{"id":15892,"date":"2023-03-10T17:23:21","date_gmt":"2023-03-10T11:53:21","guid":{"rendered":"https:\/\/gstguntur.com\/?p=15892"},"modified":"2023-03-13T14:39:33","modified_gmt":"2023-03-13T09:09:33","slug":"preliminary-ca-inter-law-study-material","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/preliminary-ca-inter-law-study-material\/","title":{"rendered":"Preliminary \u2013 CA Inter Law Study Material"},"content":{"rendered":"<p>Preliminary \u2013 <a href=\"https:\/\/gstguntur.com\/ca-inter-law-study-material\/\">CA Inter Law Study Material<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n<h2>Preliminary \u2013 CA Inter Law Study Material<\/h2>\n<p><strong>Definitions<\/strong><\/p>\n<p>Question 1.<br \/>\nX Industries Ltd. is a company in which 25% of shareholding is held by Central Government; 10% shareholding is held by Government of Maharashtra and 15% shareholding is held by Central Government and Government of Rajasthan jointly. Examine whether, X Industries Ltd. Is a government company.<br \/>\nAnswer:<br \/>\nGovernment Company:<\/p>\n<ul>\n<li>As per Sec. 2(45) of Companies Act, 2013, government company means any company in which not less than 51% of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a government company.<\/li>\n<li>In the given case, X Industries Ltd. is a company in which 25% of shareholding is held by Central Government; 10% shareholding is held by Government of Maharashtra and 15% shareholding is held by Central Government and Government of Rajasthan jointly.<\/li>\n<li>Total shareholding of X Industries Ltd. held by various governments is 50%.<\/li>\n<\/ul>\n<p>Conclusion: X Industries Ltd. is not a government company as the shares held by various<br \/>\ngovernments in aggregate is less than 51%.<\/p>\n<p>Question 2.<br \/>\nThe statutory auditors of a company were required to issue a certificate on the net worth of the company as per the requirement of the management as of 30 September 2022 computed as per the provision of section 2(57) of the Companies Act, 2013.<\/p>\n<p>The company had fair valued its property, plant and equipment in the current year which was mistakenly taken into retained earnings of the company in its books of account. Please advise whether this fair valuation would be covered in the net worth of the company as per the legal requirements.<br \/>\nAnswer:<br \/>\nComputation of Net Worth:<\/p>\n<p>As per Sec. 2(57) of Companies Act, 2013, net worth means the aggregate value of the paid-up share capital and all reserves created out of the profits, securities premium account and debit or credit balance of profit and loss account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation.<\/p>\n<p>In the given case, company had fair valued its property, plant and equipment in the current year which was mistakenly taken into retained earnings of the company in its books of account.<\/p>\n<p>Conclusion: Even if the company has taken the fair valuation to the retained earnings in its books of account, the resultant credit in reserves would be in the category of &#8216;reserves created out of revaluation of assets&#8217; which is specifically excluded in the definition of &#8216;net worth\u2019 in Sec. 2(57) and hence should be excluded by the company.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Preliminary \u2013 CA Inter Law Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 3.<br \/>\nIn a company, a default was committed with respect to the allotment of shares by the officers. In company there were no managing director, whole time director, a manager, secretary, a person charged by the Board with the responsibility of complying with the provisions of the Act, and neither any director\/directors specified by the board. Examine, the persons who can be treated as Officer in Default.<br \/>\nOR<br \/>\nJohnson Limited goes for public issue of its shares. The issue was oversubscribed. A default was committed with respect to allotment of shares by the officers of the company. There were no Managing Director, Whole time Director or any other officer\/person designated by the Board with the responsibility of complying with the provisions of the Act.<\/p>\n<p>State, who are the persons considered as officers in default under the Companies Act, 2013. Examine who will be considered in default in the instant case.7 [July 21 (5 Marks)]<br \/>\nAnswer:<br \/>\nOfficer in Default:<br \/>\nAs per Sec. 2(60) of Companies Act, 2013, officer who is in default, for the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely:<\/p>\n<ol>\n<li>whole-time director;<\/li>\n<li>key managerial personnel (KMP);<\/li>\n<li>where there is no KMP, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified;<\/li>\n<li>any person who, under the immediate authority of the Board or any KMP, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;<\/li>\n<li>any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity;<\/li>\n<li>every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance; and<\/li>\n<li>in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer.<\/li>\n<\/ol>\n<p>Conclusion; In the given case, there were no managing director, whole time director, a manager, secretary, a person charged by the Board with the responsibility of complying with the provisions of the Act, and neither any director\/directors specified by the board. Therefore, in such situation, all the directors of the company may be treated as officers in default.<\/p>\n<p>Question 4.<br \/>\nFlora Fauna Limited was registered as a Public Company. There are 230 members in the company as noted below:<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td width=\"37\">(a)<\/td>\n<td width=\"481\">Directors and their relatives<\/td>\n<td width=\"46\">50<\/td>\n<\/tr>\n<tr>\n<td width=\"37\">(b)<\/td>\n<td width=\"481\">Employees<\/td>\n<td width=\"46\">15<\/td>\n<\/tr>\n<tr>\n<td width=\"37\">(c)<\/td>\n<td width=\"481\">EX&#8217;Employees (Shares were allotted when they were employees)<\/td>\n<td width=\"46\">10 &#8216;<\/td>\n<\/tr>\n<tr>\n<td width=\"37\">(d)<\/td>\n<td width=\"481\">5 couples holding shares jointly in the name of husband and wife (5*<a href=\"#_ftn2\" name=\"_ftnref2\"><\/a>2)<\/td>\n<td width=\"46\">10<\/td>\n<\/tr>\n<tr>\n<td width=\"37\">(e)<\/td>\n<td width=\"481\">Others<\/td>\n<td width=\"46\">145<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The board of directors of the company propose to convert it into a private company. Also, advice whether reduction in the number of members is necessary.