Sample Questions

1. What is known as a charter of a Company?

A. Memorandum of Association

B. Bye laws

C. Articles of Association

D. Prospectus.

ANSWER: A

2. The dividend on preference capital is paid______________

A. whenever there are profits

B. when there is loss

C. even if there are no profits

D. after dividend is paid to equity shares

ANSWER: A

3. Minimum paid up capital for a public company

A. 500000

B. 400000

C. 300000

D. 200000

ANSWER: A

4. The minimum number of persons required to form a private company is ___________.

A. 7

B. 2
C. 3

D. 4

ANSWER: B

5. The name of a company can be changed by________________.

A. an ordinary resolution

B. a special resolution

C. . the approval of the union government

D. a special resolution and with the approval of the central government

ANSWER: D

6. A change in a companys registered office from one state to another may be effected
by____.

A. an ordinary resolution

B. a resolution of the board of directors

C. a special resolution

D. a special resolution and confirmation from the company law board

ANSWER: D

7. When is a company said to have been registered?

A. When it files the memorandum of association with the registrar of companies.

B. When it gets the certificate of incorporation

C. When it gets the certificate of commencement of business

D. When it actually starts its business

ANSWER: B
 

8. The ________defines the scope of a companys activities.

A. prospectus

B. statutory declaration

C. memorandum of association

D. articles of association

ANSWER: C

9. The __________defines a companys relations with the outside world.

A. prospectus .

B. memorandum of association.

C. articles of association .

D. statement in lieu of prospectus .

ANSWER: B

10. ._____________ contains a model form of memorandum of association of a company

limited by

shares.

A. Table A.

B. Table B.

C. Table C.

D. Table D.

ANSWER: B

11. Mark out the type of alteration that is permitted in the articles of association____.

A. that may not be in the companys interest .

B. that is contrary to the provisions of the companies act.

C. that increases a members liability without his written consent .

D. that is consistent with the memorandum of association .

ANSWER: D

12. . _________ companies must have their own Articles.

A. Government companies.

B. Unlimited companies.

C. Companies limited by shares.

D. Registered companies.

ANSWER: B

13. Which of the following companies must file a statement in lieu of prospectus?

A. A private limited company .

B. A cooperative society .

C. A company that has issued a prospectus .

D. A public company that has not issued a prospectus .

ANSWER: D

14. The most important document of a company is its__________.

A. prospectus .

B. annual report.

C. memorandum of association .

D. articles of association .

ANSWER: C
 

15. The rules and regulations for the internal management of a company are contained in
its___.

A. prospectus .

B. annual report .

C. memorandum of association .

D. articles of association .

ANSWER: D

16. . Mark out the document that need not be prepared and registered with the registrar of
companies in

public limited companies.

A. statutory declaration

B. memorandum of association .

C. articles of association .

D. d. directors undertakings to take up and pay for qualification shares.

ANSWER: C

17. Which of the following documents may be changed with retrospective effect?

A. Memorandum of association

B. prospectus .

C. Articles of association .

D. Statement in lieu of prospectus

ANSWER: C

18. The share capital of a company may be reduced by__________.

A. an ordinary resolution

B. a special resolution .

C. a resolution of the board of directors .

D. obtaining permission from the company law board

ANSWER: B

19. The articles of association can be altered by____________.

A. a resolution of the board of directors .

B. an ordinary resolution in general meeting .

C. a special resolution in general meeting .

D. obtaining permission from the company law board .

ANSWER: C

20. . The principle that so far as the companys internal working is concerned , strangers
dealing with the company are entitled to assume that everything has been regularly done has
been laid down in

the_____________.

A. doctrine of indoor management .

B. principle of constructive notice.

C. principle of management by exception .

D. management by objectives.

ANSWER: A

Unit – II

21.  A change of registered office of a company from one place to another within the same
city may be

effected by ___________-.
A. ordinary resolution .

B. confirmation from the regional director of the zone .

C. special resolution .

D. special resolution with union government approval

ANSWER: B

22. A foreign company means a company incorporated ________India and having a place of

business______ India .

A. outside, outside.

B. in, in .

C. in , outside .

D. outside, in .

ANSWER: D

23. A/an _______may become a director of a company.

A. partnership firm .

B. person of unsound mind .

C. individual .

D. body corporate .

ANSWER: C

24. .How many directors of a public company, unless the articles provide otherwise, must be
appointed by

the company in general meeting

A. All the directors .

B. One half of the directors .

C. Two-thirds of the directors .

D. Three-fourths of the directors .

ANSWER: C

25. The _______constitute the top administrative organ of the company. .

A. general manager .

B. shareholders.

C. board of directors .

D. advisory panel .

ANSWER: C

26. Who/what appoints the first directors of a company ?

A. The shareholders in general meeting .

B. The Registrar of companies .

C. The articles of association .

D. The promoters .

ANSWER: D

27. The companies Act provisions as to qualification shares do not apply to ___________.

A. independent private companies .

B. directors appointed by the union government.

C. directors representing special interests .

D. all of the above .

ANSWER: D

 
28. The union government may appoint such number of directors in a company as it may
deem necessary

A. at its own initiative .

B. on the application of least 100 members of the company .

C. on the application of members holding at least 10% voting rights.

D. any of the above .

ANSWER: D

29. A directors election takes place in a general meeting through a separated Resolution
passed by a

_______.majority.

A. single .

B. two-thirds.

C. three-fourths.

D. five-sixths .

ANSWER: A

30. . Which of the following is beyond the powers of the board of directors ?

A. To issue debentures .

B. To make loans .

C. To remit the payment of any debt due by a director .

D. to issue prospectus.

ANSWER: C

31. The total managerial remuneration to the directors and the manager in respect of any
financial year

must not exceed _________percent of the net profit.

A. one .

B. three.

C. eleven.

D. ten .

ANSWER: C

32. Where a company has three directors , the maximum remuneration payable to all of them
is

________% of the annual net profit

A. 5.

B. 10.

C. 20.

D. 25.

ANSWER: B

33. . Holding company means a company ______________.

A. which holds other company.

B. a government company.

C. a chartered company.

D. a subsidiary company.

ANSWER: A

34. A part from the board of directors, a company can have____________.

A. only a manager.

B. only a managing director .

C. both a manager and a managing director .

D. either a manager or a managing director .

ANSWER: D

35. A person cannot act as managing director of more than _______company /companies at a
time.

A. one .

B. two .

C. four.

D. five.

ANSWER: B

36. A public corporation denotes a ___________.

A. private limited company .

B. public company .

C. government company .

D. statutory corporation .

ANSWER: D

37. The partnership entity may be regarded as ____________.

A. a legal entity .

B. an accountable entity .

C. both a legal and accountable entity .

D. neither a legal nor an accountable entity .

ANSWER: D

38. A promoter is a person who ______________.

A. is a director .

B. is a relative of the company .

C. is a wellwisher of the company .

D. takes part in the companys incorporation .

ANSWER: D

39. The amount of minimum subscription may be learnt from the ______________.

A. prospectus.

B. memorandum of association.

C. articles of association .

D. records of general meetings .

ANSWER: A

40. When can a private company commence business ?

A. at any time .

B. after applying for registration.

C. after obtaining the certificate of incorporation.

D. after obtaining the certificate of commencement of business .

ANSWER: C

Unit – III

41. The doctrine of indoor management means__________.

A. strangers dealing with the company may assume that everything is done regularly

B. strangers must enquire into the regularity of proceedings .

C. strangers can afford to be negligent a s regularity is the companys responsibility .

D. constructive notice

ANSWER: A

42. The doctrine of constructive notice implies that __________.

A. every person dealing with the company is deemed to have notice of the documents field

B. with the registrar of companies

C. regularity of proceedings need be enquired into a notice of a weeks period is to be given

for every

exchange of correspondence

D. indoor management

ANSWER: A

43. An exception to the doctrine of constructive notice is____________.

A. the doctrine of ultra vires .

B. the doctrine of indoor management .

C. lifting the corporate veil .

D. the doctrine of ultra vires in Articles of Association.

ANSWER: B

44. Protection can be claimed under the doctrine of constructive notice if __________.

A. the act is voidable .

B. no inquiries are made.

C. no inquiries are made.

D. resolution.

ANSWER: C
 

45. A prospectus is to be issued within _______days of registration.

A. 30.

B. 60.

C. 90.

D. 180.

ANSWER: C

46. A letter of provide must be demanded in the transmission of shares when a person______.

A. is declared insolvent .

B. misbehaves .

C. becomes of unsound mind .

D. has died .

ANSWER: D

47. All monies received with the application of shares are to be deposited_______.

A. with the controller of capital issues .

B. in the companys bank account

C. in a special account opened in a scheduled bank for the purpose

D. with the registrar of companies

ANSWER: C

48. .A company shall not proceed to allot shares until the beginning of the ________day from
the date of issue of prospectus

