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Question 1Corporate Law and Governance

Under the Companies Act, 2013, a private company must restrict the transfer of its shares. Which provision of its articles is the statutory basis for this restriction?

  1. A clause restricting the right to transfer shares in the manner prescribed Correct answer.
  2. A clause requiring prior approval of the Registrar of Companies for every transfer
  3. A clause prohibiting any transfer of shares for a fixed period of five years
  4. A clause empowering the board to refuse registration of any transfer without assigning reasons

Explanation

Section 2(68) requires a private company's articles to restrict the right to transfer its shares. The restriction must operate in a defined manner; an absolute bar or an unfettered board veto is not what the statute contemplates, and the Registrar has no role in share transfers.

Question 2Corporate Law and Governance

A public company has 1,000 members holding equity shares. What is the maximum number of directors it may appoint, assuming it has not passed any special resolution on the matter?

  1. Ten
  2. Twelve
  3. Fifteen Correct answer.
  4. Twenty

Explanation

Section 149(1) permits a company to appoint a maximum of fifteen directors; a higher number requires a special resolution. A public company must have at least three directors, and the ceiling of fifteen applies unless the company opts for more.

Question 3Corporate Law and Governance

Which of the following persons is disqualified from being appointed as a director of a company under Section 164(1)?

  1. A person who holds shares in the company itself
  2. A person who has been convicted of an offence involving fraud and sentenced to imprisonment for one year
  3. A person who is a director in a company that has defaulted in filing annual returns for three years
  4. A person who is an undischarged insolvent Correct answer.

Explanation

Section 164(1) expressly disqualifies an undischarged insolvent from appointment as a director. Holding shares is not a disqualification, and conviction for fraud disqualifies only where the sentence is imprisonment for six months or more, so a one-year sentence would in fact disqualify - but that is a different limb of the section and the option must be read precisely.

Question 4Corporate Law and Governance

A company wishes to appoint an independent director. Which condition must be satisfied under Section 149(6)?

  1. The person must hold at least one per cent of the total voting power of the company
  2. The person must be a nominee of a lending bank
  3. The person must not have been a promoter of the company or its holding or subsidiary company Correct answer.
  4. The person must have been an employee of the company for not less than five years

Explanation

Section 149(6) requires that an independent director not be a promoter of the company or of its holding, subsidiary or associate company. The other conditions in the option set are inconsistent with independence: material shareholding, prior employment and bank nomination all compromise the independence criteria.

Question 5Corporate Law and Governance

A company's articles provide for the appointment of a managing director. Which provision of the Companies Act, 2013 governs the appointment of the managing director?

  1. Section 141 read with Schedule VI
  2. Section 196 read with Schedule V Correct answer.
  3. Section 152 read with Schedule IV
  4. Section 178 read with Schedule II

Explanation

Section 196 deals with the appointment of managing director, whole-time director and manager, and Schedule V sets out the conditions of appointment and remuneration. Schedule IV contains the code for independent directors and is not relevant here.

Question 6Corporate Law and Governance

Under Section 123 of the Companies Act, 2013, a company may declare a dividend for a financial year only if which condition is satisfied?

  1. The company has transferred at least ten per cent of its net profits to reserves
  2. The company has obtained prior approval of the Central Government
  3. The company has not defaulted in payment of interest or repayment of deposit Correct answer.
  4. The company has paid all its secured creditors in full

Explanation

Section 123(1) allows dividend to be declared only if the company has not defaulted in payment of interest or repayment of deposit or interest thereon. Reserves are relevant only for computing free reserves for certain dividend declarations, and Central Government approval is not required for ordinary dividends.

Question 7Corporate Law and Governance

A company wants to buy back its own shares. Which of the following is a permissible source of funds for a buy-back under Section 68?

