NK LAW CLASSES

One stop solution to law

Contact no. -8928607746, 993099365
Q. 1 Answer in one or two sentences
1. State the nationality of the company.
Ans: The Nationality of a Company is where its formed/ incorporated and registered.
2. Which companies have license to drop the word “Limited” from their name?
Ans: A company which is registered under section 8 of the Companies Act, 2013 and
where it is proved to satisfaction of the Central Government that an association –
(a) Is about to be formed as a limited company for promoting commerce, arts,
science, religion, charity or any other useful object and
(b) Intends to apply its profits, if any, or other income in promoting its object; and to
prohibit the payment of any dividend to its members.
3. What is joint venture?
Ans: Joint venture is a business is arrangement in which two or more parties agree to
pool their resources for the purpose of a accomplishing a specific task. This task can
be a new project or any other business activity. However , the venture is its own
entity, separate from the participants other business interest.
4. Who is Promoter?
a) Who has been named as a promoter in a prospectus,
b) Who is identified by the company as a promotor in its annual return; or
c) Who has control over the affairs of the company, directly or indirectly,
whether as a shareholder, director or otherwise; or
d) In accordance with whose advice, directions or restriction the Board of
Directors of the company is accustomed to act. (However, clause (d) does not
cover a person who is acting merely in a professional capacity.)
5. What is pre-incorporation contract?
Ans: A contract which is entered into on behalf of the company even before it is duly
incorporated is a Pre-Incorporation Contract.
6. What is Red-Herring Prospectus?
Ans: A Red-Herring Prospectus means a prospectus which does not have complete
particular on the price of the securities offered and the quantum of securities
offered.
7. How can a company alter its name clause?
Ans: A company can change its name by passing a special resolution at a meeting of
its members and obtaining the approval of the Central Government in writing.
8. How AoA can be altered?
Ans: S. 14 of the Act lays down that the AOA of a company may be altered by a
special resolution of the members of the company, subject to
 a. The provision of the act and
b. The conditions contained in the company’s memorandum.
9. Who is an outsider for the company?
Ans: Except the Directors and shareholders all other persons who deal with the
company are considered as outsides for the purpose of the transactions they make
with the company. According to the doctrine of constructive notice they are
presumed to know the contents of the Memorandum of Association and Articles of
Association and is bound by these documents when he transacts with the company.
Contrary to this doctrine, there is a doctrine of Indoor Management which states
that in case of any acts irregularity on the part of the company or any act done by
the company outside the scope of Memorandum and Articles, then the outsider who
transacts with the company is not bound by such acts of the company which are
ultra-vires, and thus, he is protected in his transaction against the company.
10. Which company can publish shelf prospectus?
Ans: Shelf prospectus was made mandatory for public financial institution, public
sector banks and scheduled banks.
11. What is an allotment of shares?
Ans: Allotment is the appropriation to an application by a resolution of the board of
directors of company of a certain number of shares in the company in response to an
application.
12. What does blank transfer mean?
Ans: Blank transfer is a transfer of shares which is executed without the name of the
transferee being filed in the transfer form or deed which a transferor hands over to a
purchaser or pledgee.
13. When shares can be forfeited?
Ans: Where a valid call on share is made and the called amount is not paid within the
due date in such circumstances the company may initiate an action for recovery of
the called amount against the member concerned or forfeited the shares of
defaulting member.
14. What is dividend?
Ans: Dividend means that portion of corporate profits which has been set aside and
declared by the Company as liable to be distributed among the shareholder. The
profits of the company when distributed amongst its member are dividend.
15. Who is contributory?
Ans: A contributory means a person liable to contribute to the asset of a company in
the event of Winding Up and includes the holders of any shares which are fully Paid-
up.
16. When does transmission of shares take place?
Ans: When a registered shareholder dies or becomes bankrupt, his share are
transmitted to his legal representative or the official assignee or receiver.
17. What is lien of shares?
Ans: Lien on shares means, the member would not be permitted to transfer his
shares unless he pays his debt to the company. Company shall have first and
paramount lien (i.e. right to hold shares) on each member till he pays his debts.
18. What is share warrant?
Ans: Share warrant is a document issued by a public company under its common seal
showing that the bearer of the arrant is entitled to the number of shares specified
therein. A person who is the holder of a share warrants is not a member of the
company.
19. What is cumulative preference shares?
Ans: If there are no profits in one year and the arrears of dividends are to be carried
forward and paid out of the profits of subsequent years, the preference shares are
said to be cumulative.
20. Use of security premium account.
Ans: Security premium account can be used for writing off any preliminary expenses
of the company. To write off expenses of Issue of shares and debentures, such as
commission paid or discount given on the issue of shares.
21. Who is proxy?
Ans: Proxy means a personal representation to carry out the act as per the
instruction received.
22. What is debenture?
Ans: Debenture means a document which either creates a debts or acknowledges it,
and any document which fulfils either of these conditions is a debenture.
23. Who is an alternate director?
Ans: An alternate director is appointed by the Board of Directors under the authority
of i) The Articles; or (ii) a resolution passed by the company at general meeting. He in
fact acts in the leave vacancy of an original director who remains absent for more
than three months from the State in which meetings of the Board are ordinary held.
He cannot remain in office for a longer period than that of the original director.