A. second .

B. third .
C. Afifth.

D. seventh.

ANSWER: A

49. .The Return of document is to be filed with the Registrar in the case of __________.

A. allotment of debentures

B. reissue of forfeited shares

C. issue of shares

D. all of the above

ANSWER: C

50. .The minimum subscription is to be received within ______days of the offer.

A. 30.

B. 60.

C. 120.

D. 150.

ANSWER: C

51. .The private company requires conversion of a public company into a __________.

A. an ordinary resolution .

B. a special resolution

C. a special resolution and union governments approval

D. a special resolution and company law board approval

ANSWER: C

 
52. A private company is to become a public company if its average turnover in the previous
three years

exceeds___________.

A. Rs. 4 crore.

B. Rs. 8 crore

C. Rs. 10 crore

D. Rs. 50 crore .

ANSWER: C

53. The charter of a company refers to its ________________.

A. prospectus.

B. memorandum of association

C. articles of association

D. statement in lieu of a prospectus

ANSWER: B

54. .A Person ceases to be a companys members when _____________.

A. he loses his share certificate .

B. he becomes insolvent

C. his share certificate is converted into a share warrant

D. his shares are forfeited for nonpayment of call monies

ANSWER: D

55. A company is registered with a share capital of Rs. 1,00,000 divided into 1,000 Shares of
Rs. 100 each.

If X holds 999 shares and Y has only one share, the law would regard this as a/an_________.
A. illegal association

B. monopoly .

C. partnership .

D. private company

ANSWER: D

56. An association of 30 persons not registered under the companies Act but carrying on a
business is a/an

___________.

A. illegal association

B. partnership .

C. private company

D. public company.

ANSWER: A

57. .Which of the following are characteristics of a company ?

A. It has unlimited liability.

B. It exists only in contemplation of law

C. It has not a perpetual succession

D. It comes to an end on the death of all its members.

ANSWER: B

58. A company is a juristic person with a perpetual succession _____________.

A. as such it dies.

B. its life depends on the life of its members.

C. it is created by a process of law and can be put to an end only by a process of law
D. none

ANSWER: C

59. .Since a company is regarded as an entity separate from its members, __________.

A. the property of the company is the property of its shareholders

B. the debts of the company are the debts of its shareholders.

C. the shareholders can enter into contracts with the company.

D. the shareholders have insurable interest in the property of the company

ANSWER: C

60. On a share of Rs. 100 of a company, a shareholder has already paid Rs. 30.His Liability is
now limited

to ___________.

A. Rs. 100.

B. Rs. 30.

C. Rs. 70.

D. rs.10

ANSWER: C

61. A share certificate is required to be signed by__________.

A. company secretary.

B. two directors

C. two directors and company secretary.

D. all directors and company secretary.

ANSWER: C

 
62. . The duties of Company Secretary s regarding company meetings are restricted
upto_____.

A. before company meeting

B. during company meeting

C. after company meeting.

D. ln all the above situations

ANSWER: D

63. .Transmission of shares takes place in the following case

A. sale of shares.

B. theft of shares

C. operation of any law.

D. all of these

ANSWER: C

64. one of the following is NOT an advantage of the incorporation of the company?

A. perpetual succession

B. limited liabilities of members.

C. capital contribution forming part of the joint stock f the company.

D. Freedom to do any business

ANSWER: D

65. Economic oligarchy, fraudulent practices, bureaucratic management and difficulty in

formation are the

limitations of a ________________.

A. sole proprietary concern.

B. partnership firm .

C. joint stock company.

D. co-operate society.

ANSWER: C

66. To enable a company to pay dividends, a special authority is ___________.

A. not needed either in the memorandum or in the articles

B. needed either in the memorandum or in the articles

C. needed only in the memorandum

D. needed only in the articles.

ANSWER: A

67. Which of the following is not feature of a private companies act?

A. Limitation of the number of the number of its members.

B. Restriction on the right to transfer its shares.

C. Ban on floating of debentures

D. Prohibition of any invitation to the public.

ANSWER: C

68. According to the companies act, which one of the following companies can commence
allotment of

shares even before the minimum subscription is subscribed or paid?

A. Charted company.

B. Private company.

C. Government company

D. Public limited company

ANSWER: B

69. Which one of the following companies deal with only its shareholders for their benefit?

A. Private limited company.

B. Chit fund company

C. Nidhi company.

D. Banking company.

ANSWER: C

70. Which of the following reports is to be placed before the parliament by a government
company?

A. Directors report.

B. Annual report.

C. Income report.

D. Statutory report.

ANSWER: B

Unit – IV

71 .The Reserve Bank of India is an example of a _____________.

A. registered company.

B. statutory company .

C. chartered company .

D. unlimited company .

ANSWER: B

72. .A private company becomes a public by process of law_____________.

A. where not less than 25 percent of its paid-up share capital is held by one or more bodies
corporate.

B. where not less than 10 percent of it paid-up share capital is held by another single private
company.

C. where less 25 percent of the paid-up share capital of a public company is held by it.

D. where not less than 20 percent of it paid-up share capital is held by another single private
company.

ANSWER: A

73. .The liability of a shareholder in a company limited by shares is ____________.

A. unlimited .

B. limited by guarantee.

C. limited to the unpaid value of shares subscribed by him.

D. none of the above.

ANSWER: C

74. A company may change its name by passing ______________.

A. a special resolution .

B. an ordinary resolution

C. a special as well an ordinary resolution as the case may be .

D. a unanimous resolution of the board of directors.

ANSWER: C

75. .Where the registered office of a company is changed from one state to another a certified
copy of the order of the company Law Board confirming the alteration must be filed by the
company with

_____________.

A. the Registrar of the state in which the company was originally located.
B. the Registrar of the state in which the registered office is shifted.

C. the Registrars of both the states

D. the central Government.

ANSWER: C

76. An act is said to be ultra vires a company when it is beyond the powers ___________.

A. of the company

B. of the directors .

C. of the directors but not the company.

D. conferred on the company by the Articles.

ANSWER: A

77. The altered Memorandum must be filed with the Registrar within ______________.

A. 1 month of the company Law Boards order .

B. 2 months of the company Law Boards order.

C. 3 months of the company Law Boards order.

D. 4 months of the company Law Boards order.

ANSWER: C

78. Which of the following companies need not have their own articles of Association ?

A. . unlimited companies.

B. companies limited by guarantee.

C. private companies limited by shares.

D. public companies limited by shares.

ANSWER: D
 

79. .If public company limited y shares does not have its own Articles, it may adopt ______.

A. table a in schedule i to the act.

B. table b in schedule i to the act .

C. table c in schedule i to the act .

D. table d in schedule i to the act .

ANSWER: A

80. the Articles of a company conflict with the Memorandum _______________.

