FYUG Even Semester Exam, 2025
Corporate Law (COMDSC-251)
UNIT-I
Question 1 [2 x 2 = 4 Marks]
(a) Mention any two characteristics of a company.
- Separate Legal Entity: A company is a distinct legal person existing independent of its members.
- Perpetual Succession: The existence of a company is not affected by the death, insolvency, or retirement of its members.
(b) What is meant by 'lifting of the corporate veil'?
Lifting of the corporate veil refers to the legal concept where courts ignore the separate legal entity of a company to look at the individuals (members or directors) behind the corporate structure, typically in cases of fraud or improper conduct.
(c) What is a pre-incorporation contract?
A pre-incorporation contract is a contract entered into by the promoters on behalf of a company before it has been formally incorporated or granted a certificate of registration.
Question 2 [10 Marks]
Option A
Explain the structure and functions of the National Company Law Tribunal (NCLT).
The NCLT is a quasi-judicial body in India that adjudicates issues relating to Indian companies.
- Structure: It consists of a President and such number of Judicial and Technical members as the Government deems necessary.
- Functions:
- Registration of companies.
- Handling cases related to the transfer of shares.
- Power to investigate the management of a company.
- Freezing assets of a company.
- Handling insolvency proceedings under the IBC.
Option B
Discuss the process of online registration of a company in India.
The process is primarily handled through the MCA21 portal using the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form.
- Digital Signature Certificate (DSC): Acquire DSC for proposed directors.
- Director Identification Number (DIN): Apply for DIN through the SPICe+ form.
- Name Reservation: Use the RUN (Reserve Unique Name) service or Part A of the SPICe+ form.
- Filing SPICe+ Part B: Include details regarding incorporation, MoA, and AoA.
- e-MoA and e-AoA: File the electronic versions of the Memorandum and Articles of Association.
- PAN/TAN Application: These are issued automatically with the Certificate of Incorporation.
- Certificate of Incorporation: Once verified, the Registrar issues the certificate and a CIN (Corporate Identity Number).
UNIT-II
Question 3 [2 x 2 = 4 Marks]
(a) Define Articles of Association.
The Articles of Association (AoA) represent the document that contains the rules, regulations, and bye-laws for the internal management and conduct of the business of a company.
(b) What is meant by 'forfeiture of shares'?
Forfeiture of shares occurs when a company cancels the shares held by a member due to their failure to pay call money within the specified period.
(c) What are bonus shares?
Bonus shares are additional shares given to existing shareholders without any extra cost, based upon the number of shares that a shareholder owns. These are issued out of the company's accumulated profits or reserves.
Question 4 [10 Marks]
Option A
What are the key differences between the Memorandum of Association (MoA) and Articles of Association (AoA)?
| Basis |
Memorandum of Association (MoA) |
Articles of Association (AoA) |
| Nature |
Charter of the company; defines its powers and objects. |
Internal rules and regulations for management. |
| Relationship |
Defines relationship between company and outsiders. |
Defines relationship between company and its members. |
| Hierarchy |
Subordinate to the Companies Act. |
Subordinate to both the Companies Act and MoA. |
| Alteration |
Difficult; requires special resolution and often Govt/Tribunal approval. |
Relatively easy; usually requires a special resolution. |
Option B
What is buy-back of shares? Discuss its legal provisions.
Buy-back is a process where a company purchases its own shares from the existing shareholders to reduce the number of shares outstanding in the open market.
Legal Provisions (Section 68 of Companies Act, 2013):
- Sources: Buy-back can be done from free reserves, securities premium account, or proceeds of any previous issue.
- Authorization: Must be authorized by the AoA and a special resolution in a general meeting.
- Limits: Buy-back cannot exceed 25% of the aggregate of paid-up capital and free reserves.
- Debt-Equity Ratio: Post buy-back ratio should not exceed 2:1.
- Physical Destruction: Shares bought back must be physically destroyed within 7 days.
UNIT-III
Question 5 [2 x 2 = 4 Marks]
(a) Who is an independent director?
An independent director is a non-executive director who does not have any material or pecuniary relationship with the company or its promoters, ensuring unbiased decision-making.
(b) Define key managerial personnel (KMP).
KMP refers to a group of people who are in charge of maintaining the operations of the organization, such as the CEO, Managing Director, Company Secretary, and CFO.
(c) How is a director removed from office?
