved category tothe number of specified securities reserved for that category.The reservation on competitive basis shall be subject to following conditions:(a) Aggregate of reservations for employees shall not exceed 5% of the post issue capital of the issuer;

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(b) Reservation for shareholders shall not exceed 10% of the issue size;(c) Reservation for persons who as on the date of filing the draft offer document with SEBI, have business

association as depositors, bondholders and subscribers to services with the issuer making an initial publicoffer shall not exceed 5% of the issue size;

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(d) No further application for subscription in the net offer to public category shall be entertained from any per-son (except an employee and retail individual shareholder) in favour of whom reservation on competitivebasis is made;

(e) Any unsubscribed portion in any reserved category may be added to any other reserved category and theunsubscribed portion, if any, after such inter-se adjustments among the reserved categories shall beadded to the net offer to the public category;

(0 ln case of under-subscription in the net offer to the public category, spill-over to the extent of undersub-scription shall be permifted from the reserved category to the net public offer category;

(g) Value of allotment to any employee in pursuance of reservation made shall not exceed (2 lakh. ln thecase of reserved categories, a single applicant in the reserved category may make an application for anumber of specified securities which exceeds the reservation.

(iii) Sunlight Ltd. and Moonlight Ltd. have entered into a Joint Venture Agreement (JVA). pursuant to provisions ofJVA, a Joint Venture Company (JVA) shall be incorporated to run the Software Development Business inSouth Asia. A part from Capital lnvestment, both the partywill provide knowhow and intellectual business se-crets to JVC. ln this regard, Sunlight Ltd. and Moonlight Ltd. need to enter in a Non-Disclosure Agreement.What are the points to be incorporated in Undertaking Clause and Exception Clause of Non-DisclosureAgreement? Explain briefly. @ marks)Ans. ln consideration of the disclosure of Confidential lnformation by the Disclosing party, the ReceivingParty agrees to the following:(i) To keep confidential and not disclose to any third party, copy, reproduce, adapt, divutge, publish or circu-

late any part of or the whole of any Confidential Information without the prior written consent of the Dis-closing Party;

(ii) To restrict access to the Confidential lnformation disclosed to it under the Agreement to those of its em-ployees and officers who need to know the same stricfly for the purpose;

(iii) Not to use Confidential lnformation disclosed to it under the Agreement for any purpose other than thePurpose;

(iv) To procure that each employee and officer to whom Confidential lnformation is disclosed under theAgreement is, prior to such disclosure, informed of the terms of this Agreement and agrees to be boundby them;

(v) To procure that the Confidential lnformation in its possession is stored securely and that physical accessto it is controlled.

(vi) Not to combine any part of or the whole of the Confidential lnformation with any other information;(vii) Not to disclose the whole or any part of the Confidential lnformation to any third party without the prior

written consent of the Disclosing Party and prior to disclosure to such third party procuring that the thirdparty is bound by obligations which are no less onerous than those contained in this Agreement.

ExceptionsThe protections and restrictions in the Agreement as to the use and disclosure of Confidential lnformationshall not apply to the following information:(i) Any information which is, at the time of disclosure, already published or otherwise publicly available;(ii) Any information'which is, after disctosure published or becomes available to the public other than by

breach of this Agreement;(iii) Any information which is rightfully in the Receiving Party's possession with rights to use and disclose,

prior to receipt from the Disclosing party;

fiv) Any information which is rightfully disclosed to the Receiving Party by a third party with rights to use anddisclose;

(v) Any information which is independently developed by or for the Receiving party without reference or ac-cess to Confidential lnformation disclosed.

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Lawpoint's CS Solutions - SACMDD

Question 3

(a) OK Tyre Co. Ltd. is planning to set up a plant for manufacturing of Tyres in Singur at Hugli district, West Ben-gal. As a member of team of Senior Management, can you prepare a note on Environment lmpact Asssess-ment (ElA) and the basic factors that should be addressed by ElA, which would be forming part of Agenda tobe put up in ensuing Board rneeting. (8 marks)

Ans. The purpose of Environmental lmpacl Assessment (ElA) is to identify and evaluate the potential impacts(beneficial and adverse) of development and projects on the environmental system. lt is a useful aid for deci-sion making based on understanding of the environment implications including social, cultural and aestheticconcerns which could be integrated with the analysis of the project costs and benefits. This exercise shouldbe undertaken early enough in the planning stage of projects for selection of environmentally compatible sites,process technologies and such other environmental safeguards.The Environmental lmpact Assessment (ElA) should be prepared on the basis of the existing background pol-lution levels vis-a-vis contributions of pollutants from the proposed plant. The EIA should address some of thebasic factors listed betow:(i) Meteorology and air quality Ambient levels of pollutants such as Sulphur Dioxide, oxides of nitrogen, car-

bon monoxide, suspended pariiculate matters, should be determined at the center and at 3 other loca-tions on a radius of 10 km with 120 degrees angle between stations.

(ii) Additional contribution of pollutants at the locations are required to be predicted after taking into accountthe emission rates of the pollutants from the stacks of the proposed plant, under different meteorologicalconditions prevailing in the area.

(iii) Hydrology and water quality(iv) Site and its surroundings(v) Occupational safety and health(vi) Details of the treatment and disposal of effluents(liquid, air and solid) and the methods of alternative uses(vii) Transportation of raw material and details of material handling(viiilControl equipment and measures proposed to be adopted.

(b) Explain the role of the Board of Directors in doing their oversight function on the subject of Compliance Man-agement. How Company Secretary of the Company could play a significant role in helping the Board in institu-tionlizing an adequate and effective Compliance Management System? (7 marks)

Ans. Compliance Management encompasses (i) Compliance ldentification (ii) Compliance Ownership (iii)

Compliance Awareness (iv) Compliance Reporting and (v) Periodical Compliance MlS. Compliance is a per-manent and integral part of business processes that is ongoing and needs continuous tuning in line with thebusiness environment and the applicable regulatory ambit. The objective of compliance programme is tomanage the compliance risk effectively, to promote ethical culture in the organisation, resulting in the mainte-nance and enhancement of the reputation of the Company. The responsibility of the Board of Directors is tooversee the company's Corporate Compliance Program so that a compact compliance management systemprevails in the organization.A well-designed compliance management programme has abilities to perform the following key functionsacross the enterprise:1. Compliance Dashboard - The complianae prograrnme must provide a single enterprise-wide dashboard

for all users to track and trend compliance events. All compliance events should be easily viewed interac-tively through the enterprise compliance dashboard.

2. Policy and Procedure Management - A well-designed document management system forms the basis ofmanaging the entire lifecycle of policies and procedures within an enterprise. Ensuring that these policies

and procedures are in conformity with the ever-changing rules and regulations is a critical requirement.

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3' Event Management - The compliance management system rnust have ability to capture and trackevents' cases and incidents across the extended enterprise. compliance officers, call center personnel, lrdepartments, QA personnel, ethics hotline shouid be able to log in any adverse event across the enter-prise, upon which the necessary corrective and preventive actions are initiated.4' Rules and Regulations 'A well-designed cornpliance management solution must offer capabilities fororganization to continuously stay in sync with changing rules a-nd regulations. As soon as there are regu-latory changes, the various departments shoutd ue nJtirieo erou"tir;;ih-r"rg;";;it oa"eo,, co,abora-tion' A well-designed compliance managernent programme offers up-to-date regulatory alerts across theenterprise.5' Audit Management' lnternal audits, financial audits, external audits, vendor audits must be facilitatedthrough a real-time system' Appropriate evidence of internal

"roit" b".o*es critical in defending compli-ance to regulations"

well-designed compriance management program incorporates and supportsMost quality p.actitioners agree that compiiance and quarity are two sides of

6. Quality Management - Aongoing quality initiatives.the same coin.

7' Training Management - The sEBl (LoDR) Regulations, 2015 and sarbanes-oxley Act, stress on em-ployee training' well-designed complianc" progri* requiies a wefl-integrated approach to training man-agement.8' compliance Task Management 'organizations must plan, manage and report status of all compliancerelated activities from a centralized solution. Automated updates from the various compliance moduiesshould provide for up-to-the-minute status reporting rhat

"orto o"-ri"*"i o, i[" d'"rrd, corporate cornpli-ance officer, entity compliance coordinators, quality offices and others as designated.

Question 4{a) Explain the points to be observed in relation to Liquid and solid wastes as per Environmental ManagementPian (EMP).

(4 marks)Ans.

. Liquid Effluents(i) Effluents from the industria! plants should be treated well to the standards as prescribed by the cen-trallState Water pollution Control Boards.(ii) soil permeability studies should be made prior to effluents being discharged into holding tanks or im-poundmen[s and steps taken to prevent percolation

"no giouna water contamination.(iii) special precautions should be taken regarding flight patterns of birds in the area. Effluents containingtoxic compounds, oil and grease have been known-to cause extensive death of migratory birds. Locationof plants should be prohibited in such type of sensitive areas.

(iv) Deep well burial of toxic effluents should not be reso(ed to as it can result in re-surfacing and ground wa-ter contamination' Re-surfacing has been known to cause extensive damage to crop and livestocks.(v) ln all cases, efforts should be made for re-use of water and its conservation.Solid Wastes(i) The site for waste disposal should be checked to verify permeabirity so that no contaminants percolateinto the ground water or river/lake.(ii) Waste disposal areas should be planned down-wind of villages and townships.(iii) Reactive materials should be disposeci of by immobilising thl reactive materiats with suitabie additives.(iv) The pattern of fiiling disposal site should be planned to create better landscape and be approved by ap-propriate agency and the appropriately pretreated solid wastes should be disposed according to the ap-proved plan.(v) lntensive programs of tree plantation on disposal areas should be undertaken.

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10 Lawpoint,s CS Solufion s - SACMDD

(b) State the time limit under the SEBI (Listing Obligations and Disclosure Requirements) 201S for submitting astatement to the stock exchanges showing holding of specified securitles and shareholding pattern separatelyfor each class of securities and guide the managing director of FY lndustries Limited who are going for reclas-sification of some of their promoters. (6 marks)Ans. As per regulation 3'l of the SEBI (LODR) Regulations, 2015 the listed entity shail submit to the stockexchange(s) a statement showing holding of securities and shareholding pattern separately for each class ofsecurities, in the format specified by the Board from time to time within the following timelines -(a) one day prior to listing of its securities on the stock exchange(s);(b) on a quarterly basis, within 21 days from the end of each quarter; and,(c) within 10 days of any capital restructuring of the listed entity resulting in a change exceeding 2% of the to-

tal paid-up share capital.ln case of listed entities which have listed their specified securities on SME Exchange, the above statementsshall be submitted on a half yearly basis within 21 days from the end of each half year.The listed entity shall ensure that hundred percent of shareholding of promoter(s) and promoter group is indematerialized form and the same is maintained on a continuous basis in the manner as specified by theBoard.The listed entity shall comply with circulars or directions issued by the Board from time to time with respect tomaintenance of shareholding in dematerialized form.As per regulation 31A, all entities falling under promoter and promoter group shall be disclosed separately inthe shareholding pattern appearing on the website of all stock exchanges having nationwide trading terminalswhere the specified securities of the entity are listed, in accordance with the formats specified by SEBI.The stock exchange shall allow modification or reclassification of the status of the shareholders, only upon re-ceipt of a request from the concerned listed entity or the concerned shareholders along with all relevant evi-dence and on being satisfied with the compliance of conditions mentioned in this regulation.When a new promoter replaces the previous promoter subsequent to an open offer or in any other manner,re-classification may be permitted subject to approval of shareholders in the general meeting and complianceof the following'conditions. Such promoter along with the promoter group and the Persons Acting in Concertshall not hold more than ten per cent of the paid-up equity capital of the entity. Such promoter shall not con-tinue to have any special rights through formal or informal arrangements. All shareholding agreements grant-ing special rights to such entities shall be terminated. Such promoters and their relatives shall not act as keymanagerial person for a period of more than three years from the date of shareholders' apprdval provided thatthe resolution of the said shareholders' meeting must specifically grant approval for such promoter to act askey mana.gerial person.

(c) ADLAP lnfra Project Ltd. is in process of lnitial Public Offer of { 450 Crore. M/s SPMG, is being appointed fordue diligence in respect of Project of ADLAP. As the Company Secretary, prepare a Checklist for such duediligence to provide Project related information and records" (5 marks)Ans. Given below the check list for due diligence to provide project related information and records.1. Project Feasibility report2. Reports/documents prepared by independent research agencies in respect of the state of the industry

and demand and supply for the company's products3. Break-up of Cost of Project for the following:

(i) Land - Location site & map, area, copy of documents i.e. Sale/ Lease Deed for land, Soil Test Re-port, Order for converting land into lndustrial land etc.