  1. The proceeds of a fresh issue of shares made specifically for the buy-back Correct answer.
  2. The company's statutory reserves without any adjustment
  3. The company's securities premium account in all circumstances without any restriction
  4. The company's share capital account other than the proceeds of a fresh issue

Explanation

Section 68 permits buy-back out of free reserves, the securities premium account, or the proceeds of a fresh issue of shares made for the purpose. The share capital account cannot be used, and the securities premium account is subject to conditions such as the buy-back ratio and the seventy per cent balance requirement.

Question 8Corporate Law and Governance

Which of the following constitutes a 'related party' under Section 2(76) of the Companies Act, 2013?

  1. A person who is a director of a company that is not the holding, subsidiary or associate company
  2. A director of the company or his relative Correct answer.
  3. An employee of the company who is not a key managerial personnel
  4. A customer of the company who buys goods on credit

Explanation

Section 2(76) includes a director or key managerial personnel of the company or his relative within the definition of related party. An unrelated company's director, an ordinary employee and a customer are not automatically related parties under that clause.

Question 9Corporate Law and Governance

A company proposes to enter into a related party transaction exceeding the limits in Section 188. Which of the following is required?

  1. Approval of the shareholders by an ordinary resolution Correct answer.
  2. Approval of the board by a special resolution of the board
  3. Prior approval of the Registrar of Companies
  4. Prior approval of the Audit Committee only

Explanation

Section 188 requires prior approval of the company by an ordinary resolution where the transaction exceeds the prescribed thresholds, in addition to board approval. The Audit Committee approval is required for certain transactions but does not substitute for shareholder approval, and the Registrar does not approve transactions.

Question 10Corporate Law and Governance

Under Section 139 of the Companies Act, 2013, an auditor of a company is appointed for a term of five years. Which of the following statements about the rotation of auditors is correct?

  1. An individual auditor may be reappointed for a second term of five years
  2. An audit firm may be reappointed for a second term of five years Correct answer.
  3. An audit firm may be reappointed for a second term of ten years
  4. An individual auditor may be reappointed for a second term of ten years

Explanation

Section 139(2) prohibits reappointment of an individual auditor for more than one term of five consecutive years and of an audit firm for more than two terms of five consecutive years. Thus an audit firm may be reappointed for a second term of five years, subject to the cooling-off period.

Question 11Corporate Law and Governance

A company has a paid-up share capital of Rs. 5 crore and turnover of Rs. 50 crore. Which of the following statements about the constitution of the Audit Committee is correct?

  1. The Audit Committee is mandatory only if the company has listed securities
  2. The Audit Committee is not required because the turnover is below Rs. 100 crore
  3. The Audit Committee is required to be constituted only if the company has a public deposit
  4. The Audit Committee is required to be constituted under Section 177, and the majority of members must be independent directors Correct answer.

Explanation

Section 177 mandates an Audit Committee for companies meeting the prescribed thresholds, including paid-up capital of Rs. 10 crore or more or turnover of Rs. 100 crore or more. The committee must consist of a minimum of three directors with independent directors forming a majority.

Question 12Corporate Law and Governance

Which of the following is a ground for compulsory winding up of a company under Section 271 of the Companies Act, 2013?

  1. The company has changed its registered office without intimation
  2. The company has, by special resolution, resolved that it be wound up by the Tribunal Correct answer.
  3. The company has failed to file its annual return for one year
  4. The company has not held a board meeting for six months

Explanation

Section 271 permits winding up by the Tribunal where the company has, by special resolution, resolved to be wound up by the Tribunal. Failure to file returns or hold meetings may attract penalties but is not a ground for compulsory winding up.

Question 13Corporate Law and Governance

A company has failed to pay a debt of Rs. 1.5 crore to a creditor. The creditor wants to initiate the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. Which of the following statements is correct?

  1. The creditor must first obtain a decree from a civil court
  2. The creditor must file an application before the National Company Law Tribunal as a financial creditor Correct answer.
  3. The creditor must obtain the consent of the Registrar of Companies
  4. The creditor must first exhaust the remedy of winding up under the Companies Act

Explanation

Under the IBC, a financial creditor may file an application before the NCLT for initiation of the corporate insolvency resolution process. The Code does not require a prior civil decree or the consent of the Registrar, and the IBC is an independent remedy.

