FREE PRACTICE QUESTIONS

SEBI GRADE A

FOR SEBI GRADE A EXAM

50 MOST IMPORTANT

COMPANIES ACT MCQS

SEBI Grade A 2020

Lecture 1

Coverage:CHAPTER III-Part1

50 MOST IMPORTANT QUESTIONS

Q.1)According to Section 23 of Companies Act,2013 ,in how may ways can a public company raise funding

?(1M)

A) Through Public Offering

B) Through Private placement

C) Through existing shareholders

D) A and C

E) All of the above

Practice Questions

Question No.1

Answer: Option E

COMPANIES ACT

Q.2) Power of securities and exchange board to regulate issue and transfer of securities is dealt under

which of the following section of Companies Act,2013?(1 M)

A) Section 24

B) Section 25

C) Section 26

D) Section 27

E) Section 28

Practice Questions

Question No.2

Answer: Option A

COMPANIES ACT

The provisions contained in this Chapter, Chapter IV and in section 127 shall,—

(a) in so far as they relate to —(i) issue and transfer of securities; and(ii) non-payment of dividend,by listed companies or those companies which intend to get their securities listed onany recognised stock exchange in India, except as provided under this Act, be administeredby the SEBI by making regulations in this behalf;

(b) in any other case, be administered by the Central Government.Explanation.—For the removal of doubts, it is hereby declared that all powers relatingto all other matters relating to prospectus, return of allotment, redemption of preferenceshares and any other matter specifically provided in this Act, shall be exercised by theCentral Government, the Tribunal or the Registrar, as the case may be.

Section 24- Power of Securities and Exchange Board to regulate issue and transfer of securities, etc.

Q.3) Which of the following is correct with respect to Shelf Prospectus?(1 M)

A) It does not need a separate prospectus for each offering.

B) It is a prospectus that lacks complete particulars about the quantum or price of the securities.

C) The validity period of the shelf prospectus cannot exceed more than 2 years.

D) A and C

E) None of the above

Practice Questions

Question No.3

Answer: Option A

COMPANIES ACT

Q.4) Which of the following section in the Companies Act,2013 mentions about Red Herring Prospectus?(1

M)

A) Section 30

B) Section 31

C) Section 32

D) Section 33.

E) Section 34

Practice Questions

Question No.4

Answer: Option C

COMPANIES ACT

Q.5) According to Section 29,Demat( Dematerialized form) is compulsory for which of the following?(1 M)

A) Companies going for public offer.

B) Companies going for private placement.

C) Prescribed unlisted companies.

D) A and C

E) All of the above

Practice Questions

Question No.5

Answer: Option D

COMPANIES ACT

• Section 29 of the Act required public companies or classesof public companies, prescribed by the Central Government, tocompulsorily issue its securities in dematerialised form.

• The new amendment removes the word “public” from Section 29(1)(b),and the section is now applicable to all “other class or classes ofcompanies as may be prescribed” by the Central Government.

• Further, a new Section 29(1A) has been added, which states: “In case ofsuch class or classes of unlisted companies as may be prescribed, thesecurities shall be held or transferred only in dematerialised form in themanner laid down in the Depositories Act, 1996 and the regulationsmade thereunder”.

• As such, those classes of unlisted companies, public or otherwise,prescribed by the Government shall be mandatorily required to hold aswell as transfer the shares in the dematerialised format and will have tocomply with the provisions of the Depositories Act, 1996 and itsregulations

Section 29: Public offer of securities to be in dematerialised form

Q.6) Global depository receipt is mentioned in which of the following sections of Companies Act,2013?(1M)

A) Section 38

B) Section 39.

C) Section 40.

D) Section 41

E) Section 42

Practice Questions

Question No.6

Answer: Option D

COMPANIES ACT

Q.7) Which of the following are correct with respect to Private Placement.?(2 M)

1. It is mentioned in Section 40 of Companies Act ,2013

2. Maximum limit for the private placement in a financial year cannot exceed 200.

3. Private placement must be made within 60 days.

A) 1 and 2

B) 2 and 3

C) 1 and 3

D) 3 only

E) ALL of the above

Practice Questions

Question No.7

Answer: Option B

COMPANIES ACT

COMPANIES ACT

Who can issue private placement?A public company or private company can issue shares on private placement basis.Maximum number of person to whom private placement can be madePrivate placement can be made to maximum 50 persons or higher number prescribed ina financial year, excluding (a) Qualified Institutional Buyer (QIB)(b) employees understock option scheme under section 62(1)(b) of Companies Act, 2013.

