Question 1

The audit committee primarily focuses on:

Accepted Answer

Audit committee oversees reporting, controls and audit (concept).

Question 2

Which is a consequence of non-compliance?

Accepted Answer

Non-compliance can attract fines and harm reputation (concept).

Question 3

A person who holds shares in a company and is entitled to receive a portion of the companys profits is known as a:

Accepted Answer

b) Shareholder

Question 4

Voluntary winding up is initiated by:

Accepted Answer

Voluntary winding up is started internally through a decision/resolution (concept).

Question 5

Which of the following is a source of company law?

Accepted Answer

Company law comes from statute, case law and internal constitutional documents (within limits).

Question 6

Who is responsible for appointing the first auditor of a company?

Accepted Answer

The shareholders

Question 7

Remedies for oppression and mismanagement generally aim to:

Accepted Answer

Reliefs are corrective—regulate affairs, stop harm, protect members (concept).

Question 8

Which document is most directly used to compute profits for dividend declaration?

Accepted Answer

Profit is derived from the statement of profit and loss and related disclosures (concept).

Question 9

What is the maximum number of members allowed in a private limited company?

Accepted Answer

b) 50

Question 10

Minutes are important because they serve as:

Accepted Answer

Minutes provide evidence of what was decided and discussed.

Question 11

Which of the following is not a regulatory body for companies in India?

Accepted Answer

c) Reserve Bank of India (RBI)

Question 12

What is the primary purpose of the Memorandum of Association?

Accepted Answer

b) To specify the companys authorised capital

Question 13

Promoters are mainly responsible for:

Accepted Answer

Promoters conceptualise and complete formation steps: documents, filings, arrangements.

Question 14

Company law is primarily:

Accepted Answer

Company law is largely statutory and compliance-oriented, regulating formation and governance.

Question 15

Which of the following is not a characteristic of a partnership?

Accepted Answer

a) Limited liability

Question 16

The doctrine of separate legal entity means:

Accepted Answer

A company has a separate identity and can sue/be sued in its own name.

Question 17

Which of the following is evidence that a company has been formed legally?

Accepted Answer

Certificate of Incorporation issued by ROC is conclusive evidence of incorporation.

Question 18

Minutes of a meeting are:

Accepted Answer

Minutes provide legal evidence of decisions and proceedings.

Question 19

Who is responsible for maintaining the Register of Members of a company?

Accepted Answer

a) Registrar of Companies (ROC)

Question 20

In winding up, payments generally follow the principle of:

Accepted Answer

A safe conceptual point: creditors/priority claims are settled before shareholders.

Question 21

State one objective/benefit of CSR (concept).

Accepted Answer

CSR supports **sustainable development** and improves stakeholder relationships/reputation (concept).

Question 22

What is Board of Directors?

Accepted Answer

The **Board of Directors** is the collective body of directors responsible for overall management and policy decisions of the company.

Question 23

State one feature of a company.

Accepted Answer

One feature is **limited liability** of members.

Question 24

What is meant by perpetual succession?

Accepted Answer

Perpetual succession means the company continues to exist **despite changes in membership** such as death or insolvency of members.

Question 25

State one consequence of non-compliance.

Accepted Answer

Non-compliance can lead to **penalties/fines** and reputational damage (concept).

Question 26

What is meant by company law?

Accepted Answer

Company law is the set of rules governing **incorporation**, management, capital, disclosures and winding up of companies.

Question 27

EGM is held for special/urgent business. (True/False)

Accepted Answer

True. EGM is called for **special/urgent** matters requiring members’ approval.

Question 28

What is an interim dividend?

Accepted Answer

Interim dividend is a dividend declared **during the financial year** between two annual general meetings (concept).

Question 29

Ethics means doing the right thing beyond mere legal compliance. (True/False)

Accepted Answer

True. **Ethics** focuses on right conduct beyond minimum legal requirements.

Question 30

Define compliance management.

Accepted Answer

Compliance management is a system to identify legal requirements, implement controls, monitor adherence, and maintain **evidence** of compliance.

Question 31

Explain a typical compliance cycle with a flowchart and brief note.

Accepted Answer

Compliance cycle (flow):

Identify requirements → Assign responsibility → Compliance calendar/checklist → Implement controls → Monitor/report → Corrective action → **Documentation/evidence** → Review

Brief note: This cycle ensures continuous compliance rather than one-time filing.