Question 14Corporate Law and Governance

Which of the following is a characteristic of a One Person Company under Section 2(62) of the Companies Act, 2013?

  1. It must have a minimum paid-up capital of Rs. 1 crore
  2. It must be a private company Correct answer.
  3. It must have a minimum of two directors
  4. It must be a public company

Explanation

Section 2(62) defines a One Person Company as a company which has only one person as a member, and such a company is a private company by virtue of the definition. It may have one director, and no minimum paid-up capital is prescribed.

Question 15Corporate Law and Governance

Under Section 12 of the Companies Act, 2013, a company must paint or affix its name and registered office address at its registered office. What is the consequence of non-compliance?

  1. The company is liable to a penalty, and every officer in default is liable to a penalty Correct answer.
  2. The company's certificate of incorporation is cancelled
  3. The company's directors are disqualified for five years
  4. The company is automatically struck off from the register

Explanation

Section 12(8) provides that non-compliance attracts a penalty on the company and on every officer in default. The provision does not provide for automatic striking off, cancellation of incorporation or director disqualification for this default.

Question 16Corporate Law and Governance

A company's board consists of eight directors. What is the minimum number of directors who must be independent directors if the company is a listed company?

  1. Four
  2. Two
  3. One
  4. Three Correct answer.

Explanation

Section 149(4) requires every listed public company to have at least one-third of its total number of directors as independent directors. For a board of eight, one-third is 2.67, which rounds up to three.

Question 17Corporate Law and Governance

Which of the following documents must be filed with the Registrar of Companies within thirty days of incorporation under Section 10?

  1. A declaration by the Registrar that the company has been registered
  2. A declaration by a practising chartered accountant or company secretary that the company has complied with the requirements of the Act Correct answer.
  3. A declaration by the subscribers that they have paid the whole of the share capital
  4. A declaration by the board that the company will not change its name

Explanation

Section 10 requires, at the time of registration, a declaration by a person named in the articles as a director, manager or secretary that all the requirements of the Act have been complied with. Such a declaration is signed by a practising chartered accountant or company secretary in practice.

Question 18Corporate Law and Governance

Under Section 165 of the Companies Act, 2013, what is the maximum number of directorships a person may hold simultaneously, excluding directorships in private companies?

  1. Twenty
  2. Fifteen
  3. Twenty-five
  4. Ten Correct answer.

Explanation

Section 165 limits the number of directorships to twenty, of which not more than ten may be in public companies. Excluding private companies, the limit for public companies is ten.

Question 19Corporate Law and Governance

A company's annual general meeting is due to be held. Which of the following statements about the notice period for the AGM is correct under Section 101?

  1. Not less than thirty days' notice in writing is required
  2. Not less than fourteen days' notice in writing is required
  3. Not less than twenty-one days' notice in writing is required Correct answer.
  4. Not less than forty-five days' notice in writing is required

Explanation

Section 101 requires a general meeting to be called by giving not less than twenty-one clear days' notice in writing. A shorter notice may be given with the consent of members holding the requisite majority.

Question 20Corporate Law and Governance

A company has passed a special resolution to change its name. Which of the following is required for the change to take effect?

  1. Approval of the Central Government and issue of a fresh certificate of incorporation
  2. Approval of the Registrar of Companies and issue of a fresh certificate of incorporation Correct answer.
  3. Approval of the shareholders by an ordinary resolution
  4. Approval of the board of directors only

Explanation

Section 13 requires a special resolution and the approval of the Central Government, and the Registrar must issue a fresh certificate of incorporation. The change takes effect from the date of the fresh certificate.

Question 21Corporate Law and Governance

Which of the following is a duty of the board of directors under Section 166 of the Companies Act, 2013?

