Company Law [B.

com 2nd Semester]

Company Law
S. No. Chapters Page Number
1. Syllabus & Contents

2. Introduction to company [16 Marks]

3. Formation of a company [16 Marks]

4. Company administration [16 Marks]

5. Share capital & debenture [16 Marks]

6. Corporate meetings [16 Marks]

7. Some important definitions

8. Company Law: Short Revision

i
 2nd Semester: Honours & General:
Company Law: 100 Marks (CC 2.1 Chg)
Internal Assessment: 20 marks
Semester-end Examinations: 80 marks
Total 100 marks [20 MCQ x 1, 30 MCQ x 2]
Unit 1: INTRODUCTION TO COMPANY[No of classes 16 / Marks 16] [4 MCQ x1, 6 MCQ x 2]
Meaning and Definition – Features –, High Lights of Companies Act 2013 - Body Corporate ,Kinds of
Companies (Concept, Definition and Features) – One Person Company, Private Company, Public Company,
Company limited by Guarantee, Company limited by Shares, Holding Company, Subsidiary Company,
Government Company, Associate Company, Small Company, Foreign Company, Listed Company, Dormant
company , Lifting of corporate veil.

Unit 2: FORMATION OF A COMPANY[No of classes 16 / Marks 16] [4 MCQ x1, 6 MCQ x 2]

Steps in formation of a Company, Promotion Stage, Meaning of Promoter, Position of Promoter & Functions of
Promoter, Incorporation Stage – Meaning, Contents, Forms of Memorandum of Association & Articles of
Association and its alteration, Distinction between Memorandum of Association and Articles of Association,
Doctrines of constructive notice and Indoor management, Certificate of Incorporation, Subscription Stage –
Meaning & contents of Prospectus, Types, Misstatement in prospectus and its consequences.

Unit 3: COMPANY ADMINISTRATION[No of classes 16 / Marks 16] [4 MCQ x1, 6 MCQ x 2]

Director ( Concept and Definition), DIN, Qualification, Disqualification, Appointment, Position, Rights, Duties,
Power, Resignation, Liabilities, Removal and Resignation of director. Key Managerial Personnel ( Definition,
Appointment and Qualifications) – Managing Director, Whole time Directors, the Companies Secretary, Chief
Financial Officer, Resident Director, Independent Director, Women director.

Unit 4: SHARE CAPITAL & DEBENTURE[No of classes 16/Marks 16] [4 MCQ x1, 6 MCQ x 2]
Share, Share Capital - Types and Definition, Allotment and Forfeiture, Calls on Shares, ESOP, Buyback, Sweat
Equity, Bonus, Right, Capital Reduction, Share Certificate, D-mat System, Transfer and Transmission,
Redemption of Preference Shares, Debenture – Definition, Types, Rules Regarding Issue of Debenture.

Unit 5: CORPORATE MEETINGS[No of classes 16 / Marks 16] [4 MCQ x1, 6 MCQ x 2]

Corporate Meetings - Shareholder and Board, Types of Meetings – Annual General Meeting Extraordinary
General meeting, Minutes of Proceedings of General Meeting, Meeting of BOD and other meetings (Section
118), Requisite of Valid Meeting- Notice, Agenda, Chairman, Quorum, Proxy, Resolutions, Minutes, Postal
Ballot, E- voting, Video Conferencing, Board Meetings and Resolutions

(If any new provisions are enacted in place of the existing provisions, the syllabus will accordingly include
such new provisions in place of existing provisions with effect from such date as prescribed by Calcutta
University. Similarly if any existing provision becomes redundant due to changes, it will be left out of the
syllabus)
 Company Law
Chapter 1: Introduction [16 Marks]
[4 MCQ x 1 Marks, 6 MCQ x 2 Marks]
Meaning and Definition – Features –, High Lights of Companies Act 2013 - Body Corporate ,Kinds of Companies
(Concept, Definition and Features) – One Person Company, Private Company, Public Company, Company limited
by Guarantee, Company limited by Shares, Holding Company, Subsidiary Company, Government Company,
Associate Company, Small Company, Foreign Company, Listed Company, Dormant company , Lifting of corporate
veil.

1. Introduction
Short title, extent, commencement and application.
(1) This Act may be called the Companies Act, 2013.
(2) It extends to the whole of India.
The Companies Act, 2013 consisting of 29 Chapters, 470 Sections and 7 Schedules as against 658 Sections
under 13 Parts and 15 schedules in the Companies Act, 1956, was notified partially on 12th September 2013
(55 sections) and partially again on 26th March, 2014 (168 sections with effect from 1.4.2014).
The Companies Act, 2013 is administered by the Central Government through the Ministry of Corporate
Affairs (MCA) and the Offices of Registrar of Companies, Official Liquidators, Public Trustee, Director
of Inspection, National Company Law Tribunal (NCLT), National Company Law Appellate Tribunal
(NCLAT), etc. The Registrar of Companies (ROC) controls the task of incorporation of new companies
and the administration of running companies.

2. Definition of company
“In terms of the Companies Act, 2013 ‗company‘ means a company incorporated under the Act, or under
the previous company law‖ [Sec. 2(20)].
A company may be an incorporated company or a Corporation, or an unincorporated company. An
incorporated company is a single and legal (artificial) person distinct from the individuals constituting it,
whereas an unincorporated company, such as a partnership, is a mere collection or aggregation of individuals.
Therefore, unlike a partnership, a company is a corporate body and a legal person havingstatus and
personality distinct and separate from that of the members constituting it.

3. Characteristics/Advantages of company
(a) Independent corporate existence The outstanding feature of a company is its independent corporate
existence. It is a distinct legal person existing independent of its members.
(b) Limited Liability The privilege of limiting liability for business debts is one of the principal advantages
of doing business under the corporate form of organization. No member is bound to contribute anything
more than the nominal value of the shares held by him.
(c) Perpetual succession An incorporated company never dies. It is an entity with perpetual succession.
Perpetual succession, means that the membership of a company may keep changing from time to
 time, but that does not affect the company‘s continuity. The death or insolvency of individual members
does not, in any way affect the corporate existence of the company. ―Members may come and go but
the company can go on forever‖. It continues to exist even if all its human members are dead.
(d) Separate property A company, being a legal person, is capable of owning, enjoying and disposing of
property in its own name. The company becomes the owner of its capital and assets. The shareholders
are not the several or joint owners of the company‘s property.
(e) Transferable Shares Accordingly, the Companies Act, 2013 in Section 44 declares: ‗The shares or
debentures or other interest of any member in a company shall be movable property, transferable in
the manner provided by the articles of the company‘. Thus incorporation enables a member to sell
his shares in the open market and to get back his investment without having to withdraw the money
from the company. This provides liquidity to the investor and stability to the company.
(f) Common seal Since the company has no physical existence, it must act through its agents and all such
contracts entered into by its agents must be under the seal of the company. The common seal acts as
the official signature of the company. In case a company does not have a common seal, the authorisation
shall be made by two directors or by a director and the Company Secretary, wherever the company
has appointed a Company Secretary.

4. Lifting of the ‘Corporate Veil’

Before going into this question, one should first try to understand the meaning of the phrase ‗lifting the veil‘.
It means looking behind the company as a legal person, i.e., disregarding the corporate entity and paying regard,
instead, to the realities behind the legal facade. Where the Courts ignore the company and concern themselves
directly with the members or managers, the corporate veil may be said to have been lifted. Only in appropriate
circumstances, the Courts are willing to lift the corporate veil and that too, when questions of control are
involved rather than merely a question of ownership.
The following are the cases where company law disregards the principle of corporate personality or the
principle that the company is a legal entity distinct and separate from its shareholders or members:
(a) In the law relating to trading with the enemy where the test of control is adopted.
(b) In certain matters concerning the law of taxes, duties and stamps particularly where question of the
controlling interest is in issue.
(c) Where companies form other companies as their subsidiaries to act as their agent.
(d) Where the courts find that there is avoidance of welfare legislation, it will be free to lift the corporate
veil.
(e) Protect the public policy and prevent transactions contrary to public policy.
(f) Under the law relating to exchange control. The courts pierce the corporate veil in quasi-criminal cases
in order to look behind the legal person and punish the real persons who have violated the law.
(g) Where the use of an incorporated company is being made to avoid legal obligations, the Court may
disregard the legal personality of the company and proceed on the assumption as if no company existed.
 5. Kind of Companies
On the Basis of Incorporation
(a) Statutory companies: These are the companies which are created by a special Act of the Legislature,
e.g., the Reserve Bank of India, the State Bank of India, the Life Insurance Corporation, the Industrial
Finance Corporation, the Unit trust of India and State Financial Corporations These are mostly
concerned with public utilities, e.g. railways, tramways, gas and electricity companies and enterprises
of national importance. The provisions of the Companies Act, 2013 do not apply to them unless the
special act specifies such application. Banking Regulation Act, 1949 is a special legislation concerning
banking companies.
(b) Registered companies: These are the companies which are formed and registered under the
Companies Act, 2013, or were registered under any of the earlier Companies Acts.

On the basis of liability

(a) Company limited by shares: Section 2 (22) of the Companies Act, 2013, defines that when the
liability of the members of a company is limited by its memorandum of association to the amount (if
any) unpaid on the shares held by them, it is known as a company limited by shares. It thus implies
that for meeting the debts of the company, the shareholder may be called upon to contribute only to
the extent of the amount, which remains unpaid on his shareholdings. His separate property cannot be
encompassed to meet the company‘s debt.
(b) Company limited by guarantee : Section 2 (21) of the Companies Act, 2013 defines it as the company
having the liability of its members limited by the memorandum to such amount as the members may
respectively undertake by the memorandum to contribute to the assets of the company in the event of
its being wound up. Thus, the liability of the member of a guarantee company is limited up to a
stipulated sum mentioned in the memorandum. Members cannot be called upon to contribute beyond
that stipulated sum.
(c) Unlimited company: Section 2 (92) of the Companies Act, 2013 defines unlimited company as a
company not having any limit on the liability of its members. In such a company the liability of a
member ceases when he ceases to be a member. The liability of each member extends to the whole
amount of the company‘s debts and liabilities but he will be entitled to claim contribution from other
members.

On the basis of members

(a) One person company: The Concept of One Person Company (OPC) The concept of One Person
Company (OPC) has now been introduced in India, through Section 2 (62) of Companies Act, 2013
thereby enabling Entrepreneur(s) carrying on the business in the Sole Proprietor form of business to enter
into a Corporate Framework. Though this concept is new in India but it is already a part of many other
countries like China, Australia, Pakistan and UK etc.
According to Section 2 (62) of the Companies Act, 2013 ‗One Person Company‘ means a company
which has only one person as a member. A company formed under one person company may be either:
a) A company limited by shares, or
b) company limited by guarantee, or
c) An unlimited company.
 One Person Company is a hybrid of Sole-Proprietor and Company form of business, and has been
provided with concessional/relaxed requirements under the Act.
Features of One Person Company (OPC)
(i) Only One Shareholder: Only a natural person, who is an Indian citizen and resident in India, shall
be eligible to incorporate a One Person Company.
(ii) Nominee for the Shareholder: The Shareholder shall nominate another person who shall become
the shareholders in case of death/incapacity of the original shareholder. Only a natural person, who
is an Indian citizen and resident in India, shall be a nominee for the sole member of a One Person
Company.
(iii) Director: Must have a minimum of One Director, the Sole Shareholder can himself be the Sole
Director. The Company may have a maximum number of 15 directors.

(b) Private Company [Section 2 (68)]: According to Section 2 (68) of Companies Act, 2013 a ‗private
company‘ means a company having a minimum paid-up share capital as may be prescribed, and which by
its articles:
(1) restricts the right to transfer its shares.
(2) except in case of One Person Company, limits the number of its members to two hundred:
(3) prohibits any invitation to the public to subscribe for any securities of the company.
The Companies (Amendment) Act, 2015 has omitted ‗of one lakh rupees or such higher paid-up share capital‘
from the definition of Private Company w.e.f. 25.05.2015. The impact of this amendment is that today one can
have a company of paid up capital of mere ` Two (with each subscriber giving a rupee as subscription) for a
private company and ` Seven for a public company.

(c) Public company: [Section 2 (71)]According to Section 2 (71) of Companies Act, 2013 a ‗public
company‘ means a company which:
(1) is not a private company.
(2) has a minimum paid-up share capital, as may be prescribed:
(3) Seven or more members are required to form the company.

(d) Small Company [Section 2 (85)] According to Section 2 (85) of Companies Act, 2013 a ‗‗small
company‘‘ means a company, other than a public company:
i. paid-up share capital of which does not exceed four crore rupees. Or
ii. turnover of which as per its last profit and loss account does not exceed 40 crores:
Some of the advantages enjoyed by the small companies are:
i. holding of two board meetings instead of four – one each in the first and second half years and
the gap between the two meeting should not be more than 90 days. (section 173(5))
ii. Not required to give cash flow statements with the financial statements (section 2(40))
iii. Such a company enjoys relaxations under the Act for a period of five years.
On the basis of control
Holding company& Subsidiary company: According to Section 2 (46) of the Companies Act, 2013 'holding
company', in relation to one or more other companies, means a company of which such companies are
subsidiary companies.
According to Section 2 (87) of the Companies Act, 2013 'subsidiary company' or 'subsidiary', in relation to any
other company (that is to say the holding company), means a company in which the holding company :
(a) controls the composition of the Board of Directors, Or
(b) exercises or controls more than one-half of the total share capital either at its own or together with one
or more of its subsidiary companies:

On the basis of Listing in the recognised Stock Exchange

(a) Listed company: (also widely held) According to Section 2 (52) of the Companies Act, 2013, a 'listed
company' means a company which has any of its securities listed on any recognised stock exchange.
Whereas the word securities as per the Section 2 (81) of the Companies Act, 2013 has been assigned the
same meaning as defined in clause (h) of Section 2 of the Securities Contracts (Regulation) Act, 1956.
(b) Unlisted company: Unlisted Company means company other than listed company.

Others
(a) Government Company: According to Section 2 (45) of the Companies Act, 2013, a 'Government
company' means any company in which not less than fifty one per cent of the paid-up share capital is held
by the Central Government, or by any State Government or Governments, or partly by the Central
Government and partly by one or more State Governments, and includes a company which is a subsidiary
company of such a Government company.
(b) Foreign Company: According to Section 2 (42) of the Companies Act, 2013, ‗foreign company‘ means
any company or body corporate incorporated outside India which: (a) has a place of business in India
whether by itself or through an agent, physically or through electronic mode. And (b) conducts any business
activity in India in any other manner.
(a) Associate Company: According to Section 2 (6) of the Companies Act, 2013, 'associate company' in
relation to another company, means a company in which that other company has a significant influence, but
which is not a subsidiary company of the company having such influence and includes a joint venture
company. As per the Explanation given under the Section, the clause, 'significant influence' means control
of at least twenty per cent of total share capital, or of business decisions under an agreement.
(b) Dormant company: Where a company is formed and registered under this Act for a future project or to
hold an asset or intellectual property and has no significant accounting transaction, such a company or an
inactive company may make an application to the Registrar in such manner as may be prescribed for
obtaining the status of a dormant company.
 6. What do you mean by Public & Private Company?
Public Company
According to Section 2(71) a public company means a company –
a) Which is not a private company;
b) Which has a minimum paid – up share capital of rupees five lakh or such higher paid – up capital, as
may be prescribed ;
c) Whose minimum number of members are seven and maximum unlimited;
d) Whose shares are freely transferable without any restriction;
e) This is entitled to invite public to subscribe for its shares, debentures and deposits generally through
issue of prospectus.

Private Company
As spell out in Section 2(68), a private company means a company having a minimum paid – up share
capital of rupees one lakh or such higher paid – up share capital, as may be prescribed, and which by its articles
–
i. Restricts the right to transfer its shares;
ii. Limits the number of its members to two hundred except in case of One Person Company (OPC);
iii. Prohibits any invitation to the public to subscribe for any shares or securities of the company.
However, The Companies (Amendment) Act, 2015 has omitted ‗of one lakh rupees or such higher paid-up
share capital‘ from the definition of Private Company w.e.f. 25.05.2015. The impact of this amendment is
that today one can have a company of paid up capital of mere ` Two (with each subscriber giving a rupee as
subscription) for a private company and ` Seven for a public company.

7. Point out the differences between a public company and

a private company****
Basis of Difference Private Company Public Company

1. Meaning A private company is a company A public company is a company

which is owned and traded which is owned and traded
privately. publicly
2. Minimum Number of 2 7
members
3. Maximum Number of 200 No limit
members
4. Transferability of share restricted. Freely transfer – able

5. Issue of prospectus and It cannot invite public to subscribe It may invite the general public to
invitation to public to for its shares and debentures and no subscribe for its shares,
subscribe for shares issue of prospectus is required. debentures and deposits through
issue of prospectus.
6. Restriction on name It must add the words ―Private It must add the word ―Limited‖
Limited‖ at the end of its name. only at the end of its name.
7. Statutory meeting and It does not require holding a It must hold a statutory meeting
statutory Report statutory meeting or filing a and file a statutory report with the
statutory report with the Registrar. Registrar.
 8. Minimum number of It requires at least two Directors. It requires at least three Directors.
Directors
9. Rotational retirement of No Director is required to retire by At least two – thirds of the
Directors rotation at each Annual General Directors must retire by rotation
Meeting. and one – third of the Directors
must retire at each Annual
General Meeting.
10. Minimum Quorum for Two members Five members
general meeting
11. Managerial There are no restrictions on the cannot exceed 11% of the net
remuneration managerial remuneration. profits.
12. Public deposits It cannot accept deposits from the It can freely accept deposits from
public other than the shareholders. the public.
Directors and their relatives.
13. Minimum Paid – up 1 lakh. 5 lakh.
capital

8. What do you mean by Corporate Veil? Under what

circumstances lifting of the veil is possible?****
An incorporated company has a separate legal entity distinct from its members who constitute the company.
In other words an incorporated company is an artificial person as distinct from the natural persons. In real life
situation, the business of such artificial person is always carried on by some natural persons for the benefits
of those natural persons. Therefore, the real beneficiaries of the corporate advantage of its separate legal entity
are some human beings. Those natural persons, sometimes, use the corporate personality of the company in order to
commit frauds or some other illegal activities. As because an artificial person is incapable of doing any illegal or fraudulent
activities, the façade of corporate personality might have to be removed in order to identify the guilty persons. This is
known as ―lifting the corporate veil‖. It can be done by the courts only. Lifting of corporate veil as per Companies
Act, 2013 ignores the separate identity of the company and looks back at the true owners who are in control
of the company
Circumstances, when lifting of the veil is possible:
1. Reduction of Membership: If the number of members of a company is reduced below the statutory
minimum of seven members for a public company and two for a private company and the company carries
on business for more than six months while the number is so reduced, every person who remainsa member
of the company during the time when the company so carries on business after those six months and is
aware of the fact, shall be personally liable for the debts of the company incurred during that time.
2. Misrepresentation in Prospectus: If there is a misrepresentation in a Prospectus, every director, promoter
and others, who authorize such issue of Prospectus, shall be personally liable to those who subscribed for
shares on the faith of such untrue statement.
3. Failure to return Application Money: In case of public issue of shares, if the minimum subscription, as
laid down in the prospectus, could not be raised within sixty days of the closure of the issue, the directors
shall be personally liable if the application money along with interest @ 15% per annum is not returned
within seventy days of the closing of the issue.
4. Misdescription of Name: Where a Director or officer of company signs any agreement, cheque etc. on
behalf of the company, such person shall be personally liable to the holder or other party if the name of the
company is not properly mentioned.
5. Holding-Subsidiary Company Relationship: The relationship between holding company and its
subsidiary can be investigated because a holding company is required to disclose to its members the
accounts of its subsidiaries. It amounts to lifting the corporate veil because a subsidiary is a separate legal
entity in the eye of law.
6. Investigation of ownership: It becomes sometimes necessary to enquire into the ownership of shares and
the extent of controlling interest as regards payment of taxes. The court has power to disregard corporate
personality if it is used for tax evasion:
7. Fraudulent Conduct: In the case of winding up of a company, if any business of the company has been
carried on and if it is proved that such business has been carried on with a view to defrauding the creditors
and others, those who are knowingly parties to such conduct of business shall be personally liable without
limitation if the Tribunal thinks it proper so to do.
8. Liable for Ultra Vires Act: Directors and other officers shall be personally liable for all such acts if those
are ultra vires the company.
9. Illegality: If a company is formed for an unlawful object, the court can lift the corporate veil to punish the
guilty persons
10. Trading with enemy: If a company carries on trade with enemy aliens, such company can be investigated.
11. Monopoly: Creation of monopoly by a company can also be investigated.
 Multiple Choice Questions (1 Marks & 2 Marks)
(1) According to Section __________of the Companies Act, 2013 ‗company‘ means a company
incorporated under the Act, or under the previous company law‖
(a) 2(20)
(b) 2 (19)
(c) 2 (21)
(d) 2 (22)
(2) Which of the following is Characteristics of company?
(a) Perpetual succession
(b) Transferable Shares
(c) Limited Liability
(d) All of the above
(3) ________means that the membership of a company may keep changing from time to time, but
that does not affect the company‘s continuity. (i.e. An incorporated company never dies)
(a) Perpetual succession
(b) Common Seal
(c) Independent corporate existence
(d) Separate property
(4) The ________ acts as the official signature of the company.
(a) Corporate Seal
(b) Common Seal
(c) Particular Seal
(d) General Seal
(5) As Per Company Act 2013 a public company has a minimum paid-up share capital of ₹ _____
(a) 1 Lakh
(b) 5 Lakh
(c) 20 Lakh
(d) 50 Lakh
(6) As Per Company Act 2013 a Private company has a minimum paid-up share capital of ₹ _____
(a) 1 Lakh
(b) 5 Lakh
(c) 20 Lakh
(d) 50 Lakh
(7) Minimum Number of members to form a private company (except OPC) is ________ & public
company is ____________
(a) 2 & 7
(b) 3 & 7
(c) 2 & 10
(d) 3 & 10
(8) Minimum Number of Directors of a private company (except OPC) is _______ & public
company is ____________
(a) 2 & 7
(b) 2 & 3
(c) 2 & 10
(d) 3 & 10

(9) Minimum Quorum for general meeting of a private company (except OPC) is _______ & public
company is ____________
(a) 2 & 7
(b) 2 & 5
(c) 2 & 10
(d) 3 & 10
(10) Minimum Paid-up capital of a private company (except OPC) is _______ & public company is
___________as per companies Act, 2013
(a) 1 Lakh & 5 Lakh
(b) 5 Lakh & 20 Lakh
(c) 20 Lakh & 50 Lakh
(d) 50 Lakh & 5 crore
(11) Minimum ________ members are required to form the Public company.
(a) 2
(b) 10
(c) 7
(d) 1
(12) Private Company except One Person Company, limits the number of its members to ______
(a) 50
(b) 200
(c) 100
(d) No limit
(13) According to Section 2 (62) of the Companies Act, 2013 ‗ ___________ 'means a company which
has only one person as a member.
(a) One Person Company
(b) One Member Company
(c) One man company
(d) Sole Proprietorship Company
(14) One Person Company Must have a minimum of _______Director & maximum of ___ directors.
(a) 1, 15
(b) 2, 15
(c) 1, 10
(d) 2, 10
(15) The provisions of the Companies Act, 2013 do not apply to________
(a) Statutory companies
(b) Foreign companies
(c) Dormant company
(d) Small Company
(16) Which of the following is a Statutory Company:
(a) The Reserve Bank of India,
(b) The Life Insurance Corporation
(c) Unit trust of India
(d) All of the Above
(17) Where a company is formed and registered for a future project is called_____________
(a) Dormant company
(b) Associate Company:
(c) Holding company
(d) Subsidiary company:
(18) According to company Act, 2013, "____________"in relation to another company, means a company
in which that other company has a significant influence, (i.e. at least twenty per centof total
share capital)
(a) Dormant company
(b) Associate Company:
(c) Holding company
(d) Subsidiary company:
(19) According to Section 2 (42) of the Companies Act, 2013, ‗ __________‘means any company or
body corporate incorporated outside India
(a) Dormant company
(b) Associate Company
(c) Foreign Company
(d) Statutory Company
(20) According to Section 2 (45) of the Companies Act, 2013, a 'Government company' means any
company in which not less than _________of the paid-up share capital is held by the Government:
(a) 50 %
(b) 49 %
(c) 20 %
(d) 51 %
(21) According to Section 2 (52) of the Companies Act, 2013, a '________'means a company which
has any of its securities listed on any recognised stock exchange.
(a) Dormant company
(b) Government Company
(c) Listed Company
(d) Statutory Company
(22) __________in relation to one or more other companies, means a company of which such
companies are subsidiary companies.
(a) Statutory Company
(b) 'holding company',
(c) Associate Company
(d) Dormant company
(23) According to Section 2 (87) of the Companies Act, 2013 'subsidiary company' means a company in
which the holding company exercises or controls more than ________of the total share capital
(a) 50 %
(b) 49 %
(c) 20 %
(d) 51 %
(24) Paid-up share capital of a small company does not exceed ₹ ________ or such higher amount as
may be prescribed which shall not be more than ₹ _______
(a) 50 lakh , 5 crore
(b) 2 crore, 20 crore
(c) 5 Lakh, 1 crore
(d) 1 Lakh, 1 crore
(25) Turnover of Small company as per its last P/L account does not exceed _______ rupees or such
higher amount as may be prescribed which shall not be more than ______ rupees:
(a) 50 lakh , 5 crore
(b) 2 crore, 20 crore
(c) 5 Lakh, 1 crore
(d) 1 Lakh, 1 crore
(26) Small company enjoys relaxations under the company Act for a period of _________
(a) 5 years
(b) 2 Years
(c) 3 Years
(d) 1 Years
(27) Section 2 (22) of the Companies Act, 2013, defines that when the liability of the members of a
company is limited to the amount (if any) unpaid on the shares held by them, it is known as a __
(a) Company limited by shares
(b) Company limited by guarantee :
(c) Unlimited company:
(d) Limited Company
(28) The liability of the member of a ________is limited up to a stipulated sum mentioned in the
memorandum.
(a) Company limited by shares
(b) Company limited by guarantee
(c) Unlimited company:
(d) Limited Company
(29) Section 2 (92) of the Companies Act, 2013 defines ________ as a company not having any limit
on the liability of its members
(a) Company limited by shares
(b) Company limited by guarantee :
(c) Unlimited company:
(d) Limited Company
(30) ‗Lifting the Corporate veil‘ means looking behind the company as a legal person. In which
cases the Corporate veil may be lifted?
(a) trading with the enemy
(b) avoidance of welfare legislation,
(c) Where the use of an incorporated company is being made to avoid legal obligations,
(d) All of the above
(31) Where the Courts ignore the company and concern themselves directly with the members or
managers, is called ___________
(a) Lifting the Corporate veil
(b) Separating the Corporate veil
(c) Liquidation of the company
(d) Winding up the company
(32) Circumstances, when lifting of the veil is possible:
(a) Trading with enemy
(b) Illegality
(c) Liable for Ultra Vires Act
(d) All of the above
(33) Circumstances, when lifting of the veil is possible:
(a) Reduction of Membership
(b) Failure to return Application Money
(c) Fraudulent Conduct:
(d) All of the above
(34) Lifting the corporate veil violates the following characteristics of the company
(a) Separate legal entity
(b) Separate Property
(c) Perpetual succession
(d) Common Seal
(35) ―Lifting the corporate veil‖. It can be done by the _________ only.
(a) Courts
(b) Central Government
(c) Board of Directors
(d) Shareholders
 1. Formation of company
Persons who form the company are known as promoters. It is they, who conceive the idea of forming the
company. They take all necessary steps for its registration. Section 3 of the Companies Act, 2013 deals with
the basic requirement with respect to the constitution of the company.
(a) Public Company: In the case of a public company with or without limited liability any 7 or more persons
can form a company for any lawful purpose by subscribing their names to memorandum and complying
with the requirements of this Act in respect of registration.
(b) Private Company: In exactly the same way, 2 or more persons can form a private company.
(c) One person company (OPC): One person, where the company to be formed is to be One Person
Company.

