Corporate Law Solved Question Paper 2022, Dibrugarh University B.Com 2nd Sem CBCS Pattern

Corporate Law Solved Question Paper 2022 (June/July)
Dibrugarh University Solved Question Paper
Paper: C-204 (Corporate Law)

Full Marks: 80

Pass Marks: 32

Time: 3 hours

The figures in the margin indicate full marks for the questions

In this Post You will Get Corporate Law Solved Question Paper 2022 for Dibrugarh University.

1. Write True or False:                    1x8=8

(a) A company being a legal person and having independent existence enjoys the fundamental rights given to the citizens under the Constitution of India.

Ans: False, a Company is not a Citizen

(b) A certificate of incorporation cannot be challenged on any ground.

Ans: True

(c) Any act which is ultra vires of the company is void and without any legal effect.

Ans: True

(d) The ‘Doctrine of constructive notice’ protects a company against the outsiders.

Ans: True

[DTS Hint: Doctrine of Indoor management projects the third parties against the company.]

(e) A person must have Director Identification Number (DIN) to be appointed as director.

 Ans: True

(f) A change in company’s name may be effected by passing an ordinary resolution.

Ans: False, Special Resolution

(g) The dividend is always declared by the Board of Directors.

Ans: True, and approval from shareholders is also necessary

(h) The power to order winding-up of a company has been vested in the Tribunal instead of Court under the Companies Act, 2013.

Ans: True

2. Write short notes on any four of the following:            4x4=16

(a) National Company Law Tribunal (NCLT).

Ans: National Company Law Tribunal (NCLT): After Companies Act’ 2013 the Company Law Board has been abolished and a Tribunal known as the National Company Law Tribunal has been constituted. The powers which are earlier under the jurisdiction of the Company Law Board have been transferred to Central Government and some of this is transferred to NCLT by the central government. It consists of a president and such number of judicial and technical members as may be deemed necessary. Its main functions are: Registration of companies, converting public limited company into private company and settlement of disputes arises amongst the companies.

(b) One Person Company (OPC).

Ans: One Person company (OPC) [Sec. 2(62)]: It means a company which has only one person as a member. All the provisions of a private company are also applicable to this company.

One-person company (OPC): According to Sec. 2(62) of the Indian Companies Act, 2013, one-person company means a company which has only one person as a member. Sec. 3 of the Companies Act, 2013 classify OPC as private company and all the provisions of a private company are also applicable to this company.

Features of OPC:

1. There is only one director.

2. It can have only one member.

3. The word OPC is mentioned in the bracket with the name of the company.

4. OPC is exempted from conducting annual general meeting and board meeting.

(c) Doctrine of constructive notice.

Ans: The memorandum and articles of a company are public documents and available for inspection by anyone on payment of nominal fee. Therefore, every person who is entering into a contract with a company is deemed to have a “constructive notice” of the contents of its memorandum and articles. In other words, person entering into contract with the company know the powers of the company or directors and also aware about the restrictions imposed on the powers of the company or limit set on the authority of the directors. Consequently, if a person enters into a contract with the company which is beyond the powers of the company or outside the limits set on the authority of the directors, he cannot, as a general rule, acquire any rights under the contract against the company. For example, if the articles provide that a bill of exchange to be effective must be signed by two directors, a person dealing with the company must see that it is so signed; otherwise he cannot claim under it.

Outsiders dealing with incorporated bodies are bound to take notice of limits imposed on the corporation by the memorandum or other documents of constitution. Nevertheless, they are entitled to assume that the directors or other persons exercising authority on behalf of the company are doing so in accordance with the internal regulations as set out in the Memorandum & Articles of Association.

(d) Transmission of shares.

Ans: When the shares are transferred under the operation of law it is called transmission of shares. Transmission of shares takes place:

(i)      When the registered shareholder dies.

(ii)    When he is declared insolvent.

(iii)   In case where the shareholder is the company, it goes into liquidation.

In case of the death of registered shareholders, his legal representative becomes the care taker of the shares. The legal representative if he can sell the shares without being registered, if he does not want to become the member of the company. In case he wants to become the member of the company, he should send a written and signed notice to the company disclosing his decision.

