Corporate and Economic Law MCQs Set I

In compliance to the Companies Act, 2013, at least one woman Director shall be on Board of such class or classes of companies as may be prescribed. Ms. Riya is keen to hold the office of woman Director in a company. She has selected some companies in which there is a vacancy for the woman Director. Advice Ms. Riya in selecting the companies which are mandatorily required to appoint a woman Director

KDS Agro Pvt. Ltd., a newly incorporated company has not mentioned the names of first Directors of the company in its Articles of Association. Referring the provisions of the Companies Act, 2013, who shall be deemed to be the first Directors of the company?

The turnover of XYZ Ltd. as on the last date of latest audited financial statements is 400 crore rupees. An Intermittent vacancy of the women Director arises on 15th June, 2018 in the company. The immediate Board Meeting was held on 14th October, 2018. The vacancy of the women Director shall be filled up by——-:

Amar Textiles Limited, a listed company, engaged in the production of furniture and fittings in Pune. The company is having 50,000 small shareholders. The small shareholders wanted to elect a small shareholders Directors amongst themselves so that the issues are resolved during the Board Meetings at the earliest. 500 small shareholders served a notice for appointment of a small shareholder in the Board. Decide the validity of the notice by the small shareholders:

Mr. Q, a Director of PQR Limited proceeding on a foreign tour for six months, appointed Mr. Y as an alternate Director to act for him during his absence. The articles of the company provide for appointment of alternate Directors. Mr. Q claims that he has a right to appoint alternate Director. Examine the validity of Mr. Q’s claim.

Mr. Nagarjuna decided to resign from MGT Private Limited due to pre occupation. He sent his resignation letter dated 12thJune, 2017 to the Company stating that he will resign w.e.f.15thJune, 2017. Due to non receipt of any communication from the Company he dropped a mail on 17th June, 2017, to confirm whether Company has received his letter. Finally, company received his letter on 25thJune, 2017. In this case, from which date his resignation will be effective?

Mr. Z is proposed to be appointed as the Director in a public company RLP Ltd. Mr. Z is already a Director in one dormant company, in two section eight company, in eight public limited company and in nine private limited companies. Two out of nine private limited companies are subsidiaries of public limited companies. Determine whether Mr. Z can accept the new Directorship in RLP Ltd.

ABC Ltd is a government company with fourteen Directors. They are willing to appoint two more Directors in the company to enable the effective management of the company. Mr. X, the Managing Director of the company is of the view that appointment of two more Directors would be a violation of the Companies Act. Examine the above situation in lights of the legal provision.

Due to non-compliance of certain requirements under the Companies Act, 2013 not amounting to fraud, a company was required to re-state its financial statements for the financial year 2016-17 during the current year. After the financial statements were re-stated it was found that the Managing Director (MD) of that period, who is now retired, was paid excess remuneration to the extent of rupees 5,00,000. State whether such excess amount is recoverable.

Capable Limited appoints Mr. Vikas as the Managing Director of the company. The Board of Directors entrusted him with some powers. Mr. Vikas is not ready to do administrative acts authorised by the Board of Directors keeping in view that he shall been entrusted with substantial powers of the management. Decide the acts which Mr. Vikas can undertake:

You are a Whole Time Director of Choco-chips Private Limited and wishes to appoint Mr. Vanilla Sequera as its Managing Director who has attained the age of 72 years. However, the Board has got to know about the fact that 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. You are requested by the board to evaluate the situation and suggest whether he can be appointed as Managing Director?

Mr. A was appointed as a Manager of PQR Ltd for the period of five years on 20thJune, 2015. Considering his performance and dedication, before completion of his tenure, management decided to re-appoint him as a Manager. On which date his re-appointment will be considered valid?

Lockworth Safety Gears Private Limited pays remuneration to its Directors on yearly basis. Company has a Whole Time Director on Board. Currently they appointed Mr. X as a Managing Director of the Company. Now Company has to keep in mind that overall remuneration to the Directors including Managing Director, Whole Time Director and Manager shall not exceed maximum limit mentioned under the Act. If there is more than one Managing Director/ Whole Time Director/ Manager, how much maximum remuneration is allowed in a financial year.