  1. To declare a dividend every year
  2. To hold a board meeting every month
  3. To appoint a statutory auditor every year
  4. To act in good faith in order to promote the objects of the company Correct answer.

Explanation

Section 166 imposes duties on directors, including the duty to act in good faith to promote the objects of the company and in the best interests of the company. Declaring dividend, appointing auditors and holding monthly meetings are not statutory duties of the board in that section.

Question 22Corporate Law and Governance

A company has a paid-up share capital of Rs. 15 crore. Which of the following statements about the appointment of a whole-time company secretary is correct?

  1. A whole-time company secretary is mandatory for a company with paid-up capital of Rs. 10 crore or more Correct answer.
  2. A whole-time company secretary is mandatory for all companies irrespective of capital
  3. A whole-time company secretary is mandatory only if the company has a public deposit
  4. A whole-time company secretary is mandatory only for listed companies

Explanation

Section 203 requires every company with paid-up share capital of Rs. 10 crore or more to appoint a whole-time company secretary. The requirement is not confined to listed companies or to companies with public deposits.

Question 23Corporate Law and Governance

Which of the following is a consequence of a company failing to comply with the provisions relating to the maintenance of a register of members under Section 88?

  1. The company is automatically dissolved
  2. The members lose their voting rights
  3. The company is liable to a penalty, and every officer in default is liable to a penalty Correct answer.
  4. The company's shares are automatically transferred to the Registrar

Explanation

Section 88 requires the company to maintain registers of members, debenture holders and other security holders. Non-compliance attracts a penalty on the company and on every officer in default, but does not lead to dissolution or loss of voting rights.

Question 24Corporate Law and Governance

A director of a company has been convicted of an offence involving fraud and sentenced to imprisonment for eight months. What is the consequence under Section 164(1)?

  1. The director is disqualified for six years from the date of conviction
  2. The director is disqualified for five years from the date of conviction Correct answer.
  3. The director is disqualified for ten years from the date of conviction
  4. The director is not disqualified because the sentence is less than one year

Explanation

Section 164(1) disqualifies a person convicted of an offence involving fraud from being appointed as a director for five years from the date of conviction. The statutory threshold is a sentence of imprisonment for six months or more, which eight months satisfies.

Question 25Corporate Law and Governance

A company has passed a resolution for the buy-back of its shares. Which of the following conditions must be satisfied under Section 68?

  1. The buy-back must be less than fifty per cent of the total paid-up capital and free reserves
  2. The buy-back must be less than twenty-five per cent of the total paid-up capital and free reserves Correct answer.
  3. The buy-back must be less than ten per cent of the total paid-up capital and free reserves
  4. The buy-back must be less than fifteen per cent of the total paid-up capital and free reserves

Explanation

Section 68(2)(c) provides that the buy-back must be less than twenty-five per cent of the total paid-up capital and free reserves. The ten per cent limit applies to buy-back by the board without a special resolution, and the fifty per cent limit is not a statutory condition.

Question 26Corporate Law and Governance

Under the Companies Act, 2013, which class of company is required to have at least one woman director on its board?

  1. Only listed companies with turnover exceeding Rs. 300 crore
  2. Only Section 8 companies engaged in charitable activities
  3. Every public company and every private company having paid-up share capital of Rs. 100 crore or more Correct answer.
  4. Every private company irrespective of its capital or turnover

Explanation

Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 read with the first proviso to Section 149(1) requires a woman director in every listed company and in every other public company having paid-up share capital of Rs. 100 crore or more or turnover of Rs. 300 crore or more. The obligation also covers private companies meeting those financial thresholds. It is not limited to listed or charitable companies.

Question 27Corporate Law and Governance

A company's articles contain a clause restricting the transfer of its shares. Which of the following best describes the legal effect of such a restriction under the Companies Act, 2013?

