2 Company Law Forms and Precedents

40 Corporate and Commercial Agreements

40

CHAPTER 2

COMPANY LAW: FORMS AND PRECEDENTS

SYNOPSIS

TYPES OF COMPANIESPublic and Private Companies

Formation procedure (private limited company)

PRECEDENTS• APPLICATION FORM FOR AVAILABILITY OF NAMES• MEMORANDUM OF ASSOCIATION• ARTICLES OF ASSOCIATION• LEGAL DUE DILIGENCE• DUE DILIGENCE REPORT

It is important for a draftsman to remember that the principal form ofcommercial enterprise in India, apart from statutory corporations owned by theGovernment, is a Company incorporated with limited liability1 . Indian law makesa distinction between corporate body and Company. ‘Corporate Body” includes aCompany incorporated outside India. “Company” means a company formed andregistered under the Indian Companies Act, 1956 or any other previous CompaniesAct2.

Companies incorporated in India and branches of foreign corporations areregulated by the Indian Companies Act, 19563 . The Act, in general is morerestrictive than the English Act, and is more comprehensive. However, severalprovisions of the Act do not apply to branches of foreign corporations and theCompanies Act is in fact far less stringent with regard to such branches.

Companies incorporated under the Companies Act are usually limited liabilitycompanies having a share capital. Companies limited by guarantee or unlimitedcompanies, though permissible, are relatively uncommon.

The distinction between the following types of companies is important,because the applications of the provisions of the Act may vary accordingly. The

1. It is important to note that banking, insurance and electric utility companies are subjectto special legislation.

2. The term “corporate body” includes both Indian and foreign companies, whereas“Company” refers only to an Indian Company.

3. The Act in its unamended form was in many respects similar to the English CompaniesActs.

Company Law: Forms and Precedents 41

provisions are more stringent in the case of public companies and less so forprivate companies. A private company that is a subsidiary of a public companyis, with a few exceptions, treated as a public company.

Types of Companies

Public and Private CompaniesA Company may be incorporated, as either a public or a private company. To

qualify as a private company, its articles of association must restrict the right totransfer its shares, limit the number of shareholders to 50 (excluding employeesand former employees) and prohibit any invitation to the public to subscribe toshares or debentures. There are certain requirements of the Act from which privatecompanies are exempt, but the requirement to file annual accounts with theRegistrar of Companies applies to all companies.

The Companies Act, provides that a private company becomes a deemedpublic company, if any of the following conditions are met:

• 25 per cent or more of its paid-up share capital is held by one or morecorporate bodies.

• It holds 25 per cent. or more of the paid-up share capital of a publiccompany.

• Its average annual turnover is above a prescribed amount (at present Rs..............(amount)).

• It accepts deposits from the public after an invitation to accept is madeby an advertisement or renews its public deposits. Deposits fromshareholders, directors and their relatives are not treated as publicdeposits.

All companies, other than private companies are public companies1.

Subsidiaries

A Company is a subsidiary of its holding Company, if the following conditionsare met:

(1) The composition of the Board of Directors is controlled by the holdingCompany.

(2) The holding Company controls more than one-half of the total votingpower in the subsidiary.

(3) The subsidiary is a subsidiary of any other Company that is itself thesubsidiary of the holding Company.

Formation procedure (private limited company)

The law under which a Company is incorporated in India is the IndianCompanies Act, 1956, which extends to the whole of India.

1. The Central Government exercises considerable control over the affairs of companies. Itssanction or approval is necessary in several important matters of internal administration,particularly in matters concerning managerial personnel [directors and managers]. Suchcontrols are less stringent in the case of private limited companies.


Detailed below are the steps to incorporate a private limited company in India:

1. Select, in order of preference, a few suitable names, not less than four,each of which should indicate as far as possible the main object of theproposed company.

2. Out of the four proposed names, one name will be the main name, andother three are to be mentioned in order of preference.

3. Avoid names, which resemble too closely or are the same, as the namesof any other company already registered, and avoid names with thewords “Stock Exchange” as part of the names.

4. Apply to the Registrar of Companies to ascertain which of the namesselected by you is available.

5. An application in Form No. 1A is to be submitted to the Registrar ofCompanies in this regard, and a fee of Rs. ..........(amount) is payablewith each application1.

6. See that one of the promoters is also a subscriber to the memorandumand articles of association of the proposed Company.

7. Pay the fee for the application for availability of name (Form 1A) in cashto the Registrar of Companies.

8. The Registrar of Companies will ordinarily inform you within a period ofseven to fourteen days from the submission of your application, whetherany of the names applied for is available.

9. If, none of the names is available, you will have to apply again, selectingfresh names, along with required application fee.

10. Get the memorandum and articles of association suitable for a privatelimited company drafted.

11. Get both the memorandum and articles of association stamped as perthe Indian Stamp Act, or the relevant State Act and the notificationsthereunder in force in your State.

12. Get both the memorandum and articles of association signed by at leasttwo subscribers, each of whom will also write in his own hand, hisfather’s name, occupation, address and the number of shares subscribedfor.

13. There will be at least one witness to these signatures, as mentionedabove who will sign and write in his own hand, his father’s name,occupation and address.

14. Their agents duly authorised by power of attorney may sign the aforesaidtwo documents on behalf of the subscribers.

15. Both the documents will then be dated.16. See that the date given on these documents is any date after the date

of stamping of them and not before that date.

17. Get the following forms duly filled up and signed:

1. The formal application should be done at the same time, as the memorandum andarticles of association.


(i) Declaration of compliance in Form No.1 by an advocate of theSupreme Court or of a High Court, an attorney or a pleader entitledto appear before a High Court or a Secretary or a CharteredAccountant in whole-time practice in India who is engaged in theformation of company, or by a person named in the articles as adirector, manager or secretary of the company that all therequirements of the Companies Act, 1956 and the rules thereunderhave been complied with in respect of registration and mattersprecedent and incidental thereto.

(ii) Notice of the situation of the registered office of the company inForm No.18.

(iii) Particulars of directors, manager or secretary in Form No. 32 induplicate.

(iv) Declaration in favour of one of the subscribers to the Memorandumof Association or any other person authorising him to file thedocuments and papers for registration and to make necessarycorrections, if any. This should be executed on non-judicial stamppaper of the requisite value.

(Forms stated in sub-items (ii) and (iii), though required to be filed within30 days of the incorporation of the company, are generally filed togetherwith the memorandum and articles of association.)

18. File the following with the Registrar of Companies within six months fromthe date of availability of name with necessary registration and filingfees. Minimum registration fee is Rs. ...............(amount) and themaximum is Rs. ...............(amount) lakhs:—

(i) The stamped and signed copy of the memorandum and articles ofassociation;

(ii) The forms mentioned in item 17 above;

(iii) Any other Agreement, if referred to in memorandum and articles ofassociation, as in that case, it will form a part of the Memorandumand Articles;

(iv) Any Agreement which the company to be incorporated proposes toenter into with any individual for appointment as its managing orwhole-time director or manager;

(v) Original copy of the Registrar of Companies’ letter intimating aboutthe availability of name.

19. Pay the registration and filing fee by way of cash or demand draft ortreasury challan for registration of the memorandum of association andfor filing of the articles of association and the forms mentioned in item17, depending on the authorised share capital of the proposed Company.

20. If, paid by way of demand draft, then draw the demand draft in favourof either the concerned Registrar of Companies of the State or Union


Territory or Pay and Accounts Officer, Department of Company Affairs,New Delhi, or Mumbai, or Calcutta or Chennai, as the case may be.

21. If, paid by way of treasury challan, then obtain three copies of treasurychallan from the specified branches of the appropriate bank, fill up thedetails, and deposit along with the fee in cash to the said branch of thebank.

22. The description of the head of account of the treasury challan should beas prescribed under Rule 22(1) of the Companies (Central Government’s)General Rules and Forms, 1956 and as amended up-to-date.

23. Two copies of the challans will be given to the depositor one of whichshould be sent to the Registrar of Companies along with the forms anddocuments mentioned in item 17.

24. The Registrar of Companies will then scrutinise the documents andpapers filed for registration and, if necessary, on intimation, theauthorised person will make necessary correction to them under hisinitials.

25. The Registrar of Companies will then register the Company and issue thecertificate of incorporation.

26. The date given by the Registrar of Companies on the certificate ofincorporation will be the date of incorporation of the Company and on thatdate, the Company will come into being as a separate legal entity.

27. The private limited company, so registered can commence business andexercise borrowing powers immediately after obtaining the certificate ofincorporation from the Registrar of Companies.

PRECEDENTS

APPLICATION FORM FOR AVAILABILITY OF NAMES

The Registrar of Companies.

Sir,

Subject: Availability of names—Information—Furnishing of:

We, the following applicants, are desirous of forming a company to beregistered under Companies Act, 1956, in the State of .........................................

1. Name and full address of the person(s) applying for the availability of thename. (in block capitals).........................................

2. Proposed name of the company.........................................

3. State whether public or private.........................................

4. In case the proposed name mentioned in item 2 is not available, 3 namesto be considered in the order of preference.


5. Main object of the proposed company.

6. Names and addresses of the prospective directors, promoters, etc.

7. Particulars of the names and situation of registered offices of othercompanies in the group or under the same management.

8. Proposed authorised capital. Rs........................................

9. Please furnish particulars and results of any application moved to this orany other Registrar previously for availability of name.

10. Particulars of remittance of fee (Draft/IPO) Rs. .......

Situation...................

Dated........................ Signature of the applicant

MEMORANDUM OF ASSOCIATION

Memorandum of Association is charter of a company. It is the fundamentaldocument pertaining to the formation of a company. It contains the basicconditions on the basis of which the company is incorporated. In other words theMemorandum of Association is the constitution of the company, which defines andconfines the area of operation of the company. It demarcates the area beyondwhich the action of the company cannot go. Any transaction outside the objectsand powers given in the memorandum is ultra vires and cannot be ratified by thecompany in the general meeting.

Drafting of Memorandum of Association

Draftsmen should know that a Memorandum of Association is the basicdocument upon which the whole structure of the company is formed. As theMemorandum of Association is the charter of the company, it shall define the areaof its activity and extent of power it could exercise. Section 13, of the CompaniesAct, 1956 deal with contents of Memorandum of Association. The provisions ofsection 13 could be summarised as below:

(i) Name clause (Name of the company)—As per section 13(1)(a), thewords ‘limited’ or ‘private limited’, as the case may be, shall be added asthe last words to the name made available by Registrar of Companies(ROC).

(ii) Registered office clause: (Registered office of the company) As persection 13(1)(b) the State in which the registered office of the companywould be situated, is to be mentioned here.

(iii) Objects clause: (objects for which the company is established) As persection 13(1)(d) the objects clause is required to state (i) the mainobjects to be pursued by the company on its incorporation and objectsincidental or ancillary to the attainment of the main objects;

(ii) other objects of the Company not included in above sub-clause (1).


As per section 13(1)(e) in the case of companies (other than tradingcorporations), with objects not confined to one State, the States towhose territories the objects extend.

(iv) The memorandum of a company limited by shares or by guarantee shallalso state that the liability of its members is limited.

(v) The memorandum of a company limited by guarantee shall also statethat each member undertakes to contribute to the assets of the companyin the event of its being wound up while he is a member or within oneyear after he ceases to be a member, for payment of the debts andliabilities of the company, or of such debts and liabilities of the companyas may have been contracted before he ceases to be a member as thecase may be. It should also state that each member undertakes tocontribute for the charges, costs and expenses of winding up and foradjustment of the rights of the contributories among themselves suchamount as may be required, not exceeding a specified amount.

(vi) In the case of a company having a share capital—

(a) If the company is a limited company, the memorandum shall alsostate the amount of share capital with which the company is to beregistered and the division thereof into a shares of a fixed amount.

(b) No subscriber of the memorandum shall take less than one share;and

(c) each subscriber of the memorandum shall write opposite to his namethe number of shares he takes.

TOTAL VALUE OF WORKS

Less Payments Previously Certified

BALANCE DUE TO CONTRACTOR

2. The Purchaser shall pay the amount due to the Contractor within (30)days after the date hereof.

3. Payment by the Purchaser of the amount due to the Contractorhereunder shall constitute conclusive evidence that the Purchaserhas performed all its obligations under the Contract, provided that itis not so conclusive:

(a) to the extent that fraud or dishonesty relates to or affects anymatter dealt with in this Certificate, or

(b) if any arbitration or court proceedings under the contract havebeen commenced by either Party before the expiry of 90 daysafter the date hereof.

MEMORANDUM OF ASSOCIATION

OF

ALPHA PVT. LTD.


(Registered under the Companies Act, 1956)

I. The name of the Company is “Alpha Private Ltd.”

II. The Registered Office of the Company is situated in the National CapitalTerritory of Delhi.

III. The objects for which the Company is established are:

(A) THE MAIN OBJECTS OF THE COMPANY TO BE PURSUED BY IT ONITS INCORPORATION ARE:

1. To carry on trade, business of or otherwise in any other way venture intothe activity of mining, extracting, exploring, producing, washing,managing, mobilising, supplying, expanding, developing, processing,buying, selling, re-selling, importing, exporting, exchanging, distributing,transporting, acting as agents and dealing in all kinds of fuel, includingcoal including but not limited to lignite and washed coke, naphtha, diesel,other hydro-carbon, natural gas in liquefied or vaporised form etc. (for thesake of brevity, hereinafter referred to as the fuel) for the purpose ofsupplying, transmitting, marketing, distributing, entering into contractwith, franchising, transporting the fuel to any power projects in India orabroad including externally aided projects and non-pithed fast trackpower projects.

(2) To acquire (whether by purchase, lease, grant, hire or otherwise);establish, develop, exploit, operate and maintain land, airspace,foreshore, claims, walls, mines, washeries, oil refineries, licenses,consents or authorisations, concessions, drilling and mining rights,exploration and production rights, and rights and interests of alldescriptions in or relating to the same which may seem to the companycapable or possibly capable of affording or facilitating the purchase,generation, supply, distribution, transformation, conversion, transmission,production, manufacture, processing, development, storing, carrying,import and export of, or dealing in the fuel or by-products derived fromor connected with any such activity (including limitation scheme) oraffording supply of natural or other gas, petroleum or other hydrocarbons,coal and other minerals, heat, steam, solar, hydro, wind, wave,geothermal, biological and all other forms of energy, or chemicals.

3. To construct, operate, maintain and acquire storage, regasification,liquification and other associated facilities for Liquefied Natural Gas.

4. To construct, operate, acquire and maintain pipelines and other modes oftransport including automobile tankers, ships for transport, supply anddistribution of fuel.

5. To promote, undertake, sponsor and provide research and developmentservices associated with fuel.

(B) THE OBJECTS INCIDENTAL OR ANCILLARY TO ATTAINMENT OF MAINOBJECTS ARE:

(1) To acquire and hold controlling and other interests in any company orcompanies and in particular in companies (a) in the business of


development of infrastructure for the regasification of the LiquefiedNatural Gas (LNG) required for power plants and other users of gas; (b)in the power sector; (c) in the business of exploration, production, sale,purchase, import, export, storage or transportation of the fuel, (d) in thebusiness of construction, maintenance, operation and ownership of apipeline distribution system to transport natural gas to power plants andother users of gas.