Amarco Company Limited, a company incorporated under the Companies Act, 2013, wants to appoint Mr. Ashwin as a Whole Time Director of the Company. Mr. Ashwin travels to abroad for other business commitments and usually resides outside India for a period of 12 months. Now Mr. Ashwin wants to know the eligibility conditions, with respect to the condition of resident in India, for the appointment of Whole Time Director. You as a qualified Chartered Accountant and a dear friend to Mr. Ashwin is required to help him out considering the provisions of the Companies Act, 2013*

F&I Limited, a listed company under the Companies Act, 2013 has Mr. Abhishek as Chief Financial Officer of the Company. Mr. Abhishek has been in full time employment at F&I Ltd.. Now Mr. Abhishek has been offered to be a Whole Time Director at M&N Limited, in which more than 51% of the paid up share capital is held by F&I Limited*. Mr. Abhishek seeks your advice whether he can proceed with the offer of Whole Time Director considering the provisions of the Companies Act, 2013.

Hasmukh Limited, incorporated under the Companies Act, 2013 have a whole-Time Director (WTD) Mr. Ram who has been re-appointed in the Annual General Meeting (AGM) held on 28th August 2019. Mr. Ram has served as WTD of the company for nearly 4 years and his tenure of office would expire on 24th December 2020. Further, the Company’s upcoming AGM is scheduled to take place on 25th October 2019. In the said AGM, Mr. Ram has been re-appointed as the WTD for his last tenure. You are required to comment about the validity of the re- appointment of Mr. Ram by the company?

M.D.H. Masala Enterprises Limited, a public company incorporated under the Companies Act, 2013 is into the business of trading of various chat masalas used in daily food items. Mr. Vinayak, was appointed as the Chief Financial Officer of the company on 2nd July, 2017 by the board of Directors. In the upcoming Board Meeting scheduled on 30th April 2020, Mr. Rinkesh aged 55 years was appointed as Managing Director of the company. The Board of Directors also made a re- appointment for another term of 3 years in the said meeting. Further in the Annual General Meeting of the company held on 30th June 2020, the appointment of Mr. Rinkesh was approved by the company and the members also noted the reappointment of Mr. Vinayak as Chief Financial Officer for another term of 3 years. You are required to state whether the reappointment of Mr. Vinayak is valid in law?

Go Dairy Company Limited, a public company incorporated under the Companies Act, 2013 is into the business of selling dairy products through online mode. Mr. Dhaval is holding the position of the Whole Time Director in the Company. During the financial year ended March 2020, the office of Mr. Dhaval got vacated on attracting disqualifications under section 164 of the Companies Act, 2013. You are required to advise how shall the board of Directors fill the vacancy of Mr. Dhaval considering the provisions of the Companies Act, 2013?

CK Limited was incorporated on 25th June, 2018. CK Limited wants to make donations to a political party. It wants to know when can it make such donations to political party?

Where at any time the number of interested Directors exceeds or is equal to ——— of the total strength of the Board of Directors, the quorum shall be the number of non-interested Directors who are present at the meeting and not less than two.

In case of a company where minimum per cent members
(in number) are relatives of promoters or are related parties, they are not precluded from voting on a resolution for approving any related party transaction.

Out of the total strength of six Directors of SQ Ltd, five are attending a Board Meeting to consider the investment of funds of the company. The resolution relating to investment shall be taken as passed in which of the following cases:

In case of a Board Meeting which is conducted through the means of video conferencing, the draft minutes shall be circulated among all the Directors within days of the meeting either in writing
or in electronic mode as may be decided by the Board.

Audit Committee may make omnibus approval for:

Firothi Limited, incorporated under the Companies Act, 2013, has 7 directors on its Board of Directors (BOD). One of the director Mr. Avinash, got expired and a casual vacancy is created in its office. Now the Board of Directors wants to appoint another person Mr. Rakesh to fill the vacancy so created. Now the Board of Directors have consulted you, a qualified Chartered Accountant, to advise them within how much time period, Mr. Rakesh can be appointed to fill the vacancy considering the provisions of the Companies Act, 2013.

