Chapter 2: Incorporation of Company and Matters Incidental Thereto - Test 3: answer key

Question 1 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · medium

Scenario. Anekta Garments Limited was incorporated on 2 April 2026. Its registered office was situated at Unit 8, Indore, and the company began commercial operations from a separate warehouse at Pithampur. The company furnished verification of its registered office to the Registrar in Form INC-22 only after the initial thirty-day period had expired. The Board later considered a sequence of relocations to accommodate expansion. On 25 May 2026, the company shifted its registered office from Unit 8 to Unit 24, both falling within the same local limits of Indore. The Board approved the move and the company filed Form INC-22 within thirty days. On 5 August 2026, it moved the registered office from Indore to Ujjain, outside the local limits of the earlier city but still within the jurisdiction of the same Registrar of Companies. Members approved this move by special resolution, and the company notified the Registrar in Form INC-22 within thirty days. A further proposal involved shifting from Ujjain to a place falling within the jurisdiction of another Registrar in the same State. Members passed a special resolution on 1 October 2026, and the company submitted Form INC-23 to the Regional Director on 28 October. The Regional Director communicated confirmation on 18 November. Anekta filed that confirmation with the Registrar on 1 December, and the Registrar issued the certificate of registration on 22 December 2026. Management nevertheless recorded 1 October as the effective date of the final shift. The finance head also asked whether the initial delay in verification could be ignored because the premises were available and the Registrar had eventually received the form. The company secretary was asked to advise the Board on the approvals, filings, effective date and consequences of the delay.

When Anekta moved its registered office from Unit 8 to Unit 24, both addresses being within the same local limits of Indore, which statutory position is correct?

1. A special resolution and prior Regional Director approval were both compulsory before the company could move.
2. A special resolution was not required, but the company had to notify the Registrar within thirty days. (correct answer)
3. A special resolution was compulsory, but the Registrar could be notified within sixty days after the move.
4. Regional Director confirmation was compulsory, although no separate notice of the changed address was needed.

Answer: B — A special resolution was not required, but the company had to notify the Registrar within thirty days.

Explanation. Section 12(5) requires a special resolution when the registered office is shifted outside the local limits of the city, town or village. A move that remains within the same local limits does not trigger that special-resolution requirement. However, Section 12(4) requires notice of every change in the situation of the registered office to the Registrar in the prescribed manner, ordinarily Form INC-22, within thirty days. The trap is treating the absence of a special-resolution requirement as an exemption from the notice filing.

Where it goes wrong. Assuming that an intra-city move within local limits needs no Registrar intimation.

Authority. Section 12(4) and 12(5) of the Companies Act, 2013; Rule 27 of the Companies (Incorporation) Rules, 2014

Question 2 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

The move from Indore to Ujjain was outside the local limits of the earlier city but remained within the jurisdiction of the same ROC. Which approval-and-filing combination correctly describes the statutory position?

1. Board resolution alone, followed by Form INC-23 to the Regional Director within sixty days.
2. Special resolution and Regional Director confirmation, followed by Form INC-28 within fifteen days.
3. Central Government approval before the move, followed by a fresh certificate of incorporation.
4. Special resolution and notice to the ROC in Form INC-22 within thirty days, without inter-ROC confirmation. (correct answer)

Answer: D — Special resolution and notice to the ROC in Form INC-22 within thirty days, without inter-ROC confirmation.

Explanation. A shift outside the local limits of the city, town or village requires a special resolution under Section 12(5). The additional Regional Director confirmation under Section 12(5) is triggered when the office moves from the jurisdiction of one Registrar to that of another Registrar within the same State. Here the ROC jurisdiction does not change. The company must nevertheless notify the Registrar of the new situation within thirty days under Section 12(4), using the prescribed filing. The trap is confusing a change of city with a change of ROC jurisdiction.

Where it goes wrong. Treating every inter-city shift as an inter-ROC shift requiring Regional Director confirmation.

Authority. Section 12(4) and 12(5) of the Companies Act, 2013; Rule 27 of the Companies (Incorporation) Rules, 2014

Question 3 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

For the final shift from Ujjain to the jurisdiction of another ROC in the same State, on what date did the change take effect on the stated facts?

1. 22 December 2026, when the Registrar issued the certificate of registration of the confirmation. (correct answer)
2. 1 October 2026, when members passed the special resolution authorising the shift.
3. 28 October 2026, when the company submitted Form INC-23 to the Regional Director.
4. 18 November 2026, when the Regional Director communicated its confirmation to the company.