2. Steps in formation of a Company:

(1) Filing of the documents: There shall be filed with the Registrar within whose jurisdiction the registered
office of a company is proposed to be situated, the following documents and information for registration,
namely:—
(a) the memorandum and articles of the company duly signed by all the subscribers
(b) a declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or
company secretary in practice, who is engaged in the formation of the company, and by a person named
in the articles as a director, manager or secretary of the company,
(c) an affidavit from each of the subscribers to the memorandum and from persons named as the first
directors, if any,
(d) the address for correspondence till its registered office is established;
(e) the particulars of name, including surname or family name, residential address, nationality and such
other particulars of every subscriber to the memorandum along with proof of identity,
(f) the particulars of the persons mentioned in the articles as the first directors of the company,
(g) the particulars of the interests of the persons mentioned in the articles
(2) Registration of the documents: The Registrar on the basis of documents and information filed under
sub-section (1) shall register all the documents and information referred to in that subsection in the
register and issue a certificate of incorporation in the prescribed form
(3) Issue of certificate of incorporation & issue of corporate identity number: On and from the date
mentioned in the certificate of incorporation issued under sub-section (2), the Registrar shall allot to
the company a corporate identity number, which shall be a distinct identity for the company and which
shall also be included in the certificate.
(4) Maintain and preserve all documents : The company shall maintain and preserve at its registered
office copies of all documents and information as originally filed.
 3. Promotion Stage
The first step to form a company is the process known as ‗promotion‘ where a person persuades others to
contribute capital to a proposed company before it is incorporated . Such a person is called the promoter of the
company. Promoters also can enter into a contract on behalf of a company before or after it has been granted a
certificate of incorporation, and arrange share issues in the name of the company

4. Meaning of Promoter:
Section 2 (69) of the Companies Act, 2013 defines the term ‗promoter‘ as under:-
―Promoter‖ means a person—
(a) who has been named as such in a prospectus or is identified by the company in the annual return
referred to in section 92; or
(b) who has control over the affairs of the company, directly or indirectly whether as a shareholder,
director or otherwise; or
(c) in accordance with whose advice, directions or instructions the Board of Directors of the company is
accustomed to act.
Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional
capacity;

5. Legal status of a promoter

Although a promoter has very wide powers as regards the formation of a company, he is neither an agent of
the proposed company, because the company, because the company is yet to come into existence, nor a trustee
of the proposed company because there is not existence of a trust.
The only way to explain his legal position of a promoter is that he stands in a fiduciary relation with the
company to be formed.
Fiduciary position of a promoter
A promoter stands in a fiduciary relation to the company which he promoters and to those persons whom he
induces to become shareholders in the company which he promotes. He cannot bind the company by any
contract made as promoter without fully disclosing to the company all material facts which the company should
know. The fiduciary position of a promoter may be spelt out as follows:
1. Not to make any profit at the expenses of the company:
2. Benefits of contracts or negotiation must be given to the company:
3. To make full disclosure of any profit or personal interest:
4. Not to make unfair use of position as promoter:

6. Functions of Promoter,
i. A promoter selects the line of business of a proposed company.
ii. He studies the future possibilities of the business of the proposed company.
iii. He decides the name of the company, objects of the company and also to decide where its
registered office should be situated.
iv. He prepares the memorandum of association and articles of association and files these documents
with the Registrar of Companies.
v. He takes necessary steps to get the company registered.
vi. He makes necessary arrangements for the initial capital of the proposed company.
vii. He selects the first Director of the proposed company.
viii. He appoints the banker, auditors, brokers and legal advisors for the proposed company.
ix. He enters into preliminary contracts with different parties (i.e., vendors, underwriters, etc.)
x. He makes necessary arrangements for the allotment of shares and securities.
 7. Certificate of Incorporation:
The certificate issued by the registrar after a company is registered is called the Certificate of Incorporation. As
a conclusive evidence The certificate of incorporation issued by ROC shall be conclusive evidence that:
 All the requirements of the Act and rules their under have been complied with.
 The association is a company authorized to be registered under the Act.
Once the Certificate is issued, the incorporation cannot be challenged even though there were irregularities prior
to registration.

8. Certificate of Commencement of Business:

A private company and a company having no share capital can commence business immediately on receipt
of certificate of incorporation. A company other than these two cannot commence business until a certificate
of commencement of business is obtained.
A public company cannot start the business without having a ‗certificate of commencement‘ from the Registrar.

9. Definition of memorandum of association [MOA] [section 2(56) ]

. A memorandum is a public document under Section 399 of the Companies Act, 2013. It is also known as
Charter document of the company. It lays down the boundaries within which a company can operate. Any act
beyond this is known as “ ULTRA VIRES”

10. Content of the memorandum

The memorandum of a company shall state:
a. the name of the company with the last word ‗Limited‘ in the case of a public limited company, or the
last words ‗Private Limited‘ in the case of a private limited company.(NAME CLAUSE)
b. the State in which the registered office of the company is to be situated.(REGISTERED OFFICE/ SITUATION
CLAUSE/ DOMICILE CLAUSE)
c. the objects for which the company is proposed to be incorporated and any matter considered necessary
in furtherance thereof. If any company has changed its activities which are not reflected in its name, it
shall change its name in line with its activities within a period of six months from the change of activities
after complying with all the provisions as applicable to change of name.(OBJECT CLAUSE)
d. the liability of members of the company, whether limited or unlimited,(LIABILITY CLAUSE)
e. in the case of a company having a share capital the amount of share capital with which the company is
to be registered(CAPITAL CLAUSE)
f. SUBSCRIPTION CLAUSE
g. NOMINEE CLAUSE ( ONLY IN OPC)
h. In short OPC has 7 clauses and others company has 6 clauses in MOA

11. Format of Memorandum

Pursuant to section 4(6) of the new Companies Act, the Memorandum shall be in an appropriate Form as
prescribed in Tables A to E of Schedule 1,
Table A: is format of Memorandum for a company limited by shares.
Table B: is format of Memorandum for a company limited by guarantee having no share capital.
Table C: is format for guarantee company with share capital.
Table D: is format for unlimited company with no share capital.
Table E: is format for unlimited company with share capital.
 12. Definition of articles of association [AOA] [sec [2(5)]
Articles means the AOA of a company as originally framed or as altered from time to time in pursuance of any
previous company law or of this Act. In terms of section 7 of the Act, it is mandatory also to produce to the
Registrar, at the time of registration of a company, the Articles of Association, in the case of;
(a) Public company limited by shares;
(b) Private company limited by shares;
(c) Company limited by guarantee, public or private limited; and
(d) Unlimited company, public or private limited;
(e) One person company;
The Articles of Association of a Company have to be registered with the Registrar of Companies along with
the Memorandum of Association at the time of incorporating a company.

13. Content of the Article of association:

The Articles contain the regulations for the management and internal working of a company. For example
some of the regulations that are contained in Articles are given below:---
1. Share capital and division thereof into various shares and alteration of capital.
2. Procedure for the conduct of general meetings of members.
3. Procedure for the conduct of general meetings of members.
4. Rights of members at general meetings.
5. Constitution of the Board of Directors.
6. Appointment and removal of Directors.
7. Powers of the Board.
8. Appointment of Managing Director, whole – time Director and Manager.
9. Appointment of other managerial personnel.
10. Procedure for conduct of Board meetings.
11. Transfer and transmission of securities.
12. Keeping of accounts and conducting audit.
13. Payment of dividend.
14. Common seal.
15. Variation of rights of shares.
16. Capitalization of reserves.
17. Amalgamation, merger, compromise.
18. Borrowing.
19. Investments and formation of joints ventures.
20. Issue of preference shares and debenture.
14. Distinguish between memorandum of association & articles of association

Basis of Memorandum of Association Articles of Association

difference
Nature of Memorandum is the fundamental charter of Articles are subsidiary to the charter.
documents a company. A company functions within Articles contain by-laws and rules
the limits laid down in the regarding day-to-day working of the
memorandum. company.
Scope Memorandum states the relationship Articles contain provisions for
between the company and an outsider. internal management of the company.
Objectives Memorandum defines the objects of the Articles define the rules for carrying
company. out the objects of the company.
Alteration in the Memorandum cannot be altered easily. It Articles can easily be altered without
document requires court confirmation. the confirmation of the court.
Limitations A company cannot do anything beyondthe Any act done beyond the provisions of
scope of the Memorandum. Any act the Articles will not be void as it can
beyond its scope will be void. be altered by passing a special
resolution.
Registration Registration of Memorandum is Registration of Articles is not
compulsory for any company. necessary in case of a publiccompany.
Public company may optfor Table –
A of Schedule – 1 for its
incorporation purposes.
Application of Memorandum of association is based on Articles of Association are based on
rules the doctrine of constructive notice. the doctrine of indoor management.

Provision and its Memorandum cannot contain anything Articles are subsidiary to both the
observations contrary to the provisions of the Memorandum and Companies Act.
Companies Act. Articles cannot contain anything
contrary to both.
Violation Company cannot violate the clauses of the Company may go beyond the scope
Memorandum. There is no remedy for ultra of the Articles. Outsiders may
vires acts. presume that Articles are complied
with.
Necessity This document is a must for getting a All companies are not required to
company registered. have their own Articles of
Association.
Contents the Memorandum contains, inter alia, the the Articles contain the regulations
objects for which a company is formed, concerning the relationship between
the members and the company, the
powers and functions of the directors
and all matters touching the day-to-
day working of a company.
Alteration the memorandum, comprising the the Articles, on the other hand, could
fundamental law of the company, could be freely alterable by theshareholders
be alterable only in accordance with the of a company in general meetings by
manner specifically prescribed in the Act, special resolutions.
 15. Format of articles:
Pursuant to the provisions in section 5(2), model sets of Articles have been incorporated in Schedule 1, Tables
F to J for different types of companies are as under:
Table F – For a company limited by shares --- public, private or OPC
Table G ---For a company limited by guarantee and having share capital --- public, private or OPC.
Table H --- For a company limited by guarantee not having share capital --- public, private or OPC.
Table I --- For unlimited company having share capital --- public, private or OPC.
Table J --- For unlimited company not having share capital --- public, private or OPC.

16. Alteration of the Memorandum

Section 13 of the Companies Act, 2013 provides the provisions that deal with the alteration of the
memorandum. The provision says that:
(a) Alteration by special resolution: Company may alter the provisions of its memorandum with the
approval of the members by a special resolution
(b) Name change of the company: Any change in the name of a company shall be effected only with the
approval of the Central Government in writing:
(c) Entry in register of companies: On any change in the name of a company, the Registrar shall enter
the new name in the register of companies in place of the old name and issue a fresh certificate of
incorporation with the new name and the change in the name shall be complete and effective
only on the issue of such a certificate.
(d) Change in the registered office: The alteration of the memorandum relating to the place of the registered
office from one State to another shall not have any effect unless it is approved by the Central Government
on an application in such form and manner as may be prescribed.
(e) Dispose of the application of change of place of the registered office: The Central Government shall
dispose of the application of change of place of the registered office within a period of sixty days.
(f) Filing of the certified copy of the order with the registrar of the states:
(g) Issue of fresh certificate of incorporation:
(h) Change in the object of the company: A company, which has raised money from public through
prospectus and still has any unutilised amount out of the money so raised, shall not change its objects for
which it raised the money through prospectus unless a special resolution is passed
(i) Registrar to certify the registration on the alteration of the objects: The Registrar shall register any
alteration of the memorandum with respect to the objects of the company and certify the
registration within a period of thirty days from the date of filing of the special resolution.
(j) Alteration to be registered: No alteration made under this Section shall have any effect until it has
been registered in accordance with the provisions of this Section.
(k) Only member have a right to participate in the divisible profits of the company: Any alteration of
the memorandum, in the case of a company limited by guarantee and not having a share capital, intending
to give any person a right to participate in the divisible profits of the company otherwise than as a member,
shall be void.
 17. Alteration of articles.—
(1) Subject to the provisions of this Act and the conditions contained in its memorandum, if any, a company
may, by a special resolution, alter its articles including alterations having the effect of conversion of—
(a) a private company into a public company; or
(b) a public company into a private company:
(2) Every alteration of the articles under this section and a copy of the order of the Tribunal approving the
alteration as per sub-section (1) shall be filed with the Registrar, together with a printed copy of the
altered articles, within a period of fifteen days in such manner as may be prescribed, who shall register the
same.
(3) Any alteration of the articles registered under sub-section (2) shall, subject to the provisions of this Act,
be valid as if it were originally in the articles.

18. Doctrines of constructive notice

In consequences of the registration of the memorandum and articles of association of the company with the
Registrar of Companies, a person dealing with the company is deemed to have constructive notice of their
contents. It protect the company from outsiders.
Case law relating to doctrine of constructive notice
(a) Knowledge of irregularity: Where a person dealing with a company has actual or constructive notice of
the irregularity as regards internal management, he cannot claim the benefit under the rule of indoor
management.
(b) Negligence: Where a person dealing with a company could discover the irregularity if he had made proper
inquiries, he cannot claim the benefit of the rule of indoor management. The protection of the rule is also
not available where the circumstances surrounding the contract- are so suspicious as to invite inquiry, and
the outsider dealing with the company does not make proper inquiry
(c) Act void abinitio and forgery: Where the acts done in the name of a company are void abinitio, the doctrine
of indoor management does not apply. The doctrine applies only to irregularities that otherwise might affect
a genuine transaction. It does not apply to a forgery. A Company can never he held liable
for forgeries committed by its officers.
(d) Acts outside 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.

19. Doctrine of Indoor Management

The aforesaid doctrine of constructive notice does in no sense mean that outsiders are deemed to have
notice of the internal affairs of the company. It protects the outsiders and it is opposite of Doctrine of
Constructive notice.
For example, the directors of the Royal British Bank Ltd. (R.B.B) gave a bond to T. The articles empowered
the directors to issue such bonds under the authority of a proper resolution. In fact, no such resolution was
passed. Notwithstanding that, it was held that T could sue on the bonds on the ground that he was entitled to
assume that the resolution had been duly passed. This is the doctrine of indoor management, which is the only
limitation to the doctrine of constructive notice discussed above.
Exceptions to Doctrine of Indoor Management:
1. Void Acts: The rule of indoor management does not extent to transactions which are illegal and void
ab initio and which involve forgery.
2. Knowledge of Irregularity: The rule does not apply where the outsiders have notice, actual or
constructive, that the Directors have not the authority to enter into the transactions. In such case, the
outsider cannot seek protection under the rule of indoor management.
3. Lack of Authority: The doctrine of indoor management does not apply if an agent of a company makes
a contract with a third party and if the act of the agent falls outside the ordinary authority of the agent
4. No knowledge of the Articles: The rule of indoor management does not protect a person who did not
consult the memorandum and the articles and thus did not rely on them before entering into thetransaction.
5. Negligence: The rule of management does not protect a person who behaves negligently. Thus when a
director of a company does something which is not ordinarily within his powers, the person dealing with
him must make enquiries and satisfy himself as to the Director‘s authority. If he fails to make such enquiry,
he is stopped from relying on the rule of indoor management.

20. The doctrine of 'ultra vires' and its effect:

The powers of a company are derived from the statute constituting it and the Memorandum of Association.
Any act beyond such powers will be invalid and ineffective even if it is unanimously agreed by all the
members of the company. This rule is commonly known as ―doctrine of ultra vires‖. The word
―ultra‖ means beyond and the word ―vires‖ means the powers. The words ―ultra vires‖ therefore means
beyond the powers. With reference to the Companies Act it means beyond the powers of the company
and the objects of the doctrine, as explained by Lord Justice. Cairns in Ashbury Rly. Carriage & Iron Company
v. Riche are as follows:
1. To protect investors of the company so that they may know the objects in which their money is to be
employed; and
2. To protect the creditors by ensuring that the company funds, to which they must look for payment,
are not wasted in unauthorized activities.
Effects of ultra vires transactions:
1. Void ab initio: The ultra vires acts are void ab initio. The company cannot sue or be sued upon it. In other
words, the company is not bound by such acts.
2. Injuction: Even a single member can get an order or Injuction from the court restraining the company
from doing the ultra vires act.
3. Personal Liability of Directors: If the capital of the company is diverted into objects or purposes which
are not contained in the Memorandum, the Directors will be personally liable to replace it because it is the
duty of the directors to ensure that the corporate capital is used for the legitimate business of the company.
4. Acquisition of Property: When the company‘s fund is invested, ultra vires, to acquire some property,
the company‘s right over such property is held to be secured because the property represents the
money of the company.
5. Personal Liability of Directors to third party: In respect of ultra vires transactions, directors and other
officers shall be personally accountable to third parties.
 21. How can the name, object & registered office of a company be altered?
The different clauses of the memorandum can be altered according to the procedure and mode laid down
in the Companies Act, by passing an ordinary or special resolution. Under certain circumstances, the
approval of the Government is necessary to alter the memorandum.
(1) Alteration of name clause: A company can change its name in the following ways:
a. By a special resolution at a general meeting with the written approval of the Central Government
b. If the name registered by it is identical to the name of an existing company, the registered name
can be changed by passing an ordinary resolution and by obtaining a written consent of theCentral
Government.

(2) Alteration of registered office: A company may change its registered office: (a) within the same
city; (b) one city to another city within the same State, and (c) from one State to another.
a. If the registered office is to be shifted from one locality to another within the same city, an
ordinary resolution will be sufficient.
b. If the registered office is to be shifted from one city to another city within the same State – a
special resolution is required.
c. If the registered office is to be shifted from one State to Another State – a special resolution as
well as sanction of the court is required.

(3) Alteration of the object clause: The object clause cannot be altered as a routine affair. The object clause
of a company may be changed by passing a special resolution and by obtaining the sanction of the court
on the following grounds:
a. To carry on its business more economically or efficiently;
b. To enlarge the area of its operations;
c. To attain its main purpose by new or improved means;
d. To sell the whole or part of the company‘s property;
e. To amalgamate with any other company;
f. To restrict any of the objects specified in the memorandum.

(4) Alteration of capital clause: A limited company, having a share capital, may alter its capital clauseby
passing an ordinary resolution in the general meeting for the following purposes: (i) increasing its share
capital; (ii) consolidating and dividing its capital into shares of larger amounts; (iii) converting its fully
paid up shares into stock; (iv) reconverting stock into fully paid up shares; (v) sub-dividing its shares
into shares of smaller amounts.
But for the deduction of share capital, a special resolution and confirmation by the court are necessary.

(5) Alteration of liability clause: The liability clause cannot be changed so as to make the liability ofthe
members unlimited. However, if the members of a public limited company are reduced to below seven,
the liability of the members automatically becomes unlimited. Liability of the Directors and Managing
Director may be made unlimited by altering the articles of associations.
 22. Prospectus
A prospectus is an essential disclosure document that a company has to issue at the time of issuing
investment securities to the public

23. Contents of Prospectus

As contained in Rule 3 of the Companies (Prospectus & Allotment of Securities) Rules, 2014, the contents
of prospectus will be as follows:
a) Names, addresses and contract details of the corporate office of the issuer company, compliance
officer to the issuer company, merchant bankers and co – managers to the issue, registrar to the issue,
bankers to the issue, stock brokers to the issue, credit rating agency for the issue, names and addresses
of such other persons as may be specified by the SEBI in its regulations.
b) The dates relating to opening and closing of the issue;
c) A declaration which shall be made by the Board or the Committee authorised by the Board in the
prospectus that the allotment letters shall be issued or application money shall be refunded within fifteen
days from the closer of the issue or such lesser time as may be specified by SEBI or else the application
money shall be refunded to the applicant forthwith, failing which interest shall be due to be paid to the
applicants at the rate of 15% percent per annum for the period of delay;
d) A statement given by the Board that all monies received out of the issue shall be transferred to a separate
bank account maintained with a Scheduled Bank;
e) The details of all utilised and unutilized monies out of the monies collected in the previous issue made
by way of public offer shall be disclosed and continued to be disclosed in the balance sheet till the
time any part of the proceeds of such previous issue remains unutilized indicating the purpose for which
such monies have been utilised, and the securities or other forms of financial assets in which such
unutilized monies have been invested;
f) The names, addresses, telephone numbers, fax numbers and e – mail addresses of the underwriters and
the amount underwritten by them;
g) The consent of trustees, solicitors or advocates, merchant bankers to the issue, registrar to the issue,
lenders and experts.

24. Shelf prospectus [Section 31]

Shelf Prospectus means a prospectus in respect of which the securities or class of securities included
therein are issued for subscription in one or more issues over a certain period without theissue of a
further prospectus.
In simple terms Shelf Prospectus is a single prospectus for multiple public issue. Issuer is permittedto
offer and sell securities to the public without a separate prospectus for each act of offering for a
certain period.

25. Red herring prospectus

Red herring Prospectus means a prospectus which does not include complete particulars of the
quantum or price of the securities included therein. In simple terms a red herring prospectus contains
most of the information pertaining to the company ‘s operations and prospects, but does not include key
details of the issue such as its price and the number of shares offered.
According to section 32 a company proposing to make an offer of securities may issue a red herring
prospectus prior to the issue of a prospectus. Such company proposing to issue a red herring prospectus
shall file it with the Registrar at least three days prior to the opening of the subscriptionlist and the
offer.

26. Abridged prospectus

According to section 2(1) of the Act ―abridged prospectus‖ means a memorandum containing such
salient features of a prospectus as may be specified by the Securities and Exchange Board by making
regulations in this behalf.
Section 33 of the Act provides that no form of application for the purchase of any of the securities
of a company shall be issued unless such form is accompanied by an abridged prospectus. A copyof
the prospectus shall, on a request being made by any person before the closing of the subscription
list and the offer, be furnished to him.

27. What is statement in lieu of prospectus?

1) Who has to file?
All public companies with share capital have to issue a prospectus or a statement in lieu of prospectus.
The statement in lieu of prospectus has to be filed in case of:
a) A private company converting into a public company
b) A public company having a share capital which:
i) Does not issue prospectus on or with reference to its formation, or
ii) Issued a prospectus but has not or proceeded to allot due to failure i.e., non – receipt of
minimum subscription.
Note:
a) Such public companies shall not allot any of its shares/debentures unless atleast 3 days before first
allotment there has been delivered to the Registrar of Companies a statement in lieu of prospectus.
b) Private company need not file wither prospectus or statement in lieu of prospectus.

