Final Examination Syllabus 2016 Paper 13: Corporate Laws & Compliance (CLC)

Paper 13: Corporate Laws & Compliance [December_2021_Term]
FINAL EXAMINATION
Syllabus 2016
Paper 13: CORPORATE LAWS & COMPLIANCE (CLC)

Time Allowed: 3 Hours Full Marks: 100
There are Sections A, B, C and D to be answered subject to instructions given against each.
Section A [20 Marks]

You are required to answer all the questions. Each question carries 1 mark. [20X1=20]
Instructions: Each question is followed by 4 Answer choices and only one is correct.
You are required to select the choice which according to you represents the correct
answer.
1. The concept of One Person Company (OPC) has now been introduced in India, through Section
2 (62) of Companies Act, 2013 thereby enabling Entrepreneur(s) carrying on the business in the
form of business to enter into a Corporate Framework
Which of the following options according to you most appropriately fills the above blank?
(i) Joint Stock company
(ii) Single Person
(iii) Sole Proprietor
(iv) None of the above
2. The Company may have a maximum number of directors as per Companies Act, 2013.
(i) 30
(ii) 15
(iii) 12
(iv) 18
3. Which of the following section in the Companies Act, 2013 mentions about Red Herring
Prospectus?
(i) 21
(ii) 32
(iii) 45
(iv) 54
4. According to Section 43 of Companies Act, 2013 ,How many types of share capital exists?
(i) 30
(ii) 9
(iii) 2
(iv) 6
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?
The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1
(i) 1/3rd
(ii) 3/4th
(iii) 1/2th
(iv) 1/4th
6. Section of the Companies Act, 2013 gives the cost auditor the same power as the financial auditor
has under the section of the Companies Act, 2013.
(i) 146,147
(ii) 147,148
(iii) 143,148
(iv) 148 ,143
7. As per the Companies Act, 2013, declaration of dividends can be declared out of surplus reserves
on which of the following conditions.
(i) The amount of declared dividend can’t be more than that of an average rate of dividends
which was declared in past 2 years.
(ii) 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.
(iii) The remaining balance of the reserve shall not fall below 20% of the paid up capital
8. Which section of the Companies Act, 2013 deals with the Prohibition on acceptance of deposits
from public?
(i) Section 75
(ii) Section 77
(iii) Section 73
(iv) Section 79
9. According to Section 2(6) of the Companies Act, 2013, “associate company‘” in relation to
another company, means –
(i) a company in which that other company has a significant influence.
(ii) a company which is not a subsidiary company of the company having such influence.
(iii) a company which includes a joint venture company.
(iv) All
10. As per section 128 (3) of the Companies Act, 2013 “Books of Account” can be inspected by
(i) Shareholders
(ii) Board of Directors or any Director
(iii) Investors
(iv) All
11. Which among the following cannot Initiate insolvency resolution process as per Insolvency
and bankruptcy Code ,2016
(i) a financial creditor
(ii) an operational creditor
(iii) any corporate debtor commit a default
(iv) Registrar
12. Which among the following not a part of Insolvency resolution process costs
(i) the amount of any interim finance and the costs incurred in raising such finance
(ii) any costs incurred at the expense of the Government to facilitate the insolvency resolution
process; and
(iii) any costs incurred by the resolution professional in running the business of the corporate
debtor as a going concern
(iv) Dividend
13. SEBI announced plans to tighten regulations for which type of trading?
(i) Algorithmic Trading
(ii) Investor Trading
(iii) Spot Trading
14. SEBI has proposed a set of changes to relax rules and rename the institutional trading platform as
what?
(i) Contribution
(ii) High Tech Incubation & Other New Business Platform
(iii) High Tech Start Up & Other New Business Platform
(iv) High Tech Innovation % Other New Business Platform
15. In 2004, SEBI further amended Clause 49 in response to the ………..Committee‘s

