Namma Kalvi 12th Commerce Unit 10 Surya Guide em

Namma Kalvi
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UNIT-X COMPANIES ACT 2013
CHAPTER
26
Introduction
The companies act 1956 has been enacted with the object to consolidate and amend the law relating to the
companies and the act has been force for about 55 years and it has been amended for several times. It is
the basic statute that is responsible for the incorporation, regulation, privileges, and restrictions applicable to
the corporate sector. This act has been the growth engine of the country’s economy. The Companies Act 2013 is
an act of the Parliament of India which regulates incorporation of a company, it explains clearly the r esponsibilities
of the company and its directors. This act also explains the format of dissolution of the companies. This chapter
clearly defines the act of company law and the changes made with regard to the incorporation procedure of this
law and also the capital structure of the company.
a) Ordinary b) Special
I. Choose the Correct Answers c) Either Ordinary or Special d) Board
1. The company will have to issue the no- 6. Who can issue stock?
tice of situation of Registered Office to the a) Public b) Private
Register of Companies within __________ c) One Person d) small
days from the date of incorporation.
7. Specify the document which comes under
a) 14 days b) 21 days
the Negotiable Instrument Act.
c) 30 days d) 60 days
a) Share Certificate b) Share
2. How does a person who envisages the idea c) Share Warrant d) Stock
to form a company called?
8. The shares which are offered to the existing
a) Director b) Company Secretary
shareholder at free of cost is known as
c) Registrar d) Promoter
____.
3. For which type of capital a company pays a) Bonus Share b) Equity Share
the prescribed fees at the time of registra- c) Right Share d) Preference Share
tion?
9. The shares which are offered first to the
a) Subscribed Capital
existing shareholder at reduced price is

b) Authorised Capital
known as ___.
c) Paid-up capital
a) Bonus Share b) Equity Share
d) Issued Capital
c) Right Share d) Preference Share
4. Which of the following types of shares are
10. The Companies Act 2013 prohibits the is-
issued by a company to raise capital from
sue of shares at _______ to the public.
the existing shareholders?
a) Premium b) Par
a) Equity Shares b) Right Shares
c) Discount d) Both at par and
c) Preference Shares d) Bonus
Premium
Shares
Answers
5. Specify the type of resolution to be passed 1 c) 2 d) 3 b) 4 b) 5 d)
to choose the location of Registered Office
6 a) 7 c) 8 a) 9 c) 10 c)
of the company within the town or village
or city.
210 SURYA
XII Std - Commerce Chapter - 26 Companies Act 2013
5. What is Sweat Equity Shares?
II. Very Short Answer Questions: Sweat Equity shares means issue of shares to
employees or directors at lower price for cash or
other than Cash, in lieu of providing know- how or
1. Who is called as Promoters?
making available rights in the nature of intellectual
Promoter means a person
property rights or any value additions.
Who has been named as such in a prospectus or
is identified by the company in the annual return 6. What is Bonus Shares?
referred to in section 92; or A company may, if its Articles provide, capitalize
Who has control over the affairs of the company, its profits by issuing fully-paid bonus shares.
directly or indirectly whether as a shareholder, To utilize the company’s reserves and surpluses,
director or otherwise; or issue of shares to existing shareholders w ithout
In accordance with whose advice, directions taking any consideration is known as Bonus
or instructions the Board of Directors of the Shares.
company is accustomed to act. It can be issued by:
•• Making partly paid up shares as fully paid
2. What is Share?
•• Issuing new shares
The fraction or portion of total capital of the
company which have equal denomination is 7. What is Right shares?
known as share. Right shares are the shares which are issued
In simple, the total capital of the company is by the company, with the aim of increasing the
shared by many person and each share is having subscribed share capital of the company by

equal value. further issue, if it is authorized by its Articles.
According to section 2(84) of the Companies The right shares are primarily issued to the
Act, 2013, share means in the “share Capital of existing equity shareholders through a letter of
a company and includes stock except where a an issue, on pro rata basis.
distinction between stock and share is expressed
8. What is Private Placement?
or implied”
Private placement means offer of securities or
3. What do you mean by Equity Share? invitation to subscribe to securities to a select
The share of a company which do not have group of persons through private placement
any preferential rights with regard to dividend offer letter.
any repayment of share capital at the time of But, companies going for private placement
liquidation of a company, is also called as Equity should fulfill certain condition mentioned in
Share. Companies Act 2013 in this regard.
The rate of dividend is not a fixed one, in all the Then only they can collect capital through private
years. placement.
When a company earned loss no dividend is pay- 9. Define Share Warrant?
able to any share holders in that year. A share warrant is a negotiable instrument, issued
by the public limited company only against fully
4. What do you understand by Preference
paid up shares.
Share?
It is also termed as a document of title because
According to Section 42 of the Companies Act,
the holder of the share warrant is entitled to the
2013 the term ‘Preference shares’ mean that part
number of shares mentioned in it.
of the share capital the holders of which have a
Prior approval of the Central Government (CG)
preferential right over payment of dividend (fixed
is required.
amount or rate) and repayment of share capital in
Further the issue of a share warrant must be
the event of winding up of the company’.
authorized in the articles of association of the
company.
SURYA 211
Chapter - 26 Companies Act 2013 XII Std - Commerce
10. What is Debentures? Debentures are offered to the public for
When a company needs fund it can borrow from subscription in the same way as for issue of

general public by issuing certificate for a fixed equity shares.
period of time and at a fixed rate of interest. Debentures is issued under the common seal
This loan certificate is known as debenture. of the company acknowledging the receipt of
money.
III. Short Answer Questions:

1. Distinguish between shares and stocks?
Sl.No Basis of Comparison Shares Stock

1. Meaning The capital of a company, is divided The conversion of fully paid up
into small units, which are commonly shares of a member into a single
known as shares fund is known as stock
2. Nature of Original issue It is possible for a company to make It is not possible for a company to
original issue make orginal issue
3. Paid up value It can be partly or fully paid up It can only be fully paid up
4. Definite Number A share have a definite number A stock does not have such
known as distinctive number number
5. Denomination It will be on equal numbers It will be on unequal number
2. What do you understand by Issue of It can only be used for the above mentioned
Securities at Premium? purposes and also for buying back of securities
When shares are issued at a price above the face (section 77A).
or nominal value, they are said to be issued at a It must be noted that Security premium is not
premium. available for distribution of dividend.
For example, a share having the face value
3. What is issue of shares at discount? What
of Rs 10 is issued at Rs.12. Here, Rs.2 is the
conditions should be fulfilled?
premium.
When the shares are issued at a price below
The amount of share premium has be transferred
the face value they are said to be issued at a
to an account called the ‘Securities Premium
discount.
Account’.
For example, a share having the face value of Rs
This account is capital in nature and can only
10 is issued at Rs 8.
be utilized for the purposes specified by the Act
The companies act 2013, prohibits the issue of
under Section 78.
shares at discount (section 53) except sweat
Issue of fully paid bonus shares to members of
Equity share.
the company for the following reasons:
•• To write off preliminary expenses. 4. State condition stipulated for capital
•• To write off the expenses of issue, or com- subscription at the time of promotion?
mission paid, or discount allowed, on issue of The following are the conditions stipulated for
shares or debentures of the company. capital subscription at the time of promotion.
•• To provide for the payment of premium on (i) T
he fulfilling formalities to raise necessary
the redemption of any redeemable preference capital
shares or debentures of the company. (ii) Adhering to SEBI guidelines in this regard
Thus, the Securities Premium Account cannot (iii) Observing guidelines for Disclosure and
be treated as a revenue reserve for distributing investor protection issued by SEBI
dividends.
212 SURYA
(iv) Issuing prospectus Dividends are paid out of profits for every
(v) A ppointing official banker of the company for year.
receiving application from the investors There are no arrears carried over a time
(vi) F ulfilling the condition for valid allotment by period to be paid at the end of the term.
director
(iii) Redeemable Preference Shares:
(vii) Passing resolution for making allotment by
Such preference shares can be claimed after
director
a fixed period or after giving due notice
(viii) Despatch allotment letters to allottees
(ix) Filing allotment return with the Registrar (iv) Non-Redeemable Preference Shares:
(x) I ssuing share certificates in exchange for their Such shares cannot be redeemed during
allotment letter the lifetime of the company, but can only
(xi) Ensuring collection of minimum subscription be obtained at the time of winding up
(liquidation) of assets.
5. Explain different Kinds of preference
shares? (v) Convertible Preference shares:
Meaning: Section 42 of the Companies Act, The shares can be converted into equity
2013 the term ‘preference shares’ mean that part shares after a time period or as per the
of the share capital the holders of which have a conditions laid down in the terms.
preferential right over payment of dividend (fixed
amount or rate) and repayment of share capital in (vi) Non-convertible Preference shares:
the event of winding up of the company. Non-convertible preference shares
cannot
be, at any time , converted into equity
Kinds of Preference shares: shares.
There are eight types of preference shares. In
(vii) Participating Preference Shares:
case of dissolution of the company, any of the
Such shares have the right to participate
eight types would be paid out before other types
in any additional profits, after paying the
of equity.
equity shareholders.
(i) Cumulative Preference Shares: The surplus of profit is apart from the fixed
As the word indicates, all dividends are dividend paid up for preference shares.
carried forward until specified, and paid out Non-Participating Preference shares:
only at the end of the specified period. Non-participating preference shares do not
possess any right to participate in surplus
(ii) Non-cumulative Preference Shares: profits or any surplus gained at the time of
The opposite of cumulative, obviously. liquidation of the company.
IV. Long Answer Questions:
1. Write the difference between Debentures and Shares?

S.No Debentures Shares
1. Debentures constitute a loan. Shares are part of the capital of a company.
2. Middle and Lower Level. Top level.
3. Debentures holder gets fixed rate of Inter- Shareholders gets dividends with a varying rate.
est which carries a priorities over dividend.
4. Debentures generally have a charge on Shares do not carry any such charge.
the assets of the company.
5. Debentures can be issued at a discount Shares cannot be issued at a discount.
without restrictions.
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6. The rate of interest is fixed in the case of Whereas on the equity shares, the dividend varies from
debentures. year to year depending upon the profit of the com-
pany and the Board of directors decision to declare
dividends or not.
7. Debentures holders do not have any vot- Shareholders enjoy voting right.
ing right.
8. Interest on debentures is payable even if Dividend can be paid to shareholders only out of the
there are no profits i.e. even out of capital. profits of the company and not otherwise.
9. Interest paid on debentures is a business Dividend is not allowable deduction as business
expenditure and allowable deduction from expenditure.
profits.
10. Return of allotment is not required for al- Return of allotment in e-Form No.2 is to be filed for
lotment of debentures. allotment of shares.
2. Brief different stages in Formation of a 2. Registration or Incorporation: Second