(ii) Building - Details break-up from Architect, Approval details from Municipality etc. and Valuauon Re-, port from a Chartered Engineer. (for existing building and suitability of site)

(iii) Equipments - lnvoices/Quotations of main items. (lndicate Imported machinery separately)(iv) Margin Money for Working Capital - Margin Money for Working Capitat (calcutation)

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(v) Preliminary & Pre-operative expenses - break-up(vi) Provision for contingencies - break-up

4. Schedule of lmplementation.5. Status of Project as on a recent date - Amount spent & sources

6, Promoter's contribution till date (supported by Auditor's Certificate, if possible)

7. Current & proposed Shareholding pattern

8. Sanctions received by the issuer from bankerslinstitutions for debt financing in the project

9. Notes on the following: Technical process, utilities (power, water, transport, effluent treatment, location,

land building, Plant & Machinery).10. Manpower

(i) Break-up of employees - whether any agreements are entered into with employee - lf so, copy of

agreement(ii) Details of Pay scaleslbonus (including performance bonus)/PF/ Gratuity etc.

(iii) Employment of contract labour - no. of workers, copy of contract.

11. Quality Controlfacilities, Research & Development.12. Market (Demand/supply with sources along with copies),13. Marketing & Diskibution (network etc,) & relevant documents wherever applicable.

14. Arrangements and strategy of the company for marketing its products

15. Discussions with important customers, suppliers, Joint Venture partners, collaborators of the company.

Question 5

(a) Write short notes on the following :

(i) National Green Tribunal Act, 2010

(3 marks each)

. Ans. National Green Tribunal Act 2010 was enacted for effective and expeditious disposal of cases relat-

ing to environmental protection and conservation of forests and other natural resources including en-

forcement of any tegal nght retating to enviranment and giving relief and compensation for damages to

persons and property and for matters connected therewith or incidental thereto.

(ii) Checklist for Compliance of Terms of lnsurance in Due Diligence for Banks

Ans. Check the following in regard to compliance of terms of insurance:

(a) The company's assets have been insured comprehensively. Where a joint insurance on plant and build-

ings has been taken, the value thereof has been apportioned in the manner prescribed/approved;

(b) The insurance policy has been taken in the joint names of the company and the bank(s)/financial in-

stitution(s) ;

(c) The policy has been kept alive for such full value, as has been determined by the bank(s)lfinancial in-

stitution(s) , all premia are being paid on time, and the company has not done any such act as would

iender the policY void or voldable;

{d) The policy has been taken from an insurance office of repute, as determined by the bank(s)/financial

institution(s); andAll moneys received under the insurance policies are held in trust for better securing to the

bank(s)/financial institution(s) , the payment of all moneys secured under the indenture agreement.

(iii) Risk Management Committee.

Ans. The board of directors of a listed company shall constitute a Risk Management Committee. The ma-

jority of members of Risk Management Committee shall consist of members of the board of directors' The

bhairp"r.on of the Risk management committee shall be a member of the board of directors and senior

executives of the listed entity may be members of the committee. The board of directors shall define the

role and responsibility of the Risk Management Committee and may delegate monitoring and reviewing of

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the risk management plan to the committee and such other functions as it may deem fit. The provisions ofthis regulation shall be applicable to top 100 listed entities, determined on the basis of market capitalisa-tion, as at the end of the immediate previous financial year.

(b) Define the foliowing terms : (3 marks each)(i) Wilfuldefault

Ans. A "willful default" would be deemed to have occurred if any of the following events is noted :-(a) The company has defaulted in meeting its paymenUrepayment obligations to the lender even when it

has the capacity to honour the said obligations.(b) The company has defaulted in rneeting its paymenVrepayment obligations to the lender and has not

utilised the finance from the lender for the specific purposes for which finance was availed of but hasdiverted the funds for other purposes.

(c) The company has defaulted in meeting its paymenUrepayment obligations to the lender and has si-phoned off the funds so that the funds have not been utilised for the specific purpose for which fi-nance was availed of, nor are the funds available with the unit in the form of other assets.

' ln order to prevent the access to the capital markets by the willful defauiters, a copy of the list of willful de-faulters (non-suit filed accounts) and list of willful defaulters (suit-filed accounts) are forwarded to SEBI byRBland Credit lnformation Bureau (lndia) Ltd. respectively.

(ii) "Specified Securities" under SEBI (ICDR) Regulation, 2009.Ans. Under SEBI (ICDR) Regulations 2009, "specified securities" means equity shares and convertiblesecurities.The "convertible security" has been defined to mean a security which is convertible into or exchangeablewith equity shares of the issuer at a later date, with or without the option of the holder of the security andincludes convertible debt instrument and convertiQle preference shares.

Question 6

(a) Stable Ltd. is b'eing merged in Growing Ltd. As a Practicing Company Secretary, what are the infonnation re-quired to check if there is cross holding of Directors of the Transferee and Transferor Companies? (5 ma*s)Ans. The following information are required to be checked if there is cross holding of Directors of the Trans-feree and Transferor Companies:(i) Relationship between the directors of the transferee and transferor companies under the Companies Act,

2013.(ii) Names of the officers of both the transferee and transferor companies who are to be authorised to sign

the Application, Affidavit and Petition. (The companies concerned can authorise any one person to act onbehalf of them, who may be from either of the eompanids).

(iii) Names of the English and regional language newspapers in which notices are to_ be published.(iv) Names in preferential order as to the chairmen of the meetings of the transferee and transferor compa-

nies. (The chairman in this case need not be a director on the board of directors of the company con-cerned or even a member of the company).

(v) List of creditors and their dt-res.(vi) List of individual cases to be given, as well as categorisation in various slabs.

(b) Hindustan Zinc Ltd. issued the tender for developing Compliance Software for the Company. Webscroll Co.Ltd. was the successful bidder giving lowest price bid. As a Compliance Soiution provider, what are the ap-proaches to be adopted by Webscroll Co. Ltd. (5 marks)Ans. The compliance solution providers adopts following approaches for creating or enhancing an ethics andcompliance program for companies:RisUCultural Assessment - Through employee surveys, interviews, and document reviews, a company'sculture of ethics and compliance at all levels of the organization is validated. Our Reports and recommenda-

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tions with detail observations identify gaps between dompany's curent practices and benchmarks with inter-national practices.

Program Design/Update - ln this phase, compliance solution providers help company in creating guidelinedocuments that outline the reporting structure, communications methods, and other key components of the codeof ethics and compliance program. This encompasses all aspects of the program, from grass roots policies tostructuring board committees that oversee the program; from establishing the mandatory anonymous complaintreporting rnechanism-i.e., compliance and ethics help line or whistleblower hot line-to spelling out the specif-ics of the code of ethics in a way that is easily understood by everyone at all levels of organization.Policies and Procedures - ln this phase compliance solution providers help company to develop or enhancethe detailed policies of the program, including issues of financial reporting, antitrust, conflicts of interest, giftsand entertainment, records accuracy and retention, employment, the environment, global business, fraud, po-litical activities, securities, and sexual harassment, among others.Communication, Training, and lmplementation - Eyen the best policies and procedures are useless if theyare not institutionalized* they must become part of the fabric of the organization. Compliance solution pro-viders help company to clearly articulate, communicate, and reinforce not only the specifics of the program,but also the philosophy behind it, and the day-to-day realities of it. ln this way, key stakeholders and otherpersonnel are more likely to embrace the program and incorporate it into their attitudes and behaviours.Ongoing self-Assessment, Monitoring, and Reporting - The true test of a company's ethics and compli-ance program comes over time. How do one kngw in one year or five that both the intent and letter of the laware still being observed throughout organization? How does the program and the organization adapt to chang-ing legislation and business conditions? As the organization evolves for example, through mergers and acqui-sitions will the program remain relevant? The cultural assessment, mechanisms, and processes put in placeincluding employee suryeys, internal controls, and monitoring and auditing programs, help organisationsachieve sustained success.

(c) The Competition Commission of lndia has receiyed a complaint that the combination proposafof Tina Ltd. andMena Ltd. is loing to have an appreciable advelse effect on competition. Explain the factors to be consideredto evaluate the effect of Combination under the Competition Act, 2002 (5 marks)

Ans. The Competition Act, 2002 envisages appreciable adverse effect on competition in the relevant markeiin lndia as the criterion for regulation of combinations. ln order to evaluate appreciable adverse effect oncornpetition, the Act empowers the Commission to evaluate the effect of Comblnation on the basis *f factorsmentioned in Section 20(4). Factors to be considered by the Commission while evaluating appreciable ad-verse effect of Combinations on competition in the relevant market:(a) Actual and potential level of competition through imports in the market;(b) Extent of barriers to entry into the market;(c) Level of concentration in the market ;

(d) Degree of countervailing power in the market;(e) Likelihood that the combination would result in the parties to the combination being able to significantly

and sustainably increase prices or profit rnargins;(f) Extent of effective competition likely to sustain in a rnarket;(g) Extent to which substitutes are available or are likely to be avaiiable in the market;(h) Market share, in the relevant market, of the persons or enterprise in a combination, individually and as a

combination;(i) Likelihood that the combination wouid result in the remoVai of a vigorous and effective competitor or foil-

petitors in the market;

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fi) Nature and extent of vertical integration in the market;

(k) Possibility of a failing business;

(l) Nature and extent of innovation;

(m) Relative advantage, by way of the contribution to the economic development, by any combination having

or likely to have appreciable adverse effect on competition;

(n) Whether the benefits of the combination outweigh the adverse impact of the combination, if any'

AppendixLawpoint's

CS SolutionsProfessional Programme

Secretarial Audit, Compliance Management and Due DiligenceModulel.Paper2

December 2017 Examination Paper's Solution

Note : Answer All Questions.

PART - AAttempt all parts of either Q. No. 1 or e. No. 1A

Question 1

(a) Mr. Alok Kumar, retired Chairman of South Bank Ltd., is recently appointed as lndependent Director of TransPower Limited, a Listed Company for the period of 3 years. While submitting the declaration under section149 of the Companies Act, 2013, he asked about the requirements of the Secretarial Audit, periodicity of thesecretarial Audit Report and its reporting requirements. Prepare the brief note. (5 marks)Ans. Note on SecretarialAuditAs per section 204 of the Companies Act, 2013 read with rule g of the Companies (Appointment and Remu-neration of Managerial Personnel) Rules, 2014 the following class of companies shall carry out secretarial au-dit:

(a) Every listed company.

(b) every public company having a paid-up share capital of T50 crore or more; or(c) every public company having a turnover of (250 crore or more.Periodicity:It is recommendatory that secretarial audit should be done periodically and the secretarial report be placedbefore the Board on regular basis. The Secretarial Audit Report shall be given according to the financial year.Reporting:The format of the Secretarial Audit Report shall be in Form No.MR.3 addressed to the members. The qr:alifi-cations in the report shall be stated in bold type.The report shall be annexed to the Board's report rnade in terms of section 134(3) of the Cornpanies Act,2013. lt shall be the duty of the company to give all assistance and facilities to the company secretary in prac-tice, for auditing the secretarial and related records of the company. The Board of Directors, in their repcr"t,shall explain in full any qualification or observation or other remarks made by the company secretary in pi.ac-tice in his report.