recommendations.
(i) Murthy
(ii) Kotak
(iii) Ethics
16. The Insurance Laws (Amendment) Act 2015 is deemed to have come into force on ……..
(i) 22th April, 2016
(ii) 26th December , 2014
(iii) 26th November 2015
(iv) 23 March 2015
17. As per Banking Regulation Act, 1949, any banking company aggrieved by the decision of the
Reserve Bank cancelling a license under Section 22 may, within days from the date on which
such decision is communicated to it, appeal to the Central Government and the decision of the
Central Government shall be final.
(i) 90 days
(ii) 60 days
(iii) 45 days
(iv) 30 days
18. The Corporate Social Responsibility committee shall have at least ……..independent directors.
(i) One
(ii) Three
(iii) Two
(iv) Not required
19. The framework for establishing good corporate governance & accountability was originally set up
by
(i) Rowntree Committee
(ii) Cadbury Committee
(iii) Nestle Committee
(iv) Thornton Committee
20. Which of the following is the Principle of Corporate Governance?

(i) Transparency
(ii) Accountability
(iii) Independence
(iv) All
Section B [20 Marks]
You are required to answer all the questions. Each question carries 1 mark. Instructions: Each
question is followed by a space where you are required to type your answer
1. As per Companies Act, 2013 every listed Public Company shall have at least women
director.
Type your answer here ::
One
2. Authentication of documents, proceedings and contracts, is provided in section _________of the

Companies Act, 2013
Type your answer here:
21
3. As per Companies Act 2013, what is maximum tenure of preference shares except for infrastructure
20 years
4. The Companies Act, 2013 specified “Small Shareholder” as a shareholder holding shares
of that company.
Type your answer here :
Rs.20,000
5. Section of the Companies Act, 2013 imposes a Statutory obligation on every company to
cause minutes of all proceedings of general meetings, board meetings and other meeting and
resolution passed by postal ballot.
118
6. According to section of the Companies Act, 2013 every board meeting shall be called by
giving at least 7 days’ notice in writing to all the directors at their registered address whether in
India or outside India.
173(3)
7. The company shall furnish to the Registrar verification of its________ registered office within a
period of its incorporation in such manner as may be prescribed as per Companies Act, 2013.
30 days
8. If the shares or securities are to be listed for the first time by a company on a stock exchange, it is
called as .
Initial Listing
9. A company has to keep Key Managerial Personnel on having paid up capital of Rs……. cr. or more
10
10. According to Section 35 of the 1956 Act, a Certificate of Incorporation given by the Registrar in
respect of any association shall be _______.

Conclusive Evidence
11. The liquidator shall receive or collect the claim of creditors within a period of from the date
of the commencement of the liquidation process-Section 38(1) of Insolvency and Bankruptcy
Code, 2016.
30 days
12. The Adjudicating Authority (NCLT) shall appoint an interim resolution professional within
days from the insolvency commencement date, as per procedure specified in Section 15 of
Insolvency and Bankruptcy Code, 2016.
14 days
13. The Securities and Exchange Board of India constituted on ______.

12th April 1988
14. Section of the Foreign Exchange Management Act ,1999 deals with realisation and
repatriation of foreign exchange.
8
15. There are maximum _ whole time members in Insurance Regulatory and Development
Authority
5
16. The scheduled offences under Prevention of Money Laundering Act 2002 are divided into two
parts _and Part C
Part A
17. Any person aggrieved by any decision or order of the Securities Appellate Tribunal may file an
appeal to the Supreme Court within from the date of communication of the decision or
order of the Securities Appellate Tribunal to him on any question of law arising out of such
order.
60 days
18. There are usually …………… key participants in corporate governance.

19. Board of every Company shall ensure that the company spends in every financial year on
account of Corporate Social Responsibility Policy at least of average Net Profit.