(2) To act as a holding company and to give guarantees and indemnities, toinvest or use moneys and property of the Company in such manner asthe Board may think fit and without limiting the generality of foregoing,to advance deposit or lend moneys, securities and property to or withsuch persons, companies or corporations on such security or withoutsecurity and on such terms and conditions as to the directors may deemexpedient and to issue on commission, subscribe for, take, acquire, hold,sell and exchange share stocks, bonds, obligations, debentures,mortgages or securities of any government or other competent authority,company or persons, and to provide financial, managerial andadministrative advice, services and assistance for any company in whichthis Company is interested, and for any other Company, firm or persons.

(3) To plan, locate, design, establish, build, construct, equip, operate, makeuse, administer, manage and maintain service, improve, inspect, enlarge,alter, protect, develop, extend, repair, replace, refurbish, pull down andremove and carry out work (including without limitation dredging works)in respect of the whole or any part or parts of a fuel receipt, storage,processing treatment and handling facility, a port and harbour facility,jetty, harbour, support vessels, pumping stations, buildings, plants,equipment and any facilities ancillary to the operation or use of theaforesaid or any of them including structures, erections, pipes, pipelines,offices, works, warehouses, plants, platforms, derricks, liquefied naturalgas revaporisation equipment, laboratories, research stations, transportfacilities, roads, railways, bridges and structures of all kind and topurchase or otherwise, lease, charter, and take or let or hire part of, anyoperation in respect of the same and to acquire, operate and maintain thelicenses, consents, authorisations, wayleaves, easements and otherrights capable or possibly capable of facilitating the aforesaid.

(4) To install in any premises or plant and to operate, use, inspect, maintain,service, repair, refurbish and remove meters or other devices forassessing the quantity and/or quality of supplies of the fuel and othersubstances and forms of energy and further purposes connected withsuch supplies.

(5) To do anything that an electricity generator, electricity supplier orelectricity transmitter, oil refinery, coal washeries, coal mines etc., areempowered, enabled, or required to do under or by virtue of, or underlicense or exemption granted under any enactment or statutoryinstruments.


(6) To do any of the business of procurers, suppliers, distributors, extractors,producers, developers, purchasers, refiners, distillers, processors,converters, storers, carriers, importers and exporters of, explorers andprospectors for the dealers in natural gas and other gases, petroleum andother hydrocarbon, minerals, metals, chemicals, and other products,other than the Fuel derived from or connected with any of them for thepurposes of the main objects of the Company.

(7) To enter into partnership or into any arrangement for sharing profits,union or interest, co-operation, joint venture, reciprocal concessions orotherwise, or collaborate with any person or company, carrying on orengaged in, any business or transaction either in India or abroad whichthis Company is authorised to carry on or engage or in any business ortransaction, capable of being conducted so as directly or indirectly tobenefit the Company.

(8) To make donations to such persons or institutions either of cash or anyother assets as may be thought directly or indirectly conducive to anyof the Company’s objects or otherwise and in particular to remunerateany person or corporation introducing business to the Company and alsoto subscribe, contribute or otherwise assist, or guarantee for money forcharitable, scientific, religious, benevolent, national, public, cultural,educational or other institutions or objects or for any exhibition of anypublic, general or other objects.

(9) To train, establish training facilities for or pay for training in India orabroad of any of Company’s employees or officers or any candidate inthe interest of or furtherance of the Company’s objects.

(10) To expend money in experimenting, developing, planning and testing andimproving or seeking to improve any patents, rights, inventions,discoveries, processes or information of the Company or which theCompany may acquire or propose to acquire.

(11) To establish, provide, maintain and conduct or otherwise subsidise,research laboratories and experimental workshops for scientific andtechnical research and experiments and to undertake and carry on withall scientific and technical research, experiments and tests of all kindsand to promote studies and research both scientific and technicalinvestigations and inventions by providing, subsidising, endowing orassisting laboratories, workshops, libraries, lectures, meetings andconferences and by providing remuneration to scientific and technicalprofessors and teachers and by providing for the award, scholarships,prizes, grants to students or independent students or otherwise and toencourage, promote and award studies, researches, investigations,experiments, tests and inventions of any kind that may be consideredlikely to assist any of the businesses which the Company is authorisedto carry on.

(12) To set up a productivity enhancement, support centre to bring aboutimprovements in product engineering, quality control and procurement


management.

(13) To buy, purchase, take on lease, exchange or otherwise machinery, plantand equipment, trademarks and stock in trade, acquire lands, buildings,flats, and hereditaments of any tenure or description in India orelsewhere whether for residential, business or other purposes and anyrights, easements, advantages and privileges relating thereto and eitherfor investment or resale and to turn the same into account as may seemappropriate or expedient, and to construct, alter, improve, decorate,develop, furnish and maintain offices, flats, houses, buildings, andstructures, works and conveniences of all kinds on any of the land, orimmovable properties, purchased or acquired by the company and tolease, sell, mortgage, exchange, convey, transfer, deal in or to otherwisedispose of the same.

(14) Subject to the directions of the Reserve Bank of India in this behalf, toborrow or raise moneys or loans from any person, firm, body corporate,financial institutions, banks, or association of persons for the purposesof the Company by promissory notes, Bills of Exchange, Hundies, andother negotiable or transferable instruments or by mortgage, charge,hypothecation or pledge, or by debentures or debenture stock, perpetualor otherwise, charged upon all or any of the Company’s properties andassets both present and future, movable and immovable, including itsuncalled capital, upon such terms as the directors may deem appropriateor expedient or in such other manner, or to take money on deposit orotherwise (merely for the purpose of financing the business of theCompany) with or without allowance of interest thereon and to lendmoney to customers and others having dealings with the Company andto guarantee the performance of contracts by such person and toexecute all deeds, writings and assurances for any of the aforesaidpurposes.

(15) To open current, overdraft or fixed deposit accounts with any banks,bankers, shroffs or merchants and to pay into and draw moneys fromsuch accounts.

(16) To draw, make, accept, endorse, discount, execute and issue promissorynotes, bills of exchange, bills of lading, warrants, debentures, and othernegotiable or transferable instruments.

(17) To invest the funds of the Company from time to time in such assets,properties, securities, shares, bullion, specie or investment or otherwiseas may from time to time be determined appropriate by the directors andfrom time to time sell or vary all such investments and to execute allassignments, transfers, receipts and documents that may be necessaryin that behalf.

(18) Upon any issue of shares, debentures, or any other securities of theCompany, to employ brokers, commission agents and underwriters, andto provide for the remuneration of such persons for their services by


payment in cash or issue of shares, debentures or other securities of theCompany, by granting the option to take the same or in any other mannerpermitted by law.

(19) To act in conjunction with, unite or amalgamate with, create or constituteor assist in creating or constituting any other company or association ofa kind similar, wholly or partially to this Company for the purpose ofacquiring all or any of the properties, rights and liabilities of the Companyand to buy or absorb all or any part of the business or properties of anysuch company or association and to acquire and secure membershipseat or privilege in and of any of the associations, exchange, market, orinstitution in India or any part of the world.

(20) To enter into any arrangements with any Government or authorities,municipal, local or otherwise or any persons or companies in India orabroad, that is or may be conducive to the object of the Company or anyof them and to obtain from any such Government authorities, persons,or companies, any rights, privileges, charters, contracts, licenses andconcessions which the Company deem desirable and to carry out,exercise and comply therewith.

(21) To alter, manage, develop, exchange, lease, transfer, mortgage, and givein gift, or otherwise dispose of, improve or deal with the lands,properties, assets and rights and resources and undertakings of theCompany or any part thereof for such considerations as the Companymay think fit and in particular for shares, debentures, securities, of anyother Company having object altogether or in part similar to those of thisCompany and to distribute amongst the members of the Company incash or in specie any properties or assets of the Company, provided thatno such distribution amounts to reduction of share capital of theCompany except in accordance with the provisions of the CompaniesAct, 1956, in this behalf.

(22) To pay all costs, charges and expenses incurred or sustained in or aboutthe promotion and establishment of the Company or which the Companyshall construe to be preliminary, including therein the cost of advertising,commission for underwriting, brokerage, printing and stationery and theexpenses attendant upon the formation of agencies and local boards.

(23) To pay all preliminary expenses of any company promoted by theCompany or any company in which the Company is or may contemplatebe interested and preliminary expenses may include all or any part of thecosts and expenses of owners of any businesses or properties acquiredby the Company.

(24) To procure the incorporation, registration or other recognition of theCompany in India, and to establish and regulate agencies for thepurposes of the Company’s business and to apply or join in applying togovernmental, local, municipal or other authorities or bodies forconcessions, orders, rights or privileges, that is, or may be conducive tothe Company’s objects or any of them and to oppose any proceedingsor applications which are or may be calculated directly or indirectly to


prejudice the Company’s interests.

(25) To provide for welfare of the Directors or the employees or formeremployees of the Company, and the wives, widows and families of suchpersons, by building or by contributing to the building of houses, dwellinghouses or by grant of money, pensions, allowances, bonus or otherpayments or by creating and from time to time subscribing to providentand other funds and providing or subscribing towards schools, places ofinstruction and recreation and hospitals, dispensaries, medical and otherattendants and other assistants as the Company shall think fit, and toform, subscribe to or otherwise aid benevolent, religious, scientific,national, public or other institutions or objects or purposes.

(26) To acquire and undertake the whole or any part of the business, propertyand liabilities of any person carrying on the main business of theCompany and to carry on or possession of property suitable for thepurpose of the main objects of the Company.

(27) To dispose of or transfer the business, property and undertaking of theCompany or any part thereof for any consideration which the Companymay deem fit to accept and in particular for shares, debentures,debenture stock, bonds or securities of any other company or companiesfor the purpose of its or their acquiring all or any of the property, rightsor liabilities of this Company or for any other purpose which may seemcalculated to benefit this Company.

(28) To create any reserve fund, sinking fund, insurance fund, dividendequalisation fund or any other special fund, whether for depreciation orfor repairing, improving, extending or maintaining any of the property ofthe company or for any other purposes conducive to the interests of theCompany.

(29) Subject to the provisions of the Companies Act, 1956 to place, toreserve or to distribute as dividend or bonus shares among the membersor otherwise to apply, as the Company may from time to time think fit,any moneys belonging to the Company including those received by wayof premium on shares or debentures issued by the Company at apremium and any moneys received in respect of forfeited shares andmoneys arising from the reissue by the Company of forfeited shares.

(30) To do all or any of the things hereby authorised either alone or inconjunction with, or in partnership with any person, firm or bodycorporate or as factors, trustees, or agents of any other companies orpersons or by or through any factors, trustees, or agents.

(31) To do all and everything necessary, suitable or proper for theaccomplishment of any of the purposes or the attainment of any of theobjects or the furtherance of any of the powers herewith set forth, eitheralong or in association with other corporate bodies, firms, or individuals,and to do every other act or acts, thing or things incidental orappurtenant to or growing out of or connected with the aforesaidbusiness or powers or any part or parts thereof.


(32) To appoint or employ, temporarily or permanently, or obtain on deputationany person or persons, remunerate any person, firm or company forrendering services to the Company whether in cash or by allotment ofshares or securities (including debentures) of the Company credited aspaid in full or in part or otherwise as may be thought expedient.

(33) To accept gifts of property, shares or assets in connection with theattainments of main objects of the Company.

(34) Subject to the provisions of the Companies Act, 1956, to enter intoarrangements for rendering and obtaining of technical know-how servicesand/or technical collaboration with individuals, firms, research laboratory,body corporate whether in or outside India.

(35) To buy wholesale or retail, repair, alter and exchange, let on hire, importall kinds of articles and things which may be required for the purpose ofany of the main businesses or which is commonly supplied or dealt withby persons engaged in any such business or which may seem capableof being profitably dealt with in connection with any of the mainbusinesses.

(36) To apply for purchase or otherwise, acquire any patent, patent right,copyright, trade marks, formula, license, know-how, lease, concessions,conferring any exclusive or limited right to use or other information as toany invention which may seem capable of being used for any of thepurposes of the Company or the acquisition of which may directly orindirectly benefit the Company, and to use, exercise, develop or grantlicenses in respect of the property rights, or information so acquired.

(37) To lend and advance money to the credit of any person or company, togive a guarantee or indemnity for the payment of money or theperformance of contracts or obligations by any person, to secure orundertake in any way the repayment of moneys lent or advanced to, orthe liabilities incurred by any person subject to the provisions of theCompanies Act, 1956 and Regulations made thereunder and directivesissued by the Reserve Bank of India.

(38) To adopt such means of making known and advertising the business andproducts of the Company as may be expedient.

(39) To issue or allot fully or partly paid shares in the Capital of the Companyin payment of or part payment of any movable or immovable propertypurchased or otherwise acquired by the Company or any servicesrendered to the Company.

(40) To control, manage, finance, subsidise, co-ordinate or otherwise assistany company or companies, including subsidiaries, in which theCompany has a direct or indirect financial interest, to provide secretarial,administrative, technical, commercial and other services and facilities ofall kinds for any such Company or Companies and to make paymentsby way of subvention or otherwise and any other arrangements whichmay seem desirable with respect to any business or operations of orgenerally with respect to such Company or companies.


(41) To arrange for the marketing in India and abroad and sale of services ofthe Company and purchase of raw materials, goods and articles, as arenecessary for carrying on the business of the Company and, for thatpurpose, either to establish its own shop, agency, or marketingorganization, or to appoint selling or buying agents or distributors of both(whether individuals, firms, bodies corporate) in any place in or outsideIndia and to allot, specify, alter or modify their areas of operation or theterms and conditions of their appointment and to pay remuneration tosuch selling or buying agents or distributors or both by way of suchcommission or in such other manner as the Company may deem fit.

(42) To institute and defend any suit, appeal, application for review or revisionor any other application of any nature whatsoever, to take outexecutions, to enter into agreements, to refer to arbitration and to enforceand where need be to contest any award and for all such purposes toengage or retain counsels, attorneys and agents and when necessary toremove them.

(43) To carry out research, investigation, development and experimental workof every description in relation to computer hardware and software andits application and use.

(44) To undertake and execute any trusts the undertaking of which may seemto the Company desirable and either gratuitously or otherwise.

(45) To insure the whole or any part of the property of the Company, eitherfully or partly, and to protect and indemnify the Company from liabilityor loss in any respect.

(46) To construct, assemble, erect, maintain, run and establish factories formaking pre-fabricated houses or apartments or structures in connectionwith the main business of the Company.

(47) To indemnify members, officers, directors, secretaries and servants ofthe Company against proceedings, damages, claims and demands inrespect of anything done or ordered to be done by them for and in theinterest of the Company or for any loss, damages, or misfortunes whichmay happen in the execution of the duties of their office or in relationthereto.