Company? stage:
Formation/Incorporation of a company: The second stage in the formation of the
company is incorporation or registration. In this
‘Formation of a company’ has been divided
stage the promoter does the following:
into four stages:
•• Application for availability of name of
1. Promotion
company
2. Registration
•• Preparation of memorandum and articles
3. Capital subscription and
of association
4. Commencement of business
•• Declaration from the professional
1. Promotion: First Stage •• Preparation of affidavit from the subscribers
Promotion stage begins when the idea to form to the memorandum
a company comes in the minds of a company •• Furnishing verification of registered office
comes in the mind of a person. •• Preparation of particulars of subscribers
The person who envisage the idea is called a •• Preparation of particulars of first directors
‘promoter’, Section 2 (69) of the companies along with their consent to act as directors
act, 2013 defines the term ‘promoter’ as •• Power of attorney
under:-
3. Capital subscription: Third Stage
“Promoter” means a person—
•• Both private company and public company
•• Who has been named as such in a
not having share capital can commence its
prospectus or is identified by the company
business after the completion of the above
in the annual return referred to in section
stages.
92; or
•• But a public limited company having its
•• Who has control over the affairs of the
share capital has to pass through two more
company, directly or indirectly whether as
stages.
a shareholder, director or otherwise; or
•• One of them is capital subscription, steps
•• In accordance with whose advice, directions
to be taken at this stage are listed below.
or instructions the board of directors of the
•• The fulfilling formalities to raise necessary
company is accustomed to act.
capital
•• The stage of promotion starts when a
•• Adhering to SEBI guidelines in this regard
promoter conceives the idea to form a

•• Observing guidelines or disclosure and
company and ends when the company is
investor protection issued by SEBI
formed and is handed over to the directors.
•• Issuing prospectus 2. Partly Convertible Debentures (PCD):
•• Appointing official banker of the company •• A part of these instruments are converted
for receiving application from the investors into equity shares in the futher at notice of
•• Fulfilling the condition for valid allotment the issuer.
by director •• The issuer decides the ratio for conversion.
•• Passing resolution for making allotment by •• This is normally decided at the time of
director subscription.
•• Dispatch allotment letters to allotters 3. Fully convertible Debentures (FCD):
•• Filing allotment return with the registrar •• These are fully convertible into Equity
•• Issuing share certificates in exchange for shares at the issuer’s notice.
their allotment letter •• The ratio of conversion is decided by the
•• Ensuring collection of minimum subscription issuer.
•• Upon conversion the investors enjoy the
Commencement of Business: Fourth stage:
same status as ordinary shareholders of
As per section 11 of the act, a company
the company.
having share capital should file with the registrar,
4. Optionally Convertible Debentures (OCD):
declaration stating that
•• The investor has the option to either
(i) Every subscriber to the memorandum has
convert these debentures into shares at a
paid the value of shares agreed to be taken
price decided by the issuer/agreed upon at
by him
the time of issue.
(ii) P aid up capital is not less than Rs. 5 lakhs
II. On the basis of Security, debentures are
in the case of public limited company and
classified into:
Rs. 1 lakh in the case of private limited
A. Secured Debentures:
company.
•• These instruments are secured by a charge
(iii) I t has filed the registrar the verification of
on the fixed assets of the issuer company.
the registered office.
•• So if the issuer fails on payment of either
These restrictions in section 11 are a pplicable
the principal or interest amount, such fixed
to companies having share capital. It can commence
assets can be sold to repay the liability to
business only after fulfilling all the formalities
the investors.
mentioned above and exercise borrowing powers
B. Unsecured Debentures:
immediately after incorporation.
•• These instrument are unsecured in the
3. What are the various kinds of Debentures? sense that if the issuer defaults on payment
The following are the various kinds of debentures: of the interest or principal amount, the
investor has to be included as unsecured
Kinds of Debentures: creditors of the company.
Debentures are generally classified into III. On the basis of Redeemability,
different categories on the basis of: Debentures are classified into:
•• Convertibility of the Instrument A. Redeemable Debentures:
•• Security of the Instrument •• It refers to the debentures which are
•• Redemption ability issued with a condition that the debentures
•• Registration of Instrument will be redeemed at a fixed date or upon
I. On the basis of convertibility: demand, or after notice, or under a system
Debentures may be classified into following of periodical drawings.
categories: •• Debentures are generally redeemable and
1. Non Convertible Debentures (NCD): on redemption these can be reissued or
•• These instruments retain the debt character cancelled.
and cannot be converted into equity shares.
SURYA 215
B. Perpetual or Irredeemable Debentures: B. Bearer debentures:
•• A Debentures, in which no specific time •• Bearer debentures on the other hand,
is specified by the companies to pay back are issued to bearer, and are negotiable
the money, is called an irredeemable instruments, and so transferable by mere
debentures. delivery like share warrents.
•• The debentures holder cannot demand re-
5. What formalities need to be fulfilled
payment as long as the company is a going
for a company’s having share capital to
concern.
commence business?
•• Issuing company has to pay interest
As per section 11 of the act, a company
periodically.
having share capital should file with the registrar,
•• But all debentures, whether redeemable or
declaration stating that
irredeemable become payable on the com-
(i) Every subscriber to the memorandum has
pany going in to liquidation.
paid the value of shares agreed to be taken
•• However, after the commencement of
by him
the Companies Act,2013, now a compa-
(ii) P aid up capital is not less than Rs. 5 lakhs
ny cannot issue perpetual or irredeemable
in the case of public limited company and
debentures.
Rs. 1 lakh in the case of private limited
IV. On the basis of Registration,
company.
Debentures may be classified as
(iii) I t has filed the registrar the verification of
A. A Registered Debentures:
the registered office.
•• Registered debentures are issued in the
These restrictions in section 11 are applicable to
name of a particular person, whose name
companies having share capital. It can commence
appears on the debentures certificate and
business only after fulfilling all the formalities
who is registered by the company as holder
mentioned above and exercise borrowing powers
on the Register of debentures holders.
immediately after incorporation.
6. Write the difference between share C

ertificate between and Share Warrant?
Sl.No Basis of Difference Share Certificate Share Warrant

1. Meaning It is a legal document indicates the It is a document which indicates
possession of the shareholder on the the bearer of the share warrant is
specified number of shares. entitled to the specified number
of shares is share warrant
2. Compulsion of certificate It is a compulsory certificate It is not a compulsory certificate
3. Issued by It is issued by all the companies It is issued by only public limited
limited by shares irrespective of public companies
or private
4. Transfer of Certificate The transfer of share certificate can The transfer of share warrant can
be done by executing a valid transfer be done by mere hand d elivery
deed
5. Time limit It is issued within 3 months of the al- There is no time limit for share
lotment of shares warrant
6 Title It is a registered evidence of title It is a bearer document of title
7. Issue of shares It is issued in respect of partly or fully It is issued in respect of only
paid up shares fully paid up shares
10. Which of the following section deals with
Additional Questions: Incorporation of Companies Act 1956?
a) 12 b) 34
I. Choose the Correct Answers: c) 21 d) None
1. The companies act,2013 has _________ 11. The number of documents to be submitted
sections/clause. by a public limited company to the registrar
a) 420 b) 490 while applying for incorporation of the
c) 470 d) 560 company is _______.
a) 3 b) 2
2. A company is not a citizen but it has ____. c) 7 d) 50
a) Nationality b) Domicile
c) both a & b d) None 12. A person who envisage the idea to form a
company is known as _______.
3. The Company bill, received the assent of a) Promoter b) Owner
the Resident of India on __________. c) Director d) None
a) 29.08.2013 b) 1.1.2018
c) 08.12.2018 d) None 13. The person who take the procedural
steps to set up a company and who make
4. Associate Company is defined in section business preparations for the company are
_________ of the companies act 2013. called as ___________.
a) 5(2) b) 2(6) a) Promoter b) Owner
c) 6(2) d) None c) Director d) None
5. A private company has a maximum number 14. If a person wants to form a new company,
of ________ members, as per companies which of the following documents must
act, 2013. be acknowledged with the Registrar of
a) 400 b) 200 Companies?
c) 600 d) Unlimited a) Memorandum of Associations
b) Application form for registration
6. In a Government company the government
c) Statement of Compliance
shareholding must not be less than
d) All of the above
___________.
a) 50 % b) 40% 15. Shares issues without any special rights
c) 51% d) None of the above attached to them are known as _____.
a) Preferrence Shares b) Capital Shares
7. Which of the following is a Statutory
c) Ordinary Shares d) None
Company?
a) RBI b) NABARD 16. The preference shares which can be claimed
c) SBI d) All the above after a fixed period is known as ______.
a) Redeemable Preference Shares
8. Companies Act 2013, has how many
b) Convertible Preference Shares
chapters?
c) Cumulative Preference Shares
a) 32 b) 23
d) Participating Preference Shares
c) 29 d) 46
17. __________ shares are primarily issued to
9. There are _________ schedules in
the existing equity shareholders through
Companies act 2013.
a letter of an issue, on pro rata basis.
a) 5 b) 7
a) Equity Shares b) Share Warrant
c) 43 d) 10
c) Right Shares d) Bonus Shares
SURYA 217
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18. Which of the following are included in the Codes:
concept of debenture? (A) Both (A) and (R) are correct.
a) Debenture Stock (B) Only (A) is correct, but (R) is wrong.
b) Bonds (C) Only (R) is correct, but (A) is wrong.
c) other instruments evidencing a debt (D) Both (A) and (R) are wrong
d) All of the above
24. Assertion(A): It is not possible for a
19. In general cases Bonus shall be paid with company to make original issue of stock.
in ______. Reason(R): The conversion of fully paid up
a) 6 months b) 7 months shares of a member into a single fund is
c) 8 months d) None of these known as stock
Codes:
20. The companies which are formed under (A) Both (A) and (R) are correct and (R) is correct
Companies Act 1956. They will be called as explanation of (A).
________. (B) Both (A) and (R) are correct, but (R) is not a
a) Chartered Companies
correct explanation of (A).
b) Statutory Companies
(C) (A) is correct, but (R) is incorrect.
c) Registered Companies
(D) (A) is incorrect, but (R) is correct
d) None
25. Assertion(A): The securities premium
21. Assertion (A): Issue of shares to employees account cannot be treated as a revenue

or directors at lower price for cash or other reserve for distributing dividends.
than cash is known as sweat equity shares. Reason(R) : As per the act under section
Reason(R) : Sweat equity is an input to a 78 Securities Premium account is in c apital
project or enterprise in form of effort and nature and can only be utilised for the
labour. purposes specified.
Codes:
Codes:
(A) Both (A) and (R) are correct and (R) is correct
explanation of (A).
explanation of (A).
(B) Both (A) and (R) are correct, but (R) is not a
22. Statement (I): Right shares are the shares 26. Match the following:
which are issued by the company to the
List I List II
existing shareholders on pro-rate basis.
Share i.Pro rata basis
Reason(R): Right issues must be a uthorized
by Articles of Association Equity Shares ii.Shares issued to employees
Codes: or directors
(A) Both (A) and (R) are correct. Sweat Equity iii. Which are not preferential
(B) Only (A) is correct, but (R) is wrong. shares
(C) Only (R) is correct, but (A) is wrong. Right Shares iv. Portion of Capital
(D) Both (A) and (R) are wrong a) b) c) d)
a) 4 3 1 2
23. Statement (A): A share warrant is also
b) 3 4 1 2
known as a document of title
c) 3 2 1 4
Statement (R): Prior approval of the CG is
d) 4 3 2 1
required for Share Warrant.
218 SURYA
27. Match the following 16. a 17. c 18. d 19. c 20. c
List I List II 21. a 22. a 23. a 24. a 25. a
Royal Charter i. Registration in India 26. d 27. c 28. d 29. d 30. d
Joint Stock Company Act ii. England
English Joint Stock iii. East India II. Very Short Answer Questions:
Companies Act
Indian Companies act iv P
rotect and preserve 1. What is meant by Sweat Equity Shares?
the rights of Under section 54 of the Companies Act 2013,
shareholders Sweat Equity Shares can be issued at Discount.
a) b) c) d) Sweat Equity shares means issue of shares
a) 4 3 1 2 to employees or directors at lower price for
b) 3 4 1 2 cash or other than Cash, in lieu of providing
c) 3 2 1 4 know how or making available rights in the
d) 4 3 2 1 nature of intellectual property rights or any value
additions.
28. Match the Following
List I List II 2. What is meant by Right Shares?
Royal Charter i.2013 Right shares are the shares which are issued
English Joint Stock Company ii.1913 by the company, with the aim of increasing the
Indian Companies act iii.1850 subscribed share capital of the company by

