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Q1. A. Ltd wanted to make contribution to Topi Kamal Haath Party, a political party. The BOD delegated the same to a select Committee formed entirely of Independent Directors. Is the delegation proper?
Yes , as the Committee is fully Independent as stipulated by Companies Act
No, as resolution for political Contributions are to be made only at GM of shareholder
No, as such resolution is to be passed at BOD in a convened BM only
No, Political Contributions are banned to be made w.e.f. FY 2017
Q2. A certain company has Nomination and Remuneration Committee consisting 4 member Directors including the Chairperson of Company. Of which 3 are non-executive and 2 amongst them are Independent Directors. Chairperson of Company (only executive member) is elected as the Chair of the NRC. Is the constitution proper?
Q3. Bosch Ltd {NSE:Bosch} is a listed public company having PUC of 5 crores, turnover of 50 crore and aggregate borrowing and debt of 50 crores: Will it be required to form a Nomination and Remuneration Committee?
Yes, as the PUC is above 1 crore
Yes, as the turnover is above 10 crores
Yes, as aggregate borrowings are equal to or exceed 50 crores
Yes as all listed public companies require to have a Nomination and Remuneration Committee
Q4. Failure of a Company to constitute a proper Nomination & Remuneration Committee can result in fine of:
1 lakh to 5 lakh
5 lakh to 10 lakh
10 lakh to 15 lakh
5 lakh + 1000/- for every continuing day without NRC
Q5. A Nomination and Remuneration Committee has 4 member Directors including the Chairperson of BOD. All of whom are non-executive and 2 are Independent Directors. Is the constitution proper? If not, why?
Yes , the constitution is proper
No, as the number of Independent Directors shall be a majority, which it is not
No, as the number of non-executive Directors shall be less than 3
No, as the minimum number of member Directors for a NRC is 5
Q6. Defaulting officer of a Company which fails to constitute a proper NRC can be:
Imprisoned for upto 1 year OR Fined from 25000 to 100000 OR Both
Imprisoned for upto 6 months OR Fined upto 10000 OR Both
No Imprisonment. Fine from 10000 to 50000
None of these
Q7. Good People, a Sec 8 Company, wanted to pass a resolution through circulation on the matter of investing of the Company’s funds in select Government securities. Can the Sec 8 Company pass such a resolution through Circulation?
Yes, it is specifically covered in the Companies Act
No, as the Companies Act prohibits specifically passing circular resolution on above matter
No, as the Sec 8 Companies are prohibited to pass resolutions by circulation
Yes, but the Securities can only be Government Guaranteed securities
Q8. The BOD at the BM approved a contract to Arc Builders. The said contractor was having less than 2 years 11 months of Building experience in Infra projects at that point. At the ensuing General meeting 3 months later, the Company added a regulation that only Contractors with more than 3 years of Builiding experience shall be hired . Arc Builders’ contract was rescinded as a result retrospectively, as the GM was of the opinion that Shareholders can undo decisions made by BOD, and can provide retrospective ratification or revocation. Is the treatment correct?
Q9. Artisans , a sec 8 company is required to form a Audit Committee . It appoints 5 member Directors, only 2 of whom are Independent. Is this a valid constitution of the Audit Committee?
No, as more than 50 percent shall be Independent Directors
No, as more than 3/4th shall be Independent, and any fraction shall be counted as 1
Yes , as the minimum criteria of 2 Independent Directors is fulfilled
Yes, as the provisions are relaxed for a sec 8 company, exempting need for majority Independent Director
Q10. The auditor of Arc Ltd. attended the meeting of Audit Committee thereof. He made a statement about certain pressing matters about Internal Control weaknesses. In the ensuing resolution of the Board , regarding the fortification of Internal Control through digital means, the auditor claimed he had a special right to vote under Companies Act, as he is the expert on that subject. Is he entitled to vote?
Yes, Audit Committee is required to allow auditor to vote on matters towards which he has made statements in Committee meeting
No, the Auditor has no right under Companies Act to vote at such meeting, but has right to make statement thereat.
