IGNOU BCOC-135 Company Law | Solved Assignment 2025-26

Section – A 

(Each question carries 10 marks)

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Q1. Company is an artificial person by law with a perpetual succession and is different from the members constituting it. Comment.

Answer: A company is not a natural person, but law treats it as an artificial person with rights and obligations.

Main Points:

1. Artificial person – Created by law, can own property, enter contracts, sue and be sued.

2. Perpetual succession – Company never dies; members may change but company continues.

3. Separate legal entity – It is different from shareholders.

4. Limited liability – Members are liable only up to their shares.

5. Case law – Salomon v. Salomon & Co. confirmed company’s separate legal status.

Conclusion: A company is an artificial person, distinct from its members, with perpetual succession.

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Q2. Define a private company. Distinguish between a private company and a public company. Describe the procedure for converting a private company into a public company.

Answer: A private company is one which restricts transfer of shares, limits members to 200, and prohibits public subscription.

Differences (Private vs Public):

1. Members – Private: 2 to 200; Public: minimum 7, no maximum.

2. Shares – Private: restricted transfer; Public: freely transferable.

3. Raising capital – Private: cannot invite public; Public: can issue prospectus.

4. Directors – Private: minimum 2; Public: minimum 3.

5. Postfix – Private uses “Private Limited”; Public uses “Limited”.

Procedure for Conversion:

1. Hold a Board Meeting.

2. Call an Extra-ordinary General Meeting (EGM).

3. Pass a special resolution to amend Articles of Association.

4. File resolution with Registrar of Companies (RoC).

5. Obtain fresh Certificate of Incorporation.

Conclusion: A private company has restrictions but can be converted into a public company through proper legal procedure.

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Q3. “The Certificate of incorporation is a conclusive proof that all the requirements of the Act in respect of formation of the company, have been complied with.” Explain.

Answer: Certificate of Incorporation is issued by the Registrar after all documents are filed for company formation.

Main Points:

1. Legal effect – It is proof that the company has been legally formed.

2. Conclusive evidence – Even if there were irregularities in documents, the certificate cannot be challenged.

3. Separate entity – Company comes into existence from the date of incorporation.

4. Perpetual succession – Company continues until wound up legally.

5. Case law – Moosa v. Ebrahim held certificate cannot be questioned once issued.

Conclusion: The Certificate of Incorporation is final proof of legal existence of a company.

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Q4. What do you understand by Memorandum of Association? Enumerate the different clauses which are included in the Memorandum of Association.

Answer: The Memorandum of Association (MoA) is the charter of the company, defining its scope of activities.

Clauses of MoA:

1. Name Clause – Company name with “Limited” or “Private Limited”.

2. Registered Office Clause – State where office is located.

3. Object Clause – Main and ancillary objectives.

4. Liability Clause – Liability of members (limited/unlimited).

5. Capital Clause – Authorised share capital.

6. Association Clause – Declaration by subscribers to form company.

Conclusion: MoA defines the powers and limits of a company and is binding on all members.

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Q5. Explain the procedure of forfeiting the shares. What is the effect of forfeiture? How forfeiture is different from surrender of shares?

Answer: Forfeiture of shares means cancellation of shares of a member for non-payment of dues.

Procedure:

1. Notice to defaulting shareholder.

2. Give minimum 14 days to pay dues.

3. If unpaid, Board of Directors may pass a resolution of forfeiture.

4. Enter forfeiture in company records.

Effects of Forfeiture:

• Member ceases to be shareholder.

• Money already paid is not refunded.

• Company can reissue forfeited shares.

Difference (Forfeiture vs Surrender):

• Forfeiture – Compulsory, by company.

• Surrender – Voluntary, by shareholder.

Conclusion: Forfeiture is a penalty for default, while surrender is voluntary giving up of shares.

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Section – B 

(Each question carries 6 marks)

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Q6. What restrictions have been imposed by the Companies Act in respect of appointment of directors?

Answer: The Companies Act, 2013 lays down rules to ensure only eligible persons are appointed as directors.

Restrictions:

1. Minimum 1 director in OPC, 2 in Private, 3 in Public.

2. Maximum 15 directors (can increase by special resolution).

3. A person cannot hold directorship in more than 20 companies.

4. Only individuals can be directors (not firms/associations).

5. Disqualified persons (undischarged insolvent, convicted, etc.) cannot be appointed.

Conclusion: These restrictions ensure competent and responsible persons act as directors.

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Q7. Discuss the winding up of a Company by the Tribunal.

Answer: Winding up means closing down of company’s affairs and selling assets to pay debts.

Grounds for Tribunal winding up (Sec. 271):

1. If company unable to pay debts.

2. If company acted against interests of sovereignty of India.

3. If company defaulted in filing financial statements.

4. If Tribunal thinks it is just and equitable.

5. If company has reduced membership below statutory limit.

Conclusion: The Tribunal supervises winding up to protect creditors and public interest.

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Q8. What is the significance of annual general meeting (AGM)? What business is generally transacted at such meetings?

Answer: AGM is a yearly meeting of shareholders of a company.

Significance:

1. Ensures transparency.

2. Provides opportunity for shareholders to question management.

3. Approves financial matters.

4. Strengthens accountability.

Business transacted:

• Approval of accounts and dividends.

• Appointment/reappointment of directors.

• Appointment of auditors.

• Discussion on policies and performance.

Conclusion: AGM safeguards shareholders’ rights and ensures good governance.

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Q9. What is private placement of securities? Discuss the conditions to be satisfied for private placement of shares.

Answer: Private placement means offering securities to a select group of investors, not to the public.

Conditions:

1. Offer made to max 200 persons in a financial year.

2. Must be approved by shareholders through special resolution.

3. Payment must be made only through banking channels.

4. Company must file return of allotment with RoC.

5. Securities cannot be advertised publicly.

Conclusion: Private placement helps companies raise capital quickly with fewer formalities.

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Q10. What is Whistle Blowing? What are the protections available to a person making disclosure?

Answer: Whistle blowing means reporting unethical or illegal practices within an organisation.

Protections under law:

1. Identity of whistleblower kept confidential.

2. Protection against dismissal, harassment or discrimination.

3. No civil or criminal liability for disclosure.

4. Encouragement through SEBI/Companies Act guidelines.

Conclusion: Whistle blowing protects public interest and law provides safeguards to the person making disclosure.

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