Chapter 7: Management and Administration - Test 3: answer key

Question 1 · 2 marks · Chapter 7: Management and Administration · hard

Scenario. Aarambh Infra Ltd is an unlisted public company with 1,800 members and a paid-up capital of Rs 4 crore. Its registered office is in Jaipur. The Board convened the AGM for FY 2025-26 on 28 September 2026 at 2:30 p.m. at the registered office. The notice contained ordinary business and a special business for approval of a related party transaction with Surya Traders Pvt Ltd. It was sent by email to all members, directors and auditors on 6 September 2026. The explanatory statement disclosed the Managing Director's concern but omitted that his relative held 3% of the paid-up capital of Surya Traders Pvt Ltd. No consent for shorter notice was obtained. The notice stated the place, date, day, hour and business. The Articles do not provide for a longer notice period. Due to an accidental omission in the email list, Mr. Naveen did not receive the notice. He attended the AGM and later claimed that the meeting was invalid because notice was not served on him. At the AGM, the related party transaction was approved. Another member requested the Chairman to transact an additional item of special business without any explanatory statement having been circulated. The Chairman refused. The company now seeks advice on the validity of the notice period, the effect of the omitted disclosure about the relative's shareholding, and Mr. Naveen's contention.

Was the notice for the AGM of Aarambh Infra Ltd sent on 6 September 2026 valid with respect to the length of notice?

1. Yes, because 21 clear days were available after excluding the date of service and the date of the meeting. (correct answer)
2. No, because the notice should have been sent at least 30 clear days before the meeting.
3. No, because email notice is invalid unless the Articles specifically permit it.
4. Yes, because the company obtained the consent of 95% of members entitled to vote.

Answer: A — Yes, because 21 clear days were available after excluding the date of service and the date of the meeting.

Explanation. Section 101(1) requires at least 21 clear days' notice. Clear days exclude the date of service and the date of the meeting. Notice sent on 6 September for a meeting on 28 September leaves 21 clear days from 7 September to 27 September. Email notice is permitted under Rule 18. No shorter notice consent was needed because the full period was available. Option (b) wrongly applies 30 days; option (c) ignores Rule 18; option (d) is irrelevant.

Where it goes wrong. Miscounting clear days by including the date of service or the meeting date, or assuming email notice is invalid.

Authority. Section 101(1) of the Companies Act, 2013; Rule 18 of the Companies (Management and Administration) Rules, 2014

Question 2 · 2 marks · Chapter 7: Management and Administration · medium

If Aarambh Infra Ltd had failed to give 21 clear days' notice and wanted to hold the AGM by shorter notice, whose consent was required?

1. Members holding at least 75% of the paid-up share capital carrying voting rights.
2. At least 95% of the members entitled to vote at the meeting.
3. At least 95% of the members entitled to vote, in writing or by electronic mode. (correct answer)
4. The Board of Directors by a special resolution.

Answer: C — At least 95% of the members entitled to vote, in writing or by electronic mode.

Explanation. For an AGM, the proviso to Section 101(1) permits shorter notice if consent in writing or by electronic mode is given by not less than 95% of the members entitled to vote at the meeting. Option (c) correctly captures both the 95% threshold and the mode of consent. Option (b) omits the writing/electronic mode requirement; options (a) and (d) apply wrong thresholds or authorities.

Where it goes wrong. Applying the EGM shorter-notice test (majority in number plus 95% capital) to an AGM.

Authority. Proviso to Section 101(1) of the Companies Act, 2013

Question 3 · 2 marks · Chapter 7: Management and Administration · hard

What is the legal effect of omitting from the explanatory statement that the Managing Director's relative held 3% of the paid-up capital of Surya Traders Pvt Ltd?

1. There is no effect because only shareholding of 5% or more in the other company must be disclosed.
2. The disclosure was mandatory because the relative held 2% or more, and the benefit from non-disclosure may be held in trust for the company with liability to compensate. (correct answer)
3. The omission invalidates the entire AGM and all resolutions passed thereat automatically.
4. The company is liable only to a penalty of Rs 5,000, and the resolution remains unaffected.

