CA INTER Corporate & Other Laws Practice Flashcards

Comprehensive flashcards covering Kinds of Companies, Incorporation, MOA & AOA, General Meetings, Membership, Share Capital, Debentures, Deposits, Dividends, Accounts, and Audit based on CA Inter notes.

As per the Companies Act, 2013, what is the statutory definition of a 'company'?

A company means a company incorporated under this Act or any of the previous Companies laws.

According to Justice Lindley, what constitutes the 'Capital' of a company?

The common stock contributed by persons as money or money’s worth to a common stock, which is denoted in money.

What are the three main restrictions, limitations, and prohibitions that must be contained in the Articles of a Private Company?

a) Restriction on the right to transfer shares; b) Limitation of membership to $200$; c) Prohibition on making an invitation to the public to subscribe for shares or debentures.

According to Justice Lindley, the proportion of capital to which each member is entitled is called what?

His share.

Which persons are excluded when counting the maximum limit of $200$ members for a private company?

i) Joint holders (counted as one); ii) Persons in the employment of the Company; iii) Ex-employees who became members while in employment and continued after termination.

What is the 'deemed public company' rule for subsidiaries?

A company which is a subsidiary of a company, not being a private company, shall be deemed to be a public company even if it continues to be a private company in its articles.

What are the eligibility criteria for a person to incorporate a One Person Company (OPC) or be a nominee?

The person must be a natural person, an Indian citizen, and may be resident or not in India.

In the context of an OPC, how is 'resident in India' defined?

A person who has stayed in India for not less than $120, \text{days}$ during the immediately preceding Financial year.

What are the financial thresholds that trigger the compulsory conversion of an OPC?

If its paid up share capital exceeds $Rs. 50, \text{lakh}$ or its average annual turnover during the relevant period exceeds $Rs. 2, \text{crore}$.

What are the maximum and minimum number of directors for an OPC?

An OPC shall have a minimum of $1, \text{director}$. As a private company, it follows the general requirement for a minimum of $2, \text{directors}$ unless specific relaxations apply.

According to Rule 3(2), if an OPC member becomes a member in another OPC by virtue of being a nominee, within what period must they meet the 'one OPC only' criteria?

Within a period of $180, \text{days}$.

What are the maximum thresholds for a 'Small company' as per the latest definition in the notes?

Paid-up share capital not exceeding $4, \text{crore, rupees}$ (up to $10, \text{crore}$) AND turnover not exceeding $40, \text{crore, rupees}$ (up to $100, \text{crore}$).

What is the maximum number of persons allowed in an association or partnership before it must be registered as a company under Section 464?

Not exceeding $100, \text{persons}$ (as may be prescribed).

Under Section 8, what are the three primary conditions for obtaining a license as a non-profit association?

(a) Objects to promote commerce, art, science, etc.; (b) Application of profits to promote those objects; (c) Prohibition of dividend payments to members.

Define a 'Subsidiary company' according to Section 2(87).

A company in which the holding company controls the composition of the Board of Directors or exercises/controls more than one-half of the total share capital.

For determining a holding-subsidiary relationship under Section 2(87), what constitutes 'Total Share Capital'?

The aggregate of Equity share capital and Convertible preference share capital.

What is the definition of a 'Foreign company' according to the Companies Act?

Any company or body corporate incorporated outside India which has a place of business in India (physically or through electronic mode) and conducts any business activity in India.

What are the criteria for a company to be classified as a 'Government Company'?

A company in which not less than $51, \text{\%}$ of the paid up share capital is held by the Central Government, State Government(s), or jointly, including subsidiaries of a Government company.

How is a 'Dormant company' defined under Section 455?

A company formed for a future project or to hold an asset/intellectual property with no significant accounting transaction, or an inactive company.

In relation to 'Associate company' defined in Section 2(6), what does 'significant influence' mean?

Control of at least $20, \text{\%}$ of total share capital, or of business decisions under an agreement.