24. What is tenure of appointment of auditors?
Ans: Auditors are appointed by the shareholders every year at the Annual General
Meeting. An auditor appointed at one annual general meeting holds office until the
conclusion of the next annual general meeting. –
25. State any two requisites of valid meeting?
Ans: Two requisites of valid meeting:-
i. Notice of not less than 21 days in writing has be given;
ii. Quorum of the meeting should be five members in case of a public company,
in case of all other companies, two members must be personally present.
26. What is Amalgamation?
Ans: The combination of two or more companies into the company or into the unit
controlled by one company, is known as Amalgamation.
27. What is voluntary winding up?
Ans: Winding up by the members or creditors without any intervention of the Court
is called Voluntary Winding Up.
28. Who is an authorized person? OR Who is authorized person under FEMA 1999?
Ans: ‘Authorized Person’ means an authorized dealer, money changer, off-shore
banking unit or any other person for the time being authorized under sub-section (1)
of section 10 to deal in foreign exchange or foreign securities.
29. Define capital account transaction under FEMA?
Ans: Capital Account Transaction means a transaction which alters the assets or
liabilities, including contingent liabilities, outside India of persons resident in India or
assets or liabilities in India of person resident outside India, and includes transactions
referred to in sub-section (3) of section 6.
30. Give two instances of current account transaction under FEMA, 1999?
Ans: The Reserve Bank may in consultation with the Central Government specify (a)
any class or classes of capital transactions which are permissible; (b) the limit up to
which foreign exchange shall be admissible for such transections;
1. Transection or issue of any foreign security by a person resident in India.
2. Transfer or issue of any security by a person resident outside India.
3. Transfer or issue of any security or foreign security by any branch, office or
agency in India of a person resident outside India.
4. Any borrowing or lending in foreign exchange in whatever form or by whatever
name called.
31. What is fixed and floating charge?
Ans: Fixed Charge is a charge on definite and ascertained property. After creation of
a fixed charge, the company cannot deal with the property charged so as to effect
the right of the holder of the charge.
Floating charge is a charge on a class of asset, which may be present or future and
which changes from time to time in the ordinary course of business.
32. Point out any two distinctions between a company and Partnership?
Ans: Two distinction between a company and partnership are:-
i. A Company is registered under the Companies Act, 2013, Registration of a
Partnership Firm is not always essential;
ii. Company is a legal person; whereas, Partnership Firm is not.
33. What is ‘export’ under Foreign Exchange Management Act (FEMA)?
Ans: Export, with its grammatical variations and cognate expression, means;
1. The taking out of India to place outside India any goods;
2. Provisions of service from India to any person outside India;
34. What is ‘import’ under Foreign Exchange Management Act (FEMA)?
Ans: Import with its grammatical variation and cognate expression, means bringing
into India any goods or services
35. What is ‘’Foreign Security’’?
Ans: Foreign Securities means any investments of a Fund (including foreign
currencies) for which the primary market is outside the United States and such cash
and cash equivalent as are reasonably necessary to effect such Fund’s transactions in
such investments.
36. What is ‘’Director identification Number’’?
Ans: Every individual who intends to be appointed as a director of a company must
make an application to the Central Gov. in the prescribed form and manner. DIN
number is a unique 8 digit number that is required for any existing or proposed
Director of a Company.
37. What is Repatriation of Foreign exchange?
 Ans: Repatriation of Foreign exchange is a process of converting foreign exchange
into the currency of one’s own country. The amount that the investor will receive
depends on the exchange rate between the two currencies being traded at the
settlement time.
38. What is ‘’Deemed Prospectus’’?
Ans: Sec 25(1) where a company allots/ agrees to allot any shares or debentures to
issue house with a view to offer them as sale to public, then any document by which
offer is made Deemed to be a Prospectus issued by company.
39. Who is Nominee Director?
Ans: When a loan is availed of by a company, the lending institution desires to have
its own nominee on the board of the company to safeguard its interest and to
ensure that the funds made available to the company.
40. What is ‘’Subsidiary Company’’?
Ans: Subsidiary Company or Subsidiary, in relation to any other company (that is to
say the holding company), means a company in which the holding company-
i. Controls the composition of the Board of Directors; or
ii. Exercises or controls more than one-half of the total share capital either at its
own or together.
41. What is ‘’Investor Education and Protection Fund’’?
Ans: If dividend which has been declared is not paid within thirty days or the
dividend warrant is not claimed by the shareholder within this period, the company
is obliged to transfer the total amount of dividend which remain unpaid or
unclaimed within seven days into an account to be opened by it in a scheduled bank
called ‘’Unpaid Dividend Account’’. Such unpaid dividend remains in this account for
seven years, during which period the person entitled to the amount in allowed to
claim it. After seven years, the money is to be transferred to a fund established by
the Central Government called ‘’Investor Education and Protection Fund’’.
42. What is “One Person Company”?
Ans: The companies Act, 2013 has introduced the concept of a ‘One Person
Company’, which is defined in 2(62) of the act as a company which has one person as
its member.
43. When does a person cease to be a member of a company?
Ans: A person may cease to be a member by transfer, death, forfeiture, surrender,
on winding up of the company and otherwise in accordance with the provisions of
the company’s Articles of Association.
44. What shall be the Quorum of meeting of Board?
Ans: A minimum quorum is one-third of the total strength of directors or 2 directors
whichever is higher.