(b) You are recently appointed as Secretarial Auditor of Alloy Tools Limited, an unlisted public company for Sec-retarial Audit for financial year 2017-18. What are the specific eventslactions having major bearing on thecompany's affairs in pursuance of the applicable laws, rules, regulations, guidelines, standards etc. are re-quired to be reported while preparing SecretarialAudit Report. {5 marks}Ans. The following are some of the specific events having major bearing on the company's affairs and arerequired to be reported in the Secretarial Audit Report:(a) lssue of shares/debentures

15

(b) BuY'back ofshares

(c) Merger/amalgamation/reconstruction etc'

(d) Foreign technical collaborations

(e) Restructuring of the Board of Directors

(f) Major decisions taken by the Board

(g) Redemption of shares/debentures'

(c) During the secretarial Audit, it was pointed out that shri s' R' Upadhay' the shareholder of the company'

holds shares as nominee of Bhaumik & ;;'-LiC;; liTfq uiaoitity Partnership Firm' What are the check

points to oe onserveJ to check the particulars of Beneficial lnterest? $ marks)

Ans. As per section 89 of the companies Act, 2013 read with rule 9 of the companies (Management and

Administration)Rules,20l4,thefollowingpointstobechecl<edregardingthebeneficialinterest:(uWhethertheregisteredownernasfitedFormNo.MGT.4within30daysfromthedateonwhichhisname

hasbeenenteredintheregisterofmembersofthecompany.(li) whether the beneficial owner has fiieJ a declaration of his interest in Form No' MGT'5 within 30 days af-

ter acquiring such interest'

(iii) whether the company has noted the beneficial interest in the register of members'

(iv)WhetherthecompanyhasfiledFormNo.MGT.6within30daysfromthedateofdeclarationofthebene.ficial interest with the Registrar'

(d) How would you identify, check and verify the compliance of applicable statutory provisions adherence to good

corporate gor"rn"n." during the Secretarial Audii of S'S' Telecom Oompany Ltd' an unlisted e'utitffil#lj

Ans. The Secretarial Auditor shall examine the books, pliers, minute books' forms' returns filed and other

records maintaineJ ny S, s releeom Company Ltd. according to the provisions of the followings:

(i) The Companies Aot, 2013 and the rules made thereunder;

(ii) The Securities Contract Regulations Act, 1956 and the rules made thereunder;

(iiilTheForeignExchangeManagementAct,tgggandtherulesandregulationsmadethereunder;ilri The DepositoryAct, 1gg6 and the regulations made thereunder;

irt The TRAI Rct iggz and the rules, regulations made thereunder;

iuil The lndian Telegraph Act and other applicable laws'

(vli) The Seeretarial Standards

(vili) ComPosition of the Board

iixl' system and process of reporting'

(e) The Board of Directors of MCM Ltd.,has appointed M/s Famine supp]Y Ltdi "t.

contractor to supply the meal

packages to its workers of the steel ptant, itrrough resolution passeo -by

circulation. The accent of Directors

was received within 3 days except shri s. s. singh, the non-executive Directdr. H.has given some observa-

tions on this appointment. Being a Company Secrltary, what would you do to record this resolution?(5 marks)

Ans. As per section 17s of the Companies Abt, 2013 read with the Secretarial Standards - 1, the following

proc"dure shall be followed to record the resolution by circulation:

(i) The resolution shall be noted at a subsequent meeting of the Board and made part of the minutes of such

meeting'(ii) The text of the resolutions with dissent or abdtention, if any, shall be recorded in the Minutes of such

Meeting.(iii) The views of the Directors particularry the lndependent Director, if specifically insisted upon by such Di-

rectors, provided these, in the opinionof the Chairman, are not defamatory of any person, not irrelevant or

immaterial to the proceedings or not detrimental to the interests of the company'

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Or (Atternative question to e. No. 1)

Question 1A(i) Shriram Power Limited has signed a Power Supply Agreement with Government of Maharashtra, While apply-

ing for Environment Clearance, the Ministry of Environment and Forest has issued the instruction to expendthe fund for Corporate Social Responsibility (CSR). As a Company Secretary, write a brief note on applicabil-ity of provisions of CSR and also specify the eligibility criteria for carrying out the CSR activity by an entity.

(5 marks)Ans. As per section '135 of the Companies Act, 2013 every company having net worth of $00 crore or more,or turnover of 71A00 crore ar more or a net profit of tS crore or more during the (immediately preceding as per

2417 amendment Act) financial year shall constitute a Corporate Sociat Responsibility Committee of theBoard consisting of three or more directors, out of which at least one director shall be an independent director.As per the Companies (Corporate Social Responsibility Policy) Rules, 2014 lhe Board of a company may de-cide to undertake its CSR activities approved by the CSR Committee, through (a) a company established un-der section I of the Act or a registered trust or a registered society, established by the company, either singlyor alongwith any other company, or (b) a company esiablished under section 8 of the Act or a registered trustor a registered society, established by the Central Government or State Government or any entity establishedunder an Act of Parliament or a State legislature.

lf, the Board of a company decides to undertake its CSR activities through a company established under sec-tion B of the Act or a registered trust or a registered society, other than those specified, such company or trust

or society shall have an established track record of threa years in undertaking similar programs or proiects;

and the company has specified the projects or programs to be undertaken, the modalities of utilisation of

funds of such projects and programs and the monitoring and reporting mechanism.

(ii) With respect to Standards on. General Meeting (SS 2), prepare the check points of Secretarial Audit for fol-

lowings:

(1) Withdrawal of Resolution

(2) Rescinding of Resolution

(3) Modiflcations tc Resolution.

Ans.(1) Prohibition on Withdrawal of Resolutions [Para 10 of SS'2]

(5 marks)

(i) To check that resolutions for items of business which are iikely to affect the market price of the securi-

ties of the company has not been withdrawn.

(ii) To check that any resolution proposed for consideration through e-voting has not been withdrawn.

(2) Rescinding of Resolutions [Para 11]

To check that a resoiution passed at a meeting has not been rescinded otherwise than by a resolution

passed at a subsequent Meeting.

(3) Modifications to Resolutions [Para 12]

To check that modifications to any resolution which do not change the purpose of the resolution materially

may be proposed, seconded and adopted by the requisite majority at the Meeting and, thereafter, the

modified Resolution shall be duly proposed, seconded and put to vote.

(iii) While conducting Secretarial Audit, how would you verify that the constitution of Board of Directors is proper

and well balanced? $ marks)

Ans. While conducting Secretarial Audit, the constitution of Board of Directors shall be checked as stated below:

Lawpoint's GS Solutions - SACMDD

(a) The constitution of the Board shall be as per section 149 of the Companies Act, 2013.

- (b) ln case of listed companies, the constitution of the Board is as per the SEBI (LODR) Regulations, 2015.

(c) The constitution of the Board is_as per the articles of association of the company.(d) lf applicable, woman directors are employed.(e) lf applicable, independent directors are employed.(0 At least one director is a resident director.(g) Directors retire by rotation as per section 152 of the Companies Act, 2013.(h) Additional director, alternate director, nominee director are appointed if any as per section 161 of the

Companies Act, 2013.(i) There is required number of executive and non-executive directors.lf the above requirements are fulfilled then it can be said that the constitution of the Board is balanced.

(iv) The Board of Directors of ABC Ltd., an unlisted public company, has decided to issue and allot the 500000Equity Shares of t 10 each to XYZ. Housing Finance Ltd. at a premium of ( 30/- each. What are the checkpoints to be included in the explanatory statement to be annexed to the notice of General Meeting pursuant tosection 102 of the Companies Act, 2013? (5 marks)Ans. The following disclosure shall be made in the explanatory statement to be annexed to the notice of gen-eral meeting pursuant to section 102 of the Companies Act, 2013:(a) The object of the issue;(b) Total number of shares to be issued;(c) The price or price band at which the allotment is proposed;(d) The basis on which the price has been arrived along with valuation report;(e) Relevant date to which the price has been arrived;(f) The class of persons to whom the allotment is proposed to be made;(g) lntention of the promoters, KMPs to subscribed to the issue;

{h) Time wiihin which the allotment shall be completed;(i) The names of the proposed allottees and the % of their post allotment capital;

fi) The pre and post issue capital structure;

{k) Justifieation of the allotment;

{l) Disclosure of interest of Directors and KMPs.

{v) i"MT Lab (lndia) Limited invested ( 240 Crore in various mutual funds. Though this investment was madethrough TMT CPF Trust and the investments are not hold in the name of the Company. Prepare the check listwith respect to Register of lnvestments while conducting the secretarial audit of TMT Lab (lndia) Limited.

(5 marks)Ans. ln terms of section I 87 of the Companies Act, 201 3 read with the rules framed thereunder, the followingare to be checked as to Register of lnvestments:(a) The register of investment not held in the company's name is maintained as per Form No.MBP-3;(b) The entries are made in the register chronologically;(c) The reasons for not holding the investments in the name of the company;(d) The register is maintained at the registered office of the company and is preserved permanently;(e) The register shall be in custody of the Company Secretary or any person authorised by the board;(f) The entries in the register are ar,rthorised by the Company Secretary or any person authorised by the

Board"

Secember 2017

PART. B

Attempt att parts of either Q' No' 2 or Q'No' 24

Question 2

a) Elaborate the environmental, economic and social factors, which are to be recognized while settingfitr}rl!;

dustry.

Ans.lnsettingupanindustry,thefollowingenvironmental,economicandsocialfactorsshallbeconsidered:(a) No forest land shall be converted to non-forest activity'

iUl No agricultural land shall be converted to industrial site'

(c)Landacquisitionshallbelargetoprovidespacefortreatmentofwastewaterforrecycle.(d)Greenbeltshallbe/zk.m.aroundthebatterylimitandindustryhavingodour,thelimitshallbelk'm.

wide.

(e) The green belt between two large industry shall be 1 k'm'

(f) Sufficient space shall be left for solid waste management'

(g)Eachindustryshallmaintainthreeambientairqualitymeasuringstationswithinl20degreeang|ebe-tween them.

(h) The industry should conform to the landscape'

(b) List out the points to be checked in case of due diligence of delisting of lndian Depository Receipt' (5 marks)

Ans. While checking lDR, the requirements of regulation 80 of the SEBI (LODR) Regulations,2015 shall be

considered as follows:

(i) whether the tisted entity, if it decides to delist lndian Depository Receipts, give fair and reasonable treat-

ment to IDR holders.

(ii) whether the listed entity complies with such norms and conditions for delisting lndian Depository Receipts

as specified by the Board or stock exchange in this regard'

(iii) Whether the listed entity, in case underlying equity shares are delisted, shall delist and cancel the lndian

DePository ReceiPts.

(c) All businesses have a duty to act lawfully, particularly compliance with Competition Law, is the most important

aspect for growing ".orory.

In light of tiris, explain the need for Competition Compliance Programme'(5 marks)

Ans. A compliance programme shall have the following main purposes:

(i) To strive to prevent violation of law;

(ii) To promote a culture of compliance;

(iii) To encourage good corporate citizenship'

As the consequences of infringement can be serious, a compliance programme must be capable of meeting

the changing requirements of business and must make efforts as part of the regular evaluation process to en-

sure that the compliance programme continues to be relevant'

Competition Compliance programme help reduce legal costs in the short run by enabling the enterprise to

avoid violation of competition laws, while in the longlun, they increase corporate competitiveness by raising

the value of an enterprise. The prescription of beliavioral standards under the compliance programme not

only prevents officers and employe", oi "n

enterprise from unconsciously violating the competition laws' but

at the same time, relieve the employees of the fear that accompanies breach of such laws'

The enterprises shall save time and money by securing the following benefits from compliance programme:

(i)Corporateofficersandemployeesneingwellawareoftherequirementsofcompetitionlawmaymaintainlegal transParencY.

(ii) Corporate officers have advance perception concerning the activity of employees that might violate com-

petition laws.

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(iii) Corporate officers and employees can avoid civil and criminal liability resulting from violation of competi-tion laws.

Or (Alternate question to Q. No. 2)

Question 2A(i) Super Product Agro Ltd. is proposed to be merged in GeetanjaliAyurved lndia Ltd. What are the cheek points

to be observed in due diligence with respect to payment of consideration for merger and amalgamation.(5 marks)

Ans. Regulation2l of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,2011 pro-vides the following regulations to be checked in due diligence with respect to payment of consideration formerger and amalgamation.(a) For the amount of consideration payable in cash, the acquirer shall open a special escrow account with a

banker to an issue registered with the Board and deposit therein, such sum as would, together with cashtransferred, make up the entire sum due and payable to the shareholders as consideration payable underthe open offer, and empower the manager to the offer to operate the special escrow account on behalf ofthe acquirer for the purposes under these regulations.

(b) The acquirer shall complete payment of consideration whether in the form of cash, or as the case may be,by issue, exchange or transfer of securities, to all shareholders who have tendered shares in acceptanceof the open offer, within 10 working days of the expiry of the tendering period.

(c) Unclaimed balances, if any, lying to the credit of the special escrow account at the end of 7 years from thedate of deposit thereof, shall be transferred to the lnvestor Protection and Education Fund.

Further section 236 of the Companies Act, 2A13 read with rule 27 of the Companies (Arrangement and Amal-gamation) Rules,2016 provides further provisions for determining price of minority shareholders.

(ii) What are the documents/aspects to be looked into while carrying out legal due diligence with respect to fol-lowings:(1) IPR/PatenUR&D Details(2) Material Contracts. (5 marks)Ans. The following documents/aspects to be looked into while carrying out legal due diligence:(ti lPfiJPatenU R & D details:

(i) Scheduie of trademarks/copyrights(ii) Details of lndian and international patents with the company(iii) Details of pending patent applications(iv) A schedule and copies of all consulting agreements, agreements regarding inventions, licenses, or

assignments of intellectual property to or from the Company(v) Details of threatened claims if any etc.

{2} Material Contracts(i) A schedule of all subsidiary, partnership, or joint venture relationships and obligations, with copies of

all related agreements(ii) Copies of all contracts between the Company and employees, shareholders and other affiliates

{iii} Loan agreements, letter of credit, or promissory notes etc

iiv) Security agreements, mortgages etc to which the Company is a party(v) Any distribution agreements, sales representative agreements, marketing agreements etc.

ivi) All nondisclosure or non competition agreements

{vii) Other material contracts.