A director can be removed by the shareholders passing an Ordinary Resolution at a general meeting after giving a special notice, as per Section 169.
Question 6 [10 Marks]
Option A
Explain the classification of directors under the Companies Act, 2013.
- Managing Director: A director who is entrusted with substantial powers of management.
- Executive Director: Full-time directors involved in day-to-day operations (e.g., Whole-time Director).
- Non-Executive Director: Not involved in daily management; provide oversight.
- Independent Director: Directors providing unbiased judgment (Section 149(6)).
- Nominee Director: Appointed by financial institutions or stakeholders to represent their interests.
- Women Director: Mandatory for certain classes of companies to have at least one woman director.
- Additional Director: Appointed by the Board between two Annual General Meetings.
Option B
Discuss the eligibility and disqualification criteria for directors.
Eligibility: Must be an individual, of sound mind, and have a valid DIN.
Disqualifications (Section 164):
- Unsound mind as declared by a court.
- Undischarged insolvent.
- Convicted by a court for an offense involving moral turpitude (sentenced to 6+ months).
- Order disqualifying appointment passed by a court or Tribunal.
- Failure to pay calls on shares for 6 months.
- Convicted of related party transaction offenses in the last 5 years.
UNIT-IV
Question 7 [2 x 2 = 4 Marks]
(a) What is an audit committee?
An audit committee is a committee of the Board of Directors responsible for oversight of the financial reporting process and the company's systems of internal control.
(b) Define postal ballot.
A postal ballot is a method of voting where shareholders can cast their vote on a resolution by post or electronic mode instead of physically attending a meeting.
(c) State two objectives of the Corporate Social Responsibility (CSR) Committee.
- To formulate and recommend a CSR Policy to the Board.
- To monitor the CSR policy of the company from time to time.
Question 8 [10 Marks]
Option A
What is E-voting? Discuss its advantages and disadvantages.
E-voting is an electronic system that allows shareholders to vote on resolutions through a secured online platform.
Advantages:
- Increased shareholder participation.
- Convenience as voting can be done from anywhere.
- Faster counting and accurate results.
- Cost-effective compared to physical ballots.
Disadvantages:
- Risk of technical glitches or cyber-attacks.
- Difficult for shareholders who are not tech-savvy.
- Security concerns regarding data privacy.
Option B
Discuss the various types of company meetings and their significances.
- Annual General Meeting (AGM): Held once a year to discuss financial statements, dividends, and appointment of auditors. It ensures accountability.
- Extraordinary General Meeting (EGM): Called for urgent matters that cannot wait until the next AGM.
- Board Meetings: Meetings of the directors to take policy decisions and oversee management.
- Class Meetings: Meetings of a particular class of shareholders (e.g., preference shareholders) to discuss matters affecting their specific rights.
UNIT-V
Question 9 [2 x 2 = 4 Marks]
(a) Define insider trading.
Insider trading is the illegal practice of trading on the stock exchange to one's own advantage through having access to confidential or non-public price-sensitive information.
(b) What is the role of a liquidator in a company?
A liquidator is an officer appointed to wind up the affairs of a company by realizing its assets, paying off debts, and distributing the remaining balance to members.
(c) What are different modes of winding-up of company?
- Compulsory Winding-up: By the order of the National Company Law Tribunal (NCLT).
- Voluntary Winding-up: Initiated by the members or creditors (now primarily governed under the Insolvency and Bankruptcy Code, 2016).
Question 10 [10 Marks]
Option A
Explain the provisions relating to the payment of dividends under the Companies Act, 2013.
- Source: Dividend must be paid out of current year profits, previous years' profits (after providing for depreciation), or money provided by the Government.
- Declaration: Declared at the AGM based on Board recommendations.
- Deposit: The amount must be deposited in a separate bank account within 5 days of declaration.
- Payment: Must be paid within 30 days of declaration.
- Unpaid Dividend: If unpaid after 30 days, it must be transferred to the "Unpaid Dividend Account" within 7 days.
Option B
What are the rights and responsibilities of auditors in a company?
Rights:
- Right of access to books of accounts and vouchers at all times.
- Right to receive notices and attend general meetings.
- Right to obtain information and explanations from officers.
Responsibilities/Duties:
- Duty to make a report to the members on the accounts examined.
- Duty to state whether the financial statements show a "true and fair view".
- Duty to report any fraud identified during the audit to the Central Government.
- Duty to comply with Auditing Standards.