CA Intermediate (Batch Feb 2021)

Test of the following Chapters

Chapter 1 - Preliminary
Chapter 2 - Incorporation of the Company
Chapter 3 - Prospectus

Maximum Time = 2 hours

Maximum Marks = 60 marks

Part A – 18 Marks - MCQs (Attempt All)

Q1: Which of the following statement is contrary to the provisions of the Companies Act, 2013?
(a) A private company can make a private placement of its securities.
(b) The company has to pass a special resolution for private placement.
(c) Minimum offer per person should have Market Value of 20,000.
(d) A public company can make a private placement of its securities.
(1 mark)

Q2: Ruchir Marcons Ltd. which provides marketing and consultancy services is keen to have a ‘significant
influence’ in Ruchika Marketing Ltd. so that it becomes its ‘associate company’. For having ‘significant
influence’ Ruchir Marcons Ltd. needs to control certain percentage of total voting power of Ruchika
Marketing Ltd. What is that?
(a) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 15% of total voting power of Ruchika
Marketing Ltd.
(b) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 20% of total voting power of Ruchika
Marketing Ltd.
(c) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 25% of total voting power of Ruchika
Marketing Ltd.
(d) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 51% of total voting power of Ruchika
Marketing Ltd.
(1 mark)

Q3: Which of the following statements is not true?

(a) in case of shares, the rate of underwriting commission to be paid shall not exceed five percent of the issue price of
the share.
(b) underwriting commission should not be more than the rate specified by the Article of Association.
(c) in case of debentures, the rate of underwriting commission shall not exceed two percent of the issue price of the
debentures.
(d) amount of commission may be paid out of profits of the company.
(1 mark)

Q4: Food lovers Inc. was incorporated as a one person company (OPC) on 1st September 2015 with paid up
share capital of Rs. 25 lacs. This OPC wants to convert itself into a private limited company during the year
ending on 31st March 2017. But the provisions of the Companies Act, 2013 prohibits an OPC from doing so
before the expiry of a specified period. From the following options in which situation this OPC will
mandatorily be converted into a private/public company even before expiry of such period –
(a) After the expiry of two years from the date of its incorporation
(b) Paid up share capital of the company is increased beyond fifty lakh rupees
(c) The average annual turnover during the relevant period exceeds one crore rupees
(d) If the application is filed with the ROC within 90 days of its incorporation as OPC, to be converted into a Private
Limited company.
(2 marks)

Q5: Roma along with her six friends has incorporated Roma Trading Ltd. In May 2019. The paid-up share capital
of the company is 30 lacs. Further, in April 2020, she noticed that in the last financial year, the turnover
of the company was well below 2 crores. Advise whether the company can be treated as a ‘small
company’.
(a) Roma Trading Ltd. is definitely a ‘small company’ since its paid-up capital is much below 50 lacs and also its
turnover has not exceeded the threshold limit of 2 crores.

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(b) Unlike a private limited company, which automatically becomes a ‘small company’ as soon as it meets the criteria
of ‘small company’, Roma Trading Ltd. being a public limited company has to maintain the norms applicable to a
‘small company’ continuously for two years so that, thereafter, it is treated as a ‘small company’.
(c) If all the shareholders of Roma Trading Ltd. give an undertaking to the ROC stating that they will not let the paid-
up share capital and also turnover exceed the limits applicable to a ‘small company’ in the next two years, then it
can be treated as a ‘small company’.
(d) The concept of ‘small company’ is applicable only in case of a private limited company and therefore, despite
meeting the criteria of ‘small company’ it being a public limited company cannot enjoy benefits of ‘small company’.
(2 marks)

Q6: An issue house (share broker) has issued an advertisement in two leading newspapers for selling a big
number of shares allotted to it by a company under a private placement. In which of the following conditions
the advertisement will not be deemed as prospectus?
(a) Advertisement was given within six months from the date of allotment
(b) Advertisement was given after six months from the date of allotment and the issue house paid the entire
consideration to the company
(c) The issue house did not pay entire consideration to the company till the date of allotment
(d) advertisement was given within three months from the date of allotment.
(1 mark)