Maximum limit for making offer for Private placement

Offer or invitation can be made to not more than two hundred persons in the aggregatein a financial year, excluding offer to QIB and Employees stock option. This restrictionwould be reckoned individually for each kind of security that is equity share, preferenceshare or debenture [i.e. 200 for equity shares, 200 for preference shares and 200 fordebentures]. However, unless allotment with respect to one kind of security iscompleted, another kind of security shall not be issued. For example, if equity shares areissued first, preference shares or debentures cannot be issued unless allotment of equityshares is completed. This restriction does not apply to issues by NBFC registered with RBIand housing finance companies registered with NHB (National Housing Bank). If RBI orNHB has not specified similar regulation, the provision of Companies Act shall apply.

Q.8) Which of the following legislations regulate the public issue in India?(1 M)

A) Companies Act 2013

B) Securities (Contract) Regulation Act,1952

C) Securities and Exchange Board of India,1992

D) A and B

E) All of the above

Practice Questions

Question No.8

Answer: Option E

COMPANIES ACT

•Provisions of the Companies Act, 2013Chapter 3, Part I is dedicated to public offer. Amid the new amendments of 2018 therehas been drastic changes in Section 26. Matters related to prospectus will now be dealtwith SEBI in consultation with the central government. Till the SEBI notifies mattersrelated to prospectus the companies can refer to the information and reports onfinancial information under the regulations made by the Securities and Exchange Boardunder the Securities and Exchange Board of India Act, 1992.•SEBI rules & regulationsSEBI rules & regulations like The SEBI (Issue of Capitals and Disclosure Requirements)regulation 2009 and SEBI (Listing obligations and Disclosure Requirements), Regulations2015 ( The Listing Regulations) are the two most important regulations when it comes topublic issues.•Other RegulationsCompliance of Listing Agreement with the concerned stock exchanges after the listing ofsecurities. Securities Contracts (Regulations) Act, 1956, RBI regulations in case offoreign/NRI equity participation.

LAWS REGULATING PUBLIC OFFER

Q.9)Which of the following cases will be acted upon based on Section 38,Companies Act,2013?(1 M)

A) A person fraudulently inducing persons to invest money in securities.

B) A person making an application in a fictitious name.

C) Mis-Statements in the prospectus.

D) A and C

E) All of the above

Practice Questions

Question No.9

Answer: Option B

COMPANIES ACT

Punishment for Personation for Acquisition, etc., of Securities.

38. (1) Any person who—(a) makes or abets making of an application in a fictitious name to a company foracquiring, or subscribing for, its securities; or(b) makes or abets making of multiple applications to a company in different names or indifferent combinations of his name or surname for acquiring or subscribing for itssecurities; or(c) otherwise induces directly or indirectly a company to allot, or register any transfer of,securities to him, or to any other person in a fictitious name,shall be liable for action under section 447(2) The provisions of sub-section (1) shall be prominently reproduced in every prospectusissued by a company and in every form of application for securities.(3) Where a person has been convicted under this section, the Court may also orderdisgorgement of gain, if any, made by, and seizure and disposal of the securities inpossession of, such person.(4) The amount received through disgorgement or disposal of securities under sub-section (3) shall be credited to the Investor Education and Protection Fund.

Q.10) Variation of the terms of contract or objects in prospectus is mentioned in which of the following

sections of Companies Act,2013?(1 M)

A) Section 27

B) Section 25

C) Section 29

D) Section 32

E) Section 39

Practice Questions

Question No.10

Answer: Option A

COMPANIES ACT

27. Regulations required in case of unlimited company, companylimited by guarantee or private company limited by shares.(1) In the case of an unlimited company, the articles shall state thenumber of members with which the company is to be registeredand, if the company has a share capital, the amount of sharecapital with which the Company is to be registered.(2) In the case of a company limited by guarantee, the articlesshall state the number of members with which the company is tobe registered.(3) In the case of a private company having a share capital, thearticles shall contain provisions relating to the matters specified insub- clauses (a), (b) and (c) of clause (iii) of sub- section (1) ofsection 3; and in the case of any other private company, thearticles shall contain provisions relating to the matters specified inthe said sub- clauses (b) and (c).