In case of the insolvency, the official assigner has the power to take the decision regarding selling of the shares, transferring of the shares or getting himself registered as a member.

In case where a shareholding company goes into liquidation then the liquidator of the company may sell and transfer the shares.

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(e) Qualification of directors.

Ans: Qualifications of a Director:

As regards to the qualification of directors, there is no direct provision in the Companies Act, 2013.But, according to the different provisions relating to the directors; the following qualifications may be mentioned:

1. A director must be a person of sound mind.

2. A director must hold share qualification, if the article of association provides such.

3. A director must be an individual.

4. A director should be a solvent person.

5. A director should not be convicted by the Court for any offence, etc.

(f) Prospectus.

Ans: Section 2(70) of the Companies Act, 2013 defines a prospectus as ““A prospectus means Any documents described or issued as a prospectus and includes any notices, circular, advertisement, or other documents inviting deposit from the public or documents inviting offer from the public for the subscription of shares or debentures in a company.” A prospectus also includes shelf prospectus and red herring prospectus. A prospectus is not merely an advertisement. A document shall be called a prospectus if it satisfies two things:

a)       It invites subscription to shares or debentures or invites deposits.

b)      The aforesaid invitation is made to the public.

Contents of a prospectus:

a)       Address of the registered office of the company.

b)      Name and address of company secretary, auditors, bankers, underwriters etc.

c)       Dates of the opening and closing of the issue.

d)      Declaration about the issue of allotment letters and refunds within the prescribed time.

e)      A statement by the board of directors about the separate bank account where all monies received out of shares issued are to be transferred.

f)        Details about underwriting of the issue.

g)       Consent of directors, auditors, and bankers to the issue, expert’s opinion if any.

h)      The authority for the issue and the details of the resolution passed therefore.

i)        Procedure and time schedule for allotment and issue of securities.

j)        Capital structure of the company.

3. (a) Define a Private Company. What are the privileges and exemptions enjoyed by a private company? 4+8=12

Ans: Private company [Sec.2 (68)]: A private company is normally what the Americans call a ‘close corporation’. According to Sec.2 (68), a private company means a company which has a minimum paid-up capital as may be prescribed, and by its Articles:

a.       Restricts the right to transfer its shares, if any. The restriction is meant to preserve the private character of the company.

b.       Except in case of one-person company, limits the number of its members to 200 not including its employee-members. Joint shareholders shall be counted as one member only.

c.       Prohibits any invitation to the public to subscribe for any securities. In other words, a private company shall not make a public issue of its securities.

Special Privileges and Exemptions of a private company

a)    Members: A Private Company can be formed with only two members.

b)    Minimum subscription is not required.

c)    A private company is not required to issue prospectus.

d)    A private company can commence business immediately after its incorporation.

e)    It need not have an index of members.

f)     It need not required to hold a statutory meeting

g)    Unless the articles otherwise provide, two members personally present shall form quorum.

h)    A Private Company must have at least two directors. All the directors may be appointed by single resolution.

i)      The directors of a private company need not retire by rotation.

j)      Directors need not file their written consent to act as directors or to take up their qualification shares.

k)    For appointment of a new director, a special notice is not required.

l)      Directors of a private company can vote on a contract in which they are, interested.

m)  A private company is exempted from restrictions regarding managerial remuneration.

n)    No person other than the members of an independent company is entitled to inspect, or obtain copies of the profit and loss account of the company under.

o)    The provision that the written consent of directors should be filed with registrar is not applicable to an independent private company.

p)    An independent private company may by its articles, provide additional disqualification for appointment of directors.

q)    An independent private company may be its articles provide special grounds for vacation of office of a director.

r)     Provision regarding prohibition of loan to director, etc. in not applicable to an independent private company.

s)     The restrictions as to number of companies of which a person may be appointed managing director and prohibition of such appointment for more than five years at a time to not apply to it.

t)     The restructures regarding loans to company's loans to companies under the same management do not apply to it.

u)   The provision prohibiting the subscription purchase or otherwise, the shares of other companies in the same group do not apply to it.