<br \/>\n<a href=\"#_ftnref1\" name=\"_ftn1\"><\/a>Answer:<br \/>\nConversion from public company to private company:<\/p>\n<p>As per Sec. 2(68) of the Companies Act, 2013, &#8220;Private Company\u201d means a company having a minimum paid-up share capital as may be prescribed, and which by its articles, except in case of OPC, limits the number of its members to 200.<\/p>\n<p>However, where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member.<\/p>\n<p>It is further provided that &#8211;<br \/>\n(A) persons who are in the employment of the company; and<br \/>\n(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members.<\/p>\n<p>In the instant case, Flora Fauna Limited may be converted into a private company only if the total members of the company are limited to 200. Total Number of members, for this purpose are computed as below:<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td width=\"35\">(i)<\/td>\n<td width=\"179\">Directors and their relatives<\/td>\n<td width=\"36\">50<\/td>\n<\/tr>\n<tr>\n<td width=\"35\">(ii)<\/td>\n<td width=\"179\">5 couples (5*1)<\/td>\n<td width=\"36\">5<\/td>\n<\/tr>\n<tr>\n<td width=\"35\">(iii)<\/td>\n<td width=\"179\">Others<\/td>\n<td width=\"36\">145<\/td>\n<\/tr>\n<tr>\n<td width=\"35\"><\/td>\n<td width=\"179\">Total<\/td>\n<td width=\"36\">200<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Conclusion: There is no need for reduction in the number of members since existing number of members does not exceed maximum limit of 200.<\/p>\n<p>Question 5.<br \/>\nA Pvt. Ltd. is wholly owned subsidiary of AB Ltd., a public company incorporated under the Companies Act, 2013. A Pvt Ltd. wanted to avail exemptions as provided to private companies. Examine whether A Pvt Ltd. can do so.<br \/>\nAnswer:<br \/>\nStatus of wholly owned private subsidiary company:<\/p>\n<ul>\n<li>As per Sec. 2(71) of Companies Act, 2013, Public company means a company which:<br \/>\n(a) is not a private company; and<br \/>\n(b) has a minimum paid-up share capital as may be prescribed.<\/li>\n<li>It is also provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles.<\/li>\n<\/ul>\n<p>Conclusion: Since A Pvt. Ltd. is subsidiary of AB Ltd., which is a public company, therefore A Pvt. Ltd. will be deemed to be a public company and will be not allowed to avail exemptions provided to a private company.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Preliminary \u2013 CA Inter Law Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 6.<br \/>\nExamine the below mentioned situation and answer whether the entities are related parties for the purpose of Sec. 188:<br \/>\n(i) XYZ Pvt Ltd. has two subsidiary companies, Y Pvt Ltd. and Z Pvt Ltd.<br \/>\n(ii) XYZ Ltd. a public company, has two subsidiary companies, Y Pvt. Ltd and Z Pvt. Ltd.<br \/>\nAnswer:<br \/>\nRelated Parties:<\/p>\n<p>As per the section 2(76)(viii), related party with reference to a company, means any body corporate which is:<\/p>\n<p>(A) a holding, subsidiary or an associate company of such company;<br \/>\n(B) a subsidiary of a holding company to which it is also a subsidiary; or<br \/>\n(C) an investing company or the venturer of the company.<\/p>\n<ul>\n<li>However, clause (viii) shall not apply with respect to Sec. 188 to a private company.<\/li>\n<li>As per Sec. 2(71), a private company which is a subsidiary of a public company will be deemed to be a public company.<\/li>\n<\/ul>\n<p>Conclusion: Applying the provisions as stated above, following conclusions may be drawn:<\/p>\n<ol>\n<li>Y Pvt. Ltd and Z Pvt. Ltd are not related parties for the purpose of Sec. 188. However, if Y Pvt. Ltd and Z Pvt. Ltd. have common directors, then they will be deemed to be related parties because of section 2(76)(iv).<\/li>\n<li>As a private company which is a subsidiary of a public company will be deemed to be a public company, so the exemption that provisions of Sec. 188 not applicable to private companies, will not be available to Y Pvt. Ltd and Z Pvt. Ltd. Hence, Y Pvt. Ltd and Z Pvt. Ltd are related parties. In addition, XYZ Ltd. will also be related Party to Y Pvt. Ltd and Z Pvt. Ltd.<\/li>\n<\/ol>\n<p>Question 7.<br \/>\nThe paid-up share capital of Saras Private Limited \u20b9 1 crore, consisting of 8 lacs Equity Shares of \u20b9 10 each, fully paid-up and 2 lacs Cumulative Preference Shares of \u20b9 10 each, fully paid-up. Jeevan (JVN) Private Limited and Sudhir Private Limited are holding 3 lacs Equity Shares and 50,000 Equity Shares respectively in Saras Private Limited. Jeevan Private Limited and Sudhir Private Limited are the subsidiaries of Piyush Private Limited. With reference to the provisions of the Companies Act, 2013 examine whether Saras Private Limited is a subsidiary of Piyush Private Limited? Would your answer be different if Piyush Private Limited has 8 out of 9 Directors on the Board of Saras Private Limited? [RTP-May 18, May 19]<br \/>\nAnswer:<br \/>\nStatus of Subsidiary company:<\/p>\n<p>As per Sec. 2(87] of the Companies Act 2013 &#8220;subsidiary company&#8221; or &#8220;subsidiary&#8221;, in relation to any other company (that is to say the holding company], means a company in which the holding company:<\/p>\n<ol>\n<li style=\"list-style-type: none;\">\n<ol>\n<li>controls the composition of the Board of Directors; or<\/li>\n<li>exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies:<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>For the purposes of this clause:<\/p>\n<p>(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause<\/p>\n<ol>\n<li style=\"list-style-type: none;\">\n<ol>\n<li>or sub-clause<\/li>\n<li>is of another subsidiary company of the holding company;<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>(b) the composition of a company&#8217;s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors.<\/p>\n<p>In the present case, Jeevan Private Limited and Sudhir Private Limited together hold less than one half of the total share capital.<\/p>\n<p>Conclusion: Applying the provisions as stated above, it can be concluded that Piyush Private Limited (holding of Jeevan Private Limited and Sudhir Private Limited] will not be a holding company of Saras Private Limited.<\/p>\n<p>However, if Piyush Private Limited has 8 out of 9 Directors on the Board of Saras Private Limited i.e. controls the composition of the Board of Directors; it (Piyush Private Limited] will be treated as the holding company of Saras Private Limited.<\/p>\n<p>Question 8.<br \/>\nMNP Private Ltd. is a company registered under the Companies Act, 2013 with a, Paid Up Share Capital of \u20b9 1.80 crores and turnover of \u20b9 22 crores. Explain the meaning of the &#8220;Small Company&#8221; and examine the following in accordance with the provisions of the Companies Act, 2013:<\/p>\n<ol>\n<li>Whether the MNP Private Ltd. can avail the status of small company?<\/li>\n<li>What will be your answer if the turnover of the company is \u20b9 18 crore? [May 18 (6 Marks), MTP-Oct. 20]<\/li>\n<\/ol>\n<p>Answer:<br \/>\nDetermination of Status of Small Company:<\/p>\n<p>As per Sec. 2(85) of the Companies Act, 2013, Small Company means a company, other than a public company,<\/p>\n<ol>\n<li style=\"list-style-type: none;\">\n<ol>\n<li>paid-up share capital of which does not exceed \u20b9 50 lakh or such higher amount as may be prescribed which shall not be more than \u20b9 10 crore; and<\/li>\n<li>turnover of which as per its last profit and loss account does not exceed \u20b9 2 crore or such higher amount as may be prescribed which shall not be more than \u20b9 100 crore.<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>As per Rule 2(1)(t) of the Companies (Specification of Definitions Details) Rules, 2014, the paid-up capital and turnover of the small company shall not exceed \u20b9 2 crores and \u20b9 20 crores respectively.<\/p>\n<p>Nothing in this clause shall apply to:<\/p>\n<p>(A) a holding company or a subsidiary company;<br \/>\n(B) a company registered under section 8; or<br \/>\n(C) a company or body corporate governed by any special Act.<\/p>\n<p>Conclusion: Based on the provisions as stated above, following conclusions may be drawn:<\/p>\n<ol>\n<li style=\"list-style-type: none;\">\n<ol>\n<li>MNP Ltd. cannot avail the status of small company as turnover of the company is more than \u20b9 20 Crores.<\/li>\n<li>MNP Ltd. can avail the status of small company as it fulfils both criteria of paid-up capital (being less than \u20b9 2 crores) and turnover (being less than \u20b9 20 crores).<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>Question 9.<br \/>\nWhat does the term Financial Statements include in relation to a company under the Companies Act, 2013? Which companies need not prepare a cash flow statement? [Nov. 18 (4 Marks)]<br \/>\nAnswer:<br \/>\nFinancial Statements:<br \/>\nAs per Sec. 2(40) of Companies Act, 2013, Financial statement in relation to a company, includes:<\/p>\n<ol>\n<li>a balance sheet as at the end of the financial year;<\/li>\n<li>a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;<\/li>\n<li>cash flow statement for the financial year;<\/li>\n<li>a statement of changes in equity, if applicable; and<\/li>\n<li>any explanatory note annexed to, or forming part of, any document referred above.<\/li>\n<\/ol>\n<p>Companies Not requiring to prepare cash flow statement:<\/p>\n<p>The financial statement, with respect to OPC, small company, dormant company and private company (if such private company is a start up and has not committed a default in filing its financial statements u\/s 137 of the said Act or annual return u\/s 92 of the said Act with the Registrar), may not include the cash flow statement.<\/p>\n<p>Question 10.<br \/>\nTeresa Ltd. is a company registered in New York (U.S.A.). The company has no place of business established in India, but it is doing online business through data interchange in India. Explain with reference to relevant provisions of the Companies Act, 2013 whether Teresa Ltd. will be treated as Foreign Company. [Nov. 18 (6 Marks)]<br \/>\nAnswer:<br \/>\nForeign company:<\/p>\n<p>As per Sec. 2(42) of the Companies Act, 2013, foreign company means any company or body corporate incorporated outside India which:<\/p>\n<p>(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and<br \/>\n(b) conducts any business activity in India in any other manner.<\/p>\n<p>As per the Companies (Specification of Definitions Details) Rules, 2014, the term &#8220;electronic mode&#8221;, means carrying out electronically based, whether main server is installed in India or not, including, but not limited to:<\/p>\n<ol>\n<li>Business to business and business to consumer transactions, data interchange and other digital supply transactions;<\/li>\n<li>Offering to accept deposits or inviting deposits or accepting deposits or subscriptions in securities, in India or from citizens of India;<\/li>\n<li>Financial settlements, web based marketing, advisory and transactional services, database services and products, supply chain management;<\/li>\n<li>Online services such as telemarketing, telecommuting, telemedicine, education and information research; and<\/li>\n<li>All related data communication services, whether conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise;<\/li>\n<\/ol>\n<p>In the given question, Teresa Ltd. is a company registered in New York (U.S.A.). The company has no place of business established in India, but it is doing online business through data interchange in India.<\/p>\n<p>Conclusion: Teresa Ltd. will be treated as a foreign company since it is doing online business through<br \/>\ndata interchange in India even though the company has no place of business established in India.