{iii} What are the restrictions on allotment of securities under Regulation 86 of the SEBI (ICDR) Reguiations,2009. (S marks)

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Ans' As per regulation 86 of the sEBl (lcDR) Regulations, 200g ailotment under the quatified institutionsplacement shall be made subject to the foilowing conditions:(a) Minimum of 1oo/o of eligible securities shall be allotted to mutual funds. lf the mutualfunds do not sub-scribe to said minimum percentage or any part thereof, such minimum portion or part thereof may be allot-ted to other qualified institutional buyers;(b) No allotment shall be made, either directly or indirecfly, to any qualified institutional buyer who is a pro-moter or any person related to promoters of the issuer.'A qualified institutional buyer who does not holdany shares in the issuer and who has acquired the said rights in the capacity of a tender shall not bedeemed to be a person related to promotersln a qualified institutions placement of non-convertible debt instrument along with warrants, an investor cansubscribe to the combined offering of non-

"il#;;;;'insirum"nts with warrants or to the individuarse-curities, that is, either non- convertibre debt instruments or warrants.The applicants in qualified institutions placement shall not withdraw their bids after the closure of the issue.Question 3

(a) The Equity shares of Bharat coal Ltd. are held by centrar Government through its concerned ministry. Minis-try of coal' The Joint secretary of coal, who is trrl crrairman-oitn" company arso, whire reviewing the finan-cial data of the company, has desired that companv ,lv ,grin declare the dividend even after criticalchanges in the economy'. The Director (Finance) informed in"iluu to inadequacy of profit during the periodunder consideration, the dividend wourd te given out of free reserves.study the following particulars and ascertain the amount that can be drawn towards dividend apprying thecompanies (Decraration of Dividend out of Reservesy, nuies iot+:

Amount in ?

The rate of dividen

lffi*:ffi;;j:::},"1:: T:,:",T?::,:: T,r:0,, ,",0 *itn rure 3 or the companies (Decraration andPavment of Dividend) Rures, 2014, in the event of inadequac, "r;;d' jff?,Tf]ff l3ff'H:ilr::imay declare dividend out of free reserves subiect to the furfifimlnt oi tre following conditions:(a) The rate of dividend declared shall not exceed the average of the rates at which dividend was declared byit in the three years immediately preceding that year.(b) The total amount to be drawn from such accumurated profits shall not exceed one-tenth of the sum of itspaid-up share capital and free reseryes as appearing in the latest audited financial statement.(c) The amount so drawn shall first be utilised to set oflthe losses incurred in the financial year in which divi-dend is decrared before any dividend in respect of equity shares is decrared.

''' J::.,:il1fi"'li::iffi:,:ffi::T,lJ,:?:il1,"n"rr not r,iil;* 1s% orits paid up share capitar as ap-ln the given question:Avg' rate of dividend of preceding 3 years in which dividend was paid = (0+20+10) l3=1oo/o

35,00,000 Equity Shires otilorEin87,500, 9% preference Shares of t 100/- eachSecurities premium

Profit and Loss AccountGeneral ReserveNet Profit for the yearCapital Reserve on revaluation of Factory premises

3,50,00,000

87,50,000

17,50,000

3,15,000

1,05,00,000

17,85,b00

17,50,000

CS Solufions'SACMDD

T"t"l "r";t can be drawn from accumulated profit =1/10 of (3,50,00,000+87,50,000+1,05,00,000) =

{54,25,000Total amount required to be drawn:

' Preference shares @9% = (7,87,500

Equity shares = ?35,00,000

Total t42,87,500

Total amount to be drawn from GR = 42,87,50A- (17,85,000 + 3,15,000) = 21,87,500

Balance in GR after dividend = 1,05,00,000 - 21'87'500 = 83'12'500

Balance % of reserve after withdrael6l = (83,12,500/4,37'50,000)100 = 19o/o

since barance in Reserye is more than 15%, the company can decrare 10% dividend on the equity shares'

(b) Prepare a detailed note on Data Room and advantiage of Virtual Data Room' ff marks)

Ans. R Data Room provides all important business documents which may be on flnancial, regulatory' IPR'

marketing, press report or any important material aspect pertaining to a business transaction' lt provides for a

common platform where all iecords of important business information are.kept * 1* review by a potential

buyer after signing of a Non Disclosure Agreement (NDA). As data room discloses confidential data which is

not available for public and may relate to lusiness process, trade secret, technology information etc' the ac-

cess to data room is made after signing of NDA'

Benefits of data room(a) Removes ambiguity in the minds of buyer about the profitability, growth prospectus, and sustainability of

business that is proposed to be bought'

(b) provides maierial information that helps in doing a swoT analysis.

(c) lt enables the buyer to do a better bargain through the analysis of the data'

(d) May expose the weakness of the seller which is not directly provided to the buyer'

(e) Provides data that helps in better Valuation of business for both buyer and seller'

Maior Advantages of Virtual Data Room

(i) Savings in cost

(ii) Saving in time

(ii[ More Comfort to buyer and Seller

(iv) Availability of information at any time of the day

(v)EnablesmultipleprospectivebidderstoaccesstheVirtualDataRoom(vi) EasY to Set uP

(vii) More Secured

(viii) lmProved EfficiencY

(ix) Copying/printing of documents may be restricted'

(x) Closure of Virtual Data Room may happen at any time

Question 4(a) Define the Cultural Due Diligence' How would you address the cultural difference during the merger?

(4 marks)

Ans. Cultural Due Diligence (cDD) is the process of identifying, assessing, investigating' evaluating and de-

fining the cultures of two or more distinct corporates through a cultural analysis so that the similarities and dif-

ferences that impact the merged organization are identified and remedial actions are taken well in advance' lt

should be carried atong with M&A due ditigence stage itself. The findings of cultural due diligence would be

the base for post integration strategies'

December 2017

How to address Gultural Differences during merger?

1. Formation of strategies for cultural integration'

2. Analyzing the existing cultures'

3. ldentifying common aspects and differences'

4,Decideifyouwanttogoonwithoneoftheexistingculturesorifyoupreferanintegrationculture.5. Establish'bridges' between both companies'

6. Establish a basis and mechanisms for the new culture'

7. Extensive interaction with people'

The following mechanism may help in resolving cultural differences:

1. Newsletters and hotlines'

2. WorkshoPs.

3. Surveys, questionnaires and feedback analysis'

4. SYnergY teams'

tor 3in""llitlll.,i:tJi3:ilfffi"e prosramme remprate is to herp the secretarial auditor in evaluatins the critical

aspects of comptianc" *'n'g"*"nt"' Explain' ^^-^,,-^^- rick effecti,

@ marks)

Ans.Theobjectiveofcomplianceprogrammeistomanagethecomplianceriskeffectively,topromoteethicalcultureintheorganisation,resultinginthemaintenanceandenhancementofthereputationoftheCompany.comptiance management through.vrt"ririi. piol"rr.. netps rn acnieving 100% compliance with letter and

spirit. Tne followini are the objectives of Compliance Programme:

(i) To establishind maintain centralised mechanism to ensure compliance with all applicable laws (both

(ii) Ti:ffi,iiil"ililLil;. errective co-ordination or runctionar units and the compliance department un-

der the overall supervision of the Board'

(iii) To incorporate changes in the existing applicable laws or introduction of new laws, into the compliance

(iv) H"":,il::T['ffiffiT:'t',n" .nunsus in the resuratorv mandates to the applicable functional and

other units in real time manner'

(v) To provide training on comptiance requirements at regular intervals'

(vi)TointroduceandimplementethicsprogrammesforBoard,seniorManagementandotherstaffmem.bers.

(vii)Toestablishpro-activecomplianceriskmanagementcultureintotheorganisation.

ivilil fo establish effective monitoring and controlsystems'

(ix) To adopt fair market practices'

(x)Toestablishmechanismstoprevent,detect,reportandtorespondtonon-compliances.i*il To introduce effective whistle blowing mechanism'

(") fJlJ:;:tT$:,:HJruff.ff11,Ti1,,s,,""_"r slu:1and rakeovers) Regurations, 2011 incrudes event

. based/continuar disclosures; ano opening of an Escrow Account is one of important event' Explain the com-

pliance required to be done for this purpose' -- : .-^,^o anrt Tek

$ marks)

Ans. Reguration 29 and 30 of the sEBr (substantiarAcqu'sition of shares and Takeover) Regutations' 2011

provides provisions for event based/continual disclosers. Regulation 17 provides for opening of Escrow Ac-

|""fi-lffi:fi:ililTl,on*;",.on" actins i,!-llf::i^r:",'):::'.T^1:1:il"i1:[:$.:.iJ*;fll::"":"'voting rights, has to disclose ni,

"ggr"J;ie'shareholding "no-uoiing rights to the Target company at its regis-

{

$

CS Solufions - S49YA

.,o*t,,,].._lrgetCompanyareliStedwithin2workingtered office and to every Stock Exchange where the shares df the Tt

days of acquisition as per the format specified by SEBI'

i:f;J,::::;ff','"1:i',:'ffi', *'*;:,er;e;:t1:i:i::T :"li:"'i::::ilJ:'tr;?:T#',:l'"liTfl.l"ji?l;:T[:":ffi;:,1"#;,,nni.'i" ; target companv, has discrosed the number of shares or vot-

.^L ^L^h^^ 'ac*tte in chnreholdino fallinOll,'ft;l,T:[:lil:[::i^'J'':;il:iru;i'sr$:{i*j::iin:":if1y.:'::i:::"T:1"}":1::J:"ff.'[lJf$":?i#:"jX';:#;;il;;;';,;; nouingl rrom the rast discrosure made; and such change ex-

, :- ^^aaifiarl fnrm

:::X ;i:'J.i"i .i*"n"ldins or votins rishts in the tarset companv, in speciried form'q -t--.- -t ai-

::}ii^ff il.:A;J:":?;;;n;;"';,',"i""i0'.n has to be made within 7 davs or rinanciai vear endins on

-r--r- ^.,^rr^-^a rrrhara tha chares of th€fi:[lT] il'ii:'H:r:Jff;'o"r'*"Jlir',"n'"";o orrice and every stock exchanse where the shares or the

Target ComPanY are tisted bY:

(a)Shareholders(alongwithPACs,ifany)hotdingsharesorvotingrightsentitlingthemtoexercise2'o/oormore of the voting rights in the target company'

(b) promoter (atong iuiti pnc., if any) of tne iarglt company irrespective of their percentage of holding'

EscrowAccount: , --!a-rt.lonescrowaccounthastobeopenedandthefollowingsumhastobedeposited.(ii}Theescrowamountshallbecalculatedinthefollowingmanner:For consideration payable under the public offer'-(a) On the first 500 crores, 25% of the consideration

{b) on the balance consideration, an additional amount equal to 10% of balance consideration'

rf, an open offer is made conditionar upon minimum rever of acceptance, 100% of the consideration payable in

respectofminimumlevelofacceptanceor50%oftheconsiderationpayableundertheopenoffer,whicheveris higner, shall be deposited in cash in the escrow account'

The consideration payable under the open offer shall be computed and in the event of an upward revision of

the offer price or of the offer size, the value of the escrow amount shall be computed on the revised consid-

eration carcurated at such revised otr", prio, "nd

the additionar amount shail be brought into the escrow ac-

count prior to effedting such revision'

Theescrow account may be in the form of'*(a) cash deposited with any scheduled commercial bank;

(b)bankguaranteeissuedinfavourofthemanagertotheopenofferbyanyscheduledcommercialbank;or(c}depositoffrequentlytradedandfreelytransferableequitysharesorotherfreelytransferablesecurities

with aPProPriate margin'

The securities sought to be provided towards escrow account shall be required to conform to the require-

ments set out in regulation 9(2)'

Question 5

(a) Write the short notes on following :

(i) Need of LegalDue Diligence . ll-^r,ar.r a n p marks)

Ans.LegalDueDiligenceprovidescompletepictureofacompanythroughamethodicalinvestigativeprocess. Due Diligence investigations are'good at finding liabilities in a company and to uncover the hid-

den risks. These investigation, ""n

nlrp io-negotiate a lower price in a business transaction negotiation'

LegalDueDiligenceisalart-ofmanagingariskof.undertakingamajorbusinesstransaction,ltinvolvesmaintaining a methodical system tor'offiiring and

_analyzing tne documents, data, and information pro-

vided by the information provider, and inen quLntitatively ass-essing the risks associated *]tl-1ll]::::,t

or problems discovered d'uring the process. dnty a careful and thor:ough Legal Due Diligence process will

help to avoid legal difficulties, unintended transfer of legal property and other drawbacks'

11

information that'is needed to make good

business 'no tlnli"i'i aecisLns'

'#t"'"'i"tiigltion' rcrp lo "'"'i

t"to' mistakes and ean also help to

avoid tawsuio ""r."J by a bad b".i;;';;;nlrsnip' l"Y:i;ffit't-* '": ln:se

can also be crucial in

nesotiations - bv hetping "::iT1*:f[n::'"i*t to tn"'Jttu'lfacts about a corporation' thev help to

;:il;$ffi nJlo"J'to iesotiate betters terms'

The need for legal o'",,;i;n:;;; '"* occur in the following occasions:

{i) Mergers/Acquisitions

iii) CorPot"te Restructuring

iiiil iotpoote Governance related matters

(iv) lPOs/FPOs

i"oP* of Legal Due diligence:

lit Private EquitY

iiif C"""*r compliance requirement'

iiiil co**"tcial agreements

1ir1 Lur"tugtd buY'outs

(v) Joint Ventures etc marks)

(ii) Wien Dominance gets abused ..Ans. Abuse of oominance is judged in terms of the specified.types of acts committed. by a dominant en-

terprise atone or in concert. sucn acts. r,."'i*'in"J'"9:'^y:i;;' ;;ii"; 4(2) of the competition Act

speeifies the forowing practices uv a ooinant enterprise" o,. E-lrp'otLnt"'p'i'es as abuse of dominant

{i) Directly or indirectly imoosing unfair or discriminatory conc

vice; -!-:. ; in purchase or sale (inciuding predatory

(ii) Directly or indirectly imposing unfair or discriminatory pnc(

- r, lml; :::"11'.fffiT'""-l "t'il -'1 ^n

o od s o r p rovi sion or servi ces or m arket;

. (iv) Limiting o." ..""iri.,,ni iecrrnicat ",.