  1. The restriction is void because shares are freely transferable in a public company
  2. The restriction is valid only if it is fair and reasonable and the articles are treated as a contract between the company and its members Correct answer.
  3. The restriction binds only the original subscribers and not later transferees
  4. The restriction requires prior approval of the Central Government to be enforceable

Explanation

Section 44 declares shares to be movable property transferable in the manner provided by the articles, and Section 10 treats the articles as a contract binding the company and its members. Restrictions on transfer are therefore enforceable when they are contained in the articles and are reasonable. They do not require government approval to operate.

Question 28Corporate Law and Governance

A private company wants to accept deposits from its members. Which of the following statements correctly reflects the position under the Companies Act, 2013 and the Deposit Rules?

  1. A private company may accept deposits from members subject to the prescribed limits, members' resolution and compliance with the Deposit Rules Correct answer.
  2. A private company is absolutely prohibited from accepting any deposit from any person
  3. A private company may accept deposits from members without any limit and without any resolution
  4. A private company may accept deposits only after obtaining prior approval of the Reserve Bank of India

Explanation

Chapter V and the Companies (Acceptance of Deposits) Rules, 2014 permit a private company to accept deposits from its members within the prescribed ceiling, subject to a members' resolution and other conditions such as deposit repayment reserve and deposit insurance where applicable. The exemption from certain provisions does not create an unlimited power. Deposits from the public at large remain outside the permitted scope for private companies.

Question 29Corporate Law and Governance

Which of the following is the correct quorum for a meeting of the Board of Directors of a public company under Section 174 of the Companies Act, 2013?

  1. Two directors irrespective of the size of the board
  2. One-third of its total strength or two directors, whichever is higher Correct answer.
  3. One-fourth of its total strength or two directors, whichever is higher
  4. One-half of its total strength or three directors, whichever is higher

Explanation

Section 174(1) fixes the quorum for a board meeting at one-third of the total strength of the board or two directors, whichever is higher. The participation of directors by video conferencing or audio-visual means is counted for quorum. Total strength excludes directors whose office is vacant.

Question 30Corporate Law and Governance

A statutory auditor of a listed company resigns before the end of his term. Within what period must he file a statement of resignation with the company and the Registrar?

  1. Within sixty days of resignation
  2. Within fifteen days of resignation
  3. Within thirty days of resignation Correct answer.
  4. Within seven days of resignation

Explanation

Section 140(2) requires an auditor who resigns to file a statement in the prescribed form with the company and the Registrar within thirty days of the date of resignation. The statement must indicate the reasons and other prescribed particulars. Non-compliance attracts penalty under Section 140(3).

Question 31Corporate Law and Governance

A company proposes to alter its articles of association to convert itself from a private company into a public company. Which of the following is required for the alteration to be effective?

  1. Approval of the Tribunal by way of an application
  2. An ordinary resolution of the members together with consent of the board of directors
  3. A special resolution alone, with no filing requirement
  4. A special resolution of the members and approval of the Registrar, who shall register the alteration Correct answer.

Explanation

Section 14 permits alteration of articles by special resolution, and Section 18 deals with conversion of companies, requiring the altered articles to be filed with the Registrar, who registers the conversion. The change takes effect on registration. A mere resolution without filing does not complete the conversion.

Question 32Corporate Law and Governance

A director of a company has a direct pecuniary interest in a contract that the board is considering. Which of the following correctly states his obligation under Section 184 of the Companies Act, 2013?

  1. He must resign from the board before the contract is considered
  2. He must disclose his interest at the board meeting and shall not participate in the discussion or vote on the resolution Correct answer.
  3. He need not disclose the interest if the transaction is at arm's length
  4. He may participate and vote provided he discloses the interest afterwards in the annual return

Explanation

Section 184 requires a director with a direct or indirect interest in a contract or arrangement to disclose the nature of his concern at a board meeting. Where the interest is direct, the director shall not be present at the meeting during the discussion and shall not vote on the resolution. Arm's length pricing does not dispense with disclosure.

Question 33Corporate Law and Governance

Which of the following statements correctly describes the concept of 'independent director' under Section 149(6) of the Companies Act, 2013?