(48) To promote any company or companies for the purpose of acquiring allor any of the properties and liabilities of this Company or for any othersuch purpose connected with the main business of the Company carriedor in pursuance of its aforesaid objects.

(49) To import or prepare for market revise, clean, restore, recondition, treatand otherwise manipulate and deal and turn to account by any processof means, by-products, re-use and waste, and other products capable ofbeing manufactured or produced out of or with the use of all or any rawmaterials, ingredients, substances or commodities used in themanufacture of all or any of the products which the Company is entitledto manufacture or deal in and to make such use of the same as maybe thought fit for the attainment of the main objects of the Company.


(50) To do any of the business as buyers, sellers, traders, importers,exporters, distributors, general merchants, stockists, warehouses,commission agents, advertising agents, agents for promotion of sales,clearing and forwarding agents and the business of sourcing of all kindsof goods and materials, either manufactured, semi-manufactured or rawmaterials of all materials and descriptions and to offer all services inrelation to the above and to carry on agency business of all kinds.

(51) To guarantee the payment of money, unsecured by or payable under orin respect of bonds, debentures, debenture stocks, contracts,mortgages, charges, obligations and other securities of any company orof any authority, Central, State, Municipal, local or otherwise or of anyperson whatsoever, whether incorporated or not and generally to transactall kinds of guarantee business, to guarantee the issue of or the paymentof interest on the shares, debentures, debenture-stock or other securitiesor obligations of any company or association, and to pay or provide forbrokerage, commission and underwriting in respect of any such issueand to transact all kinds of trust and agency business.

(52) To purchase, charter, lease, take or let on hire, operate, use, employ orturn to account, build, equip, service, repair, maintain, supply, and dealin tankers and other ships and vessels and crafts of every description(including without limitation submersible crafts), hovercraft, motorvehicles, aircraft, airships, railway, locomotives, wagons, trucks, andmany means of transport and parts and accessories of all kinds for anyof the same.

(C) THE OTHER OBJECTS ARE:

(1) To invent, design, develop, construct, manufacture, produce, erect,assemble, test, import, export, alter, install, maintain, repair, renovate,refurbish, recondition, utilise, operate, manage, acquire, sell, hire, hireout, supply, and otherwise deal in plant, equipment and apparatus for thepurposes of communications of all kinds (including, without prejudice tothe generality of the foregoing, plants, equipment and apparatus which isintended for, or capable of, or designed for use in, with, in connectionwith, in conjunction with, connected directly or indirectly, to, or ancillaryto, all, part or parts of telecommunication, data processing, informationstorage or retrieval or process control, systems, services, facilities,apparatus, plant and equipment, as the case may be), and anythingcapable of being used for or in connection with or ancillary to such plant,equipment and apparatus as aforesaid.

(2) To provide remotely located offices and services and systems (includingwithout prejudice to the generality of the foregoing telephone answering,calling and related services and computer bureau) and remotely locatedservices and systems for the control of machinery utilisingtelecommunication or data processing facilities, to act as business andoffice managers, secretaries, messengers, telephone operators,commercial agents, mail order bureau, market researchers and to provideservices in connection with the reception, processing and forwarding of


signals and information by telephone, telemessage, telegram, telex,letter, wireless telegraphy and (without limitation) any other means ofcommunications and the processing, ordering and payment for anddispatch and delivery of goods, articles and services of all kinds by anymeans whatsoever.

(3) To acquire, produce, transmit, publish, print and reproduce in any formwhatsoever (including, without prejudice to the generality of theforegoing, visual or audible form and forms capable of being used by, in,or in connection with computers) and to buy, sell, supply and otherwisedeal in directories, brochures, manuals, journals, periodicals, magazines,newspapers, books, pictures, photographs, stationary and otherdocuments.

(4) To establish, acquire, operate, manage, supply, sell, hire, hire out,maintain and otherwise deal in facilities, plant, apparatus, and equipment(including but not limited to radio and television stations and studios)used or designed for use for the purposes of receiving and broadcastingor otherwise transmitting (by wireless telegraphy, closed circuits, cablesor otherwise) and of making, producing, recording replaying or producingprogrammes and cinematographic films for radio and television and forany other means of communication, sound and visual recordings andother products of all kinds (whether pre-recorded or not) for recording inpermanent or semi-permanent form, and replaying or reproducing sounds,images and signals of all kinds.

(5) To carry on all or any of the businesses of, and provide servicesassociated with, engineers, (including without limitation,telecommunications, mechanical, chemical, electrical, civil, heating andventilation engineers), bankers, financiers, factors, underwriters anddealers in securities, insurers, insurance brokers, share brokers andagents, insurance underwriters, property developers, freight contractors,carriers by land, water and air of freight and passengers, forwardingagents, shipping agents, travel agents, employment agents, estateagents, surveyors, architects, wharfingers, warehousemen, garageproprietors, motor mechanics, storage contractors, electricity supplyundertakers, general traders, licensed restaurateurs, food processors,manufacturers and distributors, painters, decorators, producers of oilexhibitions and displays, entertainers, photographers, cartographers,couriers and retailers, wholesalers and mail order operators for the sale,hire or other supply of any products or services.

(6) To render engineering, technical, management and other types of skilledand other services of all types of industries or organisations in India orabroad including for office, advertising, accounting, computer, secretarialand taxation matters and without limiting the generality of the above toact as consultants.

(7) To undertake, carry out, promote and sponsor rural developmentincluding any programmes for promoting the social and economic welfareor, the upliftment of the public in any rural area and to incur any


expenditure or any program of rural development and to assist theexecution and promotion thereof either directly or indirectly or through anindependent agency or in any other manner. The words rural area shallinclude such areas as may be regarded as rural areas under section35CC of the Income-tax Act, 1961, or any other law relating to ruraldevelopment for the time being in force or as may be regarded by theDirectors as rural areas and the Directors may at their discretion, in orderto implement any of the above mentioned objects or purposes, transferwithout consideration or at such fair or concessional valuer as theDirectors may think fit and divest the ownership of any property of theCompany to or in favour of any Public institutions or Trusts of Fundswhose object is rural development or upliftment.

(8) To acquire or set up and run hospitals, clinics, nursing homes, maternityand family planning units or pathological laboratories and optician shops.

(9) To carry on in India or elsewhere the business of importers and exportersof and dealers in all such items that are permissible under the prevailingImport and Export Trade Policy of the Government of India and also tobuy and sell, either as principal to principal or as broker, ImportReplenishment License as per the policy of the Government of India.

(10) To carry on the business of building construction, civil contractors andundertake construction work on turnkey project based in India andabroad.

(11) Subject to the approval of RBI if necessary under RBI Act, 1934, asamended by RBI (Amendment) Act, 1997, to carry on the business offinance, hire purchase, leasing and investment. The Company shall,however, not carry on any business of Banking as defined under theBanking Regulation Act, 1949.

(12) To carry on all or any of the business of and provide services associatedwith engineers (including without limitation, electrical, gas, petroleum,environmental, drilling, construction, mechanical, heating, ventilation,civil, chemical, telecommunications, computer and data informationengineers), environmental biologists, physicists, chemists, physiciansand specialists in medicine, mechanics, technicians, geologists,draftsmen, designers, surveyors, architects, builders, painters anddecorators.

(13) To carry on all or any of the businesses of procurers, suppliers,distributors, converters, producers, processors, developers, storers,carriers, importers and exporters of, and dealers in, hydrocarbon fuels,fuel handling equipment and machinery and fuel handling facilities theretoand any products or by products derived from any such business(including without limitation distillate fuel oil and natural gas whether inliquefied or vaporised form) and to carry on all or any of the businessesof construction, maintenance, running and owning a pipeline distributionsystem and import, export, store, sell, market and transport the naturalgas to power plants and other users of gas by way of laying pipelinesor through any other transportation means.


(14) To plan, locate, design, establish, build, construct, equip, operate, makeuse, administer, manage and maintain, service, improve, inspect,enlarge, alter, protect, develop, extend, repair, replace, refurbish, pulldown and remove and carry out works in respect of the whole or any partor parts of any electricity generating station (including without limitationcombined heat and power stations), generating sets, sub-station,transformer station, pumping station, building, plant, equipment, electricmain works and any facilities ancillary to the operation or use of theaforesaid or any of them including structures, erections, pipes, pipelines,machinery, engines, shops and showrooms, offices, factories, works,warehouses, plants, platforms, derricks, transmission towers or pylons,rigs, wind structures, dams and associated structures, testing sites,offshore wave structures, installations, (including without limitation solarpower and geothermal installations), depots, distribution stations andsub-stations, wharves, jetties, terminals, transport facilities, canals,roads, railways, branches, or sidings, bridges, reservoirs, water courses,tunnels, airports, and structures of all kinds, whether for the purposes ofthe Company or for sale or hire to, or in return for any consideration fromany person, and to purchase or otherwise acquire, lease, charter andtake or let on hire any of the same and to contribute to, or assist in, orcarry out any part of, any operation in respect of the same and toacquire, operate and maintain the licenses, consents, authorisations,wayleaves, easements and other rights capable of facilitating theaforesaid.

(15) To do any of the businesses of procurers, suppliers, distributors,designers, developers, manufacturers, installers, fitters, repairers,maintainers, importers and exporters of, and dealers in electricalappliances, electrical plants and machinery, and all kinds of goods,equipment, fittings, machinery, materials and installation connected withthe generation, transformation, transmissions, supply and use ofelectricity for domestic, industrial, commercial or other purposes or withconservation of electricity and other forms of energy for the purpose ofmain objects of the Company.

IV. The liability of the Members is limited.

V. The Authorised Share Capital of the Company is Rs. .................... (Amountin figure) .................... (Amount in words) divided into Rs. .................... (Amountin figure) .................... (Amount in words) Equity Shares of Rs. ....................(Amount in figure) .................... (Amount in words) each.

We, the several persons whose names, addresses and descriptions aresubscribed hereunder, are desirous of being formed into a Company in pursuanceof this Memorandum of Association and we respectively agree to take the numberof shares in the Capital of the Company set opposite our respective names.

S No. Name, address, description No. of Signature of Signature ofand occupation of the Equity Shares Subscriber Witness with


Subscriber taken by address andeach Subscriber occupation

1 10(Ten)

2. 10(Ten)

TOTAL 20

Twenty (only)

Dated..................

Place....................

ARTICLES OF ASSOCIATION

IntroductionThe Articles of Association is an important document which is framed with the

object of carrying out the aims and objective of the company as contained inMemorandum. The Articles are regulations for the internal management of acompany and are subordinate to the Memorandum. It constitutes a contractbetween the company and its members and members inter se.

Drafting of Articles of Association. —Articles of association of a companymay be drafted in any one of the forms given in Tables ‘A’, ‘C’, ‘D’ and ‘E’ ofSchedule 1 of the companies Act as may be applicable or in a form as nearthereto as circumstances admit. The companies are, however free to makeprovisions contained in any of the tables adopted by the Company.

The articles of association usually contains provisions relating to the followingmatters:

1. Exclusion wholly or in part of Table ‘A’;

2. Issue of sweat equity shares;

3. Issue of preference shares;

4. Allotment of shares;

5. Dematerialisation;

6. Lien of shares;

7. Call on shares;

8. Transfer of shares;

9. Transmission of shares;

10. Nomination;

11. Forfeiture of shares;

12. Buy-back of its own shares;

13. Conversion of shares into stock;

14. Share warrants;


15. Alteration of capital;

16. General meetings and proceedings, thereat;

17. Voting rights of members, voting and proxies;

18. Minimum and maximum number of directors;

19. Directors, managing/whole-time directors/their appointment,remuneration, qualifications, powers and proceedings of the Board ofDirectors;

20. Dividends and reserves;

21. Managing and/or Secretary;

22. Accounts and Audit;

23. Borrowing powers;

24. Common sale;

25. Capitalisation of profits;

26. Secrecy;

27. Winding up; and

28. Execution or adoption of preliminary agreements.

COMPANY LIMITED BY SHARES

ARTICLES OF ASSOCIATION

OF

Beta (Plumbing) Private Limited

Table ‘A’1. Regulations contained in Table ‘A’ in the First Schedule to the Companies

Act, 1956 (hereinafter referred to as Table ‘A’) shall apply to the Company in sofar as they are not inconsistent with these Articles.

2. Regulations 36 to 43 and 64 to 66 of Table A shall not apply to theCompany.

Definitions3. The following expressions shall have the meaning assigned to them herein

below unless there be something in the subject or context inconsistent therewith:

“The Act” means the Companies Act, 1956, as amended from time to time.

“The Agreement” shall mean the Shareholder’s Agreement between Alpha.................... and Beta .................... Private Limited dated.................... , 20..…along with annexures thereto and shall include any modification, alteration, additionor deletion thereto agreed between the parties in writing after the effective date ofthis Agreement.

DGO B.V Alpha .................... B.V means a company organised and existingunder Dutch law and having its registered office in .................... (place/State) andplace of business at .................... (address).


The “.................... Group” means Mr. .................... (name) son of Mr..................... (name), resident of .................... (address), representing himselfand certain other companies, individuals and entities specified in Schedule 1 toShareholders Agreement, all of whom are collectively referred to hereinafter as the“Beta Private Limited”

“Board” means the Board of Directors of the company or the Directors presentat a duly convened meeting of the Directors at which quorum is present.

“Company” means Beta .................... Private Limited.

“Director(s)” means the Director(s) for the time being of the company includingAdditional Director(s) and Alternate Director(s) as the case may be, the Directorsassembled at a Board, or acting under a Circular Resolution under the Articles.

“Office” means the Registered Office for the time being of the company.

“The Register” means the Register of Members to be kept pursuant to the Act.

“The Chairman” means the Chairman of the Board of Directors for the timebeing of the Company.

“Documents” including summons, notice, requisition other legal process andregisters, whether issued, sent or kept in pursuance of this or any other Act orotherwise.

“Members” means the duly registered holders, from time to time of the sharesof the Company and includes the subscribers to the Memorandum of theCompany.

“Month” means the calendar month.

“The Registrar” means the Registrar of the Companies,.................................

“The Register of Members” means the register of members to be kept pursuantto section 150 of the Act.

“Shares” means the shares or stocks into which the capital of the Companyis divided and interest corresponding with such shares or stocks except where adistinction between stocks and shares is expressed or implied.

“Year” means the calendar year and “Financial Year” shall have the meaningassigned thereto by section 2(17) of the Act.

Private Company4. The company is a Private Limited Company, within the meaning of section

3(1)(iii) of the Companies Act, 1956 and accordingly:

(a) The number of members of the Company (exclusive of the persons whoare in the employment of the Company and persons or who having beenformerly in the employment of the Company, were members of theCompany while in that employment and have continued to be membersafter the employment ceased) is not to exceed fifty. Provided that wheretwo or more persons hold one or more shares in the Company jointly,they shall for the purposes of this clause be treated as a single member;

(b) Any invitation to the public to subscribe for any shares or debentures of


the Company is hereby prohibited; and

(c) The right of transfer of shares shall be restricted as hereinafter provided.