Section 27 in The Companies Act, 1956

SEBI Grade A 2020

Lecture 2

Coverage:CHAPTER IV-Part2

50 MOST IMPORTANT QUESTIONS

Q.1)According to Section 43 of Companies Act,2013 ,How many types of share capital exists?(1M)

A) 2

B) 3

C) 4

D) 5

E) None of the above

Practice Questions

Question No.1

Answer: Option A

COMPANIES ACT

Q.2) Which of the following Section of the Companies Act,2013 mentions about the voting rights of the

members?(1 M)

A) Section 47

B) Section 45

C) Section 46

D) Section 49

E) Section 50

Practice Questions

Question No.2

Answer: Option A

COMPANIES ACT

Section 47 of the Companies Act 2013 relates to voting rights of shareholders in a Company.

equity share holders→will have a right to vote on every resolution related to the company.

The voting right on a poll will be in percentage of his share in the paid-up equity share capital associated with the company.

Hence, if a shareholder owns 51% of the company in terms of paid-up equity, he will have the rights to exercise majority control over the company.

COMPANIES ACT

Q.3) Which of the following is incorrect with respect to shares with differential rights?(1 M)

A) They are a issued as a part of preferential shares.

B) Companies (share capital and debenture) rules 2014,mention the condition for issue of shares with

differential voting rights.

C) It cannot exceed 26% of the total post issue paid up capital.

D) A and C

E) All of the above

Practice Questions

Question No.3

Answer: Option D

COMPANIES ACT

Amendments to SCDR,2019.

A company to have a consistent track record of distributable profits for the previous 3 (three) years in order to be eligible to issue DVR shares was DELETED.

Imposed a limit of 26% on the percentage of shares with differential rights out of the total post-issue paid up equity share capital was amended and the aforesaid→ limit was increased to 74% .

Q.4) Preference shareholders have the right to vote in which of the following cases?(1 M)

A) On every resolution of the company.

B) Resolutions which affect their rights.

C) Resolution for winding up of the company.

D) A and B.

E) B and C

Practice Questions

Question No.4

Answer: Option E

COMPANIES ACT

Preference shareholders do not enjoy normal voting rights like equityshareholders. But under certain circumstances voting rights will also beavailable to the preference shareholders of the company.

(i) Where resolutions → directly affects the rights to his preferenceshares and(ii) Any resolution for the winding up of the company or for the repaymentor reduction of its equity or preference share capital andThe voting right on a poll shall be in proportion to his share in the paid uppreference share capital of the company

Where the dividend is not paid such class of preference shares for a periodof 2 years or more, such class of preference shareholders shall have a rightto vote on all the resolutions placed before the meeting.

Q.5) According to Section 48 of Companies Act,2013, the rights attached to the shares of any class can be

varied with the consent of ___ of the shareholders of that class? (1 M)

A) 1/3rd

B) 1/2

C) 1/4th

D) 3/4th

E) None of the above

Practice Questions

Question No.5

Answer: Option D

COMPANIES ACT

Variation of Shareholders' Rights.• 48. (1) Where a share capital of the company is

divided into different classes of shares, the rightsattached to the shares of any class may be variedwith the consent in writing of the holders of not lessthan three-fourths of the issued shares of that classor by means of a special resolution passed at aseparate meeting of the holders of the issued sharesof that class

• (2) Where the holders of not less than ten per cent ofthe issued shares of a class did not consent to suchvariation or vote in favour of the special resolution forthe variation, they may apply to the Tribunal to havethe variation cancelled, and where any suchapplication is made, the variation shall not haveeffect unless and until it is confirmed by the Tribunal:

Q.6) Company can issue shares at premium under which of the following sections of Companies

Act,2013?(1 M)

A) Section 50

B) Section 49.

C) Section 51.

