Question 1

A resolution is:

Accepted Answer

Resolutions record decisions of members/directors in meetings.

Question 2

The process by which a company divides its existing shares into a larger number of shares with a lower face value is known as:

Accepted Answer

a) Share split

Question 3

Ethics in corporate governance means:

Accepted Answer

Ethics is right conduct beyond legal minimums.

Question 4

In the context of company law, what does AGM stand for?

Accepted Answer

a) Annual General Meeting

Question 5

Which of the following is a source of company law?

Accepted Answer

Company law comes from statute, case law and internal constitutional documents (within limits).

Question 6

Which is a consequence of non-compliance?

Accepted Answer

Non-compliance can attract fines and harm reputation (concept).

Question 7

Who is responsible for the day-to-day management of a companys affairs and the implementation of its policies?

Accepted Answer

b) Board of Directors

Question 8

Which of the following is not a statutory meeting?

Accepted Answer

a) Annual General Meeting (AGM)

Question 9

Which of the following is a secretarial record?

Accepted Answer

Minutes are official records and evidence of decisions.

Question 10

Who is responsible for maintaining the Register of Members of a company?

Accepted Answer

a) Registrar of Companies (ROC)

Question 11

Reserves are generally created from:

Accepted Answer

Reserves are retained profits used for stability and future needs.

Question 12

Compliance management mainly involves:

Accepted Answer

Compliance management is a system to ensure legal adherence with evidence.

Question 13

Promoters are mainly responsible for:

Accepted Answer

Promoters conceptualise and complete formation steps: documents, filings, arrangements.

Question 14

Company law is primarily:

Accepted Answer

Company law is largely statutory and compliance-oriented, regulating formation and governance.

Question 15

The power to approve the appointment of the first auditor of a company lies with:

Accepted Answer

b) Shareholders

Question 16

The doctrine of separate legal entity means:

Accepted Answer

A company has a separate identity and can sue/be sued in its own name.

Question 17

Which of the following is evidence that a company has been formed legally?

Accepted Answer

Certificate of Incorporation issued by ROC is conclusive evidence of incorporation.

Question 18

Which document contains the constitution of a company and its rules and regulations?

Accepted Answer

b) Articles of Association

Question 19

Which document is most useful as evidence in oppression/mismanagement cases?

Accepted Answer

Minutes, accounts, communications help prove unfair/harmful conduct.

Question 20

A person who holds shares in a company and is entitled to receive a portion of the companys profits is known as a:

Accepted Answer

b) Shareholder

Question 21

State one objective/benefit of CSR (concept).

Accepted Answer

CSR supports **sustainable development** and improves stakeholder relationships/reputation (concept).

Question 22

Directors should avoid conflict of interest. (True/False)

Accepted Answer

True. Directors must avoid **conflict of interest** and disclose any interest in contracts or arrangements.

Question 23

Give one circumstance where corporate veil may be lifted.

Accepted Answer

Corporate veil may be lifted in case of **fraud** (or tax evasion / sham company).

Question 24

What is incorporation of a company?

Accepted Answer

Incorporation is the legal process of registering a company under law to obtain a **separate legal identity**.

Question 25

State one consequence of non-compliance.

Accepted Answer

Non-compliance can lead to **penalties/fines** and reputational damage (concept).

Question 26

Separate legal entity means company and members are distinct. (True/False)

Accepted Answer

True. A company has a **separate legal identity** from its members and can own property and sue/be sued.

Question 27

What is an interim dividend?

Accepted Answer

Interim dividend is a dividend declared **during the financial year** between two annual general meetings (concept).

Question 28

Dividend should not be paid out of capital. (True/False)

Accepted Answer

True. Dividend is a distribution of **profits**, not of capital (principle).

Question 29

Ethics means doing the right thing beyond mere legal compliance. (True/False)

Accepted Answer

True. **Ethics** focuses on right conduct beyond minimum legal requirements.

Question 30

Define compliance management.

Accepted Answer

Compliance management is a system to identify legal requirements, implement controls, monitor adherence, and maintain **evidence** of compliance.

Question 31

Explain a typical compliance cycle with a flowchart and brief note.

Accepted Answer

Compliance cycle (flow):

Identify requirements → Assign responsibility → Compliance calendar/checklist → Implement controls → Monitor/report → Corrective action → **Documentation/evidence** → Review

Brief note: This cycle ensures continuous compliance rather than one-time filing.