Authorised Capital5. The Authorised share capital of the company is Rs. .................... (amount

in figures and words) divided into .................... (quantity of shares in figures andwords) Equity shares of Rs. .................... (amount in figures and words) eachpayable in the manner as may be determined by the Directors, from time to time,with power to increase, reduce, sub-divide or to repay the same or to divide thesame into several classes and to attach thereto any right and to consolidate orsub-divide or re-organise the shares subject to the provisions of the Act, to varysuch rights as may be determined in accordance with the regulations of theCompany.

6. In regulation 13 of Table ‘A’ the words “provided that no call shall exceedone fourth of the nominal value of the share or be payable at less than one monthfrom the date fixed for the payment of the last proceeding call” shall be omitted.

7. The shares may be issued against consideration other than cash.

8. The calls on any partly paid up shares in the Company and any furtherissue of shares shall be made by the Company in accordance with the provisionsof Articles and upon taking into account financial requirements of the Company.

Issue of Capital9. If and when the Company desires to increase the paid-up share-capital,

whether by a further issue of equity shares or preference shares, the additionalshares shall be offered in the first instance to the existing holders of the sharesby way of rights issue in proportion to the capital paid-up on the shares (whetherequity or preference) held by them at the time so as to maintain the ownershipstructure within the Company except when issued under Article 13 hereof.

10. The new shares shall be issued upon such terms and conditions and withsuch rights and privileges annexed thereto as the general meeting resolving uponthe creation thereof, shall direct and if no direction shall be given, as the Boardshall determine, and in particular such shares may be issued with a preferentialor qualified right to dividends, and in the distribution of assets of the Company andwith a special or without any voting right.

Additional Contribution11. The Shareholders shall contribute additional capital to the Company, in

proportion to their respective shareholding percentages (each such contributionbeing referred to as an “Additional Contribution”), as required by the Company toimplement its projects envisaged in the Agreement.

12. Each Shareholder shall, unless otherwise specified herein, pay the amountof its pro-rata share of the Additional Contribution, in accordance with the followingprocedure:

a. The Board of Directors shall issue a notice (‘Payment Notice’) to theShareholders setting forth each Shareholder’s pro-rata share, based onits shareholding percentage of such contribution and specifying the date


on which payment is required to be made.

b. The Shareholders shall, on or before the date specified in the PaymentNotice, remit immediately available funds as specified in the PaymentNotice to the Company’s bank account(s) designated in the PaymentNotice.

c. Against the amounts contributed by the Shareholders pursuant to thisArticle the Board of Directors shall issue to each Shareholder suchadditional number of Shares, credited as fully paid, as are necessary toreflect such Shareholder’s pro-rata share of the relevant contribution.

13. The Board of Directors may issue the further share to the person(s) whomay not be the shareholders of the Company with previous approval of theShareholders accorded by passing a resolution at a general meeting by consensusvote.

Transfer of Shares14. The Company shall keep a register of transfers, and therein shall be fairly

and distinctly entered particulars of every transfer or transmission of any Share.

15. The instrument of transfer shall be in writing and all the provisions ofsection 108 and other applicable provisions of the Act shall be duly complied within respect of all transfers of Shares and registration thereof. The Company shallnot charge any fee for registration of transfer of Shares.

16. Except where the transfer is made pursuant to Article 21 hereof the personproposing the transfer of any share (hereinafter called ‘the Proposing Transferor’)shall give notice in writing (hereinafter called a ‘Transfer Notice’) to the Companythat he desires to transfer the shares. A Transfer Notice shall specify the numberof shares proposed to be transferred, the sum the Proposing Transferor fixed asthe fair value, and shall constitute the Company his agent for the sale of the shareto any member or person selected by the Board, willing to purchase the share(hereinafter called “the Proposed buyer”) at the price so fixed, or at the fair valueto be fixed in accordance with Article 19 hereof. The Transfer Notice may includeseveral shares and in such case shall operate as if it were a separate notice inrespect of each share. The transfer Notice shall not be revocable without thesanction of the Board.

17. On receipt of the Transfer Notice the Company shall within fifteen (15) daysinform all the Shareholders (except the Proposing Transferor)

18. If the Company shall within three months after being served with a TransferNotice, find a Proposed buyer, shall give notice thereof to the Proposing Transferor.On receipt of the notice and upon payment of the fair value as fixed in accordancewith Article 16 or 19 hereof the Proposing Transferor shall be bound to transfer theshare to Proposed buyer.

19. In case any difference arises between the Proposing Transferor and theProposed buyer as to the fair value of a share, the fair value shall be calculatedas the norms given in Article 22 and Auditors of the Company shall on theapplication of either party, certify in writing the sum which, in their opinion, is thefair value, as per the norms given in Article 22 hereof and such sum shall be


deemed to be the fair value, and in so certifying the Auditors shall be consideredto be acting as experts and not as arbitrators, and as such the Arbitration andConciliation Act shall not apply.

20. If the Proposing Transferor, after having become bound as aforesaid,makes default in transferring the share, the Company may receive the purchasemoney and the Proposing Transferor shall be deemed to have appointed any oneDirector or the secretary of the Company as his agent to execute the TransferDeeds or any other documents as may be necessary to transfer the shares infavour of the Proposed buyer, and upon the execution of such Transfer Deed theCompany shall hold the purchase money in trust for the Proposing Transferor. Thereceipt of the purchase money by the Company shall be a good discharge to theProposed buyer, and after his name has been entered in the register of membersin purported exercise of the aforesaid power, the validity of the proceedings shallnot be questioned by any person.

21. If the Company is unable to find, within a period of three months afterbeing served with a Transfer Notice, a Proposed buyer, the company shall givenotice to the Proposing Transferor. On receipt of such notice the ProposingTransferor shall at any time within three months of this notice, be at liberty, to selland transfer the share(s) to any person and at any price not below the pricementioned in the Transfer Notice.

Transfer Price22. The transfer price shall be calculated as follows:

The Transfer price shall be greater of:

(a) The book value determined according to the method of the evaluationused in the balance sheet of the previous year.

22.1 The price of the proposed sale of Shares to BLS and or its nominee shallbe the fair value of such Shares determined on the basis of a valuation report byDelta or one of the other firms of Chartered Accountants of similar internationalrepute. If so requested by DGO, such valuation report shall take into account theprice offered by the potential buyer. Provided that if the approval of the ReserveBank of India is required. Such shares shall be valued in accordance with themethod/s acceptable to the Reserve Bank of India for the purpose of grantingapproval for the said transfer. BLS may convey, in writing, its acceptance to theoffer to DGO within a reasonable period, which shall be not later than sixty (60)days from the date of receipt of offer from DGO along with the valuation reportof the firm of chartered accountants.

23. Refusal to register transfer of shares

1. Subject as aforesaid, the Board may at any time in their absolute anduncontrolled discretion decline to register any proposed transfer of shares. Thisclause shall apply to a case where the proposed transferee is also a member ofthe Company.

2. The Board may also decline to register any transfer of shares on which theCompany has a lien. The Board may also suspend the registration of transfersduring the fourteen days immediately preceding the annual general meeting in


each year.

3. The Board may also decline to recognise any instrument of transfer unlessthe instrument of transfer is accompanied by the certificate of the shares to whichit relates and such other evidence as the Board may reasonably require to showthe right of the transferor to make the transfer.

Directors24. Unless otherwise determined by a general meeting, the number of

Directors shall not be less than and not more than

25. The First Directors of the Company shall be........................................

26. A Director shall not be required to hold any qualification shares nor requiredto retire by rotation. Once appointed they shall continue in office until they areremoved by the general meeting or die or resign or become permanentlyincapacitated. The Directors are entitled to notice of general meetings and toattend and speak thereat.

27. Subject to the provisions of the Companies Act, 1956:

(a) The remuneration of every Director for his services shall be such sumas the Board may from time to time determine for each meeting of theBoard or a meeting of any committee attended by him.

(b) If any Director, being willing, shall be called upon to perform extraservices (which expression shall include work done by the Director as amember of any committee formed by the Directors) or to make anyspecial exertions for any of the purposes of the Company or to givespecial attention to the business and affairs of the Company, the Boardmay remunerate such Director either by paying a fixed sum or apercentage of profits or both or any other manner, and may allow to suchDirector at the cost and expense of the Company such facilities oramenities as the Board may determine from time to time.

28. If the office of the Director is vacated due to death, resignation orotherwise, the resulting vacancy shall be filled in by the Board at a duly convenedmeeting of the Board.

29. Subject to the provision of section 313 of the Companies Act, the Boardmay appoint an alternate Director to act for one or more Directors (hereinaftercalled the ‘Original Director’) during his/their absence for a period of not less thanthree months from the state in which the meetings of the Board are usually heldand such appointment shall have effect and such appointee, whilst he holds officeas an alternate Director, shall be entitled to notice of meetings of the Board andattend and vote on behalf of the Original Director he is representing. If the alternateDirector is himself a director, he shall be entitled to exercise in addition to his vote,a vote on behalf of the Original Director to whom he is alternate. An alternatedirector appointed under this clause shall be a person nominated by the party whonominated the Original Director.

30. The Company may have other Directors, i.e. Directors, not representingeither or provided this is agreed in writing by both and such Directors shall be inaddition to the number of Directors mentioned in Article 24 provided, however, thatshall be entitled to nominate for each such new Director one additional Director to


ensure its casting vote under Article 46.

31. The Board may appoint and, at their discretion, remove or suspend such/officers by whatever designation called, managers, secretaries, engineers,experts, legal advisers, solicitors, clerks, agents, salesmen, workmen and otherservants or professionals for permanent, temporary or special service, as theBoard may, from time to time, think fit and determine their duties, fix theirremuneration, salaries or emoluments, and delegate to or confer upon them suchpowers, including the power to sub-delegate, authorities and discretion as theBoard may think fit.

32. The Board may authorise or empower any Director or Directors or theSecretary of the Company either by name or by virtue of office or otherwise, orany other person or persons, either singly or jointly, to exercise such powers,functions and authorities subject to such restrictions, limitations and conditions, ifany, and either generally or in specific cases, as the Board may think fit.

Managing Director33. Subject to the necessary approvals, there shall be two Managing Directors

of the Company, each nominated by the Board and the day to day managementof the Company shall be entrusted by the Board of Directors to the ManagingDirectors, who shall manage the affairs of the Company under the supervision andcontrol of the Board. The Board shall if deems fit and proper, define duties andresponsibilities of the Managing Directors.

34. The Managing Directors shall be appointed for such term and with suchpowers and at such remuneration whether by way of salary or commission orparticipation in profits or partly in one way and partly in another, as the Board maythink fit.

35. Subject to the control, direction and supervision of the Board, theManaging Directors shall be delegated with maximum operational responsibilities.Provided the decisions on the matters as set out hereunder shall be subject to theapproval of the Board of Directors:

(a) annual planning, budget and long term corporate planning (as well assubstantial changes of and deviations from the plans approved);

(b) selection of auditors, tax advisors, attorneys and managementconsultants for the Joint Venture Company;

(c) fundamental issues of business policy and organisation includingsignificant changes of the organisation;

(d) increase or reduction in the authorised share capital of the Joint VentureCompany, transfer of shares;

(e) any one time borrowing or guarantee of loans exceeding the limits fixedby the Board of Directors and/or borrowings, which exceed the paid-upshare capital and free reserves of the Joint Venture Company;

(f) the annual accounts and distribution of profits;

(g) measures and activities concerning the company’s managementincluding any increase or reduction in the number of Directors;


(h) formulation of the product range policy of the Joint Venture Companyincluding the discontinuation or significant changes of an existing line ofbusiness or product range;

(i) any amendment or alteration of the Joint Venture Company’sMemorandum and Articles of Association;

(j) merger or amalgamation with another company as well as reorganisationor reconstruction and winding-up of the Joint Venture Company;

(k) purchase, sale and encumbrance of real estate and real estate rights;

(l) contracts regarding intellectual property (patents, licenses, etc.);

(m) other matters of particular significance like particularly important, risky,a typical or exceptional business transactions, contract measures oractivities.

36. In case the Managing Directors fail to take decisions on any matter byconsensus, the matter shall be delegated to the Board of Directors and theMeeting of the Board may be convened for that purpose by any Managing Directorby giving at least seven business days notice to other directors.

37. The Company shall have Auditors (belonging to an International CharteredAccountant firm such as .................... , Delta, etc.) to be agreed and appointedat the first meeting of the Board of Directors.

Borrowing Power38. 1. The Board may from time to time at their discretion raise or borrow

money or secure payment of any sum or sums of money for thepurposes of the Company.

2. The payment or repayment of such money may be secured in suchmanner and upon such terms and conditions as the Board of Directorsmay think fit, and in particular by the issue of bonds, perpetual orredeemable debentures of the Company charged upon all or any part ofthe property of the Company, both present and future, include itsuncalled capital for the time being, and the debentures and othersecurities may be made assignable free from any equities between theCompany and the person to whom the same may be issued.

3. The working capital requirements shall be financed by a debt/equity ratioof 1.5 : 1. If a debt/equity ratio of 1.5 : 1 is not sufficient to enable thecompany to borrow the remaining necessary funds without providingfurther securities or guarantees, then the debt/equity ratio has to beimproved to a sufficient level whereby the contribution shall be made byBravo and Delta in the ratio of 49 : 51.

Meetings of the Board of Directors39. The Managing Director or Secretary of the Company may convene

meetings of the board. A written notice of every meeting of the board shall begiven to every Director at least seven (7) days in advance thereof. In case of aDirector residing outside India, notice of meetings of the board shall be given tosuch Director by cable, telex or fax at least twenty one (21) days in advance of


the meeting.

40. Every notice convening a meeting of the Board shall set out the agendaof the business to be transacted thereat in full and sufficient detail.

41. The quorum for a meeting of the Board of Directors shall be one- third ofthe total strength of the Board or two Directors whichever is higher. Quorum shallnot be complete unless one director each nominated by .................... (name) and.................... (name) is present at the meeting.

42. Resolutions to be passed at the meeting of the Board shall be passed bya majority of votes.

43. No resolution shall be deemed to have been duly passed by the Board bycirculation, through facsimile transmission or otherwise, unless the resolution hasbeen circulated in draft together with necessary papers, if any, to all the Directorsor their alternates or to all members of the committee as are entitled to vote onthe resolution.

Chairman44. After he has been nominated by the Board as the Director of the Company,

shall be the Chairman for all Board and General meetings. In the absence of theChairman, the Board shall from among their members elect a Chairman of theBoard or the General meeting.

45. The Chairman of the Board or General meeting shall not have a castingvote.

46. When there is a tie of votes cast in favour and against any resolution atthe Board or General meeting, the Managing Director nominated by the Board shallhave a casting vote. If the such Managing Director is not present at any meeting,any other director nominated by the Board and present at the meeting shall havea casting vote.

General Meetings47. The quorum for general meetings shall be the presence of two

shareholders.