2%
20. XBRL stands for

Extensible Business Reporting Language.
Section C [48 Marks]
You are required to answer any 4 out of 6 questions in this section [4 X 12=48 Marks]
Instructions: Each question is followed by a space where you are required to type your
answer.
1. (a) There are four directors in Shine Paper Limited. Mr. Madhav, being the director in station, has
been authorized to draw and endorse cheque or other negotiable instruments on account of
the company and also to direct registration of transfer of shares and signing the share
certificates etc. Evaluate whether he will be treated as Managing Director of the company. 6
Section 2(54) of the Companies Act, 2013 defines a "Managing Director" as a director who is
entrusted with substantial powers of management of the affairs of the company by:
a) virtue of articles of a company, or
b) an agreement with the company, or
c) a resolution passed in its general meeting, or by its Board of Directors, and includes a
director occupying the position of the managing director, by whatever name called.
Explanation to Section 2 (54) clarifies that substantial powers of the management shall not be
deemed to include the power to do such administrative acts of a routine nature when so
authorised by the Board such as:
i) the power to affix the common seal of the company to any document or
ii) to draw and endorse any cheque on the account of the company in any bank
iii) to draw and endorse any negotiable instrument or
iv) to sign any certificate of share or
v) to direct registration of transfer of any share.
In the instant case, Mr. Madhav, a director in Shine Paper Limited has been, authorized to draw
and endorse cheque or other negotiable instruments on account of the company and also to direct
registration of transfer of shares and signing the share certificates etc.
Hence, according to explanation to section 2(54), Mr. Madhav will not be treated as managing
director of the company as he is authorized to do administrative acts of a routine nature.
(b.) Discuss the duties of directors as per section 166 as per Companies Act,2013
6
Duties of directors has been defined in the company Law for the first time under section 166 of
the Companies Act, 2013. The following duties have been prescribed for a director under the said
section:
a. He shall act in accordance with the articles of the company, subject to the provisions of this Act.
b. He shall act in good faith in order to promote the objects of the company for the benefit of its
members as a whole, and in the best interests of the company, its employees, the
shareholders, the community and for the protection of environment.
c. He shall exercise his duties with due and reasonable care, skill and diligence and shall
exercise independent judgment.
d.He shall not involve in a situation in which he may have a direct or indirect interest that
conflicts, or possibly may conflict, with the interest of the company.

e. He shall not achieve or attempt to achieve any undue gain or advantage either to himself or to
his relatives, partners, or associates and if such director is found guilty of making any undue gain,
he shall be liable to pay an amount equal to that gain to the company.
f. He shall not assign his office and if any assignment so made, it shall be void.
g. If a director of the company contravenes the provisions of this section, such director shall be
punishable with fine which shall not be less than Rs 1,00,000 but which may extend to Rs
5,00,000.
2. (a) Explain the contents of the Memorandum of association of a Producer Company per
Companies Act, 2013. 7
The memorandum of association of every Producer Company should contain the following as
per Companies Act, 2013 Section 581F :
a) The name of the company with ‘Producer Company Limited’ as the last words of the name of
such Company.
b) The State in which the registered office of the Producer Company is to situate.
c) The main objects of the Producer Company shall be one or more of the objects specified in
Section 378B.
d) The names and addresses of the persons who have subscribed to the memorandum.
e) The amount of share capital with which the Producer Company is to be registered and
division thereof into shares of a fixed amount.
f) The names, addresses and occupations of the subscribers being producers, who shall act as the
first directors in accordance with Sub-Section (2) of Section 58IJ.
g) That the liability of its member is limited.
h) Opposite to the subscriber’s name the number of shares each subscriber takes:
i) In case the objects of the Producer Company are not confined to one State, the States to
whose territories the objects extend
(b) Segma Ltd. has a credit balance of Rs 10,00,000 in Securities Premium Reserve. It did not earn
profit during the year and thus was unable to declare dividend. MR B, the accountant of the
Company, suggested that Securities Premium Reserve of Rs 10,00,000 may be used for payment
of dividend. Comment.
5
According to section 52 of the Companies Act, 2013, where a company issues shares at a
premium, whether for cash or otherwise, a sum equal to the aggregate 'amount of the premium
received on those shares shall be transferred to a "securities premium account" and the
provisions of this Act relating to reduction of share capital of a company shall, except as provided
in this section, apply as if the securities premium account were the paid-up share capital of the
company. The securities premium account may be applied by the company—
a) towards the issue of unissued shares of the company to the members of the company as fully
paid bonus shares;
b) in writing off the preliminary expenses of the company;
c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of
shares or debentures of the company;
d) in providing for the premium payable on the redemption of any redeemable preference shares
or of any debentures of the company; or

