Modules 1-3

Total: 35 Marks

 Please read the instructions carefully:                                                                                                                                        

• All questions and sub-questions are compulsory.
• There are FOUR (4) Questions in total. THREE (3) Questions for 10 marks each. And 1 Question for 5 marks.
• The word/sentence limit for each question has been provided below each question. Kindly adhere to it. Submissions that exceed the word/sentence limits by more than 15% will be penalized.
• All submissions must be made on the UMS portal in WORD format (and not as PDFs or any other formats). Write the Question Number correctly against every Answer.
• All submissions must be on UMS made before the deadline. The deadline is 10^th December, 2022 (11:59PM). Any submissions by email after the deadline (unless expressly authorized previously in the form of an extension) will be penalized as per the rules.
• This Question Paper has total of FIVE (5) pages.

Question 1 10 Marks

Mukesh and Suresh completed their degrees in electrical engineering from Stanford University, USA and returned to India. Together, they researched and created a design for electric cars which would be suitable for Indian market. Subsequently, they applied and attained the patent license for the same. On 15^th September 2019, they registered a private company called ‘Magix Cars Pvt. Ltd. (Magix)’ having a registered office in Delhi. The Memorandum of Association (MOA) included the following in its object clause:

1. ‘To design, develop, manufacture and sell high-performance fully electric motor vehicles such as trucks, lorries, omnibuses, buses, motorcycles, cars, scooters, tractors, bulldozers and steam rollers of every description and kind.
2. To design, develop and manufacture all component parts, spare parts, accessories, equipment and apparatus for use in connection therewith.
3. To carry on business as manufacturers, importers and exporters of and dealers in machinery articles and goods of all classes and kinds whatsoever required in connection of main object therein and to carry on as Electrical, Mechanical Engineers and General Contractors of any nature and kind.
4. To carry out or perform all such legal formalities or compliances with statutory requirements to carry out abovementioned objects.

…’

Magix has a total of 4 shareholders including Mukesh (40% voting power); Suresh (30% voting power); Seema (20% voting power) and Sarika (10% voting power). The company has two board of directors i.e. Mukesh and Suresh.

1. In January, 2021, the Government of Haryana invited bids for construction of six-lane access-controlled highway from Rohtak to Karnal. In February, Magix applied for the bid and was awarded the contract for the same. Pursuant to contract, the directors of Magix called a shareholder’s meeting wherein this action was ratified via special resolution. In the meeting, Sarika voted against the ratification of such contract. After the meeting she has approached you to advise her regarding the legal validity of such contract and any legal actions that can be taken against such contract. Discuss with the relevant case laws and provisions.

3 marks

(maximum 250 words)

• The Articles of Association of Magix states that ‘if any shareholder wants to sell their shareholding then they must first offer it to the existing shareholders in equal percentage. If all or any of the existing shareholder(s) refuse(s) to purchase the same, then the selling shareholder might offer those shares to a third party with prior approval of the board of directors.’ On 30^th September 2019, Seema and Sarika entered into an agreement wherein they agreed that ‘in case any either of them would sell their shares in Magix, they would first offer it to each other first.’ The parties also informed the board of directors about this agreement. On 15^th April, 2020, Sarika sold her 10% shareholding to Seema. However, the board of directors refused to register such transfer. Discuss if such refusal to register the transfer of shares is justified. Discuss with the relevant case laws and provisions.

4 marks

(maximum 300 words)

• Before incorporation, on 1^st September 2019, Mr. Mukesh entered into a contract on behalf of the company with Mr. Shankar, a company secretary for his assistance in incorporation of the Company. In total, the company had to pay Rs. 60,000/- to Mr. Shankar. Post the incorporation, on 25^th September, 2019, the company made half payments (Rs. 30,000/-) towards the contract with Mr. Shankar. After that, the company kept delaying the payments, even after several demands were made by Mr. Shankar. Finally, on 30^th November, 2019, the Company refused to perform the contract and alleged that it was never a party to such a contract and hence, not obligated to pay. Advise whether Mr. Shankar can enforce such contract against the Company. Discuss with the relevant case laws and provisions.

3 marks

(maximum 250 words)

‘Facegram Pvt. Ltd.’ (‘FaceGram’) is a private company in India which runs a social media application wherein people share pictures and videos from their daily lives. The Company was incorporated in 2005 having their registered office at Delhi. The company has an authorized

share capital of Rs. 20,00,00,000 (Twenty Crores only) divided into 20,00,000 shares of Rs. 100 each. Out of these 20,00,000 shares, around 15,00,000 shares are equity shares and 5,00,000 shares are preference shares. The company has already issued 10,00,000 equity shares and 2,00,000 preference shares to around 100 members.