A. the Articles shall prevail.

B. the Memorandum shall prevail

C. the directors will resolve the conflict.

D. the court will resolve the conflict.

ANSWER: A

81. .The memorandum and Articles of a company are open to inspection by ___________.

A. the members of the company

B. the members and creditors of the company.

C. everybody .

D. the Registrar.

ANSWER: C

82. .Any person who induces a company to allot shares in a fictitious name is punishable
with___.

A. a fine of Rs. 5,000.

B. a fine of Rs. 10,000.

C. imprisonment upto 5 years

D. a fine of Rs. 5,000 and imprisonment upto 5 years

ANSWER: C

83. A shareholder purchased in the open market shares of a company whose prospectus
contained some

misstatements. He ____________.

A. can rescind the contract only but cannot claim damages.

B. can claim damages only but cannot rescind the contract.

C. has no remedy against the company.

D. has remedy against the directors responsible for the issue of the prospectus .

ANSWER: C

84. A statement in lieu of prospectus is required to be issued ___________.

A. by all companies which issue shares or debentures

B. by public companies when shares are issued among friends and relatives.

C. by private companies as they do not issue shares to the public

D. by all companies

ANSWER: B

85. .Underwriting means ___________.

A. selling shares at a discount .

B. purchasing property at less than market price.

C. agreeing to purchase shortfall of shares in a company in case of under subscription

D. offering new shares to outsiders

ANSWER: C
 

86. .The underwriting commission paid or agreed to be paid must not exceed ________.

A. 2 percent of the issue price of the shares.

B. 2.5 percent of the issue price of the shares

C. 5 percent of the issue price of the shares.

D. 10 percent of the issue price of the shares.

ANSWER: C

87. .Share capital of a company means______________.

A. equity share capital .

B. preference share capital

C. equity and preference share capital .

D. equity and preference share capital and debentures.

ANSWER: C

88. A shareholder in a company___________.

A. can be its debentureholder

B. cannot be its debentureholder

C. alone can become its debentureholder

D. must also become its debentureholder within a year of being a shareholder.

ANSWER: A

89. .The dividend on preference capital is paid_____________.

A. whenever there are profits

B. only if there are profits.

C. even if there are no profits.

D. only when the directors recommend it .

ANSWER: D

90. .The name of a company can be changed by __________.

A. an ordinary resolution.

B. a special resolution.

C. the approval of the union government .

D. a special resolution and with the approval of the union government.

ANSWER: A

91. . Share premium received by issuing shares can be used for___________.

A. payment of dividend

B. issue of bonus share.

C. remuneration to management.

D. any business purpose

ANSWER: B

92. . Which of the following is the joint stock company as per companies act, 1956?

A. a charitable trust

B. a partnership firm with fixed capital

C. a society with fixed reserve fund.

D. a partnership firm.

ANSWER: D

 
93. Under the companies act, which of the following powers can be exercised by the board of
directors?

A. Power to sell any of the companies undertaking

B. Power to make call.

C. Power to borrow money in excess of the paid up capital.

D. Power to reappoint on auditor

ANSWER: B

94. . A public limited company can offer pre-emptive rights only to the ______________.

A. directors of the company.

B. existing equity share holders.

C. debenture holders.

D. short-term creditors of the company

ANSWER: B

95. . The liability of shareholders of a public company is limited to the _________.

A. paid up value of shares

B. nominal value of shares

C. extent of their private assets

D. amounts called up.

ANSWER: D

96. Under the Indian Companies Act, 1956, a person can be a Director in_____________.

A. 7 companies.

B. 10 companies

C. 20 companies.
D. 25 companies.

ANSWER: C

97. . Rights shares means the shares which are __________.

A. issued to the directors of the company

B. first offered to the debentureholders

C. first offered to the existing shareholders

D. issued by a newly formed company

ANSWER: C

98. . Reserve Bank of India is an example of _______________.

A. department organisation of the central government.

B. government company

C. public corporation

D. none of these.

ANSWER: C

99. . Investment in which of the following is most risky?

A. equity shares .

B. preference shares

C. debenture.

D. Land.

ANSWER: A

100 . A project, which may not add to the existing profits, should be financed
by___________.
A. debentures.

B. preference share capital.

C. equity capital.

D. public deposits.

ANSWER: C

Unit – V

101. When is a company said to have been registered?

A. when it files the memorandum of association with the registrar if companies.

B. when it gets the certificate of incorporation.

C. when it gets the certificate of commencement of business

D. when it actually starts its business

ANSWER: A

102. Shares can be issued____________.

A. at par.

B. at discount.

C. at premium.

D. all of the above.

ANSWER: D

103. doctrine of ultar vires mean

A. beyond the power

B. no power

C. with in the power

D. none

ANSWER: A

104 . The debenture holders of a company are companys__________.

A. owners.

B. creditors.

C. customers.

D. all of these .

ANSWER: B

105. Annual General Meeting can be called by______________.

A. anaging director.

B. shareholders.

C. board of directors.

D. company secretary.

ANSWER: D

106. A share certificate is required to be signed by______________.

A. company secretary.

B. two directors.

C. two directors and company secretary.

D. all directors and company secretary.

ANSWER: C
 

107. A secretary should have sound knowledge of_______________.

A. company law.

B. tax laws.

C. labour laws.

D. all of these.

ANSWER: A

108. The duties of Company Secretary s regarding company meetings are restricted
upto_____.

A. before company meeting.

B. during company meeting

C. after company meeting.

D. ln all the above situations.

ANSWER: D

109 . Transmission of shares takes place in the following case_____________.

A. sale of shares.

B. theft of shares.

C. operation of any law.

D. all of these.

ANSWER: C

110. A shareholder in a company____________.

A. can be its debentureholder.

B. cannot be its debentureholder.

C. alone can become its debentureholder.

D. must also become its debentureholder within a year of being a shareholder

ANSWER: B

111. The dividend on preference capital is paid___________.

A. whenever there are profits.

B. only if there are profits.

C. even if there are no profits.

D. only when the directors recommend it

ANSWER: D

112. A Company at least 51% of whose share capital is held by the government, is called
a___________.

A. public enterprise.

B. public company.

C. public corporation.

D. . government company.

ANSWER: D

113. .A private company ________issue deferred shares with disproportionatevoting rights.

A. can ony

B. can.

C. cannot.

D. can with the prior approval of the government.

ANSWER: A

 
114. The name of a company can be changed by_____________.

A. an ordinary resolution.

B. a special resolution

C. the approval of the union government .

D. . a special resolution and with the approval of the union government.

ANSWER: A

115. .When is a company said to have been registered?

A. when it files the memorandum of association with the registrar if companies

B. when it gets the certificate of incorporation

C. when it gets the certificate of commencement of business

D. when it actually starts its business.

ANSWER: A

116. how many types of preference shares

A. 8

B. 7

C. 6

D. 5

ANSWER: A

117. Shares can be issued_________.

A. at par.

B. at discount.

C. at premium.

D. all of the above.

ANSWER: D

118. After re-issue of forfeited shares the balance of forfeited share account is transferred
to___.

A. general reserve.

B. profit & loss a/c.

C. capital reserve.

D. none of these.

ANSWER: C

119 . The debenture holders of a company are companys____________.

A. owners.

B. creditors

C. customers.

D. all of these

ANSWER: B

120. . A company secretary has to be___________.

A. firm or body corporate.

B. registered with securities and exchange board of india (sebi).

C. person with desired professional degree

D. . part of any secretarial agency.

ANSWER: C

121. . The partnership entity is ___________.

A. legal entity.

B. legal entity and accotmtable entity.

C. neither legal entiry nor accountable entity.

D. Group of individuals without legal status.

ANSWER: B

122. . Promoter is a person who__________.