28. What is Misstatement in prospectus?

A prospectus shall be deemed to be ―a prospectus in which an untrue statement in included‖ if:
 It contains a statement which is misleading in the form and context in which it is included.
 There is an omission from the prospectus of any matter calculated to mislead.

29. Liability for mis-statements

Criminal Liability
As per Section 447 of the -Act any person who is found to be guilty of fraud, shall be punishable with
imprisonment for a term which shall not be less than six months but which may extend to ten years and shall
also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to
three times the amount involved in the fraud.

Civil Liability:
 Compensation for the untrue statement. (Sec. 62).
 Damages for omission.
 Multiple Choice Questions (1 Marks & 2 Marks)
(1) The first step to form a company is the process known as ____________
(a) Promotion
(b) Incorporation
(c) Subscription
(d) Application
(2) where a person persuades others to contribute capital to a proposed company before it is
incorporated . Such a person is called the _____________ of the company.
(a) Promoter
(b) Director
(c) Managing Director
(d) Shareholder
(3) Which of the following are the steps in formation of a Company:
(a) Filing of the documents:
(b) Registration of the documents:
(c) Issue of certificate of incorporation & issue of corporate identity number
(d) All of the above
(4) A promoter stands as __________to the company which he promoters and to those persons
whom he induces to become shareholders in the company which he promotes.
(a) fiduciary position
(b) Agent
(c) Trustee
(d) Owner
(5) Which of the following are the functions of Promoter?
(a) Selects the line of business of a proposed company.
(b) Studies the future possibilities of the business of the proposed company.
(c) Decides the name of the company,
(d) All of the above
(6) Certificate issued by the registrar after a company is registered is called the ____________
(a) Certificate of Incorporation
(b) Certificate of Commencement of Business
(c) Articles of Association
(d) Memorandum of Association
(7) A public company cannot start the business without having a ‗ ____________ 'from the Registrar.
(a) Certificate of Incorporation
(b) Certificate of Commencement of Business
(c) Articles of Association
(d) Memorandum of Association
(8) A ___________ cannot commence business until a certificate of commencement of business is
obtained.
(a) Public Company
(b) Private company
(c) Company having no share capital
(d) All of the above
(9) is a document, on the basis of which a company is formed. It contains the objects for
which a company is formed and identifies the possible scope of its operation.
(a) Articles of Association
(b) Memorandum of Association
(c) Prospectus
(d) Certificate of Incorporation,
(10) The ___________ is the second most important document containing the rules and regulations for
internal management of the company.
(a) Articles of Association
(b) Memorandum of Association
(c) Prospectus
(d) Certificate of Incorporation,
(11) Which of the following are the Contents of the memorandum?
(a) Name of the company
(b) The State in which the registered office of the company is to be situated.
(c) Objects for which the company is proposed
(d) All of the above
(12) is format of Memorandum for a company limited by shares.
(a) Table A
(b) Table B
(c) Table C
(d) Table D
(13) Which of the following are the Content of the Article of association?
(a) Share capital and division thereof
(b) Procedure for the conduct of general meetings of members.
(c) Rights of members at general meetings.
(d) All of the above
(14) is format of Articles of association for a company limited by shares.
(a) Table F
(b) Table G
(c) Table H
(d) Table J
(15) Any change in the name of a company shall be effected only with the approval of the
(a) Central Government
(b) Tribunal
(c) State Government
(d) Shareholders
(16) A person dealing with the company is deemed to have constructive notice of their contents. This
is called ___________
(a) Doctrines of constructive notice
(b) Doctrine of Indoor Management
(c) doctrine of ultra vires
(d) None of the above
(17) Outsiders are deemed to have no notice of the internal affairs of the company. This is called
(a) Doctrines of constructive notice
(b) Doctrine of Indoor Management
(c) doctrine of ultra vires
(d) None of the above
(18) is the limitation to the doctrine of constructive notice
(a) Doctrine of indoor management
(b) doctrine of ultra vires
(c) Both
(d) None of the above
(19) Which of the following are the exceptions to Doctrine of Indoor Management:
(a) Knowledge of Irregularity:
(b) No knowledge of the Articles:
(c) Negligence
(20) The powers of a company are derived from the statute constituting it and the Memorandum of
Association. Any act beyond powers will be invalid and ineffective even if it is unanimously agreed
by all the members of the company. This rule is commonly known as
(a) Doctrines of constructive notice
(b) Doctrine of Indoor Management
(c) Doctrine of ultra vires
(d) None of the above
(21) The registered office may be shifted from one locality to another within the same city by passing
(a) ordinary resolution
(b) special resolution
(c) a special resolution as well as sanction of the court
(d) a special resolution as well as approval from the central Government
(22) The object clause of a company may be changed by passing a
(a) ordinary resolution
(b) special resolution
(c) a special resolution as well as sanction of the court
(d) a special resolution as well as approval from the central Government
(23) A company can change its name by passing
(a) ordinary resolution
(b) special resolution
(c) a special resolution as well as sanction of the court
(d) a special resolution as well as written approval from the central Government
(24) For the deduction of share capital, are necessary.
(a) ordinary resolution
(b) special resolution
(c) a special resolution as well as sanction of the court
(d) a special resolution as well as written approval from the central Government
(25) A limited company, having a share capital, may increase its share capital by passing
(a) ordinary resolution
(b) special resolution
(c) a special resolution as well as sanction of the court
(d) a special resolution as well as written approval from the central Government
(26) If the members of a public limited company are reduced to below , the liability of the
members automatically becomes unlimited.
(a) Seven
(b) Two
(c) Ten
(d) Three
(27) refers to an information booklet or offer document on the basis of which an
investor invests in the securities of an issuer company.
(a) Prospectus
(b) Articles of Association
(c) Memorandum of Association
(d) Certificate of Incorporation
(28) The contents of prospectus will be as follows:
(a) Names, addresses and contract details of the corporate office of the issuer company,
(b) The dates relating to opening and closing of the issue;
(c) The names, addresses, telephone numbers, fax numbers and e – mail addresses of the underwriters
(29) means a prospectus in respect of which the securities or class of securities included
therein are issued for subscription in one or more issues over a certain period without the issue of
a further prospectus
(a) Shelf Prospectus
(b) Red herring prospectus
(c) Abridged prospectus
(d) statement in lieu of prospectus
(30) is a single prospectus for multiple public issue
(a) Shelf Prospectus
(b) Red herring prospectus
(c) Abridged prospectus
(d) statement in lieu of prospectus
(31) Issuer of is permitted to offer and sell securities to the public without a separate
prospectus for each act of offering for a certain period.
(a) Shelf Prospectus
(b) Red herring prospectus
(c) Abridged prospectus
(d) statement in lieu of prospectus
(32) means a prospectus which does not include complete particulars of the quantum or
price of the securities included therein.
(a) Shelf Prospectus
(b) Red herring prospectus
(c) Abridged prospectus
(d) statement in lieu of prospectus
(33) A contains most of the information pertaining to the company ‘s operations and prospects,
but does not include key details of the issue such as its price and the number of shares offered.
(a) Shelf Prospectus
(b) Red herring prospectus
(c) Abridged prospectus
(d) statement in lieu of prospectus
(34) According to section 32 a company proposing to make an offer of securities may issue a
prior to the issue of a prospectus
(a) Shelf Prospectus
(b) Red herring prospectus
(c) Abridged prospectus
(d) statement in lieu of prospectus
(35) A company proposing to issue a red herring prospectus shall file it with the Registrar at least
prior to the opening of the subscription list and the offer.
(a) 3 days
(b) 15 Days
(c) 14 Days
(d) 21 Days
(36) According to section 2(1) of the Act ― ‖ means a memorandum containing such salient
features of a prospectus as may be specified by the SEBI by making regulations in this behalf.
(a) Shelf Prospectus
(b) Red herring prospectus
(c) Abridged prospectus
(d) statement in lieu of prospectus
(37) What is Misstatement in prospectus?
(a) a prospectus in which an untrue statement in included
(b) Does not issue prospectus on or with reference to its formation
(c) non – receipt of minimum subscription.
(d) which does not include complete particulars of the quantum or price of the securities
(38) As per Section 447 of the Act any person who is found to be guilty of fraud of Misstatement in
prospectus, shall be punishable with imprisonment for a term not less than
(a) One Month
(b) Six month
(c) 12 Month
(d) 3 Month
(39) Prospectus has been defined under section
(a) 2(70)
(b) 2 (69)
(c) 2 (71)
(d) 2 (72)
(40) Liability of the Directors and Managing Director may be made unlimited by altering the
(a) Articles of associations
(b) Memorandum of Association
(c) Both
(d) Can't be altered
(41) ultra vires acts are
(a) void ab initio
(b) Void
(c) Voidable
(d) Valid
(42) Which of the following statement are true about Memorandum of Association
(a) Memorandum is the fundamental charter of a company
(b) Memorandum states the relationship between the company and an outsider
(c) Memorandum defines the objects of the company
(d) All of the above
(43) Which of the following statement are true about Articles of Association
(a) Articles are subsidiary to the charter.
(b) Articles contain provisions for internal management of the company.
(c) Articles define the rules for carrying out the objects of the company.
(d) All of the above
(44) is the fundamental charter of a company
(a) Articles of Association
(b) Memorandum of Association
(c) Prospectus
(d) Certificate of Incorporation,
(45) Memorandum of association is based on the
(a) Doctrines of constructive notice
(b) Doctrine of Indoor Management
(c) Doctrine of ultra vires
(d) None of the above
 CHAPTER 3: COMPANY ADMINISTRATION
Director ( Concept and Definition), DIN, Qualification, Disqualification, Appointment, Position, Rights, Duties,
Power, Resignation, Liabilities, Removal and Resignation of director. Key Managerial Personnel ( Definition,
Appointment and Qualifications) – Managing Director, Whole time Directors, the Companies Secretary, Chief
Financial Officer, Resident Director, Independent Director, Women director.

1. Concept of Director
The Board of directors of a company is a nucleus, selected according to the procedure prescribed in the
Act and the Articles of Association. Members of the Board of directors are known as directors, who unless
especially authorised by the Board of directors of the Company, do not possess any power of management
of the affairs of the company. Acting collectively as a Board of directors, they can exercise all the powers of
the company except those, which are prescribed by the Act to be specifically exercised by the company in
general meeting.
The directors of a company are its eyes, ears, brain, hands, nerves and other essential limbs, upon whose
efficient functioning depends the success of the company. The directors formulate policies and establish
organisational set up for implementing those policies and to achieve the objectives as contained in the
Memorandum, muster resources for achieving the company objectives and control, guide, direct and manage
the affairs of the company.

2. Definition of Director
The Companies Act, 2013 does not contain an exhaustive definition of the term ―director‖. Section 2 (34) of
the Act prescribed that ―director‖ means a director appointed to the Board of a company. A director is a
person appointed to perform the duties and functions of director of a company in accordance with the
provisions of the Companies Act, 2013.

3. Position of Director
The position that the directors occupy in a corporate enterprise is not easy to explain. They are professional
men hired by the company to direct its affairs. Yet they are not the servants of the company. They are rather
the officers of the company. 'A director is not a servant of any master. He cannot be described as a servant
of the company or of anyone‘. 'A director is in fact a director or controller of the company‘s affairs‘. A
director may, however, work as an employee in a different capacity.
The senior management positions mainly consist of manager, whole time director or as a managing director.
These occupy the prominent position in the decision making of the company.
But, whether a person is to be regarded as a manager, whole time director or as a managing director of the
company would depend on the nature and extent of the duties entrusted to him and that the designation
under which the appointment is made would not make any difference in this regard. The duties assigned
are the main things behind the position. The Companies Act, 2013 has detailed provisions with regard to
these key managerial personnel.

4. Company to have Board of Directors (Section 149)

This section provides for the provisions for companies to have a duly constituted Board of Directors. According
to this section: According to section 149 (1) of the Companies Act, 2013, every company shall have a Board
of Directors consisting of individuals as directors.
Maximum number of directors:
(a) Maximum number of Directors are 15.
(b) If the company wants to appoint more than 15 directors, it can do so after passing a special resolution.
(c) the limit of maximum of 15 directors and their increase in limit by special resolution shall not apply to
Government Company.

5. Women director

 A new Company incorporated under Companies Act, 2013 shall comply with this provision within 6
months from the date of incorporation
 Company existing on or before the date of commencement of this Act shall within one year from
such commencement comply with this requirement
 Any intermittent vacancy shall be filled by the Board at the earliest but not later than immediate next
Board meeting or 3 months from the date of such vacancy, whichever is later
 The paid up share capital or turnover as on the last date of latest audited financial statements shall be
taken into account

6. Resident Director
Every company shall have at least one director who has stayed in India for a total period of not less than
182 days in the previous calendar year. [Section 149 (3)]
 7. Definition of an Independent Director – Section 149 (6)
An independent director means a director other than a managing director or a whole-time director or a
nominee director who does not have any material or pecuniary relationship with the company.

8. Numbers of Independent Director

 In case a company covered under this rule is required to appoint a higher number of independent directors
due to composition of its audit committee, such higher number of independent directors shall be applicable
to it.
 Every company existing on or before the date of commencement of this Act shall, within one year from
such commencement or from the date of notification of the rules in this regard as may be applicable, comply
with the requirements of the provisions of section 149(4)

9. Eligibility of Independent Directors Section 149(6); Rule 5

• Director other than Managing Director, Nominee Director, Whole-time Director
• Person of integrity or possessing relevant expertise and experience
• Who is or was not a promoter of the company, holding, subsidiary or associate company
• Who is not related to the promoter or director in the company, its holding, subsidiary or associate
company • Who has or had no pecuniary relationship with the company, its holding, subsidiary or
associate company,
• None of whose relatives has or had pecuniary relationship or transaction with the company,

• Who or his relative is or has not been holding the position of KMP or been an employee of the company
• Who or his relative does not hold together 2% or more of the total voting power of the company
• Who possess skills, experience and knowledge in one or more fields of finance, law, management, sales
, marketing, administration, research, corporate governance, technical operations or other disciplines
related to the company‘s business
 [Link] Identification Number (DIN).
Application for allotment of Director Identification Number.
Section 153. Every individual intending to be appointed as director of a company shall make an application
for allotment of Director Identification Number to the Central Government in such form and manner and along
with such fees as may be prescribed.

Allotment of Director Identification Number.

Section 154. The Central Government shall, within one month from the receipt of the application under section
153, allot a Director Identification Number to an applicant in such manner as may be prescribed.

Prohibition to obtain more than one Director Identification Number.

Section 155. No individual, who has already been allotted a Director Identification Number under section 154,
shall apply for, obtain or possess another Director Identification Number.

Director to intimate Director Identification Number.

Section 156. Every existing director shall, within one month of the receipt of Director Identification Number
from the Central Government, intimate his Director Identification Number to the company or all companies
wherein he is a director.

Company to inform Director Identification Number to Registrar.

Section 157( 1): Every company shall, within fifteen days of the receipt of intimation under section 156,
furnish the Director Identification Number of all its directors to the Registrar or any other officer or authority
as may be specified by the Central Government
Section 157( 2): If a company fails to furnish Director Identification Number under sub-section (1), before the
expiry of the period specified under section 403 with additional fee, the company shall be punishablewith
fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees

Obligation to indicate Director Identification Number.—

Section 158: Every person or company, while furnishing any return, information or particulars as are required
to be furnished under this Act, shall mention the Director Identification Number in such return, information or
particulars in case such return, information or particulars relate to the director or contain any reference of any
director.

Punishment for contravention.—

Section 159: If any individual or director of a company, contravenes any of the provisions of section 152,
section 155 and section 156, such individual or director of the company shall be punishable with imprisonment
for a term which may extend to six months or with fine which may extend to fifty thousand rupees and where
the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every
day after the first during which the contravention continues.
 [Link] of Director:
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 beappointed as a
Director. The Companies Act does not prescribe any qualifications for Directors of any company.

[Link] for appointment of director

Section 164 (1) A person shall not be eligible for appointment as a director of a company, if —
(a) he is of unsound mind and stands so declared by a competent court;
(b) he is an undischarged insolvent;
(c) he has applied to be adjudicated as an insolvent and his application is pending;
(d) he has been 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 and a period of five years has
not elapsed from the date of expiry of the sentence. If a person has been convicted of any offence and
sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible
to be appointed as a director in any company;
(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the
order is in force;
(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly
with others, and six months have elapsed from the last day fixed for the payment of the call;
(g) he has been convicted of the offence dealing with related party transactions under section 188 at any
time during the last preceding five years; or
(h) he has not got the DIN.
An additional disqualification is provided in sub section (2) of Section 164 relating to consequences of non
filing of financial statements or annual returns. Any person who is or has been of any company which has not
filed any financial statements and Annual Return for 3 continuous financial year or has defaulted in payment
of debentures/deposit/dividend etc, shall also not be eligible for appointment as director of any public company
and for reappointment in the same company for a period of five years from the date on which the said company
fails to do so.

[Link] 151: Appointment of director elected by small shareholders.—

A listed company may have one director elected by such small shareholders in such manner and with such
terms and conditions as may be prescribed.
Explanation.—For the purposes of this section ―small shareholders‖ means a shareholder holding shares of
nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.
 [Link] of directors – section 152
First Director
 The first directors of most of the companies are named in their articles. If they are not so named in the
articles of a company, then subscribers to the memorandum who are individuals shall be deemed to be the
first directors of the company until the directors are duly appointed.
 In the case of a One Person Company, an individual being a member shall be deemed to be its first
director until the director(s) are duly appointed by the member in accordance with the provisions of
Section 152.
General provisions relating to appointment of directors
Otherwise expressly provided in the Act, every Director shall be appointed by the Company in the General
meeting
(a) Every proposed Director shall have DIN
(b) Every proposed Director shall furnish DIN and a declaration that he is not disqualified to become a
Director
(c) Proposed Director shall give his consent in Form DIR-2 to hold the office as director and such consent
be filed with the Registrar in Form DIR-12 within 30 days of his appointment
(d) In the case of appointment of an independent director, an explanatory statement shall include a statement
that in the opinion of the Board, he fulfills the conditions specified in this Act for such an appointment
(e) Unless the articles otherwise provide, atleast two-third of total number of Directors of a Public Company
shall be persons whose period of office shall be liable to determination by retirement of Directors by
rotation and shall be appointed in general meeting
(f) Subject to the articles of the Company, remaining Directors shall also be appointed by Company in
general meeting
(g) At first AGM of a Public Company held next after the date of general meeting at which the first directors
are appointed and at every subsequent AGM, atleast one-third of such directors (whose officeis liable
for retirement by rotation) shall retire from office
(h) Retiring Directors shall be those who have been longest in the office since their last appointment but
as between persons who became directors on the same day, be determined by lot subject to any
agreement among themselves
(i) At Annual General Meeting, the Company may fill up the vacancy by appointing the retiring directors
or some other person
(j) If vacancy of retiring Directors is not filled-up and meeting has not expressly resolved, then meeting
shall adjourned till same day (which is not a public holiday) in next week and at same time and place
and in case of national holiday, till the next succeeding day which is not a holiday, at the same time
and place
(k) If vacancy is not filled up in adjourned meeting also, then retiring director shall be deemed to have been
re-appointed, unless in following cases:
 If at that meeting or at the previous meeting, resolution for re-appointment has been put to the
meeting and lost
 If retiring director expressed his unwillingness to be so re-appointed by way of written notice
 If he is disqualified for appointment
 [Link] modes of appointment of directors of a public limited company:
The appointment of directors may be made in the following manner:
(i) Appointment of first Directors by promoters of the company: The first Directors of the company are
usually appointed by the promoters. If it is not possible, the signatories to the Memorandum are deemed
to be the Directors, till the first Directors are elected at the first annual general meeting.
(ii) Appointment of Directors by shareholders at the annual general meeting: Subsequent appointment
of Directors is made by the shareholders at the annual general meetings. In case of a public company
and a subsidiary private company, two-thirds of the total number of Directors mustbe appointed by
the company at the annual general meeting. At every annual general meeting, one- third of the elected
Directors shall retire by rotation. The retiring Directors may be re-appointed.
(iii) Appointment of Directors by the Board of Directors]: The Board may appoint a Director as – (a) and
additional Director, (b) a casual Director, (c) an alternate Director.
(a) Additional Director: The Board of Directors can appoint an additional Director within the maximum
strength of the Board, fixed by the Articles of the company. Such an additional Director shall hold
office only up to the commencement of the next annual general meeting. As soon as the annual general
meeting starts, he ceases to be an additional Director.
(b) Casual Director: The Board may appoint a casual director when there is a casual (or short term)
vacancy amongst the Directors. A casual Director shall hold office till the joining of the original
Director. Such an appointment can be made, provided there is a provision in the Articles of
Association in this regard.
(c) Alternate Director: The Board may appoint an alternate Director to act for the original Director
during his absence for more than three months from the place of meeting. The alternative Director
vacates his office immediately on the joining of the original Director. An alternate Director is
appointed by the Board as per the provisions laid down in the Articles of Associationor by passing
a resolution at the general meeting of the company.
(iv) Appointment of Directors by the Central Government: The Central Government may appoint some
Directors for a period of not more than three years, in the case of mismanagement of company affairs.
(v) Appointment of Directors by third parties: A company may give powers to debenture-holders, banks,
financial institutions to appoint their nominees on the Board.
(vi) Appointment of Directors by proportional representation: The Articles of Association of a company
may provide for appointment of at least two-thirds of the total number of Directors on thebasis of the
principle of proportional representation. Proportional representation empowers minority shareholders to
send their representatives on the Board of Directors.
(vii) Appointment of Directors by National Company Law Tribunal: The Tribunal may appoint a new
Director in place of a misfit Director on the basis of application of the Central Government.
 [Link] of a Director
The Companies Act has not mentioned the specific qualifications for directorship. In other words, the
Companies Act does not lay down any academic or technical or share-holding qualifications for holding
the directorship. However, a Director should have the following qualifications:
(i) He must be an individual, having the capacity to contract (a firm or a body corporate cannot be appointed
as a Director);
(ii) He must be a shareholder of the company;
(iii) He has to hold a minimum qualifying amount of shares. The nominal value of qualification share
shall not exceed Rs. 5,000. He has to hold at least one share, where the nominal value exceeds Rs.
5,000.
(iv) He must not act as Director for more than fifteen public companies at a time.

[Link] for Appointment of Director [section 164]

1. A person shall not be eligible for appointment as a director of a company, if –
a) He is of unsound mind and stands so declared by a competent court;
b) He is an undischarged insolvent;
c) He is applied to be adjudicated as an insolvent and his applications is pending;
d) He has been 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 and
a period of five years has not elapsed from the date of expiry of the sentence:
Provided that if a person has been convicted of any offence and sentenced in respect thereof to
imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a
director in any company;
e) An order disqualifying him for appointment as a director has been passed by a court or
Tribunal and the order is in force;
f) He has not paid any calls in respect of any shares of the company held by him, whether
alone or jointly with others, and six months have elapsed from the last day fixed for the
payment of the call;
g) He has been convicted of the offence dealing with related party transactions under Section
188 at any time during the last preceding five years; or
h) He has not complied with sub – section (3) of Section 152.
2. No person who is or has been a director of a company which –
a) Has not filed financial statements or annual returns for any continuous period of three financial
years; or
b) Has failed to repay the deposits accepted by it or pay interest thereon or to redeem any
debentures on the due date or pay interest due thereon or pay any dividend declared and such
failure to pay or redeem continuous for one year or more, Shall be eligible to be re – appointed
as a director of that company or appointed in other company for a period of five years from
the date on which the said company fails to do so.
3. A private company may, by its articles, provide for any disqualifications for appointment as a director
 [Link] Director
 Board may appoint Additional Director at any time, if articles confers powers
 A person who fails to get appointed in a general meeting, cannot be appointed as an additional
director
 Additional Director shall hold office till next Annual General Meeting (AGM) or the last date on
which the AGM should have been held, whichever is earlier.

[Link] Vacancy
 In case of Public Company, if the office of any Director appointed by the Company in a general
meeting is vacated before his term of office expires in normal course, then such casual vacancy may
be filled by Board of Directors at Board Meeting
 Any person so appointed shall hold office only up to the date upto which the Director in whose place
he is appointed would have held office if it had not been vacated.

[Link] Director
 Board may appoint Alternate Director at any time, if articles confers powers
 The person to be appointed as an alternate director shall not hold another alternate directorship for
any other Director in the Company
 Alternate Director can only be appointed in case a Director leaves India for a period of at least three
months
 An Alternate Director to an Independent Director should also satisfy the criteria for Independent
Director
 Office of Alternate Director shall vacate, if and when the Director in whose place he has been
appointed, returns to India
 Provisions of automatic re-appointment of retiring Director shall apply to the original Director and
not to the Alternate Director.