e) for the purchase of its own shares or other securities, under section 68.
As such dividend cannot be declared.
3. (a) Examine the following aspect related to convening of board meeting with reference to the
provisions of the Companies Act, 2013:
(i) The Chairman of Green house Limited convened a board meeting and two weeks'
notice was served on all directors of the company. Two of the independent directors
on the board objected on the grounds that no proper agenda for the meeting was
circulated.
(ii) Purple Florence Limited proposes to hold its board meeting at a shorter notice
through video conferencing.
4+5
(i)According to section 173 (3) of the Companies Act, 2013, a meeting of the Board shall be called
by giving not less than 7 days' notice in writing to every director at his address registered with
the company and such notice shall be sent by hand delivery or by post or by electronic means.
According to the question, two of the independent directors on the Board has objected on the
grounds that no proper agenda for the meeting was circulated.
The Companies Act, 2013 does not specifically provide for sending agenda along with the notice
of the meeting. However, generally as a good secretarial practice, the notice is accompanied
with the agenda of the meeting. Thus, the contention of the independent directors objecting on
the grounds that no agenda for the meeting was circulated, does not hold good.
Further, the Chairman of Greenhouse Limited has convened the Board meeting by serving a two
weeks' notice (i.e. more than 7 days). Hence, the meeting shall be valid.
(ii)According to section 173 of the Companies Act, 2013,
(a) The directors can participate in a meeting of the Board either in person or through video
conferencing or other audio visual means, as may be prescribed, which are capable of recording
and recognising the participation of the directors and of recording and storing the proceedings
of such meetings along with date and time. Further, Central Government may provide for
matters which cannot be dealt in a meeting through video conferencing or other audio visual
means.
(b) A meeting of the Board shall be called by giving not less than 7 days' notice in writing to
every director at his address registered with the company. Provided that a meeting of the Board
may be called at shorter notice to transact urgent business subject to the condition that at least
one independent director, if any, shall be present at the meeting. Further, in case the
independent directors are not present at such a meeting of the Board, decisions taken at such a
meeting shall be circulated to all the directors and shall be final only on ratification thereof by
at least one independent director, if any.
Hence, Purple Florence Limited can hold a board meeting at a shorter notice through video
conferencing, for transacting urgent business subject to the condition that at least one
independent director, if any, shall be present at the meeting. Further, if the independent directors
are absent from the meeting of the Board, decision taken at such a meeting shall be circulated to
all the directors and shall be final, only on ratification thereof by at least one independent
director, if any.
(b) Duties of resolution professional under Insolvency and Bankruptcy Code, 2016
3
It shall be the duty of the resolution professional to preserve and protect the assets of the
corporate debtor, including the continued business operations of the corporate debtor - Section
25(1) of Insolvency and Bankruptcy Code, 2016.
He can take any or all the actions specified in Section 25(2) of Insolvency and Bankruptcy Code, 2016
for this purpose. However, action as specified in Section 28 of Insolvency and Bankruptcy Code,
2016
cannot be taken without prior approval of committee of creditors with 66% voting in favour.
Section 25A has been introduced in March, 2020 which provides for rights and duties of
authorised representative of financial creditor.
4.(a) List out the main features of a qualified and independent audit committee to be set up under SEBI.
6
The main features of a qualified and independent audit committee to be set up under SEBI
(Listing
Obligations and Disclosure Requirements) Regulations, 2015 are as follows:
1. The audit committee shall have minimum three directors as members. Two-thirds of the
members of audit committee shall be independent directors;
2. All members of audit committee shall be financially literate and at least one member shall
have accounting or related financial management expertise;
Explanation (I): The term "financially literate" means the ability to read and understand basic
financial statements i.e. balance sheet, profit and loss account, and statement of cash flows.
Explanation (ii): A member will be considered to have accounting or related financial
management expertise if he or she possesses experience in finance or accounting, or requisite
professional
certification in accounting, or any other comparable experience or background which results in
theindividual's financial sophistication, including being or having been a chief executive officer,
chief financial officer or other senior officer with financial oversight responsibilities.(listing
obligations and disclosure Requirements) Regulations, 2015
3. The Chairperson of the Audit Committee shall be an independent director;
4. The Chairperson of the Audit Committee shall be present at Annual General Meeting to answer
shareholder queries;
5. The Audit Committee at its discretion shall invite the finance director or the head of the
finance
function, head of internal audit and a representative of the statutory auditor and any other such
executives to be present at the meetings of the committee; provided that occasionally, the Audit
Committee may meet without the presence of any executives of the listed entity.;
6. The Company Secretary shall act as the secretary to the committee
4.(b) How money laundering takes place? 6
The process of Money Laundering generally involves the following three stages
(a) Placement: The Money Launderer, who is holding the money generated from criminal
activities, introduces the illegal funds into the financial systems. This might be done by breaking
up large amount of cash into less conspicuous smaller sums which are deposited directly into
a Bank Account or by purchasing a series of instruments such as Cheques, Bank Drafts etc.,
which are then collected and deposited into one or more accounts at another location.
(b) Layering: The second stage of Money Laundering is layering. In this stage, the Money
Launderer typically engages in a series of continuous conversions or movements of funds, within
the financial or banking system by way of numerous accounts, so as to hide their true origin and to
distance them Laws Related to Banking Sector from their criminal source. The Money Launderer
may use various channels for movement of funds, like a series of Bank Accounts, sometimes
spread across the globe, especially in those jurisdictions which do not co– operate in anti-money
laundering investigations.
(c) Integration: Having successfully processed his criminal profits through the first two stages of
Money Laundering, the Launderer then moves to this third stage in which the funds reach the
legitimate economy, after getting inseparably mixed with the legitimate money earned through
legal sources of income. The Money Launderer might then choose to invest the funds into real
estate, business ventures & luxury assets, etc. so that he can enjoy the laundered money,
without any fear of law enforcement agencies.
The above three steps may not always follow each other. At times, illegal money may be mixed
with legitimate money, even prior to placement in the financial system. In certain cash rich
businesses, like Casinos (Gambling) and Real Estate, the proceeds of crime may be invested without
entering the mainstream financial system at all.
5. (a) What is meant by Corporate Governance? State the major 'characteristics' of good corporate
2+3
Corporate Governance: Simply stated, 'Governance' means the process of decision making and
the process by which decisions are implemented. The term corporate governance is understood
and defined in various ways. Corporate governance can be defined as the formal system of
accountability and control for ethical and socially responsible organisational decisions and use
of resources and accountability relates to how well the content of workplace decisions is
aligned with the organisations strategic direction. Control involves the process of auditing and
improving organisation decisions and actions. Good corporate governance has the following
major characteristics:
(i) Participatory
(ii) Consensus oriented
(iii) Accountable
(iv) Transparent
(v) Responsive
(vi) Effective and efficient
(vii) Equitable and inclusive and
(viii) Follows the rule of law.
(b) Explain various benefits of Corporate Social Responsibility Programme.