A. takes part in the incorporation of a company.

B. is a director.

C. is a relative of the managing director.

D. works to siva publicity to the co.

ANSWER: A

123. . A company created by an act of parliament is ____________.

A. A statutory company.

B. Legal company.

C. Formal company .

D. Govt. company.

ANSWER: A

124. . Name of a company can be altered by _______________.

A. an ordinary resolution

B. a special resolution.

C. an approval of the central government

D. a special resolution and with the approval of the central government.

ANSWER: A

125. . Further issue of shares can be made to _________________.

A. public .

B. financial institution.

C. existing share holders.

D. debenture holders.

ANSWER: C

126. The first auditor of a company are appointed by_____________.

A. board of directors

B. Members.

C. central govt.

D. state government

ANSWER: A

127. The secretary of a company maybe ____________.

A. only an individual.

B. only body corporate

C. group of persons.

D. Shareholders.
ANSWER: A

128. .A deemed public company must have at least _____________.

A. 1director

B. 2directors .

C. 3 directors .

D. 5 directors.

ANSWER: B

129. . Dividend and interest are ____________.

A. Synonymous terms.

B. different from each other.

C. debited to profit and loss account.

D. divisible profits.

ANSWER: C

130.  Auditors act as agent of______________.

A. Shareholders.

B. directors.

C. promoter.

D. debenture holder.

ANSWER: A

PART – B (5 Marks)
 (Minimum 10 Question from Each unit, no maximum limit)

Unit – I

1. Define a company.

Answer: A company is a "corporation" - an artificial person created by law. A company is a

"legal" person. A company thus has legal rights and obligations in the same way that a
natural person does.
 

2. What do you mean by separate legal entity?

Answer: A company has a distinct legal entity independent of its members. It can own
property, make contracts and file suits in its own name. Shareholders are not the joint
owners of the company's property

A shareholder cannot be held liable for the acts of the company. Similarly, members of the
company are not its agents.There can be contracts between a company and its members. A
creditor of the company is not a creditor of its members.

The separate legal entity of a company was recognized in the famous case of Salomon, v.
Salomon and Co. Ltd. The facts of the case were as follows:Salomon formed a company
which acquired his own shoe business. He took all the shares except six shares which he
distributed among his wife, daughter and four sons.Salomon also purchased some
debentures of the company which gave him a charge over its assets. At the time of winding
up, the company's assets were not sufficient enough to pay its debts.The creditors of the
company (other than Salomon) argued that their debts should be cleared before paying
Salomon for his debentures because Salomon and the company was one and the same
person.The Court decided that after incorporation, Salomon and Co. had an identity
separate from Salomon even though he owned virtually all the shares in the company.

3. What is a Public company?

Answer:   CA 1985, s.1(3): "a company limited by shares which has a memorandum stating
that it is to be a public company and which complies with the requirements of the Act for
registration as a public company."

A company cannot be registered as a public company unless it has a minimum allotted share
capital of £50,000, at least one quarter of which has actually been paid. A public company
must have at least two shareholders and at least two directors.

4. List the duties of the promoters.

 
Answer: In the 19th century, it was common for promoters to sell their own property to a
newly formed company at an inflated price, or to acquire assets for the company and receive
a commission from the seller. The courts then began to impose a fiduciary duty on promoters
similar to that imposed on agents. A promoter must disclose any profit or potential conflict of
interest to either:
(i) an independent board of directors, or
(ii) existing or intended shareholders.

5. What are the documents required for registration?

Answer:
(a)    Memorandum of Association
(b)   Articles of Association

                    These are the documents which make up the constitution of the
company.The Companies (Tables A - F) Regulations 1985 give suggested forms for
memoranda and articles for different kinds of company.

A public company’s memorandum must be in accordance with Table F of the Regulations.

Public and Private companies limited by shares can adopt the articles in Table A of the
Regulations - Table A will also apply automatically so far as not modified or excluded by the
company’s own articles.

The Memorandum must be signed (subscribed) unless submitted in electronic form, and must
show the number of shares each subscriber is taking.

A statement giving the address of the company’s registered office and the details (name,
address, nationality, occupation and date of birth) of the company’s first directors and
secretary.

Statement must be signed by the subscribers to the memorandum and include a written
consent to act signed by those named as directors/secretary.

 
The statutory declaration must be signed by a solicitor involved in the formation of the
company or by one of the persons named as director or secretary.

6. Give the meaning of certificate of incorporation.

Answer:

If Registrar is satisfied that requirements of the Act have been met, he registers the
documents and issues a certificate of incorporation. This is the company’s "birth certificate".

The Registrar publishes the issue of the certificate in the London or Edinburgh Gazette.

Certificate is conclusive evidence that registration requirements have been met. It is also
conclusive evidence as to the date of incorporation.

Registrar is entitled to refuse to register a company where it has been formed for an unlawful
purpose:

The court may also be petitioned to cancel a registration if it appears that the company has
been registered for purposes which are unlawful or contrary to public policy.

Private companies can begin to trade as soon as the certificate of incorporation has been
issued.

Public companies require a further certificate - called a s.117 certificate or trading certificate.

Registrar will only issue s.117 certificate if satisfied that minimum capital requirements for a
public company have been met.
 

A public company which begins to trade without a trading certificate commits a criminal
offence - the company and any director responsible for the default can be convicted.

7. What do you mean by prospectus?

Answer:

A prospectus means any document describe or issue as a prospectus and includes any notice,
circular, advertisement or other documents inviting deposits from the public or inviting offers
from the public for the subscription or purchase of shares in or debentures of a day corporate.
 
The companies Act, 1956 defines prospectus as any document described or issued as a
prospectus and include any notice, circular, advertisement or other documents inviting
deposits from the public or inviting offer from the public for the subscription of shares. It is
circulated among the public in printed pamphlets. It gives all necessary information about the
company so that the prospective shareholders may fully understand the objectives and the
plans of the company.
 

8. What is a criminal liability for misstatements in prospectus?

Answer:

As per Sec-65, a statement included in a prospectus shall be deemed to be untrue if the

statement is misleading in the form and context in which it is included. Where there is any
omission of a matter from the prospectus and this is made to mislead, the prospectus is
deemed to be called as a prospectus in which an untrue statement is included. Not only in
prospectus, but a statement can be said to mislead even if it is present in any report or
memorandum by reference incorporated therein or issued therewith. The liability accrues
where any person subscribes for any shares or debentures on the faith of the prospectus for
any loss or damage he may have sustained by reason of untrue statement included therein.

9. What is the civil liability for misstatement in prospectus?

Answer:

Section 62 of the Companies Act, 1956 makes certain person liable to pay compensation to
every person who subscribes for any shares of debentures on the faith of the prospectus for
any loss or damage he may have suffered due to any untrue statement made in the
prospectus. These would include Directors of the company, Promoters, or even the
company. Thus, this section deals with the cases of misstatements of facts in a prospectus.
It is immaterial for the purpose of this section whether the Director sees the prospectus or
not; it is enough that he authorizes its issue.

The provision of the section is to protect the rights of the deceived shareholders who acted
upon the wrong statement given in the prospectus. This tightens up the duties of the
directors and others who are related to the issue of the prospectus. So this section provides
for the statutory civil liability for untrue statement.

10. List the conditions for invoking Section 62.

Answer:

Conditions for invoking Section 62:

1)      The company had issued a prospectus inviting persons to subscribe for its shares or
debentures.

2)      An untrue statement was included in the prospectus.

3)      The person who is claiming for the compensation had subscribed for the shares or
debentures offered by the prospectus.

4)      Such person has subscribed for the shares or debentures relying upon the untrue
statement contained in the prospectus.

5)      Such person has sustained a loss or damage after having subscribed for the shares or
debentures.

