Law Ethics And Communication
Questions and Answers
- 1.
Which of the following is not a restriction associated with a Private Company?
- A.
Transfer of shares
- B.
Invitation to Public
- C.
Limits the number of Members to 200
- D.
Cannot have a Subsidiary Company
Correct Answer
D. Cannot have a Subsidiary CompanyExplanation
A private company can have a subsidiary company, which means it can own and control another company. This is not a restriction associated with a private company. The other options mentioned, such as transfer of shares, invitation to the public, and limiting the number of members to 200, are all restrictions that are typically associated with private companies.Rate this question:
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- 2.
Percentage of Share Capital required for a company to be called as an Associate Company is
- A.
20%
- B.
51%
- C.
10%
- D.
18%
Correct Answer
A. 20%Explanation
An Associate Company is a company in which another company holds a significant ownership stake, but does not have full control over its operations. In this case, the correct answer is 20%, indicating that a company needs to hold at least 20% of the share capital of another company to be considered an associate. This threshold is important as it signifies a level of influence and control over the associate company's decision-making processes, without having complete control.Rate this question:
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- 3.
As Per SEBI Guidelines, Every Public Company in India should be a listed Company
- A.
True
- B.
False
- C.
Cannot Say
- D.
None of the above
Correct Answer
A. TrueExplanation
According to SEBI guidelines, every public company in India should be a listed company. This means that the company's shares should be listed on a recognized stock exchange, allowing the public to buy and sell them. Being listed provides transparency and accountability to shareholders and investors, as the company is required to disclose information and comply with various regulations. Therefore, the statement "True" is the correct answer as per SEBI guidelines.Rate this question:
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- 4.
Which of the Following is not a Public Financial Institution under the Companies Act, 2013?
- A.
Life Insurance Corporation of India
- B.
Infrastructure Development Finance Company
- C.
Companies referred to in UTI Act
- D.
State Bank of India
Correct Answer
D. State Bank of IndiaExplanation
The State Bank of India is not considered a Public Financial Institution under the Companies Act, 2013. This is because the State Bank of India is a statutory corporation established under the State Bank of India Act, 1955, and not under the Companies Act. Public Financial Institutions under the Companies Act include entities like Life Insurance Corporation of India, Infrastructure Development Finance Company, and companies referred to in the UTI Act.Rate this question:
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- 5.
To convert a Public Company to a Private Company, the approval has to be given by
- A.
Central Government
- B.
Tribunal
- C.
Supreme Court
- D.
ROC
Correct Answer
B. TribunalExplanation
To convert a Public Company to a Private Company, the approval has to be given by the Tribunal. The Tribunal is a judicial body that has the authority to make decisions and provide approvals in matters related to company law. In this case, the conversion of a Public Company to a Private Company requires the approval of the Tribunal, indicating that it is the correct answer. The Central Government, Supreme Court, and ROC (Registrar of Companies) do not have the specific authority to give approval for such conversions.Rate this question:
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- 6.
Can a person incorporate more than one OPC
- A.
Yes
- B.
No
- C.
Yes, with CG approval
- D.
None
Correct Answer
B. NoExplanation
According to the Companies Act, 2013, a person can only incorporate one One Person Company (OPC). The concept of OPC is designed for individuals who want to start a company on their own without the need for any partners. Therefore, the correct answer is "No" as a person cannot incorporate more than one OPC.Rate this question:
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- 7.
Documents required to be filed with Registrar for Incorporating a Company:
- A.
Affidavit from Subscribers
- B.
MOA and AOA
- C.
Address for Correspondence
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
The correct answer is "All of the above" because when incorporating a company, all of the mentioned documents are required to be filed with the Registrar. An affidavit from subscribers is necessary to confirm their intention to become shareholders of the company. The Memorandum of Association (MOA) and Articles of Association (AOA) outline the company's objectives, rules, and regulations. An address for correspondence is needed to establish a communication channel with the company. Therefore, all of these documents are essential for the incorporation process.Rate this question:
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- 8.
Can a Shareholder Mortgage their Shares and take loan from the Company?
- A.
Yes
- B.
