Chap 10

Question 1

Investment is

Answer 1

Gale
Guarantee
Advance (outside normal credit)
Loan
Equity

Question 2

Associated company?

Answer 2

A director or 20% shareholder is also a director or 20% shareholder in other company
-Pref shares are not considered
-Shares held by minor and spouse is considered

Companies under common mgmt and control, holding subsidiary

Modaraba managed by company

Question 3

Exception of associated company

Answer 3

Nominee director (by govt)
Independent director
Shares owned by NIT
Shares registered in the name of CDC

Question 4

Exceptions (investment of company)

Answer 4

Investment in another company in the name of nominee director
Investment in subsidiary company to ensure minimum number of members requests
Investment held in the name of CDC

Question 5

Conditions for investment in associated company (public company) - Required

Answer 5

Special resolution
Stating terms and conditions (nature, period, amount)
For change ~ Special resolution

Question 6

Additional conditions if loan

Answer 6

-Written agreement
-Stating terms and conditions
(Return on investment)
-Return on investment
•shall not be less than borrowing cost
•shall be recovered on regular basis
-Due diligence

Question 7

Register of investment not in name of companh

Answer 7

Register shall state
Nature
Value
Other particulars to identify such investment

Question 8

Inspection of register by members

Answer 8

Can inspect without fee for atleast two business hours in a day.
Can apply and get copy within 7 days (with fee)

Question 9

Inspection of register by others

Answer 9

Can inspect with fee

Question 10

Notes for inspection

Answer 10

Company can impose reasonable restrictions
If inspection is refused registrar may direct inspection

Question 11

Responsibilities of disclosure of directors interest

Answer 11

A director of company directly or indirectly (spouse, child, step child, parents) interested im proposed contract

He shall disclose to other directors

Question 12

Timing of disclosure- Transaction does not required approval

Answer 12

@ first meeting held after transaction

Question 13

Transaction require approval (timing of disclosure)

Answer 13

Before first time consideration
@board meeting at which Matter considered first

Question 14

After consideration

Answer 14

@ first board meeting held after he become interested

Question 15

Prohibition of (director whose interest is disclosed)

Answer 15

Not participate in discussion
Not counted for quorum
Shall not vote (void if vote)
Not participate in board meeting (if listed company)

Question 16

Exception of prohibition

Answer 16

On director of private company
On contract of indemnity

Question 17

General notice

Answer 17

Instead of separate notice for each transaction
-notice shall be given at director’s meeting
-Take reasonable steps to ensure notice is read by other directors
-Expire at end of financial year
(Fresh notice is given in last month of current financial year for next year)

Question 18

What is related party

Answer 18

A holding, subsidiary or associated company
A director or key mgr (and his relatives)
A firm in which director/key manager/his relatives is partner
A pvt company director/key mgr is a director or member
A public co in which director/key mgr is a director or holds any shares (+ relatives)
Any company whose chief executives act on instructions of directors or key mgr
Any person on whose instructions, directors or key mgr acts

Question 19

What is related party transaction - types

Answer 19

Sale/pur of goods or services
Sale/pur/lease of any property
Appointment as agent for sale/purchase
Appointment to an office of profit (relative)

Question 20

Status of contract (transaction without approval)

Answer 20

Status of contract
If not ratified by board/general meeting within 90 days
-Voidable at option of board
-Concerned director shall indemnify co if his relatives is involved

Question 21

Penalty

Answer 21

Listed co:
Imprisonment- 3 yrs
Fine - min Rs 5 million

Unlisted:
@ level 2