Answer: B — The disclosure was mandatory because the relative held 2% or more, and the benefit from non-disclosure may be held in trust for the company with liability to compensate.

Explanation. The proviso to Section 102(2) requires disclosure of the extent of shareholding of every promoter, director, manager and KMP in another company if the item relates to that company and the shareholding is 2% or more. A relative's 3% holding is within the disclosure requirement. Under Section 102(4), any benefit accruing from non-disclosure is held in trust for the company, with liability to compensate. Option (a) uses the wrong threshold; option (c) overstates the consequence; option (d) is incorrect.

Where it goes wrong. Applying a 5% disclosure threshold instead of the 2% threshold in the proviso to Section 102(2).

Authority. Proviso to Section 102(2) and Section 102(4) of the Companies Act, 2013

Question 4 · 2 marks · Chapter 7: Management and Administration · medium

Can Mr. Naveen successfully invalidate the AGM on the ground that he did not receive the notice due to an accidental omission?

1. Yes, because every member must actually receive the notice for the meeting to be valid.
2. Yes, because non-receipt by even one member makes the meeting void ab initio.
3. No, unless he proves that the omission was deliberate and affected the outcome.
4. No, because accidental omission in giving notice or non-receipt by a member does not invalidate the proceedings. (correct answer)

Answer: D — No, because accidental omission in giving notice or non-receipt by a member does not invalidate the proceedings.

Explanation. Section 101(4) expressly provides that any accidental omission to give notice to, or the non-receipt of notice by, any member or other person entitled to notice shall not invalidate the proceedings of the meeting. The onus is on the company to show that the omission was not deliberate, but the accidental nature protects the meeting. Options (a) and (b) ignore this statutory protection; option (c) adds a condition not required by the section.

Where it goes wrong. Assuming actual receipt by every member is a condition precedent to a valid meeting.

Authority. Section 101(4) of the Companies Act, 2013

Question 5 · 2 marks · Chapter 7: Management and Administration · medium

Scenario. Bhavya Retail Ltd is a public company with 3,200 members and its registered office in Surat. The Board called the AGM for FY 2025-26 on 10 September 2026 at 11:00 a.m. at the registered office. By 11:30 a.m., the following persons were present: 12 members personally, 5 persons holding proxies from members, and 2 authorised representatives of corporate members. The Articles do not prescribe a larger quorum. The Chairman waited until 11:30 a.m. and then declared that the quorum was not present. The company had not been called by requisitionists. Some members argued that the proxies should be counted for quorum, while others argued that the representatives of corporate members should be counted as members personally present. The Board wants to understand the correct quorum requirement, whether quorum was actually present, what should happen if quorum is not present, and what happens if the adjourned meeting also lacks quorum. The company has no special exemptions. The meeting was called by the Board on its own and not on a requisition by members.

What was the required quorum for the AGM of Bhavya Retail Ltd?

1. 5 members personally present.
2. 15 members personally present. (correct answer)
3. 30 members personally present.
4. 2 members personally present.

Answer: B — 15 members personally present.

Explanation. For a public company with more than 1,000 but not more than 5,000 members, the quorum is 15 members personally present. Bhavya Retail has 3,200 members, so the quorum is 15. Option (a) applies where members are up to 1,000; option (c) applies above 5,000; option (d) applies to private companies.

Where it goes wrong. Using the 5-member quorum applicable to public companies with up to 1,000 members.

Authority. Section 103(1)(b) of the Companies Act, 2013

Question 6 · 2 marks · Chapter 7: Management and Administration · hard

Was the quorum actually present at 11:30 a.m. at the AGM of Bhavya Retail Ltd?

1. No, because proxies are excluded and only 12 members plus 2 authorised representatives count, giving 14. (correct answer)
2. Yes, because the 5 proxies are also counted as members personally present.
3. Yes, because the 2 authorised representatives count as 5 members each.
4. No, because authorised representatives of corporate members cannot be counted for quorum.