,;1;;;.-;J,""u*"nt to the prejudice of consumers;

i-t Denying market access in any manner:

n,, H,H:,:,",H;::1,:J:::::ffiil',f':::r::::lH:i,'#lr;5ff;"""1'::T"'"'T',"J':Jl'::i3?:::;contracts;

(vii) Using iis dominant position in one relevant market to enter into, oi. prot.ect, other relevant market,

P marks)

(iii) bcneme of Spcnsored ADRs / GDRs' ^/lan,,c is a orocess of disinvestments by lndian shareholders of

,""

[::r,i*::tX:::"::TT-ii:!n::]i:ni'".:T;,?,";;";rs 'ihe nonsrcons against

'1he

shares offered tor Jisinvestments, rn" pr"."-J. rearised "r" J'.irin-riuJ "*ong

the shareholders in pro-

Portion to the shares sold'

Paragraph48oftheForeignCurrencyConvertibleB:.ll,andordinaryShares(ThroughDepository

[,-il"#*i*:**f:;i..*:1n':il"J'i![iln' *'tn an overseas depositorv against shares

held by it= ,i"IJJro",. ,i u p,ice io uu o"t"'mln"d by the Lead Manager.

{b} The pro"."O. oi the issue shall be ffi*",", ," lndia. within a period of one month'

(c) The sponsoring company ,nrrr "omJr'v

*ith the provision''oi tn" s"n"'" and guidelines issued in this

,r, n***:*:f'r:;ru*fffJT:it1[l;such issue, in the speciried rorm within 30 davs

from the date of closure of the issue'

7

rf

)

)

r

*

Dt

a

E

I

rE

EFtEE

*-

=

E

==EEE

EEE==E===_=

=====-===_-==========-=---=-:=-=:-:-=

(b) Define the following terms =

- (i) Corporate Cutture marks)

Ans. Culture is a complex system with a multitude of interrelated processes and mechanisms based on

which the organisation functions. lt includes visionlmission of the organisation, work flow process, com-

munication mechanism, formal procedures, informal practices, strategy setting mechanism and so on'

Corporate Culture is embedded deeply in the organization and in the behavior of the people there' lt is not

necessarily equal to the image the company giies itself in.brochures and on the website' Therefore' it is

difficult to determine an organization's culture from the outside.

Corporate culture influences the performance of an organization, since it determines the following:

(i) StYle of tackling Problems(ii) Method or style of communication

(iii) AdaPtabilitY of emPloYees

{iv) Organization commitment to strategies and ultimately to vision and mission etc

(v) Style of organizational functioning

(vi) Adaptability of people to change

(vii) The way people interact with each other

(viii) The way the organization interacts with stakeholders

(ix) Level of commitment p marks)(ii) SME Exchange'

Ans. ln recognition of the need for making finance available to small and medium enterprises, SEBI has

decided to encourage promotion of dedicated exchanges and/or dedicated platforms of the exchanges for

listing and trading of securities issued by Small and Medium Enterprises ('SME')' Consequently, SEBI

amended SEBI (issue of capital and Diiclosure Requirements) Regulations, 2009 by inserting Chapter

XB on ,,lssue of ipecified securities by small and medium enterprises", with effect from 23'9'2011

.SME Exchange. means a trading platform of a recognized stock exchange having nationwide trading

terminals by sEBl to list the specified securities issued and includes a stock exchange, granted recogni-

tion for this purpose but does not incJude the Main Board',Main board, means a recognized stock exchange having nationwide trading terminals other than SME

exchange.

Question 6

(a) what are the areas to be avoided while setting up an industry as per guidelines issued by Ministry of Envi-

ronment and Forest?- $ marks)

Ans. ln setting up industries, care should be taken to minimise the adverse impact of the industries on the

immediate neighbourhood as well as distant places. Some of the natural life sustaining systems and some.

specific land uses are sensitive to industrial impacts because of the nature and extent of fragility. For this pur-

pose, such industrial sites shall maintain the following distances from the areas listed:

lal Ecotogically and/or otherwise sensifive areas - At least 25 km; depending on the geo-climatic conditions'

the requisiie distance shall have to be increased by the appropriate agency'

(bl Ecotogicat and/or otherwse sensrTive areas includej

(i) Religious and Historic Places;

(ii) Archaeological Monuments (e.g. identified zone around Taj Mahal);

(iii) Scenic Areas;

tiv) HillResorts;(v) Beach Resorts;(vi) Health Resorts;(vii) CoastalAreas rich in Coral, Mangroves, Breeding Grounds of Specific Species;

t's CS Solutions' SACMDD

December 2017

(viii) Estuaries rich in Mangroves' Breeding Ground of Specific Species;

(ix) Gulf Areas;(x) BiosPhereReserves;

i.il NationalParksandSanctuaries;(xii) NaturalLakes,Swamps;(xiii) Seismic Zones;

(xiv) TribalSettlements;

inl) Areas of Sciehtific and Geological interest; n,'a ancl sensitive to pc

(n i) Defence f n.t"ff"tLnr, especiatty tfrose of securi$ importance and sensitive to pollution:

iwib eoroerAreas (lnternational) and

(wiii) AirPorts' ?!r^ , !-^tct boasiaf areas.'at least ll}Rmfrom High Tide Line' d plain affected by

(dl Ftood Ptain of thr";i;;;;;..;r:':lgl1?:Y' km from frood prain or modified froc

dam in the upstream or by flood control sVst9,1.s'

F)?ilJ;J;;;;;;;;,;r#ii;6;llg:llly';::T:1I3":1"'''"'1I'?J;';;';tr:::yr1:#:{*::;;il;;{;:i;:i:,1*::::::h":"*:*"15-ff$il::i;::'t5ii,3fi1i;is',.H;lg"i,?:flfffinffi'J';'i.1{''"t'l1'ii'd$':ili.?:I"H':::::'5n::ii:"i*:19}'j:Jll[i;,1:il;

i^TiliiX';il,:HTi;ffii.3i'i3iiird?'':J*':1*i.*11**3;;*cssessed and the industry

Tn"iB:''3iS:i'H$; #iffi inl;;;i"'t"o s'L*tn boundary or the settrementirlaror{ while fil

(b) wh;T\ff 3::ffitffi'.1:#ffiil",ilLHiil;;ffi i" lon'io.'"d whire rinanzins the search and(5 marks)

7

r5

status Report? h---r -^ i^ anr ontains two aspects, The first being'search'Ans. A Search and Status Report as is apparent from' its name c

,ornprit."oiteportingwhich involves physical inspection of oocuments and the second activity 'status' which c

. of the information as made avairabre by the search, Thus a .""r.n

"n.istatus report de facto acts as a 'Pro-

gress Report, on tne fegli rrp"&r and.Ltso a ready reckoner of the exact position'

il" t"+fy!:J:;:::iffiIe$:li11"urd

give exact detairs or particurars or charges/modirications/ satisrac-

tions as effected, filed and registered from time to time'

(ii)ldentifythosechargesandmodificationofcharges,whichhavebeencreatedinfavourofaparticularlender.

s creating the charge as specified in cHG-1 and cHG-9

liXl H:in'f','Jfl'JJi[1.,|":ffi::l ,""u,"Jby the charse as per the documents executed has been

(v) fl'JJ:,l'::?i *r."tn., ,properties, offered as securitv are mentioned as per the documents creatins the

charge and attached with the rorr, "no '"rify

whether they are as per the terms of sanction'

(vi)Checkwhetherthetermsandconditionsgoverningthechargehavebeenmentioned'(vii) Ascertain whether the namg of the lender is properly mentioned'

(viii) rn case of modification of charge ascertain whether the names of documents effecting the modification

are mentioned and whether the particulars of modification are clearly mentioned'

(ix)lncaseofcharge,theparticularsofdocumentsattachedwithforms,amountsecuredbythechargeasper the oo"rrJni. ,nd/o, sanction ti"r"f tr'.l" properties/assets securea by the charge' the terms and

conditions governing the charge "ni

in" name of the f"nOli it property mlntioned in the relevant col-

umns of Forms No' CHG-1 ' - -.-.,-r:^- aE ^{ eEElr /Qrrhctantial Ac-(c) what information shourd be given in the.pubric announcement under reguration 15 of sEBt (Substantial Ac

quisition of snares aia i'tt"J'"") Regulations' 2011 -, ",^.^. onrr Tar<anr

@ marks)

Ans.Asperregulationl5oftheSEBI(SubstantialAcquisitionofSharesandTakeovers)Regulations,2011the public announcement shall contain such information as may be specified' including the following:

,$

14 Lawpoint's CS Solutions - SACMDD

(a) Name and identity of the acquirer and persons acting in concert with him;(b) Name and identity of the sellers, if any;(c) Nature of the proposed acquisition such as purchase of shares or allotment of shares, or any other means

of acquisition of shares or voting rights in, or control over the target company;(d) The consideration for the proposed acquisition that attracted the obligation to make an open offer for ac-

quiring shares, and the price per share, if any;(e) The offer price, and mode of payrnent of consideration; and(0 Offer size, and conditions as to minimum level of acceptances, if any.The detailed public statement pursuant to the public announcement shall contain such information as may bespecified in order to enable shareholders to make an informed decision with reference to the open offer.The public announcement of the open offer, the'detailed prslic statement, and any other statement, adver-tisernent, circular, brochure, publicity material or letter or:noffer issued in relation to the acquisition of sharesunder these regulations shall not omit any relevant inforrna[ign, or contain any misleading information.

I

],_

L

AppendixLawpoint's

CS SolutionsProfess ional Prog ramme

secretarial Audit, cornpliance Management and Due DiligenceModulel'Paper2

June 2018 Exarnination paper,s Solution

PART _ AAttempt all parts af either e. No. 1 or e. No. 1A

Question 1

(a) Anil Kumar, Practicing Compdny Secreiary of ABC Ltd. while conducting the Secretariai Audit of the eon:-pany, has found that a fraud involving ? 2 crore has been committed against the company by one of lts offi-cers. The said officer has made dummy account identity in the SAP while nraking entrres. Enumeraie the crc-cedure for reporting of fraud by secretarial Auditor. ff marksiAns. As per section 143(14) of the Cornpanres Act, 2013 the provisions of section 143 shall mutatis mutandisapply to the company secretary in practice conducttng secretariai audit under section 204 of the Aci.Section 143(12) read with rule 13 of the Companies (Audit and Auditors) Rules, 2014 provides the foiiowingprovisions regarding reporting fraud:(a) If an auditor of a company in the course of the performance of his duties as auditor, has reason to believe

that an offence of fraud involving {1 crore or more is being or has been committed in the company by itsofficers or employees, the auditor shall report the matter to the Centrai Government immediately but notlater than 60 days.

(b) ln case of a fraud involving lesser than t1 crore, the auditor shall report the matter to the audit committeeor to the Board or the Audit Committee, as the case may be, immediately but not later than two days ofhis knowledge of the fraud, seeking their reply or observations within 45 days.

(c) On receipt of such reply or observations, the auditor shall forward his report and the reply or observationsof the Board or the Audit Committee along with his comments to the Central Government within 15 ciaysfrorn the date of receipt of such reply or observations

(d) ln case the auditor fails to get any reply or observations from the Board or the Audit Commrttee within thestipulated period of 45 ciays, he shall forward his report to the Central Government along with a note eon-taining the details of his report that was earlier forwarded to the Board or the Audit Cornrnitt*e f*i whlchhe has not received any reply or observations.