D) Section 52

E) Section 53

Practice Questions

Question No.6

Answer: Option D

COMPANIES ACT

COMPANIES ACT

Q.7) Sweat Equity Shares can be issued to which of the following employees?(2 M)

A) A permanent employee of the company who is working in India.

B) A permanent employee of the company who is working outside India.

C) A director of the company working in the subsidiary of the holding company.

D) A director of the company working outside India.

E) All of the above

Practice Questions

Question No.7

Answer: Option E

COMPANIES ACT

‘‘Employee’’ means-(a) a permanent employee of the company whohas been working in India or outside India; or(b) a director of the company, whether a wholetime director or not; or(c) an employee or a director as defined in sub-clauses (a) or (b) above of a subsidiary, in Indiaor outside India, or of a holding company of thecompany;

Q.8) Incase of a unlisted startup company, the sweat equity share should not increase more than ____ of

paid up capital up to 5 years from the date of incorporation?(1 M)

A) 30%

B) 35%

C) 40%

D) 45%

E) 50%

Practice Questions

Question No.8

Answer: Option E

COMPANIES ACT

Quantum of issue of Sweat Equity Shares

For One time:

The Company shall not issue Sweat Equity Shares for more than 15% of existing paid-up share capital or issue value of shares Rs.5,00,00,000/-(Rupees Five Crores), whichever is higher.

For lifetime:

The Company shall not issue Sweat Equity shares for more than 25% of the paid-up Equity Capital at any time.

Further the limit for issuance of Sweat Equity Shares for Start-up Company shall not exceed 50% of its paid-up capital upto 5 years from the date of its incorporation or registration.

Q.9)CRR is mentioned in Companies Act 2013.What does CRR stand for?(1 M)

A) Current Redemption Reserve.

B) Cash Reserve Ratio

C) Capital Redemption Reserve

D) Cash Redeemable Reserve

E) Capital Reserve Redemption

Practice Questions

Question No.9

Answer: Option C

COMPANIES ACT

Companies Act – Capital Redemption Reserve

Capital Redemption Reserve (CRR) is a requirement under the Companies Act which applies to buy-back schemes and redemptions of preference capital.

The provisions relating to the CRR are available in Section 69 of the Act.

When a company engages in redemption or buy-back of capital, the capital base is reduced.

To compensate for the reduction→a portion of the available reserves should be separately allocated. The allocated portion should be transferred to the CRR.

The purpose of the CRR is to ensure that companies maintain the capital base intact in the event of a capital diminution.

A capital diminution refers to a depletion in the paid-up capital of a company. It can be caused when a company redeems preference capital or opts to undertake a buy-back scheme.

Q.10) Which section of companies act mentions about the transfer and transmission of shares?(1 M)

A) Section 52

B) Section 53

C) Section 54

D) Section 55

E) Section 56

Practice Questions

Question No.10

Answer: Option E

COMPANIES ACT

SECTION -44

Shares and Debentures-Movable property

Public-freely transferable

Private –With restrictions

• Section 56-Transfer and Transmission ofsecurities

• TransferDeed-FormSH-4,stamped,dated andsigned

• One needs to send Form SH 4 to the companyby the transferor or the transferee of theshares within 60 days from the date ofexecution, of the share transfer agreement

COMPANIES ACT

SEBI Grade A 2020

Lecture 3

Coverage:CHAPTER IV-Part3

50 MOST IMPORTANT QUESTIONS

Q.1)Which of the following is the new category of company introduced in Companies Act 2013?(1M)

A) Public Private Partnership

B) Two Person Company

C) Limited Liability Partnership

D) One Person Company

E) None of the above

Practice Questions

Question No.1

Answer: Option D

COMPANIES ACT

One Person Company is aprivate company which is oneformed by one person bysubscribing their names or hisname to a memorandum andcomplying with therequirements of CompaniesAct

Q.2) Which among the following is type of share issued to existing shareholders to increase its subscribed

share capital?(1M)

A) Bonus Shares

B) ESOP

C) Right Issue

D) Preference Shares

E) None of the above

Practice Questions

Question No.2

Answer: Option C

COMPANIES ACT

• When a company needs additional capital andkeeps the voting rights of the existingshareholders proportionately balanced, thecompany issues Rights shares.