7

Benefits of Corporate Social Responsibility programme
As the business environment gets increasingly complex and stakeholders become vocal about
their expectations, good CSR practices can only bring in greater benefits, some of which are as
follows:
(a) Communities provide the licence to operate: Apart from internal drivers such as values and
ethos, some of the key stakeholders that influence corporate behaviour include governments
(through laws and regulations), investors and customers. In India, a fourth and increasingly
important stakeholder is the community and many companies have started realising that the
‘licence to operate’ is no longer given by governments alone, but communities that are impacted
by a company’s business operations.
Thus, a robust CSR programme that meets the aspirations of these communities not only
provides them with the licence to operate, but also to maintain the licence, thereby precluding
the ‘trust deficit’.
(b) Attracting and retaining employees: Several human resource studies have linked a
company’s ability to attract, retain and motivate employees with their CSR commitments.
Interventions that encourage and enable employees to participate are shown to increase
employee morale and a sense of belonging to the company.
(c) Communities as suppliers: There are certain innovative CSR initiatives emerging,
wherein companies have invested in enhancing community livelihood by incorporating them into
their supply chain. This has benefitted communities and increased their income levels, while
providing these companies with an additional and secure supply chain.
(d) Enhancing corporate reputation: The traditional benefit of generating goodwill, creating a
positive image and branding benefits continue to exist for companies that operate effective CSR
programmes. This allows companies to position themselves as responsible corporate citizens.
6. You are required write Short Notes on any 4 out of 5 [4×3=12