Answer: A — No, because proxies are excluded and only 12 members plus 2 authorised representatives count, giving 14.

Explanation. For quorum, only members personally present are counted. Proxies are excluded. Authorised representatives of corporate members are treated as members personally present. Thus, 12 members plus 2 representatives give 14, which is below the required 15. Option (b) wrongly counts proxies; option (c) overcounts representatives; option (d) wrongly excludes representatives.

Where it goes wrong. Counting proxies towards quorum or excluding authorised representatives of corporate members.

Authority. Section 103 of the Companies Act, 2013; Secretarial Standard-2

Question 7 · 2 marks · Chapter 7: Management and Administration · medium

If quorum was not present within half an hour, what should have happened to the AGM of Bhavya Retail Ltd?

1. The meeting should stand cancelled automatically because it was called by the Board.
2. The meeting should be dissolved and a fresh requisition obtained from members.
3. The meeting should stand adjourned to the same day in the next week at the same time and place, or to another date, time and place decided by the Board. (correct answer)
4. The meeting should continue with the members present, who shall form the quorum.

Answer: C — The meeting should stand adjourned to the same day in the next week at the same time and place, or to another date, time and place decided by the Board.

Explanation. Under Section 103(2), if quorum is not present within half an hour, the meeting stands adjourned to the same day in the next week at the same time and place, or to such other date, time and place as the Board may determine. Cancellation applies where the meeting was called by requisitionists. The members present do not automatically form quorum at the original meeting; that rule applies to the adjourned meeting. Hence option (c) is correct.

Where it goes wrong. Applying the requisitionists' cancellation rule or the adjourned-meeting quorum rule to the original meeting.

Authority. Section 103(2) of the Companies Act, 2013

Question 8 · 2 marks · Chapter 7: Management and Administration · hard

If the adjourned AGM of Bhavya Retail Ltd also fails to have quorum within half an hour, what is the legal position?

1. The meeting shall be cancelled permanently.
2. The meeting shall be adjourned again for another week.
3. The Board must obtain fresh consent from all members.
4. The members present shall form the quorum. (correct answer)

Answer: D — The members present shall form the quorum.

Explanation. Section 103(3) provides that if quorum is not present at the adjourned meeting also within half an hour, the members present shall form the quorum. This ensures that the adjourned meeting can transact business. Options (a), (b) and (c) are not prescribed consequences. The cancellation rule applies only to meetings called by requisitionists, not to adjourned Board-called meetings.

Where it goes wrong. Confusing the original meeting's lack of quorum with the special rule for the adjourned meeting.

Authority. Section 103(3) of the Companies Act, 2013

Question 9 · 2 marks · Chapter 7: Management and Administration · hard

Scenario. Chandra Chemicals Ltd is a public company with 1,500 members and its registered office in Chennai. The AGM for FY 2025-26 was scheduled for 27 September 2026 at 11:00 a.m. Mr. P was appointed as proxy by 55 members holding in aggregate 6% of the total share capital carrying voting rights. Ms. Q, a member holding 15% of the total share capital carrying voting rights, appointed Mr. R as a single proxy. Mr. R also acted as proxy for 10 other members. Mr. S deposited his proxy form in Form MGT-11 with the company at 10:00 a.m. on 25 September 2026. The Articles require proxy forms to be deposited at least 72 hours before the meeting. Mr. T, a member entitled to vote, gave written notice on 22 September 2026 of his intention to inspect the proxies and came to the registered office at 9:00 a.m. on 26 September 2026. The company refused inspection on the ground that the request was too early. The company seeks advice on the validity of the proxies of Mr. P and Mr. R, the deposit of Mr. S's proxy, and Mr. T's inspection rights.

Is Mr. P validly appointed as proxy for 55 members holding 6% of the total share capital carrying voting rights?