• The issue is called so as it gives the existingshareholders a pre-emptive right to buy newshares at a price that is lesser than marketprice.

• The Rights issue is an invitation to the existingshareholders to buy new shares in proportionto their existing shareholding.

Q.3) Which of the following alterations of share capital requires the approval of NCLT(National Company

Law Tribunal)?(1 M)

A) Increase of authorized share capital.

B) Consolidation and division all or any share capital which results in increase in voting percentage of

shareholders.

C) Conversion of all or any of the fully paid-up shares into stock.

D) Cancellation of shares.

E) Sub-division of shares or any of them into smaller amount.

Practice Questions

Question No.3

Answer: Option B

COMPANIES ACT

Alteration of Share Capital- Sec 61 of Companies Act, 2013

• Increase or decrease of authorized share capitalof a company is known as alteration of sharecapital.

• Power of a company to alter its share capital isdefined and explained in section 61 of theCompanies Act, 2013.

• It can be done by ordinary resolution of thecompany, thus it is not necessary to confirm thealteration of the share capital of the companyfrom the tribunal except in certain situations.

COMPANIES ACT

Types of alteration of share capital :

(a) Increase of authorized share capital;.

(b) Consolidation and division all or any of share capital into shares of a larger amount than existing shares (consolidation and division which results in changes in the voting percentage of shareholders shall require the approval of NCLT);.

(c) Conversion of all or any of the fully paid-up shares into stock, and vice versa;

(d) Sub-division of shares;

(e) Cancelation of shares which, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. (this shall not be deemed as reduction in share capital)

Q.4) Section 62 ,Companies Act 2013 mentions about further issue of share capital is applicable to which

of the following companies?(1 M)

A) Private Companies.

B) Public Companies.

C) Listed Companies.

D) Unlisted Companies

E) All of the above

Practice Questions

Question No.4

Answer: Option E

COMPANIES ACT

According to Section 62 (1) of the Companies Act 2013, the procedure for issue of shares is as follows:1.Issue of notice of Board meeting2.Convene the First Board Meeting3.Issue Letter of Offer:min-15 days,max-30 days4. File MGT – 14:The form MGT 14 is mandatory for a public limited company5.Receive application money6.Convene the Second Board Meeting7.File the forms with ROC8.Issue of Share Certificates:Within 2 months from the date of allotment of shares. The share certificate must be signed by at least 2 directors. The share certificates must be issued in Form SH -1.

Q.5) Which of the following section of Companies Act,2013 deals with bonus shares ? (1 M)

A) Section 45

B) Section 52

C) Section 59

D) Section 63

E) None of the above

Practice Questions

Question No.5

Answer: Option D

COMPANIES ACT

Q.6) Bonus shares shall be issued from which of the following reserves?(1 M)

A) Capitalizing reserves created by revaluation of assets.

B) Capital Redemption Reserve Account

C) Free Reserves

D) B and C

E) All of the above

Practice Questions

Question No.6

Answer: Option D

COMPANIES ACT

Bonus shares.—(1) A company may issue fully paid-upbonus shares to its members, in any manner whatsoever,out of

(i) its free reserves;(ii) the securities premium account; or(iii) the capital redemption reserve account:

NOT:• Bonus shares shall not be made by capitalising

reserves created by the revaluation of assets.

• The bonus shares shall not be issued in lieu of dividend.

Q.7) Buyback means repurchase by a company of its own shares. Which of the following is correct with

respect to buy back shares?(2 M)

A) It is exercised to increase the number of shares of a company.

B) It eliminates the threats from shareholders who may be looking for a controlling stake.

C) A company cannot buy back its equity shares.

D) A and B.

E) B and C

Practice Questions

Question No.7

Answer: Option B

COMPANIES ACT

The power of company to purchase its own securities (section 68) is called as buy – back.

Purchase its own shares or other specified securities can be out of –

(a) Its free reserve;

(b) The securities premium account; or

(c) The proceeds of the issue of any shares or other specified securities.

No buy – back of any kind of shares or other securities shall be made out of the proceeds of an earlier issue of the same kind of share or other specified securities.

