Thursday, January 25, 2007

Solutions to Key talking points - 2

Click here to go to the case
Except for some confusions, I think people have been fairly on the mark for the first set

1. Most are correct. He is not 'entitled' to more than 5% inspite of the fact that he gave it in goodwill at a lower than market price and Chandu profited from it

2. Rakesh has the right to oppose since he would have considered all factors in balance sheet while paying a certain amount of money for his stake

3. Even though it is 51-49 ratio, it does not mean that Chandu can take any decision. He cannot give his uncle 20%.
Simple example to elucidate - Chandu cannot double his salary without Rakesh permitting just because he has 51%. Nor can he employ his uncle for one day and give him 1 lakh :)

4. The answers wont change :) that was an easy one

For Set Two
Good attempt here too by all. One thing to understand is the funda of company being a legal entity. For the acts of company, only company can be sued. Neither employees, nor shareholders.

1. No, they cannot claim. It is a limited liability firm and the court has ruled against the company and not Chandu/Rakesh. The very idea of a limited firm is that the liabilities are limited to the investment and thats it!
Example to elucidate: If Infosys had closed before they paid out the dues to Rekha (Phanish Murthy case), she could not have come knocking at my door just because I owner Infy shares

2. The company has declared to close down and has no money to give. HDFC can claim but there is nothing for it to get

3. As for the same reason as answer 1, HDFC cannot claim it from Chandu and Rakesh (or from any of the investors)

4. No they cannot claim. They themselves are owners too

5. The answers will not change since it is still a limited company. Public or private does not matter.

I am sure that there will still be small confusions lurking. Put it across and lets resolve them. Hope this is helping all
Click here to go to the case



Anonymous Anonymous said...

Hey Gyan-ee..ur efforts r truly helping us a lot...
I had a confusion regarding d last Q...i read it in class XII in commerce that d identity of a public limited co is separate & distinct from that of its owners...i.e.,it is a separate legal entity...but the identity of a private co. is d same as that of its owners & that they r personally responsible 4 all d debts & liabilities of d firm...may b i a m not recollecting my facts right..but just thought of clarifying it from u.....


5:55 AM, January 25, 2007  
Blogger Gyan-ee said...


Note that this is a 'private limited company' and hence the liability is 'limited' --- Only diff from a public limited is that the shares are not traded

An example of this would be Kingfisher Airlines Limited. If it goes boom, the debtors cannot knock at Mr. Mallya's doors. The debt has been given to the company (and hence trusting the company to do well) and not to Mallya and other shareholders

6:26 AM, January 25, 2007  
Anonymous b2b said...

Sorry for dropping in late, but I have added one point under the main thread. Let me know what do you all think of it.


8:38 AM, January 26, 2007  
Blogger Gyan-ee said...

My reply to b2b at the same place.

10:04 PM, January 28, 2007  

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