Not possible
- C.
Yes, provided it is approved by AOA
- D.
No, even if it is approved by AOA
Correct Answer
C. Yes, provided it is approved by AOAExplanation
Yes, a shareholder can mortgage their shares and take a loan from the company, but only if it is approved by the Articles of Association (AOA). The AOA is a document that outlines the rules and regulations governing the company, including any provisions related to shareholders' rights and borrowing against shares. Therefore, without the approval of the AOA, it would not be possible for a shareholder to mortgage their shares and take a loan from the company.Rate this question:
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- 9.
The Registered Office of a Company can be changed by passing:
- A.
Ordinary Resolution
- B.
Special Resolution
- C.
Board Resolution
- D.
Unanimous Resolution
Correct Answer
B. Special ResolutionExplanation
The Registered Office of a Company can be changed by passing a Special Resolution. A Special Resolution is a resolution that requires the approval of a specified majority of shareholders, usually at least 75% or more. Changing the registered office is a significant decision that can impact the company's legal and administrative matters, so it requires a higher level of approval than an Ordinary Resolution or a Board Resolution. A Unanimous Resolution would require the approval of all shareholders, which may not be practical or necessary for changing the registered office.Rate this question:
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- 10.
Which of the following is not a Memorandum Clause?
- A.
Liability Clause
- B.
Name Clause
- C.
Situation Clause
- D.
Remuneration Clause
Correct Answer
D. Remuneration ClauseExplanation
The given options are all types of clauses that can be included in a memorandum. A Liability Clause specifies the extent of liability of the parties involved, a Name Clause states the name of the company, and a Situation Clause describes the registered address of the company. However, a Remuneration Clause is not typically found in a memorandum as it pertains to the payment or compensation of employees or directors, which is usually addressed in other documents such as employment contracts or board resolutions.Rate this question:
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- 11.
Which Principle states that it is the outsider's responsibility to look into company's Documents before entering into any agreement?
- A.
Doctrine of Indoor Management
- B.
Doctrine of Constructive Notice
- C.
Doctrine of Nullification
- D.
Doctrine of Prima Facie
Correct Answer
B. Doctrine of Constructive NoticeExplanation
The Doctrine of Constructive Notice states that it is the outsider's responsibility to look into a company's documents before entering into any agreement. This principle implies that anyone dealing with a company is deemed to have knowledge of its public documents, such as its memorandum of association and articles of association. Therefore, individuals cannot claim ignorance of these documents and are expected to have knowledge of their contents.Rate this question:
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- 12.
Where a Company has raised money from public through prospectus and still has any unutilized amount, Objects Clause can be changed only through:
- A.
Special Resolution
- B.
Special Resolution through Postal Ballot
- C.
Cannot change the Objects Clause
- D.
Can change only with Central Govt approval
Correct Answer
B. Special Resolution through Postal BallotExplanation
When a company has raised money from the public through a prospectus and still has unutilized funds, the Objects Clause can only be changed through a Special Resolution passed through a Postal Ballot. This means that the shareholders of the company must agree to the change in the Objects Clause through a voting process conducted via postal ballot. This method ensures that all shareholders have an opportunity to express their opinion on the proposed change.Rate this question:
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- 13.
Can Central Govt give any direction to a Company to rectify its name?
- A.
Yes
- B.
No
- C.
May be
- D.
None of the above
Correct Answer
A. YesExplanation
The central government can give directions to a company to rectify its name because it has the authority to regulate and govern businesses in the country. If a company's name is found to be misleading or in violation of any laws or regulations, the central government can intervene and instruct the company to make the necessary changes to comply with the rules.Rate this question:
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- 14.
Resolution required to alter Articles of Association of a Company:
- A.
Ordinary Resolution
- B.
Special Resolution
- C.
Board Resolution
- D.
No Resolution required
Correct Answer
B. Special ResolutionExplanation
A special resolution is required to alter the Articles of Association of a company. This type of resolution is used for important decisions that require a higher majority vote from the shareholders. Altering the Articles of Association is a significant change that affects the fundamental structure and governance of the company. Therefore, it is necessary to have a special resolution to ensure that the decision is made with careful consideration and with the support of a significant majority of shareholders. A special resolution typically requires a vote of at least 75% or more of the shareholders present and voting at a general meeting.Rate this question:
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- 15.