Common Seal48. The Board of directors shall provide for a common seal for the purpose of

the Company, and shall have power from time to time to destroy the same andsubstitute a new seal in lieu thereof and the Board shall provide for the safecustody of the Seal and the Seal shall not be used except by the authority of aresolution of the Board of Directors, previously given. Every deed or instrument towhich the Seal of the Company is required to be affixed shall unless the same isexecuted by a duly constituted attorney for the Company be signed by oneDirector and the Seal shall be affixed thereto in his presence, subject, however toRule 6 of the Companies (Issue of Share Certificates) Rules, 1960.

Indemnity49. Subject to section 201 of the Companies Act, 1956, every officer or agent

for the time being of the Company shall be indemnified out of the assets of the


Company against any liability incurred by him in defending any proceedings,whether civil or criminal, in which judgment is given in his favour or in which heis acquitted or in connection with any application under section 633 of theCompanies Act, 1956 in which relief is granted to him by the Court.

50. Subject to section 201 of the Companies Act, 1956, no Director or otherofficer of the Company shall be liable for the acts, receipts, neglects or defaultsof any other Director or officer of the Company for joining in any receipt or otheract for conformity or for any loss or expense happening to the Company throughthe insufficiency of title to any property acquired by order of the directors for oron behalf of the Company or for the insufficiency or deficiency of any security inor upon which any of the moneys of the Company shall be invested or for any lossor damage arising from the bankruptcy, insolvency, or tortoise act of any personwith whom any moneys, securities or effects shall be deposited or for any lossoccasioned by any error of judgement or oversight on his part or for any other loss,damage whatever, which shall happen in the execution of the duties of his officeor in relation thereto.

………………………………

Name, description occupation and address of subscribers

………………………………

Signature of Subscriber, Signature of Witness with address and occupation

Place....................

Date....................., 20...

LEGAL DUE DILIGENCE

List of Documents

The Legal Due Diligence Report is based on the documents supplied by theCompanies.

ALPHA Limited1. Copy of the Memorandum and Articles of Association

2. Minutes of Board and General Meetings (Original)

3. Copies of Register of—

(a) Transfer of Shares

(b) Directors

(c) Contracts

(d) Directors’ Shareholding

(e) Charges

4. Copy of list of Shareholders as on .................... 20..... (date)


5. Copy of the release of first hypothecation charge for Rs. ....................(amount) by .................... Bank dated....................

6. Copy of the Sale Deed dated ...................., between Beta and Alpha inrespect of property bearing numbers ....................

7. Copy of the Sale Deed dated ...................., between .................... (name)and Alpha in respect of property bearing number ....................

8. Copy of letter dated ...................., of .................... (name) regardingallotment of industrial sheds number .................... to Alpha.

9. Copy of the Notice under .................... (name).

10. Copy of the Sale Deed dated .................... (name), between Gama.................... (name) and Alpha in respect of industrial sheds number.................... Address

11. Copy of Memorandum of Settlement under the Industrial Disputes Act,1947, between the Workman and the Management of the Company.

12. Copy of the Directors’ Report to the Shareholders twenty first Annual Reportand Accounts of the Company.

13. Copy of the Auditors’ Report for the year ending ....................

14. Copy of the Hypothecation of Book Debts Agreement and Hypothecation ofGoods Agreement dated ...................., with .................... (bank).

15. Copy of the Loan Agreement for vehicle financing dated ....................

16. Copy of the Loan Agreement for Auto Loan and Guarantee dated....................

17. Copy of the Hire-Purchase Agreement dated ...................., with.................... (name of company)

18. Copy of the Equipment Lease Agreement dated ...................., with....................(name of company)

19. Copy of the Lease Deed dated ...................., with ....................Pvt. Ltd.

20. Copy of the Trust Deed dated ...................., with InsuranceCompany.................... under the Employee Group Gratuity cum CAScheme and Copy of the Deed of variation to the Trust Deed dated....................

21. Copies of Writ Petitions, Notifications, Orders passed by the High Court,proposition notices, reply to the said notices in respect of matter relatingto litigation.

22. Copy of the Assessment Order of Deputy Commissioner of Income Taxdated ....................

23. Copy of Notice of Demand under section 156 of Income Tax dated....................

24. Copy of the Appeal to the Deputy Commissioner of Income Tax dated....................


Beta Private Limited1. Copy of Memorandum and Articles of Association

2. Copy of Deed of Dissolution dated....................

3. Copy of the Certificate of Incorporation dated ....................

4. Copy of the fresh Certificate of Incorporation dated ....................

5. Copy of the list of Shareholders as on ....................

6. Copy of Form 24AA, Notice of Interested Directors (pursuant to section 299of the Act).

7. Copy of Memorandum of Settlement under section 2(p) read with section18(3) of the Industrial Disputes Act, 1947.

8. Register of Charges and Contracts (original).

9. Copy of Minutes of Board and General Meetings.

10. Copy of the Auditors report for the year ending March....................

11. Copy of Application filed by Workman of the Company for Unfair LabourPractices.

12. Copies of show cause-cum-demand notices from the Excise Authority,Company’s reply to the said notices and copy of the legal opinion soughtby the Company in this matter.

13. Copy of the Appeal filed by the Company before the Asst. Commissionerof Income Tax, Appellate Tribunal, ...................... against the orders ofAssistant Commissioner of Income tax dated ....................

14. Copy for the documents pertaining to creation of Equitable Mortgage bydeposit of title deeds on .................... on Company’s immovable propertyat .................... in favour of .................... (bank) for credit facilities andmodification of the charge dated ....................

15. Copy of the Hypothecation of Goods Agreement dated .................... with.................... (bank) and Supplemental Agreement dated ....................

16. Copy of the Agreement for Hypothecation of Assets for credit facilitiesdated ....................

17. Copy of the Agreement for Hypothecation of Movable Assets datedMarch...................., with .................... (bank)

18. Copy of the Agreement for Hypothecation of Book Debts and Agreement ofHypothecation of Goods dated ....................

19. Copy of the Composite Loan Agreement for Auto Loan and Guarantee dated...................., with .................... (bank)

20. Copy of the Trust Deed dated ...................., under the Employees GroupGratuity cum Life Assurance Scheme amended by a Deed of Variationdated ....................

21. Copy of the Sale deed between .................... Pvt. Ltd. andBeta...................., in respect of ....................and Survey Nos.....................(Address)


22. Copy of Memorandum of Satisfaction of Charges dated ...................., ofRs. .................... (amount)

23. Copy of the Auditors’ Report for the year ending ....................

Beta India (J&K) Private Limited1. Copy of Certificate of Incorporation.

2. Copy of Memorandum and Articles of Association.

3. Copy of Certificate of SSI Unit.

4. Copy of the Auditors Report for the year ending ....................

5. Copy of the Minutes of the Board and General Meetings.

6. Register of Members (original).

7. Copy of the Register of—

(a) Contracts, Companies and Firms in which the Directors, etc., areinterested.

(b) Mortgages and Charges.

(c) Directors, Managing Directors, Manager and Secretary.

(d) Contracts.

8. Copy of letter pertaining to variation in the letter of appointment of……………… (name), dated ....................

9. Copy of the list of Share Transfers of the last three years.

10. Copy of the Lease Deed dated .................... in respect of ....................(address) in favour of Beta Pvt. Ltd.

11. Copy of the Rectification Deed dated ...................., in respect of....................(adderss) in favour of Beta Pvt. Ltd.

12. Copy of the Appointment letter of .................... as Authorised SalesRepresentative of the Company, dated ....................

13. Copy of the Hypothecation of Book Debts Agreement dated ....................with .................... (bank) and Promissory Note in favour of ....................(bank) for Rs. ...............(amount).

14. Copy of the Hypothecation of Goods Agreement dated .................... with.................... (bank) for Rs. ................. (amount) and copy of PromissoryNote in favour of .................... (bank) for Rs. ...............(amount).

15. Copies of the letters pertaining to renewal/enhancement of credit facilitiesto the Company, by .................... (bank)

BETA India Private Limited1. Copy of the Certificate of Incorporation.

2. Copy of Memorandum and Articles of Association.

3. Copy of the Minutes of the Board and General Meetings.

4. Copy of the Register of—


(a) Contracts, Companies and Firms in which the Directors etc. areinterested.

(b) Mortgages and Charges.

(c) Directors, Managing Directors, Manager and Secretary.

(d) Contracts.

5. Copy of the list of Share Transfers of the last three years.

6. Lease Agreement dated .................... with .................... in respect of,....................(adderss)

7. Agreement dated .................... with .................... in respect of premisesbearing No. ....................

8. Lease Agreement dated .................... with .................... in respect ofIndustrial Shed No. ....................

9. Agreement dated .................... with .................... for what purpose.

10. Letter by .................... Ltd., pertaining to payment of Rs................(amount) towards trade advance on ....................

11. Copy of the Letter(s) of Hypothecation dated .................... and Documentsrelating to registration of charge.

12. Copy of the Term Loan Agreement dated .................... with ....................(bank) for Rs. ...............(amount).

13. Copy of the search Report dated ...................., stating the particulars ofthe assets charged.

14. Copy of the letter pertaining to grant of credit facilities to the Company, by.................... (bank) dated ...................., and ....................

15. Litigation papers of ..................(name of Company), Sales Tax Matter.

16. Litigation papers of Sales Tax Appeal pending in the High Court of....................

17. Litigation papers of Labour case pending before LabourCourt ....................

DUE DILIGENCE REPORT

Alpha PACKAGING PRIVATE LIMITED

1. Organisation and Existence1.1 Alpha Private Limited, (hereinafter “the Company”) was incorporated on

.................... in the name of .................... Pvt. Ltd., as a private limited companyunder the Indian Companies Act, 1956 (hereinafter the ‘Act’).

1.2.1 The Company became a partner in a partnership firm called AlphaTraders/Alpha Engineering Company in .............. (year). The said


partnership firm was dissolved on .................... (date) and theCompany became entitled to the said business and its assets andgoodwill together with the ownership rights to the business premises andhave been accordingly continuing the said business on their own accountfrom the date of dissolution of the said partnership firm. A copy of theDeed of Dissolution, dated .................... is annexed hereto as Annexure1

1.2.2 The name of the Company was changed from .................... Pvt. Ltd. toAlpha Pvt. Ltd. A copy of the fresh Certificate of Incorporationconsequent to change of name of the Company, dated .................... isannexed hereto as Annexure 2.

1.3.1 The Registered Office of the Company is situated in the State of................................... at the following address:

................................................

................................................(address)

1.3.2 According to Clause III (A) of the memorandum of association of theCompany, the main objects to be pursued by the Company on itsincorporation are:

1. To carry on the business of manufacturers, buyers, sellers,importers, exporters and dealers in electro-pneumatic valves, air-operated valves, both hand-operated and foot-operated, solenoidvalves, low watt consumption valves, intrinsically safe valves foroperation by air, hydraulics and liquids, and generally of valves ofevery kind and description; air cylinders including single and doubleoperated, low friction and with or without cushion and cylinders ofevery other kind and description; pneumatic and electric tools suchas drills including Auto Feed, Screw Drivers, etc.; balances includingSky Climbers’ equipment of every size and weight; electro-pneumaticsequence control systems for machine tools, industrial machineryand any automation device incorporating valves and cylinders orotherwise, manufactured by the Company as well as by others;special purpose machines to be operated by valves and cylinders orotherwise, manufactured by the Company as well as by others;electro-heating induction equipment for welding on high, low andcontact frequency rating and electro-pneumatic machinery of everykind, nature or description, machinery of every kind incorporatingpneumatic, electro-pneumatic or electro-magnetic devices.

2. To manufacture, buy, sell, import, export and otherwise deal in:

(a) all accessories and spares required for the use in andmanufacture of the aforesaid articles and things, including drillchucks, drill collates, couplings, compressors, air filtration,regulation, lubrication equipment, Pneumatic Hoist, etc.;

(b) Corrugated cardboard rolls, sheets and boxes, including their


printing and waxing; and flat stitching wire, flexible and otherpackaging items.

1.3.3 The Objects clause III (B) in the Memorandum of Association of theCompany includes objects incidental and ancillary to the attainment ofthe main objects and other objects. A copy of the Memorandum ofAssociation is annexed hereto as Annexure 3.

1.3.4 According to clause IV of the memorandum of association, the liabilityof the members of the Company is limited.

1.3.5 According to clause VA of the memorandum of association, theauthorised share Capital1 of the Company is Rs. ...............(amount)(amount in words) divided into ...............(quantity of equity shares)equity shares of Rs. ...............(amount) each.

2. Share Capital2.1 As on ...................., the Authorised Share Capital of the Company was

Rs. ............... (amount) divided into (quantity of equity shares) equity shares ofRs. ............... (amount) each.

2.2 As on March...................., the issued subscribed and paid-up Capital ofthe Company was Rs. ............... (amount) divided into (Quantity of equity shares)equity shares of Rs. ............... (amount) each, fully paid-up.

2.3 There are no restrictions under the memorandum of association onchanges in the capital structure of the Company.

3. Internal Regulations3.1 The internal regulations of the Company are contained in the Articles of

Association (hereinafter ‘the Articles’). A copy of the articles of association isannexed hereto as Annexure 41.

3.2 The regulations contained in Table ‘A’2 to the Act, shall not apply to theCompany except as adopted by the articles.

3.3 The articles authorise the Company to issue shares at a premium or atpar or subject to the provisions of section 79 of the Act3, at a discount and “togive to any person the option to call for or be allotted any shares either at par orat a premium during such time and for such consideration as the Board thinks fit”.(Article 11)

3.4 Certain restrictions are placed on the transfer of shares to a person whois not a member of the Company. Therefore, a member desirous of selling hisshares shall offer the same to the existing members at the first instance by givinga notice to the Board of Directors (Article 23 to Article 27 contain the procedure

1. For a company limited by shares, the amount of the share capital with which theCompany is to be registered is called the authorised capital, which must be stated in theMemorandum. The Authorised capital sets the limit of capital available for issue and theissued capital can never exceed that limit. [Section 13 (4) of the Companies Act].


for transfer of shares to non-members). However, such restrictions as containedin Articles 20 to 25 and Article 27 shall not apply to transfer of shares to existingmembers or to a person selected by the Board and in certain other cases(Article 28).

3.5 Article 29 provides that “the Directors may, in their absolute anduncontrolled discretion and without being bound to give any reason, refuse toregister transfer of any share”1. Articles 31 to 34 contain the procedure as totransfer of shares.

3.6 The provisions relating to joint holders of a share are contained inArticle 42.

3.7 Article 45 provides, that any General Meeting (annual or extra ordinary) ofthe Company may be called by giving not less than 7 days notice in writing2.However, a General Meeting3 may be called by giving a shorter notice than 7days4.

3.8 Article 46 provides, that “where any special business1 is to be transactedat a general meeting, no explanatory statement need to be annexed to the noticeof the meeting”. The Article excludes the applicability of section 173(2)2.

