CA Inter Corporate and Other Law MCQ Quiz( ICAI MCQ 1-20 )

1. Roma along with her six friends has incorporated Roma Trading Ltd. in May 2019. The paid-up share capital of the company is ₹ 30 lacs. Further, in April 2020, she noticed that in the last financial year, the turnover of the company was well below ₹ 20 crores. Advise whether the company can be treated as a ‘small company’.

Roma Trading Ltd. is definitely a ‘small company’ since its paidup capital is much below ₹2 crores and also its turnover has not exceeded the threshold limit of ₹ 20 crores.

The concept of ‘small company’ is applicable only in case of a private limited company/OPC and therefore, despite meeting the criteria of ‘small company’ it being a public limited company it cannot enjoy benefits of ‘small company’.

Unlike a private limited company/OPC which automatically becomes a ‘small company’ as soon as it meets the criteria of ‘small company’, Roma Trading Ltd. being a public limited company has to maintain the norms applicable to a ‘small company’ continuously for two years so that, thereafter, it will be treated as a ‘small company’.

If all the shareholders of Roma Trading Ltd. give an undertaking to the ROC stating that they will not let the paid-up share capital and also turnover exceed the limits applicable to a ‘small company’ in the next two years, then it can be treated as a ‘small company’.

2. Abhilasha and Amrita have incorporated a ‘not for profit’ private limited company which is registered under Section 8 of the Companies Act, 2013. One of their friends has informed them that their company can be categorized as a ‘small company’ because as per the last profit and loss account for the year ending 31st March, 2019, its turnover was less than ₹ 20 crores and its paid up share capital was less than ₹ 2 crores. Advise.

A section 8 company, which meets the criteria of ‘turnover’ and ‘paid-up share capital’ in the last financial year, can avail the status of ‘small company’ only if it acquires at least 5% stake in another ‘small company’ within the immediately following Financial Year.

if the acquisition of minimum 5% stake in another ‘small company’ materializes in the second financial year (and not in the immediately following financial year) after meeting the criteria of ‘turnover’ and ‘paid-up share capital’ then with the written permission of concerned ROC, it can acquire the status of ‘small company’.

The status of ‘small company’ cannot be bestowed upon a ‘not for profit’ company which is registered under section 8 of Companies Act, 2013.

A section 8 company, if incorporated as a private limited company (and not as public limited company) can avail the status of ‘small company’ with the permission of concerned ROC, after it meets the criteria of ‘turnover’ and ‘paid-up share capital’.

3. Namita Ceramic Goods Limited having 152 members was incorporated with the main objects of manufacture of ceramic goods, glazed, unglazed floor and wall tiles, etc. and to carry on trading in such products. After three years of successful operation, it wants to diversify its business by entering into the field of manufacturing electronic goods for which it is required to alter its objects clause. Advise the company in relation to alteration of Memorandum.

The company can alter its Memorandum of Association by passing an ordinary resolution and obtaining the confirmation of the Regional Director (RD).

The company can alter its Memorandum of Association by passing a special resolution at the shareholders’ meeting.

The company can alter its Memorandum of Association in relation to the objects clause by passing a special resolution at the shareholders’ meeting and obtaining the confirmation of the Regional Director (RD).

The company can alter its Memorandum of Association in relation to the objects clause by passing a special resolution at shareholders’ meeting and simultaneously publishing the contents of special resolution in two newspapers (one in English and the other one in vernacular language) circulating in that area.

4. Due to the management disputes, Flow Writing Industries Limited could not hold its current Annual General Meeting by the latest due date. Even after lapse of the due date, it seemed rather impossible to convene the AGM. In such a grim situation, one option available was to approach National Company Law Tribunal (NCLT) and seek direction for the calling of AGM. Out of the following four options, which one is applicable in the given case:

Any member of the company can make an application to the National Company Law Tribunal (NCLT) and seek direction for the calling of AGM.

A member of the company holding at least 1% of the total paidup share capital must make an application to the National Company Law Tribunal (NCLT) and seek direction for the calling of AGM.

Minimum two members of the company holding at least 1% of the total paid-up share capital must make a joint application to the National Company Law Tribunal (NCLT) and seek direction for the calling of AGM.

Minimum five members of the company holding at least 1% of the total paid-up share capital must make a joint application to the National Company Law Tribunal (NCLT) and seek direction for the calling of AGM.

5. Anupam incorporated a ‘One Person Company’ (OPC) with his sister Alpana as the nominee and about three years have passed satisfactorily. Anupam does a number of charitable works and is associated with three NGOs. His business under his OPC has also flourished. Now he is planning to convert the OPC into a Section 8 company (i.e. a company formed with charitable objects). Choose the correct option.

Since the company belongs to Anupam, he has full discretion to convert the OPC either as a Section 8 company or as a private or public company

Since the company was formed as a private company, the only option available with Anupam is to convert it into a public limited company.

There is specific prohibition on converting OPC into a Section 8 company; otherwise it can be converted into a private or public company without any hindrance.

Since Anupam does a lot of charitable works there is no prohibition on converting his OPC into a Section 8 company.

6. An issuing house (share broker) has issued an advertisement in two leading newspapers for selling a large number of shares allotted to it by a company under a private placement. In which of the following conditions will the advertisement NOT be deemed to be a prospectus:

Advertisement was given within six months from the date of allotment

Advertisement was given after six months from the date of allotment and the issuing house has paid the entire consideration to the company

The issuing house did not pay entire consideration to the company till the date of allotment

advertisement was given within three month from the date of allotment

7. Which of the following statements is not true?

in case of shares, the rate of underwriting commission to be paid shall not exceed five percent of the issue price of the share.

underwriting commission should not be more than the rate specified by the Article of Association.

in case of debentures, the rate of underwriting commission shall not exceed five percent of the issue price of the debentures.

amount of commission may be paid out of the profits of the company.