further issue, if it is authorized by its Articles.
d. New Companies Act iv. 1844
The right shares are primarily issued to the
a) b) c) d)
existing equity shareholders through a letter of
a) 4 3 1 2
an issue, on pro rata basis.
b) 3 4 1 2
c) 3 2 1 4 3. What are the four stages of formation of a
d) 4 3 2 1 company?
Promotion
29. Find the odd one out:
Registration
a) Promotion
Capital Subscription
b) Registration
Commencement of Business.
c) Capital Subscription
d) Amalgamation
III. Short Answer Questions:
Reason: Except amalgamation all the above three
are the stages in the formation of a company. 1. What is meant by Bonus Shares?
To utilize the company’s reserves and surpluses,
30. Find the odd one out:
issue of shares to existing shareholders w ithout
a) Memorandum of Association
taking any consideration is known as Bonus
b) Articles of Association
Shares.
c) Certificate of Incorporation
It can be issued by:
d) Power of attorney
•• Making partly paid up shares as fully paid
Reason: Power of attorney is a document which
•• Issuing new shares
is prepared to carry out the instructions stipulated
A company may, if its Articles provide, capitalize
by the registrar.
its profits by issuing fully-paid bonus shares.
Answers
The issue of bonus shares by a company is a
1. c 2. c 3. a 4. b 5. b common feature.
6. c 7. a 8. c 9. b 10. a
11. c 12. a 13. a 14. d 15. c
SURYA 219
2. What is meant by Private Placement? (vi) F ulfilling the condition for valid allotment by
Private placement means offer of securities or director
invitation to subscribe to securities to a select (vii) Passing resolution for making allotment by
group of persons through private placement director
offer letter. (viii) Despatch allotment letters to allottees
The number of subscribers under private (ix) Filing allotment return with the Registrar
placement should not exceed 50 members or
(x) I ssuing share certificates in exchange for their
such numbers prescribed. allotment letter
Qualified institutional buyers and employees (xi) Ensuring collection of minimum subscription
holding shares under stock option plans should
be excluded in country the maximum members IV. Long Answer Questions:
mentioned above.
But, companies going for private placement 1. Explain the features of Debentures.
should fulfill certain condition mentioned in The following are the important features of
Companies Act 2013 in this regard. debentures:
Then only they can collect capital through private 1. It is issued by the Company in the form of a
placement. certificate under the common seal.
3. Explain the scope of the formation of a 2. It is a movable property
company. 3. Debenture holders are the creditors of the
Section 3(1) of the Act states that a company may company
be formed for any lawful purpose by- 4. Debentures carry a fixed rate of interest.
(a) seven or more persons, where the company to 5. D ebenture is redeemed after a fixed period
be formed is to be a public company; of time.
(b) two or more persons, where the company to be 6. Debentures may be either secured or
formed is to be a private company; or unsecured.
(c) one person, where the company to be formed 7. Interest payable on a debenture is a charge
is to be One Person Company that is to say, a against profit and hence it is a tax deductible
private company by subscribing their names expenditure.
or his name to a memorandum and complying 8. Debenture holders do not enjoy any voting
with the requirements of this Act in respect of right.
registration. 9. Interest on debenture is payable even if there
is a loss.
4. Write a note on Capital Subscription:
Both private company and public company not 2. What are all the changes in existing
having share capital can commence its business
company is not allowed in the proposal of a
after the completion of the above stages. But a
name for a company?
public limited company having its share capital has Changes in Type, Letter Case, Spacing or
to pass through two more stages. One of them is Punctuation marks.
capital subscription; Joining words or separating words before or
Steps to be taken at this stage are listed below. after the company name.
(i) The fulfilling formalities to raise necessary capital Different tense or number of the same word
(ii) Adhering to SEBI guidelines in this regard Different phonetic spellings or spelling variations
(iii) Observing guidelines for Disclosure and investor Intentionally misspelled words
protection issued by SEBI Addition of internet related designation
(iv) Issuing prospectus Addition of common names or titles
(v) A ppointing official banker of the company for Addition of name of place
receiving application from the investors Different combination of the same words
Translation of a word
220 SURYA
3. Define preference shares and explain its time of winding up (liquidation) of assets.
types? Convertible Preference shares: The shares
Meaning of Preference Share can be converted into equity shares after a time
Section 42 of the Companies Act, 2013 the term period or as per the conditions laid down in the
‘preference shares’ mean that part of the share terms.
capital the holders of which have a preferential Non-convertible Preference shares:
right over payment of dividend (fixed amount or Non-convertible preference shares cannot be, at
rate) and repayment of share capital in the event any time, converted into equity shares.
of winding up of the company. Participating Preference shares: Such
Kinds of Preference shares shares have the right to participate in any
There are eight types of preference shares. In additional profits, after paying the equity
case of dissolution of the company, any of the shareholders. The surplus of profit is apart from
eight types would be paid out before other types the fixed dividend paid up for preference shares.
of equity. Non-Participating Preference shares:
Cumulative Preference shares: As the word Non-participating preference shares do not pos-
indicates, all dividends are carried forward until sess any right to participate in surplus profits or
specified, and paid out only at the end of the any surplus gained at the time of liquidation of
specified period. the company.
Non-cumulative Preference shares: The
4. Explain the difference Between Equity
opposite of cumulative, obviously. Dividends are
Shares and Preference Shares?
paid out of profits for every year. There are no
Equity Shares are the shares that carry voting
arrears carried over a time period to be paid at
rights and the rate of dividend also fluctuate ev-
the end of the term
ery year as it depends on the amount of profit
Redeemable Preference shares: Such pref-
available to the company.
erence shares can be claimed after a fixed period
On the other hand, Preference Shares are the
or after giving due notice.
shares that do not carry voting rights in the com-
Non-Redeemable Preference shares: Such
pany as well as the amount of dividend is also
shares cannot be redeemed during the lifetime
fixed.
of the company, but can only be obtained at the
BASIS FOR COMPARISON EQUITY SHARES PREFERENCE SHARES

Meaning Equity shares are the ordinary Preference shares are the shares that carry
shares of the company repre- preferential rights on the matters of payment of
senting the part ownership of the dividend and repayment of capital.
shareholder in the company.
Payment of dividend The dividend is paid after the Priority in payment of dividend over equity
payment of all liabilities. shareholders.
Repayment of capital In the event of winding up of In the event of winding up of the company,
the company, equity shares are preference shares are repaid before equity
repaid at the end. shares.
Rate of dividend Fluctuating Fixed
Redemption No Yes
Voting rights Equity shares carry voting rights. Normally, preference shares do not carry voting
rights. However, in special circumstances, they
get voting rights.
Convertibility Equity shares can never be Preference shares can be converted into equity
converted. shares.
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Arrears of Dividend Equity shareholders have no Preference shareholders generally get the
rights to get arrears of the arrears of dividend along with the
dividend for the previous years. present year's dividend, if not paid in the last
previous year, except in the case of non-cumulative
preference shares
5. Explain the difference Between Right total number of shares issued by the companies
Shares and Bonus Shares as bonus issue increases, but the ratio of shares
Definition of Right Shares owned by the shareholder remains same.
Right shares are the shares which are issued by the Bonus shares do not inject fresh capital into the
company, with the aim of increasing the subscribed company, as they are issued to the shareholders
share capital of the company, by further issue. The without any consideration. As per Section 63 of the
right shares are primarily issued to the current Companies Act 2013, the company can issue fully
equity shareholders through a letter of an issue, on paid up bonus shares, out of any of the following
pro rata basis. reserves/account:
Definition of Bonus Shares Free reserves
Bonus Shares denotes free share of stock issued Securities premium account
to the existing shareholders of the company, Capital redemption reserve account
depending on the number of shares held by the However, bonus shares cannot be issued by
shareholder. The bonus issue only raises the total capitalising reserves created out of revaluation of
number of shares issued, but it does not make any assets.
change in the entity’s net worth. Nevertheless, the
BASIS FOR COMPARISON RIGHT SHARES BONUS SHARES
Meaning Right shares are the one available to the Bonus shares refers to the shares
existing shareholders equivalent to their issued by the company free of cost to the
holdings, that can be bought at a fixed existing shareholders in the proportion
price, for a definite period of time. of their holdings, out of accumulated
profits and reserves.
Price Issued at discounted prices Issued free of cost
To bring the market price per share,

Objective To raise fresh capital for the firm.
within a more popular range.
Shareholders may fully or partly

Renunciation No such renunciation
renounce their rights.
Paid up value Either fully or partly paid up. Always fully paid up.
Minimum subscription Mandatory Not required
222 SURYA
UNIT-X COMPANY MANAGEMENT
CHAPTER
27
INTRODUCTION
In the process of Company management concentrates on the process of planning, organizing, leading and
controlling the efforts of company members. This chapter clearly deals with the organizational hierarchy
in company management, role of shareholders, directors responsibilities and types of officers in company
anagement. This chapter clearly deals with the duties and responsibilities of top management and the working
attitude of the employees.
c) P
ower to borrow money in excess of the paid up
I. Choose the Correct Answers capital.
d) Power to reappoint an auditor.
1. A person shall hold office as a director in
_____ companies as per the Companies 7. Which director need not hold qualifying
Act, 2013. shares.
a) 5 companies b) 10 Companies a) Directors appointed to Central Government.
c) 20 companies d) 15 companies b) Directors appointed to Shareholders.
c) Directors appointed to Managing Directors.
2. Which ____________ Director is appoint- d) Directors appointed to Board of Directors.
ed by a Financial institution.
a) Nominee b) Additional 8. What is the statue of Directors who regu-
c) Women d) Shadow late money of the company.
a) Banker b) Holder
3. A private company shall have a minimum c) Agent d) Trustees
of _________ .
a) Seven directors b) Five directors 9. According to Companies Act, the Directors
c) Three directors d) Two directors must be appointed by the.
a) Central Government
4. A public company shall have a minimum of b) Company Law Tribunal
___________ Directors. c) Company in General Meeting
a) Twelve b) Seven
d) Board of Directors.
c) Three d) Two
10. The Board of Directors can exercise the
5. A public company having a paid up power to appoint directors in the case of.
share capital of Rs. _____ or more may a) Additional Directors
have a Director, elected by such small b) Filling up the Casual vacancy
shareholders. c) Alternate Directors
a) One b) Three
d) All the above.
c) Five d) Seven
6. Under the companies Act, which one of the ANSWERS

following powers can be exercised by the 1. c 2. a 3. d 4. c 5. c
Board of Directors? 6. b 7. a 8. d 9. c 10. d
a) Power to the company’s undertakings.
b) Power to make call.
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Chapter - 27 Company Management XII Std - Commerce
II. Very Short Answer Questions: III. Short Answer Questions:
1. Define Director. 1. Differentiate Executive and non-Executive

