ICSI Previous Year papers CS Professional Programme Module II

ICSI Previous Year papers

CS Professional Programme Module II

Corporate Restructuring and Insolvency

June 2009

Time allowed : 3 hours

Maximum marks : 100
Total number of questions : 8

NOTE : All references to sections relate to the Companies Act, 1956 unless stated otherwise.
P A R T — A
(Answer Question No.1 which is compulsory and any three of the rest from this part.)

1. (a) (i) ABC Ltd. has 700 creditors (in number) representing total value of Rs.100
crore as per its balance sheet. In a creditors meeting called under section 391
for considering proposed scheme of amalgamation with XYZ Ltd., out of total
700 creditors, only 150 creditors representing value of Rs.45 crore were present.
Out of said 150 creditors present at the said meeting, only 140 creditors
representing value of Rs.40 crore voted in favour of the resolution, while 10
creditors representing value of Rs.5 crore cast their dissenting vote against
the scheme. Whether the motion proposing the scheme of amalgamation
should be treated as approved or not ? Explain with reference to relevant provisions of law and case law, if any.           (5 marks)
(ii) In a scheme of arrangement made under section 391, a company proposes to transfer one of its undertakings to its subsidiary and also to reduce its share capital. Is the scheme valid ? Explain with relevant provisions of law and relevant cases. (5 marks)
(b) State whether the following statements are true or false citing briefly relevant provisions of the law :
(i) There is a bar on a company amalgamating with a newly incorporated company.
(ii) A non-profit making company licensed under section 25 can be merged with a profit making company.
(iii) High Court can sanction a scheme of merger of a sick industrial company when a revival scheme is pending before BIFR.
(iv) An appeal can be preferred to the Supreme Court of India against the order
passed under section 391/394 sanctioning a scheme of amalgamation.
(v) The court can modify ‘transfer date’ proposed in a scheme of amalgamation.    (2 marks each)
(c) Explain the provisions relating to buy-back of shares through book-building route. (5 marks)
Corporate Restructuring and Insolvency

2. (a) Reduction of capital is one of the modes of re-organisation of capital structure of
the company and to a certain extent it can be done without the sanction of the court. Explain with relevant provisions of the law.         (7 marks)
(b) Strategy is the very soul of any action and activity. Briefly define the strategy with 5Ps of Henry Mintzberg.                     (4 marks)
(c) In a scheme of compromise, arrangement, reconstruction or amalgamation, various
types of approvals are required. Describe briefly such approvals.         (4 marks)

3. (a) In a buy-back of securities, a company has to pay stamp duty under the Indian
Stamp Act, 1899 for physical shares. Do you agree ? Explain.         (5 marks)
(b) In an open offer in terms of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997, what message is conveyed by the SEBI by way of
‘disclaimer clause’ to the shareholders of the target company ?            (5 marks)
(c) What do you mean by ‘hostile takeover’ ? Why these types of takeovers are
resorted to and by whom, and what is the objective of the acquirer ?     (5 marks)

4. (a) Good Value Ltd. (GVL) is contemplating acquisition of Fair Value Ltd. (FVL).
GVL has 3,00,000 equity shares and FVL has 2,00,000 equity shares and the
market value of shares are Rs.30 and Rs. 20 and EPS is Rs.4 per share and
Rs.2.25 per share respectively. It is proposed to give one share of GVL to the
shareholder of FVL for their two shares in FVL. Based on the above information,
you are required to —
(i) calculate EPS after the merger/acquisition of the company; and
(ii) show the impact on EPS for the shareholders of both the companies.        (5 marks)
(b) X, an acquirer, fails to fulfil the offer obligation towards shareholders of target
company who have lodged their shares with the acquirer. What are the remedies
available to a merchant banker for discharge of the obligations especially towards
shareholders who have participated in the offer as well as to deal with the escrow
account ?                (5 marks)
(c) State whether any stamp duty is payable on transfer of properties under the order
of amalgamation. Briefly comment with relevant case law.            (5 marks)

5. (a) (i) The court has fixed meeting of equity shareholders of Rim Zim Ltd. on Tuesday,
the 9th June, 2009 at Broadway Hotel, 3, Osaka Street, Mumbai for considering
the proposed scheme of amalgamation with Jhil Mil Ltd. and appointed Kabir
as Chairman and Mrs. Noori as alternate Chairperson of the meeting. As a
Company Secretary of Rim Zim Ltd., draft the notice of the meeting.            (7 marks)
(ii) After meeting of equity shareholders of Rim Zim Ltd., the proposed scheme of
amalgamation of Rim Zim Ltd. with Jhil Mil Ltd. was passed. Draft the Chairman’s
report for onward submission to the court.              (4 marks)
(b) Briefly explain with relevant provisions of the Companies Act, 1956 as to when the
scheme of amalgamation would become effective.        (4 marks)
(Answer ANY TWO questions from this part.)

6. (a) Explain the enforcement of security interest by a secured creditor under the Securitisation
and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
(7 marks)
(b) Define ‘securitisation’ and explain the objectives of securitisation.              (4 marks)
(c) What do you mean by ‘non-performing assets’ under the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002 ?                 (4 marks)

7. (a) What do you understand by ‘sick industrial company’ ? Explain the immunities
provided to a sick industrial company under the Sick Industrial Companies (Special
Provisions) Act, 1985.                  (7 marks)
(b) Though, UNCITRAL Model Law is not a substantive law, yet it recommends
protection to creditors and other interested persons. Briefly describe what are the
protections provided under the UNCITRAL Model Law.           (4 marks)
(c) The main objective of asset reconstruction company (ARC) is to act as an agent
for banks and financial institutions. Briefly explain with the relevant provisions
of law.             (4 marks)

8. (a) State the World Bank principles for effective insolvency and creditor rights systems.
(7 marks)
(b) On 2nd December, 1983, winding-up order was passed in respect of Heaven Ltd.
On 1st December, 1989, official liquidator of Heaven Ltd. (in liquidation) initiated
misfeasance proceedings against the promoter directors of the company. Directors
pleaded that proceedings should be quashed being time barred. Briefly explain
with support of relevant case laws, period of limitation for initiating misfeasance
proceedings under the Companies Act, 1956.           (4 marks)
(c) Can an Indian court pass an order of amalgamation that has the winding-up effect
in respect of the foreign company ? Support your answer with relevant case law.  (4 marks)

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