The Contracts which are entered into, by agents or trustees on behalf of a prospective company before It has come into existence are called:
- A.
Preliminary Contracts
- B.
Pre-Incorporation Contracts
- C.
Quid-Pro Contracts
- D.
None of the above
Correct Answer
B. Pre-Incorporation ContractsExplanation
Pre-Incorporation Contracts refer to the contracts that are made on behalf of a prospective company before it is officially formed or incorporated. These contracts are entered into by agents or trustees who act as representatives of the future company. These agreements are binding on the company once it comes into existence. They are essential for carrying out necessary activities such as securing financing, acquiring assets, or establishing business relationships before the company is formally established.Rate this question:
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- 16.
A Company Promoter has Right to demand remuneration for his promotional services:
- A.
True
- B.
False
- C.
True, Provided it is stated in AOA
- D.
None of the above
Correct Answer
B. FalseExplanation
A company promoter does not have the right to demand remuneration for his promotional services. Promoters are individuals who initiate the formation of a company and are responsible for its initial setup. They may incur expenses during the promotional stage, but they cannot demand remuneration for their services unless it is specifically stated in the Articles of Association (AOA) of the company. However, in most cases, promoters do not have the right to demand remuneration as their role is considered voluntary and part of their investment in the company's formation. Therefore, the correct answer is False.Rate this question:
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- 17.
A Company can serve documents to its members through:
- A.
Post
- B.
Courier
- C.
Email
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
The company can serve documents to its members through post, courier, and email. This means that the company has the option to send documents to its members using traditional mail services, through a courier service, or electronically via email. Using all of these methods provides flexibility and ensures that the company can reach its members efficiently, regardless of their preferred communication method or location.Rate this question:
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- 18.
Which of the following is included in the definition of Prospectus?
- A.
Advertisement
- B.
Circular
- C.
Notice
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
The correct answer is "All of the above". A prospectus is a document that provides information about a company, investment, or project to potential investors. It typically includes advertisements, circulars, and notices that help promote and provide details about the offering. Therefore, all of these options are included in the definition of a prospectus.Rate this question:
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- 19.
Which of the following details need not be stated in a Prospectus?
- A.
Names and addresses of Directors
- B.
Dates of Opening and Closing of Subscription list
- C.
Address of Company's registered office
- D.
Details of Company Bankers
Correct Answer
D. Details of Company BankersExplanation
The details of company bankers need not be stated in a prospectus. While the names and addresses of directors, the dates of opening and closing of the subscription list, and the address of the company's registered office are important information that should be included in a prospectus, the details of company bankers are not typically necessary for potential investors to make an informed decision about investing in the company.Rate this question:
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- 20.
Time limit within which Prospectus need to be issued to public after it is Registered with ROC:
- A.
45 days
- B.
30 days
- C.
90 days
- D.
120 days
Correct Answer
C. 90 daysExplanation
After a prospectus is registered with the Registrar of Companies (ROC), it is required to be issued to the public within 90 days. This means that the company has a maximum of 90 days to make the prospectus available to potential investors. This timeframe ensures that investors have sufficient time to review the prospectus and make informed decisions about investing in the company. It also helps maintain transparency and accountability in the process of raising funds from the public.Rate this question:
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- 21.
The Prospectus through which a company can make more than one Public Issue and raise moneys is called
- A.
Abridged Prospectus
- B.
Shelf Prospectus
- C.
Red-Herring Prospectus
- D.
Recurring Prospectus
Correct Answer
B. Shelf ProspectusExplanation
A shelf prospectus is a type of prospectus that allows a company to make multiple public issues and raise funds over a period of time. It provides flexibility to the company as it can issue securities whenever it deems appropriate, without having to go through the lengthy process of preparing a new prospectus each time. This enables the company to react quickly to market conditions and investor demand. Therefore, a shelf prospectus is the correct answer as it aligns with the description provided in the question.Rate this question:
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- 22.