<\/p>\n<p>Note: Sec. 2(42) is not covered in Study Material of ICAI (Sep. 2021 Edition).<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Preliminary \u2013 CA Inter Law Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 11.<br \/>\nHerry Limited is a company registered in Thailand. It has no place of business established in India, yet it is doing online business through telemarketing in India having its main server for online business outside India. State the status of the company under the provisions of the Companies Act, 2013. (Nov. 19 (2 Marks)]<br \/>\nAnswer:<br \/>\nForeign Company:<\/p>\n<p>As per Sec. 2(42) of the Companies Act, 2013, &#8220;foreign company&#8221; means any company or body corporate incorporated outside India which &#8211;<\/p>\n<p>(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and<br \/>\n(b) conducts any business activity in India in any other manner.<\/p>\n<p>As per the Companies (Registration of Foreign Companies) Rules, 2014, &#8220;electronic mode\u201d means carrying out electronically based, whether main server is installed in India or not, including, but not limited to online services such as telemarketing, telecommuting, telemedicine, education and information research.<\/p>\n<p>Conclusion: Based on the legal provisions as stated above, it can be concluded that being involved in telemarketing in India having its main server for online business outside India, Herry Limited will be treated as foreign company.<\/p>\n<p>Note: Sec. 2(42) is not covered in Study Material of ICAI (Sep. 2021 Edition).<\/p>\n<p>Question 12.<br \/>\nSKP Limited (Registered in India), a wholly owned subsidiary company of Herry Limited decided to follow different financial year for consolidation of its accounts outside India. State the procedure to be followed in this regard assuming that Herry Limited is a foreign company. [Nov. 19 (2 Marks)]<br \/>\nAnswer:<br \/>\nFinancial year in case of a foreign company:<\/p>\n<p>As per proviso to Sec. 2(41) of Companies Act, 2013, where a company or body corporate, which is a holding company or a subsidiary or associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Central Government may, on an application made by that company or body corporate in such form and manner as may be prescribed, allow any period as its financial year, whether or not that period is a year.<\/p>\n<p>Hence, SKP Limited is required to make an application to the Central Government to follow a different financial year for consolidation of its accounts outside India in prescribed form and manner.<\/p>\n<p>Question 13.<br \/>\nThe information extracted from the audited Financial Statement of Smart Solutions Private Limited as at 31st March, 2022 is as below:<\/p>\n<p>(1) Paid-up equity share capital \u20b9 50,00,000 divided into 5,00,000 equity shares (carrying voting rights) of \u20b9 10 each. There is no change in the paid-up share capital thereafter.<br \/>\n(2) The turnover is \u20b9 2,00,00,000.<\/p>\n<p>It is further understood that Nice Software Limited, which is a public limited company, is holding 2,00,000 equity shares, fully paid-up, of Smart Solutions Private Limited. Smart Solutions Private Limited has filed its Financial Statement for the said year with the Registrar of Companies (ROC) excluding the Cash Flow Statement within the prescribed time line during the financial year 2022-23. The ROC has issued a notice to Smart Solutions Private Limited as it has failed to file the cash flow statement along with the Balance Sheet and Profit and Loss Account.<\/p>\n<p>You are to advise on the following points explaining the provisions of the Companies Act, 2013:<\/p>\n<p>(i) Whether Smart Solutions Private Limited shall be deemed to be a small company whose significant equity shares are held by a public company?<br \/>\n(ii) Whether Smart Solutions Private Limited has defaulted in filing its financial statement? (July 21 (6 Marks)]<\/p>\n<p>Answer:<\/p>\n<p>Determination of Status of Small Company:<\/p>\n<ul>\n<li>As per Sec. 2(85) of the Companies Act, 2013, Small Company means a company, other than a public company,\n<ol>\n<li>paid-up share capital of which does not exceed \u20b9 50 lakh or such higher amount as may be prescribed which shall not be more than \u20b9 10 crores; and<\/li>\n<li>turnover of which as per its last profit and loss account does not exceed \u20b9 2 crores or such higher amount as may be prescribed which shall not be more than 1100 crore.<\/li>\n<\/ol>\n<\/li>\n<li>Nothing in this clause shall apply to:<br \/>\n(A) a holding company or a subsidiary company;<br \/>\n(B) a company registered under section 8; or<br \/>\n(C) a company or body corporate governed by any special Act.<\/li>\n<li>As per Rule 2(l)(t) of the Companies (Specification of Definitions Details) Rules, 2014, the paid-up capital and turnover of the small company shall not exceed \u20b9 2 crores and \u20b9 20 crores respectively.<\/li>\n<li>As per Sec. 2(87), subsidiary company, in relation to any other company (that is to say the holding company), means a company in which the holding company exercises or controls more than 1\/2 of the total voting power either at its own or together with one or more of its subsidiary companies.<\/li>\n<li>In the given question, Nice Software Limited (a public company) holds 2,00,000 equity shares of Smart Solutions Private Limited (having paid up share capital of 5,00,000 equity shares @ \u20b9 10 totaling \u20b9 50 lakhs).<\/li>\n<\/ul>\n<p>Hence, Smart Solutions Private Limited is not a subsidiary of Nice Software Limited and hence it is a private company and not a deemed public company.<\/p>\n<p>Conclusion: As the paid-up share capital (\u20b9 50 lakhs) and turnover (\u20b9 2 crores) of the Smart Solutions Private Limited is within the limit as prescribed u\/s 2(85), hence, this company will be categorised as a small company.