1. No, because a person cannot act as proxy for more than 50 members. (correct answer)
2. Yes, because the members hold only 6%, which is below 10%.
3. Yes, because there is no limit on the number of members a proxy can represent.
4. No, because a proxy cannot represent more than 20 members.

Answer: A — No, because a person cannot act as proxy for more than 50 members.

Explanation. Rule 19(2) limits a person acting as proxy to not more than 50 members and not more than 10% of the total share capital carrying voting rights. Mr. P represents 55 members, exceeding the numerical limit of 50, so the proxy appointment is invalid to that extent. The 6% capital limit is satisfied, but the member-count limit is not. Options (b) and (c) ignore the 50-member cap; option (d) uses a wrong cap.

Where it goes wrong. Checking only the 10% voting-power limit and ignoring the separate 50-member limit.

Authority. Rule 19(2) of the Companies (Management and Administration) Rules, 2014

Question 10 · 2 marks · Chapter 7: Management and Administration · hard

Is Mr. R validly acting as proxy for Ms. Q, who holds 15% of the total share capital carrying voting rights, and also for 10 other members?

1. Yes, because Ms. Q is entitled to appoint a single proxy and that proxy can also act for others.
2. No, because where a member holding more than 10% appoints a single proxy, that proxy cannot act as proxy for any other person. (correct answer)
3. Yes, because the total number of members represented is only 11.
4. No, because a member holding more than 10% cannot appoint a proxy at all.

Answer: B — No, because where a member holding more than 10% appoints a single proxy, that proxy cannot act as proxy for any other person.

Explanation. Rule 19(2) allows a member holding more than 10% of the total share capital carrying voting rights to appoint a single person as proxy, but such a person shall not act as proxy for any other person or shareholder. Mr. R is therefore disqualified from acting for the 10 other members. Option (a) ignores the restriction; option (c) focuses on number rather than the 10% rule; option (d) is incorrect as such a member can appoint a proxy.

Where it goes wrong. Overlooking the special restriction where the appointing member holds more than 10% of voting capital.

Authority. Rule 19(2) of the Companies (Management and Administration) Rules, 2014

Question 11 · 2 marks · Chapter 7: Management and Administration · medium

Was Mr. S's proxy form validly deposited, considering that the Articles require deposit at least 72 hours before the meeting?

1. No, because the Articles validly require 72 hours and the form was deposited only 49 hours before the meeting.
2. No, because proxy forms must be deposited at least 7 days before the meeting.
3. Yes, because the statutory requirement is at least 48 hours before the meeting and the Articles cannot require a longer period. (correct answer)
4. Yes, because proxy forms can be deposited at any time before the meeting begins.

Answer: C — Yes, because the statutory requirement is at least 48 hours before the meeting and the Articles cannot require a longer period.

Explanation. Section 105(4) provides that a proxy form received 48 hours before the meeting is valid even if the Articles prescribe a longer period. The statutory 48-hour rule prevails. Mr. S deposited the form at 10:00 a.m. on 25 September for a meeting at 11:00 a.m. on 27 September, which is 49 hours before the meeting, so it is valid. Option (a) gives effect to the longer Articles period, which is not permissible; options (b) and (d) state wrong timelines.

Where it goes wrong. Applying the longer period in the Articles instead of the statutory 48-hour maximum.

Authority. Section 105(4) of the Companies Act, 2013

Question 12 · 2 marks · Chapter 7: Management and Administration · hard

Was Mr. T entitled to inspect the proxies at 9:00 a.m. on 26 September 2026 for the AGM to be held at 11:00 a.m. on 27 September 2026?

1. Yes, because he gave more than 3 days' notice and inspection is allowed during business hours.
2. Yes, because a member can inspect proxies at any time after giving notice.
3. No, because inspection is allowed only with the prior approval of the Chairman.
4. No, because inspection is permitted only during the 24 hours before the meeting and until its conclusion. (correct answer)

Answer: D — No, because inspection is permitted only during the 24 hours before the meeting and until its conclusion.

