Law MCQ SET 1

Roma along with her six friends has incorporated Roma Trading Ltd. in May 2019. The paid-up share capital of the company is 30 lacs. Further, in April 2020, she noticed that in the last financial year, the turnover of the company was well below 40 crores. Advise whether the company can be treated as a ‘small company’.

• Roma Trading Ltd. is definitely a ‘small company’ since its paidup capital is much below 4 crores and also its turnover has not exceeded the threshold limit of 40 crores.

• The concept of ‘small company’ is applicable only in case of a private limited company/OPC and therefore, despite meeting the criteria of ‘small company’ it being a public limited company it cannot enjoy benefits of ‘small company’

• Unlike a private limited company/OPC which automatically becomes a ‘small company’ as soon as it meets the criteria of ‘small company’, Roma Trading Ltd. being a public limited company has to maintain the norms applicable to a ‘small company’ continuously for two years so that, thereafter, it will be treated as a ‘small company’

• If all the shareholders of Roma Trading Ltd. give an undertaking to the ROC stating that they will not let the paid-up share capital and also turnover exceed the limits applicable to a ‘small company’ in the next two years, then it can be treated as a ‘small company’.

Abhilasha and Amrita have incorporated a ‘not for profit’ private limited company which is registered under Section 8 of the Companies Act, 2013. One of their friends has informed them that their company can be categorized as a ‘small company’ because as per the last profit and loss account for the year ending 31st March, 2019, its turnover was less than 40 crores and its paid up share capital was less than 4 crores. Advise.

• A section 8 company, which meets the criteria of ‘turnover’ and ‘paid-up share capital’ in the last financial year, can avail the status of ‘small company’ only if it acquires at least 5% stake in another ‘small company’ within the immediately following financial year.

• If the acquisition of minimum 5% stake in another ‘small company’ materializes in the second financial year (and not in the immediately following financial year) after meeting the criteria of ‘turnover’ and ‘paid-up share capital’ then with the written permission of concerned ROC, it can acquire the status of ‘small company’

• The status of ‘small company’ cannot be bestowed upon a ‘not for profit’ company which is registered under Section 8 of the Companies Act, 2013.

• A section 8 company, if incorporated as a private limited company (and not as public limited company) can avail the status of ‘small company’ with the permission of concerned ROC, after it meets the criteria of ‘turnover’ and ‘paid-up share capital’.

Namita Ceramic Goods Limited having 152 members was incorporated with the main objects of manufacture of ceramic goods, glazed, unglazed floor and wall tiles, etc. and to carry on trading in such products. After three years of successful operation, it wants to diversify its business by entering into the field of manufacturing electronic goods for which it is required to alter its objects clause. Advise the company in relation to alteration of Memorandum.

• The company can alter its Memorandum of Association by passing an ordinary resolution and obtaining the confirmation of the Regional Director (RD).

• The company can alter its Memorandum of Association by passing a special resolution at the shareholders’ meeting.

• The company can alter its Memorandum of Association in relation to the objects clause by passing a special resolution at the shareholders’ meeting and obtaining the confirmation of the Regional Director (RD)

• The company can alter its Memorandum of Association in relation to the objects clause by passing a special resolution at the shareholders’ meeting and simultaneously publishing the contents of special resolution in two newspapers (one in English and the other one in vernacular language) circulating in that area

Due to the management disputes, Flow Writing Industries Limited could not hold its current Annual General Meeting by the latest due date. Even after lapse of the due date, it seemed rather impossible to convene the AGM. In such a grim situation, one option available was to approach National Company Law Tribunal (NCLT) and seek direction for the calling of AGM. Out of the following four options, which one is applicable in the given case:

• Any member of the company can make an application to the National Company Law Tribunal (NCLT) and seek direction for the calling of AGM

• A member of the company holding at least 1% of the total paidup share capital must make an application to the National Company Law Tribunal (NCLT) and seek direction for the calling of AGM.

• Minimum two members of the company holding at least 1% of the total paid-up share capital must make a joint application to the National Company Law Tribunal (NCLT) and seek direction for the calling of AGM

• Minimum five members of the company holding at least 1% of the total paid-up share capital must make a joint application to the National Company Law Tribunal (NCLT) and seek direction for the calling of AGM

Anupam incorporated a ‘One Person Company’ (OPC) with his sister Alpana as the nominee and about three years have passed satisfactorily. Anupam does a number of charitable works and is associated with three NGOs. His business under his OPC has also flourished. Now he is planning to convert the OPC into a Section 8 company (i.e. a company formed with charitable objects). Choose the correct option.

• Since the company belongs to Anupam, he has full discretion to convert the OPC either as a Section 8 company or as a private or public company

• Since the company was formed as a private company, the only option available with Anupam is to convert it into a public limited company.

• There is specific prohibition on converting OPC into a Section 8 company; otherwise it can be converted into a private or public company without any hindrance.

• Since Anupam does a lot of charitable works there is no prohibition on converting his OPC into a Section 8 company

An issuing house (share broker) has issued an advertisement in two leading newspapers for selling a large number of shares allotted to it by a company under a private placement. In which of the following conditions will the advertisement NOT be deemed to be a prospectus:

• Advertisement was given within six months from the date of allotment

• Advertisement was given after six months from the date of allotment and the issuing house has paid the entire consideration to the company

• The issuing house did not pay entire consideration to the company till the date of allotment

• advertisement was given within three month from the date of allotment

Which of the following statements is not true?

• in case of shares, the rate of underwriting commission to be paid shall not exceed five percent of the issue price of the share.

• underwriting commission should not be more than the rate specified by the Article of Association.

• in case of debentures, the rate of underwriting commission shall not exceed five percent of the issue price of the debentures.

• amount of commission may be paid out of profits of the company.

Which of the following statement is contrary to the provisions of the Companies Act, 2013?

• A private company can make a private placement of its securities.

• The company has to pass a special resolution for private placement.

• Minimum offer per person should have Market Value of ` 20,000

• A public company can make a private placement of its securities.

A shelf prospectus filed with the ROC shall remain valid for a period of:

• one year from the date of registration

• one year from the date of closing of first issue

• one year from the date of opening of first issue

• Ninety days from the date on which a copy was delivered to ROC

Shripad Religious Publishers Limited has received application money of 20,00,000 (2,00,000 equity shares of 10 each) on 10th October, 2019 from the applicants who applied for allotment of shares in response to a private placement offer of securities made by the company to them. Select the latest date by which the company must allot the shares against the application money so received.

• 9th November, 2019

• 24h November, 2019

• 9th December, 2019.

• 8th January, 2020