<br \/>\nDefault in filing the financial statements:<\/p>\n<p>As per Sec. 2(40) of the Companies Act, 2013, Financial statement in relation to a company, includes:<\/p>\n<p>(a) a balance sheet as at the end of the financial year;<br \/>\n(b) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;<br \/>\n(c) cash flow statement for the financial year;<br \/>\n(d) a statement of changes in equity, if applicable; and<br \/>\n(e) any explanatory note annexed to, or forming part of, any document referred to in points (a) to (d):<br \/>\nProvided that the financial statement, with respect to OPC, small company and dormant company, may not include the cash flow statement.<\/p>\n<p>Conclusion: Smart Solutions Private Limited being a small company is exempted from filing a cash flow statement as a part of its financial statements. Thus, Smart Solutions Private Limited has not defaulted in filing its financial statements with ROC.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Preliminary \u2013 CA Inter Law Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 14.<br \/>\nNew Private Ltd. is a company registered under the Companies Act, 2013 with a paid-up share capital of \u20b9 70 lakh and turnover of \u20b9 30 crores. Explain the meaning of the &#8220;Small Company\u201d and examine the following in accordance with the provisions of the Companies Act, 2013:<br \/>\n(i) Whether the New Private Ltd. can avail the status of small company?<br \/>\n(ii) What will be your answer if the turnover of the company is 115 crore and the capital is same as \u20b9 70 lakh? [MTP-Oct. 21]<br \/>\nAnswer:<br \/>\nDetermination of Status of Small Company:<\/p>\n<ul>\n<li>As per Sec. 2(85) of the Companies Act, 2013, Small Company means a company, other than a public company,\n<ol>\n<li>paid-up share capital of which does not exceed \u20b9 50 lakh or such higher amount as may be prescribed which shall not be more than \u20b9 10 crore; and<\/li>\n<li>turnover of which as per its last profit and loss account does not exceed \u20b9 2 crore or such higher amount as may be prescribed which shall not be more than \u20b9 100 crore.<\/li>\n<\/ol>\n<\/li>\n<li>As per Rule 2(1)(t) of the Companies (Specification of Definitions Details) Rules, 2014, the paid-up capital and turnover of the small company shall not exceed \u20b9 2 crores and \u20b9 20 crores respectively.<\/li>\n<li>Nothing in this clause shall apply to:<br \/>\n(A) a holding company or a subsidiary company;<br \/>\n(B) a company registered under section 8; or<br \/>\n(C) a company or body corporate governed by any special Act.<\/li>\n<\/ul>\n<p>Conclusion: Based on the provisions as stated above, following conclusions may be drawn:<\/p>\n<ol>\n<li>New Private Ltd. cannot avail the status of small company as turnover of the company is more than \u20b9 20 Crores.<\/li>\n<li>New Private Ltd. can avail the status of small company as it fulfils both criteria of paid-up capital (being less than \u20b9 2 crores) and turnover (being less than \u20b9 20 crores).<\/li>\n<\/ol>\n<p>Question 15.<br \/>\nDefine \u201cSmall Company&#8221;. [Dec. 21 (2 Marks)]<br \/>\nAnswer:<br \/>\nSmall Company:<br \/>\nAs Per Sec. 2(85) of the Companies Act, 2013, \u2018Small company&#8217; means a company, other than a public<br \/>\ncompany-<\/p>\n<ol>\n<li>paid-up share capital of which does not exceed \u20b9 50 lakh or such higher amount as may be prescribed which shall not be more than \u20b9 10 crore; and<\/li>\n<li>turnover of which as per profit and loss account for the immediately preceding financial year does not exceed \u20b9 2 crore or such higher amount as may be prescribed which shall not be more than \u20b9 100 crore:<\/li>\n<\/ol>\n<p>Provided that nothing in this clause shall apply to-<\/p>\n<p>(A) a holding company or a subsidiary company;<br \/>\n(B) a company registered under section 8; or<br \/>\n(C) a company or body corporate governed by any special Act.<\/p>\n<p>As per the Companies (Specification of Definitions Details) Rules, 2014, for the purposes of sub-clause<\/p>\n<ol>\n<li>and sub-clause<\/li>\n<li>of Sec. 2(85) of the Act, paid up capital and turnover of the small company shall not exceed \u20b9 2 crores and \u20b9 20 crores respectively.<\/li>\n<\/ol>\n<p>Question 16.<br \/>\nKapila Limited issued equity shares of \u20b9 1,00,000 (10,000 shares of \u20b9 10 each) on 01.04.2022 which have been fully subscribed, whereby Kusha Limited holds 4000 shares and Prem Limited holds 2000 shares in Kapila Limited. Kapila Limited is also holding 20% equity shares of Red Limited before the date of issue of equity shares stated above. Red Limited controls the composition of Board of Directors of Kusha Limited and Prem Limited from 01.08.2022.<\/p>\n<p>Examine with relevant provisions of the Companies Act, 2013:<\/p>\n<ol>\n<li>Whether Kapila Limited is a subsidiary of Red Limited?<\/li>\n<li>Whether Kapila Limited can hold shares of Red Limited? [MTP-March 22]<\/li>\n<\/ol>\n<p>Answer:<br \/>\nStatus of Subsidiary company:<\/p>\n<p>As per Sec. 2(87) of the Companies Act, 2013 &#8220;subsidiary company&#8221; or &#8220;subsidiary&#8221;, in relation to<br \/>\nany other company (i.e., the holding company), means a company in which the holding company-<\/p>\n<ol>\n<li style=\"list-style-type: none;\">\n<ol>\n<li>controls the composition of the Board of Directors; or<\/li>\n<li>exercises or controls more than 50% of the total voting power either at its own or together with one or more of its subsidiary companies.<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>For the purposes of this clause:<\/p>\n<ol>\n<li style=\"list-style-type: none;\">\n<ol>\n<li>a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause\n<ol>\n<li>or sub-clause<\/li>\n<li>is of another subsidiary company of the holding company;<\/li>\n<\/ol>\n<\/li>\n<li>the composition of a company&#8217;s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors.<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>As per Sec. 19 of the Companies Act, 2013, no company shall, hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void:<br \/>\nProvided that nothing in this sub-section shall apply to a case where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company.