  1. An independent director is a nominee director of a financial institution that has lent funds to the company
  2. An independent director is any non-executive director nominated by a promoter
  3. An independent director is a director who, among other things, has no material pecuniary relationship with the company and is not a promoter or related to a promoter Correct answer.
  4. An independent director is a director who holds office for a fixed term of ten years without reappointment

Explanation

Section 149(6) defines an independent director by reference to the absence of material pecuniary relationships with the company, its promoters, directors or holding company, and by exclusion of promoters and their relatives. Nominee directors and whole-time directors cannot qualify. The definition lists several cumulative disqualifications rather than a single test.

Question 34Corporate Law and Governance

A company's net worth is Rs. 600 crore and turnover is Rs. 1,100 crore in the preceding financial year. Which of the following statements about constitution of a Corporate Social Responsibility Committee is correct?

  1. A CSR Committee is required only if the board passes a resolution to that effect
  2. No committee is required because the company is not listed
  3. A CSR Committee is required only if the company earns profits exceeding Rs. 10 crore
  4. A CSR Committee is required because the company meets the net worth and turnover thresholds under Section 135 Correct answer.

Explanation

Section 135 applies to a company having net worth of Rs. 500 crore or more, turnover of Rs. 1,000 crore or more, or net profit of Rs. 5 crore or more during the immediately preceding financial year. Meeting any one threshold triggers the obligation to constitute a CSR Committee. Listing status is not a condition.

Question 35Corporate Law and Governance

A member of a company wants to inspect the register of members. Which of the following statements correctly states the position under Section 88 of the Companies Act, 2013?

  1. The register of members need not be maintained if the company is a private company
  2. The register of members must be kept at the registered office and is open to inspection by members without any fee Correct answer.
  3. The register of members may be kept at any place chosen by the company secretary and is closed to inspection
  4. The register of members must be preserved for eight years and then destroyed

Explanation

Section 88 requires the register of members and other registers to be kept at the registered office of the company, and members have a right to inspect them without payment of any fee. Copies may be sought on payment of prescribed fees. The register must be preserved permanently for members and for eight years after entry for debenture holders.

Question 36Corporate Law and Governance

A company wishes to issue sweat equity shares to its employees. Which of the following conditions must be satisfied under Section 54 of the Companies Act, 2013?

  1. The issue may be made at any price without any valuation requirement
  2. The issue must be authorised by a special resolution of the members and must comply with the prescribed rules, including a minimum one-year gap from the date of commencement of business Correct answer.
  3. The issue may be made by board resolution alone if the shares are issued to whole-time directors
  4. The issue may be made to employees of an unrelated company under a group scheme

Explanation

Section 54 permits a company to issue sweat equity shares of a class already issued, subject to authorisation by a special resolution and compliance with the Companies (Share Capital and Debentures) Rules, 2014. The rules prescribe, among other things, that the issue shall be after one year from the date on which the company is entitled to commence business. Sweat equity is confined to directors and employees of the company or its group.

Question 37Corporate Law and Governance

A company has defaulted in filing its financial statements for three consecutive financial years. Which of the following consequences is correct under Section 132 of the Companies Act, 2013?

  1. The company's registration is automatically cancelled by the Registrar
  2. The company's directors are automatically disqualified for life from holding any directorship
  3. The company may voluntarily refer the matter to the National Financial Reporting Authority for adjudication
  4. The company is liable to a penalty, and the matter may be referred to the National Financial Reporting Authority for investigation Correct answer.

Explanation

Section 132 read with the proviso to Section 132(1) empowers the National Financial Reporting Authority to investigate matters of non-compliance with accounting standards and connected defaults. The Companies (Amendment) Act, 2019 introduced penalties for non-filing of financial statements, and such defaults can be referred to NFRA. Automatic lifetime disqualification and automatic cancellation of registration are not prescribed consequences.