Unit – II

11. Give the meaning of memorandum of association.

 

Answer: The memorandum of association of company, often simply called the

memorandum, is the document that governs the relationship between the company and the
outside. It is one of the documents required to incorporate a company. A document that
regulates a company's external activities and must be drawn up on the formation of a
registered or incorporated company. 

12. What do you mean by alteration of memorandum of association under common law?

Answer:  Under the Common Law the Joint Stock Companies Act 1856, which introduced
the Memorandum of Association into company law, made no provisions for the alteration of
a memorandum. Companies Act 1862 permitted a company to change its name and its
authorized share capital, but forbade any other alteration. Subsequent acts have extended
the range of alteration that may be made. The CA Act 1985 S.2 (7) provides: A company may
not alter conditions contained in the memorandum except in the case in the mode and to
that extend, for which express provision is made by this Act. 

The court has in Scott v. Scott Ltd. held that even if inadvertently the memorandum of a
company does not correctly express the wishes of its subscribers, the court doesn’t to have
power to rectify the mistake after the company has been registered.

13. How to alter the registered office clause?

Answer: A company may change the situation of its registered office for the smooth
running of its business and the realization of its objects. Such change in the situation can be:
(a) from one place to another in the same city or town (b) from one town to another in the
same state and (c) from one state to another.

14. Discuss the alteration of object clause.

Answer: Plainly speaking, it is very difficult to alter the objects clause because the law has
laid down strict limitations on such alteration. Section 17 of the CA defines the limitations
and any alteration must necessarily be within these limitations.

The limits imposed upon the power of alteration are of two kinds, namely substantive and
procedural. The former defines the physical limits of alteration and the latter the procedure
by which it can be effected. 

The alteration of object clause involves:

Special Resolution: In the first place , the company has to call a general meeting of its
members and pass a special resolution and file a certified copy of the resolution with the
central government.

Ratification by the central government: After this, the application for proposed alteration is
filed with the central government. The application shall be scrutinized by the government
before confirming the alteration.

Registration of alteration: A certified copy of the order of the central government shall be
filed by the company with the RoC along with the printed copy of the altered memorandum
within three months from the date of the order. The registrar shall register the same and
certify the registration under his hand within one month of the date of filing such
documents. 

15. Give the meaning of doctrine of ultra vires.

Answer: It is the function of the Memorandum of Association to delimit and identify the
objects in such plain and unambiguous manner as that the reader can identify the field of
industry within which the corporate activities are to be confined. And it is the function of the
courts to see that the company does not movie in a director away from the field. That is
where the doctrine of ultra vires comes into play in relation to joint stock companies. 

The doctrine has been affirmed by the Supreme Court in India in the case of
Lakshmanaswami Mudaliar v. Life Insurance Corporation of India wherein the court held
that the directors of a company were authorized to make payment towards any charitable
or any benevolent object or for any general public, general useful object. The payment
made towards the same was held by the court as ultra vires. The court said that the
directors could not spend the company’s money on any charitable institutions or any
general object they choose. They could spend for the promotion of only such charitable
objects as would be useful for the attainment of the company’s own objects

16. What do you mean by articles of association?

Answer: A company's articles of association is a document which, along with

the memorandum of association form the company's constitution, defines the responsibilities
of the directors, the kind of business to be undertaken, and the means by which the
shareholders exert control over the board of directors

17. List the companies that should have articles of association.

Answer: The following companies must have their own articles, namely

           1. Unlimited companies
           2. Companies limited by guarantee
           3. Private companies limited by shares\

The articles shall be signed by the subscribers of the Memorandum and registered along with
the Memorandum. A public company may have its own Articles of association. If it does not
have its own Articles, it may adopt Table A given in Schedule I to the Act.

18. What is the effect of articles of association?

Answer: Section 36 provides that the memorandum and articles, when registered, bind the
company and its members to the same extent as if they have been signed by the company and
by each member and contain covenants on its and his part to observe all the provisions of the
memorandum and of the articles. Thus the company is bound to its members, the members
are bound to the company and the members are bound to other members by whatever is
contained in these documents. But in relation to articles, neither a company nor its members
are bound to outsiders.

The articles of association merely govern the internal management, business or

administration of a company. They may be binding between the members affected by them
but do not have the force of statute

19. What do you mean by doctrine of indoor management?

 
Answer: The doctrine of indoor management is an exception to the rule of constructive
notice.  According to the rule of constructive notice, a person dealing with the company is
deemed to have knowledge of the memorandum and the articles of the company.  If he enters
into a transaction with the company which is ultra vires, he cannot treat the transaction as
binding on the company.
 

The doctrine of indoor management on the other hand argues that outsiders dealing with the
company are entitled to assume that everything had been regularly done so far as its internal
proceedings are concerned.  The doctrine had its origin in a famous case, “Royal British Bank
vs. Turquand”.

20. What are the exceptions for doctrine of indoor management?

     Answer: The doctrine of indoor management is subject to the following exceptions:

1.       Knowledge of irregularity: Under the rule of indoor management the benefit cannot
be claimed if a person dealing with a company has the knowledge of the irregularity in its
internal management.
2.       Acts are void ab initio and forgery: The doctrine of indoor management will not be
used, where the acts done in the name of company are void ab initio. The doctrine is
applicable only to those irregularities that otherwise might affect a genuine transaction. It
does not apply to forgery. A company cannot be made liable for forgeries done by its
officers.
3.       No knowledge: A person having no knowledge of Articles of association cannot ask
for protection under the indoor management.
4.       Negligence: If the irregularities are discovered by the person dealing with a company,
on making proper inquires, he cannot claim the advantages of the rule of indoor
management. No protection of the rule is possible, where the circumstances surrounding
the contracts are so suspicious as to invite inquiry and the outsiders dealing with the
company does not make proper inquiry.

5.       Act outsides the scope of apparent authority: if an officer of a company enters into
a contract with a third party and if the act of the officer is beyond the scope of his authority,
the company is not bound.

Unit – III

21. Who is a director?

Answer: A company is a legal entity and does not have any physical existence. It can act
only through natural persons to run its affairs. The person, acting on its behalf, is called
Director. A Director is any person, occupying the position of Director, by whatever name
called. They are professional men, hired by the company to direct its affairs. But, they are
not the servants of the company. They are rather the officers of the company.

22. List any five duties of a director.

Answer:

• To convene Statutory, Annual General Meeting (AGM) and also Extraordinary General
Meetings;
• To prepare and place at the AGM, along with the balance sheet and, profit and loss
account, a report on the company's affairs, including the report of the Board of Directors;
• To authenticate and approve annual financial statement;
• To appoint first auditor of the company;
• To appoint cost auditor of the company;
• To make a declaration of solvency in the case of a Members' voluntary winding up;

23. Who can appoint a director?

Answer: Appointment of a Director is not only a crucial administrative requirement, but is

also a procedural requirement that has to be fulfilled by every company. Under the
Companies Act, only an individual can be appointed as a Director; a corporate, association,
firm or other body with artificial legal personality cannot be appointed as a Director.

24. Give the restrictions on number of directorships.

Answer: The Companies Act prevents a Director from being a Director, at the same time, in
more than fifteen (15) companies. For the purposes of establishing this maximum number
of companies in which a person can be a Director, the following companies are excluded:

1. A "pure" private company;

2. An association not carrying on its business for profit, or one that prohibits the payment of
any dividends; and

3. A company in which he or she is only appointed as an Alternate Director.

Failure of the Director to comply with these regulations will result in a fine of fifty thousand
rupees (Rs. 50,000/-) for every company that he or she is a Director of, after the first fifteen
(15) so determined.
25. Define shares?

Answer: Borland’s trustee v. steel bros. in the following words:“A share is the interest of a
shareholder in the company, measured by a sum of money, for the purpose of liability in the
first place, and of interest the second, but also consisting of a series of mutual covenants
entered into by all the shareholder inter se in accordance with the companies act”.