<\/p>\n<p>In the instant case, Kapila Limited issued 10,000 equity shares on 1.4.2022 whereby Kusha Limited &amp; Prem Limited holds 4000 &amp; 2000 shares respectively in Kapila Ltd., Considering 1 share = 1 vote, Kusha Limited and Prem Limited together holds more than one-half (50%) of the total voting power. Therefore, Kapila Limited will be subsidiary to Kusha Limited &amp; Prem Limited from 1.4.2022.<\/p>\n<p>Kapila Limited is already holding 20% equity shares of Red Limited before the date of issue of equity shares i.e. 1.4.2022. Further, Red Limited controls the composition of Board of Directors of Kusha Limited and Prem Limited from 01.08.2022. In the light of sub-clause (87) of Clause 2, Red Limited is a holding company of Kusha Limited and Prem Limited (Subsidiary companies).<\/p>\n<p>Conclusion: Based on the above discussion, following conclusions may be drawn:<\/p>\n<ol>\n<li>Kapila Limited shall be deemed to be a subsidiary company of the holding company (Red Limited) as Red Limited controls the composition of subsidiary companies Kusha Limited &amp; Prem Limited as per explanation to clause (87) of Sec. 2.<\/li>\n<li>Kapila Limited can hold shares of Red Limited as Kapila Limited was holding shares even before it became a subsidiary company of the Red Limited.<\/li>\n<\/ol>\n<p>Question 17.<br \/>\nAJD Pvt. Ltd. is having paid up share capital of \u20b9 45 Lakhs and annual turnover of \u20b9 185 Lacs, it is a wholly owned subsidiary of K Ltd., a listed company. Can AJD Pvt. Ltd. be called a small company as per the provisions of the Companies Act, 2013. [MTP-April 22]<br \/>\nAnswer:<br \/>\nDetermination of Status of Small Company:<\/p>\n<ul>\n<li>As per Sec. 2(85) of the Companies Act, 2013, Small Company means a company, other than a public company,\n<ol>\n<li>paid-up share capital of which does not exceed \u20b9 50 lakh or such higher amount as may be prescribed which shall not be more than \u20b9 10 crore; and<\/li>\n<li>turnover of which as per its last profit and loss account does not exceed \u20b9 2 crore or such higher amount as may be prescribed which shall not be more than \u20b9 100 crore.<\/li>\n<\/ol>\n<\/li>\n<li>As per Rule 2(1)(t) of the Companies (Specification of Definitions Details) Rules, 2014, the paid-up capital and turnover of the small company shall not exceed \u20b9 2 crores and \u20b9 20 crores respectively.<\/li>\n<li>Nothing in this clause shall apply to:<br \/>\n(A) a holding company or a subsidiary company;<br \/>\n(B) a company registered under section 8; or<br \/>\n(C) a company or body corporate governed by any special Act.<\/li>\n<\/ul>\n<p>Conclusion: In the given case, AJD Pvt. Ltd. satisfies the turnover and paid-up share capital criteria to be small company, but being a subsidiary of K Ltd (a listed), it falls under the exclusions to the definition and hence is not a small Company.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Preliminary \u2013 CA Inter Law Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 18.<br \/>\nFollowing are some of the securities, issued by different companies related with each other, as follows:<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td width=\"100\">Company<\/td>\n<td width=\"238\">Securities Issued<\/td>\n<td width=\"245\">Remarks<\/td>\n<\/tr>\n<tr>\n<td width=\"100\">Kleshrahit Ltd.<\/td>\n<td width=\"238\">Listed non-convertible redeemable preference shares issued on private placement basis in terms of relevant SEBI Regulations.<\/td>\n<td width=\"245\">Has the power to appoint 2\/3rd directors in Indriyadaman Ltd.<\/td>\n<\/tr>\n<tr>\n<td width=\"100\">Indriyadaman Ltd.<\/td>\n<td width=\"238\">Listed non-convertible debt securities issued on private placement basis in terms of relevant SEBI Regulations.<\/td>\n<td width=\"245\">Holding 60% voting power in Sajagta (P) Ltd.<\/td>\n<\/tr>\n<tr>\n<td width=\"100\">Sajagta (P) Ltd.<\/td>\n<td width=\"238\">Listed non-convertible debt securities issued on private placement basis in terms of relevant SEBI Regulations.<\/td>\n<td width=\"245\">The company holds 52% equity shares in Pratibodh Ltd. as an investment on behalf of another company in a capacity of a trustee.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Equity shares issued by the Kleshrahit Ltd. and Indriyadaman Ltd. are not listed in any of the recognized stock exchanges.<br \/>\nIn the context of aforesaid facts, answer the following question(s):<br \/>\n(a) Whether the aforesaid companies can be considered as listed company(ies)?<br \/>\n(b) Explain the relationship between the aforesaid companies? [RTP-May 22]<br \/>\nAnswer:<br \/>\n(a) Listed Company:<\/p>\n<ul>\n<li>As per Sec. 2(52) of the Companies Act, 2013, listed company means a company which has any of its securities listed on any recognised stock exchange:<br \/>\nProvided that such class of companies, which have listed or intend to list such class of securities, as may be prescribed in consultation with the SEBI, shall not be considered as listed companies.<\/li>\n<li>As per Rule 2A of the Companies (Specification of Definitions Details] Rules, 2014, the following classes of companies shall not be considered as listed companies, namely:<\/li>\n<\/ul>\n<p>(a) Public companies which have not listed their equity shares on a recognized stock exchange but have listed their-<\/p>\n<ol>\n<li>non-convertible debt securities issued on private placement basis in terms of SEBI (Issue and Listing of Debt Securities] Regulations, 2008; or<\/li>\n<li>non-convertible redeemable preference shares issued on private placement basis in terms of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013; or<\/li>\n<li>both categories of (i) and (ii) above.<\/li>\n<\/ol>\n<p>(b) Private companies which have listed their non-convertible debt securities on private placement basis on a recognized stock exchange in terms of SEBI (Issue and Listing of Debt Securities] Regulations, 2008;<br \/>\n(c) Public companies which have not listed their equity shares on a recognized stock exchange but whose equity shares are listed on a stock exchange in a jurisdiction as specified in Sec. 23(3] of the Act.