Answer: A — 22 December 2026, when the Registrar issued the certificate of registration of the confirmation.

Explanation. For a shift from the jurisdiction of one ROC to another within the same State, Section 12(5) requires Regional Director confirmation. Under Section 12(6), the company must file that confirmation with the Registrar within sixty days; the Registrar then registers it and certifies the registration. The certificate is conclusive evidence of compliance, and the change takes effect from the date of that certificate. Therefore, 22 December 2026 is the effective date on the facts. The trap is treating the special resolution or RD confirmation as the effective date.

Where it goes wrong. Using the SR date or RD communication date instead of the ROC certificate date.

Authority. Section 12(5) and 12(6) of the Companies Act, 2013; Rule 28 of the Companies (Incorporation) Rules, 2014

Question 4 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · medium

Anekta’s initial verification of its registered office was filed after the thirty-day period. Which statement correctly describes the consequence of a continuing default under Section 12?

1. Only the company is liable to a fixed penalty of ₹10,000, regardless of how long the default continues.
2. The company and every officer in default are liable to ₹1,000 per day, capped at ₹1 lakh overall.
3. The company and each officer in default owe ₹1,000 daily, subject to a maximum penalty of ₹1 lakh. (correct answer)
4. The company is liable to ₹1 lakh daily, while every officer is liable to ₹1,000 in total.

Answer: C — The company and each officer in default owe ₹1,000 daily, subject to a maximum penalty of ₹1 lakh.

Explanation. Section 12(2) requires verification of the registered office to be furnished to the Registrar within thirty days of incorporation. Under Section 12(8), a default in complying with Section 12 attracts a penalty of ₹1,000 for every day during which the default continues, subject to an overall ceiling of ₹1 lakh. The company and every officer who is in default are covered. The trap is either converting the penalty into imprisonment or applying the ceiling separately as a per-day amount.

Where it goes wrong. Misreading the ₹1 lakh maximum as the daily penalty or omitting officers in default.

Authority. Section 12(2) and 12(8) of the Companies Act, 2013; Rule 25 of the Companies (Incorporation) Rules, 2014

Question 5 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

Scenario. Zenith Agro Tech Private Limited has its registered office in Pune and has members residing in several States. For a general meeting scheduled on 24 August 2026, the company posted the meeting notice to its members by speed post on 1 August. It also sent a copy to one member by courier. The courier agency maintains delivery records and provides proof of delivery. A separate statutory notice addressed to the company was left at its registered office during business hours. The company has enabled electronic communications through the email addresses supplied by members. Its system retains messages, permits their retrieval and review, and can render them in a clearly legible form. For an electronic message board, the company uses the network designated by the concerned member. One member had earlier requested that documents be delivered by courier and agreed to pay the fee determined by the company at its annual general meeting. The Board has also authorised its finance controller, an employee who is not a key managerial personnel, to sign routine contracts and authenticate specified company records. The controller signed a supply contract within the scope of that authority. Separately, the procurement manager has routinely drawn bills of exchange for purchases with the knowledge and authority of the company. For a land acquisition, however, the manager signed a formal deed on the strength of an oral instruction from the managing director. The company has no common seal, and the deed was not executed under a power of attorney authorised by two directors or by a director together with the Company Secretary. A dispute has arisen over the date of deemed service of the meeting notice, the validity of the electronic and courier methods, and whether the different instruments bind the company.

One Zenith member had requested that documents be delivered by courier and agreed to pay the fee determined by the company at its annual general meeting. The company now proposes to send the document only by speed post, although the member’s request is still operative. Which statement most accurately reflects Section 20?

1. The company may disregard the request and use speed post, because Section 20 leaves the choice of delivery mode entirely to the company.
2. The member may request a particular mode and, after paying the fee fixed by the company at its AGM, require delivery by that mode. (correct answer)
3. The member may insist on courier only if the courier agency is appointed by the Registrar and paid for by the company.
4. The request is invalid because members may choose registered post only, and cannot select courier or another prescribed delivery mode.

Answer: B — The member may request a particular mode and, after paying the fee fixed by the company at its AGM, require delivery by that mode.

Explanation. Section 20(2) permits a member to request delivery of a document through a particular mode, for which the member must pay the fee as determined by the company in its annual general meeting. Since the member requested courier and agreed to pay the prescribed fee, the company should comply with that mode rather than unilaterally substitute speed post. The Study Material also defines courier as a person or agency that delivers the document and provides proof of delivery. The trap is overlooking the member’s express mode-selection right.