26. What are share certificates?

Answer: A share certificate certifies on a certain date that a person is the registered owner
of shares in a company. In terms of the Companies Act 2006, it is considered prima
facie evidence (‘sufficient evidence unless the contrary is shown’ in Scotland) of the
member’s ownership of shares in the company.

However, while a share certificate may be issued by a company, it is an entry in the register
of members that provides legal proof of ownership of shares in the company: whenever
dealing with share certificates, therefore, it’s important also to refer to the register of
members to make sure the two are consistent.

27. When does a share certificate need to be issued?

Answer: Subject to any provision to the contrary in the company’s Articles of Association,

there is a legal time limit for issuing a share certificate. After your initial registration,
company share certificates must be issued to shareholders within two months – this is
usually done as part of the first board meeting. A company must thereafter, within two
months of allotting shares, issue the share certificate representing those shares. The same
two month time limit applies following any transfer of shares.

While share certificates should be issued to the registered holder, there is no requirement
to send a copy of the share certificate to Companies House

28. Discuss the information to be shown on share certificate.

Answer: The information that should be included as part of a share certificate template is:

 a unique share certificate number

 the company’s name and registered number
 Registered office of the company
 the name of the shareholder
 the address of the shareholder
 the number of shares covered by the share certificate
 the type or class of shares
  the extent to which the shares are paid up (usually shares will be fully paid)

29. What do you mean by share warrant?

Answer: A share warrant is a document in which it is stated that the bearer of the warrant is
entitled to the shares specified therein. A definition may, thus, be given as follows:

A share warrant is a bearer "document of title" to the shares, issued by the company under
its common seal, duly stamped and signed by one or more directors of the company, as per
Articles'.

30. List the conditions for the issue of share warrant.

Answer: Section 114 lays down the following provisions for the issue of share warrants:

(1) Only a public company limited by shares can issue share warrants.

(2) Share warrants cannot be issued originally. Only share certificates for fully paid shares
can be converted into share warrants.

(3) The articles of association must authorize the issue of share warrants.

(4) Approval of Central Government must be obtained for issuing share warrants.

Unit – IV

31. Write a short note on annual general meeting.

Answer: An annual general meeting (commonly abbreviated as AGM, also known as the
annual meeting) is a meeting that official bodies, and associations involving the general
public (including companies with shareholders), are often required by law (or
the constitution, charter, by-laws etc. governing the body) to hold. An AGM is held every
year to elect the board of directors and inform their members of previous and future activities.
It is an opportunity for the shareholders and partners to receive copies of the company's
accounts as well as reviewing fiscal information for the past year and asking any questions
regarding the directions the business will take in the future.

32. Explain about Extra-ordinary general meeting

Answer: An extraordinary general meeting, commonly abbreviated as EGM, is a meeting of

members of an organisation, shareholders of a company, or employees of an official body,
which occurs at an irregular time.  The term is usually used where the group would ordinarily
hold an annual general meeting (AGM), but where an issue arises which requires the input of
the entire membership and is too serious or urgent to wait until the next AGM. Members
and/or shareholders must be informed of the purpose of the EGM so that they may attend in a
position where they can discuss and exercise intelligent judgment, otherwise any resolutions
passed are invalid

33. Discuss different types of secretary.

Answer:

1. Private secretary
2. Secretary of an association

3. Secretary of embassy

4. Secretary of a cooperative society.

5. Secretary of local body

6. Secretary of Government department.

7. Company secretary

34. Explain different types of company meeting.

Answer: 1. Shareholders meeting: When the meeting is held with the shareholders of the
company it is called shareholders meeting.

 Statutory meeting
 Annual general meeting
 Extra-ordinary general meeting

2. Directors meeting: When the meeting is held among the directors of the company it is
called directors meeting. It is classified into two parts. They are:

 Board meeting
 Committee meeting

3. Special meeting: For any special situation, when the meeting is arranged by the company,
it is called special meeting. The types of the special meetings are as follows:

 Class-meeting
 Creditors meeting

35.  Write a short note on Writing of Minutes

Answer: Minutes should start with the name of a company and it shall state the time, date,
place, type of meeting, a record of the name of the members present in the meeting, etc.
Minutes should contain summary of the discussions held leading to the resolution. The
aforesaid statement is generally written in bold capital letters and it may be on the following
style such as 'MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF …..
LIMITED AT THEIR MEETING HELD ON …..AT, THE …TH DAY OF …., …., AT THE
REGISTERED OFFICE OF THE COMPANY, AT '……….', AT … A.M/P.M.'

36. Define company secretary.

Answer: Officer of a corporation responsible for the official documents of the corporation

such as the official seal, records of shares issued, and minutes of all board or committee
meetings.

37. State the objectives of the meeting?

Answer: Formulating a set of objectives in the meeting preparation is the first and most
important step because having a purpose of goal for the meeting will keep the participants
focused on what they need to accomplish in that session. The objectives have to be realistic
and measurable to become achievable.

Meeting goals have to be action statements that would prompt the attendees to take an
action and carry out a task. Usually, objective statements start with the phrase “By the end
of the meeting or session, the group should be able to…”, and then supply it with activities
that participants need to do to achieve an overall outcome.

Objectives help the facilitator and the participants plan the meeting in a more focused
approach. Moreover, established goals allow for a concrete measure with which to assess
the outcome of the meeting and provide areas for improvement in the future.

38. What is an agenda?

Answer: An agenda is a list of meeting activities in the order in which they are to be taken
up, by beginning with the call to order and ending with adjournment. It usually includes one
or more specific items of business to be discussed. It may, but is not required to, include
specific times for one or more activities. An agenda may also be called a docket or schedule.

39. What is statutory meeting?

Answer: A public company limited by shares or a guarantee company having share

capital is required to hold a statutory meeting. Such a statutory meeting is held only once
in the lifetime of the company. Such a meeting must be held within a period of not less
than one month or within a period not more than six months from the date on which it is
entitled to commence business i.e. it obtains certificate of commencement of business. In
a statutory meeting, the following matters only can be discussed :-

a.       Floatation of shares / debentures by the company

 b.      Modification to contracts mentioned in the prospectus

40. Discuss about Proxy?

Answer: A proxy is someone who attends a general meeting and votes in place of a member
of the company. Every member of a company has a statutory right to appoint a proxy. The
statutory provisions are in sec324 - sec331. They largely re-enact sec372 of the 1985 Act, but
there are some significant changes of detail.

Unit – V

41. Explain the procedure for winding up a company by court.

Answer:  Winding up subject to supervision of court, is different from "Winding up by

court." Here the court only supervises the winding up procedure. Resolution for winding up is
passed by members in the general meeting. It is only for some specific reasons, that court
may supervise the winding up proceedings. The court may put up some special terms and
conditions also. However, liberty is granted to creditors, contributories or other to apply to
court for some relief.

Ø  The court may also appoint liquidators, in addition to already appointed, or remove any
such liquidator. The court may also appoint the official liquidator, as a liquidator to fill up the
vacancy.

Ø  Liquidator is entitled to do all such things and acts, as he thinks best in the interest of
company. He shall enjoy the same powers, as if the company is being wound-up voluntarily.

Ø  The court also may exercise powers to enforce calls made by the liquidators, and such other
powers, as if an order has been made for winding up the company altogether by court.

42. What are the consequences of company winding up?

Answer:

Ø  The consequences of voluntary winding up are as follows:

Ø  (1) A voluntary winding up shall be deemed to commence from the date or the
passing of the resolution to that effect (Sec. 486).

Ø  (2) From the commencement of voluntary winding up, the company ceases to carry
on its business, except so far as may be required for the beneficial winding up
thereof (Sec. 487).
 Ø  (3) The possession of the assets of the company vests in the Liquidator for
realisation and distribution among the creditors. The corporate state and powers of
the company shall, however, continue until it is dissolved (Sees. 456 and 487).