Explanation. Section 105(8) allows a member entitled to vote to inspect proxies during the period beginning 24 hours before the time fixed for the meeting and ending with its conclusion, during business hours, after giving at least 3 days' written notice. The meeting is at 11:00 a.m. on 27 September, so the inspection window opens at 11:00 a.m. on 26 September. Mr. T came at 9:00 a.m., which is too early. Options (a) and (b) ignore the 24-hour window; option (c) is not required.

Where it goes wrong. Focusing on the 3-day notice requirement and ignoring the separate 24-hour inspection window.

Authority. Section 105(8) of the Companies Act, 2013

Question 13 · 2 marks · Chapter 7: Management and Administration · hard

Scenario. Dharitri Finance Ltd is a public company with 900 members and its registered office in Kolkata. The Board decided to call an EGM on 15 October 2026 at 3:00 p.m. to transact a special business. As the matter was urgent, the Board proposed to call the meeting by giving shorter notice than 21 clear days. Consent in writing was obtained from members holding 94% of the paid-up share capital carrying voting rights and constituting a majority in number of members entitled to vote. The notice was sent on 10 October 2026. It stated the special business and the reasons for the resolution, but no separate explanatory statement under Section 102 was annexed. At the EGM, only 4 members were personally present and 1 person was present as a proxy. The Chairman declared that quorum was not present. The EGM had been called by the Board on its own and not on a requisition by members. The company wants advice on whether the shorter notice was valid, the effect of the missing explanatory statement, the quorum position, and the consequence of absence of quorum.

Was the shorter notice for the EGM of Dharitri Finance Ltd valid, given that consent was given by members holding 94% of the paid-up capital and constituting a majority in number?

1. No, because for an EGM, the consent must be of members holding at least 95% of the paid-up share capital carrying voting rights, along with majority in number. (correct answer)
2. Yes, because 94% is sufficient if the members also constitute a majority in number.
3. Yes, because any majority in number is sufficient for shorter notice of an EGM.
4. No, because shorter notice is not permitted for an EGM under any circumstances.

Answer: A — No, because for an EGM, the consent must be of members holding at least 95% of the paid-up share capital carrying voting rights, along with majority in number.

Explanation. For a general meeting other than an AGM, shorter notice requires consent of members holding a majority in number and representing not less than 95% of the paid-up share capital carrying voting rights. Consent by members holding only 94% falls short of the 95% threshold. Hence the shorter notice is invalid. Option (b) wrongly lowers the threshold; option (c) ignores the capital threshold; option (d) is too absolute.

Where it goes wrong. Using 94% as sufficient or applying only the majority-in-number requirement for EGM shorter notice.

Authority. Proviso to Section 101(1) of the Companies Act, 2013

Question 14 · 2 marks · Chapter 7: Management and Administration · medium

At the EGM of Dharitri Finance Ltd, only 4 members were personally present and 1 person was present as proxy. What is the correct consequence?

1. The quorum was satisfied because the proxy counts as a member.
2. The meeting should stand adjourned to the same day in the next week at the same time and place, or as the Board decides. (correct answer)
3. The meeting should stand cancelled because it was called by the Board.
4. The members present shall form the quorum because the company has only 900 members.

Answer: B — The meeting should stand adjourned to the same day in the next week at the same time and place, or as the Board decides.

Explanation. For a public company with up to 1,000 members, quorum is 5 members personally present. Only 4 members were personally present; the proxy is not counted. Since quorum was not present within half an hour, the meeting stands adjourned under Section 103(2) to the same day next week at the same time and place, or as the Board decides. Cancellation applies to requisitionists' meetings, not Board-called meetings. Option (d) applies only to adjourned meetings.

Where it goes wrong. Counting the proxy towards quorum or applying the requisitionists' cancellation rule.

Authority. Section 103(1) and Section 103(2) of the Companies Act, 2013

Question 15 · 2 marks · Chapter 7: Management and Administration · hard

If a proxy form for the EGM of Dharitri Finance Ltd was deposited 47 hours before the meeting, what is its validity?