The Companies act 2013 section 2 (34) defines Directors.
a director appointed to the board of a Company An Executive Director can be either a whole-time
is“A person who is appointed or elected member Director of the Company or a managing Director.
of the board of Directors of a company and has But a Non-Executive director is a Director who is
the responsibility of determining and implement- neither a Whole- time Director nor a Managing
ing policies along with others in board. director.
It is not necessary to, hold any shares in the
2. When are alternative directors appointed?
company or be an employee.
Alternate director is appointed by the Board of
Directors act on the basis of resolutions made in
Directors, as a substitute to a director who may
the board of Directors meeting according to their
be absent from India, for a period which is not
powers stated in the Articles of Association of
less than three months.
the company”.
The appointment must be authorized either by
2. Name the companies required to appoint the Articles of association of the company or by
KMP. a passing a resolution in the general Meeting.
Following companies are required to appoint The alternative director is not a representative or
KMP: agent of Original Director.
Every listed company
3. Who is a shadow director?
Every public company (Having paid up share
Shadow Director:
capital of Rs. 10 crore or more)
A person who is not the member of Board but
3. Who is whole time Director? has some power to run it can be appointed as the
A Whole Time Director is one who devotes whole directors but according to his/her wish.
of his time of working hours to the company and
4. What is causal Vacancy?
has a significant personal interest in the company
It means a vacancy caused due to death,
as the source of his income.
disqualification and resignation of an auditor.
4. Who is called as Managing Director?
5. State the minimum number of directors for
A Managing Director is one who is employed
a Private company.
by the company and has substantial powers of
Minimum number of Directors:
management over the affairs of the company
subject to superintendence, direction and control
a) Public Company: Every public company shall
of the board.
have a minimum number of 3 directors and
5. Who can be Executive Director?
An executive director is a Chief Executive Officer b) Private company:
(CEO) or managing director of an organization, In case of One Person Company: The requirement
company, or corporation, who is responsible for of directors is one.
making decisions to complete the mission and O ther Private Companies: The minimum
for the success of the organization. requirement of Directors is two.
In the globalised business world the title of
President or of chief Executive Officer used
instead of Managing Director.
224 SURYA
XII Std - Commerce Chapter - 27 Company Management
non-executive chairperson, at least half of the board
IV. Long Answer Questions: of directors shall comprise independent directors.
1. Who are the KMP? c) When the non-executive chairperson is a

Key-Managerial Personnel of a Company promoter or is related to any promoter or
Companies Act, 2013 (Act) has introduced many person occupying management positions
new concepts and Key Managerial Personnel at the level of board of director or at one
(KMP) is one of them. level below the Board of Directors:
KMP covers the traditional roles of managing •• In this case, at least one half of the board
director and whole time director and also in- of directors of the company shall consist of
cludes some functional heads like Chief Financial Independent Directors (ID).
Officer and Chief Executive Officer and Company •• A director is appointed to the board of a
Secretary. company. Such directors have a different
role to play to attain the goal of the company.
who are the key managerial personnel? •• According to their role they are differently
The definition of the term Key Managerial classified in accordance with the provision of
Personnel is contained in Section 2(51) of the the Companies Act 2013.
companies Act, 2013. This section states: 3. Brief different types of Directors.
•• the Chief Executive Officer The following are the types of Directors as per
•• the Managing Director or the Manager; Companies Act 2013
•• the Company Secretary
•• the Whole-time Director; 1. Residential Director: According to section
•• the Chief financial Officer; and 149(3) of Companies Act 2013, Every company
•• such other officer as may be prescribed; should appoint a director who has stayed in In-
dia for a total period of not less than 182 days in
Following companies are required to appoint the previous calendar year.
KMP: 2. Independent Director: According to section
Requirement to Appoint “KMP” 149(6) an independent director is an alternate
•• Every listed company director other than a managing director who
•• Every public company (Having paid up share is known as Whole Time director or Nominee
capital of Rs. 10 crore or more) Director. The following type of companies has
2. Explain composition of the board of to appoint minimum two independent directors:
directors. a) Public companies which have paid-up
COMPOSITION OF THE BOARD OF share capital- 10 Crores or More;-
DIRECTORS: b) Public companies which have turnover-
a) General Optimum combination: 100 crores or more;-
Board of Directors shall have an optimum c) Public companies which have total
combination of executive and non-executive
outstanding loans, debenture, and deposits
directors with at least one woman director and not of 50 crores or more.
less than fifty percent of the board of directors shall
comprise of non-executive directors. 3. Small shareholders directors: Small
shareholders can appoint a single director in a
b) When the non-executive director is the listed company. But this action needs a proper
Chairperson: procedure like handing over a notice to at
In this case, at least one-third of the board of least 1,000 shareholders or 1/10th of the total
directors shall comprise of independent directors
shareholders.
and where the company does not have a regular
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4. Nominee director: “A director nominated 4. State the qualifications of Directors.
by any financial Institution on pursuance of In general, a director shall possess appropriate
the provisions of any law for the time being in
skills, experience and knowledge in one or more
force, or of any agreement, or appointed by any
fields of finance, law, management, sales, mar-
Government, or any other person to represent
its interests”. keting, administration, research, corporate gov-
ernance, technical operations or other disciplines
From the above, related to the company’s business.
a) should be nominated by any financial According to the different provisions relating to
institution in pursuance of any law or in term
the directors; the following qualifications may be
of an agreement entered into by the company.
mentioned:
b) Could be appointed by the Government or by
any other person. •• A director must be a person of sound mind.
c) The person so appointed shall represent the •• A director must hold share qualification, if
interests of the organization/Institution which the article of association provides such.
he represents. •• A director must be an individual.
•• A director should be a solvent person.
5. Women Director: As per section 149 (1) (a),
there are certain categories according to which •• A director should not be convicted by the
there should be at least one woman as a director Court for any offence, etc.
on the board. The following class of companies
shall appoint at least one woman director 5. List the disqualifications of directors.
(i) every listed company: Disqualifications of a director:
(ii) every other public company having: Section 164 of companies act, 2013, has
(a) paid-up share capital of one hundred mentioned the disqualification as mentioned below:
crore ruppes or more; or
1) A person shall not be capable of being appointed
(b) turn over of three hundred crore
director of a company, if the director is
rupees or more.
6. Additional directors: Any individual can be (a) Of unsound mind
appointed as Additional directors by a company. (b) An undercharged insolvent;
(c) Has been convicted by a court for any offence
7. Alternate directors: Alternate director is involving moral turpitude and sentenced in
appointed by the board of directors, as a

respect thereof to
imprisonment for not
substitute to a director who may be absent from
less than six months
India, for a period which is not less than three
months. The appointment must be a uthorized (d) Has not paid any call in respect of shares of
either by the Articles of Association of the the company held by him, whether alone or
company or by a passing a resolution in the
jointly with others.
General Meeting. The alternative director is not (e) An order disqualifying him for appointments
a representative or agent or original director.
as director has been passed by a court in
8. Shadow Director: A person who is not the pursuance of section 203.

member of Board but has some power to run it (f) He has been convicted of the offence
can be appointed as the directors but according dealing with related party transactions

to his/her wish. under section 188.
(g) He has not got the Director Identification
Number.
226 SURYA
6. Explain how director of a company can be c) Removal by the company law board:
removed from the office. •• If an application has been made to the
Removal of Director: company law board against the o ppression
A director of company can be removed from his and mismanagement of the company’s
office before the expiry of his term by affairs by a director, then the company law
•• the shareholders board may order for the termination of the
•• the central government director’s tenure or set aside any agreement
•• the company law board that has been entered into between the
A director can be removed from his office in any company and the director.
of the following three ways: •• Such order can effect the removal of the
a) Removal by shareholder 169: director from his office.
•• A company (whether public or private) may,
7. What is the maximum limit for the
by giving a special notice and passing an
Managerial remuneration?
ordinary resolution, remove a director before
Managerial Remuneration
the expiry of his period of office without the
The managerial remuneration is payable to a
proof of mismanagement, breach of trust,
person’s appointed u/s 196 of the Act. The term
misfeasance or other misconduct on the part
remuneration means any money or its equivalent
of the director.
given or passed to any person for services rendered
•• If the shareholders feel that the policies
by him and includes perquisites.
pursued by the director are not appropriate,
•• Value of rent-free or concession
then director can be removed.
accommodation.
•• The shareholders can do so by passing an
•• Value any other items provided at free of
ordinary resolution in a general meeting.
cost or at concessional rate.
•• Value of securities/sweat equity shares
b) Removal by the Central Government:
allotted or transferred by the employer or

The central government has been empowered
former employer to the employee.
to remove managerial personnel from office on the
•• A contribution made by an employer to an
recommendation of the company law board under
approved superannuation fund.
the following circumstances.
•• Value of any other fringe benefit or amenity.
•• Where a person concerned in the conduct
•• Stock options would be part of remuneration
and management of the affairs of a com-
for all directors.
pany has been guilty of fraud, misfeasance,
Forms of Managerial Remuneration:
persistent negligence in carrying out his
•• Based on profit of the company
obligations.
•• Based on Shareholders’ recommendations
•• Where the business of a company has not
•• Based on shareholders’ and central
been conducted and managed by such a
Government recommendations.
person, in accordance with sound business
principles or prudent commercial practices; 8. What are the duties of a director?
•• Where the business of a company has been Duties of director:
conducted and managed by such a person Directors act as agents of the shareholders and
in a manner which is likely to cause injury or act as a trustees of shareholders. Tus they have
damage to the interest of the trade, industry a fiduciary duty to protect the property of the
or business. company. Simply stated the following are the