[Link] Director
 Subject to articles, Board may appoint any person as director nominated by any institution as a
Nominee Director in pursuance of any law or agreement or by Central Government or by State
Government by virtue of its shareholding in a Government Company
 At a General Meeting of a Company, a motion shall not be moved for the appointment of two or
more persons as Directors of the Company by a single resolution, unless a resolution has first been
agreed at meeting without any vote being cast against it.
 Resolution moved in contravention of section 162(1), shall be void, whether any objection was taken
or not
 Motion for approving a person for appointment or for nominating a person for appointment shall be
treated as a motion for his appointment.
 [Link] of Directorships Section 165
 Maximum number of directorships including alternate directorships : 20
 Maximum number of public companies in which a person can be : 10
 Any person holding office as directors in companies more than the limits before the commencement
of the Act shall within a period of 1 year from such commencement: choose companies in which he
wish to continue to hold the office of Director; shall resign in other remaining Companies; intimate
the choice to each company and Registrar.
 No person shall act as Director in more than the limits: after dispatching the resignation of his office
as director or non-executive director or after expiry of one year from commencement whichever is
earlier

[Link] of Directors Section 166

 Subject to the provisions of this Act, a Director shall act in accordance with the articles of the Company
 To act in good faith in order to promote the objects of the company for the benefits of its members and
in the best interest of the company, its employees, shareholders, community and for protection of
environment
 To exercise his duties with due and reasonable care, skill and diligence and shall exercise
independent judgment
 Not to be involved in a situation in which he have direct or indirect interest which conflicts with the
interest of the company
 Not to achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives,
partners, or associates and if such director is found guilty of making any undue gain, then he shall be
liable to pay an amount equal to that gain to the Company
 Not to assign his office and any assignment, if made, shall be void If a Director of the Company
contravenes the provisions of this section such Director shall be punishable with fine of not less than
Rs. 1,00,000/- but which may extend to Rs. 5,00,000/-
 [Link] of office of Director Section 167
 The office of a Director shall become vacant if: he incurs any of the disqualifications as per section
164
 he absents himself from all the Board meetings held during a period of twelve months with or
without seeking leave of absence
 he acts in contravention of the provisions of section 184 relating to entering into contracts or
arrangements in which he is directly or indirectly interested
 he fails to disclose his interest in any contract or arrangement in which he is directly or indirectly
interested, in contravention of the provisions of section 184
 he becomes disqualified by an order of court or Tribunal
 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 even he has filed an appeal
 he is removed in pursuance of the provisions of this Act
 he, having been appointed a director by virtue of his holding any office or other employment in the
holding, subsidiary or associate company, ceases to hold such office or other employment in that
company.
 Private Company may provide additional grounds for vacation of office of director, by its Articles
 If all the Directors vacate their offices, then promoters shall appoint the required number of Directors,
or in his absence, then Central Government shall appoint directors who shall hold officetill the
directors are appointed by the company in general meeting.
 [Link] of Director Section 168, Rules 15 and 16
 A Director may resign from his office by giving notice to the Company and the Company shall intimate
to Registrar in Form DIR-12 within 30 days from receipt of notice of resignation
 The fact of the resignation shall be mentioned in the Board‘s report laid in next general meeting of the
Company
 Director shall also forward his resignation along with detailed reason for resignation to the Registrar
within 30 days of resignation in Form DIR-11
 Resignation shall take effect from the date on which the notice is received by the company or date,
specified by director in the notice, whichever is later
 Director who has resigned shall be liable for the offences occurred during his tenure even after his
resignation
 If all the directors resign from their offices or vacate their offices u/s 167 then the promoter or in his
absence, the Central Government shall appoint the required number of directors who shall holdoffice
till the directors are appointed by the company in general meeting.

[Link] of Directors Section 169

 A Company may remove a Director before the expiry of the period of his office through ordinary
resolution except Director appointed by Tribunal after giving him a reasonable opportunity of being
heard Above provision shall not apply, if Company has adopted the principle of proportional
representation
 Special notice shall be required for removal of director or appointing another person as director in
place of the Director so removed at the meeting in which he is removed
 On receipt of notice of resolution, the company shall send a copy of notice of a resolution to the
concerned director and the director whether he is a member of the company or not, shall be entitled
to be heard on the resolution at the meeting
 Where notice has been given of a resolution to remove a director, and director makes representation
to the company and requests its notification to members, the company shall:
 state the facts of the representation given by the director, in any notice of resolution given
to members
 send a copy of representation given by the director, to every member (whether before or
after receipt of the representation by the Company)
If a copy of the representation is not sent, due to insufficient time or for the company‘s default, the
representation shall be read out at the meeting but if Tribunal is satisfied that rights of making
representation are being abused by Director to secure needless publicity for defamatory matter then
there is no need to sent representation given by the Director, to any member
 A vacancy shall be filled by the Company in the meeting in which he was removed by the
appointment of another director in his place but special notice is required and the Director so appointed
shall hold office till the date upto which his predecessor would have held office if he had not been
removed
 If the vacancy is not filled under section 169(5), it may be filled as a casual vacancy .
 Director who was removed from office shall not be re-appointed as a Director by the Board of Directors
 [Link] of Directors and Key Managerial Personnel and their shareholding
Section 170 – 171, Rule 17 and 18
 Every Company shall keep at its registered office a register containing prescribed particulars of its
Directors and Key Managerial Personnel
 Particulars of Register of Directors and KMP shall include the details of securities held by each of
them in the company or its holding, subsidiary, subsidiary of company‘s holding company or associate
companies.
 A return containing the particulars of appointment of director or key managerial personnel and
changes therein, shall be filed with the Registrar in Form DIR-12 within 30 days of such appointment
or change
 Register shall be open for inspection during business hours
 Members shall have a right to take extracts therefrom and copies thereof, on a request by the
members, be provided to them free of cost within thirty days
 Register shall also be kept open for inspection at every annual general meeting of the Company and
shall be made accessible to any person attending the meeting
 In case inspection is refused or copy is not sent within thirty days then the Registrar on application
made to him, order for inspection and supply of copies required thereunder.

[Link] for non compliance of this chapter Section 172

If Company contravenes any of the provisions of this chapter for which no specific punishment is provided,
Every officer of the Company who is in default will be Fine ₹ 5,000/- to ₹ 5,00,000/-.

E forms
 Form DIR 1: Application for inclusion of name in the databank of Independent Directors
 Form DIR 2: Consent to act as a director of a company •
 Form DIR 3: Application for allotment of Director Identification Number
 Form DIR 4: Verification of applicant for application for DIN
 Form DIR 5: Application for surrender of Director Identification Number
 Form DIR 6: Intimation of change in particulars of Director to be given to the Central Government
 Form DIR 7: Verification of applicant for change in DIN particulars
 Form DIR 8: Intimation by Director
 Form DIR 9: Report by the company to Registrar
 Form DIR 10: Form of application for removal of disqualifications of Director
 Form DIR 11: Notice of resignation of a Director to the Registrar
 Form DIR 12: Particulars of appointment of Directors and Key Managerial Personnel and the
changes among them
 [Link] Managerial Personnel:
The Companies Act, 2013 has for the first time recognized the concept of Key Managerial Personnel. As
per section 2(51) ―key managerial personnel‖, in relation to a company, means—
(i) the Chief Executive Officer
(ii) the managing director or the manager;
(iii) the company secretary;
(iv) the whole-time director;
(v) the Chief Financial Officer; and
(vi) such other officer as may be prescribed.
Let us now proceed to understand how this six personnel are defined under the Act.
(a) CEO: – Chief executive officer means an officer of a company, who has been designated as such by
it,
(b) ―Managing Director‖: – means a person who is appointed as such by passing a resolution in general
meeting, or by its Board of Directors and has the substantial power of management of the affairs of the
Company.
(c) Manager means a person appointed as such who is in charge of control and direction of the Board of
Director and is entrusted with the substantial powers of management of the affairs of the Company and
it is inclusive the position of managing director or by whatever name called.
(d) Company secretary or secretary: –means a person who been qualified as such and holds a valid
qualified certificate issued by Institute of Company Secretary of India as prescribed under Company
secretaries act 1980,
(e) ―whole time director‖: – includes a director in the whole-time employment of the Company,
(f) Chief Financial officer‘: – Chief financial officer means a person appointed as the Chief financial
officer of a company,

[Link] of Companies that are required to Mandatorily require to appoint

Managerial Personnel
Following Companies are needed to appoint Key Managerial Personnel mandatorily
Listed Companies,
1. All such public companies with paid-up share capital of ₹ 10 crores should have the following:
 Chief financial officer,
 Managing Director,
 Chief Financial Officer or Manager and in their absence, a whole time director,
 Company Secretary.
2. All such Companies which are having paid up share capital of ₹ 5 crores or more shall appoint a whole
time company secretary.

[Link] Person shall act as Chairman or Managing Director at the same timer:
First proviso to section 203(1) states that an individual shall not be appointed or reappointed as the
chairperson of the company, in pursuance of the articles of the company, as well as the managing director
or Chief Executive Officer of the company at the same time after the date of commencement of this Act
unless,--
(a) the articles of the company contain provision for appointment of same person, or
(b) the company carries only a single business, or
(c) the company is engaged in multiple businesses and has appointed one or more Chief Executive Officers
for each such business as may be notified by the Central Government.

[Link] of appointment of KMP

(a) Every whole-time key managerial personnel of a company shall be appointed by means of a resolution
of the Board containing the terms and conditions of the appointment including the remuneration.
(b) A Whole-time key managerial personnel shall not hold office in more than one company except in its
subsidiary company at the same time.
(c) A key managerial personnel may become a director of any company with the permission of the Board.
(d) A company may appoint or employ a person as its managing director, if he is the managing director or
manager of one, and of not more than one, other company and such appointment or employment is made
or approved by a resolution passed at a meeting of the Board with the consent of all the directors present
at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been
given to all the directors then in India.

[Link] of KMP
If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up
by the Board at a meeting of the Board within a period of 6 months from the date of such vacancy.

[Link] for contravention:

 On Company : Fine which shall not be less than ₹ 1,00,000/- but which may extend to ₹ 5,00,000/-
 On every director and key managerial personnel of the company who is in default : Fine which
may extend to ₹ 50,000/- and where the contravention is a continuing one, with a further fine which
may extend to ₹ 1,000/- for every day after the first during which the contravention continues

Section 196 of the Companies [Link]

Act, 2013provisions regarding
provides the provision KMP
for appointment of Managing Director,
Whole-Time Director and Manager
Tenure : Appointment of Managing Director, Whole-Time Director or Manager shall not be for a term
exceeding five years at a time.
Re-appointment: The company may re-appoint them for next term before expiry of their present term but
not earlier than one year before expiry of the current term. This means, company may re-appoint them for
next term in last one year of current term.
Disqualification of managing Director, Whole-Time Director or Manager: No company shall appoint
or continue the employment of any person as managing director, whole-time director or manager who –
• is below the age of twenty-one years or has attained the age of seventy years. Provided thatappointment
of a person who has attained the age of seventy years may be made by passing a special resolution
• is an undischarged insolvent or has at any time been adjudged as an insolvent;
• has at any time suspended payment to his creditors or makes, or has at any time made, a composition
with them; or
• has at any time been convicted by a court of an offence and sentenced for a period of more than six
months.
 Multiple Choice Questions (1 Marks & 2 Marks)
(1) Director is defined under Section ____________
(a) 2 (34)
(b) 2 (32)
(c) 2 (33)
(d) 2 (35)
(2) A__________ is a person appointed to perform the duties and functions of a company in
accordance with the provisions of the Companies Act, 2013.
(a) Director
(b) Promoter
(c) Manager
(d) Secretary
(3) The Directors of the company are __________ of the company.
(a) servants
(b) officers
(c) key managerial personnel.
(d) All of the above
(4) Minimum number of Directors of a public company are ________
(a) Three
(b) Two
(c) One
(d) Five
(5) Minimum number of Directors of a Private company are ________
(a) Three
(b) Two
(c) One
(d) Five
(6) Minimum number of Directors of a one person company is ________
(a) Three
(b) Two
(c) One
(d) Five
(7) Maximum number of Directors are ______
(a) 15
(b) 20
(c) 10
(d) 7
(8) If the company wants to appoint more than 15 directors, it can do so after passing a _______
(a) Special resolution
(b) Ordinary Resolution
(c) Resolution with a notice
(d) None of the above
(9) The limit of maximum of 15 directors and their increase in limit by special resolution shall not
apply to _________
(a) Government Company
(b) Private company
(c) Public Company
(d) One Person Company
(10) There must be at least _______woman director in a listed company & Public company having
paid up capital of ₹ 100 crores & More or turnover of ₹ 300 crores or more.
(a) Three
(b) Two
(c) One
(d) Five
(11) There must be at least one woman director in a listed company & Public company having paid
up capital of ________& More or turnover of__________or more.
(a) ₹ 100 crores, 300 crores
(b) ₹ 200 crores, 500 crores
(c) ₹ 300 crores, 700 crores
(d) ₹ 500 crores, 900 crores
(12) According to Section 149 (3) Every company shall have at least one director who has stayed in India
for a total period of not less than 182 days in the previous calendar year. This Director is called
_________
(a) Resident Director
(b) Whole time Directors
(c) Managing Director,
(d) Independent Director,
(13) According to Section 149 (3), Every company shall have at least _______ resident director.
(a) Three
(b) Two
(c) One
(d) Five
(14) According to Section 149 (3) Every company shall have at least one director who has stayed in
India for a total period of not less than _________ in the previous calendar year.
(a) 182 days
(b) 180 Days
(c) 181 Days
(d) 183 Days
(15) An _________means a director other than a managing director or a whole-time director or a
nominee director who does not have any material or pecuniary relationship with the company.
(a) Resident Director
(b) Whole time Directors
(c) Managing Director,
(d) Independent Director,
(16) A listed company should at least _______ of the total Directors as Independent Directors.
(a) One third
(b) One Half
(c) Two third
(d) One Fifth
(17) There must be at least ________ Independent director in a public company having paid up
capital of 10 crores & More or turnover of ₹ 100 crores or more.
(a) Three
(b) Two
(c) One
(d) Five
(18) There must be at least one Independent director in a public company having paid up capital of ₹
______ & More or turnover of ₹ ___________ or more.
(a) ₹ 10 crores, 100 crores
(b) ₹ 20 crores, 200 crores
(c) ₹ 30 crores, 300 crores
(d) ₹ 50 crores, 500 crores
(19) Which of the following are the conditions for becoming an Independent Director:
(a) Director other than Managing Director, Nominee Director, Whole-time Director
(b) Who is or was not a promoter of the company
(c) Who has or had no pecuniary relationship with the company
(d) All of the above
(20) Which of the following are Eligible for Independent Directors
(a) a promoter of the company,
(b) Who has or had pecuniary relationship with the company
(c) Who is related to the promoter or director in the company
(d) Director other than Managing Director, Nominee Director, Whole-time Director
(21) Under Section 153, Every individual intending to be appointed as director of a company shall
make an application for allotment of Director Identification Number (DIN) to the _______
(a) Central Government
(b) State Government
(c) Court
(d) Tribunal
(22) Under Section 154. The Central Government shall, within _________from the receipt of the
application under section 153, allot a Director Identification Number (DIN)
(a) One Month
(b) Two Month
(c) Three Month
(d) Six Month
(23) Who Can apply for Director Identification Number (DIN)
(a) Only Individual
(b) Company
(c) Firm
(d) All of the above
(24) Every existing director shall, within _________of the receipt of Director Identification Number from
the Central Government, intimate his Director Identification Number to the company orall
companies wherein he is a director.
(a) One Month
(b) Two Month
(c) Three Month
(d) Six Month
(25) Every company shall, within _________ of the receipt of intimation under section 156, furnish the
Director Identification Number of all its directors to the Registrar or any other officer or
authority as may be specified by the Central Government
(a) One Month
(b) Two Month
(c) Three Month
(d) 15 Days
(26) If a company fails to furnish Director Identification Number under sub-section (1), before the
expiry of the period specified under section 403 with additional fee, the company shall be
punishable with fine which shall not be less than ________ but which may extend to
_____________
(a) ₹ 25,000, ₹ 1,00,000
(b) (₹ 25,000, ₹ 50,000
(c) ₹ 50,000, ₹ 1,00,000
(d) ₹ 50,000, ₹ 2,00,000

(27) If any individual or director of a company, contravenes any of the provisions of section 152, section
155 and section 156, such individual or director of the company shall be punishablewith
imprisonment for a term which may extend to _____or with fine which may extend to
_______
(a) 6 month, ₹ 50,000
(b) 6 Month, ₹ 1,00,000
(c) 3 month, ₹ 50,000
(d) 3 Month, ₹ 1,00,000
(28) Under the Companies Act, only _________ can be appointed as a Director
(a) Only Individual
(b) Corporate
(c) association
(d) Firm
(29) Section 164 (1) A person shall not be eligible for appointment as a director of a company, if —
(a) he is of unsound mind and stands so declared by a competent court;
(b) he is an undischarged insolvent;
(c) an order disqualifying him for appointment as a director has been passed by a court or Tribunal
(d) All of the above
(30) Section 164 (1) A person shall not be eligible for appointment as a director of a company, if —
(a) he has not got the DIN.
(b) he has been convicted of the offence dealing with related party transactions
(c) he has not paid any calls in respect of any shares of the company held by him,
(d) All of the above
(31) Small shareholders‖ means a shareholder holding shares of nominal value of not more than
________or such other sum as may be prescribed.
(a) ₹ 20,000
(b) ₹ 50,000
(c) ₹ 10,000
(d) ₹ 5,000
(32) The first directors of most of the companies are named in their ________
(a) articles
(b) Memorandum
(c) Prospectus
(d) any one of the above
(33) The first directors of most of the companies are named in their articles. If they are not so
named in the articles of a company, then subscribers to the ______ who are individuals shall be
deemed to be the first directors of the company until the directors are duly appointed.
(a) articles
(b) Memorandum
(c) Prospectus
(d) any one of the above
(34) In the case of a ________ , an individual being a member shall be deemed to be its first director
until the director(s) are duly appointed by the member in accordance with the provisions of
Section 152.
(a) One Person Company
(b) Public company
(c) Private company
(d) Government company
(35) General provisions relating to appointment of directors are as follows:
(a) Every proposed Director shall have DIN
(b) Every proposed Director shall furnish DIN and a declaration that he is not disqualified to become
a Director
(c) Proposed Director shall give his consent in Form DIR-2
(d) All of the above
(36) The first Directors of the company are usually appointed by the______
(a) Promoters
(b) Shareholders
(c) Government
(d) Tribunal
(37) Subsequent appointment of Directors is made by the _________ at the annual general meetings
(a) Promoters
(b) Shareholders
(c) Government
(d) Tribunal
(38) At every annual general meeting, _________ of the elected Directors shall retire by rotation.
(a) one-third
(b) Two-third
(c) Three Fourth
(d) One Fourth
(39) In case of a public company and a subsidiary private company, ________of the total number of
Directors must be appointed by the company at the annual general meeting.
(a) one-third
(b) Two-third
(c) Three Fourth
(d) One Fourth
(40) The Board of Directors can appoint a ________within the maximum strength of the Board, fixed
by the Articles of the company & Such Director shall hold office only up to the commencement of
the next annual general meeting.
(a) Additional Director:
(b) Casual Director:
(c) Alternate Director
(d) Nominee Director
(41) shall hold office only up to the commencement of the next annual general meeting.
(a) Casual Director:
(b) Alternate Director
(c) Nominee Director
(d) Additional Director:
(42) The Board may appoint _________ when there is a short term vacancy amongst the Directors
(a) Casual Director:
(b) Alternate Director
(c) Nominee Director
(d) Additional Director:
(43) The Board may appoint an _________to act for the original Director during his absence for
more than three months from the place of meeting.
(a) Casual Director:
(b) Alternate Director
(c) Nominee Director
(d) Additional Director:
(44) A __________ shall hold office till the joining of the original Director.
(a) Alternate Director
(b) Casual Director:
(c) Both
(d) None of the above
(45) The Central Government may appoint some Directors for a period of not more than
_________in the case of mismanagement of company affairs.
(a) 3 years
(b) 2 years
(c) 1 years
(d) 5 years
(46) Board may appoint any person as director nominated by any institution is called ________
(a) Casual Director:
(b) Alternate Director
(c) Nominee Director
(d) Additional Director:
(47) Maximum Number of Directorships including alternate directorships under Section 165 is___
(a) 20
(b) 10
(c) 15
(d) 25
(48) Maximum number of public companies in which a person can be Director is __
(a) 20
(b) 10
(c) 15
(d) 25
(49) Which of the following are the Duties of Directors Section 166
(a) To act in good faith in order to promote the objects of the company
(b) Not to be involved in a situation in which he have direct or indirect interest which conflicts with
the interest of the company
(c) Not to achieve or attempt to achieve any undue gain or advantage either to himself or to his
relatives
(d) All of the above
(50) The office of a Director shall become vacant if he incurs any of the disqualifications as per
section 164 are:
(a) he absents himself from all the Board meetings held during a period of twelve months
(b) he fails to disclose his interest in any contract or arrangement in which he is directly or indirectly
interested,
(c) he becomes disqualified by an order of court or Tribunal
(d) All of the above
(51) A Director may resign from his office by giving notice to the Company and the Company shall
intimate to Registrar in Form DIR-12 within _________ from receipt of notice of resignation
(a) 30 days
(b) 15 Days
(c) 21 Days
(d) 7 Days
(52) A Company may remove a Director before the expiry of the period of his office through
______except Director appointed by Tribunal after giving him a reasonable opportunity
(a) ordinary resolution
(b) Special Resolution
(c) Approval of the court
(d) Approval of the Central Government
(53) Application for inclusion of name in the databank of Independent Directors is fined in _____
(a) Form DIR 1
(b) Form DIR 2
(c) Form DIR 3
(d) Form DIR 4
(54) Which of the following are not the ―key managerial personnel‖, As per section 2(51) in
relation to a company:
(a) Managing Director
(b) Company secretary
(c) Chief executive officer
(d) Auditor
(55) Which of the following are the ―key managerial personnel‖, As per section 2(51) in relation to
a company:
(a) Chief Executive Officer (CEO)
(b) Chief Financial Officer
(c) Managing director
(d) All of the above
(56) _____________means a person who is appointed as such by passing a resolution in general
meeting, or by its Board of Directors and has the substantial power of management of the affairs
of the Company.
(a) Chief Executive Officer (CEO)
(b) Chief Financial Officer
(c) Managing director
(d) Chief Financial officer‘
(57) ________means a person appointed as such who is in charge of control and direction of the Board
of Director and is entrusted with the substantial powers of management of the affairs of the
Company and it is inclusive the position of managing director or by whatever name called.
(a) Chief Executive Officer (CEO)
(b) Chief Financial Officer
(c) Managing director
(d) Manager
(58) _______means a person who been qualified as such and holds a valid qualified certificate
issued by Institute of Company Secretary of India
(a) Chief Executive Officer (CEO)
(b) Chief Financial Officer
(c) Managing director
(d) Company secretary or secretary:
(59) All such public companies with paid-up share capital of ₹ 10 crores should have the
following:
(a) Chief financial officer,
(b) Managing Director,
(c) Company Secretary
(d) All of the above
(60) All such Companies which are having paid up share capital of _________or more shall
appoint a whole time company secretary.
(a) ₹ 5 crores
(b) ₹ 10 crores
(c) ₹ 15 crores
(d) ₹ 20 crores
(61) If the office of any whole-time key managerial personnel is vacated, the resulting vacancy
shall be filled-up by the Board at a meeting of the Board within a period of ________ from the
date of such vacancy.
(a) 6 month
(b) 1 Month
(c) 3 month
(d) 12 Month
(62) Appointment of Managing Director, Whole-Time Director or Manager shall not be for a term
exceeding _____ at a time
(a) 5 years
(b) 6 Years
(c) 3 Years
(d) 1 year
(63) No company shall appoint or continue the employment of any person as managing director,
whole-time director or manager who is below the age of _______ years or has attained the age of

(a) 21, 70
(b) 18, 70
(c) 21, 65
(d) 21, 60
 Unit 4:
SHARE CAPITAL & DEBENTURE
Share, Share Capital - Types and Definition, Allotment and Forfeiture, Calls on Shares, ESOP, Buyback, Sweat
Equity, Bonus, Right, Capital Reduction, Share Certificate, D-mat System, Transfer and Transmission,
Redemption of Preference Shares, Debenture – Definition, Types, Rules Regarding Issue of Debenture.

1. Types of share capital

Section 43 of the Act provides that the share capital of a company limited by shares shall be of two
kinds:
(A) equity share capital—
i. with voting rights; or
ii. with differ ential rights as to dividend, voting or otherwise in
accordance with such rules as may be prescribed; and
(B) preference share capital:

2. ‗‗Equity share capital‘‘,

‗‗Equity share capital‘‘, with reference to any company limited by shares, means all share capital which is
not preference share capital. As per section 43 (a) equity share capital may be divided on the basis of voting
rights and differential rights(DVR) as to dividend, voting rights or otherwise according to the rules.

