ANS 1 B A parent corporation that owns enough voting stock in another corporation to control its board of directors (and,

therefore, controls its policies and management). A company whose voting stock is more than 50% controlled by another company, usually referred to as the parent company or holding company. A subsidiary is a company that is partly or completely owned by another company that holds a controlling interest in the subsidiary company. If a parent company owns a foreign subsidiary, the company under which the subsidiary is incorporated must follow the laws of the country where the subsidiary operates, and the parent company still carries the foreign subsidiary's financials on its books (consolidated financial statements). For the purposes of liability, taxation and regulation, subsidiaries are distinct legal entities. A Holding Company may be a Subsidiary Company of some other Company. Similarly a Subsidiary Company may be a Holding Company of some other Company. For the purposes of the Companies Act, 1956, a company shall be deemed to be a subsidiary of another, subject to the provisions of subsection (3) of Section 4.

Illustration 1 Controls the composition of Board of Directors.

ABC Ltd Company controls the composition of Board of Directors of DEF Ltd Company. Here, ABC Ltd Company is a Holding Company. DEF Ltd Company is deemed a Subsidiary Company, for the purposes of this Act.

Illustration 2 Holds Preference Shares > half of the voting powers, similar to Equity Shares. It was there. Not now.

GHE Ltd Company is an existing Company, formed and registered under previous Companies Laws. It issued Preference shares, those days, i.e. before the commencement of this Companies Act, 1956. Those preference shares were having the same voting rights as the holders of equity shares. IJK Ltd Company held more than half of the voting power through holding Preference shares of GHE Ltd Company.

Here, IJK Ltd Company is a Holding Company. GHE Ltd Company is deemed a Subsidiary Company., for the purposes of this Act.

Here note, that the Companies Act, 1956 discontinued to issue preference shares which carry the voting rights as the holders of equity shares. This is very rare.

ANS 2.. MEMORANDUM OF ASSOCIATION: A document that regulates a company's external activities and must be drawn up on the formation of a registered or incorporated company. As the company's charter it (together with the company's articles of association) forms the company's constitution.

ARTICLE OF ASSOCIATION: A document that specifies the regulations for a company's operations. The articles of association define the company's purpose and lays out how tasks are to be accomplished within the organization, including the process for appointing directors and how financial records will be handled. MOA vs AOA MOA and AOA stand for memorandum of association and articles of association respectively and are important source of information for shareholders and other stakeholders in a company that has been duly incorporated. These are documents that are necessary at the time of formation of a company and must be deposited with the registrar of companies who approves the incorporation of the company. Though there are similarities, there are differences between MOA and AOA that need to be highlighted for the benefit of all those who are stakeholders in a company or are potential investors as these documents reveal a lot about a company. MOA MOA is the document that reveals the name, registered office address, aims and objectives of the company, clause about its limited liability, share capital, minimum paid up capital etc. MOA also gives information about its first shareholders including the number of shares subscribed by them. MOA is one document that tells people all about the company and its relationship with the outside world. Though it is essential to submit MOA with the registrar when a company is being formed, it does not find mention in the constitution of the company. Subsequent to an amendment added in 2006 Companies Act, it is no longer mandatory to include the details about name, address, objectives and first shareholders names. Hence there is no restriction upon a company to engage in a particular business. AOA Articles of Association, also simply referred to as Articles, are necessary to be submitted during incorporation of a company with the registrar of companies. When Articles are taken in conjunction with MOA, they form what is called as the constitution of the company. Though there are differences in these articles as to their requirements in different countries, in general AOA is a document that provides following information about the company. The manner in which shares have been distributed along with voting rights attached with different classes of shares Estimate of intellectual property rights The list of directors with shares allotted to each Schedule of the meetings of the board of directors along with the quorum required with percentage of votes with directors Chairmans special voting rights and the manner in which he is elected How profits are distributed through dividends How the company can be dissolved

 Secrecy of know-how and how it is managed How shares can be transferred, and so on.

ANS 3

A Meaning Of Promoter And Nature Of Pre-Incorporation Contract Promoter

The Company Act, 1956, does not provide a common definition of Promoter. Although few section like 62, 69, 76, 478, 519 of Company Act and SEBI Guidelines 2000 Chapter VI Explanation I to III to clause 6.4.2(k) does discuss about promoter, but definition provided under those section would be restricted to the area of those section. Resent Company Bill does have the definition of Promoter in the definition clause under section 2(zzq), it says that promoter means a person who has (a) been named as such in a prospectus; or (b) control over the affairs of the company, directly or indirectly whether as a shareholder, director. But this Bill is not in force till now, so the old Act of 1956 would be applicable in present day, which does not has the common definition clause of promoter. Even the English law does not provide the definition. Joseph H. Gross in his celebrated article Who is a Company Promoter?' found that it was rather intentional to not providing definition in English Legislation, because if legislation try to define it then someone might escape from the liability who enjoy the place of promoter but not come under the definition of promoter. In this situation, where the legislature if silent about the definition, it is necessary to see the judicial interpretation.