•• Where the business of the company has been duties of directors.
conducted and managed by such a person Collective duties of directors:
with the intent to defraud its creditors, Directors as a part of board perform certain
members or any other persons. duties collectively. The following are some of those
SURYA 227
duties exercised collectively:- ccordance with the specification given in
a
•• Approval of annual accounts and the act.
authentication of annual accounts. •• Duty to arrange for making payment of
•• Directors report to shareholders highlighting dividend declared.
performance of the company, transfers •• Duty to file return of allotment o securities
to reserves, investment surplus funds, with the registrar.
borrowings •• Duty to forfeit and transfer shares.
•• Appointment of First Auditors •• Duty to file all the reports and resolutions
•• Issuance of notice and holding of board as required by the act with the registrar of
meetings and shareholders meetings companies.
•• Passing of resolutions at board meetings or •• Duty to carry out all other activities as
by circulation. specified in the act in time.
•• Duty to call on an extraordinary general body
General duties of Directors: meeting, if necessary.
•• Structuring or new policy to reach the objec- •• Duty to call statutory and annual general
tives of a company. meeting of the company.
•• Delegating power to any committee if the ar-
9. State the powers of the directors.
ticles permits for well being of the company.
Power of Director:
•• Issuing instructions to employees for
Directors should have a vision to frame policies
implementation of policy to review c ompany’s
to achieve high level of performance.
progress.
To achieve high level of performance, they must
•• Appointing their subordinates like managing
set the goals of the company.
director, manager, secretary and other
They must have powers to carry on objectives of
employees.
the company.
•• Acting in accordance with the articles of the
The power of the Directors grouped into four
company
different heads viz.,
•• Act in good faith in order to promote the ob-
•• Statutory powers of directors
jects of the company.
•• Managerial powers of directors
•• Perform duties with due and reasonable care
•• Power only with a resolution
and diligence.
•• Other powers
Specific Duties of Directors:
Statutory powers of directors:
•• Duty to disclose his name, address and
In the general body meeting of the company
occupation
the following powers must be exercised by the
•• Duty to disclose his shareholding and interest
board of directors by passing a resolution.
in contracts of the company.
Power to make calls on shareholders in respect
•• Duty to hold minimum qualification shares
of money unpaid on their shares.
within two months after his appointment.
Power to issue debentures.
•• Duty to issue prospectus and fix the minimum
Power to borrow moneys otherwise than on
subscription.
debentures.
•• Duty to take care that prospectus should not
Power to invest the funds of the company.
contain any false or misleading statement.
Power to make loans
•• Duty to confirm the required disclosure in
Power to approve amalgamation, Merger or
the prospectus as required by the act.
reconstruction.
•• Duty to sign in the prospectus before
Power to approve financial statement and
submitting it to the registrar of companies.
board reports.
•• Duty to deposit application money in
a scheduled bank and its utilization in
228 SURYA
Managerial powers of directors: 10. State the Criminal liabilities of Directors.
Power to contract with the third party. Criminal liabilities of directors:
Power to allot, forfeit or transfer shares of Directors will be liable with a fine and
imprisonment or both for fraud of non-compliance
company.
of any statutory provisions in the following situations
Power to decide the terms and conditions to
where
issue debentures. There is mis-statement in prospectus
Power to frame new polices and to issue There is failure to file return on allotment with
the registrar
instructions for the efficient running of the There is failure to give notice to the registrar
business. for conversion of share into stock
There is failure to issue share certificate and
Power to appoint managing director, manager,
debenture certificate
secretary of the company.
There is failure to maintain register of the
Power of control and supervision of work of members and register of debenture holders
subordinates. There is default in holding annual general
meeting
Power only with a resolution: There is failure to provide financial statements.
To sell or lease any asset of the company
To allow time to the director for repayment of
Additional Questions:
the loan
To borrow money in excess of paid up capital I. Choose the Correct Answers:
and free reserves
To appoint a sole agent for more than 5 years. 1. The companies act 2013 section ______
To issue bonus shares and for reorganization defines the appointment of director.
of share capital. a) 2(34) b) 4(24)
To contribute money for charitable purposes c) 3(24) d) None of the above
exceeding 50000 or 5% of the average profits 2. The public company shall have a minimum
of 3 years whichever is greater. number ______ directors.
a) 3 b) 2
Other powers: c) 6 d) None of the above
Power to fill casual vacancy
3. What is the notice period for the annual
Power to appoint the first auditor of the
general meeting of a public company?
company
a) 21 days
Power to appoint alternative directors,
b) 21 days unless the articles provide for a longer
additional
directors and key managerial
period
personnel. c) 14 days
Power to remove key managerial personnel d) 14 days unless the articles provide for a longer
Power to recommend the interim and final period
dividend to shareholders.
4. Maximum rate of discount that can be
Power to declare solvency position of the
allowed on issue of shares _______.
company.
a) 5 % b) 10%
Power to make political contribution.
c) 15% d) 20%
SURYA 229
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5. In case of Non-Profit making companies 12. The primary stakeholders of a company are
notice of general meeting should be given ______.
within ___ days a) Customers b) Suppliers
a) 14 b) 15 c) Shareholders d) None of the above
c) 21 d) 22
13. The board of the directors and CEO should
6. Which of the following relationship is
be the leaders with _______.
shared by the directors with the company?
a) Vision and the problem solving skills
a) Agent b) Principal
c) Both (a) & (b) d) None of the above b) Motivating ability
c) Profit earning capacity
7. Which of the following statements about d) All of the above
the directors are true?
a) The directors enjoy the rights and privileges of 14. The market price of a share is determined
an agent. by ________.
b) There is no personal liability on any contracts a) The board of directors of the company
entered by them except the powers stated in the b) The stock exchanges
memorandum and articles of the company.
c) The CEO of the company
c) They are appointed to lead the company in
d) individual buy and sell shares
relation to third parties.
d) All the above 15. A Company’s ________ are potentially
8. ___________ mean those directors who the most effective instrument of good
hold office from the date of incorporation corporate governance.
of the company. a) Common Stock Shareholders
a) Nominee directors b) Alternate director b) Board of Directors
c) First Director d) Officer Director c) Top Executive Officers
d) All of the above
9. A director can be removed from his office
by which way of the following? 16. Assertion (A): Mr.A is known as Residential
a) By the Shareholders
Director because he stayed in India for a
b) By the Central Government
period of 240 days in the previous year.
c) By the Company Law Board
Reason(R): Section 149(3) of Companies
d) All the above
act allowed a person to be called as a
10. The removal of the director by the residential director, who has stayed in
shareholder is given in section ________ India for a total period of not less than 182
of Companies Act, 2013.
days in the previous calendar year.
a) 169 b) 187
Codes:
c) 168 d) 190
11. Expand DIN______ explanation of (A).
a) Domain Identification Number (B) Both (A) and (R) are correct, but (R) is not a
b) Director Identification Number
c) Directors’ Indian Number
d) Directors’ International Number
230 SURYA
17. Assertion (A): KMP covers the traditional 21. Match the following:
roles of managing director and whole time List I List II
director. Whole time director i. S
ubstitute for board of
Reason (R): Section 2(51) of the companies director
act, 2013 explains the key managerial
Managing director ii. responsible for taking
functions of directors.
decisions
Codes:
Executive director iii. s
ubstantial powers of
management
explanation of (A).
Alternate director iv. d
evotes whole of his
time
(C) (A) is correct, but (R) is incorrect. a) b) c) d)
(D) (A) is incorrect, but (R) is correct a) 4 3 1 2
b) 3 4 1 2
18. Statement (I): A person who is not the c) 3 2 1 4
member of board but has some power to d) 4 3 2 1
run is known shadow director.
Statement (II) : The shadow director can 22. Match the List
be appointed as per their wish. List I List II
Codes: CAPITAL REMUNERATION TO
(A) Both (A) and (R) are correct. DIRECTORS
(B) Only (A) is correct, but (R) is wrong. a. less than Rs.5 i. R s.60 lakhs + 9.91 % of
(C) Only (R) is correct, but (A) is wrong. crore the effective capital in
(D) Both (A) and (R) are wrong excess of Rs. 250 crore.
b. R
s.5 crore and ii. Rs60 lakhs
above but less
19. Assertion (A): A person can hold the
than Rs.50 crore
position of Directorship in different
c. R
s.50 crore and iii. Rs.42 lakhs
companies up to maximum of 20.
above but less
Reason (R): Section 165 of the companies’
than Rs.100
act 2013 describes the appointment of
crore
directors.
Codes: d. R
s.250 crore and iv. Rs.30 lakhs
(A) Both (A) and (R) are correct. above
(B) Only (A) is correct, but (R) is wrong. a) b) c) d)
(C) Only (R) is correct, but (A) is wrong. a) 4 3 1 2
(D) Both (A) and (R) are wrong b) 3 4 1 2
c) 3 2 1 4
20. Statement (I): Manager allocates the work d) 4 3 2 1
to the subordinates according to their
nature of appointment and job. ANSWERS
Statement (II) : Director implements 1. a 2. a 3. b 4. b 5. a
policies and provides fundamental
6. c 7. d 8. c 9. d 10. a
guidelines to carry out a job.
11. b 12. c 13. d 14. d 15. b
Codes:
(A) Both (A) and (R) are correct. 16. a 17. a 18. a 19. a 20. a
(B) Only (A) is correct, but (R) is wrong. 21. d 22. d
(C) Only (R) is correct, but (A) is wrong.
(D) Both (A) and (R) are wrong
SURYA 231
II. Very Short Answer Questions: irectors after passing a special resolution
d
in general meeting and approval of Central
Government is not required.
1. Write a note on Small Shareholders
A period of one year has been provided to
Directors.
enable the companies existing on or before

Small shareholders can appoint a single director
the commencement of Companies Act, 2013 to
in a listed company.
comply with this requirement.
This action needs a proper procedure like h
anding
over a notice to at least 1000 shareholders or
1/10th of the total shareholders.
IV. Long Answer Questions:
1. Explain the Number of Directorships
III. Short Answer Questions: allowed by the company law.
Under Section 165 of the Companies Act 2013 A
1. Who is called as a Nominee Director? person can hold the position of Directorship in
“A director nominated by any financial Institution different companies up to maximum of 20.
on pursuance of the provisions of any law for The number of directorships in public companies/
the time being in force, or of any agreement, or private companies that are either holding or
appointed by any Government, or any other person subsidiary company of a public company shall be
to represent its interests”. limited to 10.
From the above, Further the members of a company may restrict
should be nominated by any financial above mentioned limit by passing a special
institution in pursuance of any law or in
resolution.
term of an agreement entered into by the
company.
Could be appointed by the Government or by If a person holds Directorship in more than the
any other person. limit specified above he/she has to resign the
The person so appointed shall represent the excess, according to his / her choice.
interests of the organization/Institution which If a person accepts an appointment as a director
he represents. in excess of above mentioned limit is punishable
with a fine of not less than Rs. 5,000 but which
2. Explain Power of Attorney. may extend to Rs. 25,000 for every day after the
The promoters may appoint an attorney first day for the period of Directorship hold by
empowering him/her to carry out the instructions/ the person.
requirements stipulated by the Registrar.
This requires execution of Power of Attorney on 2. Write a note on the legal position of a
a non-judicial stamp paper for a value prescribed director.
in the respective State Stamp Laws. Directors are the persons duly appointed by the
Company to lead and manage its affairs and their
3. Write a note on the Number of directors in legal position. At times they have to act as agents,
a company: managing partner, trustees, Employee, and Officer.
Section 149(1) Section 149(1) of the Companies a) Directors as Agents:
Act, 2013 requires that every company shall have Directors who are elected representatives of
a minimum number of 3 directors in the case of the shareholders and who execute decision
a public company, two directors in the case of a made for the benefit of shareholders.
private company, and one director in the case of Directors share a relationship of an agent and
a One Person Company. a principal with the company.
A company can appoint maximum 15 fifteen Directors are appointed to lead the company
directors. in r elation to third parties.
A company may appoint more than fifteen
232 SURYA
They can enjoy the rights and privileges of as a full-fledged trustee.
an agent. d) Directors as employees
There is no personal liability on any contracts Directors are professionals who manage the
entered by them, company for the benefit of themselves and
If it is not so they have personal liability. for the benefit of the shareholders.
If a director accepts employment in the
b) Directors as Managing Partners same company under a separate contract of
The management of company is vested in the service, then, in addition to the directorship,
hands of many executives. he is also treated as an employee or servant
So, the directors are virtual managing partners of the company.
and the Directors elected by shareholders are In other words, when the director is appoint-
like partners to the shareholders. ed as whole time employee of the company,
Director is a person has to act under the then that particular director shall be con-
superintendence, control and direction of the sidered as employee director or whole time
board of Directors. director.
Therefore, unlike in a partnership firm, no
power can be delegated to a single director e) Directors as officers
as a managing partner. “Officer” includes any director, manager or
key managerial personnel or any person in
c) Directors as trustees accordance with the directions or instructions
Directors are trustees of the company’s mon- the Board of Directors or any one or more of
ey and property and they have to safeguard the directors who is or are accustomed to act.
them and use them for the sake of the com- Director is treated as officers of an company.
pany and on behalf of the company. Sometimes, they may be also liable for
According to Law of trust, the equitable own- punishments in form of penalties, under
ership of the trust property is vested with the Companies Act, when the provisions of the
beneficiary only, Hence directors cannot act Act are not strictly complied with.
3. Differentiate Manager and Director
Sl.No Basis of Difference Manager Director