3. Procedure
1. Check whether for Issue
the Articles Equity Shares
of Association With
of the Differential
company Voting
authorizes Rights
issue of equity shares with
differential rights and if not, then amend the Articles of Association of the company.
2. Hold the Board meeting to issue the notice of general meeting for issuance of equity share with
differential rights along with the explanatory statement u/s 102 of the Act with the contents which
is placed as Annexure at the end of this lesson.
3. Before issuing equity shares with differential rights as to dividend, voting or otherwise, ensure the
following:
(a) the shares with differential rights shall not exceed twenty-six percent of the total post-issue paid
up equity share capital including equity shares with differential rights issued at any point of time;
(b) the company has consistent track record of distributable profits for the last three years;
(c) the company has not defaulted in filing financial statements and annual returns for threefinancial
years immediately preceding the financial year in which it is decided to issue such shares;
(d) the company has no subsisting default in the payment of a declared dividend to its shareholders
or repayment of its matured deposits or redemption of its preference shares or debentures that
have become due for redemption or payment of interest on such deposits or debentures or payment
of dividend;
4. Preference Share Capital
The other type of share capital is the ―Preference share capital‖. According to section 55 of the Act, a
company limited by shares cannot issue any preference shares which are irredeemable. However a
company limited by shares may, if so authorised by its articles, issue preference shares which are liable
to be redeemed within a period not exceeding twenty years from the date of their issue.
With reference to any company limited by shares, Preference share capital means that part of the issued
share capital of the company which carries or would carry a preferential right with respect to—
a. payment of dividend,
b. repayment, in the case of a winding up or repayment of capital

5. Issue of shares at discount

Section 53 of the Companies Act, 2013, prohibits a company to issue shares at discount except in the case of
issue of sweat equity shares. Any shares issued by a Company at a discounted price shall be void.
Where a company contravenes the provisions of section 53, the company shall be punishable with fine which
shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer in default
shall be punishable with imprisonment for a term of which may extend to six months or with fine which shall
not be less than one lakh rupees but which may extend to five lakh rupees, or with both.

6. Issue of sweat equity share

 According to Section 2(88) of the Companies Act, 2013, sweat Equity Shares means such equity shares
issued by a company to its directors or employees at a discount or for consideration , other than cash,
for their providing know- how or making available rights in the nature of intellectual property rights or
value additions, by whatever name called.
 Sweat equity shares are different from shares issued by a company under Employee Stock Option
Scheme (ESOS) and Employee Stock Purchase Scheme (ESPS).
 an unlisted company shall not issue sweat equity shares unless the issue is authorized by a special
resolution passed by the company in general meeting.
 Validity: The special resolution authorizing the issue of sweat equity shares shall be valid for making
the allotment within a period of not more than twelve months from the date of passing of the special
resolution.
 Maximum extent of Issue: The company shall not issue sweat equity shares for more than 15%
of the existing paid up equity share capital in a year or shares of the issue value of rupees five crores,
whichever is higher. The issuance of sweat equity shares in the Company shall not exceed 25% of the
paid up equity capital of the Company at any time.
 Lock in period: Sweat equity shares issued to directors or employees shall be locked in/non
transferable for a period of three years from the date of allotment.
 Valuation: The sweat equity shares to be issued shall be valued at a price determined by a registered
valuer as the fair price giving justification for such valuation.
 Part of managerial remuneration: The amount of sweat equity shares issued shall be treated as part
of managerial remuneration for the purposes of sections 197 and 198 of the Act if the following
conditions are fulfilled: (a) the sweat equity shares are issued to any director or manager; and (b) they
are issued for consideration other than cash, which does not take the form of an asset which can be
carried to the balance sheet of the company in accordance with the applicable accounting standards.
Conditions for issuance of sweat equity shares
Section 54 provides that, a company may issue sweat equity shares of a class of shares already issued, if the
following conditions are fulfilled, namely:-
 (a) The issue is authorized by a special resolution passed by the company;
(b) the resolution specifies the number of shares, the current market price, consideration, if any, and the
class or classes of directors or employees to whom such equity shares are to be issued;
(c) Not less than one year has, at the date of such issue, elapsed since the date on which the company
had commenced business; and
(d) Where the equity shares of the company are listed on a recognized stock exchange, the sweat equity
shares are issued in accordance with the regulations made by SEBI in this behalf and if they are not
so listed, the sweat equity shares are issued in accordance with such rules made under the Chapter IV
of the Companies Act, 2013.

7. Issue of shares at a premium

When shares are issued by a company at a price above their face value (or nominal or par value) then the
shares are said to have been issued at a ‗premium‘. It is the difference between the price at which a company
issues a share and the face value of a share.
Section 52 of the Companies Act, 2013 deals with the application of premium received on issue of shares.
The securities premium account may be applied by the company—
(a) towards the issue of unissued shares of the company to the members of the company as fully paid
bonus shares;
(b) in writing off the preliminary expenses of the company;
(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares
or debentures of the company;
(d) in providing for the premium payable on the redemption of any redeemable preference shares or
of any debentures of the company; or
(e) for the buy back of shares under section 68.

8. Conditions for redemption of Preference Share

Preference shares can be redeemed under following conditions:
 Redemption can be made in any of the two procedures i.e. either out of the profits of the company
which would otherwise be available for dividend; or; out of the proceeds of a fresh issue of shares
made for the purposes of such redemption.
 Preference shares shall be redeemed only when they are fully paid up.
 In case the company proposes redemption of shares out of the profits of the company, there shall, out
of such profits, be transferred, a sum equal to the nominal amount of the shares to be redeemed, to
a reserve, to be called the Capital Redemption Reserve Account
 The capital redemption reserve account may, be applied by the company, in paying up unissued
shares of the company to be issued to members of the company as fully paid bonus shares.

9. SHARE CERTIFICATE
Every share in a company having share capital shall be distinguished by distinctive number. This section
does not apply to shares held by a person as a beneficial owner in depository.
Section 46 of the Act declares that a certificate, issued by the company under the common seal of the
company shall be prima facie evidence of the title of the person to such shares. Such certificate shall
specify the shares held by any person. Where the shares are held in dematerialised form the record of the
depository is the prima facie evidence of the interest of the beneficial owner.
Section 56 sub clauses 4 provides that every company shall, unless prohibited by any provision of law or
any order of Court, Tribunal or other authority, deliver the certificates of all securities allotted—
 within a period of two months from the date of incorporation, in the case of subscribers to the
memorandum;
Within a period of two months from the date of allotment, in the case of any allotment of any of its
shares.

10. ISSUE OF BONUS SHARE

Bonus issue refers to a further issue of shares made by a company having share capital to its existing share
holders without receipt of any consideration from the shareholders for issuance of the shares. It is an offer
of free additional shares to existing shareholders in proportion to their holdings.
The basic principle behind bonus shares is that the total number of shares increases with a constant ratio of
number of shares held to the number of shares outstanding. For instance, if Investor ‗A‘ holds 200 shares of
a company and a company declares 4:1 bonus that is for every one share, he gets 4 shares for free. That is
total 800 shares for free and his total holding will increase to 1000 shares.
Issue of bonus shares is governed by the provisions of section 63 read along with rule 14 of the Companies
(Share Capital and Debentures) Rules, 2014.

11. Sources of Bonus share

Section 63 provides that a company may issue fully paid-up bonus shares to its members, in any manner
whatsoever, out of –
(i) Its free reserves;
(ii) The securities premium account; or
(iii) The capital redemption reserve account.
No issue of bonus shares shall be made by capitalizing reserves created by the revaluation of assets. The
bonus shares shall not be issued in lieu of dividend.
Conditions for issue of Bonus Share
The following conditions must be satisfied before issuing bonus shares:
(a) It is authorized by its articles;
(b) It has, on the recommendation of the Board, been authorized in the general meeting of the company;
(c) It has not defaulted in payment of interest or principal in respect of fixed deposits or debt securities
issued by it;
(d) It has not defaulted in respect of the payment of statutory dues of the employees, such as, contribution
to provident fund, gratuity and bonus;
(e) The partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up;
(f) It complies with such conditions as may be prescribed.
Further issue of shares capital
Section 62 of the Companies Act contains provisions relating to further issue of share capital through
(a) Rights issue of shares (Section 62(1)(a)
(b) Issue of shares through Employee Stock Option (Section 62(1)(b)
(c) Issue of shares on Preferential Basis (Section 62(1)(c)
 12. Rights Issue of Shares
Section 62. (1) states that at any time, a company having a share capital proposes to increase its subscribed
capital by the issue of further shares, such shares shall be offered to persons who, at the date of the offer,
are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up
share capital on those shares by sending a letter of offer subject to the following conditions, namely:—
(a) the offer shall be made by notice specifying the number of shares offered and limiting a time not being
less than fifteen days and not exceeding thirty days from the date of the offer within which the offer,
if not accepted, shall be deemed to have been declined;
(b) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a
right exercisable by the person concerned to renounce the shares offered to him or any of them in
favour of any other person; and the notice referred to in clause (i) shall contain a statement of this
right;
(c) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from
the person to whom such notice is given that he declines to accept the shares offered, the Board of
Directors may dispose of them in such manner which is not dis-advantageous to the shareholders and
the company

13. EMPLOYEE STOCK OPTION PLAN [ESOP]

As per Section 62(1) (b) of Companies Act 2013, the Company can offer shares through employee stock
option to their employees through special resolution subject to the conditions specified under Rule 12 of
Companies (Share Capital and Debentures) Rules 2014.,
For the purposes of clause (b) of sub-section (1) of section 62 and this rule ‗‗Employee‘‘ means –
(a) A permanent employee of the company who has been working in India or outside India; or
(b) A director of the company, whether a whole time director or not but excluding an independent
director; or
(c) an employee as defined in clauses (a) or (b) of a subsidiary, in India or outside India, or of a
holding company of the company or of an associate company
But does not include –
(a) An employee who is a promoter or a person
belonging to the promoter group; or
(ii) A director who either himself or through his relative or through anybody corporate, directly or
indirectly, holds more than ten percent of the outstanding equity shares of the company.

14. ISSUE OF SHARES ON PREFERENTIAL BASIS

Section 62(1(C) of the Companies Act 2013 read with Rule 13 of Companies (Share Capital and Debentures)
Rules 2014 enables issue of shares to persons other than the existing shareholders/employees as specified in
Section 62(1)(a) and Section 62(1)(b), provided if the same is approved by special resolution and subject to
the conditions stated in the said Rule 13.
The scope of transfer of securities have been widened under section 56 of the Act to include all the securities
of the company and the interest of a member in the company in the case of a company not having no share
capital.
General Condition: The section provides that a company shall not register a transfer of securities, other than
the transfer between persons both of whose names are entered as holders of beneficial interest in the records
of a depository, unless a proper instrument of transfer, in such form as may be prescribed. Such form shall
be
 duly stamped,
 dated and executed by or on behalf of the transferor and the transferee, and
 specify the name, address and occupation, if any, of the transferee.
Time period: Aforesaid form shall be delivered to the company by the transferor or the transferee within a
period of sixty days from the date of execution, along with the certificate relating to the securities, or if no
such certificate is in existence, along with the letter of allotment of securities.
Loss of instrument: Where the instrument of transfer has been lost or the instrument of transfer has not
been delivered within the prescribed period i.e. within sixty days from date of execution, the company
may register the transfer on such terms as to indemnity as the Board may think fit.
Partly paid up Shares: The section provides that where an application is made by the transferor alone
and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of
the application, in such manner as may be prescribed, to the transferee and the transferee gives no objection
to the transfer within two weeks from the receipt of notice.

16. Transmission of shares :

On receipt of an intimation of transmission of any right to securities by operation of law from any person
to whom such right has been transmitted the company shall exercise its power to register the same. Further
the section provides that the transfer of any security or other interest of a deceased person in a company
made by his legal representative shall, even if the legal representative is not a holder thereof, be valid as
if he had been the holder at the time of the execution of the instrument of transfer.
Delivery of securities:
The Company shall deliver the certificates of all securities transferred or transmitted within a period of one
month from the date of receipt by the company of the instrument of transfer or, of the intimation of
transmission.
Further the section provides where the securities are dealt with in a depository, the company shall intimate
the details of allotment of securities to depository immediately on allotment of such securities.
Penal Provisions:
The company shall be punishable with fine which shall not be less than twenty-five thousand rupees but
which may extend to five lakh rupees and every officer of the company who is in default shall be punishable
with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.
 17. Buyback of Securities
According to Section 68(1) of Act a company whether public or private, may purchase its own shares or
other specified securities out of:
a. its free reserves; or
b. the securities premium account; or
c. the proceeds of any shares or other specified securities.
However, no buy-back of any kind of shares or other specified securities can be made out of the
proceeds of an earlier issue of the same kind of shares or same kind of other specified securities.
Thus, the company must have at the time of buy-back, sufficient balance in any one or more of these
accounts to accommodate the total value of the buy-back.
Quantum:
a. Board of directors can approve buy-back up to 10% of the total paid-up equity capital and free reserves
of the company and such buy back has to be authorized by the board by means of a resolution passed
at the meeting.
b. Shareholders by a special resolution can approve buy-back up to 25% of the total paid-up capital and
free reserves of the company. In respect of any financial year, the shareholders can approve by special
resolution upto 25% of total equity capital in that year.
c. Post buy-back debt-equity ratio: The ratio of the aggregate of secured and unsecured debts owed by
the company after buy-back is not more than twice the paid-up capital and its free reserves i.e. the
ratio shall not exceed 2:1.
d. All the shares or other specified securities for buy-back are to be fully paid-up
Time gap:
No offer of buy-back under this sub-section shall be made within a period of one year reckoned from the
date of the closure of the preceding offer of buy-back, if any.
Time limit for completion of buyback
Every buy-back shall be completed within a period of one year from the date of passing of the special
resolution, or as the case may be, the resolution passed by the Board.
Methods of buy-back
The buy-back may be—
a. from the existing shareholders or security holders on a proportionate basis;
b. from the open market;
c. by purchasing the securities issued to employees of the company pursuant to a scheme of stock
option or sweat equity

18. DEBENTURES
Section 71 of the Act enables that a company may issue debentures with an option to convert such debentures
into shares, either wholly or partly at the time of redemption. The issue of debentures with an option to
convert such debentures into shares, wholly or partly, shall be approved by a special resolution passed at a
general meeting. The section prohibits issue of debentures carrying voting rights.
 19. Redemption of Debentures:
Where debentures are issued by a company under this section, the company shall create a debenture
redemption reserve account out of the profits of the company available for payment of dividend and the
amount credited to such account shall not be utilised by the company except for the redemptionof
debentures.

20. Define debenture. How does it differ from shares?****

Under Section 2(12) debenture includes debenture stock, bonds and other securities of the company whether
constituting a charge on the assets of the company or not. Debentures are bonds issued in acknowledgement of
any indebtedness.
Thus, a debenture is an instrument which is drawn under the seal of the company; it binds the company to pay a
sum of money at a fixed time with interest.

Differences between shares & Debentures:

Basis of Difference Shares Debentures
Nature of Owned capital. Borrowed fund.
investment
Status of holders Owners. Creditors.
Reward for Dividend Interest
investment
Security of No charge on assets Generally a charge on assets
investment
Voting rights of Have voting rights Do not have voting rights.
investors
Return from Fluctuates Fixed
investment
Redemption Not redeemable Redeemable after a certain period
Risk associated High risk Low risk
with investment
Control over Elected equity shareholders control the Debenture-holders have no control over the
management affairs of the company affairs of the company

Priority on refund No priority Prior to shareholders

of capital
Restriction on issue Certain restrictions No restrictions

Convertibility Not convertible May be convertible

Charge (or Payment of dividend is an appropriation Payment of interest is a charge against

appropriation of of profit profit.
profits)
 21. Distinguish between equity share and preference share. ****
Equity shares: Equity shares, with reference to any company limited by shares, are those which are not
preference shares [Section 85(2)
Preference shares: Preference share capital means, with reference to any such company, that part of the share
capital which fulfils both the following requirements, namely: (i) as respects dividend it carries or will carry a
preferential right to be paid a fixed amount and (ii) as respects capital, it a preferential right to be repaid the
amount of the capital paid up.
ifferences between Equity shares & Preference Shares:
Basis of Difference Equity Shares Preference Shares
Rate of dividend Fluctuates with profits. Fixed rate of dividend.
Voting Rights Enjoy voting rights Do not enjoy voting rights
Degree of risk High Low
Status of investors Owners Creditors

Participation in Can participate Cannot participate

management
Nominal value of Generally low Generally high
shares
Arrears of dividend Cannot accumulate May accumulate

Convertibility of Not convertible May be convertible

shares
Redeemability of Not redeemable Redeemable
shares
Refund of capital After preference shares are paid Priority over equity shares.

Right to dividend After preference shares are paid Priority over equity shares

Appeal for Adventurous investors Conservative investors

investors
Market value of Do fluctuate Do not alter
shares

22. What are the different kinds of preference shares?****

Preference shares are those shares to which some preference is attached in terms of: (a) payment of
dividend, or (b) return of capital, or (c) both.
Types of preference shares:
Preference shares are of the following types:
(1) On the Basis of Accumulation
(a) Cumulative preference shares: Preference shares are cumulative where the preference dividend,
if not paid in one year, is carried forward to succeeding years. These shares have a right to
claim dividend for those years also for which there were no profits. The dividend goes on
cumulating unless it is otherwise paid. The holders of these shares are entitled to get first the
arrear dividend out of future profits prior to any other shareholders.
 (b) Non-cumulative preference shares: The holders of these shares have no claim for the arrears
of dividend. They are paid a dividend if there are sufficient profits. These shareholders cannot claim
arrears of dividends in subsequent years.
(2) On the Basis of Redemption
(a) Redeemable preference shares: The holders of redeemable preference shares can get back their
capital on the expiry of a certain period or at the option of the company, as may be mentioned inthe
Articles of Association. The preference shares to be redeemed must be fully paid up. The company
can redeem preference shares either out of profits or out of a fresh issue of share capital,
(b) Irredeemable preference shares: The preference shares that cannot be redeemed unless the
company is liquidated are known as irredeemable preference shares.
(3) On the Basis of Participation
(a) Participating preference shares: These shareholders are entitled to participate in the surplus profits
of the company in addition to their usual fixed rate of dividend. Thus, participating preference
shareholders obtain returns on their capital in two forms: (a) Fixed dividend, and (b) Share in the
excess profit. This is an additional attraction to popularize preference shares.
(b) Non- Participating preference shares: Preference shares on which only a fixed rate of dividend
is paid, are known as non-participating preference shares.
(4) On the Basis of Conversion
(a) Convertible preference shares: Sometimes preference shareholders may be given the right to convert
their preference shares into equity shares within a stipulated period. These preferenceshares are
known as convertible preference share.
(b) Non- Convertible preference shares: These shareholders are not given the right to convert their
preference shares into equity shares.

23. What are the different kinds of debentures? [2011]****

Classification of Debentures:
On the Basis of Security: Secured Debentures: Unsecured or "Naked" Debentures:
On the Basis of Convertibility: Convertible Debentures; Non-Convertible Debentures:
On the Basis of Permanence: Redeemable Debentures; Irredeemable Debentures
On the Basis of Negotiability: Registered Debentures; Bearer Debentures:
On the Basis of Priority: First Mortgage Debentures; Second Mortgage Debentures:
These can be discussed as below:
(a) Secured Debentures: These debentures are secured by a charge upon some or all assets of the company.
There are two types of charges: (i) Fixed charge; and (ii) Floating charge. A fixed charge is a mortgage
on specific assets. These assets cannot be sold without the consent of the debentureholders. A floating
charge generally covers all the assets including future one.
(b) Unsecured or "Naked" Debentures: These debentures are not secured by any charge upon any assets.
A company merely promises to pay interest on due dates and to repay the amount due on maturity date.
These types of debentures are very risky from the view point of investors.
(c) Convertible Debentures: These are debentures which will be converted into equity shares (either at
par or premium or discount) after a certain period of time from the date of its issue.
(d) Non-Convertible Debentures: cannot be converted into shares in future.
(e) Redeemable Debentures: These debentures are repayable as per the terms of issue
(f) Irredeemable Debentures: Not repayable during the life time of the company. These are also called
perpetual debentures. These are repaid only at the time of liquidation.
(g) Registered Debentures: These debentures are payable to a registered holder whose name, address
and particulars of holding recorded in the Register of Debentureholders. They are not easily transferable.
(h) Bearer Debentures: These debentures are transferable by delivery. These are negotiable instruments
payable to the bearer. No kind of record is kept by the company in respect of the holders of such debentures.
(i) First Mortgage Debentures: These debentures are payable first out of the property charged.
(j) Second Mortgage Debentures: These debentures are payable after satisfying the first mortgage
debentures.

24. Distinguish between 'share certificate' and 'share warrant'. [2011]****

SHARE CERTIFICATE
A share certificate is a document of title issued by the company declaring that the person named therein is
the owner of a specified number of shares in the capital of the company
SHARE WARRANT
It is a document issued under the common seal of a public company stating that its holder is entitled to
shares specified therein.
Features
a) It is a bearer document and it is transferable by mere delivery.
b) Registration of transfer is not necessary.
c) Bearer of Share Warrant need not be a member of the company.

DISTINCTION BETWEEN SHARE CERTIFICATE AND SHARE WARRANT

Basis Share certificate Share warrant
Is holder a member? Yes No
Provision in Articles Not necessary Necessary
Approval of central Not necessary Necessary
government
Who can issue? Both private & public limited Only public limited companies
companies
When can be issued? For fully as well as partly paid Only for fully paid up shares
up shares
Transfer Made by execution of Transfer By delivery
deed and delivery
Negotiability Not negotiable It is by usage similar to a negotiable
instrument
Eligibility as Eligible Not eligible
qualification share for
director
Right to present petition Possesses Does not possess such right
for winding up
 Stamp duty on transfer Payable Not Payable

Stamp duty at the time Nominal Very high

of issue
Payment of dividend Paid to holder by issue of Dividend payment is advertised. Holder
dividend warrant in favour of has to coupon attached with the warrant
the holder. and collect the dividend.
Terms of issue There is statutory obligation on A share warrant can be issued by a public
every company issuing shares company only if it is permitted to do so
to issue a share certificate by its Articles of association and has
obtained prior approval of the Central
Government.

25. What are the guidelines for issue of Bonus Shares?*

A company may issue fully paid – up bonus shares to its members, in any manner whatsoever, out of –
i. Its free reserves;
ii. The securities premium account; or
iii. The Capital Redemption Reserve Account:
Provided that no issue of bonus shares shall be made by capitalizing reserves created by the
revaluation of assets.
No company shall capitalise its profits or reserves for the purpose of issuing fully paid – up bonus shares
under sub – section (1), unless –
a) It is authorised by its articles;
b) It has, on the recommendation of the board, been authorised in the general meeting of the
company;
c) It has not defaulted in payment of interest or principal in respect of fixed deposits or debt
securities issued by it;
d) It has not defaulted in respect of the payment of statutory dues of the employees, such as,
contribution to provident fund, of gratuity and bonus;
e) The partly paid-up shares, if any outstanding on the date of allotment, are made fully
paid-up;
f) It complies with such conditions, as may be prescribed.
g) The bonus shares shall not be issued in lieu of dividend.

26. What do you mean by forfeiture of shares?*

Forfeiture means extinction of membership as a sort of penalty for the non-payment of calls on due dates.
Shares of those members of a company, who fail to pay the call money on fixed dates, can be forfeited by the
Directors of the company. The Directors can forfeit the shares only when the Articles of Association of
the company authorize them to do so. Those shareholders, whose shares are forfeited, cease to be members of
the company. The forfeited shares can be reissued, if the Board of Directors agrees to do it.
Rules for forfeiture:
1. As provided in the articles: Forfeiture shall be valid if it is in accordance with the provisions contained
in the Articles. In accordance with Regulation 29 of the Table A, shares can be forfeited
 only against non-payment of any call or installment of a call. The Articles may lawfully incorporate
any other grounds of forfeiture.
2. Proper Notice: A proper notice must be given to a member before the shares of that member are forfeited.
The notice must mention a further period of not less than 14 days from the date of thenotice on
or before which payment is to be made. The object of the notice is to give the shareholder an opportunity
for payment of the call money along with interest and expenses.
3. Resolution for forfeiture: If the member makes default in payment of the call within the specified
time as required by the notice, the Directors may pass a resolution forfeiting the shares. The forfeiture shall
be invalid in the absence of such a resolution and unless the notice of forfeiture incorporates the resolution
of forfeiture.
4. Power of forfeiture: The power of forfeiture is in the nature of trust. Therefore, it must be exercised bona
fide and in good faith for the benefit of the company.
Effects of forfeiture:
1. Cessation of membership: A person ceases to be a member in respect of the shares forfeited.
2. Cessation of liability: The liability of the person whose shares are forfeited, ceases when the company
receives payment in full of all such money in respect of the shares forfeited.
3. Liability as past member: The former holder of the forfeited shares shall remain liable as a past member
to pay calls if liquidation takes place within one year of the forfeiture.
4. Board‘s authority to re-issue: Since the forfeited shares become the property of the company after
forfeiture, those shares may be re-issued or otherwise disposed of on such terms and in such manner
as the Board of Directors thinks fit.