Where it goes wrong. Assuming that the company can disregard a member’s requested mode even after the applicable fee is paid.

Authority. Section 20(1) of the Companies Act, 2013; Rule 35 of the Companies (Incorporation) Rules, 2014

Question 6 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · medium

The notice of Zenith’s general meeting was posted by speed post on 1 August 2026. Applying the statutory deeming rule for service by post, when is the notice deemed to have been served for Section 20 purposes?

1. At the time the postal article is physically delivered, regardless of the type of document.
2. At the end of the ordinary delivery period applicable to all postal documents.
3. Immediately upon posting, because the sender has completed the required act of dispatch.
4. At the expiration of forty-eight hours after the letter containing the notice is posted. (correct answer)

Answer: D — At the expiration of forty-eight hours after the letter containing the notice is posted.

Explanation. Section 20(2) creates a specific deeming rule where a document is delivered by post. In the case of a notice of a meeting, service is deemed to have been effected at the expiration of forty-eight hours after the letter containing the notice is posted. For any other document, service is deemed at the time when the letter would be delivered in the ordinary course of post. The trap is applying the ordinary-course rule to a meeting notice or using actual delivery as the statutory test.

Where it goes wrong. Applying the ordinary-course postal rule to a notice of meeting.

Authority. Section 20(2) of the Companies Act, 2013; Rule 35 of the Companies (Incorporation) Rules, 2014

Question 7 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

Zenith’s finance controller is an employee but not a key managerial personnel. The Board has expressly authorised the controller to sign routine contracts and authenticate specified company records. Which statement most accurately reflects Section 21?

1. The controller cannot sign because only directors or key managerial personnel may authenticate company documents or contracts.
2. The controller may sign only after each individual contract is approved by members in a general meeting.
3. The controller may sign within the Board’s authorisation because an authorised officer or employee is permitted. (correct answer)
4. The controller may sign only if the company first appoints the controller as a key managerial personnel.

Answer: C — The controller may sign within the Board’s authorisation because an authorised officer or employee is permitted.

Explanation. Section 21 permits a document or proceeding requiring authentication by a company, and contracts made by or on behalf of a company, to be signed by any key managerial personnel or by an officer or employee duly authorised by the Board for that purpose. The finance controller need not be a KMP because the Board has authorised the employee to sign within the stated scope. The trap is treating KMP status as compulsory for every permitted signatory.

Where it goes wrong. Assuming that an employee must be a KMP even when duly authorised by the Board.

Authority. Section 21 of the Companies Act, 2013

Question 8 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

The procurement manager has company authority to draw bills of exchange in the ordinary course, but signed the land acquisition deed only on an oral instruction. Which statement correctly distinguishes the two instruments?

1. A bill may bind the company under express or implied authority, but a formal deed requires a properly authorised attorney. (correct answer)
2. Both instruments bind the company whenever the managing director gives an oral instruction to the employee.
3. Neither instrument can bind the company unless the common seal is affixed to the bill and the formal deed.
4. A formal deed may be executed by any employee, while a bill requires a power of attorney in writing.

Answer: A — A bill may bind the company under express or implied authority, but a formal deed requires a properly authorised attorney.

Explanation. Under Section 22(1), a bill of exchange, hundi or promissory note is treated as made, accepted, drawn or endorsed on behalf of the company when a person acts under the company’s express or implied authority. A formal deed is different: the company must authorise a person as its attorney in writing, under its common seal if it has one, or through the statutory signatories where it has no seal. The deed must then be signed by the attorney on behalf of the company and under the attorney’s seal. An oral instruction alone does not satisfy that deed-authorisation process. The trap is applying bill authority rules to formal deeds.

Where it goes wrong. Treating authority to draw a bill as sufficient authority to execute a formal deed.