(e) The report shali be sent to the Sec;etary, iv'liristry of Corporate Affairs in a sealed cover L} Rer,srerexPost with Acknowleogement Due or by Sreer: Fost follovyed by an e-mail [n confirmation of th* $arl]e

(0 The report shall be on the letter-head *f th* xr":ditor containimE [:ostal address, e-maii aejdress end ryjn:=::telephone number or mobile nuri":br,r' er:tl 5r:, signrerj by the ar.rciitor vrith his seai end sh+jj j::li,--=,.= ,, iMembership Nurnber.

(g) The report shall be in the form of,,a statemer',:t as specified !n trrjrru ;\DT-4.

(b) Vivek Goel, one of the Shareholders of .J.K. & eompany Ltd., an ilillisred pubiic conlp*,-ii, nr.,;;= :;:1.1 =-=-=Shares in the Company bearing Share Certii'icate i{o. 17 havin-q distinetive numhei"frr:r* i':;;i li ,:= - :

€

1E

L6Lawpoint's CS Solutionu t19I99

inthefamily.itwasdecidedthattheSesn1resyv;]],:-.]:::j"j,::^'o.-=younser brothers nnimesn Goel and suonesn'coer

3oyairy, 'i:l*::.1::,'i::::t.t::,:,::'?r': :i;',"f.?;5:HTji'i;1";:jlilili;;;;;"ir;iriolp*t*"nt or J k & companv Ltd whire ensurins the approvar or

thrs transfer -r- -' marks)

Ans. Checkrist for secretariar department of J.K. & company Ltd. whire ensuring the approvar of transfer after

split of share certificate:

(a) To ensure that the requirements are contained in the A.rticles of Association anci are followed'

(b) To ensure that the company has received request ior split of share certificate and the same has been ap-

proved bY the Board.

(c) To ensure that the company receives instrument of transfer in Form sH-4 duiy filled in, executed and

stamPed ProPerlY.(d) To ensure that the transfer deed is delivered to the company wiihin 60 days of its execution along with

share certificate.(e) To ensure that the Board approved the transfer and the narne of the ti'ansferee is endorsed on the back of

the share certificate'

{f) To ensure that the company has delivered the share ceriificate after ti'ansfer within one month from the

date of receipt of the instrument of transfer'

(g) To ensure that entries in the regibter of members have been nrade and authenticated'

1tr) ro ensure that disclosure of the transfer is made in the annuai return'

(c) M/s Sagar Tripathi & co., company secretaries, a Practieing *onrpanv sec;'etary Firm' is seiected by NFSL

Transportation Ltd. (BSE Listed company) on basis of giving-lowesi bid in the Express of interest' one of ihe

partners, Mrs. Neha s. Agrawal, wnite concucting secrltaria!A.r"rdiifei Flnancial Year 20i7-18' gone through

various Registers maintained under companies Ict,2013. she also checked the non-statutory, but statistical

in nature, Registers. List out these types of arry 3 R.egisters whlch rnay require the cornments of the secretar-

ial Auditors, though giving qualification for non-compliance may be at her discretion' $ marks)

Ans" The following non-.tututory registers are generaliy maintained hy a eompany:

Register of Transfers and transmissions(i) The register of transfers containing details of transfer of securtties and the procedure of transfer meets the

statutory requirements pursuant to section 56 read with rule 11 of companies (share capital and Deben-

tures) Rules, 2014'

(ii) All transfer of securities held in physical form are through proper transfer deed in Form No'SH'4

(iii) Documents for all transmissions are received and approved by the Board anc noted and authenticated'

Register of shareholders, Attendance: The cornpany has rnaintained a reEister of shareholders' .atten-

dance at tne general meetings or has kept the attendance slips collected from the members at the meeting'

Register of Proxies(i) The register of proxies containing details of proxies lodged in respect of every general meeting is main-

tained.(ii) All proxies received by the company are recorded chronoicgieally in a register kept for that purpose' tn

pursuance with Secretarial Standarels, - L--- ^-.^-^-r ih l

(iii) ln case any proxy entered in the register is rejectecl, the rea$sns ihere of have been entered in the re-

marks column.

{d} sAi shradha Technology Ltd. callerl its Flst Annual General tui*eti'nc l.:;'l 3ih August, 2017' Total lt{embers cf

theCompanywereztg'-fneShareholdersprss*ntii':iheAnn*aillj*i1::}i;1!ir'{**tingwereToutofwhieh4wereproxies The charrman adjourned tne rr,tseiirrg wan'rs cf qucrun', A,li tr:*r*Lroi{dsi's p!'e--q*nt obje*ted the deci-

slon of the e hairman. As a Cornpar,y $:eer6]iery, list *ut the ciieeF.iist it)i :adr*uremeni of meeting as p{+r Secre-

ierialStandard 2. {5 marks}

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ftr;j:lH:":::*::':::::::i.::j:I-:,-,^1-unle3sthearticlesofthecomp,ffiHil3::'Ji;:f.::""ITI::'H:T::::q:': ?",,on,1v ;;;;ii;;;;;;;;":i,!',"n'"?" i',?:',"Jnumber of members as on the date of meeting i, ,i ,"r"lnlr'rooo.Checklist for adjournment of meetings as per para 15 of the SS_2:1

1,11l":il:ffi:"T,il?fl.':::"::lT-:lj?r:: y:::' ;':,,.r,nces so warrant rhe chairman may

frH::i*T,,::X#,lJf"T:,j*of theMembers, at which a euorum is present, # illH;r[XMeeting if so directed by the Members

t7

Meetings sha, stand adjourned for want of requisite Quorum.The chairman may also adjourn a Meeting in the event of disorder or other like causes, when it becomesimpossibre to conduct the Meeting and comprete its business. ^t' uduses, wnen lI De

2' lf a Meeting is adiourned sine-die or for a period of thirty o"lr. or. more, a Notice of the adjourned Meetingshall be given in accordance with the provisions containld hereinabove relating to Notice.3' lf a Meeting is adjourned for a period.of iess than thiriy days, the company shall give not less than threedays' Notice specifying the day, date, time and venue of the Meeting, to the Members either individuaily orby publishing an advertisement in a vernacular newspaper in the principal vernacular language of the dis-trict in which the registered office of the company i. .iirrt"o, and in an English newspaper in English tran-guage, both having a wide circulation in that Oistiict.However' if a Meeting is adiourned for a period not exceeding three days and where an announcement ofadjournment has been made at the Meeting itself, giving in the details of day, date, time, venue and busi-ness to be transacted at the adiourned Meeting, in" .-o*p"ny may also opt to give Notice of such ad-journed Meeting either individualiy or by publishiig an advertisement, as stated above.Members present, being not less than two in number, willconstitute the Quorum.ln the given case since the meeting is adjournecl for want of quorum the above procedure to be followed.since the same day in the next*I"x ir'ii;orgr",'" Nationat Hotiday, ,n" #""0.n;:,r"Jff;Xeo to16th August. The company has to compry with the notice requirements.

(e) shrandhanjali Hotels (lndia) Ltd., a NSE Listed company wants to raise the fund of usD 800 Mi,ion for spread_ing its business in all over lndia. Arnave sodi, chairman of the company, suggested for External commercialBorrowing' The company Secretary has opined that the same requires the npfiovat of the RBI under ApprovalRoute' Describe' whether the funJ can be raised under Automatic Route or not? Also enumerate the checkpoint for arrangement of the fund through External commerciar Borrowing in thrs case. g rnarks)Ans' shrandhanjali Hotels (lndia) Ltd. is a listed company. The amounr proposed to be raised through ECBbased on sectoral cap is over the permissible limit and needs prior approval of RBl. As the individual limit ofECB that can be raised by eligible entities under the automatic route per financial year is usD zE' rniillon *i.equivalent for companies in infrastructure sector, the proposed ECB is more than permissible iirnit. Theia{ereprior approval of RBI is required under Approval Route. v Lr rqr I

The following checkpoints shourd be considered whire raising the ECB:(i) To check whether the borrowing conforrns to the ECB luiderines.(ii) To check the Etigibility of borrower(iii) To check the recognition of lender"(iv) To check the Ail in cost Ceiting.(v) To check the pernnitted end use recuir;l;.ienis.{vi) To check the individuat limit of ECB.(vii) To check the hedging requirements.(viii) To check the requirement of creatior: of charge.(ix) To check whether the parking of ECB r^r-inds is as per the r;::,.-is.

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18 Lawpoint's CS Solufions - SAC,tf.l'i

(x) To checkwhether RBI permission is obtained for Pre-payment of ECB for amounts exceeding USD::-million.

(xi) To check the provisions regarding refinancing/rescheduling of ECB if any.

(xii) To check whether total outstanding stock of ECBs (including the proposed ECBs) from a foreign equi\'lender should not exceed seven times the equity holding, either directly or indirectly of the lender (in

case of lending by a group company, equity holdings by the common parent would be reckoned)

OR (Alternate question ta Q. No. 1)

Question 1A

(i) Vishesh Sewa Aayog, a NGO for promoting professionalism in lndia invites you to make a presentation on ob-jectives and functions of Secretarial Standard Board (SSB). Prepare a brief note on captioned topic. (5 marks)

Ans. The institute of Company Secretaries of lndia has constituted the Secretarial Standard Board (SSB)

with the objective of integration, standardization and harmonization of diverse secretarial practices and formu-

lating secretarial standards.The SSB formulates secretarial standards considering the applicable law, business environment and preva-

lent secretarial practice. Secretarial standards ai"e developeci in a transparent manner after extensive delib-

erations, analysis and taking views of corporate, public and reEulators.

The SSB comprises eminent members of ihe profession and senior members in practice and representatives ofmajor industrialassociations like FlCCl, Cll, ASSOCHAM, SEB|, RBl. BSE, NSE, MCA, iCSl, ICAIAND lCMAl.

The scope of the SSB is to identify the areas in which secretarial standards need to be issued. The following

are the main functions of SSB:

(i) Formulating secretarial standards(ii) Clarifying issue arising out of secretarial stanciards(iii) lssuing guidance notes(iv) Reviewing and updating the secretarial standards/guidance notes at reguiar intervals.

(ii) You are appointed as a Secretarial Auditor of Vikram Coal & Gas Ltd., a BSE Listed Cornpany, for conducting Sec-

retarial Audit for Financial Year 2017-18. During the Audit, you find that feur resciutions were passed through postal

ballot. What is the Website disclosures requirement under the Cornpanies Act, 2013 in such case (5 marks)

Ans. As per section 110 of the Companies Act, 2013 read with rule 22 of the Companies (Management and

Administration) Rules, 2014 the following are the website disclosures in connection with postal ballot:

(i) The notice of the postal ballot shall be placed on the website of the company forthwith after the notice issent to the members and such notice shall remain on such website till the last date for receipt of thepostal ballots from the members.

(ii) The results shall be declared by placing it, along with the scrutinizer's report, on the website of the corypany.

(iii) The dynamic demand of business environment necessitates the changes in the contents of basis and internal

charters of the Company, the Articles of Association and the Memorandum of Association. When there is such

a change, indicate the documents to be checked by the SecretaiialAuditor in thls regard. (5 marks)

Ans. Given below the indicative list of docurnents to be checked for alteration of memorandum:

(i) To check notice convening generai meeting with relevant explanatory statement(ii) To check Central Governmeht approvai for change of name or object clause

(iii) To check whether special resolution has been passed 'except for increase in share capital.

(iv) To check Minutes of General Meeting

(v) To check Annual Return(vi) Jo check Financial Statement(vii) To check Return of deposits

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To check paper publications for change in the object clauseTo check advertisement for change in objectsTo check Memorandum of AssociationTo check Articles of AssocrationTo check filing of MGT.14, lNC.23, lNc.24, lNc.25, tNC.26, tNC.2B (atong with attachments) as thecase may be.

have a right to remove a director from hisundertaken by a Company Secretary to

(5 marks)

(iv) As a gesture of democratic management concept, the shareholdersoffice. lf done so by the sharehorders, enumerate the steps to becheck the removal of a Directo r.Ans. Given belovy the checklist for removal of director:(i) To check whether a special notice as required under sub-section (2) of section 16g was given to the com-pany to rernove a director; v'|ye" rv (,,!