What is the validity of a Shelf Prospectus?
- A.
6 Months
- B.
1 Year
- C.
18 Months
- D.
24 Months
Correct Answer
B. 1 YearExplanation
A shelf prospectus is a type of prospectus that allows a company to offer and sell securities over a period of time, usually up to one year. During this validity period, the company can issue securities multiple times without having to file a new prospectus each time. This flexibility allows the company to respond quickly to market conditions and raise capital more efficiently. Therefore, the correct answer is 1 Year.Rate this question:
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- 23.
A Prospectus which does not include complete details of quantum of price of the securities is called
- A.
Shelf Prospectus
- B.
Abridged Prospectus
- C.
Red Herring Prospectus
- D.
Blank Prospectus
Correct Answer
C. Red Herring ProspectusExplanation
A Red Herring Prospectus is a prospectus that does not include complete details of the quantum of price of the securities. It is used to gauge investor interest and generate buzz before the final pricing of the securities is determined. This type of prospectus includes all relevant information about the issuing company and the securities being offered, except for the final offer price. The purpose of a Red Herring Prospectus is to provide potential investors with enough information to make an informed decision while keeping the final pricing details confidential until the offering is complete.Rate this question:
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- 24.
A Company proposing to issue a Red Herring Prospectus shall file it with the Registrar at least _______ days prior to the opening of subscription list:
- A.
30 days
- B.
3 days
- C.
7 days
- D.
15 days
Correct Answer
B. 3 daysExplanation
A company proposing to issue a Red Herring Prospectus is required to file it with the Registrar at least 3 days prior to the opening of the subscription list. This allows sufficient time for the Registrar to review the prospectus and ensure that it complies with all the necessary regulations and disclosures. It also provides potential investors with a reasonable amount of time to study the prospectus and make an informed decision before subscribing to the company's offerings.Rate this question:
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- 25.
In case of any misstatement in prospectus, the persons liable are:
- A.
Promoters
- B.
Directors
- C.
Expert
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
The correct answer is "All of the above." In the case of any misstatement in the prospectus, all three parties mentioned - promoters, directors, and experts - are liable. Promoters are responsible for preparing and issuing the prospectus, directors are responsible for ensuring its accuracy and completeness, and experts are responsible for any statements made by them in the prospectus. Therefore, if there is any misstatement in the prospectus, all three parties can be held liable.Rate this question:
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- 26.
Punishment for fraudulently inducing persons to invest money by making false statements in Prospectus is mentioned in:
- A.
Section 335
- B.
Section 36
- C.
Section 447
- D.
Section 420
Correct Answer
C. Section 447Explanation
Section 447 of the Indian Penal Code deals with punishment for fraudulently inducing persons to invest money by making false statements in a prospectus. This section specifically addresses the act of misleading individuals through false statements in order to persuade them to invest their money. The punishment for such fraudulent activities is outlined in this section.Rate this question:
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- 27.
What is the minimum amount payable by a shareholder on shares subscribed?
- A.
10%
- B.
5%
- C.
90%
- D.
20%
Correct Answer
B. 5%Explanation
The minimum amount payable by a shareholder on shares subscribed is 5%. This means that when a shareholder subscribes to shares, they are required to pay at least 5% of the total value of the shares they are subscribing to. This minimum payment ensures that shareholders have a financial stake in the company and helps to protect the interests of other shareholders.Rate this question:
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- 28.
What is the Minimum Subscription amount specified by SEBI for companies inviting money from Public Issue?
- A.
95%
- B.
80%
- C.
50%
- D.
90%
Correct Answer
D. 90%Explanation
SEBI, the Securities and Exchange Board of India, has specified that companies inviting money from a public issue must have a minimum subscription amount of 90%. This means that at least 90% of the total shares offered in the public issue must be subscribed to by the public. This requirement ensures that companies receive a significant amount of funding before they can proceed with their plans and helps protect investors from potential risks associated with under-subscribed issues.Rate this question:
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- 29.
What is the time limit to receive minimum subscription amount from public issue?
- A.
45 days
- B.
2 Months
- C.
30 days
- D.