Authority. Section 22(1), 22(2) and 22(3) of the Companies Act, 2013

Question 9 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · medium

Scenario. Two companies in the Vayu Infrastructure group are considering changes in their company status. Vayu Renewables Private Limited has 12,400 voting rights represented at its general meeting. On 14 August 2026, members voted on a special resolution to alter its articles by removing the restrictions and limitations required to be included in the articles of a private company. The voting record was: 8,400 votes in favour, 2,800 votes against and 1,200 abstentions. The altered articles were adopted on that date, and the company filed Form INC-27 with the Registrar on 24 August. The group’s other company, Kshipra Power Limited, is a public company that wishes to become private to facilitate a closely held ownership structure. At its general meeting on 1 September 2026, the proposal received 8,100 votes in favour and 2,700 votes against. The company passed the special resolution and prepared the altered memorandum and articles. It filed an application in e-Form RD-1 with the Regional Director, exercising the Central Government’s delegated authority, on the fifty-fifth day after the resolution. The Regional Director approved the alteration on 20 November 2026. Kshipra then filed the approval order and a printed copy of its altered articles with the Registrar in Form INC-27 eighteen days after receiving the order. The directors argue that the special resolution itself immediately completed the public-to-private conversion, while the company secretary says the approval and subsequent filing steps are material. The Board has requested advice on the voting threshold, the date when Vayu ceases to be a private company, the approval needed by Kshipra, and the deadline for filing the approval order and altered articles.

Vayu Renewables Private Limited removed the restrictions and limitations required for a private company from its articles through the alteration adopted on 14 August 2026. When does it cease to be a private company under the stated facts?

1. Only when the Registrar issues a fresh certificate of incorporation after receiving Form INC-27.
2. Only when the Regional Director separately approves the alteration of its articles.
3. On the date the first public offer of its shares is made to investors.
4. From the date of the alteration of its articles that removes the required private-company restrictions. (correct answer)

Answer: D — From the date of the alteration of its articles that removes the required private-company restrictions.

Explanation. Section 14(1) permits alteration of articles by special resolution, including conversion from private to public. Its proviso states that where a private company alters its articles so that they no longer include the restrictions and limitations required for a private company, it ceases to be a private company from the date of that alteration. The subsequent filing with the Registrar remains a statutory compliance step, but it is not the date identified by this proviso for ceasing to be private. The trap is postponing the status change until the Registrar processes the form.

Where it goes wrong. Assuming private-company status continues until the ROC completes registration.

Authority. Section 14(1) of the Companies Act, 2013; Rule 33 of the Companies (Incorporation) Rules, 2014

Question 10 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

Kshipra Power Limited passed a special resolution to convert from public to private and filed e-Form RD-1 on the fifty-fifth day after that resolution. Which statement correctly identifies the approval route and the statutory filing period?

1. The special resolution itself completes the conversion, so approval from a competent authority is not separately required.
2. The company must seek Central Government approval, delegated to the Regional Director, by applying within sixty days of the special resolution. (correct answer)
3. The company must apply to the Registrar in Form INC-22 within thirty days and obtain approval from its existing ROC.
4. The company must seek Tribunal approval by filing Form INC-23 within fifteen days after the special resolution is passed.

Answer: B — The company must seek Central Government approval, delegated to the Regional Director, by applying within sixty days of the special resolution.

Explanation. A public company’s conversion into a private company requires alteration of its articles by special resolution and approval of the Central Government, whose power is exercised by the Regional Director under the applicable delegation. The Study Material states that the application in e-Form RD-1 is to be made within sixty days from the date of passing the special resolution. Kshipra’s application on day fifty-five is within that period. The trap is treating the special resolution as sufficient by itself or confusing this application with the registered-office forms.

Where it goes wrong. Believing that the public-to-private special resolution is self-executing without RD approval.

Authority. Section 14(1) of the Companies Act, 2013; Rule 33 of the Companies (Incorporation) Rules, 2014

Question 11 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

The Regional Director approved Kshipra’s proposed conversion on 20 November 2026. Kshipra filed the approval order and a printed copy of its altered articles with the Registrar eighteen days after receiving the order. What is the correct compliance assessment?

1. The filing is timely because the company has thirty days from receipt of the approval order to file with the ROC.
2. The filing is late because the order and printed altered articles must be filed within fifteen days of receipt. (correct answer)
3. The filing is timely because the fifteen-day period applies only to private-to-public conversion, not to public-to-private conversion.
4. The filing is unnecessary because the Regional Director’s approval itself updates the Registrar’s statutory records automatically.

Answer: B — The filing is late because the order and printed altered articles must be filed within fifteen days of receipt.

Explanation. Section 14(2) requires every alteration of the articles and a copy of the order approving a public-to-private conversion to be filed with the Registrar, together with a printed copy of the altered articles, within fifteen days. Rule 33 of the Companies (Incorporation) Rules, 2014 prescribes Form INC-27 for the conversion filing. Filing eighteen days after receipt exceeds the stated fifteen-day period. The trap is importing the sixty-day period applicable to the RD application into the later ROC filing stage.

