CA Final Paper 4 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Subsidiary company definition

A company in which the holding company controls the board composition or exercises or controls more than one-half of the total voting power, alone or together with its subsidiaries.

Private company transfer restriction

A private company may restrict share transfers through its articles; refusal to register a transfer must be communicated within 30 days, with appeal to the Tribunal within 60 days of refusal.

Related party transaction approval

Section 188 requires prior Board approval for prescribed related party transactions; member approval by ordinary resolution is needed if thresholds are exceeded, and interested directors abstain.

CIRP timeline under IBC

The corporate insolvency resolution process must be completed within 180 days from the insolvency commencement date, extendable by up to 90 days by the Adjudicating Authority on the resolution professional's application.

Independent directors proportion

Under SEBI LODR, a listed entity with a non-executive non-promoter chairperson needs at least one-third independent directors; with an executive chairperson, at least half of the board must be independent.

CCI combination notification

Combinations exceeding the assets or turnover thresholds in section 5 of the Competition Act require prior notification to the CCI, which must form a prima facie opinion within 30 working days.

PMLA record retention

Reporting entities must maintain records of transactions for at least five years from the transaction date and verify client identity under KYC norms.

FEMA current account rule

Current account transactions are generally permitted unless restricted by the Rules; capital account transactions require RBI permission or are permitted only to the extent specified in regulations.

CSR spending obligation

Companies meeting net worth, turnover, or net profit thresholds must spend at least 2% of average net profits of the three preceding financial years on CSR; unspent amounts go to a specified fund within six months.

Board meeting minimum frequency

Under section 173 of the Companies Act 2013, the first board meeting must be held within 30 days of incorporation, and thereafter at least four meetings must be held every year with a gap of not more than 120 days between two meetings.

AGM first meeting deadline

The first annual general meeting must be held within nine months from the date of closing of the first financial year; thereafter an AGM must be held each year within six months of the financial year end.

Auditor rotation period

For listed companies and prescribed classes, an individual auditor may serve for one term of five consecutive years, and an audit firm for two terms of five consecutive years, with a cooling-off period.

Oppression and mismanagement remedy

Section 241 allows members to apply to the Tribunal for relief against oppression or mismanagement; the Tribunal may pass orders under section 242, including regulating the company's affairs or altering its memorandum or articles.

Class action provision

Section 245 permits members or depositors to file a class action before the Tribunal against a company, directors, auditors, or experts for conduct prejudicial to the company or its members.

Insider trading prohibition

SEBI (Prohibition of Insider Trading) Regulations 2015 prohibit trading in securities while in possession of unpublished price-sensitive information and require disclosure of trades by insiders and connected persons.

Takeover code trigger

Under SEBI (SAST) Regulations 2011, acquiring 25% or more of voting rights in a target company triggers a mandatory open offer for at least 26% of the voting capital.

SARFAESI enforcement

The SARFAESI Act 2002 allows secured creditors to enforce security interests without court intervention after a default, subject to a 60-day notice to the borrower to discharge the liability.

Dishonour of cheque offence

Section 138 of the Negotiable Instruments Act 1881 applies when a cheque is dishonoured for insufficient funds; the payee must issue a demand notice within 30 days of receiving the dishonour memo.

Arbitration award challenge period

Under section 34 of the Arbitration and Conciliation Act 1996, an application to set aside an arbitral award must be made within three months of receipt of the award, extendable by up to 30 days.

Winding up vs. insolvency

The IBC 2016 overrides the Companies Act winding-up provisions for insolvency resolution; a financial creditor can initiate CIRP, while operational creditors must meet the specified threshold and default conditions.

Pre-packaged insolvency process

Chapter III-A of the IBC provides a pre-packaged insolvency resolution process for micro, small, and medium enterprises, requiring a base resolution plan from the debtor and approval by the Adjudicating Authority.

Foreign direct investment routes

FDI is permitted under the automatic route without approval, or the government route with approval, depending on the sector; prohibited sectors include lottery, gambling, and chit funds.

External commercial borrowing limits

ECB is governed by FEMA and RBI guidelines; eligible borrowers can raise funds from recognized lenders subject to all-in-cost ceilings, maturity limits, and end-use restrictions.

Prevention of corruption

The Prevention of Corruption Act 1988, amended in 2018, penalizes public servants for accepting gratification and covers commercial organizations for bribery of public servants.

Whistleblower protection

The Companies Act 2013 and SEBI LODR require listed companies and prescribed companies to establish a vigil mechanism for directors and employees to report genuine concerns.

Secretarial audit applicability

Under section 204, every listed company and prescribed classes of companies must annex a secretarial audit report by a practising company secretary to the board's report.

Director disqualification

Section 164 disqualifies a person from being a director if they are of unsound mind, undischarged insolvent, convicted of an offence, or have failed to comply with provisions; disqualification lasts five years.

Loan to directors restriction

Section 185 prohibits a company from giving loans or guarantees to directors or entities in which they are interested, except with member approval by special resolution and subject to conditions.

Deposit acceptance rules

Chapter V of the Companies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014 regulate deposits; companies must maintain a deposit repayment reserve and comply with limits and disclosure requirements.

Dividend declaration

Dividends are declared by the board and approved by members at the AGM; dividends must be paid within 30 days of declaration, and unpaid amounts go to the Unpaid Dividend Account within seven days.

Compromise and arrangement

Sections 230-232 allow a company to enter into a compromise or arrangement with creditors or members, requiring application to the Tribunal and approval by a majority in number representing three-fourths in value.

National Company Law Tribunal

The NCLT is the adjudicating authority for company law matters under the Companies Act 2013 and for insolvency proceedings under the IBC, with appeals to the NCLAT.