21 days
Correct Answer
C. 30 daysExplanation
The time limit to receive the minimum subscription amount from a public issue is 30 days. This means that investors have a maximum of 30 days to submit the minimum required amount for the subscription of shares or securities being offered in the public issue. This time limit ensures that the company or entity issuing the securities can efficiently collect the necessary funds from investors within a reasonable timeframe.Rate this question:
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- 30.
What is the Maximum Commission payable on issue of Shares?
- A.
2.5%
- B.
10%
- C.
5%
- D.
7%
Correct Answer
C. 5%Explanation
The maximum commission payable on the issue of shares is 5%. This means that the company can pay a commission of up to 5% of the total value of the shares issued. This commission is typically paid to brokers or underwriters who help facilitate the sale of the shares. The 5% commission is the highest percentage allowed, meaning that the company cannot pay a commission higher than this amount.Rate this question:
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- 31.
The new Source of Funds through which a company can directly raise Investment from foreign Companies without the need for Public issue of shares;
- A.
American Depository Receipts
- B.
Foreign Direct Investments
- C.
Global Depository Receipts
- D.
Indian Depository Receipts
Correct Answer
C. Global Depository ReceiptsExplanation
Global Depository Receipts (GDRs) are a financial instrument that allows companies to raise investment directly from foreign companies without the need for a public issue of shares. GDRs are issued by a company in one country but traded in another country's stock exchange. They represent ownership in the company's shares and are typically denominated in a foreign currency. GDRs provide an opportunity for companies to access international capital markets and attract foreign investment without going through the time-consuming and costly process of a public share offering.Rate this question:
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- 32.
A Company shall pass a _____ to issue Global Depository Receipts:
- A.
Ordinary Resolution
- B.
Special Resolution
- C.
Board Resolution
- D.
No Resolution required
Correct Answer
B. Special ResolutionExplanation
A company shall pass a Special Resolution to issue Global Depository Receipts. This is because issuing Global Depository Receipts involves significant changes or decisions that affect the company's structure or operations. A Special Resolution requires a higher majority of votes from the shareholders, typically at least 75% or more, indicating that a significant majority of shareholders are in favor of the decision. This ensures that major decisions like issuing Global Depository Receipts are made with the consent and agreement of a significant majority of the shareholders.Rate this question:
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- 33.
The offer of shares to a select group of persons by a company without the need of issue of a prospectus is called
- A.
Cross Offer
- B.
Private Placement
- C.
Closed Subscription
- D.
Exclusive Placement
Correct Answer
B. Private PlacementExplanation
Private placement refers to the offer of shares to a select group of individuals or institutions without the need for a prospectus. This method is commonly used by companies to raise capital from specific investors, such as institutional investors or high net worth individuals, without going through the process of a public offering. Private placement allows companies to raise funds quickly and efficiently, while also maintaining confidentiality and flexibility in the transaction.Rate this question:
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- 34.
The offer of shares under Private Placement can be made maximum to
- A.
100 persons
- B.
200 persons
- C.
50 persons
- D.
30 persons
Correct Answer
C. 50 personsExplanation
Private Placement is a method of raising capital by offering shares to a select group of investors instead of the general public. In this case, the correct answer is 50 persons. This means that the maximum number of individuals to whom the offer of shares can be made under Private Placement is limited to 50. This restriction ensures that the offering remains exclusive and targeted towards a smaller group of investors rather than being widely available to the public.Rate this question:
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- 35.
In case a company fails to allot shared under prescribed time, the amounts shall be refunded along with an interest of
- A.
15%
- B.
12%
- C.
10%
- D.
18%
Correct Answer
B. 12%Explanation
If a company fails to allot shares within the prescribed time, they are required to refund the amounts paid by the shareholders. In this case, the refund must include an interest rate. The correct answer is 12% because it is the only option provided that represents an interest rate.Rate this question:
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- 36.
In case a company contravenes the provisions of Private Placement of shares, the penalty payable by the Promoters is
- A.
10 Lakhs
- B.
50 Lakhs
- C.
1 Crore
- D.