1. Meaning A person who is in charge for A person appointed by the
the particular department of the shareholders to lead the company to
company and is responsible for the achieve its goal.
performance of that department.
2. Nature of Work Allocate the works to the Implements policies and provides
Subordinates according to their fundamental guidelines to carry out

nature of appointment and job a job to the concerned manger
3 Level of Management A manager comes under executive Directors come under top level
level anagement and plays important
m
role in the process of decision making
4. Responsibility Managers are responsible for Directors responsible for formulation
implementation of plans and policies of plans and policies time to time to
approved by the Board of Directors achieve the goal of the company.
SURYA 233
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4. Different Managing Director and Whole time Director.
Sl.No Basis of Difference Managing Director Whole-Time Director

1. Power He/She is entrusted with sub- The power is stated in the term of
stantial powers. mployment
e
2. Prohibition Section 197 prohibits to act Sometimes a whole-time director may be
both a managing director and
appointed as manager and director of a
a manager simultaneously company
3. Appointment Consent of the shareholders Consent of shareholders of the company
of the company means of by a special resolution is must for the
resolution is not n
ecessarily for appointment of whole time director
the appointment of managing
director
4. Duration of No individual can be appointed There is no such restriction regarding the
Appointment for more than five years at a appointment of a whole-time director
time
234 SURYA
UNIT-X COMPANY SECRETARY
CHAPTER
28
INTRODUCTION
The word secretary has originated from the Latin word ‘Secretarius’ which means secret. In most of the
Publicly listed corporations, the Company Secretary is typically named as Corporate Secretary or Secretary.
The company secretary is responsible for the efficient administration of a company, particularly with regard to
ensure compliance with statutory and regulatory requirements and for ensuring that, decisions of the board of
directors are implemented. It is also the duty of the company secretary to ensure that the organization complies
with relevant legislations and regulations. The major responsibility of the company secretary is to register and
communicate with the shareholders ensuring the payment of dividends. This chapter evidently describes the
importance of Company Secretaries in a Company.
7. From the date of its incorporation the First
I. Choose the Correct Answers Annual General Meeting is to be conducted
within __________ months.
1. Mention the status of a company secretary
a) Twelve b) Fifteen
in a company?
c) Eighteen d) Twenty one
a) A member
b) A director 8. What percentage of shareholders is need-
c) An independent ed to pass special resolution?
d) An employee contractor a) It must be unanimous b) Not less than 90%
c) Not less than 75% d) More than 50%
2. Who can become a secretary for a compa-
ny? 9. A special resolution is required must be
a) Individual person b) Partnership filed with the Register within
c) Co-operative societies d) Trade unions a) 7 days b) 4 days
c) 30 days d) 60 days
3. Which meeting will be held only once in the
life time of the company? 10. A special resolution is required to
a) Statutory b) Annual General a) Redeem the debentures
c) Extra- Ordinary d) Class General b) Declare dividend
c) Appoint directors
4. Board Meeting to be conducted minimum
d) Appoint auditor
_______________times in the year.
a) 2 b) 3 c) 4 d) 5
ANSWERS
5. Who is not entitled to speak at the annual 1 d 2 a 3 a 4 c 5 c
general meeting of the company.
6 b 7 b 8 c 9 c 10 d
a) Auditor b) Shareholder
c) Proxy d) Directors
II. Very Short Answer Questions:
6. Mention the company which need not
convene the statutory Meeting. 1. Who is a secretary?
a) Widely held public b) Private Limited Section 2(24) of the companies Act,2013 defines
c) Public Limited d) Guarantee having a share “company secretary” or “secretary” means any
capital individual possessing the prescribed qualifications,
SURYA 235
Chapter - 28 Company Secretary XII Std - Commerce
appointed to perform the duties which may be The intention of proposing a resolution as a spe-
performed by a secretary under this act and any cial resolution must be specifically mentioned in
other ministerial or administrative duties”. the notice of the general meeting.
2. Define meeting? 2. What do you mean by statutory meeting?

A meeting is a gathering of two or more people that According to companies act, every public com-
has been convened for the purpose of achieving pany, should hold a meeting of the shareholders
a common goal through verbal interaction such as within 6 months but not earlier than one month
sharing information or reaching agreement. from date of commencement of business of the
company.
3. What is resolution?
The first general meeting of the public company
As per the companies act 2013, for taking
is called statutory meeting.
any d ecision or executing any transaction,
This meeting is conducted only once in the life-
the consent of the shareholders, the board of
time of the company. A private company or a
directors and other specified is required.
public company having no share capital need not
The decisions taken at a meeting are called
conduct a statutory meeting.
resolution.
The company gives the circular to shareholder
In other worlds a motion, with or without the
before 21days of the meeting.
amendments which is put to vote at a meeting
and passed with the required quorum becomes 3. What do you understand by ‘poll’?
resolution. Poll means tendering or offering vote by ballot
to a specially appointed officer, called the polling
4. Write short note on ‘proxy’?
officer.
Proxy means a person being the representative
Under the companies act, poll means exercising
of a shareholder at the meeting of the company
voting right in proportion to shareholder’s
who may be described as his agent to carry out
contribution to the paid-up capital of a limited
which the shareholder has himself decided upon.
company having a share capital.
Proxy can be present at the meeting and he
cannot vote. 4. Give any three cases in which ordinary
resolution need to be passed?
5. What is vote?
To change or rectify the name of the company.
The word ‘vote’ originated in Latin word ‘Votum’
To alter the share capital of the company.
indicating one’s wishes or desire.
To increase or decrease the number of directors
By casting his vote one formally declaring his
within the limits prescribed.
opinion or wish in favour of or against a proposal
or a candidate to be elected for an office. 5. What resolution is requires special
According to section 47 of the Companies Act, notices?
2013 the proposal is subject to the approval only There are certain matters specified in the
when majority of the members or shareholders Companies Act, 2013 which may be discussed at
accept it. a general meeting only if a special notice is given
at least 14 days before the meeting.
III. Short Answer Questions: The intention to propose any resolution must be
notified to the company.
1. What is special resolution? The following matters require special notice
A special resolution is the one which is passed before they are discussed in the meeting:-
by a not less than 75% of majority. The num- i) To appoint an auditors, a person other than
ber of votes, cast in favour of the resolution a retiring auditor.
should be three times the number of votes cast ii) To provide expressly that a retiring auditors
against it. shall not be reappointed.
236 SURYA
XII Std - Commerce Chapter - 28 Company Secretary
iii) T
o remove a director before the expiry of He has to ensure that the tax deducted is
his office. deposited at government treasury. Secretary
iv) To appoint a direct in the place of a directors has to submit and verify various forms for
so removed. timely filing of income tax returns to the
authorities in accordance with the law.
IV. Long Answer Questions: He has to see that the certificate of Tax
Deducted at source (TDS) is issued to every
1. Elaborate the functions of the company employees and shareholders.
secretary? Under Indian Stamp Act:
Functions of the company secretary may be The company secretary has to ensure that
discussed under two headings: whether proper stamps are affixed on the
(i) Statutory functions or duties and (ii) non-statutory company’s documents like letter of allotment
functions or duties. and share certificate or not.
He is also complying with Minimum Wages
(i) Statutory functions: Act, Industrial Disputes Act, Employee State
As the principal officer of the company, the Insurance Act etc.
secretary must observe all the legal for-
Under the Sales – tax Act:
malities in respect of the provisions of the He must ensure timely submission of tax
companies act and other laws (e.g., Income returns to the sales – tax authorities and

– tax act, Stamp act, sales – tax acts, etc.) payment of tax.
which have a bearing on the activities of the Under the Sales – tax Act:
company. The following are the Statutory He must ensure timely submission of tax
function of a Company Secretary according returns to the sales – tax authorities and

to companies Act 2013, payment of tax.
To sign document and proceedings requiring Under other Acts:
authentication by the company He must see that the provisions of any
To maintaining share registers and register of other Act applicable to the company, eg.,
directors and contracts Foreign Exchange Regulation Act, Industries
To give notice to register for increase in the (Development and Regulation) Act, and
share capital Rules, are also complied with.
To deliver share certificate of allotment with- Where the company is carrying on manufac-
in 2 months after transfer turing business, he must also comply with
To sign and send annual return the provisions of the Factories Act, payment
To make a statutory declaration for receiving of wages act, Industrial Disputes Act and
certificate of commencement of business. other labor laws.
To send notice of general meeting to every
member of the company. (ii) Non – Statutory Function
To make statutory books Secretary has to discharge non – statutory
To prepare minutes of every general meeting functions in relation to directors, sharehold-
and board meeting within 30 days. ers and office and staff. These functions are
To file a resolution with the registrar. briefly mentioned.
To assist in preparing the statement of affairs •• Functions as agent of directors;
in a winding up. •• Functions towards shareholders;
Under the Income – tax act: •• Functions towards office and staff.
He is responsible for deduction of requisite Functions in relation to directors:
Income tax from salaries of employees, A company secretary acts under the full
dividends and interest payable. control of the board of directors and carry
out the instructions of the directors.
SURYA 237
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The secretary provides necessary advice 2. Discuss the liabilities of Company
and information to the board to formulate Secretary?
company policy and arrive at decisions. The following are the liabilities of Company
It is the secretary’s duty to implement the Secretary:
decisions taken by the board of directors. According to Section 39, for the failure to
The duties of the secretary includes arranging send copies of Memorandum and Articles, to
board meetings, issuing notice and preparing the members within seven days of the re-
agenda of such meeting, recording the quirement, the company secretary has to pay
attendance of the directors and the minutes a fine upto Rs.50 for each offence.
and resolutions of the meeting in consultation According Section 75, for the failure to file
with the chairman. with the registrar a return of the allotments of
He maintains all important correspondence, shares within thirty days after the a llotment,
files, documents and records in the board a fine up to Rs.500 for every day during
office. which the default continues will be imposed.
Functions in relation to shareholders According to Section 150, for the failure
The company secretary must serve in the to maintain register of members with the
best interests of the shareholders. He also prescribed particulars, fine up to Rs.50 for
must safeguard the shareholders’ interest. everyday during which the default continues
Under the Companies Act 2013, secretary will be imposed.
should act as link between the board of di- According to section 165, for default in
rectors and the shareholders and also ensure holding the statutory meeting and filing the
that the shareholder’s rights are violated. statutory report , fine upto Rs.500 will be
He has to arrange the issue allotment let- imposed.
ters, call letters, letter of regret, share certifi-
cate, share warrants to shareholders.
3. Briefly state different types of company
Besides he has to issue notices and agen-
meetings?
A company meeting must be convened and
da of all meeting of shareholders and also
held in perfect compliance with the various
send replies to the inquiries and complaints
provisions of the act and the rules framed
of the shareholders on behalf of the board of
there under.
directors.
It is essential that the business dealt with at
Functions in relation to office and staff:
the meetings , should be validly transacted
The secretary is the kingpin of the whole cor-
and not liable to be questioned later due to
porate machinery.
any irregularity.
He is responsible for smooth functioning of
Kinds of company meetings:
the office work.
Under the companies act, 2013, company
He exercises an overall supervision, control
meetings can be of classified as under:
and co-ordination of all clerical activities in
the office.
238 SURYA
Shareholders meetings: meeting is called annual general meeting of