43. What is called creditors voluntary winding up?

Answer:   A  voluntary winding up of the company in which a declaration of its solvency is
not made is referred to as a creditors voluntary winding up.

44. Discuss about members & creditors volundary winding up? Compare

Answer:
i.
                                             Declaration of solvency
                              ii.            Control of winding up
                            iii.            Meeting
                            iv.            Appointment of liquidator
                              v.            Committee of inspection
                            vi.            Powers of liquidator

45. Explain the winding up subject to supervision of court?

Answer:Winding up subject to the supervision of the court presupposes a voluntary winding

up by the company.

46. Explain any two concequences of winding up?

Answer:
i.
                                                                     Consequences as to shareholders/members
                                                      ii.            Consequences as to creditors
 

47. Explain the different types of voluntary winding up?

Answer:
i.
                                                                     Members voluntary winding up
                                                      ii.            Creditors volundary winding up

48. Explain the kinds of company?

Answer:
diagramme with explanation

49. Distinction between a public company & a private company?

Answer: difference

50. Explain the mode of winding up?

Answer:
i.
                                             Winding up by the court
                              ii.            Voluntary winding up
                            iii.            Winding up subject to the supervision of the court

PART – C (8 Marks)

(Minimum 5 Questions from Each unit, no maximum limit)

Unit – I

1. Define a company and discuss its characteristics.

Answer:

A company can be defined as an "artificial person", invisible, intangible, created by or under

law, with a discrete legal entity, perpetual succession and a common seal It is not affected by
the death, insanity or insolvency of an individual member.

Characteristics of a Company
·         Separate legal existence
·         Perpetual succession
·         Limited liability
·         Transferability of shares
·         Common seal
·         Separation of ownership and control
·         Voluntary association

2. Bring out the classification of registered companies.

Answer:
 
(a) Unlimited Companies
 (b) Companies Limited by Guarantee

       (c) Companies Limited by Shares’

Companies Limited by Shares may be Public or Private

3. Write short notes about promoters.

Answer:

In the 19th century, it was common for promoters to sell their own property to a newly
formed company at an inflated price, or to acquire assets for the company and receive a
commission from the seller.

The courts then began to impose a fiduciary duty on promoters similar to that imposed

on agents. A promoter must disclose any profit or potential conflict of interest to either:

(i) an independent board of directors, or

(ii) existing or intended shareholders.

4. What are the documents required for registration?

Answer:

 Memorandum of Association

 Articles of Association

These are the documents which make up the constitution of the company. The Companies
(Tables A - F) Regulations 1985 give suggested forms for memoranda and articles for
different kinds of company.

A public company’s memorandum must be in accordance with Table F of the Regulations.

Public and Private companies limited by shares can adopt the articles in Table A of the
Regulations - Table A will also apply automatically so far as not modified or excluded by the
company’s own articles.

 
The Memorandum must be signed (subscribed) unless submitted in electronic form, and must
show the number of shares each subscriber is taking.

A statement giving the address of the company’s registered office and the details (name,
address, nationality, occupation and date of birth) of the company’s first directors and
secretary.

Statement must be signed by the subscribers to the memorandum and include a written
consent to act signed by those named as directors/secretary.

The statutory declaration must be signed by a solicitor involved in the formation of the
company or by one of the persons named as director or secretary.

5. What are the contents to be present in prospectus?

Answer:

The following important matter are included in the prospectus:

 The prospectus contains the main objectives of the company, the name and addresses
of the signatories of the memorandum of association and the number of shares held by
them.
 The name, addresses and occupation of directors and managing directors.

 The number and classes of shares and debentures issued.

 The qualification share of directors and the interest of directors for the promotion of
company.
 The number, description and the document of shares or debentures which within the
two preceding years have been agreed to be issed other than cash.
 The name and addresses of the vendors of any property acquired by the company and
the amount paid or to be paid.

Unit – II

6. What are the constituents of memorandum of association?

Answer:
·         Name Clause
 ·         Registered Office Clause
·         Objective Clause
·         Liability Clause
·         Capital Clause
·         Association Clause

7. How can the memorandum of association be altered?

Answer:

As a matter of course Memorandum of Association is not alterable. In fact the words of

the Memorandum cannot be changed that easily. It is said that “Memorandum of
Association is an unalterable document alterable only in accordance with the provisions
of the law”
Alteration of Memorandum of Association under the Common Law

·         Alteration of Memorandum of Association under Indian Law

·         By special Resolutions and Permission of the government

·         By rectification of omission in name

8. Give the meaning of articles of association and list out its contents

Answer:

A company's articles of association is a document which, along with the memorandum of

association form the company's constitution, defines the responsibilities of the directors, the
kind of business to be undertaken, and the means by which the shareholders exert control
over the board of directors.

1. Share capital including sub division thereof, rights of various shareholders, the relationship
of these rights, payment of commission, share certificates,
2. Lien of shares
3. Calls on shares
4. Transfer of shares
5. Transmission of shares
6. Forfeiture of shares
7. Surrender of shares
8. Conversion of shares into stock
9. Share warrant
10. Alteration of capital
9. What is the procedure for alteration of articles of association?

Answer:

For effecting alteration to the articles of association, the following procedures is required to
be followed-

1. Take the necessary decision by convening a Board Meeting to change all or any of the
existing Articles of Association and fix up the day, time, place and agenda for a general
meeting for passing special resolution to effect the change.

2. See that any such change in the Articles of the company conforms to the provisions of the
companies Act, 1956 and the conditions contained in the Memorandum of Association of the
company.

3. See that any such change does not increase the liability of any member who has become so
before the alteration to contribute to the share capital of or otherwise to pay money to, the
company.

4. See that any such change does not have the effect of converting a public company into a
private company. If such is the case, then make an application to the Central Government for
such alteration.

5. See that any such change does not provide for expulsion of a member by the company.

10. Distinguish between memorandum of association and articles of association?

Answer:

Memorandum and articles are public documents. They are inter-linked and require to be
registered for the formation of a company. Where there is any ambiguity or where the
memorandum is silent on any point, the articles may serve to explain or supplement the
memorandum. Beyond this, the two documents have nothing in common and differ from one
another in the following respects:

1. Memorandum of association is the charter of the company and defines the scope of its
activities. Articles of association of the company is a document which regulates the internal
management of the company. These are the rules made by the company for carrying out
the objects of the company as set out in the memorandum.
2. Memorandum of association defines the relation of the company with the rights of the
members of the company interest and also establishes the relationship of the company with
the members.

3. Memorandum of association cannot be altered except in the manner and to the extent
provided by the act, whereas the articles being only the byelaws of the company can be
altered by a special resolution.

4. Memorandum is a supreme document of the company whereas articles are subordinate

to the memorandum. They cannot alter or control the memorandum.

5. Every company must have its own memorandum. But a company limited by shares need
not register its articles. In such a case table A applies.

Unit – III

11. Who is a director? Discuss his duties.

Answer: A Director is any person, occupying the position of Director, by whatever name
called. They are professional men, hired by the company to direct its affairs.

There is no exhaustive list defining the duties of the Board of Directors towards the
company and shareholders. But based on the analysis of the provisions of the Companies
Act, 1956 with regards to a director, some general duties of a Director are mentioned
herein:
To file return of allotments: a company must file with the Registrar, within a period of 30
days, a return of the allotments, stating the specified particulars. Failure to file such return
shall make the Directors liable as 'officer in default'. A fine, up to Rs.500 per day, till the
default continues may be levied.

