IGNOU| COMPANY LAW (BCOE - 108/ ECO - 08)| SOLVED PAPER – (DEC - 2023)| (BDP)| ENGLISH MEDIUM
BACHELOR'S DEGREE PROGRAMME
Term-End Examination
December - 2023
BCOE-108/ECO-08
COMPANY LAW
Time: 2 hours
Maximum Marks: 50
(Weightage: 70%)
Note: Answer any five questions.
1. Define a company. Explain the essential features of a company. 2,8
Ans:- Company is defined as a voluntary association
of individuals who contribute money or money's worth to a common fund and use
it for a specific purpose. It is an artificial person that exists as a
corporate legal entity distinct from its original members or shareholders, and
a common authentication is used for its signature.
The
essential features of a company include:-
(i)
Corporate body: A company must be registered under the Companies Act, 2013, and
any other organization not registered cannot be considered a company.
(ii)
Separate legal entity: A company exists as a separate legal entity
distinct from its shareholders and members. This feature allows shareholders to
enter into contracts with the company and the company to sue and be sued by its
members or other parties.
(iii)
Limited liability: The liability of the members of a company is
limited to the extent of the shares held by them or the guarantee amount, as
distinct from the liability of shareholders in a partnership.
(iv)
Transferability of shares: Shareholders of a public limited company can
transfer their shares as per the rules laid down in the articles of association.
However, there may be restrictions on share transfer in private limited
companies.
(v) Common
seal: The company, being an artificial entity, cannot sign its own
name. Therefore, it uses a common seal to represent its decisions.
(vi)
Perpetual succession: The company, being an artificial person,
continues to exist regardless of changes in its membership, such as death,
bankruptcy, retirement, or insanity.
(vii)
Number of members: The minimum number of members required to
start a public limited company is seven, while for a private limited company it
is two. The maximum number of members for a public limited company can be
unlimited, while for a private limited company it is limited to 200.
These
essential characteristics distinguish a company from other types of business
organisations, such as partnerships, and provide the legal framework for its
operation and management.
2. Define memorandum of association. What are the differences
between memorandum of association and articles of association? 2,8
Ans:- Memorandum of Association (MOA) is a
fundamental legal document that outlines the constitution, objectives and scope
of operations of a company. It serves as a reference for the company's
functions, legal capacity and relationship with stakeholders.
On the
other hand, Articles of Association (AOA) are the rules governing the company's
internal management, specifying the rights, responsibilities and duties of
members, shareholders and directors.
The main
differences between the two are:-
(i) Nature
and scope: MOA defines the fundamental constitution and external boundaries
of the company, while AOA focuses on internal management and operational rules.
(ii)
Public access: MOA is a public document accessible to anyone, displaying the
fundamental details, objectives and legality of the company. In contrast, AOA
is an internal document that is shared only with relevant stakeholders.
(iii)
Change process: Making amendments to the MOA requires a special resolution and
regulatory approval, ensuring that the main objectives are safeguarded. The AOA
can be amended more easily through a simple resolution during the general
meeting.
(iv)
Relationship with shareholders: The MOA establishes a contractual
relationship between the company and shareholders based on defined objectives.
The AOA governs internal affairs and interactions between stakeholders.
These
differences highlight the important roles of the MOA in defining the company's
identity and external boundaries, while the AOA focuses on internal governance
and operational guidelines.
3. What is irregular allotment? What are the consequences of
irregular allotment? 4,6
Ans:- Irregular allotment of shares occurs when a
company issues shares in violation of the law or its own articles of
association.
Some of
the major circumstances that may lead to irregular allotment include:-
(i) The
prospectus was not filed with the registrar before the allotment
(ii) The
minimum subscription amount was not received before the shares were allotted to
the public
(iii) The
allotment violates the provisions of the Companies Act or the articles of the
company
(iv) The
allotment is made by an individual director instead of the board of directors
(v) The
allotment violates the requirements for listing the shares on the stock
exchange
Irregular
allotment refers to the allotment of shares by a company in violation of
specific provisions mentioned in the company laws.
The
consequences of irregular allotment are significant and are detailed in the
Companies Act, 1956 and the related regulations:-
(i)
Voidability of allotment: An allotment made by a company in violation of
certain sections of the Companies Act, such as Section 69 or 70, is deemed to
be void. This means that the allotment can be challenged by the applicant
within a specified time limit.
(ii) Time
limit for challenge: The applicant has a limited period to
challenge an irregular allotment. Generally, the allotment can be held void
within two months after the statutory meeting of the company or within two
months after the date of allotment, depending on the circumstances.
(iii)
Liability of directors: If a director of a company knowingly violates
the provisions relating to allotment or permits such violation, he is held
liable to indemnify the company and the allottee for any loss, damage or cost
incurred as a result of the irregular allotment.
(iv)
Limitation on recovery: Proceedings to recover loss, damage or costs
incurred as a result of an irregular allotment must be commenced within two
years from the date of allotment. After this period, the right to seek
compensation is time-barred.
In brief,
irregular allotment involves improper allotment of shares by the company,
causing the allotment to become void, potential liability for directors and a
limited time limit to challenge and seek compensation for any loss caused by
the irregularity.
4. Distinguish between the following: 5,5
[COMING SOON]
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