Pre-Incorporation Contract
The promoter is obligated to bring the company in the legal existence and to ensure its successful running,; and in order to accomplish his obligation he may enter into some contract on behalf of prospective company. These types of contract are called Pre-incorporation Contract'. Nature of Pre-incorporation contract is slightly different to ordinary contract. Nature of such contract is bilateral, be it has the features of tripartite contract. In this type of contract, the promoter furnishes the contract with interested person; and it would be bilateral contract between them. But the remarkable part of this contract is that, this contract helps the perspective company, who is not a party to the contract.

Liability Of Promoter Concerning Pre-Incorporation Contract

Before the passing of the Specific Relief Act 1963, the position in India, regarding preincorporation contract, was similar to the English Common Law. This was based on the general rule of contract where two consenting parties are bound to contract and third party is not connected with the enforcement and liability under the terms of contract. And because company does not come in existence before its incorporation, so the promoter signs contract on behalf of company with third party, and that is why the promoter was solely liable for the pre-incorporation contract under the established ruling of Kelner v Baxter.

Liability Of Promoter
Promoters are generally held personally liable for pre-incorporation contract. If a company does not ratify or adopt a pre-incorporation contract under the Specific Relief Act, then the common law principle would be applicable and the promoter will be liable for breach of contract

ANS 4 A
A company is an association of several persons. Decisions are made according to the view of the majority. Various matters have to be discussed and decided upon. These discussions take place at the various meetings which take place between members and between the directors. Needless to say, the importance of meetings cannot be under-emphasised in case of companies. The Companies Act, 1956 contains several provisions regarding meetings. These provisions have to be understood and followed. For a meeting, there must be at least 2 persons attending the meeting. One member cannot constitute a company meeting even if he holds proxies for other members.
Kinds of Company Meetings :Broadly, meetings in a company are of the following types :I. Meetings of Members :

These are meetings where the members / shareholders of the company meet and discuss various matters. Members meetings are of the following types :A. Statutory Meeting :

A public company limited by shares or a guarantee company having share capital is required to hold a statutory meeting. Such a statutory meeting is held only once in the lifetime of the company. Such a meeting must be held within a period of not less than one month or within a period not more than six months from the date on which it is entitled to commence business i.e. it obtains certificate of commencement of business. In a statutory meeting, the following matters only can be discussed :Floatation of shares / debentures by the company Modification to contracts mentioned in the prospectus
B. Annual General Meeting

Must be held by every type of company, public or private, limited by shares or by guarantee, with or without share capital or unlimited company, once a year. Every company must in each year hold an annual general meeting. Not more than 15 months must elapse between two annual general meetings.
Business to be Transacted at Annual General Meeting :

At every AGM, the following matters must be discussed and decided. Since such matters are

discussed at every AGM, they are known as ordinary business. All other matters and business to be discussed at the AGM are specila business.
C. Extraordinary General Meeting

Every general meeting (i.e. meeting of members of the company) other than the statutory meeting and the annual general meeting or any adjournment thereof, is an extraordinary general meeting. Such meeting is usually called by the Board of Directors for some urgent business which cannot wait to be decided till the next AGM. Every business transacted at such a meeting is special business.
D. Class Meeting

Class meetings are meetings which are held by holders of a particular class of shares, e.g., preference shareholders. Such meetings are normally called when it is proposed to vary the rights of that particular class of shares. At such meetings, these members dicuss the pros and cons of the proposal and vote accordingly.
B

Issue of Shares at a Discount

There are instances when the shares of a company are issued at a discount, i.e. at an amount less than the nominal or par value of shares, the difference between the nominal value and issue price representing discount on the issue of shares. For example, when a share of the nominal value of Rs. 100 is issued at Rs. 98, it is said to have been issued at a discount of two percent. As a general rule, a company cannot normally issue shares at a discount. It can do so only in cases such as reissue of forfeited shares and in accordance with the provisions of section 79 of The Companies Act. It states that, a company is permitted to issue shares at a discount provided the following conditions are satisfied:

(a) The issue of shares at a discount is authorised by an ordinary resolution passed by the company at its general meeting and sanctioned by the Company Law Board now Central Government. (b) The resolution must specify the maximum rate of discount at which the shares are to be issued but the rate of discount must not exceed 10 per cent of the nominal value of shares. The rate of discount can be more than 10 per cent if the Government is convinced that a higher rate is called-for under special circumstances of a case. (c) At least one year must have elapse since the date on which the company became entitled to commence the business. (d) The shares are of a class which has already been issued. (e) The shares issued within two months from the date of receiving sanction for the same from the Government or within such extended period as the Government may allow. (f) If the offer prospectus at the date of issue must mention particulars of the discount allowed on the issue of shares.