Yes, Audit Committee is formed by default with the Auditor as a member
Yes, Auditor can cast a vote, but only if there is a tie in the number of votes
Q11. Failure of a Company to enforce a proper vigil mechanism u/s 177(9) can result in fine of:
1 lakh to 5 lakh
5 lakh to 10 lakh
10 lakh to 15 lakh
5 lakh + 1000/- for every continuing day without vigil mechanism
Q12. Would it be permissible for Chairperson of Company to Chair the NRC in the above case if such person was a non-executive Director?
Yes, as Non- executive Chairperson of Company can be a Chair of NRC
No, as Chairperson of Company is prohibited to be Chair of NRC irrespective of whether executive or non-executive
No, as the number of Executive Directors would fall to zero, which is below minimum prescribed
Yes, as a NRC is required to have only Non- executive Directors
Q13. Defaulting officer of a Company who fails to enforce a proper vigil mechanism u/s 177(9) can be u/s 178(8):
Imprisoned for upto 1 year OR Fined from 25000 to 100000 OR Both
Imprisoned for upto 6 months OR Fined upto 10000 OR Both
Fine from 10000 to 50000
None of these
Q14. Can the powers of the Board u/s 179(3) be restricted by Shareholders in GM?
Q15. Bosch Ltd is an unlisted public company having PUC of 15 crores, turnover of 50 crore and aggregate borrowing and debt of 50 crores: Will it be required to form a Nomination and Remuneration Committee?
Yes, as the PUC is above 10 crore
Yes, as the turnover is above 10 crores
Yes, as aggregate borrowings are equal to or exceed 50 crores
Yes as all unlisted companies require to have a Nomination and Remuneration Committee
Q16. The Audit Committee of Arc Ltd. requested the CA firm engaged in audit of Arc Ltd. to produce its Auditor’s Report as per terms of reference of such Committee with the BOD. The CA firm outright declined saying that the Audit Committee was overstepping its limits. Is the view of the CA Firm proper as per Act?
Yes, as the CA Firm is answerable to BOD and not to a delegated authority e.g. Audit Committee
No, as the Audit Committee is given such right under Companies Act, 2013.
No, as the Audit Committee is sole authority for all communications with auditors
Yes , as the right over documentation of the Audit records solely lies with the auditor
Q17. A 4 person Stakeholders Relationship Committee was formed by Prakash Ltd having 1001 Shareholders. The 4 members were highly qualified Executive Directors. Amongst them a Director was named Chairman. Is this a validly constituted SRC, if not, why?
Yes, the SRC is validly constituted
No, the SRC is not validly constituted as there is failure to maintain minimum no. of Non-Executive Members on SRC
No, the SRC Chairman is invalid, as the post can be held only by Non- executive Director
No, the SRC is invalid as it consists members already serving on BOD
Q18. Bahd People, a Sec 8 Company, wanted to pass a resolution through circulation on the matter of giving security towards loan borrowed by it. Can the Sec 8 Company pass such resolution through Circulation?
Yes, it is specifically covered in the Companies Act
No, as the Companies Act prohibits specifically passing circular resolution on above matter
No, as the Sec 8 Companies are prohibited to pass any resolutions by circulation
Yes, but only if the value of security does not exceed Rs. 1 lakh
Q19. BOD of A. Ltd wanted to delegate the power of borrowing monies to the Managing Director. Is this a proper delegation of power?
Yes, as such delegation is allowed under Companies Act
No, as a delegated authority (i.e. BOD ) cannot further delegate
No, as the decision of borrowing monies is a matter that the Companies Act mandates to be passed by BOD only
Yes, provided the upper limit of borrowings shall not exceed Rs. 1 lakh
Q20. Medking Ltd. is required to have vigil mechanism and has an existing Audit Committee. Mr. A is a member of this Audit Committee and Chairperson. Besides, he is a consultant to Goodmeds Ltd., who supply raw material to Medking Ltd. Mr. Truthful an employee in the testing department found the supplies of Goodmeds to be substandard and accused Mr. A of accepting kickbacks. And brought this to notice of the higher-ups. After no response to his complaint he approached the Audit Committee. Mr. A who is also the Chairman of Audit Committee participated in the ensuing discussions. Can Mr A participate in such business of Audit Committee despite the apparent conflicts of interest?
No, as the Companies Act requires a person having conflict of interest to recuse himself from deliberations on those matters
Yes, provided that such resolutions passed as a result of deliberations are further ratified at Board Meeting
None of these