Q7: A shelf prospectus filed with the ROC shall remain valid for a period of:
(a) one year from the date of registration
(b) one year from the date of closing of first issue
(c) one year from the date of opening of first issue
(d) Ninety days from the date on which a copy was delivered to ROC
(1 mark)

Q8: Shripad Religious Publishers Limited has received application money of 20,00,000 (2,00,000 equity shares
of 10 each) on 10th October, 2019 from the applicants who applied for allotment of shares in response to
a private placement offer of securities made by the company to them. Select the latest date by which the
company must allot the shares against the application money so received.
(a) 9th November, 2019
(b) 24th November, 2019
(c) 9th December, 2019.
(d) 8th January, 2020
(2 marks)

Q9: Amar made an application, his wife Abhilasha being other proposed subscriber and got reserved a name
for incorporation of a private limited company but the Registrar of Companies, Delhi and Haryana, much
before the incorporation, found that the name was applied by furnishing wrong information.
(a) The reserved name, after seeking explanation from Amar and after he pays a penalty of Rs. One lac shall be allotted
by the ROC and the company shall be incorporated by this name.
(b) The reserved name shall be cancelled by the ROC but Amar shall not be liable to pay any penalty because
cancellation of name in itself is a penalty.
(c) Besides cancellation of the reserved name Amar and Abhilasha shall be debarred from making an application for
reservation of name for one year from the date on which cancellation letter was issued by the ROC.
(d) The reserved name shall be cancelled by the ROC because the name was applied by furnishing wrong information
and Amar who made the application shall be liable to a penalty up to Rs. one lac.
(2 marks)

Q10: Ravi and Ragini have formed a Section 8 company; date of incorporation being 18.02.2018 and they being
the directors and also the shareholders. During June, 2018 it transpired that two unsuitable articles were
required to be altered for smooth functioning of the company. Advise.
(a) Since articles regulate the internal management of the company, both Ravi and Ragini being directors and
shareholders are themselves capable of altering the articles.
(b) In case of Section 8 company, articles can be altered only if the company shows profits consecutively for two years.
(c) In case of Section 8 company, prior approval of the Central Government is required to be obtained before its articles
are altered.
(d) In case of Section 8 company, at least one year must elapse from the date of its incorporation before its articles are
altered but there is no need to obtain prior permission of the Central Government.
(2 marks)

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Q11: Shankar Limited was incorporated on 1st July 2020. It has to establish its registered office on or before
_______
(a) 1st October 2020
(b) 1st December 2020
(c) 16th July 2020
(d) 31st July 2020
(1 mark)

Q12: Insta Private Limited altered its Articles of Association on its conversion into Public Company. A copy of
order of the competent authority approving the alteration, is required to be filed with Registrar. How many
days Company have to file such order?
(a) 15 days
(b) 30 days
(c) 45 days
(d) 60 days
(1 mark)

Q13: In a depository system, whose name is entered in the Register of members of the company?
(a) Depository
(b) Depository Participant
(c) the company itself
(d) shareholder
(1 mark)

Part B – 42 Marks (Subjective)

Question 1 is compulsory

Attempt any 3 out of remaining 4

1.
(a) Mr. Raja along with his family members is running successfully a trading business. He is capable of developing
his ideas and participating in the market place. To achieve this, Mr. Raja formed a single person economic entity
in the form of One Person Company with his brother Mr. King as its nominee. On 4th May 2020, Mr. King withdrew
his consent as Nominee of the One Person Company. Can he do so under the provisions of the Companies Act,
2013?