(b) Describe the various stages for incorporation of a public limited company.    12

Ans: Various stages in Formation and Incorporation of a Company

Since a company is an artificial person, it has to be formed according to legal provisions. In India, these legal provisions have been provided in the Companies Act, 2013. Formation of a company involves various stages which are as follows:

1.    Promotion stage.

2.    Incorporation stage.

3.    Capital subscription stage.

4.    Commencement of business stage.

All these stages are relevant to forming a public company. For forming a private company, only the first two stages and a part of the third stage are relevant as it can commence business immediately after incorporation and receiving money from signatories to documents who have agreed to subscribe to the specified number of shares. Therefore, business commencement stage is not relevant to a private company. Further, such a company cannot invite the general public for subscribing to its shares. Therefore, a part of capital subscription stage is not relevant to it. Let us go through all these stages.

1. Promotion Stage: The term ‘promotion’ refers to the sum total of activities by which a business enterprise is brought into existence. At the promotion stage of a company, the promoters conceive the idea of promoting a company and the type of activities that it intends to undertake. It is discovery of business opportunities and subsequent organisation of funds, property and managerial ability into a business concern for the purpose of making profits therefrom. The people who undertake the task of promotion are called promoters.

2. Incorporation Stage: Incorporation or registration stage involves putting an application for registering the company before the concerned Registrar of Companies and getting it registered. Under Section 3 of the Companies Act’ 2013, 7 or more persons in case of public company, 2 or more persons in case of private company and 1 person in case of OPC may form an incorporated company for a lawful purpose by subscribing their names to the memorandum of association. Steps for incorporating a company are:

a) Before submitting documents for registration, DIN (Directors Identification Number) and Digital Signatures of the Promoters has to be obtained. Both DIN and Digital Signatures will be registered with the Ministry of Corporate Affairs (MCA) portal. After registration of DIN and Digital Signatures the next steps will be taken.

b) The next step for incorporation is to find out the availability of the proposed name of the company from the registrar of companies. Sec 4 of the Companies Act provides that a company cannot be registered by a name which is undesirable in the opinion of the Central Government. Promoters are required to select at least 6 alternative names in the order of preference to the registrar of companies for approval.

c) After getting the approval of name, an application in the prescribed form along with the prescribed fee and necessary documents shall be submitted to the registrar of the state in which the registered office of the proposed company is to be situated. Memorandum of Association, Articles of Association or declaration of accepting Table A which is a model set of Articles of Association, written consent of proposed Directors, certificate of approval of the company’s name, agreement entered with the proposed Managing Director, statutory declaration that all legal require­ments for registration have been completed and documentary evidence of payment of registration fees.

d) Scrutiny of the application and documents by the Registrar of Companies.

e) Registering the company by the Registrar if all requirements are fulfilled and entering the name of the company in the relevant register.

f) Issue of Certificate of Incorporation by the Registrar of Companies. On issue of the Certificate of Incorporation, the company comes into existence as an artificial person. The certificate of incorporation is conclusive evidence that the requirements of the Act have been complied with.

3. Capital Subscription Stage: After a company is registered, it proceeds to get money through allotment of share capital to members. Initially, shares are allotted to persons who are signatories to documents and have agreed to subscribe to the prescribed number of shares. After this, a private company may start its business while a public company is required to get the Certificate of Commencement of Business from the concerned Registrar of Companies. The procedure for subsequent allotment of shares varies for a private company and a public company. In a private company, subsequent shares are allotted through personal contacts. In a public company, shares may be allotted through public issue of shares. The usual procedure for this is as follows:

a) Filing of prospectus with Securities and Exchange Board of India (SEBI).

b) Getting approval from SEBI.

c) Appointing managers, underwriters and registrar to the issue.

d) Appointing bankers for receiving appli­cations for shares along with money and brokers for promoting the issue.

e) Inviting the general public (including institutions) for share subscription.

f) On receiving the minimum prescribed subscription, allotting the shares in consultation with the concerned stock exchange where the shares are to be listed for trading.