1. In December 2020, Mr. Tripathi is an IT expert who created several computer programmes for adding new photo features like filters, stories, reels etc., to a social media application like FaceGram. He has copyright over his programmes. FaceGram’s directors believe that these features would add to the popularity their application. They negotiated with Mr Tripathi and offered him position in their top management. Mr. Tripathi also agreed that company can use his copyrighted programmes valued at Rs. 10,00,000/-. The company wants to compensate Mr. Tripathi for his copyrights in terms of shares. Suggest a suitable method for issue of such shares in accordance with the provisions of the Companies Act, 2013.

(3 Marks)

(maximum 250 words)

• In September 2021, the company goes public. In the prospectus, the directors of the company mentioned that ‘the company has already carried on substantial research in exploring the metaverse technology. A portion of money which would be raised via public issue would be further utilized in such research. The company would prepare a metaverse application which would definitely be launched in the year 2022-2023.’ Shortly after the issue, the shareholder came to know that the company did, in fact, carry research in metaverse prior to the public issue only to conclude that currently any application would not be of commercial use and exploitation. Advise the shareholders if they can bring a misstatement case against the company and its directors. Rely on the relevant case laws and provisions of the Act.

(4 Marks)

(maximum 300 words)

• The company in 2022-2023 has already done 4 private placement rounds of preference shares in the following manner.

Time	No. of Identified Persons	No. of Preference Shares
May 2022	40	50
July 2022	39	50
August 2022	86	50
October 2022	34	50

In    November    2022,    the    company   has    approached    two    investors       (identified individuals/persons) for issuing 100 preference shares each. Discuss whether the company make such private placement shares in accordance with the provisions of the Companies Act, 2013.

(3 Marks)

(maximum 250 words)

Annie, Aliya and Atul are three automotive engineers who started a car design company called Auto Drive Pvt. Ltd. (Auto Drive). The object of the company is to ‘develop and design cars with new age requirements including sustainability, green energy compatibility, recyclability and minimal carbon footprints.’; and subsequently ‘sell such designs to car manufacturing companies.’ In 2018, the company became a public limited company. The company has total of three directors i.e. Annie, Neil and Nitin. The company has five other members who provided them with funds during various investment-raising rounds. The voting power of the members is as follows:

S. No.	Member	Voting Power
1	Annie	21 %
2	Aliya	25 %
3	Atul	20 %
4	Car Engine Pvt. Ltd.	10 %
5	Ms. F	5 %
6	Surya Ltd.	5 %
7	Mr. E	10 %
8	Mr. G	4 %

a. Car Engine Pvt. Ltd. was an important member of Auto Drive. They agreed to bring in the technical know-how to the company. In July 2022, Car Engine alleged that they were being oppressed as a minority shareholder in the company and demanded the removal of Ms. Annie as the Managing Director. On 8^th August, 2022, Car Engines and Ms. F submitted a requisition for holding a general meeting. Vide notice dated 25^th August; the BOD proceeded to call a meeting on 25^th September. Meanwhile, on 19^th August, since the requisitionists did not hear from BoD convening the meeting, they proceeded to call a meeting on 4^th September, 2022. They felt that the directors were unnecessarily delaying the meeting date and time was of the essence in this matter. They issued a notice on 20^th August, 2022 to conduct a meeting on 4^th September, 2022. In light of the provisions of the Act, discuss the validity of these extra-ordinary general meetings, i.e. meetings dated 25^th September, 2022 as well as 4^th September, 2022.

(3 Marks)

(maximum 250 words)

1. Auto Drive Ltd. decided to conduct its AGM on 15^th November 2022 at 5:00 PM. The AOA of the company provided regulation pertaining to proxy as per Sec 105(2). It also provided that ‘the instrument appointing the proxy should be submitted with the company at least 96 hours before the meeting’. Mr. Atul appointed Ms. S as his proxy as he had some prior engagements on the date of the meeting. He was able to submit the instrument to the company on 14^th November at 5:00 PM. Discuss the validity of this proxy instrument in accordance with the provisions of the Act.

(3 Marks)

(maximum 250 words)

• In July 2022, the company called for its Annual General Meeting. One of the matters transacted in the AGM was appointed of Mr. Nakul as auditor of the company. In the show of hands, E, G, F, Car Engines and Atul voted in favour of the appointment. Annie and others voted against it. Annie feels strongly against the appointment of Mr. Nakul. However, in the show of hands, majority has voted in the favour of the appointment. Discuss whether Annie can take any action which might render the resolution decision according to her.

(4 Marks)

(maximum 300 words)

When an employee accepts Employee Stock Option Plans (ESOPs) as part of their compensation package, it does not lead to immediate grant of Company’s shares in their favour. Discuss whether you agree or disagree with this statement.

5 marks

(maximum 350 words)

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