Assign 2

Ques. 1 What do you mean by Winding up of a company? What are the different modes of
winding up ?

ans..
Winding up of a company is defined as a process by which the life of a company is brought to an end and its
property administered for the benefit of its members and creditors. An administrator, called the liquidator, is
appointed and he takes control of the company, collects its assets, pays debts and finally distributes any
surplus among the members in accordance with their rights. At the end of winding up, the company will
have no assets or liabilities. When the affairs of a company are completely wound up, the dissolution of the
company takes place. On dissolution, the company's name is struck off the register of the companies and its
legal personality as a corporation comes to an end.
Winding up a Registered Company
The Companies Act provides for two modes of winding up a registered company.
Grounds for Compulsory Winding Up or Winding up by the Tribunal
If the company has, by a Special Resolution, resolved that the company be wound up by the
Tribunal.
If default is made in delivering the statutory report to the Registrar or in holding the statutory
meeting.
If the company fails to commence its business within one year of its incorporation, or suspends its
business for a whole year.
If the number of members is reduced below the statutory minimum i.e. below seven in case of a
public company and two in the case of a private company.
If the company is unable to pay its debts.
If the tribunal is of the opinion that it is just and equitable that the company should be wound up

Members' voluntary winding up
It is possible in the case of solvent companies which are capable of paying their liabilities in full.
A declaration of solvency must be made by a majority of directors, or all of them if they are two in
number.
Shareholders must pass an ordinary or special resolution for winding up of the company.
Creditor's voluntary winding up
It is possible in the case of insolvent companies. It requires the holding of meetings of creditors besides
those of the members right from the beginning of the process of voluntary winding up. It is the creditors
who get the right to appoint liquidator and hence, the winding up proceedings are dominated by the
creditors.

Ques. 2 What is the difference between Memorandum of Article and Article of
Association?
Ans---
Memorandum and articles are public documents. They are inter-linked and require to be registered
for the formation of a company. Where there is any ambiguity or where the memorandum is silent on
any point, the articles may serve to explain or supplement the memorandum. Beyond this, the two
documents have nothing in common and differ from one another in the following respects:
1. Memorandum of association is the charter of the company and defines the scope of its activities.
Articles of association of the company is a document which regulates the internal management of the
company. These are the rules made by the company for carrying out the objects of the company as
set out in the memorandum.
2. Memorandum of association defines the relation of the company with the rights of the members of
the company interest and also establishes the relationship of the company with the members.
3. Memorandum of association cannot be altered except in the manner and to the extent provided by
the act, whereas the articles being only the byelaws of the company can be altered by a special
resolution.
4. Memorandum is a supreme document of the company whereas articles are subordinate to the
memorandum. They cannot alter or control the memorandum.
5. Every company must have its own memorandum. But a company limited by shares need not
register its articles. In such a case table A applies.
6. A company cannot depart from the provisions contained in its memorandum, and if it does, it
would be ultra-vires the company. Anything done against the provisions of articles, but which is
intra-vires the memorandum, can be ratified.
Ques. 3 Is the issuing of a prospectus compulsory on the part of a company? Under what
situations, can the directors avoid their liabilities for a false statement in the
prospectus?
Ans
REMEDIES AGAINST THE DIRECTOR:
1) Dumuges for Fruudulent Mlsrepresentutlon:In Contruct Luw, Mlsrepresentutlon meuns u fulse
stutement of fuct mude by one purty to unother purty und hus the effect of lnduclng the purty lnto the
contruct. The mlsrepresentutlon should relute to u muterlul fuct. Where lt ls represented thut somethlng
wlll huppen or be done ln future, thls does not umount to u representutlon of fuct.
The person who hus been ullotted the shure muy brlng un uctlon for fruudulent mlsrepresentutlon. Now, u
dlrector who wus uwure thut u prospectus wus belng lssued to the publlc, und lf thut person dld not reud
the prospectus und dld not wlthdruw hls consent, ls very much responslble for the contents of the
prospectus. In certuln cuses, where the representutlon whlch ure true ut the tlme of lssue of prospectus
become fulse before the ullotment ls mude. In such cuses, the uppllcunt should be lnformed ubout the
chunged clrcumstunces.