Question 32

List any three contents of a prospectus (exam points).

Accepted Answer

Any three contents:

- company’s business/objects and registered office
- **capital structure** and terms of issue
- details of directors/promoters and their interests
- financial information/auditor report (as required)

These disclosures help investors evaluate the offer.

Question 33

Explain accountability and transparency in corporate governance (brief) using a table.

Accepted Answer

Accountability vs transparency:

| Principle | Meaning |
|---|---|
| **Accountability** | decision-makers are answerable for outcomes |
| **Transparency** | timely, clear and truthful disclosure of information |

Together they reduce misconduct and improve stakeholder trust.

Question 34

State any three defences against liability for misstatement in a prospectus (brief) using a table.

Accepted Answer

Any three defences:

| Defence | Brief idea |
|---|---|
| **Due diligence** | reasonable care; belief statement was true |
| Expert reliance | relied on expert report in good faith |
| No reliance | investor knew truth / did not rely |
| Withdrawal of consent | consent withdrawn before issue (where applicable) |

These defences reduce/avoid liability when the person acted honestly and reasonably.

Question 35

Explain duties of directors (any three) using a small table.

Accepted Answer

Duties of directors:

| Duty | Meaning |
|---|---|
| **Good faith** | act in company’s best interest |
| Disclosure | disclose interest; avoid conflicts |
| **Due care** | exercise skill, care and diligence |
| No secret profit | do not gain undisclosed benefits |

Any three duties can be written with brief explanation.

Question 36

Write an exam-style note on nature and scope of company law (include a table and conclusion).

Accepted Answer

### Nature
Company law is **statutory**, regulatory and disclosure-based, focusing on governance and stakeholder protection.

### Scope
| Area | Covers |
|---|---|
| Incorporation | registration, MOA/AOA |
| Management | directors, meetings, resolutions |
| Compliance | filings, accounts, audit |
| Remedies | oppression/mismanagement, investigation |

### Conclusion
Thus, company law provides a comprehensive framework for forming and regulating companies and ensuring accountability in corporate affairs.

Question 37

Write an exam-style answer on oppression: meaning, examples and remedies (include a table and conclusion).

Accepted Answer

### Meaning
**Oppression** is unfair/harsh conduct prejudicial to members’ rights/interest (concept).

### Examples (concept)
- **exclusion** of minority from participation
- unfair **dilution** of shareholding
- denial of information/records to members

### Remedies (table) (concept)
| Problem | Typical relief |
|---|---|
| unfair governance | regulate affairs / set aside acts |
| abuse by controllers | remove/appoint directors |
| minority trapped | **buy-out** order (share purchase) |

### Conclusion
Oppression remedies ensure fairness and protect minority shareholders while keeping the company functioning.

Question 38

Explain disqualifications of directors (exam-style) with a table and conclusion.

Accepted Answer

### Disqualifications (overview)

| Ground | Example (concept) |
|---|---|
| **Unsound mind** | declared by competent authority |
| Insolvency | undischarged insolvent |
| Conviction | disqualified by court/authority |
| Defaults | serious compliance defaults leading to disqualification (concept) |

### Conclusion
Disqualification rules ensure that only fit and proper persons manage companies, improving governance and stakeholder protection.

Question 39

Explain appointment of directors (exam-style) with a table and conclusion.

Accepted Answer

### Modes of appointment (overview)

| Mode | Who appoints | Example |
|---|---|---|
| At incorporation | subscribers/first directors | first board |
| General meeting | shareholders | regular directors |
| Board appointment | board (as per rules) | additional/alternate |
| Nominee | lender/investor (where allowed) | nominee director |

### Conclusion
Appointment should follow eligibility, consent and proper filings; directors then act as agents and fiduciaries of the company.

Question 40

Explain lifting of corporate veil: meaning and circumstances (exam-style) with a table and conclusion.

Accepted Answer

### Meaning
Lifting (piercing) the corporate veil means ignoring the company’s separate identity in special cases to identify the real persons behind it.

| Circumstance | Example |
|---|---|
| **Fraud** | using company to cheat creditors |
| Tax evasion | hiding income through shell companies |
| Sham/facade | company formed to avoid obligations |
| Public interest | regulatory enforcement |

### Conclusion
Veil lifting is an exception used to prevent misuse of the corporate form and to ensure **justice** and compliance.

Company Law — Question Paper

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