Where it goes wrong. Confusing the sixty-day RD application period with the fifteen-day ROC filing period.

Authority. Section 14(2) of the Companies Act, 2013; Rule 33(2) of the Companies (Incorporation) Rules, 2014

Question 12 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

At Vayu’s meeting, 8,400 votes were cast in favour and 2,800 against the special resolution; 1,200 members abstained. Applying the statutory test for a special resolution, which conclusion is correct?

1. The special resolution is passed because votes in favour are exactly three times the votes cast against. (correct answer)
2. The special resolution fails because abstentions must be added to the votes cast against before calculating the ratio.
3. The special resolution fails because votes in favour must exceed three times the total voting rights represented at the meeting.
4. The resolution is ordinary because a conversion of a private company into a public company needs only a simple majority.

Answer: A — The special resolution is passed because votes in favour are exactly three times the votes cast against.

Explanation. Section 114(2) defines a special resolution by requiring votes cast in favour to be not less than three times the votes, if any, cast against it by members entitled to vote. Vayu has 8,400 votes in favour and 2,800 against, exactly a 3:1 ratio. Abstentions are not votes cast against and are therefore not added to the denominator for this test. The special resolution satisfies the statutory threshold. The trap is counting abstentions as negative votes or using total voting rights represented instead of votes cast.

Where it goes wrong. Including abstentions in the votes cast against when testing the 3:1 requirement.

Authority. Section 14(1) and Section 114(2) of the Companies Act, 2013

Question 13 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · medium

Scenario. A specified IFSC private company has been incorporated in an approved multi-services Special Economic Zone and must establish and verify its registered office. Its compliance team applies the ordinary thirty-day period under Section 12 without considering the special IFSC treatment. Which statement most accurately reflects the Study Material’s stated exception? Assume the company satisfies the definition of a specified IFSC company and that its proposed registered-office address is within the approved multi-services SEZ.

A specified IFSC private company has been incorporated in an approved multi-services Special Economic Zone and must establish and verify its registered office. Its compliance team applies the ordinary thirty-day period under Section 12 without considering the special IFSC treatment. Which statement most accurately reflects the Study Material’s stated exception? Assume the company satisfies the definition of a specified IFSC company and that its proposed registered-office address is within the approved multi-services SEZ.

1. The company has ninety days for verification because every IFSC company receives a three-month statutory extension.
2. The company has thirty days for verification, but it may shift outside the IFSC through a Board resolution alone.
3. The relevant thirty-day period is read as sixty days for the specified IFSC company, subject to its IFSC location condition. (correct answer)
4. The company is exempt from maintaining a registered office and from furnishing any verification to the Registrar.

Answer: C — The relevant thirty-day period is read as sixty days for the specified IFSC company, subject to its IFSC location condition.

Explanation. The Study Material states that a specified IFSC public company or IFSC private company must have its registered office at the IFSC located in the approved multi-services SEZ. For such specified companies, the relevant reference to thirty days in Section 12 is read as sixty days. This is an extension of the prescribed period, not an exemption from maintaining and verifying a registered office. The separate IFSC rule for a Board resolution is also conditional on the office not being shifted outside that IFSC. The trap is treating the IFSC relaxation as a complete exemption.

Where it goes wrong. Treating the IFSC extension as a waiver of the registered-office requirement.

Authority. Section 12(1) and 12(2) of the Companies Act, 2013; Notification G.S.R. 08(E), dated 4 January 2017 (specified IFSC public and private companies)

Question 14 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · medium

Scenario. A company changes its registered office address but remains within the same local limits of its city. The company actually moves on 3 June 2026, with Board approval, and the company files notice of the change in Form INC-22 on 7 July 2026. No special resolution was passed. Which is the most accurate assessment of the filing timeline and approval requirement? Assume the company is not a specified IFSC company and no other exemption or special direction applies to its registered-office filing.

A company changes its registered office address but remains within the same local limits of its city. The company actually moves on 3 June 2026, with Board approval, and the company files notice of the change in Form INC-22 on 7 July 2026. No special resolution was passed. Which is the most accurate assessment of the filing timeline and approval requirement? Assume the company is not a specified IFSC company and no other exemption or special direction applies to its registered-office filing.