3.9 To constitute a quorum for a General Meeting, two members are requiredto be present in person3.

1. Under section 9 of the Act, any provision contained in the memorandum, articles,Agreement or Resolution to the extent to which it is repugnant to the provisions of thisAct become or be void, as the case may be.

2. As per section 28 of the Companies Act, the Articles of Association of a company limitedby shares may adopt all or any of the regulations contained in Table A in Schedule I.

3. Section 79 of the Act:

(1) A Company shall not issue shares at a discount except as provided in this Section.

(2) A Company may issue at a discount shares in the company of a class alreadyissued, if the following conditions are fulfilled, namely—

(i) the issue of the shares at a discount is authorised by a resolution passed by thecompany in a general meeting, and sanctioned by the Company Law Board;

(ii) the resolution specifies the maximum rate of the discount at which the sharesare to be issued;

(iii) not less than one year has at the date of the issue elapsed since the date onwhich the company was entitled to commence business; and

(iv) the shares to be issued at a discount are issued within two months after thedate on which the issue is sanctioned by the Company Law Board or withinsuch extended time as the Company Law Board may allow.

(3) Where a company passes a resolution authorising the issue of shares at a discount,it may apply to the Company Law Board for an order sanctioning the issue; and onany such application the Company Law Board, if, having regard to all thecircumstances of the case, it thinks proper so to do, may make an order sanctioningthe issue on such terms and conditions as it thinks fit.

(4) Every prospectus relating to the issue of the shares shall contain particulars of thediscount allowed on the issue of the shares or of the shares or of so much of thatdiscount as had not been written off at the date of the issue of the prospectus.


3.10 The Articles provide as under with respect to voting rights of members4:

(a) Upon a show of hands or on poll, every member present in person or theproxy shall be entitled to vote in proportion to his share of the paid-upequity capital viz. he shall have one vote for one equity share.

(b) In the case of equality of votes, the Chairman of the General Meetingshall, have a second or casting vote, both on show of hands and on apoll, in addition to the vote/votes to which he may be entitled as amember. (Article 52)

(c) Article 53 provides that a member can only appoint another member asa proxy to attend and vote instead of himself. Article 53 contains theprovisions relating to Proxies5.

3.11 Unless otherwise determined in a General Meeting, the Company is

1. Section 111 of the Companies Act, deals with power to refuse registration and appealagainst refusal:

If a Company refuses, whether in pursuance of any power of the Company under itsarticles or otherwise, to register the transfer of, or the transmission by operation of lawof the rights to, any shares or interest of a member in, or debentures of, the Company,it shall within two months from the date on which the instrument of transfer, or theintimation of such transmission, as the case may be, was delivered to a Company, sendnotice of the refusal to the transferee and the transferor or to the person givingintimation of such transmission, as the case may be, giving reasons for such refusal tothe transferor or transferee, or the person who gave intimation of the transmission byoperation of law, as the case may be, may appeal to the Company Law Board againstany refusal of the Company to register the transfer or transmission, or against any failureon its part within the period referred to in sub-section (1) either to register the transferor transmission or to send notice of its refusal to register the same.

2. Section 171(1) of the Act

Length of notice for calling meeting: A general meeting of a company may be called bygiving not less than twenty one days notice in writing.

The said provisions are not applicable to private companies unless otherwise specified in itsArticles (Section 170) .


(1) Every company shall in each year hold in addition to any other meeting, a generalmeeting as its annual general meeting and shall specify the meeting as such in thenotices calling it; and not more than fifteen months shall elapse between the dateof one annual general meeting of a Company and that of the next.

4. Section 171(2) of the Act:

A general meeting may be called after giving shorter notice than that specified in subsection (1), if consent is accorded thereto:

(i) in the case of an annual general meeting, by all the members entitled to vote thereat;and

(ii) in the case of any other meeting, by members of the company (a) holding, if thecompany has a share capital, not less than 95 per cent of such part of the paid upshare capital of the company as gives a right to vote at the meeting, or (b) having,if the company has no share capital, not less than 95 per cent of the total votingpower exercisable at that meeting.


required to have not less than two and not more than seven Directors (Article 59).No qualification by way of holding shares is required of any Director (Article 63).The Directors are empowered to fill up a casual vacancy or as an addition to theBoard. A Director so appointed shall hold office up to the date up to which theDirector in whose place he is appointed would have held office if it had not beenvacated. Any Director appointed as Additional Director shall hold office only up tothe date of the next Annual General Meeting but shall be eligible for re-appointmentat such meeting (Article 62).

3.12 The provisions of sections 2551 and 2562 of the Act shall apply toappointment and retirement by rotation of Directors (Article 60).

3.13 The meeting of Board of Directors shall be held once in every threemonths and at least four such meetings shall be held every year1. (Article 66(b))

3.14 Article 67 provides as under with respect to quorum for a Board Meeting:

“a. The quorum for a meeting of the Board of Directors shall be one-third ofthe total strength of the Board of Directors (any fraction contained in thatone-third being rounded off as one) or two Directors, whichever is higher.

1. Under section 173(1)

In the case of an annual general meeting, all business to be transacted at the meetingshall be deemed special, with the exception of business relating to:

(i) the consideration of the accounts, balance sheets and the reports of the Board ofDirectors and auditors,

(ii) the declaration of the dividend,

(iii) the appointment of directors in the place of those retiring, and

(iv) the appointment of and the fixing of the remuneration of the auditors.

2. Section 173(2):

Where any items of business to be transacted at the meeting are deemed to be specialas aforesaid, there shall be annexed to the notice of the meeting a statement setting outall material facts concerning each such item of business, including in particular, thenature of concern or interest,

A private company, which is not a subsidiary of a public company, may exclude the applicationto itself of the provisions of section 173(2).

3. This is in accordance with section 174(1) of the Act.

Section 174(1):

(1) Unless the articles of the company provide for a larger number, five memberspersonally present in the case of a public company (other than a public companywhich has become such by virtue of section 43A) and two members personallypresent in the case of any other Company, shall be the quorum for a meeting of theCompany.

4. Section 41 of the Companies Act defines ‘Members’ as:

(1) the subscriber of the memorandum of a Company shall be deemed to have agreedto become members of the Company, and on its registration, shall be entered asmembers in its register of members.

(2) every other person who agrees in writing to become a member of a Company andwhose name is entered in its register of members, shall be a member of theCompany.

5. Section 176 of the Act deals with proxies. The said section applies to the Company withsuch modifications as stated in the clause to Articles 53.


b. For the purpose of clause (a) ‘total strength’ means the total strength ofthe Board of Directors of the Company as determined in pursuance of theAct after deducting therefrom the number of the Directors, if any, whoseplaces may be vacant at the time.”

3.15 Powers of Directors are contained in Articles 70 to 752. Clause 21 ofArticle 70 empowers the Board to delegate its powers, authorities and discretionsto any person, firm, company or fluctuating body of persons.

3.16 Article 79 provides as under with respect to the inspection of accounts,books and documents of the Company:

“(1) The Board of Directors shall from time to time determine whether and towhat extent and at what times and places and under what conditions or


Appointment of directors and proportion of those who are to retire by rotation(1) Unless the articles provide for the retirement of all the directors at every annual

general meeting, not less than two-thirds of the total number of directors of a publiccompany, shall—(a) be persons whose period of office is liable to determination by retirement of

directors by rotation; and

(b) save as otherwise expressly provided in this Act, be appointed by theCompany in a general meeting.

(2) The remaining directors in the case of any such Company, and the directorsgenerally in the case of a private company which is not a subsidiary of a publicCompany, shall, in default of and subject to any regulation in the articles of theCompany, also be appointed by the company in general meeting.

2. Section 256 of the Act:Ascertainment of directors retiring by rotation and filling of vacancies

(1) At the first annual general meeting of a public company, or a private companywhich is a subsidiary of a public company held next after the date of the generalmeeting at which the first directors are appointed in accordance with section 255and at every subsequent annual general meeting one-third of such of the directorsfor the time being as are liable to retire by rotation, or if their number is not threeor a multiple of three, then, the number nearest to one-third, shall retire from office.

(2) The directors to retire by rotation at every annual general meeting shall be thosewho have been longest in office since their last appointment, but as betweenpersons who became directors on the same day, those who are to retire shall, indefault of and subject to any Agreement among themselves, be determined by lot.

(3) At the annual general meeting at which a director retires as aforesaid, the Companymay fill up the vacancy by appointing the retiring director or some other personthereto.

(4) ( a) If the place of the retiring director is not so filled up and the meeting has notexpressly resolved not to fill the vacancy, the meeting shall stand adjourned tillthe same day in the next week, at the same time and place, or if that day is apublic holiday, till the next succeeding day which is not a public holiday, at thesame time and place.

(b) If at the adjourned meeting also, the place of the retiring director is not filledup and that meeting also has not expressly resolved not to fill the vacancy, theretiring director shall be deemed to have been re-appointed at the adjournedmeeting, unless—

(i) at that meeting or at the previous meeting a resolution for thereappointment of such director has been put to the meeting and lost;

Contd. on next page


regulations the accounts and books of the Company or any of them shallbe open to the inspection of members not being Directors.

(2) No member (not being a Director) shall have any right of inspecting anybooks of account or documents of the Company except as conferred bylaw or authorised by the Board or by the Company in general meeting.”

3.17 The provisions relating to Dividends are contained in Regulations 85 to94 of the Table ‘A’ in the First Schedule to the Act.

4. Directors4.1 At present, the Company has four Directors. A List of Directors of the

Company is annexed hereto as Annexure 5.

4.2 A copy of the list of shareholders as of ...................., is annexed heretoas Annexure 6.

4.3 List of companies in which the Directors are interested is annexed heretoas Annexure 7.

5. Agreements5.1 Certain charges are required to be registered with the Registrar of

Companies within 30 days of making the charge1.

5.2 The Company has maintained a Register of Charges2.

5.3 An Equitable Mortgage was created in respect of Company’s immovableproperty, .................... on .................... for Rs. ...............(amount) for creditfacilities in favour of .................... (bank). The charge was modified subsequentlyand presently the amount of charge has been enhanced to Rs. ...............(amount).

5.4 The Company entered into a Hypothecation of Goods Agreement dated

(ii) the retiring director has, by a notice in writing addressed to the companyor its Board of Directors, expressed his unwillingness to be so re-appointed;

(iii) he is not qualified or is disqualified for appointment;

(iv) a resolution, whether special or ordinary, is required for his appointmentor re-appointment by virtue of any provisions of this Act;


In the case of every Company, a meeting of its Board of Directors shall be held at leastonce in every three months and at least four such meetings shall be held in a year.

2. Section 292 of the Act

Certain powers to be exercised only at Meetings:

(1) The Board of Directors of a Company shall exercise the following powers on behalfof the company, and it shall do so only by means of resolutions passed at meetingsof the Board:

(a) the power to make calls on shareholders in respect of money unpaid on theirshares;

(b) the power to issue debentures;

(c) the power to borrow money otherwise than on debentures;

(d) the power to invest the funds of the Company; and

(e) the power to make loans.

Contd. from pervious page


...................., with ................................ Bank for credit facilities wherein acharge of Rs. ...............(amount) was created on existing and future plant andmachinery installed/to be installed at the premises of the Company at.................... or elsewhere. By a Supplemental Agreement dated ....................,the credit limit was enhanced to Rs. ...............(amount) as and by way of secondmodification.

5.5 Under the Agreement for Hypothecation of Movable Assets dated...................., a charge of Rs. ...............(amount) was created on one gluermachine installed at Company premises at .................... or elsewhere for termloan facility for the purchase of machinery. The aforesaid term loan is repayableby monthly instalments of Rs. ...............(amount) per month, commencing from.................... until the loan account is fully adjusted.

5.6 Under the Hypothecation of Goods Agreement dated ...................., with.................... (bank) for banking facilities a charge of Rs. ...............(amount) wascreated on existing and future plant machinery installed/to be installed at thepremises of the Company at .................... or elsewhere. By way of Hypothecationof Assets Agreement for Cash Credit/Overdraft/Demand Loan Facility dated...................., the credit limit was enhanced to Rs. ...............(amount) as and byway of first modification.

5.7 An equitable mortgage of the Company’s immovable property at.................... was created on ...................., for Rs. ...............(amount) in favourof the .................... (bank). The charge was modified on ...................., and thecredit limit was enhanced to Rs. ...............(amount).

5.8 The Company entered into an Agreement for Hypothecation of MovableAssets to secure a Term Loan of Rs. ...............(amount) dated ...................., for

1. Section 125 of the Act deals with charges, which includes a mortgage. Section 125(4)applies to the following charges:

(a) a charge for the purpose of securing any issue of debentures;

(b) a charge on uncalled share capital of the Company;

(c) a charge on any immovable property, wherever situate, or any interest therein;

(d) a charge on any book debts of the Company;

(e) a charge, not being a pledge, on any movable property of the Company;

(f) a floating charge on the undertaking or any property of the Company includingstock-in-trade;

(g) a charge on calls made but not paid;

(h) a charge on a ship or any share in a ship;

(i) a charge on goodwill, on a patent or a licence under a patent, on a trade mark, oron a copyright or a licence under a copyright.

2. Section 143(1): Every company shall keep at its registered office a register of charges andenter therein all charges specifically effecting property of the company and all floatingcharges on the undertaking or any property of the company, giving in each case:

(i) a short description of the property charged;

(ii) the amount of the charge; and

(iii) except in the case of securities to bearer, the names of the persons entitled to thecharge.


the purchase of machinery. Under the said Agreement, new plant and machinery,including office equipment, tools, vehicles, fixtures, fittings, accessories and partsat the Company premises at ....................or elsewhere were hypothecated as andby way of first charge in favour of the Bank. Further, under the said Agreement,the Company shall deal exclusively with .................... (bank) for all types of creditfacilities in future and shall not obtain any fund/non-fund based credit facility fromany other source without the knowledge and concurrence of the Bank in writing.

5.9 Under the Agreement of Hypothecation of Goods and Agreement ofHypothecation of Book Debts dated .................... (both the Agreementsconstituting a single charge) for Rs. ...............(amount) stocks of raw materials,work-in-process, finished goods, stores and spares at ....................(address) andpresent and future book debts of the Company were hypothecated in favour of theBank. The credit facility was enhanced on subsequent dates and by aSupplemental Agreement dated ...................., the said credit facility wasenhanced to Rs. ...............(amount).

5.10 Under the Composite Agreement for Auto Loan and Guarantee dated...................., for Rs. ...............(amount) with .................... (bank), the Companyhas to repay the loan by 36 equated monthly instalments of Rs................(amount), the first instalment being due on ....................(date). We havebeen informed by the Company that it has been paying the instalments regularly.

5.11 The Trust Deed dated ...................., under the Employees Group Gratuitycum Life Assurance Scheme was amended by a Deed of Variation executed on.................... pursuant to the amendments to the Payment of Gratuity Act, deathof one of the trustees and change of name of the Company.