Marks]
(a) Interim Dividend

According to section 2(35) of Companies Act, ‘dividend‘ includes any interim dividend. According
to section 123(3), the Board of Directors of a company may declare interim dividend during any
financial year out of the surplus in the profit and loss account and out of profits of the financial
year in which such interim dividend is sought to be declared.
However, in case the company has incurred loss during the current financial year up to the end of
the quarter immediately preceding the date of declaration of interim dividend, such interim
dividend shall not be declared at a rate higher than the average dividends declared by the
company during the immediately preceding three financial years.
The Board of directors may declare interim dividend and the amount of dividend including
interim dividend shall be deposited in a separate bank account within five days from the date of
declaration of such dividend.
(b) Small Company under Companies Act,2013

According to Section 2 (85) of Companies Act, 2013 a ‘‘small company’’ means a company, other
than a public company: (1) paid-up share capital of which does not exceed fifty lakh rupees or
such higher amount as may be prescribed which shall not be more than ten crore rupees. Or (2)
turnover of which as per its profit and loss account for the immediate preceding financial year.
does not exceed two crore rupees or such higher amount as may be prescribed which shall not be
more than one hundred crore rupees: Provided that nothing in this clause shall apply to:
a) a holding company or a subsidiary company
b) a company registered under Section 8, or
c) a company or body corporate governed by any special Act.
(c) Applicability of Insolvency and Bankruptcy Code 2016

The provisions of Insolvency and Bankruptcy Code, 2016 applies to the following, in relation to
their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be (Section 2
of Insolvency and Bankruptcy Code, 2016).
(a) Companies incorporated under Companies Act
(b) Companies governed under special Act (so far as of Insolvency and Bankruptcy Code,
2016 is consistent with those special Acts i.e. provisions of Special Act will prevail over of
Insolvency and Bankruptcy Code, 2016)
(c) Limited Liability Partnership (LLP)
(d) Other body corporates as may be notified by Central Government
(e) Partnership firms and individuals.
(f) Personal guarantors to corporate debtros
(g) Partnership firms and proprietorship firms; and
(h) Individuals, other than persons referred to in clause (e).
(d) Functions of Insurance Regulatory and Development Authority

Type your answer here
The Functions of Insurance Regulatory and Development Authority are as follows:
(a) Nomination by Policyholders.
(b) Settlement of insurance claim.
(c) Practical training for Insurance agents and other intermediaries.
(d) Insurable Interest.
(e) Surrender value of Policyholders.
(f) Code of conduct of Insurance intermediaries surveyors.
(g) Assistance in gaining correct information about policies.
(h) Creation of management information system.
(i) Promotion of Self regulation within the insurance sector.
(j) Issue of certificate of insurance company registration.
(k) regulation of investment by insurance companies.
(l) Supervising and monitoring insurance companies
(e) Objectives of the Competition Act, 2002

Objectives of the Competition Act, 2002

(a) to prevent practices having adverse effect on competition.
(b) to promote and sustain competition in markets..
(c) to protect the interests of consumers.
(d) to ensure freedom of trade carried on by other participants in markets in India and for matters
connected therewith or incidental thereto.
The objectives of the Act are sought to be achieved through the instrumentality of the Competition
Commission of India (CCI) which has been established by the Central Government with effect from
14th October, 2003.
Section D [12 Marks]

Case Study
Instructions: Each question is followed by a space where you are required to type your
answer. Candidates shall provide adequate reasons in brief, in support of their answers.
Mr Negi is very hardworking person and had been employed with the top notch companies of
the country. He is the person who is responsible for the administration, management and operation
of the company. He is a person with good name and is known for his dexterity, acumen and good
style of leadership. Recently Mr. Negi was appointed as Managing Director of Bahubali Industries
Ltd. for a period of five years with effect from 1.4.2018 on a salary of Rs 12 lakhs per annum with
other perquisites. The company is a big name in the textile industry and has a good reputation in the
country. The Board of Directors appointed him keeping his skills and experience in mind. and the
company was also quite confident that he would take the company to new heights. Over the years
the company realised that something is going wrong keeping the financial transactions in mind.
After repetitive reminders from the sources the Board came into action The Board of directors of
the company on coming to know of certain questionable transactions, terminated the services of the
Managing Director from 1.3.2021. Mr. Negi termed his removal as illegal and claimed compensation
from the company. Meanwhile the company paid a sum of Rs 5 lakhs on ad hoc basis to Mr. Negi
pending settlement of his dues.
(i) Define section 202 of the Companies Act, 2013 3