1. The filing is timely because a local move can be reported within sixty days without any special resolution.
2. The filing is invalid because every registered-office change requires a special resolution and Regional Director approval.
3. The absence of a special resolution is not itself a defect, but the notice was filed after the thirty-day period. (correct answer)
4. The filing is unnecessary because the company has not crossed the municipal or city boundary at all.

Answer: C — The absence of a special resolution is not itself a defect, but the notice was filed after the thirty-day period.

Explanation. A move within the local limits does not require a special resolution under Section 12(5), but Section 12(4) still requires notice of every change in the situation of the registered office to the Registrar within thirty days. A filing on 7 July for a change on 3 June is outside that period. The company therefore cannot rely on the local-limits treatment to avoid the notice requirement. The trap is confusing the resolution threshold with the separate obligation to notify the Registrar.

Where it goes wrong. Assuming that a move within local limits removes the thirty-day notice requirement.

Authority. Section 12(4), 12(5) and 12(8) of the Companies Act, 2013; Rule 27 of the Companies (Incorporation) Rules, 2014

Question 15 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · medium

Scenario. A company shifts its registered office from the jurisdiction of ROC-A to the jurisdiction of ROC-B, both within the same State. The Regional Director confirms the shift on 10 February. The company files the confirmation with the Registrar on 5 April, and the Registrar issues its certificate on 26 April. Which date governs the effectiveness of the change under Section 12(6)? Assume the Regional Director’s confirmation is validly communicated and neither Registrar raises any objection to the documents filed.

A company shifts its registered office from the jurisdiction of ROC-A to the jurisdiction of ROC-B, both within the same State. The Regional Director confirms the shift on 10 February. The company files the confirmation with the Registrar on 5 April, and the Registrar issues its certificate on 26 April. Which date governs the effectiveness of the change under Section 12(6)? Assume the Regional Director’s confirmation is validly communicated and neither Registrar raises any objection to the documents filed.

1. The date of the Board resolution authorising the shift, because that is the company’s internal decision date.
2. The date on which the Regional Director signed the confirmation, regardless of later registration by the ROC.
3. The date on which the company submitted Form INC-23 to the Regional Director for approval of the move.
4. The date on which the Registrar certifies registration of the Regional Director’s confirmation after filing the order. (correct answer)

Answer: D — The date on which the Registrar certifies registration of the Regional Director’s confirmation after filing the order.

Explanation. For an inter-ROC shift within the same State, Section 12(5) requires Regional Director confirmation. Under Section 12(6), the company files that confirmation with the Registrar, and the Registrar registers and certifies it. The certificate is conclusive evidence of compliance, and the change takes effect from the date of the certificate. Accordingly, 26 April is the operative date in the question. The trap is selecting the earlier RD confirmation date without accounting for the subsequent ROC registration and certification.

Where it goes wrong. Treating Regional Director confirmation as the effective date rather than the ROC certificate.

Authority. Section 12(5) and 12(6) of the Companies Act, 2013; Rule 28 of the Companies (Incorporation) Rules, 2014

Question 16 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

Scenario. A company proposes to shift its registered office from State A to State B. Members have passed a special resolution altering the situation clause of the memorandum. The company is preparing the application and asks whether the move becomes effective once the resolution is passed. Which sequence is legally appropriate under the Act and the Companies (Incorporation) Rules, 2014? Assume the company has no pending prosecution or other factual impediment to the proposed transfer and seeks to complete the statutory process in the ordinary course.

A company proposes to shift its registered office from State A to State B. Members have passed a special resolution altering the situation clause of the memorandum. The company is preparing the application and asks whether the move becomes effective once the resolution is passed. Which sequence is legally appropriate under the Act and the Companies (Incorporation) Rules, 2014? Assume the company has no pending prosecution or other factual impediment to the proposed transfer and seeks to complete the statutory process in the ordinary course.

1. Apply in Form INC-23 for Central Government approval; then file the order in Form INC-28 with both State ROCs within thirty days and obtain a fresh certificate from the new-State ROC. (correct answer)
2. Pass a Board resolution, file Form INC-22 within thirty days after shifting, and treat the change as effective immediately without changing the registered-office clause in the memorandum.
3. Obtain approval from the existing ROC only, file Form INC-27 within fifteen days, and retain the original incorporation certificate without a fresh certificate for the new State.
4. Pass an ordinary resolution, seek the Regional Director’s permission in Form INC-23 within fifteen days, and file the approval only with the existing ROC without notifying the new-State ROC.