COMPANIES ACT

(a) The buy – back must be authorised by its articles;(b) A special resolution needs to be passed.

However the same is not required when:1.The buy-back is 10% or less of the total paid-up equitycapital and free reserves of the company; and2.Such buy-back has been authorized by the Board bymeans of a resolution passed at its meeting

(c) The buy – back is 25% or less of the aggregate ofpaid–up capital and free reserve of the company;

Every buy – back shall be completed within aperiod of one year from the date of passing ofthe special resolution or the resolution, as thecase may be.The buy – back may be –(a) From the existing shareholders or securityholders on a proportionate basis;(b) From the open market; or(c) By purchasing the securities issued toemployees of the company pursuant to ascheme of stock option or sweat equity.

Q.8) Which of the following are incorrect with respect to debentures?(1 M)

A) A company may issue debentures with an option to be converted into shares wholly or partly.

B) It can be issued with or without voting rights.

C) A company cannot issue debentures to more than 500 people without appointing a debenture trustee.

D) A and C

E) B and C

Practice Questions

Question No.8

Answer: Option B

COMPANIES ACT

Section 71 -Companies Act, 2013A Company may issue debentures with anoption to convert into shares, wholly or partly, atthe time of redemption but cannot issuedebentures with voting rights.Things to keep in mind while issuing debentures:1.Debentures cannot be issued with votingrights.

A company cannot issue a prospectus or make an offer or invitation to the public or to its members for the subscription of its debentures to more than 500 people without appointing a debenture trustee,

whose duty would be to protect the interest of Debenture Holders and redress their grievances.

A debenture trustee shall take steps to protect the interests of the debenture-holders and redress their grievances in accordance with such rules as may be prescribed.

On issue of debenture a company shall create aDebenture Redemption Reserve. (DRR) o0ut of theprofits of the company available for payment of dividendand the amount credited to such account shall not beutilised by the company except for the redemption ofdebentures.

Q.9)The power to look into issues of capital reduction of a company vests with which of the following

organization?(1 M)

A) High courts and appeal with Supreme court.

B) Supreme Court

C) NCLT

D) SEBI

E) None of the above

Practice Questions

Question No.9

Answer: Option C

COMPANIES ACT

Reduction of Share Capital- Section 66 of Companies Act, 2013

• Reduction of share capital is the process ofdecreasing company’s share capital (apart fromRedemption of preference shares and Buy Back ofshares which are governed separately).

• In simple words it can be regarded as ‘Cancellationof Uncalled Capital’ i.e. part of subscribed sharecapital.

COMPANIES ACT

I II III

Extinguish or reduce the liability on any of its shares in respect of the share capital not paid-

up

Cancel any paid-up share capital, which is lost, or is not represented by

available assets.

pay off any paid-up share capital which is in excess of the wants of

the company

this may be achieved either with or without extinguishing or reducing liability on any of its

shares

⇓ ⇓ ⇓

For example, if the shares are of face value

of INR 100 each of which INR 75 has been paid, the company may reduce them to INR 75

fully paid-up shares and thus relieve the

shareholders from liability on the uncalled capital of INR 25/share);

For example, out of the shares of face value of

INR 75 each fully paid-up is represented by INR 50 worth of assets. In such

a case, reduction of share capital may be

effected by cancelling INR 25 per share and

writing off similar amount of assets); or

For example, shares of face value of INR 75each

fully paid-up can be reduced to face value of INR 50 each by paying

back INR 25 per share.)

Reduction of Share capital can beaffected in any of the followingmanner:After “Capital Reduction” thenumber of shares in the companywill decrease by the reductionamount.

Q.10) As per Companies Act 2013, what is maximum tenure of preference shares except for infrastructure

projects?

A)20 years

B)15 years

C)10 years

D)5 years

E)25 years

Practice Questions

Question No.10

Answer: Option A

COMPANIES ACT

• A company limited by shares may, if soauthorised by its articles, issue preferenceshares which are liable to be redeemedwithin a period not exceeding twentyyears from the date of their issue.

