CS EXECUTIVE COMPANY LAW DIRECTORS MCQs

Multiple Choice Questions 1. Rajesh Homecare Limited, incorporated on 30th October, 2018, has ten subscribers to the Memorandum out of which two are private limited companies and remaining individuals. However, there is no mention in any of the documents as to who shall be the first directors. Advise the company regarding the appointment of first directors who shall manage the affairs of the company. (a) All the subscribers to the Memorandum shall be deemed to be the first directors. (b) The two private limited companies being subscribers to the Memorandum shall decide as to who shall be the first directors. (c) As the company requires minimum three directors, the eight individual subscribers shall choose two from among themselves and one shall be chosen by the two private limited companies from among themselves. (d) All the individual subscribers to the Memorandum shall be deemed to be the first directors. Answer: Option d

2. All the three directors of Wellspun Limited generally remain out of India for developing connections and securing business opportunities on behalf of the company. However, the company must strictly follow the legal requirement that at least one of its directors must stay for the specified statutory period in India. To reckon as ‘resident director’ for the financial year 2018-19, advise the company as to which period spent in India shall count towards statutory period. (a) Period spent in India during the previous financial year 2017-18. (b) Period spent in India during the financial year 2018-19. (c) Total of fifty percent each of the period spent in India during the financial year 2016- 17 and 2017-18. (d) Total of fifty percent each of the period spent in India during the financial year 2017 - 18 and 2018-19. Answer: Option B

3. Mr. Rajan was appointed as an Additional Director of BC Limited in July, 2018. Immediately after his appointment, on behalf of the Company he entered into an agreement with NY Private Limited for supplies of raw material. In the ensuing meeting, he was regularized as a Director. He signed Contract with Rahul vendors. At the end of the December 2018, management came to know that his appointment was not valid as he was disqualified to act as a Director of any Company. He signed one more agreement in January 2019 with Saraswati vendors. In such scenario, what will be the status of contract/agreements he signed on behalf of BC Limited? (a) All agreement/ contracts will become invalid; (b) All agreement/ contracts will be valid; (c) All agreement/ contracts before December 2018 will be valid; (d) All agreement/ contracts before December 2018 will be invalid. Answer : Option C

4.Mr. Sunil a director, decided to resign from ABC Private Limited due to preoccupation. He sent his resignation letter dated 12th June, 2018 to the Company stating that he will resign w.e.f. 15th June, 2018. Due to non receipt of any communication from the Company he dropped a mail on 17th June, 2018, to confirm whether Company has received his letter. Finally Company received his letter on 25th June, 2018. In this case, from which date his resignation will be effective? (a) 25th June, 2018 (b) 12th June, 2018 (c) 15th June, 2018 (d) 17th June, 2018 Answer: Option A

5. Mr. Jayan is a director of PQR Ltd., which had accepted deposits from public. The Financial position of PQR Ltd. declined which resulted in failure to repay the deposits. It became due for payment on 10th April, 2017 and such repayment has not been made till 5th May, 2018. Another company SAYOO Ltd. wants to appoint the said Mr. Jayan as its director at its annual general meeting to be held on 6 th August, 2018. State the correct statement as to the appointment of Mr. Jayan as a director of SAYOO Ltd. a) Mr. Jayan can be appointed in SAYOO Ltd. as it is other than the defaulted company b) Mr. Jayan cannot be appointed at all in SAYOO Ltd. or any other company. c) Mr. Jayan will not be eligible to be appointed as a director of SAYOO Ltd. on the scheduled AGM but may be after expiry of five years from the date of default. d) Mr. Jayan will not be appointed as a director of SAYOO Ltd. before 6 months from the date of default. Answer: Option C