Answer: A — Apply in Form INC-23 for Central Government approval; then file the order in Form INC-28 with both State ROCs within thirty days and obtain a fresh certificate from the new-State ROC.

Explanation. A state-to-state shift changes the situation clause of the memorandum and requires a special resolution and approval of the Central Government under Section 13(4), with the relevant power delegated to the Regional Director. The application is made in Form INC-23; the Central Government is to dispose of it within sixty days. After approval, the certified order must be filed with the Registrar of each State in Form INC-28 within thirty days of receipt, and the Registrar in the new State issues a fresh certificate of incorporation. The trap is treating this as an ordinary Section 12 address-change notice.

Where it goes wrong. Confusing a state-to-state shift under Section 13 with an ordinary change of address under Section 12.

Authority. Section 13(4), 13(5) and 13(7) of the Companies Act, 2013; Rule 30 of the Companies (Incorporation) Rules, 2014

Question 17 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

Scenario. A Nidhi company has 10,000 members. Its paid-up share capital is ₹20 lakh, so one per cent of that capital equals ₹20,000. The company proposes to serve a statutory document individually only on members who satisfy the special threshold described in the Companies Act Study Material, and to use public notice for the remaining members. Which statement correctly identifies the threshold and alternative method? Assume no separate exemption or specific direction by the Registrar applies, and the company intends to rely on the special Nidhi service provision.

A Nidhi company has 10,000 members. Its paid-up share capital is ₹20 lakh, so one per cent of that capital equals ₹20,000. The company proposes to serve a statutory document individually only on members who satisfy the special threshold described in the Companies Act Study Material, and to use public notice for the remaining members. Which statement correctly identifies the threshold and alternative method? Assume no separate exemption or specific direction by the Registrar applies, and the company intends to rely on the special Nidhi service provision.

1. Individual service applies only to members holding shares above ₹20,000 in face value; others may receive email and website notice only.
2. Individual service applies above the lower threshold—₹1,000 or 1% of paid-up capital, whichever is less; others may receive district newspaper and notice-board publication. (correct answer)
3. Individual service applies to every member holding any share, and the Nidhi must still send each member a separate postal copy.
4. Individual service applies only to members holding more than 5% of paid-up capital; others may receive ordinary postal mail only.

Answer: B — Individual service applies above the lower threshold—₹1,000 or 1% of paid-up capital, whichever is less; others may receive district newspaper and notice-board publication.

Explanation. The Study Material records a special modification for a Nidhi company: Section 20(2) applies only to members holding shares of more than ₹1,000 in face value or more than 1% of the total paid-up share capital, whichever is less. For other shareholders, service may be made by public notice in a newspaper circulated in the district where the registered office is situated and by publication on the Nidhi’s notice board. The trap is using the greater threshold or assuming that every member must receive individual service.

Where it goes wrong. Using the greater of ₹1,000 and 1% instead of the lower threshold stated for Nidhis.

Authority. Section 20(2) of the Companies Act, 2013; Rule 35 of the Companies (Incorporation) Rules, 2014

Question 18 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · medium

Scenario. A company proposes to send a statutory notice to a member by email and, alternatively, by posting it on an electronic message board. The email address was provided by the company for communications, while the message board is a network designated by the member. The company’s electronic systems preserve the message and permit later retrieval, review and production in legible form. Which statement correctly applies Section 20? The dispute concerns the legal characteristics required for electronic transmission, not the commercial desirability of email or the message board.

A company proposes to send a statutory notice to a member by email and, alternatively, by posting it on an electronic message board. The email address was provided by the company for communications, while the message board is a network designated by the member. The company’s electronic systems preserve the message and permit later retrieval, review and production in legible form. Which statement correctly applies Section 20? The dispute concerns the legal characteristics required for electronic transmission, not the commercial desirability of email or the message board.

1. Any email sent by a director from a personal account is valid once dispatched, even without a retrievable record.
2. Electronic transmission is valid only if the company uses a digital signature and the email is registered with MCA.
3. A transmission must create a record capable of retention, retrieval and review, and later production in clearly legible form. (correct answer)
4. Posting on any public social-media account is deemed service once the company announces the document there.

Answer: C — A transmission must create a record capable of retention, retrieval and review, and later production in clearly legible form.

Explanation. Section 20, read with Rule 35, recognises electronic transmission where the communication creates a record capable of retention, retrieval and review and can later be rendered into clearly legible tangible form. The Study Material identifies email addresses provided by the company or officer and electronic message boards or networks designated by the Registrar or member as possible modes. The described systems satisfy the relevant record and accessibility features. The trap is assuming that electronic service must always be followed by registered post or a new consent for each notice.