The meetings held with the shareholders of company(AGM).
the company is called shareholders meeting. Company is bound to invite the first gener-
The shareholders meeting can be classified al meeting within eighteen months from the
as statutory meeting and extra ordinary date of its registration.
general meetings. Then the general meetings will be held once
in every year.
a) Statuary meeting : The differences between two general
According to companies act, every p ublic meetings should not be more than fifteen
company, should hold a meeting of the months.
shareholders within 6 month but not earlier Every annual general meeting shall be held
than one month from te date of commence- during business hours, on a day which is not
ment of business of the company. a public holiday, at the registered office of
The first general meeting of the public com- the company or at some other place with-
pany is called the statutory meetings. in the town or village where the registered
This meetings is conducted only once in the office is situated.
lifetime of the company. A private company AGM should be conducted by both private
or a public company having no share capital and public ltd companies.
need not conduct a statutory meeting. (c) Extra-ordinary general meeting:
The company gives the circular to sharehold- Both statutory meeting and annual general
ers before 21 days of the meeting. meetings called a ordinary meetings of a
company.
b) Annual general meeting (AGM): All other general meetings other than
Every year a meetings is held to transact statutory and annual general meetings are

the ordinary business of the company. Such called extraordinary general meetings.
SURYA 239
If any meetings conducted in between two (c) Special meeting:
annual general meetings to deal with some a) C
lass meeting (Meetings of particular
urgent or special or extraordinary nature of share or debenture holders)
business is called as extra-ordinary general Meetings, which are held by a particular
meetings. class of share or debenture holders
e.g.preference shareholders or
Meeting of the board of directors: debenture holder is known as meeting.
Since the administration ofthe company The debenture holders of a particular
lies in the hands of the board of directors, class conduct these meetings. These
they should meet frequently for the proper meetings are held according to the
conduct of the business and to decide policy rules and regulations laid by the trust
matters of the company. deed or debenture bond, from time
to time, where the interest of the
(a) Board meetings: debenture holders play vital role at the
Meetings of directors are called board time of re-organisation, reconstruction,
meetings. Meeting of the directors provide
amalgamation or winding-up of the

a platform to discuss the business and take company.
formal decisions. b) Meetings of the creditors:
First meeting of directors should be convened Strictly speaking, these are not meetings
within 30(Thirty) days from the date of of a company.
incorporation of the company. Unlike the meetings of a company, there
(b) Committee meetings: arise situation in which a company may
Every listed company and every other public wish to arrive at a consensuses with the
company having paid up shared it capital of creditors to avoid any crisis or to evolve
Rs.10crore is required to have Audit . compromise or to introduce any new
This committee should meet at least four proposals.
times in a year.
4. Describe the different types of resolutions
In case of other companies, the board of
which company may pass with suitable
directors shall nominate a director to play the
matters required for each type of

role of audit committee which is functioning
resolution?
as a vigil mechanism.
Kinds of Resolution
a) Ordinary Resolution:
An ordinary resolution is one which can be passed by a simple majority.i.e. if the members of votes cast by
members, entitled to vote in favour of the resolution is more than the votes cast against the resolution.
Ordinary resolution is required for the following Matters
•• To change or rectify the name of the company.
•• To alter the share capital of the company
•• To redeem the debentures •• To change the objectives of the company
•• To declare the dividends •• To change the name of the company
•• To approve annual accounts and balance •• To alter the articles of association
sheet •• To reduce the share capital subject to the
•• To appoint the directors confirmation of the court.
•• To increase or decrease the number of •• To commence any new business
directors within the limits prescribed •• To appoint the auditor for the company
•• To remove a director and appoint another •• To appoint the sole selling agent in specified
director in his place cases
•• To make inter corporate investment, within •• To determine the remuneration of the director
the limits and the managing director
•• To approve voluntary winding up if the articles c) Resolution requiring special notice:
authorize There are certain matter specified in the
•• To fill up the vacancy in the office of companies act, 2013 which may be discussed
liquidator,etc., at a general meeting only if a special notice
is given at least 14days before the meetings.
b) Special resolution: The intention to propose any resolution must
•• A special resolution is the one which is passed be notified to the company. The following
by a not less than 75% of majority. The matters require special notice before they are
number of votes, cast in favour of the votes discussed in the meeting.
cast against it. •• To appoint an auditor, a person other than a
•• The intention of proposing a resolution as retiring auditor
a special resolution must be specifically •• To provide expressly that a retiring auditor
mentioned in the notice of the general
shall not be reappointed
meeting. •• To remove a director before the expiry of his
periodof office
Special resolution is required for the following •• To appoint a director in the place of a director
matters so removed.
•• To change the registered office of the company
from one state to another
5. Explain different types of open and secret types of voting?

www.nammakalvi.org
Procedures of voting:
There are two distinct procedures of voting viz., Additional Questions:
open and secret procedures.
I. Choose the Correct Answers:
i) Open procedure:
•• This type of voting has no secrecy as the all 1. A company secretary is considered to
the members assembled can see voting. be____________.
•• There are two popular method of open voting a) A member of the company
namely voice and voting by show of hands. b) A director of the Company
a) By voice: c) An independent contractor
•• voice voting is a popular type of voting in d) An employee of the company
which the chairman allows the members to
2. The word secretary has originated from
raise their voice in favour or against an issue
___________.
‘Yes’ for approval and ‘No’ for rejection.
a) Latin b) French
•• Chairman announces the result of voice voting
c) Spanish d) None
on the bsis of strength of words shouted.
•• It is an un scientific method. It cannot be 3. Companies Secretary’s Qualification Rules
employed for deciding complex issue. was established in the year ___________.
b) By show of hands: a) 1975 b) 1965 c) 2006 d) 2015
•• Under this method the chairman, requests the
4. Company Secretary should have a thorough
members to raise their hands of those who
knowledge on ____________.
are in favour of the proposal or candidate and
a) Company Law b) Mercantile Law
the then request those are against.
c) Labour Law d) All of the above
•• Then the chairman counts the number of
hands raised for yes and no respectively can 5. A Meeting held to transact the ordinary
announce the result on the basis of hands business of the company is known as
counted. _________.
a) Annual General Meeting
ii) Secret procedure: b) Statutory Meeting
•• Secret procedure is adopted to decided certain c) Board Meeting
vital issues. d) None
•• it is a popular voting method that could
maintain the secrecy of the voter. 6. First meeting of directors should be
c) By Ballot: convened within ______ days from the

•• Under this system, ballot paper bearing serial date of incorporation of the company
number is given to the members to record a) 15 b) 30 c) 45 d) 90
their opinion by marketing with the symbol 7. The audit committee should meet at least
or shareholders have to cast their vote in a ________ times in a year.
secret chamber and put the ballot paper into a) Two b) Five
the ballot box. c) Nine d) Four
•• The chairman opens the ballot box in the
8. A resolution which is passed by a not less
presence of tellers or scrutinizers and counts
than 75% of the majority is known as
the votes. He rejects the defective or wrongly
____.
marked ballot papers.
a) Ordinary resolution
•• The defective or wrongly marked ballot
b) Special resolution
papers. The votes are counted and the results
c) Resolution requiring Special Notice
are announced.
d) None of the above
242 SURYA
9. The word ‘Vote’ is originated from the Latin 14. Statement (A): Meeting of the directors are
word ____________. called as Board Meetings.
a) Votum b) Votus Statement (R): First Board meeting of
c) Voture d) None directors should be convened with 30

days from the date of incorporation of the
10. ________ means tendering or offering vote
company.
by ballot to a specially appointed o
fficer.
(A) Both (A) and (R) are false
a) Resolution b) Poll
(B) (A) is true, but (R) is false.
c) Pull d) None
(C) (A) is false, but (R) is true.
11. Assertion (A): The first general meeting (D) Both (A) and (R) are true
of the public company is called Statutory
15. Statement (A): Committee meeting should
meeting.
be done at least four times in a year.
Reason(R): A private company or a public
Statement (II): The audit meetings are
company having not share capital need not
also known as committee meetings.
conduct a statutory meeting.
Codes:
Codes:
(A) Both (A) and (R) are correct.
explanation of (A).
(B) Only (A) is correct, but (R) is wrong.
(C) Only (R) is correct, but (A) is wrong.
(D) Both (A) and (R) are wrong.
12. Assertion (A): The company secretary (D) (A) is incorrect, but (R) is correct
is responsible for deduction of income
16. Match the following:
tax from salaries, dividends and interest
payable.
List I List II
Reason(R) : The company secretary should
be comply with the MWA & ESIA. a. Income tax act i. T
ax-returns to sales tax
Codes: authorities
(A) Both (A) and (R) are correct and (R) is correct b. Indian stamp act ii. Welfare measures
explanation of (A). c. Sales tax act iii. TDS
(B) Both (A) and (R) are correct, but (R) is not a d. E
mployee state iv.
Proper stamps are
correct explanation of (A). insurance act ffixed
a
(C) (A) is correct, but (R) is incorrect. a) b) c) d)
(D) (A) is incorrect, but (R) is correct a) 4 3 1 2
b) 3 4 1 2
13. Assertion(A): The AGM should be held once
c) 3 2 1 4
in a year.
d) 4 3 2 1
Reason(R): The difference between two
general meeting should not exceed fifteen 17. Match the List
months. List I List II
Codes: a. A
nnual general i. m
eeting between two
(A) Both (A) and (R) are correct and (R) is correct meeting AGM
explanation of (A).
b. Board Meeting ii. Special meeting
c. Bond holders meeting iii. Meetings of the
Director
(D) (A) is incorrect, but (R) is correct d.Extra-ordinary general iv. Meetings of
meeting s hareholder
SURYA 243
a) b) c) d) To appoint a director in the place of a director
a) 4 3 1 2 so removed
b) 3 4 1 2
c) 3 2 1 4 III. Short Answer Questions:
d) 4 3 2 1
1. What is meant by Postal Ballot?
ANSWERS Big companies or big associations having
1 d 2 a 3 a 4 d 5 a members scattered all over the country follow
6 b 7 d 8 b 9 a 10 b this method of voting.
11 a 12 a 13 a 14 d 15 b Under this method serially numbered ballot
16 b 17 d papers are sent by post in sealed covers to the
members, who are living at a distance place, are
unable to attend the meeting physically.
II. Very Short Answer Questions:
The members or votes fill in the ballot papers and
return them in sealed covers which are opened
1. Write a note on Voting by show of hands. when the ballot box is opened for counting the
Under this method the Chairman, requests the votes.
members to raise their hands of those who are
in favour of the proposal or candidate and then 2. Write a note on Appointment of Company
requests those are against. Secretary.
Then the Chairman counts the number of hands Every unlisted company and every private com-
raised for Yes and No respectively can announce pany having a paid up capital of Rs.5 crore or
the result on the basis of hands counted. more must also have a full time secretary.
Only an individual who is a member of institute of
2. Under what circumstances the secretary company secretaries of India can be appointment
may be terminated? as a company secretary.
The secretary may be terminated under the Appointment By the Promoters: The first
following situations: secretary of a company is appointed by the