2 Crore
Correct Answer
D. 2 CroreExplanation
If a company contravenes the provisions of Private Placement of shares, the penalty payable by the Promoters is 2 Crore. This means that if the company violates the rules and regulations related to private placement of shares, the promoters of the company will be liable to pay a penalty of 2 Crore as per the law.Rate this question:
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- 37.
Which of the following is not considered as a Deposit accepted by a Company?
- A.
Which of the following is not considered as a Deposit accepted by a Company?
- B.
Amounts received from other companies
- C.
Any amount received from Director of the company
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
All of the options mentioned in the question are considered as deposits accepted by a company. Amounts received from other companies and any amount received from the director of the company are both considered as deposits. Therefore, the correct answer is "All of the above."Rate this question:
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- 38.
A company with a turnover of ________ can accept Deposits from General Public other than its memebers;
- A.
500 Crore
- B.
100 Crore
- C.
50 Lakhs
- D.
50 Crore
Correct Answer
A. 500 CroreExplanation
A company with a turnover of 500 Crore can accept deposits from the general public other than its members. This is because a higher turnover indicates a larger scale of operations and financial stability, making the company more capable of handling and returning public deposits.Rate this question:
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- 39.
A company having a net worth of _________ can accept Deposits from persons other than its members?
- A.
500 Crore
- B.
100 Crore
- C.
50 Crore
- D.
10 Crore
Correct Answer
B. 100 CroreExplanation
A company with a net worth of 100 Crore can accept deposits from persons other than its members. This indicates that the company has a strong financial position and is deemed capable of handling deposits from external sources.Rate this question:
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- 40.
In order to issues shares at premium, a company's AOA shall authorize the same;
- A.
Correct
- B.
Not Correct
- C.
May be
- D.
None of the above
Correct Answer
B. Not CorrectExplanation
The given answer "Not Correct" is incorrect because in order to issue shares at a premium, a company's Articles of Association (AOA) must authorize the same. The AOA is a legal document that outlines the rules and regulations governing the company's internal affairs, including the issuance of shares. If the AOA does not specifically authorize the issuance of shares at a premium, the company cannot legally do so. Therefore, the correct answer should be "Correct".Rate this question:
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- 41.
Securities Premium accounts may be utilized by the company towards;
- A.
Writing of preliminary expenses
- B.
Writing off Commission
- C.
Buy back
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
Securities Premium accounts can be used by a company for various purposes. Firstly, it can be utilized for writing off preliminary expenses, which are the costs incurred during the setup or incorporation of the company. Secondly, it can be used for writing off commission expenses, which are the fees paid to brokers or agents for their services. Lastly, securities premium accounts can also be utilized for a buyback, which is when a company repurchases its own shares from the market. Therefore, the correct answer is "All of the above."Rate this question:
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- 42.
Company's Share Premium account cannot be utilized towards
- A.
Writing of preliminary expenses
- B.
Writing off Commission
- C.
Buy back
- D.
Writing off Depreciation
Correct Answer
D. Writing off DepreciationExplanation
The Share Premium account is a reserve created when a company issues shares at a premium, which is the amount received above the face value of the shares. This reserve cannot be utilized for writing off depreciation because depreciation is a non-cash expense that represents the decrease in value of an asset over time. It is not directly related to the issuance of shares or the premium received. Therefore, the Share Premium account cannot be used to cover depreciation expenses.Rate this question:
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- 43.
What is the maximum rate at which a company can issue shares at premium?
- A.
10%
- B.
50%
- C.
90%
- D.
No such Limit
Correct Answer
D. No such LimitExplanation
There is no specific limit on the maximum rate at which a company can issue shares at a premium. The company has the flexibility to determine the premium based on various factors such as market conditions, demand for the shares, and the company's financial performance. The absence of a specific limit allows companies to have more flexibility in setting the premium rate based on their specific circumstances and objectives.Rate this question:
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- 44.
Financial Assistance given by a Company to its employees to buy shares of the Company cannot exceed;
- A.
12 Month Salary
- B.
6 Month salary
- C.
3 Month Salary
- D.