Where it goes wrong. Assuming electronic service is invalid unless accompanied by physical postal service.

Authority. Section 20(1) and 20(2) of the Companies Act, 2013; Rule 35 of the Companies (Incorporation) Rules, 2014

Question 19 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

Scenario. A company’s contract is signed by its operations manager, who is an employee but not a director or KMP. The Board had passed a resolution authorising the manager to sign contracts of that category. In a separate transaction, a KMP signs a company contract without a separate Board resolution specifically authorising that signature. Which statement most accurately reflects Section 21? The two transactions are otherwise within the company’s objects, and no separate restriction in its articles is in issue.

A company’s contract is signed by its operations manager, who is an employee but not a director or KMP. The Board had passed a resolution authorising the manager to sign contracts of that category. In a separate transaction, a KMP signs a company contract without a separate Board resolution specifically authorising that signature. Which statement most accurately reflects Section 21? The two transactions are otherwise within the company’s objects, and no separate restriction in its articles is in issue.

1. Both signatures are invalid because only directors can sign contracts made on behalf of a company under Section 21.
2. The employee’s signature is invalid unless each contract is ratified by shareholders, but the KMP’s signature is valid.
3. The employee’s signature is valid only if the manager is also appointed as the company’s Company Secretary.
4. The employee may sign within the Board’s authorisation, while a KMP may sign under Section 21 without that separate authorisation route. (correct answer)

Answer: D — The employee may sign within the Board’s authorisation, while a KMP may sign under Section 21 without that separate authorisation route.

Explanation. Section 21 provides two routes for signing company documents, proceedings and contracts: signature by any key managerial personnel, or signature by an officer or employee duly authorised by the Board in that behalf. Thus, the operations manager is covered because the Board resolution authorises the relevant category of contract. The KMP is covered under the first route; the section does not require the same separate Board authorisation applicable to the officer-or-employee route. The trap is applying one route’s condition to the other.

Where it goes wrong. Assuming that a KMP and a Board-authorised employee must satisfy identical signing conditions.

Authority. Section 21 of the Companies Act, 2013

Question 20 · 2 marks · Chapter 2: Incorporation of Company and Matters Incidental Thereto · hard

Scenario. A company without a common seal appoints an outside professional to execute a formal conveyance deed in India. The Board has not authorised the appointment in writing, and the managing director has merely sent an email instructing the professional to sign. Separately, the company’s authorised treasury officer draws a promissory note under an established express authority. Which statement correctly applies Section 22? Assume the professional’s authority is not otherwise evidenced by a valid written instrument and that the treasury officer’s authority is not disputed.

A company without a common seal appoints an outside professional to execute a formal conveyance deed in India. The Board has not authorised the appointment in writing, and the managing director has merely sent an email instructing the professional to sign. Separately, the company’s authorised treasury officer draws a promissory note under an established express authority. Which statement correctly applies Section 22? Assume the professional’s authority is not otherwise evidenced by a valid written instrument and that the treasury officer’s authority is not disputed.

1. The promissory note may bind the company under express authority, but the formal deed requires written attorney authorisation through prescribed signatories. (correct answer)
2. Both instruments are invalid because Section 22 requires a common seal to be affixed to every bill and deed.
3. Both instruments are valid because an email from the managing director is sufficient written authority for a formal deed.
4. The formal deed is valid under implied authority, but the promissory note requires an attorney appointed by power of attorney.

Answer: A — The promissory note may bind the company under express authority, but the formal deed requires written attorney authorisation through prescribed signatories.

Explanation. Section 22(1) recognises a bill of exchange, hundi or promissory note made, accepted, drawn or endorsed by a person acting under the company’s express or implied authority. For other deeds, Section 22(2) requires the company to authorise an attorney in writing; where the company has no common seal, the authorisation must be made by two directors or by a director and the Company Secretary, where one has been appointed. The deed must be signed by the attorney on behalf of the company and under the attorney’s seal. An informal email instruction from the managing director alone does not satisfy that prescribed authority method. The trap is treating a negotiable instrument and a formal deed as interchangeable.

Where it goes wrong. Extending the express-or-implied authority rule for bills and notes to formal deeds.

Authority. Section 22(1), 22(2) and 22(3) of the Companies Act, 2013