Chap 10 Flashcards
Investment is
Gale
Guarantee
Advance (outside normal credit)
Loan
Equity
Associated company?
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
Exception of associated company
Nominee director (by govt)
Independent director
Shares owned by NIT
Shares registered in the name of CDC
Exceptions (investment of company)
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
Conditions for investment in associated company (public company) - Required
Special resolution
Stating terms and conditions (nature, period, amount)
For change ~ Special resolution
Additional conditions if loan
-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
Register of investment not in name of companh
Register shall state
Nature
Value
Other particulars to identify such investment
Inspection of register by members
Can inspect without fee for atleast two business hours in a day.
Can apply and get copy within 7 days (with fee)
Inspection of register by others
Can inspect with fee
Notes for inspection
Company can impose reasonable restrictions
If inspection is refused registrar may direct inspection
Responsibilities of disclosure of directors interest
A director of company directly or indirectly (spouse, child, step child, parents) interested im proposed contract
He shall disclose to other directors
Timing of disclosure- Transaction does not required approval
@ first meeting held after transaction
Transaction require approval (timing of disclosure)
Before first time consideration
@board meeting at which Matter considered first
After consideration
@ first board meeting held after he become interested
Prohibition of (director whose interest is disclosed)
Not participate in discussion
Not counted for quorum
Shall not vote (void if vote)
Not participate in board meeting (if listed company)
Exception of prohibition
On director of private company
On contract of indemnity
General notice
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)
What is related party
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
What is related party transaction - types
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)
Status of contract (transaction without approval)
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
Penalty
Listed co:
Imprisonment- 3 yrs
Fine - min Rs 5 million
Unlisted:
@ level 2