<\/p>\n<p>Conclusion: Based on the above stated provisions, following conclusions may be drawn:<\/p>\n<p>(a) Kleshrahit Ltd.: Equity shares issued by the company are not listed. However, the company has issued listed non-convertible redeemable preference shares issued on private placement<br \/>\nbasis in terms of relevant SEBI Regulations which falls in the exceptions to the listed company, given as per clause (a)(ii) to Rule 2A, as aforesaid, and accordingly, Kleshrahit Ltd. shall not be considered as a listed company.<\/p>\n<p>(b) Indriyadaman Ltd.: Equity shares issued by the company are not listed. However, the company has issued listed non-convertible debt securities issued on private placement basis in terms of relevant SEBI Regulations which falls in the exceptions to the listed company, given as per clause (a)(i) to Rule 2A, as aforesaid, and accordingly, Indriyadaman Ltd. shall not be considered as a listed company.<\/p>\n<p>(c) Sajagta (P) Ltd.: The company has issued listed non-convertible debt securities issued on private placement basis on a recognised Stock Exchange in terms of relevant SEBI Regulations which falls in the exceptions to the listed company given as per clause (b) to Rule 2A, as aforesaid, and accordingly, Sajagta (P) Ltd. shall not be considered as a listed company.<\/p>\n<p>(b) Relationship between the aforesaid companies:<\/p>\n<p>As per Sec. 2(46) of the Companies Act, 2013, holding company in relation to one or more other companies, means a company of which such companies are subsidiary companies. According to section 2(87) of the Companies Act, 2013, subsidiary company or subsidiary, in relation to any other company (that is to say the holding company), means a company in which the holding company:<\/p>\n<ol>\n<li style=\"list-style-type: none;\">\n<ol>\n<li>controls the composition of the Board of Directors; or<\/li>\n<li>exercises or controls more than 50% of the total voting power either at its own or together with one or more of its subsidiary companies:<br \/>\nProvided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.<\/li>\n<li>For the purposes of this clause:<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause<\/p>\n<ol>\n<li style=\"list-style-type: none;\">\n<ol>\n<li style=\"list-style-type: none;\">\n<ol>\n<li>or sub-clause<\/li>\n<li>is of another subsidiary company of the holding company;<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>(b) the composition of a company\u2019s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;<br \/>\n(c) the expression &#8220;company\u201d includes any body corporate;<br \/>\n(d) &#8220;layer&#8221; in relation to a holding company means its subsidiary or subsidiaries;<\/p>\n<p>Shares held by a company or power exercisable by it in another company in a fiduciary capacity shall not be counted for the purpose of determining the holding &#8211; subsidiary relationship in terms of the provision of Sec. 2(87) of the Companies Act, 2013.<\/p>\n<p>Conclusion: Based on the above stated provisions, relationship among companies may be concluded as below:<\/p>\n<p>(i) Relationship between Kleshrahit Ltd. &amp; Indriyadaman Ltd.: It is given that Kleshrahit Ltd. has the power to appoint 2\/3rd directors in Indriyadaman Ltd. i.e. majority of the directors can be appointed by Kleshrahit Ltd. Accordingly, as per sub-clause (i) to section 2(87) read with the Explanation given in point (b), it can be understood that Indriyadaman Ltd. is the subsidiary company of Kleshrahit Ltd. while the latter is the holding company of Indriyadaman Ltd.<\/p>\n<p>(ii) Relationship between Indriyadaman Ltd. &amp; Sajagta (P) Ltd.: It is given that Indriyadaman Ltd. is holding 60% voting power in Sajagta (P) Ltd. Accordingly, as per sub clause (ii) to section 2(87), it can be understood that Sajagta (P) Ltd. is the subsidiary company of Indriyadaman Ltd. while the latter is the holding company of Sajagta (P) Ltd. as Indriyadaman Ltd. controls more than one-half of the total voting power of Sajagta (P) Ltd.<\/p>\n<p>(iii) Relationship between Kleshrahit Ltd. &amp; Sajagta (P) Ltd.: It is given that Indriyadaman Ltd. is holding 60% voting power in Sajagta (P) Ltd. and it has been derived that Indriyadaman Ltd. is the subsidiary company of Kleshrahit Ltd. and Sajagta (P) Ltd. is the subsidiary company of Indriyadaman Ltd., respectively.<\/p>\n<p>Accordingly, as per sub-clause (ii) to section 2(87) read with the Explanation given in point (a), that a company shall be deemed to be a subsidiary company of the holding company even if the control is of another subsidiary company of the holding company i.e. subsidiary of subsidiary company will be deemed to be a subsidiary of the holding company. Hence, it can be understood that Sajagta (P) Ltd. is deemed to be subsidiary company of Kleshrahit Ltd. while the latter would be considered as the holding company of Sajagta (P) Ltd.<\/p>\n<p>(iv) Relationship between Sajagta (P) Ltd. &amp; Pratibodh Ltd.: It is given that Sajagta (P) Ltd. holds 52% equity shares in Pratibodh Ltd. as an investment on behalf of another company in a capacity of a trustee i.e. in a fiduciary capacity.<\/p>\n<p>As per the notification dated 27th December 2013, Ministry (MCA) clarified that the shares held by a company or power exercisable by it in another company in a fiduciary capacity shall not be counted for the purpose of determining the holding-subsidiary relationship in terms of the provision of section 2(87) of the Companies Act, 2013. Accordingly, Sajagta (P) Ltd. &amp; Pratibodh Ltd. do not share any holding- subsidiary relationship as the former holds shares in latter just in a fiduciary capacity on behalf of another company.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Preliminary \u2013 CA Inter Law Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 19.