1. when his term of appointment has expired; promoters at pre-incorporation stage and such is
2. when he is given a proper notice of dismissal as mentioned in the Articles of Association.
per the terms of agreement of employment; Appointment by the First Board of
3. when he makes a secret profit; Directors: After the company has been been
4. when he misconducts himself ; registered, the first board of directors appoints
5. where he is found to be guilty of moral turpitude, the secretary at the firs board meeting. The
negligence, disobedience, incompetence. board of directors can continue the existing
6. w here he suffers from permanent mental and secretary appointed by promoters or can appoint
physical disabilities. a new company secretary.
3. What are all the matters require special
notice before they are discussed in the IV. Long Answer Questions:
special notice resolution meeting?
The following are the points to be discussed : 1. What are the reasons for making a special
To appoint an auditor, a person other than a resolution?
retiring auditor Special resolution is required for the following
To provide expressly that a retiring Auditor shall matters
not be reappointed To change the registered office of the company
To remove a director before the expiry of his from one state to another
period of office To change the objectives of the company
244 SURYA
To change the name of the company A diploma in Company Law granted by any
To alter the articles of association Indian Law Institute.
To reduce the share capital subject to the
3. What are the powers and rights of c ompany
confirmation of the court
secretary?
To commence any new business
a) Supervision and Control: As a head of the
To appoint the auditor for the company
office, a company secretary has the rights to
To appoint the sole selling agents in specified
supervise, direct and control all office activities
To determine the remuneration of the director
of subordinate offices.
and the managing director.
b) S igning authority: Being a principal officer,
2. What are the Statutory Qualifications of a a company secretary can sign contracts,
Company Secretary? proceedings of the company meeting, files and
In case of a company having a paid- up share documents on behalf of the company.
capital of 5 crore or more, the Secretary must be c) Exercising power: He has the right to exercise
a member of the Institute of Company Secretaries powers as granted by board of directors.
of India incorporated under the Companies Act, d) Issuing testimonial: A company secretary can
1956, and licensed under Sec. 25 of that Act. issue testimonials to employees on behalf of the
A per son who is a member of the Institute of company.
Chartered Secretaries of London shall also be e) Claiming salary and damages: As per contract,
eligible for appointment as Secretary of such a he has the right to claim his salary and other
company. allowances. He can also take legal action against
In the case of any other company, one or more the company if there is any breach of contract.
of the following qualifications shall have to be Before his services are terminated, he can
possessed by the Secretary: demand a reasonable notice and claim damages
Qualifications specified in clause (a) above for his wrongful Signing dismissal.
A degree in law granted by any university. f)
Preferential creditor: During winding up of a
Membership of the Institute of Chartered company, company secretary can claim his legal
Accountants of India. dues on a preferential basis.
Membership of the Institute of Cost and Works g) Attending meeting: He has the right to be
Accountants of India. physically present in the meetings of the

A post-graduate degree or diploma in shareholders and board of directors.
Management or Commerce granted by any
university or the Indian Institute of Management.
SURYA 245
www.nammakalvi.org
CLASS MODEL QUESTION PAPER (2019-2020)

XII STD
Commerce
Time : 2.30 Hours Marks : 90
Part-A
Choose the correct answer: 20x1=20
1. Which of the following feature does not form one of Fayol’s 14 principles of management?
a) Esprit de Corps b) Individualism c) Initiative d) Order
2. POSDCORB means _____________

a) Planning, Organising, Directing, Controlling, Report Writing
b) Planning, Organising, Staffing, Directing, Controlling, Reporting and Budgeting
c) Planning, Organising, Staffing, Directing,Costing, Reconsiliation and Budgeting
d) None of the above
3. Which one of the following is not true for MBO?

a) It acts an effective performance appraisal tool
b) The superior evaluate the individual concerned
c) It forces the management to plan the activities in a systematic way
d) Better management and improved communication.
4. The market for buying and selling of Commercial Bills of Exchange is known as a ____________.
a) Commercial Paper Market b) Treasury Bill Market
c) Commercial Bill Market d) Capital Market
5. ____ is the oldest stock exchange in the world.

a) London Stock Exchange b) Bombay Stock Exchange
c) National Stock Exchange d) Amsterdam Stock Exchange
6. . Human resource management determines the _____________ relationship.

a) internal, external b) employer, employee
c) Owner, Servant d) Principle, Agent
7. Recruitment bridges gap between _____________ and _____________ .

a) job seeker and job provider b) job seeker and agent
c) job provider and owner d) owner and servant
8. Identify the test that acts as an instrument to discover the inherent ability of a candidate.
a) Aptitude Test b) Attitude Test
c) Proficiency Test d) Physical Test
246 SURYA
XII Std - Commerce Model Question Paper
9. Case study method is _____________ type of trainee.
a) Only theoritical training b) Both theory an d practical training
c) Hands on training d) Abservation Training
10. Which of the below is a factor of production?

a) Land b) Labour
c) Entreprenership d) All of the above
11. A person who is inspired to take up entrepreneurial activity is known as _____________.

a) Pure Entrepreneur b) Spontaneous Entrepreneur
c) Motivated Entrepreneur d) Induced Entrepreneur
12. Which of the following institution helps to set up a network of technical consultancy organi-
zations in the country.
a) TCO b) ITC
c) EGB d) None of the above
13. As per section 2(12), of the sale of Goods Act, quality of goods include _____________.
a) State of goods b) Conditions of goods
c) Both (a) and (b) d) None
14. Match the following
List I List II
a. Royal Charter i. Registration in India
b. J oint Stock
ii. England
Company Act
c. English Joint Stock
iii. East India
Companies Act
d. I ndian Companies iv. P
rotect and preserve the
act rights of shareholders
a b c d
a) 4 3 1 2
b) 3 4 1 2
c) 3 2 1 4
d) 4 3 2 1
15. First meeting of directors should be convened within _____________ days from the date of
incorporation of the company
a) 15 b) 30
c) 45 d) 90
16. Find the odd one out

a) Transfer of property b) Price
c) Warranty d) Two parties
SURYA 247
Model Question Paper XII Std - Commerce
17. Assertion (A): When a company earns profit prior to its incorporation, it is called capital
profit. Reason (R): Capital profit cannot be used for distribution as dividend to the
shareholders. In the context of the above statements, which one of the following is correct?
Codes:
a) (A) is correct, but (R) is wrong.
b) Both (A) and (R) are correct.
c) (A) is wrong, but (R) is\ correct.
d) Both (A) and (R) are wrong
18. Assertion (A): A demat account holds all the shares that are purchased in electronic or de-
materialized form. Reason(R): Every share holder should have a dematerialized account for
the purpose of transacting.
a) Both (A) and (R) are correct.
b) Both (A) and (R) are incorrect.
c) (A) is not correct, but (R) is correct.
d) (A) is correct, but (R) is wrong.
19. Marketing mix means a marketing program that is offered by a firm to its target _____________
to earn profits through satisfaction of their wants.
a) Wholesaler b) Retailer
c) Consumer d) Seller
20. The General Assembly of United Nationspassed resolution of consumer protection guidelines
on
a) 1985 b) 1958
c) 1986 d) 1988.
Part-B
Answer any 7 Question: (Question No.30 is compulsory) 7x2=14
21. Who is a shadow director?
22. What do you mean by Span of management?
23. What is known as KRA?
24. How is price determined in a Capital Market?
25. What is meant by Goods sent ‘On Approval’ or ‘ Sale or Return ‘Basis?
26. What are the rights of consumer according to John F. Kennedy?
27. What is Caveat Emptor?
28. Write a short note on New Economic Policy
29. What is Sweat Equity Shares?
248 SURYA
XII Std - Commerce Model Question Paper
30. State the name of the following ventures:
a. Started by individuals for profit motive
b. Started by Government
c. Started by individuals and Government together
d. Started as a family business
Part-C
Answer any 7 Question: (Question No.31 is compulsory) 7x3=21
31. What do you mean by marketing mix? Describe any two elements.
32. Write a note on Appointment of Company Secretary.
33. What is meant by Dematerialization?
34. What is vestibule training?
35. Write a note on National Clearance and Depository System (NCDS).
36. What is meant by Account Payee Crossing?
37. Does District Forum exceeds the claim limit of Rs 20 lakhs. Explain the condition
38. Give any three cases in which an special resolution need to be passed
39. Why do you think the medical examinations of a candidate is necessary?
40. Expand the following: STEP, JAM, TREAD, M-SIPS, SEED and New Gen IEDC
Part-D
Answer all the questions: 7x5=35
41. Describe the principles of scientific management.

(or)
Distinguish between new issue market and secondary market.
42. What are the types of Speculator? Explain
(or)
What are the functions of SEBI?
43. Elaborate on the factors affecting recruitment
(or)
What are the difference between on the job training and off the job training?
44. Compare the concept of social marketing with service marketing.
(or)
What are the salient features of the Consumer Protection Act, 1986?
SURYA 249
Model Question Paper XII Std - Commerce
45. Explain the micro environmental factors of business.
(or)
Distinguish between sale and agreement to sell
46. Explain the different kinds of endorsements
(or)
Explain in detail the various functions of an entrepreneur
47. Write the difference between Debentures and Shares:
(or)
Elaborate the functions of the Company Secretary
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250 SURYA

Namma Kalvi 12th Commerce Unit 10 Surya Guide em

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III. Short Answer Questions:

Sl.No Basis of Comparison Shares Stock

IV. Long Answer Questions:

1. Write the difference between Debentures and Shares?

2. Brief different stages in Formation of a 2. Registration or Incorporation: Second

6. Write the difference between share C

Sl.No Basis of Difference Share Certificate Share Warrant

BASIS FOR COMPARISON EQUITY SHARES PREFERENCE SHARES

BASIS FOR COMPARISON RIGHT SHARES BONUS SHARES

Price Issued at discounted prices Issued free of cost

To bring the market price per share,

Shareholders may fully or partly

Minimum subscription Mandatory Not required

6. Under the companies Act, which one of the ANSWERS

II. Very Short Answer Questions: III. Short Answer Questions:

1. Define Director. 1. Differentiate Executive and non-Executive

1. Who are the KMP? c) When the non-executive chairperson is a

8. Shadow Director: A person who is not the pursuance of section 203.

3. Differentiate Manager and Director

Sl.No Basis of Difference Manager Director

Sl.No Basis of Difference Managing Director Whole-Time Director

2. Define meeting? 2. What do you mean by statutory meeting?

Shareholders meetings: meeting is called annual general meeting of

5. Explain different types of open and secret types of voting?

CLASS MODEL QUESTION PAPER (2019-2020)

Choose the correct answer: 20x1=20

2. POSDCORB means _____________

3. Which one of the following is not true for MBO?

5. ____ is the oldest stock exchange in the world.

6. . Human resource management determines the _____________ relationship.

7. Recruitment bridges gap between _____________ and _____________ .

10. Which of the below is a factor of production?

11. A person who is inspired to take up entrepreneurial activity is known as _____________.

14. Match the following

16. Find the odd one out

Answer any 7 Question: (Question No.30 is compulsory) 7x2=14

21. Who is a shadow director?

22. What do you mean by Span of management?

23. What is known as KRA?

24. How is price determined in a Capital Market?

26. What are the rights of consumer according to John F. Kennedy?

27. What is Caveat Emptor?

28. Write a short note on New Economic Policy

29. What is Sweat Equity Shares?

Answer any 7 Question: (Question No.31 is compulsory) 7x3=21

32. Write a note on Appointment of Company Secretary.

33. What is meant by Dematerialization?

34. What is vestibule training?

35. Write a note on National Clearance and Depository System (NCDS).

36. What is meant by Account Payee Crossing?

39. Why do you think the medical examinations of a candidate is necessary?

Answer all the questions: 7x5=35

41. Describe the principles of scientific management.

Anda mungkin juga menyukai

2. Brief different stages in Formation of a 2. Registration or Incorporation: Second

1. Who are the KMP? c) When the non-executive chairperson is a

8. Shadow Director: A person who is not the pursuance of section 203.

7. Recruitment bridges gap between _ and _ .