Date: 3rd November 2021

VIRTUAL COACHING CLASSES

ORGANISED BY BOS (ACADEMIC), ICAI

FINAL LEVEL
PAPER 4: CORPORATE AND ECONOMIC LAWS

Faculty: CA. S. SRIKANTH

© The Institute of Chartered Accountants of India

1. Which of the following is NOT a duty of a director?
a) To exercise his duties with due and reasonable care, skill and
diligence and to exercise independent judgment
b) Not to make any profit out of any contract entered into with the
company
c) To act in accordance with the articles of the company, subject to
the provisions of the Companies Act, 2013
d) Not to involve in a situation in which he may have a direct or
indirect interest that conflicts, or possibly may conflict, with the
interest of the company

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 Answer 1

b) Not to make any profit out of any contract

entered into with the company

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2.The maximum number of directors of a Private
Company is

a) 2
b) 7
c) 15
d) 10

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Answer 2
c) 15

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3. Mango Foods Limited, an unlisted company provides the following details:
Equity Share Capital Rs. 9 crores
Preference Share Capital Rs. 21 crores
12% Debentures Rs. 10 crores
Turnover Rs. 250 crores
The company wishes to know if they are statutorily required to appoint a
Woman Director and Independent Directors.
Which of the following statements is true:
a) The company should appoint a woman director, but not independent directors
b) The company should appoint independent directors but not a woman director
c) The company should appoint both Independent Directors as well as a woman
director.
d) The company is not required to appoint a woman director as well as
independent directors

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Answer 3
b) The company should appoint independent
directors but not a woman director

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4. ABC limited wishes to appoint the following persons as directors of
the company. State which of the following persons would NOT be
disqualified under S. 164 of the Companies Act 2013 from being
appointed as a director of the company
a) Mr. Unfortunate who has applied to be adjudicated as an insolvent
b) Mr. Malicious who has been convicted for tax evasion and sentenced
to imprisonment in respect thereof for a period of two months
c) Mr. Crazy who stands declared by the competent court as of unsound
mind
d) Mr. Casual Approach who has failed to pay the call money on shares
held by him in ABC Limited within six months from the due date fixed
for payment of the call.

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Answer 4

b) Mr. Malicious who has been convicted for tax

evasion and sentenced to imprisonment in
respect thereof for a period of two months

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5. Which of the following category of directors can be removed by
the members under S. 169 of the Companies Act, 2013?
a) Directors appointed by the method of proportional representation
under S. 163 of the Companies Act, 2013.
b) Directors appointed by the Tribunal under S. 242 of the Companies
Act, 2013
c) Independent Directors
d) None of the above

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Answer 5

c) Independent Directors

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6. It is proposed to appoint Dr. Visesh Gupta as an independent director
on the board of Terminus Software Solutions Limited. Mr. Sailesh
Gupta, brother of Dr. Visesh Gupta is holding 5,00,000/- shares in the
company. The shares, currently trading on the NSE at Rs. 4,682/- per
share, are fully paid up and have a face value of Rs. 5/- each.
i. Can Mr. Visesh Gupta be appointed as an independent director on
the board of the company.
ii. In view of the immense knowledge of Mr. Visesh Gupta the
company is proposing to provide him with a fee based on profits in
as well as stock options. Is this permissible under the Companies
Act, 2013?

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Answer 6
i. As the face value of the shares held by Mr. Sailesh Gupta is less
than rupees fifty lakhs, the exemption will apply. Therefore Dr.
Visesh Gupta can be appointed as an independent director of
Terminus Software Solutions Limited.
ii. Fee based on profits can be paid but stock options shall not be
provided.

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7.Mr Gardhab was appointed by the board of directors of
Zootopia Industries Limited at the board meeting held on
15.10.2020. He resigned for personal reasons on
15.1.2021. The Board appointed Mr. Bandar on 2.2.2021
in the casual vacancy created by the resignation of Mr.
Gardhab. Is the appointment of Mr. Bandar valid?

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Answer 7

Mr. Gardhab was appointed by the board and not

by the shareholders at general meeting. Therefore
the casual vacancy created by his resignation
cannot be filled under sec. 161 (4) by appointing
Mr. Bandar

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8. Zootopia Industries Limited has 5500 small shareholders. 700 small
share holders have left their intention to appoint Ms. Khara Ghosh
to represent them. Mr. Akrosh Sinh, the Managing Director is of the
opinion that the appointment is not valid as it should have been
signed by not less than 1000 small shareholders. Is this view
correct.
Will your answer be different if you are informed that

i. Ms. Khara Ghosh is NOT holding any shares in Zootopia Industries

Limited?
ii. Ms. Khara Ghosh is already a small shareholders’ director in Jungli
Informatics Limited and Aranya Hotels Limited?

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Answer 8
The view held by Mr. Sinh is incorrect because the proposal may be
signed by 1000 small shareholders or 1/10th of the total no. of small
shareholders whichever is lower. Therefore 700 shareholders is
sufficient as the number is more than 550 which is 1/10th of the total
no. of small shareholders.
i. A small shareholder director need not be small shareholder.
ii. A person shall hold the position of small shareholders’ director in
NOT more than two companies at the same time. Therefore, as Ms.
Ghosh is already small shareholders’ director in Jungli
InformaticsLimited and Aranya Hotels Limited she cannot br
appointed in Zootopia Industries Limited.
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9. Ms. Khara Ghosh after attending the board meetings of Zootopia
Industries Limited finds the company is being seriously mismanaged
by Mr. Akrosh Sinh, the managing director, and his cronies on the
board. She objects to this vehemently but is not heeded. She,
therefore, sends her resignation in writing to the Board of the
company on 2.5.2021. On 15.7.2021, a penalty is levied on the
company and its directors under the Companies Act, 2013 for failure
to pay interim dividend announced on 21.5.2021. Comment
whether Ms. Khara Ghosh is liable for this penalty.

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Answer 9
The resignation of Ms. Ghosh will take effect on
receipt by the company. Thereafter she is not
liable for any offences committed by the company.
Therefore, Ms. Khara Ghosh is NOT liable for the
penalty for non-payment of interim dividend
announced on 21.5.2021.

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10.Mr. Neel Tendue, a director of Zootopia Industries
Limited was arrested for insider trading and sentenced
to imprisonment for three years on 15.5.2021. On
16.5.2021 he attended a board meeting of the
company and voted on certain resolutions. Explain the
legal consequences of Mr. Tendue’s actions under the
Companies Act, 2013.

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Answer 10
A director shall automatically vacate office if he is convicted by a court
of any offence, whether involving moral turpitude or otherwise and
sentenced in respect thereof to imprisonment for not less than six
months. In the instant case Mr. Tendue has been sentenced to
imprisonment for three years. Therefore, he will automatically vacate
office on 15.5.2021. So attending the board meeting on 16.5.2021 is a
violation of law.
Mr. Tendue is liable to a penalty of not less than rupees one lakh
which may extend upto rupees five lakhs for functioning as a
director even when knowing that the office of director held by him
has become vacant on account of any of the disqualifications specified
in sec. 167 (1).
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 THANK YOU

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