Examine whether the following individuals are eligible for being nominated as Nominee of the One Person
Company as on 5th May 2020 under the above said Act.
i. Mr. Shyam, son of Mr. Raja, who is 15 years old as on 5th May 2020.
ii. Ms. Devaki an Indian Citizen, sister of Mr. Raja stays in Dubai and India. She stayed in India during the
period from 2nd January 2019 to 16th August 2019. Thereafter she left for Dubai and stayed there.
iii. Mr. Ashok, an Indian Citizen residing in India who is presently a member of a ‘One Person Company’. Also,
in case Mr. Raja dies and Mr. Ashok later becomes the member of the OPC of Mr. Raja, can he continue
to be the member of two OPCs in that case?
(6 marks)

(b) An allottee of shares in a company brought action against a Director in respect of false statements in prospectus.
The director contended that the statements were prepared by the promoters and he has relied on them and so
director is not liable. State whether the director will be liable for the misstatements. Also specify the circumstances,
if any, in which the director can escape his liability for the misstatement in the prospectus.
(6 marks)

2.
(a) The paid-up share capital of Altar Private Limited is 1 crore, consisting of 8 lacs Equity Shares of 10 each, fully
paid-up and 2 lacs Cumulative Preference Shares of 10 each, fully paid-up. New Private Limited and Ultra Private
Limited are holding 4 lacs Equity Shares and 50,000 Equity Shares respectively in Altar Private Limited. New
Private Limited and Ultra Private Limited are the subsidiaries of PQR Private Limited. With reference to the
provisions of the Companies Act, 2013 examine whether Altar Private Limited is a subsidiary of PQR Private

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 Limited? Would your answer be different if PQR Private Limited has not paid any preference dividend during the
immediately preceding 3 financial years?
(5 marks)

(b) Yadav Dairy Products Private limited has registered its articles along with memorandum at the time of registration
of company in December, 2014. Now directors of the company are of the view that provisions of articles regarding
forfeiture of shares should not be changed except by a resolution of 90% majority. While as per section 14 of the
Companies Act, 2013 articles may be changed by passing a special resolution only. Hence, one of the directors is
of the view that they cannot make a provision against the Companies Act, 2013. You are required to advise the
company on this matter.
(5 marks)

3.
(a) TDL Ltd., a public company is planning to bring a public issue of equity shares in June, 2018. The company has
appointed underwriters for getting its shares subscribed. As a Chartered Accountant of the company appraise the
Board of TDL Ltd. about the provisions of payment of underwriter's commission as per Companies Act, 2013.
(6 marks)

(b) Vijay, a member of Mayur Electricals Ltd. gave in writing to the company that the notice for any general meeting
be sent to him only by registered post at his residential address at Kanpur for which he deposited sufficient money.
The company sent notice to him by ordinary mail under certificate of posting. Vijay did not receive this notice and
could not attend the meeting and contended that the notice was improper.
Decide -
i. Whether the contention of Vijay is valid.
ii. Will your answer be the same if Vijay remains in London for two months during the notice of the meeting and
the meeting held?
(4 marks)

4.
(a) Explain the various instances which make the allotment of securities as irregular allotment under the provisions of
Companies Act, 2013.
(5 marks)

(b) S Ltd. is a company in which H Ltd. is holding 60% of its paid-up share capital. One of the shareholders of H Ltd.
made a charitable trust and donated his 10% shares in H Ltd. and 50 crores to the trust. He appoints S Ltd. as the
trustee. All the assets of the trust are held in the name of S Ltd. Can a subsidiary hold share in its holding company
in this way?
(5 marks)

5.
(a) A group of individuals intend to form a club namely 'Budding Pilots Flying Club' as limited liability company to
impart class room teaching and aircraft flight training to trainee pilots. It was decided to form a limited liability
company for charitable purpose under Section 8 of the Companies Act, 2013 for a period of ten years and thereafter
the club will be dissolved and the surplus of assets over the liabilities, if any, will be distributed amongst the
members as a usual procedure allowed under the Companies Act, 2013.
Examine the feasibility of the proposal and advise the promoters considering the provisions of the Companies Act,
2013.
(4 marks)

(b) PQR limited wants to raise funds for its upcoming project. It has issued private placement offer letters to 55 persons
in their individual name to issue its equity shares. Out of these four are qualified institutional buyers. Before
allotment under this offer letter company issued another private placement offer letter to another 155 persons in
their individual name for issue of its debentures. Being a public company can it issue securities in a private
placement? Is it in compliance with provisions related to private placement or should these offers be treated as
public offers? What if the offer for debentures is given after allotment of equity shares but within the same financial
year?
(6 marks)

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