• A company may issue preference shares fora period exceeding twenty years forinfrastructure projects

SEBI Grade A 2020

Lecture 4

Coverage:CHAPTER IV-Part4

50 MOST IMPORTANT QUESTIONS

Q.1)Declaration of Dividend is mentioned in which of the following Sections of Company Act 2013?(1M)

A) Section 120

B) Section 121

C) Section 122

D) Section 123

E) Section 125

Practice Questions

Question No.1

Answer: Option D

COMPANIES ACT

Declaration of dividend- Sec 123 of Companies Act, 2013

Dividend connotes that portion of company’s profit, which is not retainedin the business but distributed by the company among its shareholders,as a return on their investments, based on the shares held by them.

Q.2) Which among the following is correct with respect to Interim Dividend?(1M)

A) It is declared during Annual General Meeting.

B) It is recommended by the Directors and approved by the Share Holders.

C) An interim dividend is typically one of two dividends given out by a company that is providing

shareholders with income on a semi-annual basis.

D) A and B

E) B and C

Practice Questions

Question No.2

Answer: Option E

COMPANIES ACT

BASIS FOR COMPARISON INTERIM DIVIDEND FINAL DIVIDEND

Meaning Interim dividend is one that is declared and paid in the middle of an accounting year, i.e. before the finalization of accounts for the year.

Final dividend implies the dividend declared by the board of directors, at the company's Annual General Meeting, after the close of financial year.

Announcement Announced by the company's Board of Directors

Recommended by the Board at the board meeting and announced by the Members of the company at the AGM

Time of declaration Before preparation of financial statements.

After preparation of financial statements.

Revocation It can be revoked with the consent of all shareholders.

It cannot be revoked.

Rate of dividend Less Comparatively higher

Q.3) As per the Companies Act, which of the following are the sources of the dividend?(1 M)

A) Current years Profit of the Company

B) Undistributed or Accumulated Profits of the previous years.

C) Free Reserves

D) A and B.

E) All of the above

Practice Questions

Question No.3

Answer: Option E

COMPANIES ACT

123.Declaration of dividend.—(1) No dividend shall be declared orpaid by a company for any financial year except—

(a) out of the profits of the company for that year arrived at afterproviding for depreciation in accordance with the provisions of sub-section (2), or out of the profits of the company for any previousfinancial year or years arrived at after providing for depreciation inaccordance with the provisions of that sub-section and remainingundistributed, or out of both; or

(b) out of money provided by the Central Government or a StateGovernment for the payment of dividend by the company inpursuance of a guarantee given by that Government

no dividend shall be declared or paid by a company from its reservesother than free reserves:

Q.4) As per the Companies Act, 2013, declaration of dividends can be declared out of surplus reserves on

which of the following conditions ?(1 M)

A) The amount of declared dividend can’t be more than that of an average rate of dividends which was

declared in past 2 years.

B) The amount drawn from the reserves shall not exceed the amount which is equal to 1/10th of the sum

paid up capital and free reserves.

C) The remaining balance of the reserve shall not fall below 20% of the paid up capital.

D) B and C.

E) A and C

Practice Questions

Question No.4

Answer: Option B

COMPANIES ACT

Declaring Dividend out of Surplus Reserves in case of insufficientcurrent year’s profit:The company can declare the dividend out of surplus reserve in case ofinsufficient current year’s profit subject to the following conditions:•Rate of Dividend: The dividend rate shall not exceed the average ofthe declared dividend of three immediately preceding years.•Withdrawal amount: The total amount of withdrawal fromaccumulated reserve shall not exceed 1/10th of the paid-up sharecapital and free reserves as per the latest audited financial statement.•Utilization of money withdrawn: Such withdrawn money fromaccumulated reserve shall be first used to set off the previous year’sloss before declaring a dividend for the current year.•Balance: Balance of surplus reserve after withdrawal shall not fallbelow 15% of its paid-up share capital as per its latest financialstatement.

Q.5) Appointment of 1st Auditor in case of government company is made within______ days from the date

of registration ? (1 M)

A) 15 days

B) 30 days

C) 45 days

D) 60 days

E) None of the above

Practice Questions

Question No.5

Answer: Option D

COMPANIES ACT

Listed/SpecifiedCompany & Non-Government

CompaniesGovernment Company

-Appointed- By Board Of Directors.-Within 30 days from the date of

Registration.-In case BOD fail, Appointment can

be done by Members at Extraordinary General Meeting

within 90 days of the information

-Appointed by the Comptroller and Auditor General of India.