Month Salary
Correct Answer
B. 6 Month salaryExplanation
Financial assistance given by a company to its employees to buy shares of the company cannot exceed 6 months' salary. This means that the maximum amount of financial assistance that an employee can receive from the company to purchase shares is limited to an amount equivalent to 6 months' worth of their salary. This restriction ensures that the financial assistance provided by the company is within reasonable limits and does not create an undue burden on the company's resources.Rate this question:
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- 45.
What are the sources for buy-back of shares?
- A.
Free Reserves
- B.
Securities Premium Account
- C.
Proceeds of fresh issue
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
The sources for buy-back of shares include free reserves, securities premium account, and proceeds of fresh issue. Free reserves refer to the accumulated profits of a company that can be utilized for various purposes, including buying back shares. The securities premium account is created when a company issues shares at a premium, and the amount in this account can be used for buy-backs. Lastly, the proceeds from a fresh issue of shares can also be utilized for buying back shares. Therefore, all of the above options are correct sources for buy-back of shares.Rate this question:
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- 46.
The buy-back of equity shares in any financial year shall not exceed _____ of the aggregate paid up capital and free reserves of the company:
- A.
10%
- B.
25%
- C.
20%
- D.
50%
Correct Answer
B. 25%Explanation
The buy-back of equity shares in any financial year is restricted to a certain percentage of the aggregate paid-up capital and free reserves of the company. In this case, the correct answer is 25%. This means that a company can only buy back up to 25% of its total paid-up capital and free reserves in a financial year. This restriction is in place to ensure that companies maintain a certain level of capital and reserves for financial stability and to protect the interests of shareholders.Rate this question:
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- 47.
The Resolution required to buy-back 18% of Capital and Free Reserves is
- A.
Board Resolution
- B.
Special Resolution
- C.
Ordinary Resolution
- D.
No Resolution required
Correct Answer
B. Special ResolutionExplanation
A special resolution is required to buy back 18% of capital and free reserves. A buy-back of shares is a significant decision for a company, as it involves reducing the company's share capital. Special resolutions require a higher majority of votes (usually 75% or more) from shareholders to pass, indicating that this decision requires a higher level of approval and consensus among shareholders. Therefore, a special resolution is necessary for this buy-back transaction.Rate this question:
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- 48.
The ratio of aggregate debts owned by a company after any buy-back shall not be more than:
- A.
Four times the Capital and Free Reserves
- B.
Twice the Capital and Free Reserves
- C.
Thrice the Capital and Free Reserves
- D.
No such limit
Correct Answer
B. Twice the Capital and Free ReservesExplanation
After a buy-back, a company's aggregate debts should not exceed twice the amount of its Capital and Free Reserves. This means that the company should not have a debt that is more than double the combined value of its Capital and Free Reserves. This limit ensures that the company maintains a reasonable level of debt in relation to its financial resources, reducing the risk of insolvency and financial instability.Rate this question:
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- 49.
Every buy-back shall be completed within ________ months from the date of passing the special resolution.
- A.
6 Months
- B.
12 Months
- C.
8 Months
- D.
3 Months
Correct Answer
B. 12 MonthsExplanation
The correct answer is 12 months because according to the given information, every buy-back needs to be completed within a certain timeframe from the date of passing the special resolution. In this case, the timeframe is 12 months. This means that once the special resolution is passed, the company has a maximum of 12 months to complete the buy-back process.Rate this question:
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- 50.
Where a company completes buy-back of shares, it shall not make further issue of same class of shares in next six months. This 6 month period is general termed as:
- A.
Inhibit period
- B.
Ward Off Time
- C.
Hold back period
- D.
Cooling period
Correct Answer
D. Cooling periodExplanation
The correct answer is "Cooling period". When a company completes a buy-back of shares, it is not allowed to make any further issue of the same class of shares for the next six months. This period is commonly referred to as the cooling period. During this time, the company is expected to pause and allow the market to stabilize after the buy-back activity. This restriction helps prevent any potential manipulation or unfair practices in the market.Rate this question:
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Current Version
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Mar 20, 2023Quiz Edited by
ProProfs Editorial Team -
Aug 26, 2016Quiz Created by
Pratapklug
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