Not to issue irredeemable preference shares or shares, redeemable after 20 years: A

company cannot issue irredeemable preference shares or preference shares, redeemable
beyond 20 years. Directors, making any such issue, may be held liable as 'officer in default'
and, may be subject to a fine, up to Rs.1, 000.
To disclose interest: A Director, who is interested in a transaction of the company, must
disclose his interest to the Board. The disclosure must be made at the first meeting of the
Board, held after he has become interested. This is because a Director stands in a fiduciary
capacity with the company and, therefore, he must not place himself in a position in which
his personal interest conflicts with his duty.

12. What are the Liabilities of the Directors of a company towards the company?
Answer:  The liability of a Director to the company may arise from:
Breach of fiduciary duty: Where a Director acts dishonestly to the interest of the company,
he will be held liable for breach of fiduciary duty. Most of the powers of Directors are powers
in trust and, therefore, should be exercised in the interest of the company and, not in the
interest of the Directors or, any section of members.

Ultra vires acts: Directors are supposed to act within the parameters of the provisions of
the Companies Act, Memorandum and Articles of Association, since these lay down the
limits to the activities of the company and, consequently, to the powers of the Board of
Directors. Negligence: As long as the Directors act within their powers with reasonable skill
and care, as expected of them as prudent businessmen, they discharge their duties to the
company.

Mala fide acts: Directors are the trustees for the money and property of the company,
handled by them, as well as for exercise of the powers, vested in them. If they dishonestly or
in a mala fide manner, exercise their powers and perform their duties, they will be liable for
breach of trust and, may be required to make good the loss or damage, suffered by the
company by reason of such mala fide acts.

13. Give short notes on a) Retirement of directors and b) Removal of directors.

Answer:  Retirement of Directors

In any public company or a private company that is a subsidiary of a public company, one-
third of the Directors must retire at every AGM. However, every retiring Director is eligible
for re-appointment. If the vacancy is not filled and the meeting has not expressly resolved to
fill such vacancy, he or she shall be deemed to have been re-appointed until the next
election meeting, unless he or she is not otherwise disqualified or is unwilling to so act as a
Director or no resolution for such appointment has been put to the meeting and lost.

Removal of Directors

A Director can be removed by an ordinary resolution of the general meeting after a special
notice has been given, before the expiry of his term of office. However, this is not applicable
to Directors appointed by proportional representation or the Directors appointed by the
Central Government.

14. Define shares and discuss the various kinds of shares.

Answer:   “A share is the interest of a shareholder in the company, measured by a sum of

money, for the purpose of liability in the first place, and of interest the second, but also
consisting of a series of mutual covenants entered into by all the shareholder inter se in
accordance with the companies act”.

Types of shares:
According to section 86 of the companies act, a company can issue only two types of shares:

(a) Preference shares; and  (b) Equity shares.

(1) Preferences Shares
Shares which enjoy the preferential rights as to dividend and repayment of capital in the
event of winding up of the company over the equity shares are called preference shares.
The holder of preference shares will get a fixed rate of dividend. Preference shares may be:
(a) Cumulative Preference Share
(b) Non-cumulative Preference Shares
(c) Redeemable Preference Shares
(d) Participating or Non-participating Preference Shares
(2) Equity Shares
Equity shares will get dividend and repayment of capital after meeting the claims of
preference shareholders. There will be no fixed rate of dividend to be paid to the equity
shareholders and this rate may vary form year to year. This rate of dividend is determined
by directors and in case of larger profits, it may even be more than the rate attached to
preference shares. Such shareholders may go without any dividend if no profit is made.

15. Distinguish between share certificate and share warrant.

Answer:  1)The holder of a share certificate is a registered member of the company,while

the bearer of a share warrant is not.

2)The issue of a share certificate does not require the approval of the central government
while share warrant can be issue only if the articles authorize its issue and the central
government has accorded its previous approval.

3)Both public and private company must issue share certificates but share warrants can be
issued only by public companies.

4)A share certificate is issued in respect of partly or fully paid shares,whereas a share warrant
can be issued only in respect of fully-paid shares.

5)A share warrant is a negotiable instrument,but a share certificate is not negotiable.

6)The holder of the share warrant is not qualified as a director of a company (where
qualification shares are prescribed) but the holders of share certificate is so qualified.

7)The holder of a share certificate can present a petition for winding up,but the holder of a
share warrant cannot do so.

Unit- IV
16. Classification of various company meeting?

Answer: 1. Shareholders meeting: When the meeting is held with the shareholders of the
company it is called shareholders meeting.

 Statutory meeting: According to company laws, after getting the letter of commence,
the company arranges a meeting after one month of six months. This is the first
general meeting of the company and during the life of the company this type of
meeting held once. The company gives the circular before 21 days of the meeting.
The decisions of the meeting are called statutory decision.

 Annual general meeting: After registration of the company, the company is bound to
invites the first general meeting with in eighteen months. Then the general meeting
will be held in every year. The differences of the two general meeting cannot be more
than fifteen months. The decisions of the meeting are called general decision.

 Extra-ordinary general meeting: If necessary of the company this type of

meeting can be held on any time. The director or some shareholders can invite this
meeting one tenth of the shareholders may give the requisition to the Board of
directors to arrange this type of meeting. After getting the requisition of the board of
Directors fail to arrange a meeting with in twenty one days, the shareholder can invite
the meeting within three months. The decision taken by the meeting is called special
decision.

17. Explain about annual general meeting?

Answer:
i. company to hold annual general meeting every year
                                             
ii.            power of certral government to call annual general meeting
                              
                            iii.            penality for default
                            iv.            importance of annual general meeting

18. Explain about extra ordinary general meeting?

Answer:
i. extraordinary meeting convened by the board of directors
                                             
ii.            extraordinary meeting convened by the requisitionists
                              

19. Explain the minutes of meeting?

Answer:
i.
                                             Minutes of proceedings of meetings
                              ii.            Minutes book
                            iii.            Evidentiary value of minutes
                            iv.            Location and inspection of minute books of general meetings
 

20. Write about the duties of a company secretary?

Answer:
i.
                                             duties towards the company
                              ii.            duties to the directors
                            iii.            duties to the whole-time managerial authority
                            iv.            duties to the shareholders and the public
                              v.            duties towards the office and the staff
                            vi.            other duties

Unit – V

21. Explain the mode of winding up?

Answer:
i.
                                             Winding up by the court
                              ii.            Voluntary winding up
                            iii.            Winding up subject to the supervision of the court

22. What are the consequences of voluntary winding up?

Answer:
i.
                                                         Effect on status of company
                                          ii.            Boards powers to cease on appointment of a
liquidator
                                        iii.            Notice of discharge of the officers and employees of
the company
                                        iv.            Stay of actions
                                          v.            Distribution of property
                                        vi.            Notification of liquidation

23. Explain the different types of voluntary winding up?

Answer:
a.       Members voluntary winding up
b.      Creditors volundary winding up

24. What are the provisions applicable to a members voluntary winding up?
Answer:
i.
                                             Appointment and remuneration of liquidators
                              ii.            Boards powers to cease on appointment of a liquidator
                            iii.            Power to fill vacancy in office of liquidator
                            iv.            Notice of appointment of liquidator to be given by registrar
                              v.            Power of liquidator to accept shares, etc
                            vi.            Duty of liquidator to call creditors meeting in case of
insolvency
                          vii.            Duty to call general meeting at the end of each year
                        viii.            Final meeting and dissolution
                            ix.            Provision as to annual and final meeting in case of
insolvency

25. What are the provisions applicable to creditors voluntary winding up?

Answer:
i.
                                             Meeting of creditor
                              ii.            Notice of resolution to be given to registrar
                            iii.            Appointment of liquidator
                            iv.            Appointment of committee of inspection
                              v.            Liquidators remuneration
                            vi.            Boards powers to cease on appointment of liquidator
                          vii.            Power to fill vacancy in office of liquidator
                        viii.            Power of liquidator to accept shares etc.,
                            ix.            Duty of liquidator to call meeting at the end of each year
                              x.            Final meeting and dissolution