1. Valid, because it was deposited before the meeting began.
2. Valid, because the company can waive the 48-hour requirement.
3. Invalid, because a proxy form must be deposited at least 48 hours before the meeting. (correct answer)
4. Invalid, because proxy forms must be deposited at least 72 hours before the meeting.

Answer: C — Invalid, because a proxy form must be deposited at least 48 hours before the meeting.

Explanation. Section 105(4) requires the proxy form to be deposited at least 48 hours before the meeting. A form deposited only 47 hours before is late and invalid. The company cannot waive this statutory requirement merely because the form was deposited before the meeting began. Option (d) wrongly applies a 72-hour rule, which is not the statutory minimum.

Where it goes wrong. Treating any deposit before the meeting as sufficient, or applying a 72-hour rule.

Authority. Section 105(4) of the Companies Act, 2013

Question 16 · 2 marks · Chapter 7: Management and Administration · medium

What is the effect of not annexing a separate explanatory statement under Section 102 to the notice of the EGM of Dharitri Finance Ltd, even though the reasons for the resolution were stated in the notice?

1. There is no effect because reasons in the notice are sufficient compliance for an EGM.
2. The notice is valid because explanatory statements are required only for AGMs.
3. The meeting is automatically void and no business can be transacted.
4. There is non-compliance with Section 102, as a separate explanatory statement is required for special business. (correct answer)

Answer: D — There is non-compliance with Section 102, as a separate explanatory statement is required for special business.

Explanation. Section 102 requires an explanatory statement to be annexed to the notice where special business is to be transacted. All business at an EGM is special business. Merely stating reasons in the notice is not a substitute for the statutory explanatory statement. Option (d) correctly identifies non-compliance. Options (a) and (b) understate the requirement; option (c) overstates the consequence as automatic voidness.

Where it goes wrong. Assuming reasons in the notice can replace the separate explanatory statement under Section 102.

Authority. Section 102 of the Companies Act, 2013

Question 17 · 2 marks · Chapter 7: Management and Administration · medium

Scenario. A listed company wants to hold its AGM by giving shorter notice than 21 clear days. What consent is required?

A listed company wants to hold its AGM by giving shorter notice than 21 clear days. What consent is required?

1. Consent in writing or by electronic mode of not less than 95% of the members entitled to vote at the meeting. (correct answer)
2. Consent of members holding at least 75% of the paid-up share capital.
3. Consent of a majority in number of members and 95% of the paid-up capital.
4. Consent of the Board of Directors by a special resolution.

Answer: A — Consent in writing or by electronic mode of not less than 95% of the members entitled to vote at the meeting.

Explanation. For an AGM, shorter notice requires consent in writing or by electronic mode of not less than 95% of the members entitled to vote. Option (a) correctly states the AGM rule. Option (c) states the EGM rule. Options (b) and (d) use incorrect thresholds or authorities.

Where it goes wrong. Applying the EGM shorter-notice test to an AGM.

Authority. Proviso to Section 101(1) of the Companies Act, 2013

Question 18 · 2 marks · Chapter 7: Management and Administration · hard

Scenario. A Section 8 company wants to call its AGM. What is the minimum length of notice, assuming no default in filing financial statements or annual return?

A Section 8 company wants to call its AGM. What is the minimum length of notice, assuming no default in filing financial statements or annual return?

1. 21 clear days
2. 14 clear days (correct answer)
3. 7 clear days
4. 30 clear days

Answer: B — 14 clear days

Explanation. A Section 8 company that has not defaulted in filing financial statements or annual return is exempt from the 21-day notice requirement, and the words '21 days' are read as '14 days'. Therefore, the minimum notice is 14 clear days. Option (a) is the general rule; options (c) and (d) are not prescribed for Section 8 companies.

Where it goes wrong. Applying the general 21-day rule without considering the Section 8 company exemption.