27. What are the SEBI guidelines for issue of Right Shares?*
Under the provisions of the Act, when shares are offered to the existing shareholders it is called the Right issue.
The issue of Right shares require the following norms to be fulfilled :
(iii) Compliance under Section 81 of the Companies Act, 1956.
(iv) Approval of Financial Institutions for Right issue.
(v) Compliance under FEMA, if applicable to the subject company.
(vi) Compliance of the Central Government/SEBI guidelines issued from time to time.
(vii) Compliance of the Stock Exchange requirements.
SEBI Guidelines on Rights Issue :
(a) Object: The Guidelines on Rights Issue will enable companies listed on a recognised stock exchange to
raise capital by issuing securities to its shareholders on a right basis
(b) Applicability of the Guidelines : The Guidelines will be applicable to all rights issue to be made by
companies listed on a recognised stock exchange after 1st July, 1995
(c) Vetting of offer documents : Rights issue which are not accompanied by public issues 3 months prior
or subsequent to the days of the rights issue will not be required to be vetted by SEBI.
(d) Prohibition of rights issue over Rs. 50 lakhs unless guidelines are complised with : A listed
company shall not make a rights issue, where the aggregate value of the securities, including premium,
if any exceeds Rs 50 lakhs, unless a category merchant Broker, holding a valid certificate of
registration issued by SEBI has been appointed to manage the issue and has submitted to the offer
document to SEBI
 (e) All listed configures desirous of making rights issue shall variably issue an advertisement prominently
is not less than Two All India newspapers about the detail of right offer.
(f) No preferential allotment may be made along with any right issue. If the issue company desires to
do so, they may do so independent of rights issue by complying with the provisions of the Companies
Act, 1956.
(g) Rights issue should not be kept open for more then 60 days.

28. What do you mean by Transfer of shares? Discuss the procedure for transfer of shares.*
Transfer refers to voluntary conveyance of rights and duties/liabilities of a member as represented in a
shares, from a shareholder who wishes to cease to be a member or decrease his number of shares held
(Transferor) to a person desirous of becoming a member or a member who desires to increase the number of
shares held (Transferee).
Section 108 provides for the following requirements to be satisfied:
1. The transfer must be on a proper instrument of transfer known as ―Share Transfer Form‖;
2. The prescribed form has been duly stamped;
3. The transfer has been executed by or on behalf of the transferor and the transferee;
4. The name, address, occupation, if any, of the transferee must have been specified;
5. The instrument of transfer is delivered along with the certificate of shares within a specified period of
time.

29. What do you mean by transmission of shares? Discuss the procedure for transmission of shares.*
It refers to transfer by operation of law.
Transmission of shares takes place when a registered shareholders dies, or is adjudicated as insolvent or if
the shareholder being a Company, goes into liquidation.
Procedure
1) Legal representative to be recognized –
Death: If joint holding, survivor; or else executor or administrator/heir;
Insolvency: Official assignee/receiver,
2) Notice to be given to the Company by legal representative;
3) Transmission is recorded by the Company on the basis of evidence showing the entitlement of the
transferee to the shares;
4) No transfer form is required/no stamp duty is required;
All the rights of the original member are transferred to the legal representative during and after transmission.

30. Distinguish between transfer of shares & transmission of shares? [2012]*

Transfer of Shares Transmission of Shares

Transfer occurs by a voluntary and deliberate Transmission occurs by operation of law.
act of the transferor.
The transferor and the transferee have to No instrument of transfer is required. Only a
execute an instrument of transfer. proof of his title to the shares is require when
the shares are transmitted on the death or
insolvency of a member.
Transfer means transfer of property in the Transmission of shares takes place only on the
shares. death or insolvency of a shareholder.
 31. What do you mean by Shares? Distinguish between Share & Stock.***
Share: Sec. 2(46)
A share is a share in the share capital of a company and includes stock except where a distinction between
stock and shares is expressed or implied. A share thus represents such proportion of the interest of the
shareholders as the amount paid – up thereon bears to the total capital payable by the company.

CIT Vs. Standard Vacuum Oil Co.

A share in a company does not mean any sum of money but an interest measured by a sum of money and made
up of diverse rights conferred on its holders by the Articles of the Company which constitute a contract between
him and the company.

Distinction between Shares & Stock

Shares Stock
It is one of the units into which the It is the aggregate of fully paid up shares of a member
capital of the company is divided. merged into one fund of equal value.
It may be partly or fully paid up. It is always fully paid up.
Public & private companies can issue It can be issued only by public company limited by shares.
shares
It can be issued originally. A company cannot make original issue of stock. Only
fully paid shares are converted into stock.
It has nominal value Not applicable
It can be transferred only in its entirely It may be transferred in any fractions.
or multiples

32. Mention about different types of Share Capital.*

There are mainly two types of shares:
1) Preference shares
2) Equity shares
i) With voting rights, or
ii) With differential rights as to dividend, voting or otherwise in accordance with such rules and
subject to such conditions as may be prescribed.
Preference Shares Capital: Sec. 85(1)
It means, in the case of a company limited by shares, that part of the capital of the company which –
a) Carries a preferential right as to payment of dividend during the life – time of the company;
b) Carries, on winding up, a preferential right to be repaid the amount of the capital paid up.
Equity Shares: Sec. 85(2)
They are shares which are not preference shares.
Important characteristics
 Voting Rights at the General Meeting.
 Right to control management of the company.
 Right to share in profit viz. Dividend, Bonus Shares.
 On winding – up, equity shares capital is repaid after repayment to the creditors and preference
shareholders.
 Membership rights.
 33. What do you mean by Sweat Equity Shares?**
Meaning:
Sweat equity shares means equity shares –
Issued by the Company to employees or directors At a discount, or for consideration other than cash For
providing
 know – how, or
 Making available rights in the nature of intellectual property rights, or
 Value additions by whatever name called.
Procedure:
A company may issue sweat equity if the follow conditions are fulfilled, namely –
a) The shares should be of a class of shares already issued.
b) The issue of sweat equity shares is authorized by a special resolution passed by the company in the
general meeting.
c) The resolution specifies –
i) The number of shares;
ii) Current market price;
iii) The consideration, if any, and
iv) The class of directors or employees to whom such equity shares are to be issued.
d) At least one year should have elapsed from the date of commencement of business.
e) If the company is a listed company, then the issue should comply with SEBI regulations.
Applicability:
For the purpose of this section, the expression ‘Company’ means –
 The company incorporated, formed and registered under this Act and;
 Includes its subsidiary company incorporated in a country outside India.

34. Make a distinction between Bonus Share and Rights Shares.**

Right shares Bonus shares

Right shares are to be paid by shareholders It is issued to existing members free of charge
Right shares may be partly paid Bonus shares are always fully paid
Minimum subscription is to be raised No such requirement
Money received on issue should be kept in a Not applicable
separate bank account
Right to Renounce is available Not applicable
It is regulated by the companies Act and SEBI Regulated only by SEBI guidelines
guidelines
35. What do you mean by Buy-back of Shares? State the provisions of Companies Act regarding buy-
back of shares.
Buyback is a simple form of repayment of excess capital. Section 77A of The Companies (Amendment) Act,
1999 provides for a company to purchase its own shares or other specified securities subject to certain
conditions and regulations.
Buy-Back from Whom:
The buy-back under Sub-section (1) may be -
(a) from the existing security holders on a proportionate basis; or
(b) from the open market; or
(c) from odd lots, that is to say, where the lot of securities of a public company, whose shares are listed on a
recognised stock exchange, is smaller than such marketable lot, as may be specified by the stock exchange;
or
(d) by purchasing the securities issued to employees of the company pursuant to a scheme of stock option or
sweat equity.
Source of funds for buy-back:
A company may purchase its own shares or other specified securities out of:
(a) Free reserves, or
(b) Securities premium account, or
(c) Proceeds of any shares or other specified securities
No buy back shall be made out of the proceeds of an earlier issue of the same kind of shares or specified
securities.
Conditions to be satisfied:
(a) Buy back should be authorized by the Articles.
(b) Special Resolution must be passed in a General Meeting authorizing the buy – back.
(c) The Debt Equity ratio after buy back should be less than or equal to 2. (This may be relaxed subject to
Central Government Approval).
(d) The Shares/Specified securities being bought back should be fully paid up.
(e) It is a listed company, it should comply with the SEBI Guidelines.
(f) Between two buy backs there shall be an interval of at least 365 days.
Time limit:
The entire process of Buy Back should be completed within 12 months from the date of passing special
resolution
Quantum:
Not to exceed 25% of paid up capital outstanding.
Amount available for buy – back:
25% of paid up share capital & free reserves.
Declaration of solvency:
Where a company has passed a special resolution to buy – back its shares, it shall, before making such buy –
back, file with ROC and SEBI, a declaration of solvency in the form prescribed.
Physical destruction of securities:
The Securities bought back shall be extinguished & physically destroyed within 7 days from date of
completion of buy – back.
Restriction on further issue of shares within 6 months:
No further issue of securities of the same kind shall be made for the next 6 months except by way of:
 Bonus
 Employees Stock Option
 Sweat Equity
 Conversion of Warrants
 Conversion of debentures/preference shares into equity shares.
Maintenance of register:
The company should maintain a Register of securities bought back.
Filing of buy – back return:
File with RoC and SEBI, particulars as may be prescribed, within 30 days of completion of buy back.
Transfer of certain sums to capital redemption reserve a/c-Sec. 77AA:
Where Buy Back is out of free reserve, a sum equal to the nominal value of shares purchased shall be
transferred to Capital Buy Back Reserve/Capital Redemption Reserve.
Buy Back with only Board Approval:
The shares may be bought back upto 10% of the shares outstanding without obtaining any shareholders
approval. In other words board approval would be sufficient.
Prohibition of buy – back in certain circumstances – Sec. 77B:
 Through any subsidiary company including its own subsidiary.
 Through any investment company or group of investment companies.
 Default in repayment of deposit/interest payable thereon, redemption of debentures/preference shares or
payment of dividend to shareholders or repayment of loan/interest to any financial institution or bank, is
subsisting
36. State the rules regarding issue of shares at a premium.**
Issue at a premium means issue at a price more than the nominal value. When `100 shares is issued at a price
of `125, then the share is said to be issued at a premium of ` 25.
Securities premium can be utilized only for:
a) Issuing fully paid bonus shares to members;
b) Writing off the balance of the preliminary expenses of the company;
c) Writing off the commission paid or discount allowed, or the expenses incurred on issue of shares or
debentures of the company; and
d) For providing for the premium payable on redemption of nay redeemable preference shares or
debentures of the company.
e) The security premium amount can be used for buy back of shares also. (Sec. 77A).
37. Define Debenture. What are the characteristics of a Debenture?***
Meaning of Debenture:
A debenture may be defined as document containing an acknowledgement of indebtedness which need not
be, although it usually is, under seal, which need not give, although it usually does give a charge on the
assets of the Company by way of security and which may or may not be one of a series.
According to Sec. 2(12), a debenture includes debenture stock, bonds and any other securities of a Company
whether constituting a charge on the assets of the Company or not.
Characteristics of Debentures:
1) It is the form of a certificate usually under the common seal of the Company.
2) It is an acknowledgement of the indebtedness of the Company to the holder.
3) It provides for payment of a specified sum at a specified rate of interest.
4) It is usually in a series with a pari-passu clause.
5) It normally has a charge on the assets of the Company: Debentures may be secured by a fixed charge
or by a floating charge or a combination of both.
6) It does not carry rights.
 Multiple Choice Questions (1 Marks & 2 Marks)
(1) Share Capital has been defined under ___________ of company Act, 2013.
(a) Section 43
(b) Section 42
(c) Section 44
(d) Section 45
(2) As per section 43 (a) equity share capital may be divided on the basis of
(a) voting rights
(b) differential rights as to dividend,
(c) Both
(d) None
(3) the shares with differential rights shall not exceed _______ of the total post-issue paid up equity
share capital
(a) 25%
(b) 26%
(c) 50%
(d) 51%
(4) Before issuing equity shares with differential rights as to dividend, the company has consistent
track record of distributable profits for the last _______
(a) 2 Years
(b) 3 Years
(c) 5 Years
(d) 6 Years
(5) According to section 55 of the Act, a company limited by shares cannot issue any preference
shares which are liable to be redeemed within a period not exceeding ________
(a) 20 Years
(b) 25 Years
(c) 30 Years
(d) 35 Years
(6) Preference share capital means that part of the issued share capital of the company which
carries or would carry a preferential right with respect to—
(a) payment of dividend,
(b) repayment, in the case of a winding up or repayment of capital
(c) Both (a) & (b)
(d) voting rights and differential rights(DVR) as to dividend,
(7) Section 53 of the Companies Act, 2013, prohibits a company to issue shares at discount except in
the case of issue of __________
(a) Sweat equity shares.
(b) Bonus share
(c) Right Shares
(d) Shares under the Scheme of Employee stock option plan
(8) Any shares issued by a Company at a discounted price shall be _______
(a) Void
(b) Valid
(c) Voidable
(d) Illegal
(9) ___________means such equity shares issued by a company to its directors or employees at a discount
or for consideration , other than cash, for their providing know- how or making available rights in
the nature of intellectual property
(a) Sweat equity shares.
(b) Bonus share
(c) Right Shares
(d) Shares under the Scheme of Employee stock option plan
(10) The company shall not issue sweat equity shares for more than __ _________of the existing
paid up equity share capital in a year or shares of the issue value of rupees five crores,
whichever is higher.
(a) 15%
(b) 25%
(c) 20%
(d) 10%
(11) The issuance of sweat equity shares in the Company shall not exceed 25% of the paid up
equity capital of the Company at any time.
(a) 15%
(b) 25%
(c) 20%
(d) 10%
(12) Sweat equity shares issued to directors or employees shall be locked in/non transferable for a
period of __________ from the date of allotment.
(a) Five years
(b) Three years
(c) Seven Years
(d) Ten Years
(13) Section 54 provides that, a company may issue sweat equity shares of a class of shares already
issued, if the following conditions are fulfilled, namely:-
(a) The issue is authorized by a special resolution passed by the company;
(b) the resolution specifies the number of shares, the current market price, consideration, if any
(c) Not less than one year has, at the date of such issue, elapsed
(d) All of the above
(14) When shares are issued by a company at a price above their face value (or nominal or par value)
then the shares are said to have been issued at a _________
(a) Premium
(b) Discount
(c) Par
(d) None of the above
(15) Section 52 of the Companies Act, 2013 deals with the application of premium received on issue of
shares. The securities premium account may be applied by the company—
(a) towards the issue of unissued shares of the company to the members of the company as fully
paid bonus shares;
(b) in writing off the preliminary expenses of the company;
(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of
shares or debentures of the company;
(d) All of the above
(16) In case the company proposes redemption of shares out of the profits of the company, there shall,
out of such profits, be transferred, a sum equal to the nominal amount of the shares to be
redeemed, to a reserve, to be called the ______________
(a) Capital Reserve
(b) Capital Redemption Reserve Account
(c) Securities Premium
(d) Investment Allowance Reserve
(17) The capital redemption reserve account may be applied for
(a) Fully paid bonus shares
(b) Bonus to Partly Paid-up Shares
(c) For writing off Capital Losses
(d) For Payment of Dividend
(18) refers to a further issue of shares made by a company having share capital to its existing
share holders without receipt of any consideration from the shareholders for issuance of the
shares
(a) Bonus issue
(b) Right Issue
(c) Fresh Issue
(d) Sweat equity shares
(19) Section 63 provides that a company may issue fully paid-up bonus shares to its members, in any
manner whatsoever. Which of the following cap not be used for Such Issue:
(a) free reserve
(b) securities premium account
(c) The capital redemption reserve account.
(d) capitalizing reserves created by the revaluation of assets
(20) The issue of further shares, offered to persons who, at the date of the offer, are holders of equity
shares of the company in proportion, is called:
(a) Bonus issue
(b) Right Issue
(c) Fresh Issue
(d) Sweat equity shares
(21) As per Section 62(1) (b) of Companies Act 2013, the Company can offer shares through to their
employees at lower price than Market Price, is called:
(a) Employee stock option plan
(b) Sweat equity shares
(c) Bonus issue
(d) Right Issue
(22) The Company can't offer shares through employee stock option to____________
(a) A permanent employee
(b) Whole time director
(c) A director of the company excluding an independent director; or
(d) An employee who is a promoter or a person belonging to the promoter group; or
(23) The Company can offer shares through employee stock option to____________
(a) A permanent employee
(b) Independent director
(c) An employee who is a promoter or a person belonging to the promoter group; or
(d) A director holds more than ten percent of the outstanding equity shares of the company.
(24) According to Section 68(1) of Act a company whether public or private, may buyback its own
shares or other specified securities out of:
(a) its free reserves;
(b) the securities premium account;
(c) the proceeds of any shares or other specified securities.
(d) All of the above
(25) Which of the following can't be used for buyback of Equity Share?
(a) free reserves;
(b) securities premium account;
(c) proceeds of any fresh issue of shares or other specified securities.
(d) proceeds of an earlier issue of the same kind of shares
(26) Board of directors can approve buy-back up to __________of the total paid-up equity capital and
free reserves of the company
(a) 10%
(b) 25%
(c) 15%
(d) 30%
(27) Shareholders by a special resolution can approve buy-back up to _________ of the total paid-up
capital and free reserves of the company
(a) 10%
(b) 25%
(c) 15%
(d) 30%
(28) Post buy-back debt-equity ratio: shall not exceed __________
(a) 2 : 1
(b) 3: 1
(c) 1: 2
(d) 1: 3
(29) No offer of buy-back under this sub-section shall be made within a period of _________ reckoned
from the date of the closure of the preceding offer of buy-back, if any.
(a) one year
(b) Two years
(c) Three years
(d) 4 years
(30) Every buy-back shall be completed within a period of ________from the date of passing of the
special resolution, or as the case may be, the resolution passed by the Board.
(a) one year
(b) Two years
(c) Three years
(d) 4 years
(31) The buy-back may be—
(a) from the existing shareholders or security holders on a proportionate basis;
(b) from the open market;
(c) by purchasing the securities issued to employees of the company pursuant to a scheme of
stock option or sweat equity
(d) All of the above
(32) are bonds issued in acknowledgement of any indebtedness.
(a) Equity Shares
(b) Preference Shares
(c) Debenture
(d) Share Certificate
(33) In case of ___________preference dividend, if not paid in one year, is carried forward to
succeeding years.
(a) Cumulative preference shares:
(b) Non-cumulative preference shares:
(c) Redeemable preference shares
(d) Irredeemable preference shares
(34) The holders of _________ have no claim for the arrears of dividend
(a) Cumulative preference shares:
(b) Non-cumulative preference shares:
(c) Redeemable preference shares
(d) Irredeemable preference shares
(35) The holders of ___________can get back their capital on the expiry of a certain period or at the
option of the company,
(a) Cumulative preference shares:
(b) Non-cumulative preference shares:
(c) Redeemable preference shares
(d) Irredeemable preference shares
(36) The preference shares that cannot be redeemed unless the company is liquidated are known as
_______
(a) Cumulative preference shares:
(b) Non-cumulative preference shares:
(c) Redeemable preference shares
(d) Irredeemable preference shares
(37) __________are entitled to participate in the surplus profits of the company in addition to their
usual fixed rate of dividend
(a) Cumulative preference shares:
(b) Non-cumulative preference shares:
(c) Redeemable preference shares
(d) Participating preference shares:
(38) Preference shares on which only a fixed rate of dividend is paid, are known as ________
(a) Cumulative preference shares:
(b) Non-cumulative preference shares:
(c) Irredeemable preference shares
(d) Non- Participating preference shares:
(39) Sometimes preference shareholders may be given the right to convert their preference shares
into equity shares within a stipulated period. These preference shares are known as ________
(a) Cumulative preference shares:
(b) Redeemable preference shares:
(c) Participating preference shares:
(d) Convertible preference shares:
(40) These shareholders are not given the right to convert their preference shares into equity shares.
(a) Non-cumulative preference shares:
(b) Irredeemable preference shares:
(c) Non- Participating preference shares:
(d) Non- Convertible preference shares:
(41) These debentures are secured by a charge upon some or all assets of the company
(a) Secured Debentures:
(b) Unsecured or "Naked" Debentures:
(c) Convertible Debentures:
(d) Non-Convertible Debentures
(42) A fixed charge is a mortgage on ________ These assets cannot be sold without the consent of the
debentureholders.
(a) Specific assets.
(b) All Assets
(c) Fixed Assets
(d) Current Assets
(43) A floating charge generally covers __________
(a) Specific assets.
(b) Fixed Assets
(c) Current Assets
(d) all the assets including future one.
(44) These debentures are not secured by any charge upon any assets.
(a) Secured Debentures:
(b) Unsecured or "Naked" Debentures:
(c) Convertible Debentures:
(d) Non-Convertible Debentures
(45) These are debentures which will be converted into equity shares (either at par or premium or
discount) after a certain period of time from the date of its issue.
(a) Secured Debentures:
(b) Unsecured or "Naked" Debentures:
(c) Convertible Debentures:
(d) Non-Convertible Debentures
(46) These are debentures which cannot be converted into shares in future.
(a) Secured Debentures:
(b) Unsecured or "Naked" Debentures:
(c) Convertible Debentures:
(d) Non-Convertible Debentures
(47) These debentures are repayable as per the terms of issue
(a) Secured Debentures
(b) Convertible Debentures
(c) Redeemable Debentures
(d) Registered Debentures
(48) Not repayable during the life time of the company. These are also called perpetual debentures.
These are repaid only at the time of liquidation.
(a) Unsecured or "Naked" Debentures:
(b) Non-Convertible Debentures:
(c) Irredeemable Debentures:
(d) Bearer Debentures
(49) These debentures are payable to a registered holder whose name, address and particulars of
holding recorded in the Register of Debentureholders. They are not easily transferable.
(a) Unsecured or "Naked" Debentures:
(b) Non-Convertible Debentures
(c) Irredeemable Debentures:
(d) Registered Debentures
(50) These debentures are transferable by delivery. These are negotiable instruments payable to the
bearer. No kind of record is kept by the company in respect of the holders of such debentures.
(a) Unsecured or "Naked" Debentures
(b) Non-Convertible Debentures:
(c) Irredeemable Debentures:
(d) Bearer Debentures:
(51) These debentures are payable first out of the property charged.
(a) Secured Debentures:
(b) Convertible Debentures:
(c) First Mortgage Debentures:
(d) Second Mortgage Debentures
(52) These debentures are payable after satisfying the first mortgage debentures.
(a) Secured Debentures:
(b) Convertible Debentures:
(c) First Mortgage Debentures:
(d) Second Mortgage Debentures
(53) A __________is a document of title issued by the company declaring that the person named
therein is the owner of a specified number of shares in the capital of the company
(a) share certificate
(b) Share warrant
(c) Bonus Shares
(d) Right Shares
(54) It is a document issued under the common seal of a public company stating that its holder is
entitled to shares specified therein.
(a) share certificate
(b) Share warrant
(c) Bonus Shares
(d) Right Shares
(55) Which of the followings are features of share warrant?
(a) It is a bearer document and it is transferable by mere delivery.
(b) Registration of transfer is not necessary.
(c) Bearer of Share Warrant need not be a member of the company.
(d) All of the above
(56) means extinction of membership as a sort of penalty for the non-payment of calls on
due dates.
(a) Forfeiture of Share
(b) Right Issue of Share
(c) Bonus Issue of share
(d) Transmission of Share
(57) ___________refers to voluntary conveyance of rights and duties/liabilities of a member as
represented in a shares, from a shareholder who wishes to cease to be a member or decrease his
number of shares
(a) Right Issue of Share
(b) Bonus Issue of share
(c) Transfer of shares
(d) Transmission of Share
(58) takes place when a registered shareholders dies, or is adjudicated as insolvent or if
the shareholder being a Company, goes into liquidation.
(a) Right Issue of Share
(b) Bonus Issue of share
(c) Transfer of shares
(d) Transmission of Share
 Unit 5: CORPORATE MEETINGS
Corporate Meetings - Shareholder and Board, Types of Meetings – Annual General Meeting Extraordinary
General meeting, Minutes of Proceedings of General Meeting, Meeting of BOD and other meetings (Section
118), Requisite of Valid Meeting- Notice, Agenda, Chairman, Quorum, Proxy, Resolutions, Minutes, Postal
Ballot, E- voting, Video Conferencing, Board Meetings and Resolutions

1. CORPORATE MEETINGS
A meeting may be generally defined as a gathering or assembly or getting together of a number of persons
for transacting any lawful business. However, every gathering or assembly does not constitute a meeting. A
company meeting must be convened and held in perfect compliance with the various provisions of the Act and
the rules framed thereunder. It is essential that the business dealt with at the meetings, should be validly
transacted and not liable to be questioned later due to any irregularity.
The meetings of a company under the Companies Act, 2013 can be classified as under:
1. Meetings of the Directors and their Committees
2. Meetings of Shareholders:
(a) Annual General Meetings (AGM)
(b) Extraordinary General Meetings (EGM)
(c) Class Meetings.
3. Meetings of Debenture/bond holders
4. Meetings of the creditors otherwise than in winding up
5. Meeting of creditors and contributories in winding up.
6. Court convened meeting

2. Board Meetings
Generally, directors act through meetings. Meetings of the directors provide a means to discuss the business
and take formal decisions. The directors can only act at a meeting of the Board of directors through resolutions
passed at such a meeting. As a general rule, the Board of Directors should exercise its powers at duly convened
Board meeting.
Meetings of directors provide a means to discuss the business and take formal decisions. The law therefore,
specifically enjoins that the Board must formally meet once a quarter. It also provides for the matters which
the Board should formally decide at its meetings by resolutions. That apart, the meetings provide a forum for
deliberating on matters affecting the business and affairs of the company.