What comprises a 'Financial statement' as per Section 2(40)?

1) Balance sheet; 2) Profit and loss account (or Income and expenditure account); 3) Cash flow statement; 4) Statement of changes in equity; 5) Explanatory notes.

When is the deadline for a company to file a declaration and verification of its registered office to commence business under Section 10A?

Within a period of $180, \text{days}$ of incorporation.

Who is considered a 'Promoter' according to Section 2(69)?

A person named in a prospectus, identified in an annual return, who has control over company affairs, or in accordance with whose advice the Board of Directors is accustomed to act.

What is the legal effect of the 'Doctrine of Constructive Notice'?

It creates a presumption that any person dealing with the company has read and understood the Memorandum and Articles of Association; it operates in favor of the company.

What is the 'Doctrine of Indoor Management' (Turquand's Rule)?

Outsiders dealing with a company are entitled to assume that internal proceedings have been properly observed; it operates in favor of outsiders.

What is the exception to the Doctrine of Indoor Management regarding 'Negligence'?

A person cannot claim protection if the transaction is unusual or not in the ordinary course of business and they failed to make proper enquiries (e.g., Anand Bihari Lal v Dinshaw & company).

For the 'Rectification of name' on Central Government directions (Section 16), within what time must the company change its name?

Within $3, \text{months}$ from the issue of such directions by passing an ordinary resolution.

What is the quorum requirement for a Public Company meeting based on the number of members?

i) $5, \text{members}$ (up to $1,000, \text{members}$); ii) $15, \text{members}$ ($1,001$ to $5,000, \text{members}$); iii) $30, \text{members}$ (exceeding $5,000, \text{members}$).

What is a 'Casting Vote'?

The right of the Chairman to cast a second vote in the event of an equality of votes on a business item.

What is the 'clear days' requirement for a general meeting notice?

Not less than $21, \text{clear, days}$, meaning the date of service and the date of the meeting are excluded.

Under Section 105, what are the limitations on a person acting as a proxy?

A person can act for members not exceeding $50$ and holding in aggregate not more than $10, \text{\%}$ of the total share capital carrying voting rights.

What are the conditions for a company to issue bonus shares under Section 63?

Bonus shares must be fully paid-up and issued out of free reserves, securities premium account, or capital redemption reserve account, provided it is authorized by articles and recommended by the Board.

What is the maximum period for which a company can close its register of members annually?

Not exceeding $45, \text{days}$ in each year, and not exceeding $30, \text{days}$ at any one time.

What is the 'Securities Premium Account' and its permitted uses under Section 52?

An account for premiums received on share issues; used for: bonus shares, writing off preliminary/issue expenses, providing premium on redemption of preference shares/debentures, or buy-back.

What constitutes 'Sweat Equity Shares' under Section 54?

Equity shares issued to employees or directors at a discount or for consideration other than cash for providing know-how or intellectual property rights.

What is the standard time limit for the redemption of secured debentures?

It shall not exceed $10, \text{years}$ from the date of issue (except for infrastructure projects, which can go up to $30, \text{years}$).

Define 'Net Worth' under Section 2(57).

The aggregate value of paid-up share capital, all reserves from profits, securities premium, and profit/loss balance, minus accumulated losses, deferred and misc. expenditure not written off.

What are the conditions for a company's CSR obligation under Section 135?

Every company with: Net worth of $Rs. 500, \text{crore}$ or more; OR Turnover of $Rs. 1,000, \text{crore}$ or more; OR Net profit of $Rs. 5, \text{crore}$ or more during the immediately preceding financial year.

What is the minimum percentage of average net profits a company must spend on CSR?

At least $2, \text{\%}$ of the average net profits made during the $3, \text{immediately, preceding, financial, years}$.

What are the term limits for auditors in listed companies?

An individual can serve for one term of $5, \text{consecutive, years}$; an audit firm can serve for two terms of $5, \text{consecutive, years}$.