Department Management Sciences

Program Name BS Accounting & Finance

Examination Mid Term (2021 Spring)

Course Code
Course Title Corporate Law
Exam Date 06-04-2021
Exam Time (2:00 p.m.—7:00 p.m.)
Duration 5 Hours
Maximum Marks 50
Teacher Name HILAL KHURSHID

Student Name SAMI ULLAH KHAN

Section Student Id
9494
(if any)
INSTRUCTIONS TO CANDIDATES
 Write your Student ID, Name and Section clearly on any of your answer books.
 Use A4 Size plain or lined sheets.
 Write the same question number on answer book / sheet as mentioned on question paper.
 Solve the paper in your own words because if paper grader reports copying/ cheating, your
paper will be cancelled and UFM case will be initiated against you.
 In case answers of two or more students match, their paper will be cancelled and UFM case
will be initiated against each student.
 You are required to submit solved answer book/sheet on LMS as per prescribed date and time.
 Submission of papers on LMS is compulsory, however e-mail your paper “To:”
answersheets@cusit.edu.pk and “cc:” hod.mgt@cusit.edu.pk
 In case of sending papers to wrong email, no further chances will be given.
 Anyone failing to submit his/ her answer book/ sheet on specified time as per his/ her exam
date sheet will be declared ABSENT and late submissions will not be accepted in any case.
 Section –A MCQ’S
(On Same Sheet)
1) The name and number of the first directors shall be decided by
a) Members of the company
b) Promoters of the company
c) Subscribers to the memorandum
d) CEO of the company

2) The maximum number of director of a public company fixed by the Companies Act, 2017 is
a) 07
b) 10
c) 50
d) Not specified by the Companies Act, 2017

3) Number of directors to be elected in the forthcoming election shall be fixed by the directors at
least
a) 21 days before election in the general meeting
b) 35 days before election in the general meeting
c) 60 days before election in the general meeting
d) None of the above is correct

4) Which of the following ineligibility applies only to the appointment of directors in a listed
company
a) Is a minor
b) Is an undischarged insolvent
c) Has been convicted by a court for an offense involving moral turpitude
d) Has been declared by a court as defaulter in repayment of loan to a financial institution.

5) The quorum for a meeting of directors of a listed company will not be less than
a) Two third of their number or 4 whichever is greater
b) One third of their number or 4 whichever is greater
c) One fourth of their number or 4 whichever is greater
d) Three fourth of their number or 4 whichever is greater

6) A company is not allowed to contribute any amount.

a) To any social purpose
 b) To any dividend payment
c) To any political party
d) To any Zakat payment

7) A director shall be treated to have vacated the office of director, if he absents himself from:
a) Meetings held in the last 3 months
b) Meetings held in the last 120 days
c) 3 consecutive meetings of the board of directors
d) 3 consecutive meetings of the members

8) A chief executive shall be a person who is vested with whole or substantially the whole, of the
powers of the management of the affairs of the company. Being a member of the board of
directors, he reports to.
a) The chairman of the company
b) The members of the company
c) The board of directors of the company
d) The secretary of the company

9) The persons who may wish to contest an election of directors are required to give notice to the
company at least:
a) 7 days before election
b) 14 days before election
c) 21 days before election
d) None of above

10) In case of any material irregularity in the election of directors, member having 10% or more
voting power may apply to the court within

a) 14 days of election
b) 21 days of election
c) 30 days of election
d) None of above

11) In a company limited by shares, the share capital represents the capital introduced into the
company by the company’s
a) Directors
b) Guarantors
 c) Auditors
d) Members

12) Issuance of share is the first step of offering shares by the company , then people or promoters
pay for the shares, this is termed as
a) Subscription of shares
b) Transfer of shares
c) Payment of shares
d) Selling of shares

13) The issued share capital is nominal value of the shares that have been issued to shareholders.
The issued share capital
a) May be more than authorized share capital
b) Must be more than authorized share capital
c) May be less than authorized share capital
d) Must be less than authorized share capital

14) Men may come and men may go but the company exists. This explains which characteristics of
the company as per the Companies Act 2017.
a) Separate legal entity.
b) Perpetual succession
c) Perpetual Liability
d) Capacity to Sue

15) The concept of limited liability company applies to

a) The directors of the company.
b) To the creditors of the company
c) To the owners (Shareholders) of the company
d) Bankers of the company

16) The prospectus is issued, published or circulated with the approval of

a) The members
b) The board of directors
c) The Commission
d) The Auditors

17) Prospectus means any documents, circular, notice, material, publication or any other invitation
offering
 a) To the general public
b) To the board of directors
c) Only to existing shareholders
d) Only to existing customers

18) Before being permitted to trade, a public company must have

a) Obtained a certificate of incorporation only
b) Been listed on securities exchange
c) Issued a prospectus
d) Obtained a commencement of business

19) Which type of resolution is required to alter the capital clause of Memorandum of association
a) Ordinary resolution
b) Special resolution
c) Ordinary resolution of 30 days’ notice
d) Special resolution of 30 days’ notice

20) The ordinary shareholders are entitled to vote at general meeting of the company. Normally all
ordinary shares have
a) Ten votes per share
b) One vote per ten shares
c) One vote per share
d) As much vote as they wish
 PART – B
Attempt all questions
 QUESTION: 1
Define Memorandum of Association? Also briefly describe different
clauses of Memorandum?
 ANSWER:
 MEMORANDUM OF ASSOCIATION:
A Memorandum of Association (MOA) is a legal document used to
describe a limited liability company's association with its members
during the creation and registration process. The MOA is open to the
public and contains information about the company's name, registered
office address, shareholders, and share distribution.