Question 38Corporate Law and Governance

A company proposes to give a loan to a person in whom one of its directors is interested. Which of the following statements correctly reflects the restriction under Section 185 of the Companies Act, 2013 as amended?

  1. A company is absolutely prohibited from giving any loan to any person in whom a director is interested
  2. A company may advance a loan to any person in whom a director is interested provided the loan carries interest at the prevailing bank rate
  3. A company may advance a loan to a person in whom a director is interested without any resolution if the amount is below Rs. 1 crore
  4. A company may advance a loan to a person in whom a director is interested only if a special resolution is passed and the borrowing company uses it for its principal business activities Correct answer.

Explanation

Section 185, as amended by the Companies (Amendment) Act, 2017, permits a company to advance a loan or give a guarantee or security to any person in whom a director is interested, provided a special resolution of members is passed disclosing full particulars and the borrowing entity uses the funds for its principal business activities. The loan must not be at a rate below the prevailing yield of government securities.

Question 39Corporate Law and Governance

A company has passed a resolution for reduction of its share capital. Which of the following correctly describes the process under Section 66 of the Companies Act, 2013?

  1. Reduction requires only an ordinary resolution and filing with the Registrar
  2. Reduction requires approval of the Securities and Exchange Board of India in all cases
  3. Reduction may be effected by board resolution if the reduction is less than ten per cent of paid-up capital
  4. Reduction requires a special resolution and confirmation by the Tribunal, and the company must apply to the Tribunal for an order confirming the reduction Correct answer.

Explanation

Section 66 permits reduction of share capital on a special resolution, subject to application to the Tribunal for an order confirming the reduction. The Tribunal considers the interests of creditors and may direct publication and settlement of claims. The process is not a mere filing exercise.

Question 40Corporate Law and Governance

A director has been disqualified under Section 164(2) of the Companies Act, 2013 for failure to file financial statements for three consecutive years. Which of the following statements correctly describes the effect of the disqualification?

  1. He ceases to hold office only in the defaulting company and may continue in other companies
  2. He may continue as a director but cannot sign the financial statements
  3. He may be reappointed after one year if the default is cured
  4. He ceases to hold office in all companies in which he is a director and is ineligible for reappointment for five years Correct answer.

Explanation

Section 167 provides that a director disqualified under Section 164(2) vacates office in every company in which he holds a directorship. Section 164(2) imposes a five-year ineligibility for fresh appointment from the date of the default. The disqualification operates across all companies, not merely the defaulting one.

Question 41Company Secretarial Practice and Compliance

Under the Companies Act, 2013, which document must a company display at its registered office in addition to the certificate of incorporation?

  1. The latest annual return filed with the Registrar
  2. The board resolution approving the auditors' appointment
  3. A copy of the memorandum and articles of association Correct answer.
  4. The certificate of commencement of business

Explanation

Section 17 of the Companies Act, 2013 requires every company to keep a copy of its memorandum and articles of association at its registered office, available for inspection by members on payment of the prescribed fee. The certificate of incorporation must also be displayed, but the M&A copy is the statutory companion document for inspection.

Question 42Company Secretarial Practice and Compliance

A private company has 180 members. What is the maximum number of members it may have without converting into a public company?

  1. 200 Correct answer.
  2. 100
  3. 50
  4. Unlimited

Explanation

Section 2(68) of the Companies Act, 2013 defines a private company as one that restricts the transfer of shares and limits its members to 200, excluding present and past employees who are members. A private company with 180 members is therefore still within the statutory ceiling.

Question 43Company Secretarial Practice and Compliance

Which of the following is a statutory duty of a company secretary in relation to board meetings?

  1. To vote on behalf of the directors who are absent
  2. To prepare and circulate the notice, agenda and minutes of the meeting Correct answer.
  3. To preside over the meeting in the absence of the chairman
  4. To approve the financial statements before they are adopted

Explanation

The company secretary acts as the secretary to the board and is responsible for convening meetings, circulating notices and agenda, and recording and maintaining minutes under Section 118. The secretary facilitates the meeting but does not exercise the directors' decision-making powers.