3. NOTICE OF BOARD MEETINGS

A meeting of the Board shall be called by giving not less than seven days‘ notice in writing to every director
at his address registered with the company and such notice shall be sent by hand delivery or by post or by
electronic means. [Section 173]
A meeting of the Board may be called at shorter notice to transact urgent business subject to the condition that
at least one independent director, if any, shall be present at the meeting. in case of absence of independent
directors from such a meeting of the Board, decisions taken at such a meeting shall be circulatedto all the
directors and shall be final only on ratification thereof by at least one independent director, if any. In the notice
of Board meeting, the following matters are required to be Specific Notice:
(1) Appointment of Managing Director who is already a Managing Director or Manager of another company
(2) Appointment of Manager who is already a Manager or Managing Director of another company
 4. Meetings of the Board: Section 173
Section 173 of the Act deals with Meetings of the Board and Section 174 deals with quorum
a. The Act provides that the first Board meeting should be held within thirty days of the date of incorporation.
b. In addition to the first meeting to be held within thirty days of the date of incorporation, there shall be
minimum of four Board meetings every year and not more one hundred and twenty days shall intervene
between two consecutive Board meetings.
c. In case of One Person Company (OPC), small company and dormant company, at least one Board meeting
should be conducted in each half of the calendar year and the gap between two meetings shouldnot be less
than Ninety days.

5. Quorum for Board Meetings : Section 174

 One third of total strength or two directors, whichever is higher, shall be the quorum for a meeting.

 If due to resignations or removal of director(s), the number of directors of the company is reduced below
the quorum as fixed by the Articles of Association of the company, then, the continuing Directors may act
for the purpose of increasing the number of Directors to that required for the quorum or for summoning a
general meeting of the Company. It shall not act for any other purpose.

 For the purpose of determining the quorum, the participation by a director through Video Conferencing
or other audio visual means shall also be counted.

 The meeting shall be adjourned due to want of quorum, unless the articles provide shall be held tothe
same day at the same time and place in the next week or if the day is National Holiday, thenext
working day at the same time and place.

6. Statutory Meeting
Section 165 provides that ―Every company limited by shares and every company limited by guarantee and
having a share capital shall within a period of not less than one month but not more than six months from the
date the company is entitled to commence business, hold a meeting of the members of the company. This is
called as Statutory Meeting‖.
It implies that statutory meeting is the first official general meeting of the shareholders. It is held once in the
lifetime of the company. The meeting called before one month is not a statutory meeting.
The statutory meeting cannot be held by the following:
a. A private company, whether independent or subsidiary of a public company
b. A public company not having share capital
c. A public company having liability of its members unlimited
d. A public company having liability of its members limited by guarantee and not having share capital
e. A Government Company, whether registered as a private or public company.
Object of the meeting
The object of the Statutory Meeting is to put the shareholders of the company, at as early as possible, in
possession of all the important facts relating to the new company. Thus, a company holds statutory meeting
of its members primarily with the following two main objectives:
a. To discuss the success of the floatation of the company
b. To get the approval of the members for any modification in a contract specified in the prospectus.
Notice of the Statutory Meeting
 Section 171 provides that ―The Notice for calling a Statutory Meeting must be given at least 21 days
before the meeting is held unless members holding not less than 95% of the paid-up capital and having
the right to vote agree to a shorter notice‖.
 The Notice must clearly mention that it is for a Statutory Meeting.
 It must clearly state the time, date and place of the meeting. Statutory meeting can be called even on
a holiday, at any reasonable hour, and at any place convenient to the company.
 The notice of the meeting must be sent to:
a. Every member of the company
b. The Legal representative of deceased members
c. The Official receiver/assignee,
d. The auditors of the company,
e. The public trustee in case the shares are held in trust.
Since each item in the Statutory Meeting constitutes a special business, an Explanatory Statement should be
added for each item on the Agenda. The statutory report of the company and a copy of the notice should be
sent to the members of the company. Also a copy of the report should be sent to the Registrar of the Companies.
Statutory Report
The Board of Directors are required to send to every member a Statutory Report.
 The Statutory Report should be certified as correct by at least two directors of the company, one of
whom shall be the Managing Director, where there is only one in the company.
 The report must be certified as correct by the auditors of the company regarding the shares allotted
and cash received in that regard.

7. Annual General Meeting (AGM) [Section 166]

Section 166 of the companies Act provides that ―Every company, whether public or private, whether with
share capital or unlimited, must hold a meeting of its members each year‖. Since it is to be held annually it is
known as an Annual General Meeting.
Importance of the meeting
The Annual General Meeting of the company provides the members with an opportunity to review working
of the company and express their views on the working of the company. An AGM is called by the company
majorly for the following four reasons:
a. passing of the annual accounts
b. declaration of the dividends
c. election of directors in place of those retiring by rotation, and
d. appointment and fixation of the remuneration of auditors etc
All other items of the agenda except those given above are considered as special business.
Other Statutory Provisions regarding the holding of the Annual General Meeting are as follows:
a. Who can convene the meeting - the power to convene an AGM vests only with the Board of Directors.
Not even the secretary of the company can convene this meeting without the authority of the board.
b. First AGM – A company must hold its first AGM within 18 months of incorporation. Not even the
registrar of companies can extend the time limit available. If Satyam ltd Co. is incorporated on 1st
December 2005, then it need not hold its first AGM in the year 2005, or in the year 2006, but it must hold
its first AGM not later than 31st May 2007.
c. Subsequent AGM – An AGM must be held by the company each year within six months after the close
of the financial year, but the interval between two AGM‘s should not be more than 15 months. The
Registrar may, for any special reason, extend this time up to three months. Example: The accounting year
of Uniprince Ltd ends on 30-6-2004 and if its AGM cannot be held by December, 2004, the Registrar of
Companies can grant extension to Uniprince Ltd up to March 2005. In such a situation, there will be
no violation of law if no AGM is held in year 2004.
Considering the importance of the AGM to the shareholders, the directors of the company must call the
meeting even though accounts are not ready or company is not functioning ,or the management of the
entire controlled business of the company is vested in the hands of the Central Government. The correct
decision on the part of the company would be to hold the meeting and then adjourn it to a suitable date for
considering the accounts.
d. An adjourned meeting does not count as a separate meeting. Example: At the AGM held on 25th
Sept. 2007 of Cosmos Ltd., the auditor is appointed to hold office up to the conclusion of next annual general
meeting. Incidentally the next AGM is held on 20th September 2008 but that also standsadjourned without
transacting any business. In such a situation the auditor appointed on 25th September 2007 of Cosmos Ltd.
will continue to hold office till the conclusion of the meeting because the adjourned meeting is merely
continuation of the original meeting.
e. It is not enough that the two AGM‘s are held within 15 months of each other. It is imperative that
no calendar year should pass without an annual general meeting. Example: If an AGM for Redar Ltd. is
held in December 2005, then the next AGM for Redar Ltd. must be held latest by December 2006. If it
is held in January 2007, it will not satisfy the provisions of the Act.

The Ministry of Corporate Affairs has clarified the time limit for holding of the AGM
a. Six months from the close of the financial year;
b. Fifteen months from the previous AGM, or
c. By the last day of the next Calendar year, whichever is earlier.

Day, Hour and Place of the Meeting- The meeting must be held
a. On a day which is not a public holiday,
b. During business hours,
c. At the registered office of the company or at some other place within the city, town or village in which
the registered office of the company is situated.

Adjourned meeting on a Public Holiday-

Section 166 (2) provides ―Every Annual General Meeting shall be held on a day that is not a public holiday.‖
The Department has further clarified that there is no contravention of Section 166(2) if an adjourned meeting,
which was adjourned for the want of quorum, is held accidentally on a public holiday.

Notice –
The company must give a notice of 21 clear days for the AGM to all the members of the company and its
auditors. A shorter Notice may be held valid only if consent is accorded to it by all the members entitled to
vote at the meeting. The Notice must specify the place and the day and hour designated for the meeting and
must contain the business to be transacted thereat.
The Notice must be given to:
a. The every member
b. Representative of a deceased member or assignee of an insolvent member,
c. The Auditor or Auditors, and
d. The Public Trustee in respect of the holding company.

Consequences of default -
Section 167 states ―If default is made in holding the meeting, the Company Law Board may, on application
of any member of the company, call or direct the calling of the meeting.‖

8. Extraordinary General Meeting (EGM) [Section 169]

Regulation 47 of Table A provides ―That all general meetings, other than the statutory and annual general
meetings are called Extraordinary General Meetings and business transacted at such meetings is a special
business.‖ The EGM is also called a meeting held between two AGM‘s for discussing matters which cannot be
postponed till the next AGM.

Provisions regarding the convening of an EGM

a) By the Directors: - The directors collectively as a Board can call an EGM by passing an ordinary
resolution at a Board of Directors meeting, which is duly convened and properly constituted. The board
of directors must give 21 clear days notice before holding an EGM. A shorter notice however may be
valid, if holders of 95 per cent or more voting rights agree to it.
b) By the Directors on the Requisition:- Section 169 provides ―The board of directors must convene a
General Meeting upon requisition signed by members holding at least 1/10th of the paid up capital, in
case companies have share capital; and by members holding at least 1/10th of the voting power in other
cases.‖
c) The directors should, within 21 days from the date of deposit of the requisition, move to call such
meeting and the meeting should actually be held within 45 days from the date of requisition.

9. Class Meeting (Section 106)

Section 106 provides ―Where the share capital of the company consists of different classes of shares,
meetings of different classes of shareholders may have to be called whenever the company wants to make any
variation in the rights attached to shares of any particular class.‖
Meetings where only a particular class of shareholders come for any particular purpose or otherwise are class
meetings. Class meeting is an exception to the general rule that there must be at least two people to constitute
a meeting because a class of shares may be held by one person also.

10. Other Kinds of Meetings

(a) Meetings of Debenture-Holders
These meetings are called from time to time where the interests of the debenture holders are involved at the
time of the reconstruction, reorganization, amalgamation or winding up of the company. Meetings of the
debenture holders may also be held from time to time in pursuance of the terms of debenture trust deed.
These are meetings for the interests of debenture holders only.
(b) Meetings of Creditors
Section 391 provides that ―These meetings be called when the company proposes to make a scheme or
arrangement with the creditors.‖ Companies, like individuals, may sometimes find it necessary to
compromise or make some arrangement with their creditors. This Section not only gives powers to the
company to compromise with the creditors but also lay down the procedure for doing so.
(c) Meetings of the Creditors and the Contributories on winding up
These meetings are held when the company has gone into liquidation. These meetings are held to ascertain the
total amount owed by the company to its creditors and also to appoint the liquidators or a committee of
inspection. The term ―Contributory‖ includes every person who is liable to contribute to the assets of the
company in winding up.

11. Requisites for a Valid Meeting

Every meeting, in order to be valid, must be
 Duly convened,
 Properly constituted (chairmen & Quorum) and
 Property conducted (voting, Poll, Proxy, Minutes, Resolution)
Section 171 to Section 186 of the Companies Act contain provisions for the holding of General Meetings of a
company which are to be followed by every public company. Private companies can follow the same provisions
or, if they like, they can also make their own provisions for holding the meetings.
A meeting to be valid must satisfy the following essentials/requisites:-

12. Meeting to be properly convened

(A) Proper Authority
It is the first essential of a valid meeting
Board of Directors: Ordinarily, the Articles of Association of the company empower the Board of
Directors to convene a General Meeting. The Directors may call a meeting of the Shareholders by passing
a resolution at a meeting of the board. The resolution to call a general meeting must be passed at a valid
board meeting, otherwise the notice calling the general meeting with itself become invalid andthe
proceedings of the meeting shall not be effective.

By Directors on Requisition of the Shareholders:- Where a requisition is given at the registered office
of a company, the Directors should within 21 days, move to call a meeting and the meeting should be held
within 45 days of requisition. If the Directors fail to do so, the requisitionists may themselves proceed to
call the meeting within three months of the date of requisition. This is applicable in case of extra ordinary
general meeting.

By the Company Law Board (CLB):- If for any reason, it is impracticable to call meeting of the
company, other than AGM (Annual General Meeting) or to hold or conduct a meeting of the company,
the Company Law Board may, order a meeting to be called and conducted as CLB thinks fit. either:-
(i) On its own motion, or
(ii) On the application of any director of the company, or
(iii) If any member of the company entitled to vote at the meeting applies for it.
A meeting so called and conducted shall be deemed to be a meeting of the company duly called and
conducted i.e. it is a valid meeting.
(B) Proper Notice
Section 171 states –―Notice is an advance intimation of the meeting so as to give the person receiving it
an opportunity to prepare himself / herself for it‖ i.e. Notice states the purpose for which the members
are meeting. However, not every notice is a valid one.
 13. A valid notice should contain the following essentials:-
(a) Notice of the company should be given to whom ?:
Section172 (2) states ―Notice of the meeting should be sent to
 The shareholder (equity & preference) either personally or by post,
 The auditors of the company,
 All directors of the company,
 The legal representative of a deceased member and
 Whosoever is liable to attend.‖
Deliberate omission to deliver notice to even a single member would result in making a meeting invalid,
but accidental error does not make meeting invalid. If the shares are jointly held then whose name appears
first in register have to be sent the notice.
(b) Length of the notice (Time period of the notice) :-
Section 171 states that ―The notice should be in writing and must be given at least 21 days before
the date of the meeting.‖ In calculating 21 days, 48 hours from the date of posting has to be excluded
and also the day on which notice is served and the day of the meeting have also to b e excluded. The
notice of a general meeting must be sent 25 days and not 21 days before the date of the meeting in
case it is being sent through post. However, the AGM may be called by giving a shorter notice, if it
is consented by all the members entitled to vote.

14. Contents of the Notice (what should be written in notice):-

―Every notice of a meeting must specify the place and the day and the hour of the meeting and shall
contain a statement of business to be transacted at the meeting [Section 172(1)]‖. The notice must state
what kind of meeting it is i.e. whether it is AGM, EGM etc. It must accompany an Agenda. If a special
business is to be transacted then an Explanatory Statement should also be attached.

The notice of the meeting must state that a member is allowed to appoint a proxy where allowed as per
the Articles and further that a proxy need not be a member [Section 176(2)].

A fresh notice need not be given for holding an adjourned meeting because such a meeting is merely a
continuation of the original meeting .The meeting should be held at the same time next week, same day
,until and unless the chairman decides otherwise. However if a meeting is adjourned without fixing any
new date a fresh notice needs to be sent.

15. Documents to accompany notice

For an AGM –audited accounts, balance sheet, directors and auditors report, proxy form etc.
For a statutory meeting- statutory report, proxy form etc.
For an EGM- explanatory statement, proxy form etc.

16. Chairman
The Chairman is elected to see that the meeting is properly convened and duly constituted. The
successful conduct of the meeting is dependent on the decision making ability of the chairman. In a
problematic situation or in a situation of equal division it is the chairman‘s decision which is finally
accepted as he / she is the chief authority.
 17. Election of the Chairman
 The appointment of the Chairman is generally provided for in the Articles. As Section 175(1)
states ―Unless the articles otherwise provide the members present in person at the meeting shall
elect one of themselves to be the chairman thereof on the show of hands.‖
 Further regulation 51 and 52 of Table A provide that ―If there is no Chairman or he is not present
within 15 minutes after the appointed time of the meeting or he is unwilling to Act asthe
Chairman of the meeting, then the directors present shall elect one among themselves to be
Chairman or if no Director is present within 15 minutes after the appointed time of the meeting
the members present shall choose one among themselves to be the Chairman.‖

18. Duties, powers etc of the Chairman

 Chairman is prima facie authority to decide all incidental questions which arise in the meeting.
He must ensure that the proceedings at the meeting are conducted according to rules and that
order and decorum of the meeting are maintained.
 Though Chairman has power to adjourn the meeting, but not always he can adjourn a meeting
.When there is absence of quorum or there is disorder, or If Articles so direct chairman can adjourn
the meeting. But if the Chairman wrongly adjourns the meeting a new Chairman may beappointed.
 Chairman cannot change the order of the matters to be discussed in the meeting without consent
of the members present at the meeting i.e. he cannot change agenda. He also cannot without any
reason stop discussion on any topic mentioned in agenda.
 Chairman can include and exclude anything from the minutes of the meeting.
 If a Poll is demanded, the Chairman has to see that the poll is held according to the provisions of
the Act. Again, if the Articles so provide the Chairman can cast a second vote to break a tie, in
case of equality of votes.

19. Quorum for AGM

Section 174 defines ―Quorum as the minimum number of members who must be personally present at a
meeting for the business of the meeting to be validly transacted‖ i.e. When no Quorum is present at the
meeting, the meeting is said not to be legally constituted and hence the business transacted or resolution
passed at the meeting becomes invalid.

Unless the Articles provide for larger quorum the minimum quorum required to be present at a general
meeting is, five members present personally in the case of a public company and two members present
in case of a private company. The Articles of a company cannot provide for a quorum lesser than this.

Section 174 (3) states , ―If within half an hour from the time appointed for holding a meeting of the
company, a Quorum is not present in person at the meeting then
 If the meeting has been called upon the requisition of the members then it will stand dissolved.
 In any other case, it will stand adjourned to the same time and place, or to such other day and at
such other time and place as the Board of Directors may determine‖.
 In case the Quorum is not present at the adjourned meeting also within half an hour from the
time appointed for holding the meeting, the members present shall be the Quorum.
Some general points about quorum:-
 Proxy is not to be counted for the purpose of quorum.
 Joint holders of shares are treated as one member for the purposes of quorum.
 Where a company is a member of another company or where the President or Governor holds shares
in a company their duly appointed representative is deemed to be personally present and will be
counted for the purpose of the quorum.
 Preference Shareholders present in the meeting are not to be counted for the purpose of quorum except
– where the proposed business includes any item directly affecting Preference Shareholders.

20. Quorum for a Board Meeting

 Section 287(2) has fixed the Quorum of the board meeting at 1/3 rd of its total strength (any fraction
to be rounded off as one) or two directors whichever is higher.

21. Meeting must be properly conducted

Meeting to be properly conducted must have the following essentials: -
 Proper rules for ascertaining the sense of the meeting are observed,
 The rules for discussion and order in debate must be observed.
 It also includes that proceeding of the meeting to be recorded properly.
 It includes a) Voting b) Poll c) Proxy d) Resolution e) Minutes.

22. Voting
It is not possible in a meeting that all members present will always agree on a matter in the same manner i.e.
in the absence of this unanimity the role of the Chairman broadly comes in. After a ―Proposed Resolution‖
or a ―Motion‖ has been discussed in the meeting by the members it is put to vote for ascertaining the sense
of the house. This is where the role of voting comes in.
The word ―Vote‖ means an expression of wish or ―opinion‖ in an authorized formal way for or against any
proposal.
Voting if called for, can be carried out by the show of hands. Section 177 provides ―At any General Meeting
when a motion is put to vote, it shall be decided on the show of hands unless a poll is demanded.‖
The steps in this method are:
(a) The Chairman requests the members present in the meeting who are in favour of the resolution to
raise their right hand, that number is noted,
(b) The Chairman asks all those members who are against to do likewise.
(c) The Chairman then declares the result indicating whether the proposal is lost or accepted.
(d) In this particular method, every member has one vote and proxies are not allowed, unless expressly
allowed by the Articles of the company.
Further, where a company is member of another company, or where the President or the Governor holds shares
in a company, their duly appointed representatives are deemed to be personally present and can voteonshow
of hands [Section 187(2) and 187 A]
Problems with Voting are
(a) It does not take into account opinion of the individual shareholders.
(b) Votes of those members who are absent from the meeting but have appointed proxies to vote for
them are also not counted under this method.
 23. Who can demand a poll [Section 179]?
A Poll may be ordered by the Chairman on his own motion. But Chairman will be bound to take a poll if
demanded by any of the following:-
(a) In case of a public company having share capital, by any member or members present in person, or by
proxy, holding at least 1/10 of the total voting power in respect of resolution or having shares on
which an aggregate sum of not less than fifty thousand rupees has been paid up
(b) In case of a private company by one member having the right to vote on the resolution, present in person
or by proxy if not more than seven such members are personally present and by two such members or
their proxies, if more than seven such member are personally present.
(c) In case of any other company by any member or members present in person or by the person or persons
who made the demand.
The demand for a poll can be withdrawn at any time before the Poll takes place by the person or persons who
made the demand.
Time of taking poll
―A poll demanded on question of adjournment, or the appointment of a Chairman must be taken forthwith
this means on some topics poll has to taken right away. In any other case the poll must be taken within 48
hours of the demand was made‖[Section 180].
Conduct and Result of Poll
The Chairman of the meeting has the power to regulate the manner in which a poll shall be taken. The result
of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken
[Section 185]. The result of the poll shall be deemed to be the decision of the meeting on the resolution on
which poll was taken.
The declaration of the result by the Chairman and an entry to that effect in Minutes Books of the company is
conclusive and final [Section 195].

24. Proxy
Any member entitled to attend and vote in a meeting, may appoint another person to attend and vote on his
behalf. The person so appointed is called a ―Proxy‖. ―A proxy is a person representative of a shareholder at a
meeting of the company who may be described as his / her agent to carry out which the shareholder has himself
decided upon.‖
Thus the term Proxy means two things:-
a) The instrument or letter of authority whereby a member of the company appoints another person to
represent him / her at the meeting and vote on his / her behalf, and
b) The agent or the person appointed to represent and vote on behalf of the member at the meeting.
A proxy, therefore has to Act according to the wishes of the shareholder, he cannot do otherwise.
Section 176 provides that ―Every member of a company shall be entitled to appoint another person as his /
her proxy to attend and vote instead of himself / herself.‖ A proxy need not be a member of the company.

However unless the Articles otherwise provide:-

 A member of a company having no share capital cannot appoint a proxy.
 A member of a private company cannot appoint more than one proxy to attend on the same occasion
but a member of a public company can appoint more than one proxy i.e. for different class of shares
he can appoint different proxies.
  For each meeting a separate proxy is required. Unless the Articles otherwise provide, proxiesdeposited
in due time before original meeting are valid also for the adjourned meeting. If Articles allow for
lodgment of fresh proxy then members have to lodge a fresh proxy.
 Every notice of a company calling a meeting ,which has share capital or Articles that provide for
appointment of proxy , there shall appear a statement that a member entitled to attend and vote is
entitled to appoint a proxy and that every proxy need not be a member of the company. If default is
made by the officer he shall be fined with Rs 5000.
 Appointment of a proxy must be made by a written instrument signed by the appointer or his / her duly
authorized attorney [Section 176(5)].
 In case of joint holders of shares the proxy of a member whose name appears first in order in the
register of members, will be valid.

Rights of a Proxy
Section 176(1) provides that ―A proxy is not entitled to speak in meeting and can vote only on a poll.‖ Unless
the Articles otherwise provide i.e. proxy cannot be part of discussion however, he may demand a poll. The
relationship between proxy and shareholder is that of principal and agent

25. Resolution
The word Resolution as such has not been defined in the Companies Act, however the method of transacting
business at any meeting is that each matter is discussed and debated and finally put to vote, whereupon, if it
is carried by the requisite majority, then it becomes a Resolution of the meeting on that particular matter. Hence
it may be defined as‖ The formal decision of a meeting on any motion placed before it or a proposal which is
passed and accepted by the members in a meeting.‖
he Companies Act recognizes three types of resolutions:-
 Ordinary Resolution [Section 189(1)]
 Special Resolution [Section 189(2)]
 Resolutions requiring special notice [Section 190]

26. ORDINARY RESOLUTION [Section 189 (1)]

―An Ordinary Resolution is one which requires a simple majority, that is, votes cast in favour should exceed
votes cast against the resolution.‖ The votes may be casted by the members either present in person or by proxy
where proxy is allowed. Votes for and votes against the resolution are both to be counted and the neutral votes
are to be ignored.
All matters as per Company‘s Act which are not to be passed by Special Resolution are to be passed by an
Ordinary Resolution.
Usually following matters are considered for Ordinary Resolution:-
a) Issue of Shares at a Discount
b) Consideration of Directors‘ report,
c) Election of Directors
d) The increase, consolidation, conversion or sub-division of the share capital and the cancellation of
unissued shares,
e) Declaration of dividends,
f) Appointment of auditors and fixing their remuneration, require an ordinary resolution
g) Adoption of Statutory Report
 h) Adoption of Annual Accounts
i) Variation in the number of Directors of the company within the limits fixed by the Articles
j) Issue of Bonus Shares in accordance with the provisions of the Articles, and
k) Authorizing voluntary winding up under special circumstances
However there are certain items of special business, which require an Ordinary Resolution such as:-
a) Appointment of Sole Selling Agent
b) Removal of Director before the expiry of his / her tenure. It also requires a Notice of 14 days to be
given to the company
c) Appointment of Director in place of the one removed and
d) Sale of whole or part of the undertaking

27. SPECIAL RESOLUTION

Section 189(2) of the Companies Act provides that ―A Resolution shall be a Special Resolution when:-
a) The intention to propose the resolution as a Special Resolution has been duly specified in the notice
calling the general meeting or other intimation given to members
b) The notice required under Companies Act requires at least 21 days
The number of votes cast in favour of the resolution must be three times more than the numbers cast against
it‖ This is a resolution passed by a majority of atleast 75% of votes of members present in person or by proxy
and those absenting or remaining neutral and votes cancelled are not counted.
Besides the purposes mentioned by the Articles, the Companies Act requires a Special Resolution to be passed
in following matters:-
a) To alter Memorandum or Articles of the Company
b) For buy back of shares
c) To issue sweat equity shares
d) Authorising the offer of right shares to non-members
e) Reduction of share capital
f) Authorising the voluntary winding up of the company
g) Creation of reserve capital
h) Authorising payment of interest out of the capital
i) To commence a new business
j) Removal of registered office outside the local limits of the city, town or village in which it is situated
k) To authorize intercorporate loans and investments
A copy of Special Resolution must be filed with the registrar within 30 days of passing it.