 CLAUSES OF MEMORANDUM:
1) NAME CLAUSE:
In the name clause it is mention that every type of company shall use
the following word at the end of their name:
i. Public company = “Limited”
ii. Private company = “(Private) Limited”
iii. Single member company = “(SMC-Private) Limited”
iv. Guarantee Limited Company = “(Guarantee) Limited”
v. Unlimited Company = “Unlimited”

2) REGISTERED OFFICE CLAUSE:

This clause specifies that the registered office should be located in the
province or the part of Pakistan but not forming part of province
(FATA).
3) PRINCIPLE LINE OF BUSINESS:
i. The term "principal line of business" refers to the business, in
which a company holds substantial assets or is likely to hold
substantial assets, or earns substantial revenue or is likely to
earn substantial revenue, whichever one is higher.
ii. A company may conduct or engage in any lawful business or
operation, as well as perform or engage in any incidental or
ancillary act or transaction that is required to carry out its
business activities.
iii. The company's main line of business must be specified in the
memorandum of association, which must always be consistent
with the company's name.
iv. A company must not engage in any business that is prohibited
or limited by any law, rule, or regulation in effect in Pakistan,
unless the required license, registration, authorization, or
approval has been obtained, or compliance with any other
condition has been met.

4) LIABILITY CLAUSE:
i. The liability clause states that "the members' liability is
restricted" in the case of a company limited by shares and
limited by guarantee.
ii. The liability clause states that in case of an unlimited company
"the members' liability is unlimited."
iii. The liability clause states that in case of a limited by Guarantee
Company, the amount that each member intends to add to the
company's assets in the event that it is ended up must be
specified.
5) AUTHORISED CAPITAL CLAUSE:
i. This provision specifies the amount of share capital for which
the business intends to be registered, as well as the division of
that capital into fixed-value shares which is maximum no of
shares.
ii. Any subscriber to the memorandum is required to commit to at
least one share in the company's share capital under the same
clause.
iii. Each subscriber must write the number of shares he has decided
to take in the company's share capital opposite his name.

6) UNDERTAKING / SUBSCRIPTION CLAUSE:

In the memorandum, the company must have an undertaking, as
defined by the SECP.
The subscribers to the memorandum, as the first members of the
company, agree to abide by all of the above clauses.

QUESTION: 2
Discuss the provisions for selection of Name of the Company under
the Companies Act, 2017?
ANSWER:
 PROHIBITION OF CERATIN NAMES:
1. PROHIBIT NAMES:
A company should not be registered under a name that is:
a) Identical to, resembles, or is similar to the name of another
company; or
b) inappropriate; or
c) undesirable; or
 d) deceptive; or
e) designed to exploit or offend religious sensitivities of people;
f) Any other ground as may be notified

2. NAMES REQUIRING PRIOR APPROVAL OF SECP:

If the proposed name contains any words suggesting:
a) the loyalty of any past or present Pakistani or foreign head of state;
b) any relation with the Federal Government or a Provincial
Government, or any department, authority, or regulatory authority of
any such Government; or
c) Any connection with any corporation set up by or under an Act of
Parliament, prior written approval of the Commission is required.
d) the sponsorship of, or any relationship with, any foreign government
or international organization;
e) the establishment of a modaraba management company or the
floatation of a modaraba; or
f) Any other business requiring a Commission license.

3. DECISION OF COMMISION IS FINAL:

The decision of commission will be final in whatever the situation is.

4. RESERVATION OF A NAME:
An individual may send application to the registrar for the reservation
of a name; the reservation period must be maximum 60 days.
If found that the reserved name is based on false information then
such name will be cancelled. An order from commission will be final
and a person can appeal less than 30 days for the refusal of name.
 QUESTION: 3
Discuss in detail the provisions of Companies Act 2017 regarding
Ineligibility of Directors?
 ANSWER:
 INELIGIBILITY:
i. A individual may not be named as a director of a company if he
or she:
ii. is a minor;
iii. is mentally ill;
iv. has filed an application to be adjudicated insolvent, which is
currently pending;
v. is an insolvent who has not been discharged;
vi. has been found guilty in a court of law of a crime involving
moral turpitude (conduct that is thought to be contrary to
societal principles of integrity, good morality, or justice, such as
murder, kidnapping, or other types of extortion);
vii. is barred from holding such a position under the Companies
Act;
viii. has acted in a fiduciary capacity and the Court has made a
declaration to that effect at any point in the previous five years;
ix. Does not have a national tax number The Commission may
grant an exception in this case.
x. Is not a member. This does not apply, however, in the following
situations:
a. an individual who represents a non-natural person as a member;
b. a full-time director who is also a business employee;
c. a chairman of the board of directors; or
d. An individual who, by contractual agreements, represents a
creditor or other special interest.
 FOR LISTED COMPANIES:
Furthermore, an individual may not be named as a director of a public
company if he:
i. has been named a defaulter in the repayment of a financial
institution's loan by a court;
ii. Is in the brokerage business or is married to someone who is, or
is a sponsor, owner, or officer of a corporate brokerage house.

 INELIGIBILITY OF BANKRUPT:
If an individual who is an undischarged insolvent acts as the chief
executive or director of a company, he faces a maximum sentence of
two years in jail, a fine, or both.