However, it may be mentioned that it is not necessary for a public company to offer its shares to public; it has only eligibility for public issue but not a compulsion. When a public company issues its shares to the public, it is called a publicly-held company. When it does not issue its shares to the public, it is called a closely-held company.

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4. Commencement of Business Stage: All the companies without share capital can start its business immediately after getting the certificate of incorporation. Such company is not required to get certificate of commencement of business.

As per Sec 11 of the Companies Act’ 2013, all the public and private companies having a share capital would be required to obtain certificate of commencement of business from the registrar of companies before commencing the business or exercise of borrowing powers. For this purpose, the company is required to submit the following documents:

a) A declaration that the shares to be subscribed on cash basis have been allotted.

b) A declaration that all the Directors have paid in cash for the shares subscribed by them.

c) A declaration, signed either by a Director or Secretary of the company, that the above requirements have been complied with.

The Registrar of Companies scrutinises the above documents and issues the Certificate of Commencement of Business if all requirements are as per the provisions of the Companies Act.

Also Read: Company Law Question Papers (Non-CBCS Pattern)

4. (a) What is Memorandum of Association? What are its important clauses?                     4+8=12

Ans: Memorandum of Association

Memorandum of association is the document which contains the rules regarding constitution and activities and objects of the company. It is fundamental charter of the company. Its relation towards the members and the outsiders are determined by this important document.

Section 2 (56) of the Companies Act, 2013 defines Memorandum as “Memorandum means the Memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous companies’ law or of this act”.

One of the essentials for the registration of a company is memorandum of association. It is the first step in the formation of a company. Its importance lies in the fact that it contains the fundamental clauses which have often been described as the conditions of the company’s incorporation.

Memorandum of association is divided into 5 clauses/contents [Sec. 4 of the Companies Act, 2013]:

1.       Name clause

2.       Situation or Registered office clause

3.       Objects clause

4.       Liability clause and

5.       Capital clause

6.       Subscription or Association Clause

1. Name clause: This clause state the name of the company. Name of every company limited by shares or by guarantee must end by the word 'Ltd.' or 'Pvt. Ltd.' except companies exempted u/s 8.  The name must not be undesirable or most not resemble the name of any other registered company.

2. Situation or Registered office clause: Must contain the name of state is which registered office is situated.  Actual address of registered office is notified to ROC within 30 days of incorporation.

3. Object clause: It sets out object or vires of the company. The objects must be legal and not be against the provision of the companies Act, 2013. It is divided into two parts:

(a) The main objects and Objects incidental or ancillary to the main objects.

(b) Other objects.

4. Liability clause: States that liability of members is limited to the amount unpaid on their shares and in case of company limited by guarantee the amount which every member undertakes to contribute to the assets of the company in the event of its winding up.

5. Capital clause: Every company having a share capital, the amount of share capital with which the company is proposed to be registered and the division of its shares into a fixed denomination.

6. Subscription clause: This clause shall state the number of shares that each subscriber to member has agreed to subscribe. Every subscriber shall agree to subscribe for at least one share.

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(b) What do you mean by Articles of Association? Discuss the contents of Articles of Association.             4+8=12

Ans: Articles of Association

The Articles contain rules and regulations for the internal management of the company. They are framed with the object of carrying out the aims and object of the memorandum of association and also to monitor that the same are carried as prescribed.

Section 2 (5) of the Companies Act, 2013 defines articles as “Articles means Articles of Association of a company as originally framed or altered from time to time in pursuance of any previous law or of this act including so far as they apply to the company the regulations contain as the case may be in Table A to Schedule I of this act”

The Model contents of the Article of association are as under:

a)       the business of the company;

b)      the amount of capital issued and the classes of shares into which the capital is divided; the increase and reduction of the share capital;

c)       the rights of each class of shareholders and the procedure for variation of their rights;

d)      the execution or adoption of a preliminary agreement, if any;

e)      the allotment of share; calls and forfeiture of shares for non – payment of calls;

f)        transfer and transmission of shares;

g)       company’s lien on shares;

h)      exercise of borrowing powers including issues of debentures;

i)        General meeting, notices, quorum, proxy, poll, voting, resolution, minutes; etc.