28. Resolution requiring a Special Notice [section 190]

Under Companies Act, certain resolutions require Special Notice to be given. The object of the notice is to
give the members sufficient time to consider the proposed resolution, and also to give the Board of Directors
an opportunity to indicate their views, on the resolution if it is not proposed by them but by some other
shareholders.

29. Passing of Resolutions by Postal Ballot

It is not always possible for the entire body of shareholders to attend general body meetings to decide
important issues .In order that majority of shareholders participate in the decision making process of the
company the passing of resolutions through postal ballot was introduced in 2001 by inserting a new Section
192 A.
The provisions of the Section 192 A are:-
a) ―It provides that a public listed company shall get any resolution passed only by postal ballot relating
to such business as the Central Government may notify, instead of transacting that business ingeneral
meeting of the company.
b) Where a resolution is to be passed by postal ballot, notice is send to the shareholders along with the
draft resolution to send their assent or dissent in writing on a postal ballot within 30 days from the date
of posting of notice.
c) The notice is to be sent by registered post with acknowledgement due, or any other mode as prescribed
by Central Government.
d) Along with notice a prepaid envelope is sent for the communication of resolution.
e) If ballot paper is destroyed by receiver he shall be held liable. Similarly any officer who does default
shall be fined.‖

30. Minutes of the Meeting

Minutes are commonly referred as concise and precise written record of what took place in the meeting. As
per Section 193(1) ―Every company shall maintain minutes of all proceedings of general meetings and of all
proceedings at meetings of its board of directors or committees of the board. Entries of the proceedings must
be made in the books kept for that purpose within thirty days of every such meeting. Minutes are like the
evidence of the proceedings of the meeting .‖
Following are the provisions on the recording of Minutes
 The pages of Minute‘s Book are to be consecutively numbered .No attaching and pasting of papers is
allowed in minute book.
 The Minutes of each meeting shall contain a fair and correct summary of the proceedings.
 All appointments of officers made at the meetings shall be included in the Minutes.
 Each page of every Minute Book should be initialed or signed and at the last page of the record of
the proceedings shall be signed by-
a) In case of a Board or Committee meeting, Chairman of the said meeting or Chairman of the
succeeding meeting.
b) In case of the General Meeting the Chairman of the same meeting within 30 days of the meeting
or in event of death or inability of Chairman by the Directors duly authorized by board.
 In case of a Board Meeting of Directors it shall contain details of Directors present and on which
resolution which dissented and which agreed.
 The Minutes should not contain any irrelevant or defamatory matters. This decision lies with
Chairman what to include and what not to include.
 Section 194 says that ―Minutes of the meetings kept in accordance with the provisions of Section
193 shall be evidence of the proceedings recorded therein.‖
 If proper Minutes are not maintained then defaulting officers shall be fined up to Rs 500.
 The Minutes of the Shareholders meetings are required to be kept at the registered office of the
company and open for inspection for atleast 2 hours everyday.
 No report at a general meeting shall be circulated or advertised at the expense of the company unless
all matters required to be included in the Minutes are included in it. Also, it must be noted that Minute
Books of Board meetings are not open to inspection to the shareholders or the public.
 31. Agenda
An agenda is a list of meeting activities in the order in which they are to be taken up, beginning with the call
to order and ending with adjournment. It usually includes one or more specific items of business to be acted
upon. It may, but is not required to, include specific times for one or more activities.

32. Electronic voting

Electronic voting (also known as e-voting or EVM) refers to voting using electronic means to either aid or
take care of the chores of casting and counting votes.

33. Participation of Director in Board meeting through video conferencing:

Presence of a Director at a Board meeting through video conferencing or other audio visual means as may be
prescribed has been recognised as equal to attending in person. The proviso under this sub-section empowers
the Central Government to specify matters which shall not be dealt with in a meeting through video
conferencing or other audio visual means.

34. Quality of Video Conferencing System

It has also been laid down that the video conferencing system should be such as will be capable of recording
and recognising the participation of Directors and of recording and storing the proceedings of such meetings
along with date and timing.

35. What is statutory meeting? What are the provisions regarding holding of Statutory meeting?**

Meaning Statutory meeting is the first meeting of the members of a Company after its
incorporation. Such meeting is held only once in the lifetime of the Company.
Purpose To enable the members to know at an early date the financial position and future prospects
of the Company. It also provides an opportunity to the members to discuss various matters
relating to the formation of the Company and arising out of the statutory report, whether
previous notice as regards the same has been given or not. However, no
resolution may be passed of which notice has not been given in accordance with the
provisions of the Act.
Mandatory Statutory meeting is mandatory for:
Public company limited by shares
Public company limited by Guarantee and having share capital

Note:
Government Company is not required to hold statutory meeting even if it is registered as
a public Company.
Private company becoming public company within a period of 6 months from the date of
its incorporation will have to hold statutory meeting as per Sec 165.
When Statutory meeting must be held within a period of not less than 1 month and not more
than 6 months from the date on which the Company is entitled to commence business.
Place and day Statutory meeting may be called on any day even on public holiday at any reasonable
of meeting hour and at any place considered convenient by the Board.
Notice of The notice of the statutory meeting must be sent to every member atleast 21 clear days
meeting before the day of the meeting.
Each item of statutory meeting constitutes special business, thus, an explanatory
statement should be added for each item on the agenda.
Statutory The Board of Directors is required to prepare a report called the statutory report which
report must be sent to every member along with the notice of the meeting.
If the statutory report is forwarded later, it shall be deemed to have been duly forwarded
if it is so agreed to by all the members entitled to attend and vote at the meeting.
A copy of the statutory report shall be delivered to the Registrar for registration forthwith
after copies thereof have been sent to the members of the company.
List of The Board shall cause a list showing:
members The names, addresses and occupations of the members of the company, and
The number of shares held by them respectively,
to be produced at the commencement of the statutory meeting, and to remain open and
accessible to any member of the company during the continuance of the meeting.
Adjournment The meeting may adjourn from time to time, and at any adjourned meeting, any resolution
of meeting of which notice has been given in accordance with the provisions of this Act, whether
before or after the former meeting, may be passed; and the adjourned meeting shall have
the same powers as an original meeting.

Penalty If default is made in complying with the provisions of sec 165, every director or other
officer of the company who is in default shall be punishable with fine which may extend
to Rs. 5000.
Failure to hold A company may be wound up by the Tribunal if default is made in:
meeting (Sec Delivering the statutory report to the Registrar or
433) Holding the statutory meeting
 Multiple Choice Questions (1 Marks & 2 Marks)
(1) A _______ may be generally defined as a gathering or assembly or getting together of a number
of persons for transacting any lawful business.
(a) Meeting
(b) Proceeding
(c) Conferencing
(d) Resolutions
(2) The meetings of a company under the Companies Act, 2013 can be classified as under:
(a) Meetings of the Directors and their Committees
(b) Meetings of Shareholders:
(c) Meetings of Debenture/bond holders
(d) All of the above
(3) The meetings of the Shareholders under the Companies Act, 2013 can be classified as under:
(a) Annual General Meetings (AGM)
(b) Extraordinary General Meetings (EGM)
(c) Class Meetings
(d) All of the above
(4) Meetings of the directors provide a means to discuss the business and take formal decisions is
called:
(a) Board Meetings
(b) Class Meetings.
(c) Annual General Meetings
(d) Extraordinary General Meetings
(5) A meeting of the Board shall be called by giving not less than _________notice in writing to
every director at his address registered with the company
(a) 7 days
(b) 15 Days
(c) 21 Days
(d) 30 Days
(6) A meeting of the Board shall be called by giving not less than seven days‘ notice in writing to
every director at his address registered with the company and such notice shall be sent by
(a) Hand delivery
(b) Post
(c) Electronic means
(d) Any of the Above
(7) A meeting of the Board may be called at shorter notice to transact urgent business subject to the
condition that at least ________ independent director, if any, shall be present at the meeting
(a) One
(b) Two
(c) Three
(d) Four
(8) According to Section 173, The Act provides that the first Board meeting should be held within
_________of the date of incorporation.
(a) 7 days
(b) 15 Days
(c) 21 Days
(d) 30 Days
(9) In addition to the first meeting to be held within thirty days of the date of incorporation, there
shall be minimum of __ __Board meetings every year
(a) Four
(b) Three
(c) Two
(d) Five
(10) There shall be minimum of four Board meetings every year and not more than _________
days shall intervene between two consecutive Board meetings.
(a) 120
(b) 60
(c) 30
(d) 90
(11) In case of One Person Company (OPC), small company and dormant company, at least _____
Board meeting should be conducted in each half of the calendar year
(a) Three
(b) Two
(c) Five
(d) One
(12) In case of One Person Company (OPC), small company the gap between two meetings should
not be less than _________ days.
(a) 60
(b) 30
(c) 90
(d) 120
(13) _________of total strength or _______ directors, whichever is higher, shall be the quorum for a
meeting.
(a) One third, Two
(b) One third, One
(c) Two third, Two
(d) Two third, One
(14) is the first official general meeting of the shareholders. It is held once in the lifetime of
the company.
(a) Statutory meeting
(b) Annual General Meetings (AGM)
(c) Extraordinary General Meetings (EGM)
(d) Class Meetings
(15) Section 165 provides that ―Every company limited shall within a period of not less than______
but not more than _______from the date the company is entitled to commence business, hold a
meeting of the members of the company.
(a) One month, Six months
(b) Two month, Six months
(c) Three month, Six months
(d) One month, Three months
(16) The statutory meeting cannot be held by the following:
(a) A private company, whether independent or subsidiary of a public company
(b) A public company not having share capital
(c) A public company having liability of its members unlimited
(d) All of the above
(17) Section 171 provides that ―The Notice for calling a Statutory Meeting must be given at least
______ before the meeting is held unless members holding not less than 95% of the paid-up
capital and having the right to vote agree to a shorter notice.
(a) 7 days
(b) 15 Days
(c) 21 Days
(d) 30 Days
(18) The notice of the statutory meeting must be sent to:
f. Every member of the company
g. The Legal representative of deceased members
h. The Official receiver/assignee
i. All of the above
(19) Section 166 of the companies Act provides that ―Every company, whether public or private, whether
with share capital or unlimited, must hold a meeting of its members each year. It isknown as
an _______
(a) Statutory meeting
(b) Annual General Meetings (AGM)
(c) Extraordinary General Meetings (EGM)
(d) Class Meetings
(20) An AGM is called by the company majorly for the following four reasons:
(a) passing of the annual accounts
(b) declaration of the dividends
(c) election of directors in place of those retiring by rotation, and
(d) All of the above
(21) The power to convene an AGM vests only with the
(a) Board of Directors
(b) Shareholders
(c) Promoters
(d) Secretary
(22) A company must hold its first AGM within_______ of incorporation.
(a) 1 Month
(b) 6 Month
(c) 12 Month
(d) 18 months
(23) The interval between two AGM‘s should not be more than 15 months
(a) 1 Month
(b) 6 Month
(c) 12 Month
(d) 15 months
(24) An AGM must be held by the company each year within _____ months after the close of the
financial year.
(a) 1 Month
(b) 3 Month
(c) 6 Month
(d) 12 Month
(25) The Ministry of Corporate Affairs has clarified the time limit for holding of the AGM
(a) Six months from the close of the financial year;
(b) Fifteen months from the previous AGM, or
(c) By the last day of the next Calendar year, whichever is earlier.
(d) All of the above
(e)
(26) The AGM must be held
(a) On a day which is not a public holiday,
(b) During business hours,
(c) At the registered office of the company or at some other place within the city, town or village
in which the registered office of the company is situated.
(d) All of the above
(27) The company must give a notice of ___________ clear days for the AGM to all the members of the
company and its auditors
(a) 7
(b) 15
(c) 21
(d) 30
(28) The Notice of AGM must be given to:
(a) The every member
(b) Representative of a deceased member or assignee of an insolvent member,
(c) The Auditor or Auditors, and
(d) All of the above
(29) All general meetings, other than the statutory and annual general meetings are called ______
(a) Court convened meeting
(b) Class Meetings.
(c) Extraordinary General Meetings
(d) Board meeting
(30) The ________is also called a meeting held between two AGM‘s for discussing matters which
cannot be postponed till the next AGM.
(a) Court convened meeting
(b) Class Meetings.
(c) Extraordinary General Meetings
(d) Board meeting
(31) The directors collectively as a Board can call an EGM by passing an ________at a Board of
Directors meeting, which is duly convened and properly constituted.
(a) Special resolution
(b) Ordinary resolution
(c) Special Resolution with approval of court
(d) Special Resolution with approval of Tribunal
(32) The board of directors must give _________ clear days notice before holding an EGM.
(a) 7
(b) 15
(c) 21
(d) 30
(33) A shorter notice however may be valid for AGM Or EGM, if holders of______ per cent or more
voting rights agree to it.
(a) 51
(b) 75
(c) 95
(d) 25
(34) Section 169 provides ―The board of directors must convene a General Meeting upon requisition
signed by members holding at least _______ of the paid up capital,
(a) 1/4th
(b) 1/3rd
(c) half
(d) 1/10th
(35) The directors should, within ______days from the date of deposit of the requisition for EGM,
move to call such meeting and the meeting should actually be held within _______ days from the
date of requisition.
(a) 21, 45
(b) 15, 45
(c) 21, 60
(d) 15, 60
(36) Section 106 provides where the share capital of the company consists of different classes of
shares, meetings of different classes of shareholders is called:
(a) Statutory meeting
(b) Class Meetings.
(c) Extraordinary General Meetings
(d) Board meeting
(37) Meetings where only a particular class of shareholders come for any particular purpose or
otherwise are __________
(a) Statutory meeting
(b) Class Meetings.
(c) Extraordinary General Meetings
(d) Board meeting
(38) is an exception to the general rule that there must be at least two people to constitute a
meeting because a class of shares may be held by one person also.
(a) Statutory meeting
(b) Class Meetings.
(c) Extraordinary General Meetings
(d) Board meeting
(39) Every meeting, in order to be valid, must be
(a) Duly convened,
(b) Properly constituted (chairmen & Quorum) and
(c) Property conducted (voting, Poll, Proxy, Minutes, Resolution)
(d) All of the above
(40) is the first essential of a valid meeting
(a) Proper Authority
(b) Proper Notice
(c) Properly constituted
(d) Property conducted
(41) Where a requisition is given at the registered office of a company, the Directors should within 21
days, move to call a meeting and the meeting should be held within 45 days of requisition
(a) 21, 45
(b) 15, 45
(c) 21, 60
(d) 15, 60
(42) If for any reason, it is impracticable to call meeting of the company, other than AGM (Annual
General Meeting) or to hold or conduct a meeting of the company, the ________may, order a meeting
to be called and conducted
(a) Court
(b) Company Law Board
(c) Tribunal
(d) Government
(43) The notice of a general meeting must be sent _______ before the date of the meeting in case it is
being sent through post.
(a) 21 days
(b) 25 Days
(c) 30 Days
(d) 45 Days
(44) Documents to accompany notice For an AGM –
(a) audited accounts, balance sheet,
(b) directors and auditor's report,
(c) proxy form
(d) All of the above
(45) Explanatory statement are required in cast of ___________
(a) Statutory Meeting
(b) Annual General Meeting
(c) Extraordinary General Meetings
(d) Board meeting
(46) Statutory report are required in cast of ___________
(a) Statutory Meeting
(b) Annual General Meeting
(c) Extraordinary General Meetings
(d) Board meeting
(47) Audited accounts & balance sheet are required in cast of ___________
(a) Statutory Meeting
(b) Annual General Meeting
(c) Extraordinary General Meetings
(d) Board meeting
(48) Proxy form are required in cast of ___________
(a) Statutory Meeting
(b) Annual General Meeting
(c) Extraordinary General Meetings
(d) All of the above
(49) The __________ is elected to see that the meeting is properly convened and duly constituted.
(a) Chairman
(b) President
(c) Secretary
(d) Auditor
(50) Duties, powers etc of the Chairman are as follows:
(a) He must ensure that the proceedings at the meeting are conducted according to rules
(b) If a Poll is demanded, the Chairman has to see that the poll is held according to the provisions
of the Act
(c) Chairman can include and exclude anything from the minutes of the meeting.
(d) All of the above
(51) is the minimum number of members who must be personally present at a meeting
for the business of the meeting to be validly transacted
(a) Quorum
(b) Opinion
(c) Poll
(d) Voting
(52) Unless the Articles provide for larger quorum the minimum quorum required to be present at a
general meeting is, __ ________ members present personally in the case of a public company and
______members present in case of a private company.
(a) Five, two
(b) Seven, Two
(c) Five, Three
(d) , Seven, Three
(53) Some general rules about quorum:-
(a) Proxy is not to be counted for the purpose of quorum.
(b) Joint holders of shares are treated as one member for the purposes of quorum.
(c) Preference Shareholders present in the meeting are not to be counted for the purpose of
quorum
(d) All of the above
(54) Section 287(2) has fixed the Quorum of the board meeting at ______of its total strength (any
fraction to be rounded off as one) or ______directors whichever is higher.
(a) 1/4th & two
(b) 1/3rd & two
(c) half & Three
(d) 1/10th & three
(55) Meeting to be properly conducted must have the following essentials: -
(a) Proper rules for ascertaining the sense of the meeting are observed,
(b) It also includes that proceeding of the meeting to be recorded properly.
(c) It includes Voting, Poll ,Proxy, Resolution, Minutes.
(d) All of the above
(56) The word _______ means an expression of wish or ―opinion‖ in an authorized formal way for or
against any proposal.
(a) Vote
(b) Poll
(c) Resolution
(d) Motion
(57) A Poll may be ordered by the Chairman on his own motion. But Chairman will be bound to take
a poll if demanded by the following:-
(a) In case of a public company having share capital, by any member or members present in person,
or by proxy, holding at least 1/10 of the total voting power in respect of resolution or having shares
on which an aggregate sum of not less than fifty thousand rupees has been paidup
(b) In case of a private company by one member having the right to vote on the resolution, present
in person or by proxy if not more than seven such members are personally present and by two
such members or their proxies, if more than seven such member are personally present.
(c) In case of any other company by any member or members present in person or by the personor
persons who made the demand.
(d) Any of the above
(58) ―A poll demanded on question of adjournment, or the appointment of a Chairman must be taken
forthwith this means on some topics poll has to taken right away. In any other case the poll must be
taken within ____________of the demand was made‖[Section 180].
(a) 48 hours
(b) 24 Hours
(c) 36 hours
(d) 72 hours
(59) Any member entitled to attend and vote in a meeting, may appoint another person to attend and
vote on his behalf. The person so appointed is called a ________
(a) Proxy
(b) Representative
(c) Agent
(d) None of the above
(60) A ________ is a person representative of a shareholder at a meeting of the company who may be
described as his / her agent to carry out which the shareholder has himself decided upon.‖
(a) Proxy
(b) Representative
(c) Agent
(d) None of the above
(61) A member of a private company cannot appoint more than _________ proxy
(a) one
(b) Two
(c) Three
(d) Four
(62) The formal decision of a meeting on any motion placed before it or a proposal which is passed
and accepted by the members in a meeting is called___________
(a) Resolution
(b) Minutes
(c) Agenda
(d) Notice
(63) ―An ___________is one which requires a simple majority, that is, votes cast in favour should
exceed votes cast against the resolution.‖
(a) Ordinary Resolution
(b) Special Resolution
(c) Resolutions requiring special notice
(d) Resolutions requiring Approval from the court
(64) Usually following matters are considered for Ordinary Resolution:-
(a) Election of Directors
(b) Declaration of dividends,
(c) Appointment of auditors and fixing their remuneration, require an ordinary resolution
(d) All of the above
(65) For Election of Directors ____________to be passed
(a) Ordinary Resolution
(b) Special Resolution
(c) Resolutions requiring special notice
(d) Resolutions requiring Approval from the court
(66) For Declaration of dividends __________ is required.
(a) Ordinary Resolution
(b) Special Resolution
(c) Resolutions requiring special notice
(d) Resolutions requiring Approval from the court
(67) For Appointment of auditors and fixing their remuneration, ___________is required.
(a) Ordinary Resolution
(b) Special Resolution
(c) Resolutions requiring special notice
(d) Resolutions requiring Approval from the court
(68) __________passed by a majority of atleast 75% of votes of members present in person or by
proxy and those absenting or remaining neutral and votes cancelled are not counted.
(a) Ordinary Resolution
(b) Special Resolution
(c) Resolutions requiring special notice
(d) Resolutions requiring Approval from the court
(69) The Companies Act requires a Special Resolution to be passed in following matters:-
(a) To alter Memorandum or Articles of the Company
(b) For buy back of shares
(c) To issue sweat equity shares
(d) All of the above
(70) The Companies Act requires a Special Resolution to be passed in following matters:-
(a) Reduction of share capital
(b) Authorising the voluntary winding up of the company
(c) Removal of registered office outside the local limits of the city, town or village in which it is
situated
(d) All of the above
(71) To alter Memorandum or Articles of the Company ___________ is required
(a) Ordinary Resolution
(b) Special Resolution
(c) Resolutions requiring special notice
(d) Resolutions requiring Approval from the court
(72) In order that majority of shareholders participate in the decision making process of the
company the passing of resolutions through_____________ was introduced in 2001 by inserting a
new Section 192 A.
(a) Postal ballot
(b) Video conferencing
(c) E-voting
(d) All of the above
(73) Where a resolution is to be passed by postal ballot, notice is send to the shareholders along with
the draft resolution to send their assent or dissent in writing on a postal ballot within
______from the date of posting of notice.
(a) 30 days
(b) 21 Days
(c) 25 Days
(d) 45 Days
(74) Minutes are commonly referred as concise and precise written record of what took place in the
meeting.
(a) Resolution
(b) Minutes
(c) Agenda
(d) Notice
(75) As per Section 193(1) ―Every company shall maintain _________of all proceedings of general
meetings and of all proceedings at meetings of its board of directors or committees of the board.
Entries of the proceedings must be made in the books kept for that purpose within thirty days of
every such meeting. These are like the evidence of the proceedings of the meeting .‖
(a) Resolution
(b) Minutes
(c) Agenda
(d) Notice
(76) Following are the provisions on the recording of Minutes
(a) The pages of Minute‘s Book are to be consecutively numbered
(b) The Minutes of each meeting shall contain a fair and correct summary of the proceedings.
(c) All appointments of officers made at the meetings shall be included in the Minutes.
(d) All of the above
(77) Each page of every Minute Book should be initialed or signed and at the last page of the record
of the proceedings shall be signed by______
(a) Chairman
(b) President
(c) Secretary
(d) Auditor
(78) If proper Minutes are not maintained then defaulting officers shall be fined up to ₹ _________
(a) 500
(b) 1000
(c) 5000
(d) 3000
(79) The Minutes of the Shareholders meetings are required to be kept at the registered office of the
company and open for inspection for atleast __________ everyday.
(a) 1 hour
(b) 2 hours
(c) 3 hours
(d) 4 hours
(80) ______________is a list of meeting activities in the order in which they are to be taken up, beginning
with the call to order and ending with adjournment. It usually includes one or more specific items of
business to be acted upon. It may, but is not required to, include specific times for one or more
activities.
(a) Resolution
(b) Minutes
(c) Agenda
(d) Notice
(81) It usually includes one or more specific items of business to be acted upon.
(a) Resolution
(b) Minutes
(c) Agenda
(d) Notice
(82) __________refers to voting using electronic means to either aid or take care of the chores of
casting and counting votes.
(a) Electronic voting (also known as e-voting or EVM)
(b) Postal ballot
(c) Video conferencing
(d) All of the above
(83) It has also been laid down that the ___________system should be such as will be capable of recording
and recognising the participation of Directors and of recording and storing the proceedings of such
meetings along with date and timing.
(a) Electronic voting (also known as e-voting or EVM)
(b) Postal ballot
(c) Video conferencing
(d) All of the above
 MOST IMPORTANT SECTION

SECTIONS PARTICULARS