Ques. 4 What is corporate governance and discuss its role in India in the light of clause 49
of the listing agreement?
Ans-
Corporate governance "deals with conflicts of interests between
the providers of finance and the managers;
the shareholders and the stakeholders;
different types of shareholders (mainly the large shareholder and the minority shareholders)
and the prevention or mitigation of these conflicts of interests".
[1]
Ways of mitigating or preventing these
conflicts of interests include the processes, customs, policies, laws, and institutions which have
impact on the way a company is controlled.
[2][3]
An important theme of corporate governance is the
nature and extent of accountability of people in the business, and mechanisms that try to decrease
the principalagent problem.
[4]

Corporate governance also includes the relationships among the many stakeholders involved and the
goals for which the corporation is governed.
[5][6]
In contemporary business corporations, the main external
stakeholder groups are shareholders, debtholders, trade creditors, suppliers, customers and communities
affected by the corporation's activities. Internal stakeholders are the board of directors, executives, and
other employees. It guarantees that an enterprise is directed and controlled in a responsible, professional,
and transparent manner with the purpose of safeguarding its long-term success. It is intended to increase
the confidence of shareholders and capital-market investors.
[7]

A related but separate thread of discussions focuses on the impact of a corporate governance system
on economic efficiency, with a strong emphasis on shareholders' welfare; this aspect is particularly
present in contemporary public debates and developments in regulatory policy (see regulation and policy
regulation).
[8]

There has been renewed interest in the corporate governance practices of modern corporations since
2001, particularly due to the high-profile collapses of a number of large corporations, most of which
involved accounting fraud. Corporate scandals of various forms have maintained public and political
interest in the regulation of corporate governance. In the U.S., these include Enron Corporation andMCI
Inc. (formerly WorldCom). Their demise is associated with the U.S. federal government passing
the Sarbanes-Oxley Act in 2002, intending to restore public confidence in corporate governance.
Comparable failures in Australia (HIH, One.Tel) are associated with the eventual passage of the CLERP
9 reforms. Similar corporate failures in other countries stimulated increased regulatory interest
(e.g., Parmalat in Italy).
Principles of corporate governance
Contemporary discussions of corporate governance tend to refer to principles raised in three documents
released since 1990: The Cadbury Report (UK, 1992), the Principles of Corporate Governance (OECD,
1998 and 2004), the Sarbanes-Oxley Act of 2002 (US, 2002). The Cadbury and OECD reports present
general principals around which businesses are expected to operate to assure proper governance. The
Sarbanes-Oxley Act, informally referred to as Sarbox or Sox, is an attempt by the federal government in
the United States to legislate several of the principles recommended in the Cadbury and OECD reports.
Rights and equitable treatment of shareholders:
[9][10][11]
Organizations should respect the rights of
shareholders and help shareholders to exercise those rights. They can help shareholders exercise
their rights by openly and effectively communicating information and by encouraging shareholders to
participate in general meetings.
Interests of other stakeholders:
[12]
Organizations should recognize that they have legal,
contractual, social, and market driven obligations to non-shareholder stakeholders, including
employees, investors, creditors, suppliers, local communities, customers, and policy makers.
Role and responsibilities of the board:
[13][14]
The board needs sufficient relevant skills and
understanding to review and challenge management performance. It also needs adequate size and
appropriate levels of independence and commitment
Integrity and ethical behavior:
[15][16]
Integrity should be a fundamental requirement in choosing
corporate officers and board members. Organizations should develop a code of conduct for their
directors and executives that promotes ethical and responsible decision making.
Disclosure and transparency:
[17][18]
Organizations should clarify and make publicly known the roles
and responsibilities of board and management to provide stakeholders with a level of accountability.
They should also implement procedures to independently verify and safeguard the integrity of the
company's financial reporting. Disclosure of material matters concerning the organization should be
timely and balanced to ensure that all investors have access to clear, factual information.