6. Labour AgreementA Settlement was entered into between the Workmen and the Management of

the Company under section 2(p) read with section 18(3) of the Industrial DisputesAct, 1947. The Settlement will remain in force for a period of three years from...................., to ..................... either of the parties may after the expiry of thesaid period, give a written notice, two months in advance to terminate thisSettlement in accordance with section 19(2) of the Industrial Disputes Act, 1947.The terms of Settlement are contained in the Memorandum of Settlement, whichis annexed hereto as Annexure 8.

7. Title to PropertiesThe Company has the following immovable properties:

7.1 Property bearing .................... along with the building situated at..................... The title of the said property is still in the name of M/s AlphaTraders/Alpha Engineering Company (Under the Deed of Dissolution ....................,Annexure 1, the Company became entitled to the ownership of the said property).Equitable Mortgage was created on the said property in favour of ....................(bank). We have not examined the title deeds of the said property.

7.2 Plot Number .................... and Survey Nos. ....................

7.3 Plot Number .................... and Survey Nos. ....................


8. Litigation8.1 Taxation

8.1.1 The Assistant Commissioner of Sales Tax vide Order dated...................., rectified the Assessment Order for the financial year ....................,demanding additional taxes as under:

i. Central Sales Tax … Rs. ...............(amount)

ii. .................... (State) Sales Tax … Rs. ...............(amount)

(including interest)

We were informed by the Company that the additional liability i.e. Sales Taxon sale of corrugated boxes is wrongly allowed against Form -‘H’ worth Rs................(amount) and Form 14-B worth Rs. ...............(amount). We were furtherinformed that the Company was given Form -‘H’ and Form 14-B by its customer....................(name) (which exports goods using the corrugated boxesmanufactured by the Company). Further the Company has now received thecorrect forms namely viz. Form-‘C’ against Form-‘H’ and Form ‘N-14’ against Form‘14-B’, and the liability after rectification is likely to be as under:

i. Central Sales Tax … Rs. ...............(amount)

ii. .................... (State) Sales Tax … Rs. ...............(amount)

The above-mentioned liability will be borne by the Company’s customer,....................(name). The Company has further informed us that it would bemaking the necessary application for rectification shortly.

8.1.2 The Company has filed an appeal before the Assistant Commissioner ofIncome Tax, Appellate Tribunal, ......................(city) against the Orderof the Asst. Commissioner of Income Tax; ...................... (city) dated...................., for the assessment year 1991-91. The Company hasappealed against the said Order on the ground that the amount of Rs................(amount) being the provision for gratuity has not beendeducted from taxable income of the assessee.

8.2 Central Excise

8.2.1 The Company has received the following Show Cause-cum-DemandNotices which aggregate to Rs. ...............(amount):

Notice Date Period Amount/Rs.

30-6-97 1994-95 ...............

30-6-97 1995-96 ...............

30-6-97 1996-97 ...............

30-6-97 Penalty ...............

…………………………………

...............

5-12-97 1-8-97 to 31-12-97 ...............


7-5-98 1-11-97 to 31-3-98 ...............

…………………………………

...............

The Company has made a reply to all the above-mentioned notices to theCommissioner of Central Excise wherein it has submitted that the said notices arevoid and illegal and require to be recomputed taking into consideration, thesubmissions made in its reply to the said notices. The Company also requestedfor a personal hearing. At the hearing on ...................., the Company reiterated thesubmissions made in its reply to the show cause notice.

The Company sought a legal opinion on the matter and the Counsel is of theopinion that the question of liability does not arise unless the said show causenotices are converted into a confirmed demand by way of Order-In-Original aftercomplete hearing of the case. Further, the Company has a prima facie case inview of the Central Board of Excise and Custom circular clarifying that thecorrugated fitments/partitions are inherent part of the corrugated boxes and are notto be classified as separate items.

8.3 Labour

8.3.1 An Application before the Labour Court has been filed by a workman ofthe Company for unfair labour practice. The Workman was suspended inthe year 1996-97, and later on, his services were terminated in the year1997-98. In the said application, the Workman has prayed forreinstatement, back wages and subsistence allowance.

9. Miscellaneous9.1 Most of the pages of the Minute Book of the Board Meetings, Annual and

Extra Ordinary General Meeting are not initialled or signed by the Chairman of theMeeting and the last page of the record of the proceeding though signed, is notdated1 as required by the Act. Pages ...................... and ....... of the BoardMinutes are blank and page number ......... of the minutes of annual and extraordinary general meetings is blank.

9.2.1 As per the Auditor’s report for the year ending ...................., theCompany has taken unsecured loans from the directors of the Company,companies and other parties listed in the register maintained undersection 301 of the Act. The details of interest paid on unsecured loansduring the Financial Year .................... are annexed hereto as Annexure9. The Company has not taken any other loans from firms listed in theregister maintained under section 301 of the Companies Act, 1956. Therate of interest paid and other terms and conditions of such loans are notprima facie prejudicial to the interest of the Company. The Company hasnot taken any loans, secured or unsecured from companies under thesame management as defined under section 370(1B) of the CompaniesAct, 1956.

9.2.2 As per the Auditors report for the year ending ...................., theCompany during the year ...................., has not granted any loanssecured or unsecured, to companies, firms or other parties listed in theregister maintained under section 301 of the Act and/or to the companies


under the same management as defined under section 370 (IB) of theAct.

ANNEXURE 5

LIST OF DIRECTORS OF ALPHA PACKAGING PVT. LTD.

1. ………………… (NAME)

2. ………………… (NAME)

3. ………………… (NAME)

4. ………………… (NAME)

Drafting ofProspectus: As per section 2(36) of the Companies Act, 1956 “prospectus”

means any document described or issued as prospectus and includes any notice,circular, advertisement or other document inviting deposits from the public orinviting offers from the public for the subscription or purchase of any shares in,or debentures of, a body corporate.

Schedule II of the Companies Act, 1956 gives the matters to be specified inthe prospectus. Which is as following—

SCHEDULE II

(See sections 44 (2) (a) and 56)

MATTERS TO BE SPECIFIED IN PROSPECTUS ANDREPORTS TO BE SET OUT THEREIN

PART I

I. General information.—

(a) Name and address of registered office of the company.

(b) (i) Consent of the Central Government for the present issue anddeclaration of the Central Government about non-responsibility forfinancial soundness or correctness of statements.

(ii) Letter of Intent/industrial licence and declaration of the CentralGovernment about non-responsibility for financial soundness orcorrectness of statements.

(c) Names of regional stock exchange and other stock exchanges whereapplication made for listing of present issue.

(d) Provisions of sub-section (1) of section 68A of the Companies Act,relating to punishment for fictitious applications.


(1) Every Company shall cause minutes of all proceedings of every general meetingand of all proceedings of every meeting of its Board of Directors or of everycommittee of the Board, to be kept by making within thirty days of the conclusionof every such meeting concerned, entries thereof in books kept for that purposewith their pages consecutively numbered.


(e) Statement/declaration about refund of the issue if minimum subscriptionof 90 per cent is not received within 90 days from closure of the issue.

(f) Declaration about the issue of allotment letters/refunds within a period of10 weeks and interest in case of any delay in refund at the prescribedrate under section 73 (2)/(2A).

(g) Date of opening of the issue.

Date of closing of the issue.

Date of earliest closing of issue.

(h) Name and address of auditors/and lead managers.

(i) Name and address of trustee under debenture trust deed (In case ofdebenture issue).

(j) Whether rating from Crisil or any rating agency has been obtained for theproposed debenture/preference share issue.

If no rating has been obtained, this should be answered as “No”.

If yes, the rating should be indicated.

(k) Underwriting of the issue.

(Names and addresses of the underwriters and the amount underwritten bythem.)

(Declaration by Board of Directors that the underwriters have sufficientresources to discharge their respective obligations.)

II. Capital Structure of the company.—

(a) Authorised, issued, subscribed and paid up capital.

(b) Size of present issue giving separately reservation for preferentialallotment to promoters and others.

(c) Paid-up capital

(i) after the present issue,

(ii) after conversion of debentures (if applicable).

III. Terms of the present issue.—

(a) Terms of payments.

(b) Rights of the instrument holders.

(c) How to apply—availability of forms, prospectus and mode of payment.

(d) Any special tax benefits for company and its shareholders.

IV. Particulars of the issue.—

(a) Objects.

(b) Project Cost.

(c) Means of Financing (including contribution of promoters).

V. Company, management and project.—

(a) History and main objects and present business of the company.


(b) Subsidiary(ies) of the company, if any (For financial data, refer toauditor’s report in Part II).

(c) Promoters and their background.

(d) Names, addresses, and occupation of manager, managing director andother directors including nominee directors, whole-time directors (givingtheir directorships in other companies).

(e) Location of project.

(f) Plant and machinery, technology, process, etc.

(g) Collaboration, any performance guarantee or assistance in marketing bythe collaborators.

(h) Infrastructure facilities for raw materials and utilities like water, electricity,etc.

(i) Schedule of implementation of the project and progress made so far,giving details of land acquisition, civil works, installation of plant andmachinery, trial production, date of commercial production, etc.

(j) The products:

(i) Nature of the Product/s—consumer/industrial and end users.

(ii) Approach to, marketing and proposed marketing set up.

(iii) Export possibilities and export obligations, if any (In case of acompany providing any ‘service’ particulars, as applicable, befurnished).

(k) Future prospects—expected capacity utilisation during the first threeyears from the date of commencement of production, and the expectedyear when the company would be able to earn cash profits and netprofits.

Stock market data for shares debentures of the company high/low price ineach of the last 3 years and monthly high/low during the last six months (whereapplicable).

VI. Following particulars in regard to the company and other listed companiesunder the same management within the meaning of section 370 (1B) which madeany capital issue during the last 3 years:—

Name of the company

Year of issue

Type of issue

(Public/right/composite)

Amount of issue

Date of closure of issue

Date of completion of delivery of share/debenture certificates

Date of completion of the project, where object of the issue was financing ofa project

Rate of dividend paid.

VII. (a) Outstanding litigation pertaining to.—(i) matters likely to affect


operation and finances of the company including disputed tax liabilities of anynature; and

(ii) criminal prosecution launched against the company and the directors foralleged offences under the enactments specified in Paragraph 1 of Part I ofSchedule XIII to the Companies Act, 1956.

(b) Particulars of default, if any, in meeting statutory dues, institutional dues,and towards instrument holders like debentures, fixed deposits, and arrears oncumulative preference shares, etc. (also give the same particulars about thecompanies promoted by the same private promoters and listed on stockexchanges).

(c) Any material development after the date of the latest balance-sheet and itsimpact on performance and prospectus of the company.

VIII. Management perception of risk factors (e.g. Sensitivity to foreignexchange rate fluctuations, difficulty in availability of raw materials or in marketingof products, cost/time over run, etc.).

PART II

A. General Information

1. Consent of directors, auditors, solicitors/advocates, managers to the issue,registrar of issue, bankers to the company, bankers to the issue and experts.

2. Expert opinion obtained, if any.

3. Change, if any, in directors and auditors during the last three years, andreasons thereof.

4. Authority for the issue and details of resolution passed for the issue.

5. Procedure and time schedule for allotment and issue of certificates.

6. Names and addresses of the company secretary, legal adviser, leadmanagers, co-managers, auditors, bankers to the company, bankers to the issue,and brokers to the issue.

B. Financial Information

Reports to be set out

1. A report by the auditors of the company with respect to.—(a) profits andlosses and assets and liabilities, in accordance with sub-clause (2) or (3) of thisclause, as the case may require; and

(b) The rates of the dividends, if any, paid by the company in respect of eachclass of shares in the company for each of the five financial years immediatelypreceding the issue of the prospectus, giving particulars of each class of shareson which such dividends have been paid and particulars of the cases in which nodividends have been paid in respect of any class of shares for any of those years;and if no accounts have been made up in respect of any part of the period of fiveyears ending on a date three months before the issue of the prospectus,containing a statement of that fact (and accompanied by a statement of theaccounts of the company in respect of that part of the said period up to a datenot earlier than six months of the date of issue of the prospectus indicating the


profit or loss for that period and the assets and liabilities position as at the endof that period together with a certificate from the auditors that such accounts havebeen examined and found correct by them. The said statement may indicate thenature of provision or adjustments made or are yet to be made).

2. If the company has no subsidiaries, the report shall.—(a) So far as regardsprofits and losses, deal with the profits or losses of the company (distinguishingitems of a non-recurring nature) for each of the five financial years immediatelypreceding the issue of the prospectus; and

(b) So far as regards assets and liabilities, deal with the assets and liabilitiesof the company at the last date to which the accounts of the company were madeup.

3. If the company has subsidiaries the report shall.—(a) So far as regardsprofits and losses, deal separately with the company’s profits or losses asprovided by sub-clause (2) and in addition deal either—

(i) as a whole with the combined profits or losses of its subsidiaries, so faras they concern members of the company; or

(ii) individually with the profits or losses of each subsidiary, so far as theyconcern members of the company,

or, instead of dealing separately with the company’s profits or losses, deal as awhole with the profits or losses of the company, and, so far as they concernmembers of the company, with the combined profits or losses of its subsidiaries;and

(b) So far as regards assets and liabilities, deal separately with the company’sassets and liabilities as provided by sub-clause (2) and in addition, deal either—

(i) as a whole with the combined assets and liabilities of its subsidiaries,with or without the company’s assets and liabilities, or

(ii) individually with the assets and liabilities of each subsidiary,

and shall indicate as respects the assets and liabilities of the subsidiaries, theallowance to be made for persons other than members of the company.

4. If the proceeds, or any part of the proceeds, of the issue of the shares ordebentures are or is to be applied directly or indirectly—

(i) in the purchase of any business; or

(ii) in the purchase of an interest in any business and by reason of thatpurchase or, anything to be done in consequence thereof, or inconnection therewith; the company will become entitled to an interest asrespects either the capital or profits and losses or both, in such businessexceeding fifty per cent, thereof,

a report made by accountants (who shall be named in the prospectus) upon—

(a) the profits or losses of the business for each of the five financial yearsimmediately preceding the issue of the prospectus; and

(b) the assets and liabilities of the business at the last date to which theaccounts of the business were made up, being a date not more than onehundred and twenty days before the date of the issue of the prospectus.


5. (1) If.—

(a) the proceeds, or any part of the proceeds, of the issue of the shares ordebentures are or is to be applied directly or indirectly in any mannerresulting in the acquisition by the company of shares in any other bodycorporate; and

(b) by reason of that acquisition or anything to be done in consequencethereof or in connection therewith, that body corporate will become asubsidiary of the company,

a report made by accountants (who shall be named in the prospectus) upon—

(i) the profits or losses of the other body corporate for each of the fivefinancial years immediately preceding the issue of the prospectus; and

(ii) the assets and liabilities of the other body corporate at the last date towhich its accounts were made up.