6.Daya, a professional architect, had been approached by Naveen Builders Limited – a companyformed by her distant relatives but with whom she has good rapports – to accept the directorship in the company. However, she could not immediately agree to take the post of director, for she did not possess Director Identification Number (DIN). Accordingly, she applied for the DIN but her application was found to be incomplete and she received an e-mail on 3rd January, 2019 which directed her to rectify the defects by resubmitting the application. Advise Daya regarding the latest date by which she must resubmit the application after fully rectifying it. (a) Latest by 10th January, 2019. (b) Latest by 16th January, 2019. (c) Latest by 18th January, 2019 (d) Latest by 23rd January, 2019. Answer: Option C

7.TMS Motors and Spares Limited, a listed company, has 4500 small shareholders but till date there is no director who can represent them. Accordingly, some of such shareholders have approached the company for appointment of their director on the Board. By choosing the correct option, advise as to minimum how many small shareholders must group together so that they succeed in their objective. (a) Minimum one thousand small shareholders must group together for getting appointed their director on the Board. (b) Minimum nine hundred small shareholders must group together for getting appointed their director on the Board. (c) Minimum four hundred and fifty small shareholders must group together for getting appointed their director on the Board. (d) Minimum two hundred and twenty-five small shareholders must group together for getting appointed their director on the Board. Answer: C

8.Prasanna holds 2,500 equity shares of Rs. 10 each (Rs. 5 paid up) in Uranus Glass Limited which is listed on National Stock Exchange as well as Bombay Stock Exchange. In the same company her mother Seema holds 2,000 equity shares on which Rs. 7 have been paid up. Her brother Ruchir has also been allotted 3,000 equity shares by the Uranus but till date, similar to Prasanna, he has paid only Rs. 5 as application and allotment money. All the three claim to be small shareholders and want to participate in the process of appointing small shareholders’ directors. Advise them whether they could be categorized as small shareholders. a) Only Prasanna is small shareholder and therefore, she can participate in the process of appointing small shareholders’ directors. b) Only Seema is small shareholder and therefore, she can participate in the process of appointing small shareholders’ directors. c) Only Ruchir is small shareholder and therefore, he can participate in the process of appointing small shareholders’ directors. d) All the three are small shareholders and therefore, they can participate in the process of appointing small shareholders’ directors.

9. Mr. Raju is a managing director of MNS Ltd. He was proposed to be appointed as director in the same company. Mr. Raju got better opportunity and joined the other company “Rejoinder Ltd.”. He left the office of managing director of MNS Limited. State the correct legal position as to holding of offices of Mr. Raju in the companies- a) he will hold directorship both in MNS Ltd and Rejoinder Ltd. b) He cannot hold office in Rejoinder Ltd. being employed as managing director in MNS Ltd. c) He will validly hold all the designated offices in both MNS and Rejoinder Ltd. d) He can hold directorship only in Rejoinder Ltd. Answer: Option D

10. State which is not a valid situation for the vacation of the office of director amongst the given: (i) When the directors absents himself from 3 consecutive meetings of Board of Directors held during a period of 12 months (ii) Director entering into a contract in which he is uninterested (iii) Order disqualifying him as Director has been made by Court or NCLT (iv) If he is convicted by a Court of any offence, whether involving moral turpitude or otherwise, and sentenced to imprisonment for not less than 6months. (a) (i) & (ii) (b) (ii) &(iii) (c) (iii) &(iv) (d) (i) &(iv) Answer: Option a

11. SUNSHINE Interior Decorators and Furnishers Limited which has not accessed the primary market so far, is required to appoint whole-time Key Managerial Personnel (KMPs) in view of the fact that it has surpassed the threshold limit which necessitates such appointment. Out of the three whole-time KMPs which it is obligated to keep on roll, it has already appointed a Managing Director (MD) and a Company Secretary. From the given options, choose the third KMP which needs to be appointed by the company under the given circumstances. (a) Chief Executive Officer (CEO) (b) Chief Financial Officer (CFO) (c) Whole-time Director (WTD) (d) Chief Manager (CM) Answer: (b)