Test: Companies Act- 3 - CA Foundation MCQ

- Under the Companies Act, 2013, a "promoter" is someone who has control over the company's affairs, whose advice the Board acts upon, or is named as a promoter in company documents.
- A solicitor acting in a professional capacity merely provides legal services and does not have control over the company or the capacity to influence its decisions.
- Therefore, Option C, "A solicitor acting in a professional capacity for the company," cannot be considered a promoter.

- If a company was incorporated by providing false information or suppressing material facts, the Tribunal may order the removal of the company's name from the register of companies.
- This action is taken to ensure that only legitimate and lawfully incorporated entities remain registered.
- Removing the company's name serves as a corrective measure to maintain integrity in the corporate registry.
- The Tribunal's decision aims to prevent fraudulent activities and protect stakeholders from potential harm caused by misleading incorporations.

Therefore, Option A is the correct answer.

- The Whistle Blower Policy was recommended by N.R. Narayana Murthy.
- N.R. Narayana Murthy, co-founder of Infosys, is known for promoting corporate governance and ethical business practices.
- The policy encourages employees to report unethical behavior without fear of retaliation.
- It is a critical tool for transparency and accountability within organizations.
- This recommendation aligns with Murthy's emphasis on integrity and ethical conduct in business.

The correct answer is B: A system for electronically filing company incorporation forms.

- SPICe stands for Simplified Proforma for Incorporating Company Electronically.
- It is an initiative by the Ministry of Corporate Affairs in India.
- SPICe simplifies the process of incorporating a company by allowing electronic submission of incorporation documents.
- It streamlines the incorporation process, reducing paperwork and speeding up registration.
- This system integrates various services like Director Identification Number (DIN) and Permanent Account Number (PAN) application into a single form.

The correct answer is: B: It becomes a distinct legal person separate from its members.
Under the Companies Act, 2013, once a company is incorporated, it becomes a separate legal entity. This means:

- It can own property, incur debts, and enter into contracts in its own name.
- The company's existence is not affected by changes in membership.
- Shareholders have limited liability; their personal assets are protected from company debts.
- The company can sue and be sued independently of its shareholders.

- The correct answer is B: Section 9 of the Companies Act, 2013.
- This section specifies that upon registration, a company becomes a body corporate, distinct from its members.
- It attains perpetual succession, meaning it continues to exist regardless of changes in ownership.
- The company has the ability to own property, sue, and be sued in its own name, establishing it as a separate legal entity.
- This legal separation protects individual members from being personally liable for the company’s debts.

- The Memorandum of Association forms the foundation of a company's constitution, outlining its scope and defining its relationship with the outside world.
- For an unlimited company with share capital, Table E of the Companies Act (in jurisdictions following the UK model) provides a model form.
- This table specifies the structure and content required for the memorandum, tailored to the specific needs of an unlimited company.
- Therefore, for an unlimited company with share capital, Table E is the correct choice.

- A: Board meetings must occur every three months, aligning with standard corporate governance practices.
- B: Only individuals, not entities like corporations or associations, can serve as company directors.
- C: Qualification shares are shares directors own, limited to a nominal value of Rs. 5000.
- D: Directors aren't always liable for misstatements in a prospectus. Liability depends on their role and knowledge of the misstatement.

Thus, the false statement is D.

- The first directors of a company are usually named in the articles of association.
- Articles of Association: This document outlines the rules for the internal management of the company, including the appointment of directors.
- Memorandum of Association: Primarily defines the company's relationship with the outside world and its objectives.
- Prospectus: A document issued to potential investors, detailing the company's financial securities.
- Naming directors in the articles establishes initial governance and operational structure.

- The correct answer is D: board of directors.
- The board of directors is responsible for the management and oversight of a company.
- Articles of association often empower the board to appoint additional directors as needed.
- This flexibility helps companies adapt to changing needs by bringing in directors with specific expertise.
- Managers, secretaries, and promoters do not have the authority to appoint additional directors unless explicitly specified.