<br \/>\nMr. Abhi is a Chartered Accountant and MBA by profession, has been appointed as an Executive Director on the Board of XYZ Limited. His job profile includes advising the Board of Directors of the company on various compliance matters, strategies, business plans, and risk matters relating to the company. Keeping in view of above position whether Mr. Abhi can be classified as the Promoter of XYZ Limited? Please examine the same under the provisions of the Companies Act, 2013. [RTP-May 22]<br \/>\nAnswer:<br \/>\nPromoter:<\/p>\n<ul>\n<li>As per Sec. 2(69) of the Companies Act, 2013, Promoter means a person:<\/li>\n<\/ul>\n<p>(a) Who has been named as such in a prospectus or is identified by the company in the annual return; or<br \/>\n(b) Who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or<br \/>\n(c) In accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:<br \/>\nProvided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity.<\/p>\n<p>As the job profile of Mr. Abhi is only limited to advise the Board of Directors on various compliance matters, strategies, business plans and risk matters relating to business of the company and that too only in a professional capacity, he will not be classified as a Promoter of XYZ Limited.<\/p>\n<p>Question 20.<br \/>\nMNP Limited is a registered public company having the following members:<\/p>\n<table border=\"2\">\n<tbody>\n<tr>\n<td width=\"27\">i.<\/td>\n<td width=\"433\">Directors and their Relatives<\/td>\n<td width=\"40\">&#8220;18<\/td>\n<\/tr>\n<tr>\n<td width=\"27\">ii.<\/td>\n<td width=\"433\">Employees<\/td>\n<td width=\"40\">26<\/td>\n<\/tr>\n<tr>\n<td width=\"27\">iii.<\/td>\n<td width=\"433\">Ex &#8211; Employees (Shares were allotted during employment)<\/td>\n<td width=\"40\">15<\/td>\n<\/tr>\n<tr>\n<td width=\"27\">iv.<\/td>\n<td width=\"433\">Members holding shares jointly (7 x 2)<\/td>\n<td width=\"40\">14<\/td>\n<\/tr>\n<tr>\n<td width=\"27\">v<\/td>\n<td width=\"433\">Other Members<\/td>\n<td width=\"40\">137<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The Board of Directors of MNP Limited proposes to convert the company into a private limited company. Referring the provisions of the Companies Act, 2013, advise:<br \/>\n(i) Whether the company can be converted into a private company?<br \/>\n(ii) Whether existing number of members need to be reduced for the proposed private company? [May 22 (6 Marks)]<br \/>\nAnswer:<br \/>\nConversion from public company to private company:<\/p>\n<ul>\n<li>As per Sec. 2(68) of the Companies Act, 2013, &#8220;Private Company\u201d means a company having a minimum paid-up share capital as may be prescribed, and which by its articles, except in case of OPC, limits the number of its members to 200.<\/li>\n<li>However, where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member.<\/li>\n<li>It is further provided that &#8211;<br \/>\n(A) persons who are in the employment of the company; and<br \/>\n(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members.<\/li>\n<li>In the instant case, MNP Limited may be converted into a private company only if the total members of the company are limited to 200. Total Number of members, for this purpose are computed as below:<br \/>\n<table border=\"2\">\n<tbody>\n<tr>\n<td width=\"35\">(i)<\/td>\n<td width=\"179\">Directors and their relatives<\/td>\n<td width=\"65\">50<\/td>\n<\/tr>\n<tr>\n<td width=\"35\">(ii)<\/td>\n<td width=\"179\">Joint Shareholders (7*1)<\/td>\n<td width=\"65\">5<\/td>\n<\/tr>\n<tr>\n<td width=\"35\">(iii)<\/td>\n<td width=\"179\">Others<\/td>\n<td width=\"65\">137<\/td>\n<\/tr>\n<tr>\n<td width=\"35\"><\/td>\n<td width=\"179\">Total<\/td>\n<td width=\"65\">192<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/li>\n<\/ul>\n<p>Conclusion: Based on the above stated provisions, following conclusions may be drawn:<\/p>\n<ol>\n<li>Company can be converted into a private company.<\/li>\n<li>There is no need for reduction in the number of members since existing number of members does not exceed maximum limit of 200.<\/li>\n<\/ol>\n<p>Question 21.<br \/>\nABC Private Ltd. has two wholly owned subsidiary companies, D Private Limited and Private Limited. Examine, whether, D Private Limited and E Private Limited will be treated as related party as per the provisions of the Companies Act, 2013? [May 22 (3 Marks)]<br \/>\nAnswer:<br \/>\nRelated Parties:<\/p>\n<p>As per the section 2(76)(viii), related party with reference to a company, means any body corporate which is:<br \/>\n(A) a holding, subsidiary or an associate company of such company;<br \/>\n(B) a subsidiary of a holding company to which it is also a subsidiary; or<br \/>\n(C) an investing company or the venturer of the company.<\/p>\n<p>However, clause (viii) shall not apply with respect to Sec. 188 to a private company.<br \/>\nConclusion: D Pvt. Ltd and E Pvt. Ltd are not related parties for the purpose of Sec. 188. However, if D Pvt. Ltd and E Pvt. Ltd. have common directors, then they will be deemed to be related parties because of section 2(76 )(iv).<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Preliminary \u2013 CA Inter Law Study Material is designed strictly as per the latest syllabus and exam pattern. Preliminary \u2013 CA Inter Law Study Material Definitions Question 1. X Industries Ltd. is a company in which 25% of shareholding is held by Central Government; 10% shareholding is held by Government of Maharashtra and 15% shareholding &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/gstguntur.com\/preliminary-ca-inter-law-study-material\/\"> <span class=\"screen-reader-text\">Preliminary \u2013 CA Inter Law Study Material<\/span> Read More &raquo;<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[167],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/15892"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=15892"}],"version-history":[{"count":23,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/15892\/revisions"}],"predecessor-version":[{"id":16012,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/15892\/revisions\/16012"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=15892"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=15892"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=15892"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}