State which statement is correct as regards the preservation of books and papers of amalgamated company:

Seafood Limited, incorporated on 1st April, 2016. The company has conducted four Board Meetings during the financial year 2016-17 i.e. on 6thApril, 2016, 28th August, 2016, 30thSeptember, 2016 and 30th March, 2017. Decide the validity of the frequency of the Board Meeting:

The Board of Directors of Very Well Ltd. wants to contribute ` 60,000 to a charitable organization during the financial year 2017-2018. During the financial year 2015-2016, the company suffered losses. The Directors are contemplating to contribute the said amount inspite of the losses. In this connection, state whether the Board of Directors can contribute to charitable organisation?

Mayur Textiles Private limited was incorporated on 23rd October, 2017. As per the compliance requirement, Company shall hold its annual general meeting(AGM) within 9 months from the date of closure of financial year and file financial statements with MCA within due date. What is the due date for holding a Board Meeting for approval of financial statements?

ABC, a Private Ltd., with 10 Board of Directors was served notice of the Board Meeting 7 days prior to said meeting on their postal addresses. Mr. M is hospitalized due to some severe illness. Mr. Y is going to London before the Board Meeting. Mr. X and Mr. B went to Australia for some company business. Mr. A is busy with his daughter’s marriage and unable to attend the meeting. Mr. E’s mother is hospitalized so he is busy taking care of his mother but he assures to attend the meeting via video conferencing. Mr. D and Mr. P were scheduled to arrive for the meeting at 2 pm on the same day; however, the flight got delayed by 8 hours. Mr. G and Mr. H are in the town and available for the scheduled Board Meeting. Could the Board Meeting be held?

Rameshwaram Pvt. Ltd. was incorporated on January 12, 2018. The company needs to pass a resolution for the purchase of raw material.The copy of the resolution along with all the necessary documents were circulated to all the Directors. The company has 10 Directors Mr. Ram, Mr. Kamal, Mr. Raj, Mr. Firoz, Mrs. Nupur, Mr. Bharat, Mr. Vinod, Mrs. Rekha, Mr. Kapoor and Mr. Jeevan. Mr. Raj and Mr. Ram were abroad at the time of passing the resolution. Mr. Firoz, Mr. Bharat, Mrs. Nupur and Mr. Kamal took objection before the chairman against the passing of the resolution and want to discuss it further in the meeting. Find out the correct statement?

Jupiter Shopping Mall Limited was incorporated on 3rdDecember, 2016. As on 31stMarch 2018, it had free reserves of ` 50.00 lacs and its Securities Premium Account showed a balance of ` 7.50 lacs. One of its Directors Raha has a leaning towards a particular political party in which his other family members are actively involved. Raha convinced the other two Directors of the company i.e. Promila and Rana to contribute a sum of ` 10.00 lacs to this political party. Accordingly, the Board of Directors held a meeting on 16thDecember, 2018 and passed a resolution to contribute the decided amount. Advise the company as to how much amount they can contribute to a political party in the FY 2018-19.

What is the circumstance in which notice can be served for inspection of books etc. under section 206(3) of Companies Act, 2013

The shareholders of Ravi Ltd. passed a special resolution that the affairs of the company ought to be investigated. The company submitted the special resolution to the Central Government.

In a company there is a serious apprehension of cornering the share of the company by a group of unscrupulous persons likely to result in change in the Board of Directors which may be prejudicial to the public interest. The company seeks your advice as to how it can impose restrictions on the transfer of shares of the company under the provisions of the Companies Act, 2013.

After perusal of the inspector’s report it appears to the Central Government that a company is liable to be wound up under this Act, it may cause to be presented to the Tribunal,

Registrar issue a written notice to Miss Neha who is an ex-employee of Himalya Ltd. demanding information and explanation and production of documents. She ignored the notice considering that she is no more an employee of the company. Choose the right option in the light of the Companies Act, 2013.