-Within 60 days from the date of Registration.

-In case of failure to do within 60days, appointment can also be

done by Board Of Directors within 30 days of incorporation

-In case of further failure, Members can appoint at an Extraordinary

General Meeting within 60 days of Information

COMPANIES ACT

Q.6) The amount in the Unpaid Dividend Account of companies can be transferred to the Fund Investor

Education and Protection Fund if it remains unpaid or unclaimed for a period of _____ years?(1M)

A) 4

B) 5

C) 6

D) 7

E) 8

Practice Questions

Question No.6

Answer: Option D

COMPANIES ACT

Investor Education and Protection Fund

Provisions of Investor Education and Protectionfund:Transfer of Dividend:Any money transferred to the Unpaid DividendAccount of a company in pursuance of this sectionwhich remains unpaid or unclaimed for a period ofseven years (7 year and 37 days from the date ofdeclaration of dividend) from the date of suchtransfer shall be transferred by the company alongwith interest accrued, if any, thereon to Investoreducation and protection fund.

Q.7) What is the procedure for removal of an auditor before the expiry of the term?(2 M)

A) An ordinary resolution by the board of Directors of the Company.

B) An ordinary resolution by the Shareholders of the Company..

C) Special resolution with the approval by the Central Government

D) An ordinary resolution by SEBI .

E) None of the above.

Practice Questions

Question No.7

Answer: Option C

COMPANIES ACT

Removal of Auditor before expiry of his term

• According to Section 140(1) of the Act, an auditor ofan Indian company can be removed before the expiryof its term, subject to the shareholders of thecompany approving such removal by way of a specialresolution, and after obtaining the approval of theCentral Government.

• The Act also necessitates the auditor to be given areasonable opportunity of being heard before suchremoval

Q.8) According to provisions of Companies Act, 2013 an individual auditor cannot be appointed for more

than ____ consecutive years?

A) 4

B) 5

C) 6

D) 7

E) 8

Practice Questions

Question No.8

Answer: Option B

COMPANIES ACT

The following class of Companies shall not appoint or reappoint:-(a) an individual as auditor for more than one term of five consecutive years; and(b) an audit firm as auditor for more than two terms of five consecutive years:The class of companies shall mean the following classes of companies excluding one person companies and small companies:-(a) all unlisted public companies having paid up share capital of rupees ten

crore or more;(b) all private limited companies having paid up share capital of rupees twenty crore or more;(c) all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.

Tenure of Auditors appointed under Companies Act,2013

Q.9)Which of the following is responsible for prescribing the standards of auditing according to Section

143(10) of Companies Act?(1 M)

A) Central Government

B) National Financial Reporting Authority

C) Institute of chartered Accountants of India

D) B and C

E) A and B

Practice Questions

Question No.9

Answer: Option A

COMPANIES ACT

Q.10) Which of the following situations is considered as the casual vacancy in case of the post of an

auditor?(1M)

A)Vacancy caused by Death

B)Vacancy caused by Disqualification

C)Vacancy caused by expiry of term

D)A and B

E)All of the above

Practice Questions

Question No.10

Answer: Option D

COMPANIES ACT

Casual Vacancy of the Auditor means a vacancy caused due to death, resignation,disqualification etc. of the auditor after accepting a valid appointment because of whichthe auditor cease to act as auditor of the company.

How to fill Casual Vacancy arising due to resignation by the Auditor(s)?

1. A COMPANY→ ACCOUNTS ARE SUBJECT TO AUDIT BY AN AUDITOR APPOINTED BYCAG:Any casual vacancy of the auditor in the office shall be filled by the Comptroller andAuditor General of India within thirty days.2. OTHER COMPANIES:If Casual Vacancy is arising due to the resignation of auditor, it shall be filled within 30days by the Board of Directors, and the recommendation so made by the Board shall beapproved in a general meeting convened within 3 months from the date ofrecommendation of the Board.Any auditor appointed in a Casual Vacancy shall hold office until the conclusion of thenext Annual General Meeting.

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