(2) The said report shall.—(a) Indicate how the profits or losses of the otherbody corporate dealt with by the report would, in respect of the shares to beacquired, have concerned members of the company and what allowance wouldhave fallen to be made, in relation to assets and liabilities so dealt with for holdersof other shares, if the company had at all material times held the shares to beacquired; and

(b) Where the other body corporate has subsidiaries, deal with the profits orlosses and the assets and liabilities of the body corporate and its subsidiaries inthe manner provided by sub-clause (2) above in relation to the company and itssubsidiaries.

6. Principal terms of loan and assets charged as security.

C. Statutory and other information

1. Minimum subscription.

2. Expenses of the issue giving separately fee payable to—

(a) Advisors.

(b) Registrars to the issue.

(c) Managers to the issue.

(d) Trustees for the debenture-holders.

3. Underwriting commission and brokerage.

4. Previous issue for cash.

5. Previous public or rights issue, if any (during last five years):—

(a) Date of allotment: Closing Date:

Date of Refunds:

Date of listing on the stock exchange:

(b) If the issue(s) at premium or discount and the amount thereof.

(c) The amount paid or payable by way of premium, if any, on each sharewhich had been issued within the two years preceding the date of the


prospectus or is to be issued, stating the dates or proposed dates ofissue and, where some shares have been or are to be issued at apremium and other shares of the same class at a lower premium, or atpar or at a discount, the reasons for the differentiation and how anypremiums received have been or are to be disposed of.

6. Commission or brokerage on previous issue.

7. Issue of shares otherwise than for cash.

8. Debentures and redeemable preference shares and other instruments issuedby the company outstanding as on the date of prospectus and terms of issue.

9. Option to subscribe.

9A. The details of option to subscribe for securities to be debt in a depository.

10. Purchase of property.—(i) As respects any property to which this clauseapplies—

(a) The names, addresses, descriptions and occupations of the vendors;

(b) The amount paid or payable in cash, share or debentures to the vendorand, where there is more than one separate vendor, or the company isa sub-purchaser, the amount so paid or payable to each vendor,specifying separately the amount, if any, paid or payable for goodwill;

(c) The nature of the title or interest in such property acquired or to beacquired by the company;

(d) Short particulars of every transaction relating to the property completedwithin the two preceding years, in which any vendor of the property tothe company or any person who is, or was at the time of the transaction,a promoter, or a director or proposed director of the company had anyinterest, direct or indirect, specifying the date of the transaction and thename of such promoter, director or proposed director and stating theamount payable by or to such vendor, promoter, director or proposeddirector in respect of the transaction.

(ii) The property to which sub-clause (1) applies is a property purchased oracquired by the company or proposed to be purchased or acquired, which is to bepaid for wholly or partly out of the proceeds of the issue offered for subscriptionby the prospectus or the purchase or acquisition of which has not been completedat the date of issue of the prospectus, other than property—

(a) the contract for the purchase or acquisition whereof was entered into inthe ordinary course of the company’s business, the contract not beingmade in contemplation of the issue nor the issue in consequence of thecontract; or

(b) as respects which the amount of the purchase money is not material.

(iii) For the purpose of this clause, where a vendor is a firm, the members ofthe firm shall not be treated as separate vendors.

(iv) If the company proposes to acquire a business which has been carried onfor less than three years, the length of time during which the business has beencarried on.


11. (i) Details of directors, proposed directors, whole-time directors, theirremuneration, appointment and remuneration of managing directors, interests ofdirectors, their borrowing powers and qualification shares.

Any amount or benefit paid or given within the two preceding years or intendedto be paid or given to any promoter or officer and consideration for payment ofgiving of the benefit.

(ii) The dates, parties to, and general nature of—

(a) every contract appointing or fixing the remuneration of a managingdirector or manager whenever entered into, that is to say, whether withinor more than, two years before the date of the prospectus;

(b) every other material contract, not being a contract entered into in theordinary course of the business carried on or intended to be carried onby the company or a contract entered into more than two years beforethe date of the prospectus.

A reasonable time and place at which any such contract or a copy thereof maybe inspected.

(iii) Full particulars of the nature and extent of the interest, if any, of everydirector or promoter—

(a) in the promotion of the company; or

(b) in any property acquired by the company within two years of the dateof the prospectus or proposed to be acquired by it.

Where the interest of such a director or promoter consists in being a memberof a firm or company, the nature and extent of the interest of the firm or company,with a statement of all sums paid or agreed to be paid to him or to the firm orcompany in cash or shares or otherwise by any person either to induce him tobecome, or to qualify him as, a director, or otherwise for services rendered by himor by the firm or company, in connection with the promotion or formation of thecompany.

12. Rights of members regarding voting dividend, lien on shares and theprocess for modification of such rights and forfeiture of shares.

13. Restrictions, if any, on transfer and transmission of shares/debentures andon their consolidation/splitting.

14. Revaluation of assets, if any (during last 5 years).

15. Material contracts and inspection of documents e.g.

A. Material contracts.

B. Documents.

C. Time and place at which the contracts together with documents will beavailable for inspection from the date of prospectus until the date ofclosing of the subscription list.

PART III

Provisions Applying to Parts I and II of the Schedule


16. Every person shall, for the purpose of this Schedule, be deemed to be avendor who has entered into any contract, absolute or conditional, for the sale orpurchase or for any option of purchase, of any property to be acquired by thecompany, in any case where—

(a) the purchase money is not fully paid at the date of the issue of theprospectus;

(b) the purchase money is to be paid or satisfied, wholly or in part, out ofthe proceeds of the issue offered for subscription by the prospectus;

(c) the contract depends for its validity or fulfilment on the result of thatissue.

17. Where any property to be acquired by the company is to be taken onlease, this Schedule shall have effect as if the expression “vendor” included thelessor, the expression “purchase money” included the consideration for the lease,and the expression “sub-purchaser” included a sub-lessee.

18. If in the case of a company which has been carrying on business, or ofa business which has been carried on for less than five financial years, theaccounts of the company or business have only been made up in respect of foursuch years, three such years, two such years or one such year, Part II of thisSchedule shall have effect as if references to four financial years, three financialyears, two financial years or one financial year, as the case may be, weresubstituted for references to five financial years.

19. Where the five financial years immediately preceding the issue of theprospectus which are referred to in Part II of this Schedule or in this Part covera period of less than five years, references to the said five financial years in eitherPart shall have effect as if references to a number of financial years the aggregateperiod covered by which is not less than five years immediately preceding theissue of the prospectus were substituted for references to the five financial yearsaforesaid.

20. Any report required by Part II of this Schedule shall either.—

(a) indicate by way of note any adjustments as respects the figures of anyprofits or losses or assets and liabilities dealt with by the report whichappear to the persons making the report necessary; or

(b) make those adjustments and indicate that adjustments have been made.

21. Any report by accountants required by Part II of this Schedule.—

(a) shall be made by accountants qualified under this Act for appointmentas auditors of the company; and

(b) shall not be made by any accountant who is an officer or servant, or apartner or in the employment of an officer or servant, of the company orof the company’s subsidiary or holding company or of a subsidiary of thecompany’s holding company.

For the purpose of this clause, the expression “officer” shall include aproposed director but not an auditor.

22. Inspection of documents.—Reasonable time and place at which copies of


all balance sheets and profit and loss accounts, if any, on which the report of theauditors is based, and material contracts and other documents may be inspected.

Note.—Term ‘year’ wherever used herein, earlier, means financial year.

Declaration.—That all the relevant provisions of the Companies Act, 1956, andthe guidelines issued by the Government or the guidelines issued by the Securitiesand Exchange Board of India established under section 3 of the Securities andExchange Board of India Act, 1992, as the case may be, have been complied withand no statement made in prospectus is contrary to the provisions of theCompanies Act, 1956 or the Securities and Exchange Board of India Act, 1992 orrules made thereunder or guidelines issued, as the case may be.

Place.......................

Date........................ Signatures of directors)

Prospectus

Alpha Company Limited offering shares forsubscription to the public.

I. General informationI.a. Prospectus of Alpha Company Ltd., offering shares to the public for

subscription.

(This prospectus has been duly filed with the Registrar Joint Stock Company).

I.b. The subscription list will open on the.................... day of ..........20... andwill close on or before the................... day of..........20... The permission of theCentral Government has been obtained to this issue, but it must be distinctlyunderstood that in giving this permission the Government do not take anyresponsibility for the financial soundness of any schemes or for the correctnessof any of the statements made or opinions expressed with regard to them.

I.c. This Company is incorporated under the Indian Companies Act, 1956.

II. Capital structure of the company—II.a. Capital of the company is Rs. ............. divided into .............. preference

shares of Rs............... each; .............. equity shares of Rs............ each; ...........founders (or management) shares of Rs. .................each.

II.b. The preference shares carry a fixed cumulative preferential dividend@............ % p.a. on the capital for the time being paid up thereon, and rank, bothas regards dividend and capital, in priority to the ordinary shares, but without anyfurther right to participate in the profits or assets.

II.c. The founders’s shares carry a right (state the rights, also mention who isto get the shares)

III. Terms of the present issue—III.a. Of the above shares ............... ordinary shares and.............. preference

shares equal to Rs. ................. are to be issued and credited as fully paid.

issued at par

..............preference shares of Rs.....................


..............equity shares of Rs.....................

...............founders shares of Rs.....................

Payable as follows:—

On application of preference shares Rs....................

On allotment of preference shares of Rs................. the balance payable asand when called by the Directors.

On application ordering share of Rs..................

On allotment equity shares of Rs................. the balance payable whencalled by the Directors.

The Founders’ shares are payable in full on allotment.

III.b. The right of voting at general meetings is one vote for every threepreference shares, and one vote for every ordinary share and six votes for everyFounder’s share.

IV. Company, management and project—IV.a. The main object of the company is to establish and carry on the business

of manufacture of electric goods and in particular to purchase the business carriedon by M/s........................ described as Vendors hereafter at......................(place).

IV.b. A copy of the memorandum is attached which shall be treated as partof the prospectus and provides full details regarding the objects of the company.

IV.c. The following are the names of the signatories of the memorandum.

(State here the names of the signatories, and shares taken by them shouldbe stated opposite each name)

Directors(Name, address and description)

Bankers(Name and addresses)

Auditors(Names, addresses and description)

Legal Advisers(Names and addresses)

Secretary and Registered office(Name, Addresses and description)

IV.d. The qualification offered directors is fixed by articles as holding.............unencumbered shares in their own name and remuneration of the Directors is fixedby the Articles as follows:—

(Here give the remuneration fixed by the Articles).

IV.e. The minimum amount which must be raised out of the proceeds of thisissue is Rs. ...................... to provide for the purchase price of the business andother property; Rs. ......................... for the preliminary expenses and commission


payable to any person in consideration of his agreeing to be a subscriber or forprocuring or agreeing to procure subscriptions for shares in the company andRs. ........................ for working capital.

IV.f. The shares now for offered subscription have been under written byM/s...................... at a commission @...................% and such commission ispayable by the Company. The directors are of the opinion that the resources of theunder-writers are sufficient to discharge the underwriting obligations.

IV.g. The business which this company has been formed to acquire wascarried on by M/s. BETA, hereinafter called the Vendors, for a total price ofRs................ and the purchase price there of is Rs.............. The deed of thecontract is.................. which can be seen at the registered office of the companyduring business hours. Out of the total consideration for the purchase of thebusiness Rs................ is the price of the goodwill of the business. The remainingassets of the business are valued at Rs..........

Stock at cost Rs..............

Cash at hand and at

Bank and bills not discounted Rs..............

Book debt Rs..............

Less trade discounts (.....%) Rs..............

Book debts (Retail) after allowing for badand doubtful debts Rs..............

Goodwill Rs..............

Leasehold Premises Rs..............

Advances on security Rs..............

Buildings Rs..............

Plant, Equipment, fittings and fixtures Rs..............

Vehicles Rs..............

Less Trade liabilities Rs..............

The books of the firm have been recently examined by M/s. ......................chartered accountants, who have given the following certificate:—

“M/s Beta

We have examined your books and we hereby certify that the net profitsof your business for the three years ending (the date)............ 20.... havebeen........................... A balance sheet made up to this date which is notmore than 90 days from date of this issue of prospectus, is attachedherewith/mentioned under

Profits for the year ending January...................



Average for the three years.

Yours faithfully

.............................”


IV.h. The total consideration for purchase of the aforesaid property of thevendors is Rs......... payable equally to each of them which consideration shall besatisfied as follows:

Rs............. payable to each vendor in cash and the balance shall besatisfied by allotment of............... fully paid up shares to each one of thevendors.

IV.i. The Vendors are to pay the preliminary expenses of and incidental to theformation and floating of the company down to the time when it becomes entitledto commence business, exclusive of the under-writing commission abovementioned, and the estimated amount thereof is Rs................

IV.j. The sum of Rs............. is to be paid by the vendors to Mr.................,in cash, for his service for promotion of the company and Mr............ who hasjoined the directorate at the request of the vendors is to receive from them a sumsufficient to enable him to pay for his qualification shares.

The following material contracts have been entered into by the company withinthree years of the issue of this prospectus.

Agreement dated............... made between the company of the one part andM/s. Beta of the other part for sale of the business referred to above.

V. ObjectivesThis company has been formed to acquire the business of manufacture of

electric goods carried on by M/s Beta at............. . This business was foundedin............... by the predecessors of the present vendors. This business is carriedon in well built commodious building situated at........... . The premises are held onlease by the Vendors at a low rate of rent. The remarkable development made bythe business during the last........... years has pursued the vendors to convert itinto a limited company. The business will be taken over by the Company as agoing concern as from the date of.............. The working capital of the businesstogether with the sale proceeds of the share now offered to the public will beadequate for the purpose of the company.

It is proposed to continue the business without break or interruption upon thelines which have proved so successful in the past, retaining the services of thepresent Managers and staff who have so largely contributed to that success.

The vendors have agreed to serve the company as Managing Directors for theperiod of............. years and during the time of their service shall own atleast........... shares in the capital of the company.

It will appear from the above that there are very good prospects before thebusiness and after making every allowance the company expects to pay a worthyreturn for the capital invested.

Signature of the Directors.

FORM NO. 1

No. of Company.................

THE COMPANIES ACT, 1956

Declaration of Compliance with the Requirements of the Companies


Act, 1956, on application for Registration of a Company

(Pursuant to section 33(2))

Name of Company........................... .....................Limited/PrivateLimited

Presented by.......................................

I............................ of...................................................... do solemnly andsincerely declare that I am (a)...................................................... who isengaged in the formation of the company, or a person named in the Articles asa Director/Manager/Secretary of the........................................................ Limited/Private Limited.

And that all the requirements of the Companies Act, 1956, and the rulesthereunder in respect of matters precedent to the registration of the said companyand incidental thereto have been complied with. And I make this solemndeclaration conscientiously believing the same to be true.

Date.....................

Place.................... Signature

Witness Designation

(a) An advocate of the Supreme Court or the High Court or an attorney or aPleader entitled to appear before the High Court or a Secretary or a CharteredAccountant in whole time practice is India.

Registration No.

of company.......................

Nominal Capital Rs.................

*State whether director, managing/whole time director, manager or secretary.

—————


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