Alteration of Articles of Association (Sec. 14 of the Companies Act, 2013) - Any of the clause of Articles of Association can be changed simply by a special resolution. [Section 14(1)]. According to this section, ‘alteration' includes making any addition and omissions. Thus, scope is available for making alterations to Articles. The restrictions are as follows­:

a)       Such alteration cannot be with retrospective effect. Retrospective amendments are permissible as long as vested rights are not adversely affected.

b)      It should not be against provisions of Memorandum of Association or Comp Act.

c)       The alteration must be bona fide for the benefit of company as a whole

d)      Altered article cannot include anything which is illegal or opposed to public.

e)      Company cannot justify breach of contract by altering the articles.

f)        Amendment cannot increase liability of a member, unless his written consent is obtained. However, in case of club or association where member has to recurring periodical or recurring subscription or charges, a member is liable if he does not agree in writing to the increase.

g)       The amendment must not constitute a fraud on minority. It cannot be oppression of minority.

h)      Articles cannot change a public company to a private company without approval of Central Government – sec. 2(68).

i)        Statutory powers of company to amend the Articles cannot be curtailed.

j)        Every alteration of articles which is registered by the registrar, shall be as valid as if is originally contained in the articles. [Sec. 14(3)].

5. (a) Describe the legal position of Directors in a company.                        12

Ans: Position of Directors

It is very difficult to define precisely the position of directors in a company. The Companies Act, 2013, is also silent on this issue. Directors have been described sometimes as trustees, sometimes as agents or sometimes as managing partners. They have some attributes of all of them, but they are neither trustees nor managing partner in full sense of the term. The legal position can be discussed as under:

1. Directors as Agent: Directors are, in the eyes of law, agents of the company for which they act. The company itself cannot act; it can act only through directors and by the reason of which a relation of principal and agent is established between the company and the directors. Wherever as agent is liable those directors would be liable; where the liability would attach to the principal and principal only, the liability is the liability of the company.

Where the directors make contracts on behalf of the company, they incur no personal liability provided they act within the scope of their authority. In such a case, the company alone would be liable. Directors incur a personal liability in the following circumstances:

a)       Where the contract in their own names.

b)      Where they use the company’s name incorrectly.

c)       Where directors exceed their powers.

But the position of directors differs from that of the agents because an agent can enter into a contract in his own name but a director cannot. Again an agent may not disclose the name of his principal but a director must disclose the name of his principal. Hence, the directors are not agents in the true sense.

2) Directors as trustees: The directors have also been described as trustees of the company. They are trustees of the company’s money or property which comes into their hands or which is actually under their control and of the powers entrusted to them. But in real sense, the position of directors is differing from that of the trustees because a trustee can’t be an employee of the trust but a director can be an employee of the company. Again, an artificial person can become a trustee but an artificial person cannot become a director. As, only individual can be a director. Hence, directors may better be considered as quasi trustee.

3) Directors as officers: Under sec. 2(59) of the Companies Act, they are liable to certain penalties if the provisions of the Companies Act are not complied with. Moreover, whether or not a director is in the employment of the company, he shall be treated as an officer of the company.

4) Directors as employees: Although directors are agents of the company, they are not employees or servants of the company. Hence they cannot claim their remuneration as a preferential creditor in the event of winding up of a company under sec. 327 of the Companies Act, 2013. But where any director, besides being a director, is also in the service or employment of the company, such as secretary, manager, accountant or otherwise, he will be treated as an employee. As such he will be entitled to the remuneration and other benefits admissible to his as an employee in addition to his rights as a director to sitting fee, etc.

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5) Directors as managing partners: The directors are also sometimes described as managing partners because like a partner of a firm, they manage the affairs of the company and they are also usually important shareholders of the company. They do all proprietorial functions like allotting shares, making calls, forfeiting shares etc.