Question 32

List any three contents of a prospectus (exam points).

Accepted Answer

Any three contents:

- company’s business/objects and registered office
- **capital structure** and terms of issue
- details of directors/promoters and their interests
- financial information/auditor report (as required)

These disclosures help investors evaluate the offer.

Question 33

Explain accountability and transparency in corporate governance (brief) using a table.

Accepted Answer

Accountability vs transparency:

| Principle | Meaning |
|---|---|
| **Accountability** | decision-makers are answerable for outcomes |
| **Transparency** | timely, clear and truthful disclosure of information |

Together they reduce misconduct and improve stakeholder trust.

Question 34

State any three defences against liability for misstatement in a prospectus (brief) using a table.

Accepted Answer

Any three defences:

| Defence | Brief idea |
|---|---|
| **Due diligence** | reasonable care; belief statement was true |
| Expert reliance | relied on expert report in good faith |
| No reliance | investor knew truth / did not rely |
| Withdrawal of consent | consent withdrawn before issue (where applicable) |

These defences reduce/avoid liability when the person acted honestly and reasonably.

Question 35

Explain duties of directors (any three) using a small table.

Accepted Answer

Duties of directors:

| Duty | Meaning |
|---|---|
| **Good faith** | act in company’s best interest |
| Disclosure | disclose interest; avoid conflicts |
| **Due care** | exercise skill, care and diligence |
| No secret profit | do not gain undisclosed benefits |

Any three duties can be written with brief explanation.

Question 36

Write an exam-style note on nature and scope of company law (include a table and conclusion).

Accepted Answer

### Nature
Company law is **statutory**, regulatory and disclosure-based, focusing on governance and stakeholder protection.

### Scope
| Area | Covers |
|---|---|
| Incorporation | registration, MOA/AOA |
| Management | directors, meetings, resolutions |
| Compliance | filings, accounts, audit |
| Remedies | oppression/mismanagement, investigation |

### Conclusion
Thus, company law provides a comprehensive framework for forming and regulating companies and ensuring accountability in corporate affairs.

Question 37

Write an exam-style answer on oppression: meaning, examples and remedies (include a table and conclusion).

Accepted Answer

### Meaning
**Oppression** is unfair/harsh conduct prejudicial to members’ rights/interest (concept).

### Examples (concept)
- **exclusion** of minority from participation
- unfair **dilution** of shareholding
- denial of information/records to members

### Remedies (table) (concept)
| Problem | Typical relief |
|---|---|
| unfair governance | regulate affairs / set aside acts |
| abuse by controllers | remove/appoint directors |
| minority trapped | **buy-out** order (share purchase) |

### Conclusion
Oppression remedies ensure fairness and protect minority shareholders while keeping the company functioning.

Question 38

Explain disqualifications of directors (exam-style) with a table and conclusion.

Accepted Answer

### Disqualifications (overview)

| Ground | Example (concept) |
|---|---|
| **Unsound mind** | declared by competent authority |
| Insolvency | undischarged insolvent |
| Conviction | disqualified by court/authority |
| Defaults | serious compliance defaults leading to disqualification (concept) |

### Conclusion
Disqualification rules ensure that only fit and proper persons manage companies, improving governance and stakeholder protection.

Question 39

Explain appointment of directors (exam-style) with a table and conclusion.

Accepted Answer

### Modes of appointment (overview)

| Mode | Who appoints | Example |
|---|---|---|
| At incorporation | subscribers/first directors | first board |
| General meeting | shareholders | regular directors |
| Board appointment | board (as per rules) | additional/alternate |
| Nominee | lender/investor (where allowed) | nominee director |

### Conclusion
Appointment should follow eligibility, consent and proper filings; directors then act as agents and fiduciaries of the company.

Question 40

Explain lifting of corporate veil: meaning and circumstances (exam-style) with a table and conclusion.

Accepted Answer

### Meaning
Lifting (piercing) the corporate veil means ignoring the company’s separate identity in special cases to identify the real persons behind it.

| Circumstance | Example |
|---|---|
| **Fraud** | using company to cheat creditors |
| Tax evasion | hiding income through shell companies |
| Sham/facade | company formed to avoid obligations |
| Public interest | regulatory enforcement |

### Conclusion
Veil lifting is an exception used to prevent misuse of the corporate form and to ensure **justice** and compliance.

Company Law — Question Paper

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