(ii) To check whether the special notice.was signed by member(s) holding not less than one percent of total vot-ing power or holding shares on which an ag-gregate sum of more than-five lakh rupees has been paid up.(iii) To check whether the company has sent tcrtnwitn a copy thereof to the director concerned and the direc-tor was provided opportunity to be heard on the resolution at the meeting; Ivv' I rvv qr rw rr rs

(iv) To check whether the representation,.if any, made by concerned director was notified to the members onthe request of the director arong with the notice of the resorution(v) io check whether lf the copy of the representation was not sent because the same was received too lateor because of company's defaurt, it was read out at the meeting.(vi) To check whether the director who was removed f;'om office was not reappointed as a director by theBoard of directors;lndicative list of documents to be checked:(i) Special notice received(ii) Notice and minutes of Annual General Meeting/EGM, Report of General Meeting(iii) Proof of sending notjce to the director(iv) Representation received if any(v) Board's Report(vi) DIR-2, DIR-6, DtR-8, DtR-9, DIR-10 (if any), DtR-12

(v) The chairman of the Board of Directors of AQR Ltd. has desired to call a Board Meeting in the next week. Ac-cordingly, the Notice and Agenda Notes were sent to all Directors 9 days prior to the date of the Board Meeting.The company secretar:y, in the morning when the Board Meeting is scheduled, informed the chairman that dueto serious accident, he is unable to attend the Board Meeting. KS Das, the Dy. c;;;;;;u}iffi: *io r._cently joined, is asked to conduct the Board Meeting. KS Dai hqs successfullf conducted the Board Meeting.The cornpany secretary joins the office 32 days aier the Board Meeting. Till date, KS Das has finalized theMinutes.List out the check points to be observed in the Minutes by company secretary as per secretarial Standard 1.with respect to following:(a) Contents(b) Recording in the Minutes(c) Finatization(d) Entry(e) Signing and datingAns. Given below the list out the checkSecretarial Standard 1 :

Contents:1. Check whether

(5 marks)points to be observed in the Minutes by company secretary as per

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Lawpoint's CS Solufions - SACMDD

PART - Bfittempt all parts of either e. IVo. 2 or e. No. 24

Question 2

(a) List out any s (five) features of Depository Receipts scheme, 2014.Ans. Given berow five features of Depository Receipts scheme, 2014:(i) The Depository Receipts scheme, 2014 applies only to GDR issue and not FCCB issue which is still gov-erned under issue of Foreign currency convertible-gonos and ordinary shares (Through Depository Re-ceipt Mechanism) scheme, 1gg3 and guidelines issued thereunder.(ii) Any lndian company, listed or unlisted, public or private, any other issuer of permissible securities andany person holding permissible securities can issue GDRs as long as they are not

"o".,;,.ruv ,rJ",un*from accessing capital market or dealing in securities.(iiii lt covers only those DRs issued by a foreign depository in permissible jurisdiction. permissible jurisdiction

means a foreign jurisdiction which is a member of the Financial Action Task Force on Money Laundering;and the regulator of the securities market in that jurisdiction is a member of the lnternational organisationof Securities Commissions.

{iv) The aggregate of permissible securities which may be issued or transferred to foreign depositories for is-sue of depository receipts, along with permissible securities already held by persons resident outside ln-dia shall not exceed the limit on foreign holding of such permissible s"crritie. under the Foreign Ex-change Management Act, .199g.

{v} The permissible securities shall not be issued to a foreign depository for.the purpose of issuing DRs at aprice less than the price applicable to corresponding mode of issue to domestic investors.

(i) Minutes begin with the number and type of the Meeting, name of the company, day, date, venue andtime of commencement and conclusion of the meeting.(ii) Minutes record the names of the Directors present physicaily or through electronic mode, the com-pany secretary in attendance at the Meeting and invitees, if any.(iii) Minutes contain a record of ail appointments made at the Meeting(iv) Minutes contain other contents as per the Standard.

2' check whether Minutes mention the brief background of all proposals and summarise the deliberationsthereof ln case of major decisions, check whether the rationale tnereoraie rr.r r""li";;." """"'''''"3' check whether the minutes recorded the fact that a resolution was passed pursuant to the casting vote ofChairman of the Meeting.Recording:(i) Each item of business taken up at the Meeting was numbered. The minutes contain a reference to theidentification of papers incruding report or notes raid before the meeting.(ii) Minutes of the preceding Board/committee Meeting were noted at the next Meeting held immediatety fol-lowing the date of entry of such minutes in the Minules Book.(iii) where an earlier resolution or decision is superseded or modified, the Minutes contain a reference to theearlier resolution or decision.Finalisation: check whether the requirements of the standards in respect of circulation of minutes for com-ments and finalisation thereafter were duly complied with.Entry: check whether the requirements of the standards in respect of entry of minutes in the Minutes bookand alterations thereafter were duly complied with.Signing and dating: check whether the Minutes are initialled, dated and signed by the chairman as requiredby the Standard.

(5 marks)

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Comment.

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u(Jrnment.

chant oanke,.Jtrffiffl;ini;:"5r?:::.t"J"'''"s

are allottec and/or appiication moneys are refunded within 15 days from the dateln case of an lPo the minimum subscription to be received shall be subject to allotment of mjnimum numberof specified securities as provided in rule 19(2xb) of the securities contracts (Regulation) Rules, .1g57.where specified securities are not ailotted and/or application moneys are not refJnded within the perlod of 15days' ihe issuer shall undertake to pay interest at such rate and within such time as disclosed in the offerdocument.

(c) M/s S'Core Advisory services Pvt. Ltd. has submitted its bid invited through lnternational Bidding process byRE Textiles & Yarns Ltd' Being a lowest bid, the letter of award was issued in favclur of M/s s.c-ore Advisoryservices Pvt' Ltd for pro'ricling consultancy services to set up a Knitting Fabric plant at Maharashtra. M/ss core Ad'isory servlces pvt' lto. is ah'eady prcviding consurtancy serviies to various organizations in rndiaand outside India RE Textiles & Yarns Ltd. asks ulsS"core Advisory services pvt. Ltd. to enter into a NonDisclosure Agreement. The Agreement is proposed to o"lgnuo at Mumbai. The Management of RE Textiles& Yarns r-td. wants to incrude ihe foilowing crauses in the Agieement:1. No Tifle to Use2. No Cbiigation to Disclose, No RepresentationsPrepare a brief note on above two clauses required to be included in the Non-Disclosure Agreement.

Ans. The model contents of the IrJDA are stated below:(5 marks)

No Title to Use: Nothing contained in this Agreement shall be construed as conferring upon the Receivingr:ffi:lii;lfJ::: ff:,::'-

to confidentiar rnformation received bv it from the Discrosins party, other than

No obligation to Disctose, No Representations: Nothing in this Agreement shall be construed as -(i) creating an obligation on any of the Pariies to disclose"particrtar. information; or(ii) creating an obligation on the parties to negotiate; or(iii) as a representation as to the accuracy, completeness, quatity or reliability of the information.

euestion 2A R (Alternate question to Q. No. 2)

(i) The sEBl (lcDR) Regulations,2oog have various provisions on the aspects and activities of a pubric rssue bya company' As a secretarial Auditor, how will you verify the Time Limits foliowed by the company in regardto opening the issue to the Public. rrrLr rvrrvvYEu $ marks)Ans' ln terms of regulation 11 of the sEBl (lcDR) Reguiations, 200g the foilowing checks should be madewith respect to time limits in opening an issue:

;J?;:::X::ff[:'ff,:;with the provisions or the companies Act, 2013 apubric issue or rishts issue may

1' within twelve months from the date of issuance of the observations by the sEBl on draft otfer document,

2' within three months from the latter of the following dates if sEBl has not issued observations:(i) Date of receipt of draft offer document from SEBI;ttt'

3,]|:;f receipt of satisfactory reply from the lead mei'chanr banker where sEBt has sought any ctarifi-

(iii) Date of receipt of clarification from any regulator rvneie sEBl has sought any clarification;

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(iv) Date of receipt of copy of in-principle approval from the recognized stock exchange;

. 3. ln case of a fast track issue, the issue shall open within 90 days from registration of prospectus with the

ROC.

4. ln case of shelf prospectus, the first issue may be opened wlthin three months of issuance of observations

by SEBI.

S. An issue shall be opened after at least three working days from the date of registering the red herring pro-

spectus with the ROC.

(ii) The scope of Due Diligence Process is wider than a Financial Audit Process. Elucidate. (5 marks)

Ans. Due diligence review looks the historical financial performance of a business and also consider the

forecast financial performance for the company under the current business plan. An audit is concerned with

historical financial statements only and prorrides an opinion as to whether the financial siatements represent a,,true and fair" view of the company's operations. The following are the difference between Due Diligence and

Audit.

Particulars Audit Due diligence

Scope Limited to flnancial analYsis lncludes not only analysis of financial statements, but also

businrss plan, sustatnability of business, fuiure aspects'

corp.:rate artd management structure, legal issues etc.

Mandatory Mandatory Mandatory based on the transaction.

Data Based on historical data Covers future growth prospects in addition to historicaldata.

Type Post mortem analysis It is required for future decision

Assurance Positive assurance i.e. trueand fairness of the financialstatements

Negative assurance. i.e. identification of risks if any.

Nature Always uniform Varies according to the nature of transaction

Repetitiveness Recurring event Occasional event

(iii) ln the process of issue of the lndian Depository Receipts (lDRs), various Agencies are required to be en-

' gaged. Prepare a brief note. $ marks)

Ans. lndian Depository Receipt means any instrument in the form of a depository receipt created by a Do-

mestic Depository in lndia and authorized by a company incorpcrated outside lndia making an issue of such

depository receipts. The following agencies are involved in the process of issue of Indian Depository Receipts

(rDR):

Domestic Depository: lt means custodian of securities registered with the Securities and Exchange Board of

lndia and authorized by the issuing company to issue lDRs.

tJlerchant Banker: lt means a Merchant Banker as defined in sub-regulation (cb) of regulation 2 of the Secu-

rities and Exchange Board (Merchant Bankers) Regulations, 1992.

Overseas Gustodian Bank: lt means a bank'ng company which is established in a country outside lndia and

which acts as custodian for the equity shares of lssuing Company, against which lDRs are proposed to be is-

sued, by having a custodial arrangement or agreement with the Domestic Depository or by establishing a

place of business in lndia.

)uestion 3

a) UB power Inc., a Company registered in United Kingdom, through its lndian Subsidiary, is proposing to set up

a Thermal based Power Plant at Angul, in state of Odisha. The local people are protesting the proposed plant

which may be injurious to their health and Environment. The Company engaged various professionals to

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June 201 I

submit the Draft Feasibility Report. ln this report, the Risk Analysis is one of the important aspects. Prepare a

Risk Analysis Matrix for the project. $ marks)

Ans. Preparation of risk analysis matrix includes the following:

Nature of Business: lt covers the nature of industry, amount of airlwater/noise pollution in the process, pe-

riod of its existence, background of promoters, number of subsidiaries, stakeholders involved, turnover, profit

from operations, contribution to CSR activities, business acquisition history etc.

Area of Operations: lt covers location of site operations, Degree of diversification of products, location of

sites of subsidiaries etc.- Identification of poiurr,"l ir.r"s: lt covers with interaction with internal stakeholders such as employeesl

contractual labourers and with external stakeholders such as local community, shareholders, regulators,

NGOs etc. A questionnaire may be evolved for each stakeholder for identifying the potential hidden issues'

Potential issues maY be:

(i) Regulatory non-comPliance

(ii) Health hazard due to the operations to local community

(iii) Location of industry near agricultural land

(iv) Amount of noise

(v) lmpact of effluents on the rivers etc.

(vi) Lack of disaster Planning(vii) lnadequate safetY sYstems.

(viii) Lack of sustainability initiatives

(ix) Lack of occupational or safety measures

(x) lmproper water disposal systems.

lmpact analysis: lt covers cost of regulatory non-compliance, low level of employee morale, degree of repu-

tation rlsk, agitation of local community, degree of threat to long term sustainability, impact of potential issues

on the financidl health of the company.

Suggestions and mitigation measures: lt covers compliance management system, proper disposal of wastes

including e-waste, strong safety management systems, updated technoiogy for manufacturing process, conser-

vation in usage of water, energy, educating and training employees of environmentai issues, frequent interaction

with local community, sustainability initiatives and its reporting in the Annual Report.

Model Risk Analysis Matrix for UB Power lnc'

Nature of Business * Thermal Power Plant

Location - Odisha

Potential issue and effect :

Potential lssue Likely Possible Unlikely

Regulatory non-comPliance

Health Hazard

Location near agriculture land

Noise

Lack of disaster planning

Safety systems

Sustainability

Water disposal management

lmpact analysis

Suggestion and Mitigation me€sures

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24 Lawpoint's CS Solutions - SACMDD

(b) The Report of the Official Liquidator in a Scheme of Amalgamation is the route map in any Amalgamation

process, which requires ample information from the parties involved in a Corporate Amalgamation. Provide

ine ti.t of information to be furnished by them respectively to Auditor appointment by the Official Liquidator'(7 marks)

Ans. The Following lnformation is required to be furnished to the Auditors appointed by the Official Liquidator:

From the transferor comPanY:1. Certified true copy of the scheme of amalgamation alongwith the petition.