Authority. Notification No. GSR 466(E) dated 5 June 2015; Section 101(1) of the Companies Act, 2013

Question 19 · 2 marks · Chapter 7: Management and Administration · hard

Scenario. A private company has only 2 members. Only 1 member is personally present at the AGM within half an hour of the appointed time. What is the correct legal consequence?

A private company has only 2 members. Only 1 member is personally present at the AGM within half an hour of the appointed time. What is the correct legal consequence?

1. The meeting is valid because one member can constitute quorum in a private company.
2. The meeting is cancelled because it was called by the Board.
3. The meeting stands adjourned to the same day in the next week at the same time and place, or as the Board decides. (correct answer)
4. The members present shall form the quorum immediately.

Answer: C — The meeting stands adjourned to the same day in the next week at the same time and place, or as the Board decides.

Explanation. For a private company, quorum is 2 members personally present. With only 1 member present, quorum is not met. Under Section 103(2), the meeting stands adjourned to the same day in the next week at the same time and place, or as the Board decides. The rule that members present form quorum applies only to the adjourned meeting. Options (a) and (d) confuse the original and adjourned meeting rules.

Where it goes wrong. Applying the adjourned-meeting rule immediately, or assuming one member can form quorum in a private company.

Authority. Section 103(1) and Section 103(2) of the Companies Act, 2013

Question 20 · 2 marks · Chapter 7: Management and Administration · medium

Scenario. A public company has 5,200 members. What is the quorum for its general meeting?

A public company has 5,200 members. What is the quorum for its general meeting?

1. 5 members personally present
2. 15 members personally present
3. 25 members personally present
4. 30 members personally present (correct answer)

Answer: D — 30 members personally present

Explanation. For a public company with more than 5,000 members, the quorum is 30 members personally present. Option (d) is correct. Options (a) and (b) apply to lower member brackets; option (c) is not a prescribed quorum.

Where it goes wrong. Using the 15-member quorum for companies with 1,000 to 5,000 members without checking that membership exceeds 5,000.

Authority. Section 103(1)(c) of the Companies Act, 2013

Question 21 · 2 marks · Chapter 7: Management and Administration · hard

Scenario. The Articles of a company require proxy forms to be deposited 72 hours before a general meeting. A proxy form is deposited 50 hours before the meeting. Is the proxy valid?

The Articles of a company require proxy forms to be deposited 72 hours before a general meeting. A proxy form is deposited 50 hours before the meeting. Is the proxy valid?

1. Yes, because the statutory requirement is 48 hours and the Articles cannot require a longer period. (correct answer)
2. No, because the Articles validly prescribe 72 hours.
3. No, because proxy forms must always be deposited 7 days before the meeting.
4. Yes, because the Board can waive the Articles requirement.

Answer: A — Yes, because the statutory requirement is 48 hours and the Articles cannot require a longer period.

Explanation. Section 105(4) provides that a proxy form received 48 hours before the meeting is valid even if the Articles prescribe a longer period. The statutory 48-hour period overrides the 72-hour Articles requirement. Since the form was deposited 50 hours before the meeting, it is valid. Option (b) wrongly gives effect to the Articles; options (c) and (d) are incorrect.

Where it goes wrong. Enforcing a longer Articles period despite the statutory override in Section 105(4).

Authority. Section 105(4) of the Companies Act, 2013

Question 22 · 2 marks · Chapter 7: Management and Administration · medium

Scenario. A company's notice for a general meeting omitted the statement that a member entitled to attend and vote may appoint a proxy. What is the penalty on the officer in default under Section 105(3)?

A company's notice for a general meeting omitted the statement that a member entitled to attend and vote may appoint a proxy. What is the penalty on the officer in default under Section 105(3)?