Offences covered under section 447 of this Act shall be cognizable and no person accused of any such offence shall be released on bail. However, on the direction of Special court, following person may be released on bail.

Mr. Sharma who was a Key Managerial Personnel (Manager) of XYZ Ltd. retired on 12th May 2018. An examination of the final accounts of the company for the year ended on 31st March 2018, the Registrar of Companies found some serious irregularities in writing off of the huge amounts of bad debts and no satisfactory explanation was provided for the same from the company. In such a situation the Registrar of Companies wants some explanation from the company and Mr. Sharma. Can the ROC seek explanation from Mr. Sharma? Advice –

A group of creditors of X Limited makes a complaint to the Registrar of Companies. They asserted that the management of the company is indulged in destruction and falsification of the accounting records of the company. The complainants request the Registrar to take immediate steps to stop the management to tamper with the records. The complaint was received in the morning on 1st January 2019 and the ROC entered the premises within half an hour for the search. The course of action that can be taken by Registrar are:

Mr. Raman, an Inspector under section 212 of the Companies Act, 2013 investigates into the affairs of X Ltd. During the process of investigation, Mr. Raman evidenced relevant facts and information regarding the transactions made by Company X Ltd. with its subsidiary Y Ltd. During the course of investigation, Mr. Raman required to investigate the affairs of Y Ltd. Examine whether Mr. Raman can proceed with the investigation of the affairs of subsidiary company in the light of provisions of the Companies Act, 2013.

Ultra Ltd., a public company was incorporated on 13th May 2019. After one year of its incorporation the shareholders of company came to know that some transaction inside the company was not in accordance with the provision of the Companies Act and also prejudicial in the interest of company and its members, so some shareholder decided to make application to this Central Government to conduct investigation into affairs of the company by appointing inspector under the provision of the Companies Act, 2013.
Does application of shareholder can be acceptable under the provision of Companies Act, 2013.

Central Government has appointed Mr. Rishikesh as an inspector to conduct investigation in the affairs of company of Overtake Ltd. in accordance with provision of the Companies Act, 2013. During investigation it was found that company has reduced the position of Mr. Gopal (who was senior employee of company earlier), within few days after start of investigation. Company didn’t try to obtain order from tribunal before taking this action. Mr. Gopal wants to know whether company have right to reduce rank of employee during investigation.

While conducting an inspection under section 207 of the Companies Act, 2013, the inspector noticed various irregularities. The inspector seeks necessary explanations from the Directors concerned regarding those irregularities. The Director furnished necessary explanations and accordingly the inspector prepared the inspection Report under section 208 of the Act. You are required to state that to whom the inspection report shall be submitted and whether an inspector has the right to make recommendations for further investigation?

A Ltd. was amalgamated into AB Ltd. AB Ltd had held 100 % shares in AC Ltd. Both AB Ltd and AC Ltd held 10000 shares in A Ltd. before the amalgamation took place. A Ltd had 100000 issued shares in total before amalgamation and 70000 shares therein were held by B Ltd who also later became shareholder in AB Ltd under amalgamation. But the shareholders apart from B Ltd. (and excluding AB Ltd., and AC Ltd) holding 10000 shares did not become shareholders in the new AB Ltd. Assuming all other conditions for Amalgamation in the nature of merger are fulfilled, would this be:

B Limited was demerged to B Reality Limited and B Limited. What type of demerger is this?

The time limit within which the representation if any, of Sectoral regulators shall be made within _________ from the date of receipt of Notice of the meeting to be called, held and conducted by the Tribunal

The scheme of compromise or arrangement should be approved by the members or class of members or creditors or class of creditors. What is the minimum requirement for the same:

Mr. Anand who was a minority shareholder, was offered a price for purchase of his shares by the majority. The same was disbursed within the stipulated time as per the Act. However, Mr. Anand was out of town, and returned only after 2 months of the stipulated deadline. Will he be able to receive the amount. If yes, upto what period?