Question 44Company Secretarial Practice and Compliance

A company fails to file its annual return within the time prescribed under Section 92. Which consequence applies?

  1. The company is automatically struck off from the register
  2. The company's certificate of incorporation is suspended
  3. The company and every officer in default are liable to a penalty Correct answer.
  4. The directors are disqualified for a period of five years

Explanation

Section 92(5) provides that failure to file the annual return attracts a penalty on the company and on every officer who is in default. The penalty is monetary and continues for each day of default; it does not by itself dissolve the company or disqualify directors.

Question 45Company Secretarial Practice and Compliance

Which statutory register must a company maintain at its registered office under Section 88 of the Companies Act, 2013?

  1. Register of trademarks
  2. Register of members Correct answer.
  3. Register of fixed assets
  4. Register of bank accounts

Explanation

Section 88 requires companies to maintain registers including the register of members, register of debenture holders and register of other security holders, together with their index, at the registered office. The register of members is the core statutory record of ownership.

Question 46Company Secretarial Practice and Compliance

A company proposes to appoint a person as an additional director who was not recommended by the board. Which statement is correct?

  1. The appointment is valid if the person holds a valid director identification number
  2. The appointment is valid only if the articles authorise it and the person is recommended by the board Correct answer.
  3. The appointment is valid if approved by the members at the next general meeting
  4. The appointment is void because additional directors must be independent directors

Explanation

Section 161(1) allows the board to appoint additional directors only if the articles authorise such appointment, and such directors hold office until the next annual general meeting. In practice the appointment is made on the board's recommendation, and a person not so recommended must be appointed through the members' route under Section 160.

Question 47Company Secretarial Practice and Compliance

Which of the following is the correct quorum for a board meeting of a public company with eight directors under Section 174?

  1. One-half of the total number of directors
  2. Two directors or half the total number of directors, whichever is higher
  3. One-third of the total number of directors or two directors, whichever is higher Correct answer.
  4. Three directors irrespective of the total number

Explanation

Section 174(1) fixes the quorum for a board meeting at one-third of the total number of directors or two directors, whichever is higher. For a board of eight, one-third rounds to three directors, so three directors constitute the quorum.

Question 48Company Secretarial Practice and Compliance

Which company is required to constitute a Nomination and Remuneration Committee under the Companies Act, 2013?

  1. Every listed public company Correct answer.
  2. Every one person company
  3. Every company with a paid-up capital of one crore rupees
  4. Every private company

Explanation

Section 178(1) requires every listed public company, and any other class of company prescribed by rules, to constitute a Nomination and Remuneration Committee. The requirement is linked to listing status and prescribed thresholds, not to every private company or OPC.

Question 49Company Secretarial Practice and Compliance

A shareholder wants to inspect the minutes of a board meeting of a public company. Which statement reflects the legal position under Section 118?

  1. Board minutes may be inspected only with the consent of the auditors
  2. Board minutes become inspectable after seven years from the date of the meeting
  3. Board minutes are not open to inspection by members, though minutes of general meetings are Correct answer.
  4. Board minutes are open to inspection by any shareholder at any time

Explanation

Section 118 read with the applicable rules provides that minutes of board meetings are not open to inspection by members, whereas minutes of general meetings are available for inspection. The distinction protects board confidentiality while preserving member access to general meeting records.

Question 50Company Secretarial Practice and Compliance

A company with a paid-up share capital of twelve crore rupees must appoint a whole-time company secretary. Which provision imposes this requirement?

  1. Section 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules Correct answer.
  2. Section 185 of the Companies Act, 2013
  3. Section 139 of the Companies Act, 2013
  4. Section 149 of the Companies Act, 2013

Explanation

Section 203 mandates certain classes of companies, including companies with paid-up share capital of ten crore rupees or more, to appoint a whole-time company secretary. The appointment must be made through a board resolution and the vacancy filled within six months.