Whenever shares are issued at a discount, the amount of discount is brought into the books at the time of allotment by debiting an account called Discount on the Issue of Shares Account, having a debit balance, denotes a loss to the company and is shown on the asset side of the companys balance sheet under heading Miscellaneous Expenditure.

It is written-off by being charging it to the Securities Premium Account if any and, in its absence, by being gradually charged to the Profit and Loss Account over a period of 5 to 10 years.

ANS 5 a A DIRECOR OF A COMPANY CAN BE REMOVED UNDER COMPANY ACTS AS BELOW:

Section 284 in The Companies Act, 1956

284. Removal of directors. (1) A company may, by ordinary resolution, remove a director (not being a director appointed by
the Central Government in pursuance of section 408) before the expiry of his period of office: Provided that this sub- section shall not, in the case of a private company, authorise the removal of a director holding office for life on the 1st day of April, 1952 , whether or not he is subject to retirement under an age limit by virtue of the articles or otherwise: Provided further that nothing contained in this sub- section shall apply where the company has availed itself of the option given to it under section 265 to appoint not less than two- thirds of the total number of directors according to the principle of proportional re- presentation.

(2) Special notice shall be required of any resolution to remove a director under this section, or
to appoint somebody instead of a director so removed at the meeting at which he is removed. (3) On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director (whether or not he is a member of the company) shall- be entitled to be heard on the resolution at the meeting.

(4) Where notice is given of a resolution to remove a director under this section and the director
concerned makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so,(a) in any notice of the resolution given to members of the company state the fact of the representations having been made; and (b) send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company); and if a copy of the representations is not sent as aforesaid because they were received too late or because of the company' s default, the director may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting: Provided that copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the 1[ Company Law Board] is satisfied that the right conferred by this sub- section are being abused to secure nee- dless publicity for defamatory matter; and 1[ Company Law Board] may order the company' s costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it. (5) A vacancy created by the removal of a director under this section may, if he had been appointed by the company in general meeting or by the Board in pursuance of section 262, be filled by the appointment of another director in his stead by the meeting at which he is removed, provided special notice of the intended appointment has been given under sub- section (2). A director so appointed shall hold office until the date up to which his predecessor would have held office if he had not been removed as aforesaid.

(6) If the vacancy is not filled under sub- section (5), it may be filled as a casual vacancy in accordance with the provisions, so far as they may be applicable, of section 262, and all the provisions of that section shall apply accordingly: Provided that the director who was removed from office shall not be re- appointed as a director by the Board of directors.

(7) Nothing in this section shall be taken(a) as depriving a person removed thereunder of any compensation or damages payable to him
in respect of the termination of his appointment as director or of any appointment terminating with that as director; or (b) as derogating from any power to remove a director which may exist apart from this section. Meetings of Board
B

In exercise of the powers conferred by clauses (a) and (b) of section 642 read with clause (45) of section 2 and section 383A of the Companies Act, 1956 (1 of 1956), and in supersession of the Companies (Secretary's Qualifications) Rules, 1975, the Central Government hereby makes the following Rules, namely :
1. Short title and commencement (1) These rules may be called the Companies (Appointment and Qualifications of

Secretary) Rules, 1988. (2) It shall come into force on the 1st day of December, 1988. 2. Appointment, etc., of whole-time secretary (1) Every company having a paid-up share capital of not less than rupees fifty lakhs shall have a whole-time secretary. (2) No person shall be appointed as whole-time secretary under sub-rule (1) unless he is a member of the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of 1980). (3) A company having a paid-up share capital of less than rupees fifty lakhs may appoint any individual as its whole-time secretary to perform the duties of a secretary under the Companies Act, 1956, and any other ministerial or administrative duties : Provided that no individual shall be eligible to be so appointed unless he possesses one or more of the qualifications specified in sub-rule (4). (4) No individual shall be appointed as secretary pursuant to sub-rule (3) unless he possesses any one or more of the following qualifications, namely :(i) membership of the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of 1980) ; (ii) pass in the Intermediate examination conducted either by the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980 (No. 56 of 1980), or by the earlier Institute of Company Secretaries of India incorporated on 4th October, 1968, under the Companies Act, 1956 (1 of 1956), and licensed under section 25 of that Act ; (iii) Post-graduate degree in commerce or corporate secretary ship granted by any university in India ; (iv) degree in law granted by any university ; (v) membership of the Institute of Chartered Accountants of India constituted under the Chartered Accountants Act, 1949 (38 of 1949) ; (vi) membership of the Institute of Cost and Works Accountants of India constituted under the Cost and Works Accountants Act, 1959 (23 of 1959) ; (vii) post-graduate degree or diploma in management sciences, granted by any