However, all the partners of a firm act on the principal of mutual agency. But it is not so in the case of directors. A director has no authority to bind the other directors and shareholders. Moreover, directors are subject to retirement by rotation whereas partners of a firm are not. Hence, the directors are not managing partners in the full sense.

Thus, directors are described as trustees, agents or managing partners. The board of directors is the brain and the only brain of the company which is the body and the company can act only through them.


(b) Explain the legal provisions relating to the Annual General Meeting of a company.           12

Ans: Provisions of the Company’s Act relating to Annual General Meeting: (Sec. 96 of the Companies Act, 2013)

As the term denotes, annual general meeting is the meeting under section 96 which has to be held annually. It is the meeting of the members through which they get the opportunity to express their views on the management of the company. Through this meeting, the shareholders can exercise control over the affairs of the company. The ‘Annual General Meeting’ is sometimes called ‘” Ordinary General Meeting” as it usually deals with the so-called ‘Ordinary Business’.

The main purpose (Objectives) to hold these meetings are:

1.       To submit the annual account, balance sheet, director’s report and auditor’s report.

2.       To declare the dividend.

3.       Special business- any other business to be transacted will be deemed special business likes:

4.       To increase share capital

5.       To alter Article of Association

6.       To appoint auditors and fix their remuneration.

7.       To elect directors are that liable to retire by rotation.

Legal Provisions Relating to Annual General Meeting

Every company is required to hold this meeting. But, there are certain legal provisions which have to be followed, relating to the annual general meeting as contained in sections 96 and 97. There are:

a.       First Annual general meeting: A company may hold its first annual general meeting within a period of 9 months from the date of incorporation. However, this should not be more than 9 months from close of financial years.

b.      Subsequent meeting: There must be one meeting held in each year. The gap between two annual general meetings must not be more than 15 months. Meeting must be held not later than 6 months from close of financial year.

c.       Extension of time: the registrar has the power to extend the time of 15 months by 3 more months in special cases.

d.      Day, hour and place of meeting: The meeting can be held at any working place, on any working day and working hours. If the day scheduled for meeting is declared by the Central Government to be a public holiday after the issue of the notice, it shall not be deemed as a holiday.

e.       Notice of the meeting: 21 clear days’ notice or any shorter notice if agreed by all shareholders must be given.

f.        Business to be transected: At every AGM, the following matters must be discussed and decided. Since such matters are discussed at every AGM, they are known as ordinary business. All other matters and business to be discussed at the AGM are special business.

The following matters constitute ordinary business at an AGM:

a.     Consideration of annual accounts, director’s report and the auditor’s report

b.     Declaration of dividend

c.     Appointment of directors in the place of those retiring

d.     Appointment of and the fixing of the remuneration of the statutory auditors.

Ordinary business is transacted by passing ordinary resolution.

Special Business: All matters other than ordinary business is treated as special business at an annual general meeting. For transacting special business at a meeting, there shall be annexed to the notice of meeting an explanatory statement setting out:

a)       All material facts concerning each item of such business, and

b)      In particular, nature of the concern or interest, if any, of every director or manager in each item.

c)       Statement must also state time and place where document, if any, proposed for approval at the meeting can be inspected by members.

d)      The items constituting special business are transacted either by an ordinary resolution or by a special resolution depending on the requirements of the Companies Act 2013 or articles of the company in respect of each particular item.

g.       Default in holding Annual general meeting: As mentioned earlier, every company is required to hold this meeting according to the provision of the Companies Act. If any company fails to hold the annual general meeting the consequences are as follows:

A. As mentioned above, the annual general meeting provides the opportunity to the members to express views on the management of the company. Any member can apply to the Central Government for the failure of the company to call the meeting. The Central Government may give direction to the company for calling the meeting.

B. The company as well as every officer will become liable if they fail to held the meeting and shall be punishable with fine upto Rs. 50,000, and if the default continues, with a further fine of Rs. 2,500 for every day after the first day of default during which the default continues. 