Section 202 of the Companies Act, 2013 provides the provisions for compensation for loss of
office of managing or whole-time director or manager as under:
(a) A company may make payment to a managing or whole-time director or manager, but not to
any other director, by way of compensation for loss of office, or as consideration for retirement
from office or in connection with such loss or retirement.
(ii) Is the company bound to pay compensation to Mr.Negi? 3

No compensation shall be paid, if the director has been found guilty of fraud or breach of trust or
gross negligence in the conduct of the affairs of the company. Here he is entitled as there are only
allegations.
(iii) How much compensation the company is bound to pay? 3

According to Section 202 of the Companies Act, 2013, compensation can be paid only to a
Managing or Whole-time Director. Amount of compensation cannot exceed the remuneration
which he would have earned if he would have been in the office for the unexpired term of his
office or for 3 years whichever is shorter. No compensation shall be paid, if the director has been
found guilty of fraud or breach of trust or gross negligence in the conduct of the affairs of the
company. In light of the above provisions of law, the company is not liable to pay any
compensation to Mr. Doubtful, if he has been found guilty of fraud or breach of trust or gross
negligence in the conduct of affairs of the company. But, it is not proper on the part of the
company to withhold the payment of compensation on the basic of mere allegations. The
compensation payable by the company to Mr. Doubtful would be Rs 25 Lacs calculated at the rate
of Rs 12 Lacs per annum for unexpired term of 25 months .
(iv) Can the company recover the recover the amount of Rs 5 lakhs paid on the ground that Mr.Negi
is not entitled to any compensation, because he is guiding of corrupt practice. 3
Adhoc payment of Rs 5 Lacs, it will not be possible for the company to recover the amount from
Mr. Negi . In view of the decision in case of Bell vs. Lever Bros. (1932) AC 161 where it was
observed that a director was not legally bound to disclose any breach of his fiduciary obligations
so as to give the company an opportunity to dismiss him. In that case the Managing Director was
initially removed by paying him compensation and later on it was discovered that he had been
guilty of breaches of duty and corrupt practices and that he could have been removed without
compensation.
END

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Final Examination Syllabus 2016 Paper 13: Corporate Laws & Compliance (CLC)

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Paper 13: Corporate Laws & Compliance [December_2021_Term]

Paper 13: CORPORATE LAWS & COMPLIANCE (CLC)

Section A [20 Marks]

15. In 2004, SEBI further amended Clause 49 in response to the ………..Committee‘s

(iv) Not required

20. Which of the following is the Principle of Corporate Governance?

Section B [20 Marks]

2. Authentication of documents, proceedings and contracts, is provided in section _________of the

Type your answer here:

13. The Securities and Exchange Board of India constituted on ______.

18. There are usually …………… key participants in corporate governance.

Type your answer here:

20. XBRL stands for

Section C [48 Marks]

Type your answer here:

Type your answer here:

conflicts, or possibly may conflict, with the interest of the company.

or of any debentures of the company; or

(ii)According to section 173 of the Companies Act, 2013,

Type your answer here:

Type your answer here:

4.(b) How money laundering takes place? 6

Type your answer here:

(b) Explain various benefits of Corporate Social Responsibility Programme.

Type your answer here:

6. You are required write Short Notes on any 4 out of 5 [4×3=12

(a) Interim Dividend

(b) Small Company under Companies Act,2013

(c) Applicability of Insolvency and Bankruptcy Code 2016

(d) Functions of Insurance Regulatory and Development Authority

(e) Objectives of the Competition Act, 2002

Objectives of the Competition Act, 2002

Section D [12 Marks]

(i) Define section 202 of the Companies Act, 2013 3

(ii) Is the company bound to pay compensation to Mr.Negi? 3

(iii) How much compensation the company is bound to pay? 3

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