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Task
Advanced Company Law
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Question 1
Which of the following are not true regarding the notice issued for holding a shareholder meeting?
a) Clear 21 days’ notice either in writing or through electronic means except in situations when there is consent of at least 65% of the shareholding.
b) The notice must necessarily contain the place, date and time of the meeting
c) The notice must be sent to members holding at least two third of the shareholding between them
d) The notice must contain a statement of business to be transacted or discussed.
Question 2
Which of the following statement or statements is/are in-accurate?
a) Preference shareholders and debenture holders are members of a company and can vote on all resolutions.
b) Preference shareholders can vote on resolutions pertaining to reduction of preference share capital but not reduction of equity share capital.
c) Preference shareholders can vote on resolutions pertaining to reduction of equity or preference share capital.
d) Preference shareholders can vote on all resolutions if dividend is not paid on preference shares for two or more years.
Question 3
What is the difference between a shareholder and debenture holder? List them out.
Question 4
Exigen Corp Pvt. Ltd., a fintech company is your client. It intends to issue preference shares. It comes to you to understand the various types of preference shares it can issue and how they differ from one another. Describe briefly.
Question 5
Rehan is an employee working in a multinational company. Rehan’s brother, Abheek, is a director of a public listed company, Art Works Ltd. (‘AW’). Rehan and Abheek are in good terms with each other, and they also share a home. AW is in discussions with Art Supplies Ltd. (‘AS’), another public listed company regarding a potential merger between the two enterprises. Abheek, in the capacity of a director of AW, is leading the AW-AS negotiations. AW or AS has not shared the news of the proposed merger as the AW-AS talks are subject to a confidentiality agreement. SEBI issues a show cause notice to Abheek for sharing UPSI regarding the proposed AW-AS merger with Rehan and funding bulk purchases of the shares of AW on the basis of such information. Also note that several third parties (including several persons associated with Rehan) made share purchases that drove up AW’s share price from Rs. 100 per share to Rs. 115 per share.
You are SEBI’s lawyer. How would you argue the case against Abheek? Describe the key arguments by utilizing the above facts and the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015.
Question 6
Funds For All Inc. (‘Funds For All’, a financial investor) purchased a 24% stake in Ashen Ceramics Ltd. (‘Ashen Ceramics’, a public company incorporated under the Companies Act 2013). Ashen Ceramics is also listed on the National Stock Exchange. Funds For All, Ashen Ceramics and the promoters of Ashen Ceramics entered into an investment agreement that governed the rights and obligations of each of the parties (‘Investment Agreement’). Clause 10 of the Investment Agreement allowed Funds For All (a) to have a single nominee on a board of ten members, (b) presence of nominee director to constitute quorum failure of which would adjourn the matter for 2 weeks after which the directors present would constitute the quorum and (c) affirmative voting rights on fundamental corporate matters, namely: amendment to the memorandum and articles, change in share capital structure, mergers and amalgamations and winding up. SEBI issued a notice to Funds For All asking it to make a mandatory open offer under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 on the ground that it had acquired ‘control’ of Ashen Ceramics.
Funds For All has come to you, its lawyer, with the following queries:
a) Can its shareholding of 24% in Ashen Ceramics trigger open offer requirements under the SEBI (SAST) Regulations, 2011?
b) Can Clause 10 of the Investment Agreement be interpreted to give Funds For All ‘control’ over Ashen Ceramics in light of the SAT’s decision in the Subhkam Ventures case? (8 marks) (Limit yourself to 400 words)
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