2. Certified irue copy of the Memorandum and Articies of Association of the company.

3. List of shareholders of the company with their shareholding, Any changes during the last five years to be

indicated.4. Accounts of the company maQe upto the appointed day of amalgamation.

5. Address of the registered office of the company.

6. Present authorised and paid-up share capital of the company.

Z. Changes in the Board of directors during the last five years alongwith list of present Board of directors.

8. List of associated concern in which directors are interested.g. List of various appeals pending under lnconne-tax, Sale Tax, Excise Duty, Custom Duty, FEMA, etc.

10. Details of loans and advances given to the associated concern/companies under the same managernent

during the last five Years.1{. Details of revaluation of assets.

12. Details of any allegations and/or complaints against the company.

13. Details of amount paid to the managing director, directors cr any relative of the directors during the last

five years.

14. Comparative stateme nt of profit and loss account and balance sheet for the last five years.

15. Details of bad debts written off during the last five years.

16. List of all charges registered with the Registrar of Companies and the amount secured against the same.

17, Copy of the latest annual return filed with the Registrar of Companies alongwith Annexures.

18. Details of all the subsidiary companies as under:

(a) Authorised and paid-up share capital of the company'

(b) List of present shareholders alongwith details of changes in the shareholding patterns during the last

five years.

The fouowing information of the transferee company is required by the auditor:

(i) Names of the existing directors of the bompany.

(ii) List of common shareholders of the companies involved in the amalgamation with individual shareholding.

(iii) Authorised and paid up capital of the company.

(iv) Copy of latest audited balance sheet.

The auditors may also require the following records of the transferor company for exarnination :

(a) Books of accounts and relevant records for the last five years"

(b) Minutes book of Board and General Meetings.

Question 4

(a) You are engaged by a Bank for conducting the due diligence on behalf of the bank and submission of Diligence

Report. What are the check points to be observed which may be concluded as Suggested alerts. (4 marks)

Ans. The following check points should be included as suggested alerts:

(a) Disproportionately large cash payments in relation to normal requirements in a company of its size

(b) Frequent circular transactions between various bank accounts

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June 2018

(c) lnordinate delay in submission of stock statements/book debts/quarterly filings to the Bank(s)

(d) Large ditferences between MSOD/QIS2/FFR etc. with stock statements and inventory regularly and par-

ticularly as on date of balance sheet.

(e) Delay/default in meeting statutory payments

(f) Any apparent unrelated payment(s) that come to notice

(g) Disproportionate holding of Work-in-progress (WlP)

(h) Regular on account payments to creditors

(i) Regular on account payments from debtors

0) Any differential pricing system to associates

(k) Any attachment of bank accounts from statutory authorities (input from bank)

(l) Borrowings from unconventional sources

(m) Dishonour of cheques

(n) Unduly large sales returns/return of bills

(o) Lack of tie ups in project finance resulting in diversion of short term funds

(p) Winding-up cases if any filed against the company

(q) tnsolvency proceedings against any of the promoter(s)idirecto(s) .

(b) The significant of the competition Law lies in aiming at promoting competition rather than focusing on curbing

monopolies. ExPlain. $ marks)

Ans. The significance of competition law lies in aiming at promoting competition rather than focusing on curbing

monopolies. Business community needs to be fully aware that while anti competitive business practices may

bring about shortterm profits,to individual corporations, in the long run they in fact become less competitive'

Genuine business competitiveness is demonskated through fierce competition in individual markets, and only

competitiveness that survives market competition can sustain itself in the long term. All businesses have a duty

to act lavrrfully, but there are more practical reasons why compliance with competition law is particularly impor-

tant. on a,broad level, the main aim of competition law is to ensure that markets remain competitive. Compli-

ance ensures that this aim is achieved to the benefit of both business and consumers. At an individual level,

businesses that comply with the law could avord the various consequences of non-compliance'

Compliance with competition law is more than just good corporate governance, as it reduces the risk of the

company being subject to an investigation by the Competition authorities. ln the event of violation of competition

law, business can face significant financial penalties, third party actions and loss of reputation and goodwill'

ln an era of global competition, voluntary compliance with competition law is becoming a global standard led

by the world,s most prominent internationat coiporations. This is due to the growing recognition that breach of

competition law brings about managerial burdens rather than market benefits to individual companies'

Corporations are thus obliged to firmly build up a business philosophy of abiding by established-rules.of fair

market competition. ln recognition of these facts, it becomes essential that all companies strive for voluntary

observance of fair market discipline, and in the process help lay a cornerstone for a mature culture of corpo-

rate comPliance.

(c) competition is one of the major factors for merging of business besides to sustain and excel, though such

merger is not free from its own negatives with reference to competrtion Hrghlight the factors to be considered

while evaluating the appreciable adverse effect on competition of comblnation of Business. (5 marks)

Ans. The following factors are considered by the Commission while evaluatlng appreciable adverse effect of

Combinations on competition in the relevant market:

(i) Actualand potential levelof competition through rmports rn the market;

(ii) Extent of barriers to entry into the market;

(iii) Level of concentration in the market ;

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Lawpoint's CS So/uffons - SACMDD

(iv) Degree of countervaillng power in the market;(r) Likelihood that the combination would result in the parties to the combination being able to significantly

and sustainably increase prices or profit margins;

{vi) Extent of effective competition likely to sustain in a market;(vii) Extent to whlch substitutes are available or are likely to be available in the market;

(viii) Market share, in,the relevant market, of the persons or enterprise in a combination, individually and as acombination;

(ix) Likelihood that the combination would result in the removal of a vigorous and effective competitor orcompetitors in the n'rarket:

(x) Nature and extent of vertical integration in the market;(xi) Possibility of a failing business;(xii) Nature and extent of innovation,(xiii) Relative advantage, by way of the contribution to the economic deveiopment, by any combination hav-

ing or"likely to have appreciable adverse effect on competition;(xiv) Whether the benefits of the combination outweigh the adverse impact of the combination, if any.

Question 5

(a) Write short notes on the following:(i) Breaking legal due diligence hurdles

Ans. The following points are considered as hurdles while undertaking due diligence:

(i) Non availability of information:(i,) Unwillingness of target company's personnel in providing rhe complete information:(iii) Providing of incorrect information:(iv) Compiex tax policies and hidden liabilities:(v) Multiple Regulations and its applicability:(vi) Process in providing data:(vii) Absence of proper MIS:

The following actions may break the aforesaid hurdles:(a) Focus follow up questions.(b) Ask severalpeople the same guestions and utilise appropriate professional skepticism.(c) Polite persistence may help to overcome this attitude.(d) lndependent check with regulatory authorities,

(ii) Charges requiring RegistrationAns. The following are the list of charges requiring registration:(i) Charge for the purpose of securing any issue of debentures;(ii) Charge on uncalled share capital of the company;

(3 marks)

(3 marks)

(iii) Charge on any immovable property, where-ever situate, or any interest therein;(iv) Charge on any book debts of the cotipany;(v) Charge, not being a pledge, on any movable property of the company;(vi) Floating charge on the undertaking or any property of the company including stock-intrade;(vii) Charge on calls made but not paid;(viii) Charge on a ship or any share in ship;(ix) Charge on goodwill, or on a patent or a license under a patent, or on a trade-mark, or on a copy-

right, or a license under a copyright;(x) Charges on properties acquired subject to any charge thereon.

(iii) Compliance Risk p marks)

June

(b) t

(

o(a

*

June 20'18

ffiisthecurrentandprospectiverisktoearningsorcapitalarisingfromviolationsofor non.conformance with, larvs, ruies, regulations, prescribed Pract.ices,.i.::T:l::',:ff;::?jil",iij.l;l,:::|il;:?H'f;:tT fiil;il"Jr".;.,#- ;;stitution to rines, civir monev penarties, pavment or damases'

and the voiding of contracts. compriance risk can read to diminished reputation, reduced expansion po-

tentral and an inability to enforce contracts'

(b) Define the following terms: (3 marks)(i)

h"J:: 'r::jioo* is the reast expensive and rowest in tevetto provide for insurance if shares in ADR form

intheUS.ThecompanyissuingADRshastocomplywiththeSECregistrationrequirementsbutcanbeexemptedfr<.lmfullsECreportingrequirementsunderspecificcircumstances.Thecompanyisnotre-quiredtoissuequartepgraderlyorr*urrreportincompliancewithUSGAPP'TheADRscanbetradedonoverthecounierandarenotlistedonstockexchangesintheUS.CompanieswithsharetradingwiihLever r programme may decide to upgrade their programme to Lever 2 or Level 3 programme for better

exposure. (3 marks)(ii) Corporate Compliance Committee

Ans.CorporatecompliancecommitieeistobeconstitutedundertheauthorityoftheBoard'Themem-bers of the committee may be serected from the professional directors and senior management in the field

of finance and law

TheprimaryresponsibilityoftheCorporateComplianceCommitteeistooverseethecompany,sCorpo-rate bompliance Program with respect to:

(a)compliancewiththelaws,rulesandregulationsapplicabletothecompany;(b) Compliance with the Company's Code of Conduct;

(c) Compliance with Company's policies and procedures;

(d) Cornpliance with established standards'

(e)Compliancewithpreventionanddetectionoffraud,misappropriationetc.(f) oversight of the risk ,rnrg"*"nt activities of the company and the proteciion of stakeholders;

(g)Makingrecommendationtorevisethecompliancemanagementprogramme

Question 6

(a) Merger and Amargamation aims_at stabirity, deveropment and expansion of business prospects, the decision

being based on a-prudent Due Diligen"" pro.".". braft a Due Diligence Process in a tabular *ti;^;"j)[]buyer and seller.

Ans. Due Diligence Process in ts. DueFor seller

Stages For Buyer. Structure a Business Plan

r Preparation of list of potentialbuyers

. Appoint extemal advisor

. Shortlist buYers

PreparationStage

. M&A StrategY formulation

r Preparation of List of potentialtargets

. Appoint external advisor for evalua-

tion of targets

. Short list targets

. create Due diliqence teamo Approach buYers

. Negotiateinitialtermsc ExeqJtion of Non-Disclosure agreement

. Greation of Data room

Pre diligence r Approach targets

. Negotiation of initial terms

o Execute Ncn Disclosure Agreement

. Compilation of list of data reqUired

-

q

(b)


What are the Auditing Limited Review to be disclosed by a Listed Entity who has listed its lndian Depository

Due diligence r lnspection of Data roomr Analysis of private documentso Evaluation of risk and returnr Structure the terms and conditions

Assistance in data room

Setting deadlines for offer

a

a

Negotiations . Make final offer. Negotiate and agree on terrns

Compile final offers

Select best offerNegotiations

a

a

a

Post diligence (d) Post merger integration and culturaladjustments

(e) Termination of data room and owner-ship exchange

Receipts as per Part B of Schedule lV of SEBI (LODR) Regulations,2015 ? (5 marks)

Ans. The listed entity shall comply with the following requirements while preparing the financial results forAuditing/ Limited Review:(i) ln case the listed entity prepares and discloses the financial results as per lndian GAAP, the listed entity

shall ensure that the annual, half yearly and/or quar:terly results, as required under the laws , rules orregulations of home country, shall be audited or subject to limited review by a Chartered Accountant inaccordance with Auditing ad Assurance Standards

(ai) ln case the listed entity prepares and discloses the financial results as per US GAAP or IFRS, the iisted

entity shall ensure that the annual, half yearly and/or quarterly results, as required under the laws, rules

or regulations of home country shall be audited or subject to limited review by professional accountant or

certified public accountant in accordance with the lnternational Standards on Auditing. The auditor's re'port shall also be prepared in accordance with the lnternational Standards on Auditing:

(iii) The listed entity shall disclose the audit qualification(s) or any other audit reservation(s) along with the fi-nancial results in addition to the explanatory statement as to how audit qualification(s) or any other audit

reservation(s) in respect of the audited. accounts of the previous accounting year have been addressed in

the financial results;

(c) X Ltd. received a quotation from the brokers contemplating for t 10 Crore of Commission to procure a sub-

scription for its public issue of Equity Shares with a nominal value of { 100 Crore at an issue price of t 150

Crore. The Articles of Association of X Ltd. permits to pay only 4o/o commission for the same. As a Company

Secretary, advise on the issue. Would your answer differ, if the issue price is t 250 Crore ? (5 marks)

Ans. As per rule 13(c) of the Companies (Prospectus and Allotment of Securities) Rules 2014 the rate of

commission to be paid shall not exceed 5% of the price at which the shares are issued or a rate authorized by

the artibles of association whichever is less.

ln the given case the commission therefore shall not exceed the following:

5% of issue price of {150 crore = {7.5 crore

4% of issue price as authorised in the articles = (6 crore

The less amount of { 6 crore can be paid.

However, in case the issue price is t250 crore, the commission can be paid @4o/o = t10 crore.

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