university, or the Institutes of Management, Ahmedabad, Calcutta, Bangalore or Lucknow ; (viii) post-graduate diploma in company secretary ship granted by the Institute of Commercial Practice under the Delhi Administration or Diploma in Corporate Laws and Management granted by the Indian Law Institute, New Delhi ; (ix) post-graduate diploma in company law and secretarial practice granted by the University of Udaipur; or (x) membership of the Association of Secretaries and Managers, Calcutta, registered under the West Bengal Registration of Societies Act, 1961 (XXVI of 1961) : Provided that where the paid-up share capital of such company is increased to rupees twenty-five lakhs or more, the company shall, within a period of one year from the date of such increase, comply with the provisions of sub-rules (1) and (2) of rule 2. Explanation - In this rule, "University" has the meaning assigned to it in the University Grants Commission Act, 1956 (No. 3 of 1956), and includes any university outside India which is recognised by the Union Public Service Commission for the purposes of recruitment to public services and posts in connection with the affairs of the Union or of any State.
3. Provisions relating to existing secretaries -

Notwithstanding contained in sub-rules (1) and (2) of rule 2, the qualifications possessed by a person holding the office of whole-time secretary of a company immediately before 30th October, 1980, in terms of the second proviso to clause (a) of rule 2 of the Companies (Secretaries Qualifications) Rules, 1975, shall be deemed to be the qualifications which he shall be required to possess in order to be eligible to continue as whole-time secretary in that company.

What is annual value and what are the deductions from it ?

According to section 23(1.), the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year subject to deduction on account of municipal taxes. What the law contemplates by annual value is not the actual rent received by the owner of the property, but a notional rent which would be gathered from a hypothetical tenant for the property having regard to local conditions, demand for houses in the same locality, rent paid for similar houses in the same locality, the type of the building, cost of construction, valuation by the municipality, or any other local authority, the Pugree or premium, if any, paid by the tenant and so on.

Deductions from annual value :

The deductions from annual value are

Considerations for property: It is necessary to take into account the whole of the consideration exacted by the landlord for the right to use and occupy the property. For instance, any premium originally paid by the lessee would have to be taken into account and also the interest thereon. Rent : In a State in which rent control law is in operation, the standard rent under such law should be taken as the basis for determining the annual value. The annual value of the house belonging to the assessee must be taken to be the standard rent determinable under the provisions of the Rent Control Act. Amolak Ram Khosla v CIT [1981] 131 ITR 589 (SC). House property : In case, the house property was let out many years ago at the then prevailing rate and the whole transaction is genuine, it is not open to the revenue to ignore the rent actually received by the assessee. Addl. CIT v Mrs. Leela Govindan [1978] 113 ITR 136. Municipal valuation : It is always presumed that municipal valuation affords an indication as to the reasonable letting value of a building. This presumption can be rebutted on the basis of other materials on record. If an annual value has been assessed in or about the relevant time and after taking into consideration all the relevant factors and if the figures of actual rent are not available, the figure of annual value determined for the municipal purposes can be presumed to be the correct figure of annual value and can be adopted for income-tax purposes also, if the Assessing Officer agrees. But the figure of assessment for municipal tax purposes is only a piece of evidence and it cannot override the figure of actual rent as the basis for determination of annual value when such figure of actual rent is available to the AOCIT v HP. Sharma [1980] 122 ITR 675 (Del) Actual rent : Thus, the "annual value" may be different from the actual rent realized. A house may be let out to a person at a concessional or nominal rent on grounds of friendship, love and affection or some other consideration. Such a concession or nominal rent will not form the basis for arriving at the "annual value". In cases where the premises let are furnished, the annual value for the purpose of income from property should be estimated exclusive of the furniture. The portion of the rent attributable to the furniture should be excluded. This is to be taxed separately under the head 'business' or 'other sources'. Similar is the position about moneys charged in respect of other services provided by the landlord.