8. Which of the following statement is contrary to the provisions of the Companies Act, 2013?

A private company can make a private placement of its securities.

resolution for private to pass a special The company has placement.

Minimum offer per person should have Market Value of ₹20,000.

A public company can make a private placement of its securities.

9. A shelf prospectus filed with the ROC shall remain valid for a period of:

one year from the date of registration

one year from the date of closing of first issue

one year from the date of opening of first issue

Ninety days from the date on which a copy was delivered to ROC

10. Shripad Religious Publishers Limited has received application money of ₹ 20,00,000 (2,00,000 equity shares of ₹ 10 each) on 10th October, 2019 from the applicants who applied for allotment of shares in response to a private placement offer of securities made by the company to them. Select the latest date by which the company must allot against the application money so received.

9th November, 2019

24h November, 2019

9th December, 2019.

8th January, 2020

11. Being in need of further capital, Rimsi Cotton-Silk Products Limited offered 50 lacs equity shares of ` 1 each to 50 identified persons on ‘private placement’ basis and accordingly a letter of offer accompanied by application the necessary form was sent to them after fulfillment of due formalities including passing of special resolution. One of the applicants Rajan made a written complaint to the company highlighting the fact that the offer letter was incomplete as well as illegal, as it did not contain ‘renunciation clause’ as he wanted to exercise his ‘right of renunciation’ in favour of his son Uday. By choosing the correct option, advise the company in this matter.

As the ‘Right of Renunciation’ cannot be denied, the company needs to rectify its mistake by including the same in the offer letter and the application form.

The company is prohibited from providing ‘Right of Renunciation’ so the offer letter and the application form need not include any such clause.

Instead of absolute prohibition, the company can provide ‘Right of Renunciation’ limited to twenty five percent of offering.

Instead of absolute prohibition, the company can provide ‘Right of Renunciation’ limited to fifty percent of offering.

12. Innovative Tech Sol Limited intends to invite subscription for ₹ 1.10 crores equity shares of ₹ 10 each on private placement basis. The persons identified as potential subscribers are within the statutory limit and also include the two other categories to which such statutory limit is not applicable. One such category is employees of the company who are offered equity shares under Employees’ Stock Option Scheme. the other excluded category is:

Quality Institutional Buyers

Qualified Institutional Buyers.

Qualificational Institutional Buyers.

Qualified Investing Institutional Buyers.

13. Neptune Metal Tools Limited was incorporated on 2nd December, 2018 with twenty-five subscribers and authorised capital of ` 50,00,000 (5,00,000 equity shares of ` 10 each). The directors of the company are in a dilemma whether to issue share certificates to the subscribers in physical form or in dematerialized form. Advise them correctly on this matter:

Being an unlisted company, Neptune may either issue physical share certificates to the subscribers or alternatively, issue them in dematerialized form.

Neptune needs to issue shares to the subscribers only in dematerialized form.

A company having more than 100 shareholders needs to issue shares in dematerialized form and therefore, Neptune may issue physical share certificates to the subscribers.

A company having authorised capital of fifty lakhs and above needs to issue shares in dematerialized form and therefore, Neptune may issue physical share certificates to the subscribers.

14. The amount that an unlisted public company is required to maintain as security deposit, at all times, with the respective depository when it dematerializes its securities shall be

Equal to not less than one year’s fees payable to the depository

Equal to not less than two years’ fees payable to the depository

Equal to not less than two and a half years’ fees payable to the depository

Equal to not less than three years’ fees payable to the depository

15. Commission is permitted to be paid to any underwriter by the company only in respect of an offer of securities:

where securities are offered on rights basis

where securities are offered in the form of bonus issue

where securities are offered on private placement basis

where securities are offered to the public for subscription

16. In case of ‘offer of sale of shares by certain members of the company’, which of the following options is applicable:

The provisions relating to minimum suThe provisions relating to minimum subscription are not applicable

Entire minimum subscription amount is required to be received within three days of the opening date

25% of the minimum subscription amount is required to be received on the opening date and the remaining 75% within three days thereafter

50% of the minimum subscription is required to be received by the second day of the opening date and the remaining 50% within next three days after the second day

17. The time limit within which a copy of the contract for the payment of underwriting commission is required to be delivered to the Registrar is:

Three days before the delivery of the prospectus for registration

At the time of delivery of the prospectus for registration

Three days after the delivery of the prospectus for registration

Five days after the delivery of the prospectus for registration

18. Shares issued by a company to its directors or employees at a discount or for a 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 are known as:

Equity Shares

Preference Shares

Sweat Equity Shares

Redeemable preference shares

19. The Articles of Association of a private limited company state that the company may issue preference shares which will have preference with respect to payment of dividend only but no preference as to the repayment of capital, in the case of winding up. Is it possible for the company to issue such preference shares?

No; as per section 43 preference shares should have both preferences.

No; this will become an equity share as per section 43.

Yes; because as per section 43 preference shares should have any one preference.

Yes; because Articles of Association of the company allow issue of such preference shares and the issuing company is a private limited company.

20. A general meeting of the company is to be held on 30th August, 2020. The company has not paid dividend in respect of its preference shares for the financial year 2018-19 as well as 2019-20. In such case preference shareholders:

will not have the right to vote because preferential shareholders have no right to vote

will have the right to vote because dividend has not been paid for the last two years

will not have the right to vote because only equity shareholders can vote in general meetings

will have right to vote because preference shareholders have the right to vote in general meetings