6. (a) Explain the legal provisions relating to the appointment of auditors.           12

Ans: Appointment of Directors

Section 149 of the Companies Act, 2013, makes it obligatory on every public company to have at least three directors and on every other company to have at least two directors. The directors may be appointed in the following ways:

1. Appointment of First Directors (Sec. 152): First directors mean the director of the company who assumes office from the date of incorporation of the company. The first directors of a company may be named in its articles of association and if it is not mentioned, then the subscribers of the memorandum of association who are individual, shall be deemed to be the first directors of the company, until the directors are not appointed in accordance with Section 152.

In case of public company, if the article provides any share qualification, only such subscribers as possess the necessary share qualification shall be deemed to be directors. The articles at the time of registration may contain the names of the first directors until directors are appointed in the first general meeting.

2. Appointment of Directors by Members in the General Meeting (Sec. 152(2): Except for the first director, the subsequent directors are appointed by the company in the general meeting. Sec. 152(2) provides that not less than 2/3 of the total number of directors of a public company, or of a private company which is subsidiary of a public company must be appointed by the company in general meeting. These directors must be subject to retirement by rotation. The remaining directors of such a company and a purely private company are appointed by the company in general meeting

3. Appointment by Board of Directors: The directors are appointed in the general meeting by the members. But, the Board of Directors may also appoint the directors, in the following way:

a. Additional Directors: Section 161, of the Act, lays down that the Board may appoint additional directors if the article of association of a company empower the Board of Directors to do so. Such additional directors shall hold office only up to the date of the next annual general meeting. If the annual general meeting is not held, then such additional director vacates his office on the last day on which the annual general meeting should have been held in terms of Section 166. The additional directors are exempted from the requirement of filing consent to act as directors.

b. Casual Vacancies: Section 161 empowers the Board of Directors to appoint the directors in the casual vacancy which may occur due to any reasons like, death, resignation, insanity, insolvency etc. of the directors. Such casual vacancy may be filled according to the regulations and procedure prescribed by the articles of association. A person appointed to fill a casual vacancy will hold office only till the date up to which the directors in whose place, he is appointed would have held office. 

c. Alternate Directors: The Board Meeting may be held at a time when a director is, absent for a period of more than three months from the state and in such a situation, an ‘alternate director’ is appointed. The Board of Directors can appoint the additional director in the absence of a director if so authorized by articles or by a resolution passed by the company in general meeting. The alternate director shall work until the original director return or up to the period permitted to the original director. The provision of the Act not applicable to the alternate director is as:

A. The appointment of an alternate director is not considered as an increase in the strength of the Board of Directors.

B. Alternate Directorship held by a person cannot be counted for the maximum number of directorship, which a person can hold.

C. An alternate director is not required to hold any qualification shares.

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4. Appointment of Directors by Central Government: At least 100 members of the company or the members of the company who hold at least one-tenth of the total voting power, approach the Central Government for appointing a director to safeguard the interest of the company or its members or the public or to curb the oppressive and mismanagement of company’s affairs.

The term of appointment of the directors by the Central Government should not exceed 3 years and he may be removed by the Central Government for appointing another person to hold the office.

5. Appointment of Directors by Third-Parties if the Article provides (Sec. 152): A company may have ‘nominee directors’ which is permissible in a company if the articles of association gives power to such third parties to appoint their nominee on company’s board. Here the third party may be debenture holders, financial corporation, banking companies who have advanced loan to the company to safeguard their interests that the money is only used for the purpose for which it was borrowed.

6. Appointment of Directors by small shareholders if the article provides: The Small Shareholders, in case of a public company having:

i) A paid-up capital of five cores rupees or more, and

ii) one thousand or more small shareholders.

may have a director elected by such small shareholders in the manner as may be prescribed.
The directors are appointed by ordinary resolution i.e. through the majority of the shareholders. The minority of the shareholders does not get the opportunity to send representative in the Board of Directors. But, through proportional representative voting, the shareholders can get that opportunity.

7. Appointment of directors by professional representation (Sec. 163): The Directors of a company are generally appointed by simple majority. As a result, majority shareholders controlling 51% or more votes may elect all directors and a substantial minority of 49% may not find any representation on the board. This section gives power to the minority shareholders to elect directors through single transferable vote and cumulative voting.