1. Rs 1,000
2. Rs 5,000 (correct answer)
3. Rs 25,000
4. Rs 50,000

Answer: B — Rs 5,000

Explanation. Section 105(3) imposes a penalty of Rs 5,000 on every officer of the company who is in default for failure to comply with the requirement in Section 105(2) to include the proxy statement in the notice. Option (b) is correct. Other amounts relate to different defaults, such as the Rs 50,000 penalty under Section 105(5) for improper proxy invitations.

Where it goes wrong. Confusing the Rs 5,000 penalty for omitting the proxy statement with the Rs 50,000 penalty for proxy invitations at company expense.

Authority. Section 105(3) of the Companies Act, 2013

Question 23 · 2 marks · Chapter 7: Management and Administration · hard

Scenario. An officer of a company issues invitations at the company's expense to members to appoint a specified person as proxy. What is the penalty on the officer under Section 105(5)?

An officer of a company issues invitations at the company's expense to members to appoint a specified person as proxy. What is the penalty on the officer under Section 105(5)?

1. Rs 5,000
2. Rs 10,000
3. Rs 50,000 (correct answer)
4. Rs 1,00,000

Answer: C — Rs 50,000

Explanation. Section 105(5) provides that where invitations to appoint a person or one of a number of persons specified in the invitations as proxy are issued at the company's expense, every officer who issues, authorises or permits the issue shall be liable to a penalty of Rs 50,000. Option (c) is correct. Option (a) is the penalty under Section 105(3) for omitting the proxy statement.

Where it goes wrong. Mixing up the penalty for omitting the statutory proxy statement with the penalty for soliciting proxies at company expense.

Authority. Section 105(5) of the Companies Act, 2013

Question 24 · 2 marks · Chapter 7: Management and Administration · hard

Scenario. A special business at a general meeting relates to another company in which a director holds 1.5% of the paid-up share capital. Is disclosure of that shareholding mandatory in the explanatory statement?

A special business at a general meeting relates to another company in which a director holds 1.5% of the paid-up share capital. Is disclosure of that shareholding mandatory in the explanatory statement?

1. Yes, because any shareholding in another company must be disclosed.
2. Yes, because the threshold for disclosure is 1% or more.
3. No, because disclosure is required only if the director is a promoter of the other company.
4. No, because the prescribed threshold for disclosure is 2% or more of the paid-up share capital of the other company. (correct answer)

Answer: D — No, because the prescribed threshold for disclosure is 2% or more of the paid-up share capital of the other company.

Explanation. The proviso to Section 102(2) requires disclosure of the extent of shareholding in the other company of every promoter, director, manager and KMP only if the shareholding is 2% or more of the paid-up share capital of that other company. A 1.5% holding is below the threshold, so disclosure is not mandatory. Options (a) and (b) use incorrect thresholds; option (c) adds a promoter condition not in the proviso.

Where it goes wrong. Assuming any shareholding in the other company must be disclosed, or using a 1% threshold.

Authority. Proviso to Section 102(2) of the Companies Act, 2013

Question 25 · 2 marks · Chapter 7: Management and Administration · medium

Scenario. A member did not receive the notice of a general meeting because of an accidental omission by the company. He challenges the validity of the meeting. What is the correct legal position?

A member did not receive the notice of a general meeting because of an accidental omission by the company. He challenges the validity of the meeting. What is the correct legal position?

1. The proceedings are not invalidated by the accidental omission or non-receipt of notice. (correct answer)
2. The meeting is automatically void because every member must receive notice.
3. The meeting is valid only if the member later consents in writing.
4. The meeting is invalid unless the company proves that the member actually read the notice.

Answer: A — The proceedings are not invalidated by the accidental omission or non-receipt of notice.

Explanation. Section 101(4) expressly saves the proceedings from invalidation where there is an accidental omission to give notice or non-receipt by a member or other person entitled to notice. The company may need to show the omission was not deliberate, but the meeting is not automatically void. Options (b), (c) and (d) impose conditions not required by the section.

Where it goes wrong. Treating actual receipt by every member as a condition precedent to the validity of the meeting.

Authority. Section 101(4) of the Companies Act, 2013