(b) State the various modes of winding-up of a company.                             12

Ans: Modes of winding up of a company

As per section 270 of the Companies Act 2013, the procedure for winding up of a company can be initiated either:

a) By the tribunal or,

b) Voluntary.

a) Winding up by the tribunal: As per new Companies Act 2013, a company can be wound up by a tribunal in the below mentioned circumstances:

1. When the company is unable to pay its debts

2. If the company has by special resolution resolved that the company is wound up by the tribunal.

3. If the company has acted against the interest of the integrity or morality of India, security of the state, or has spoiled any kind of friendly relations with foreign or neighboring countries.

4. If the company has not filled its financial statements or annual returns for preceding 5 consecutive financial years.

5. If the tribunal by any means finds that it is just & equitable that the company should be wound up.

6. If the company in any way is indulged in fraudulent activities or any other unlawful business, or any person or management connected with the formation of company is found guilty of fraud, or any kind of misconduct.

Filling up winding up petition: Section 272 provides that a winding up petition is to be filed in the prescribed form no 1, 2 or 3 whichever is applicable and it is to be submitted in 3 sets. The petition for compulsory winding up can be presented by the following persons:

a)       The company

b)      The creditors; or

c)       Any contributory or contributories

d)      By the central or state govt.

e)      By the registrar of any person authorized by central govt. for that purpose

FINAL ORDER AND ITS CONTENT: The tribunal after hearing the petition has the power to dismiss it or to make an interim order as it think appropriate or it can appoint the provisional liquidator of the company till the passing of winding up order. An order for winding up is given in form 11.

b) Voluntary winding up of a company: The company can be wound up voluntarily by the mutual decision of members of the company, if:

a)       The company passes a Special Resolution stating about the winding up of the company.

b)      The company in its general meeting passes a resolution for winding up as a result of expiry of the period of its duration as fixed by its Articles of Association or at the occurrence of any such event where the articles provide for dissolution of company.


1. Conduct a board meeting with 2 Directors and thereby pass a resolution with a declaration given by directors that they are of the opinion that company has no debt or it will be able to pay its debt after utilizing all the proceeds from sale of its assets.

2. Issues notices in writing for calling of a General Meeting proposing the resolution along with the explanatory statement.

3. In General Meeting pass the ordinary resolution for the purpose of winding up by ordinary majority or special resolution by 3/4th majority. The winding up shall be started from the date of passing the resolution.

4. Conduct a meeting of creditors after passing the resolution, if majority creditors are of the opinion that winding up of the company is beneficial for all parties then company can be wound up voluntarily.

5. Within 10 days of passing the resolution, file a notice with the registrar for appointment of liquidator.

6. Within 14 days of passing such resolution, give a notice of the resolution in the official gazette and also advertise in a newspaper.

7. Within 30 days of General meeting, file certified copies of ordinary or special resolution passed in general meeting.

8. Wind up the affairs of the company and prepare the liquidators account and get the same audited.

9. Conduct a General Meeting of the company.

10. In that General Meeting pass a special resolution for disposal of books and all necessary documents of the company, when the affairs of the company are totally wound up and it is about to dissolve.

11. Within 15 days of final General Meeting of the company, submit a copy of accounts and file an application to the tribunal for passing an order for dissolution.

12. If the tribunal is of the opinion that the accounts are in order and all the necessary compliances have been fulfilled, the tribunal shall pass an order for dissolving the company within 60 days of receiving such application.

13. The appointed liquidator would then file a copy of order with the registrar.

14. After receiving the order passed by tribunal, the registrar then publish a notice in the official Gazette declaring that the company is dissolved.

7. (a) State the rights of depositories and beneficial owner under the Depositories Act, 1996.     8

Ans: Will be available in DTS Application only. [Thanks for visiting Dynamic Tutorials Official Website]


(b) Explain the legal provisions relating to penalty for various defaults under the Depositories Act, 1996.              8

Ans: Will be available in DTS Application only. [Thanks for visiting Dynamic Tutorials Official Website]


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