CA Inter Corporate and Other Laws MCQ Test 1: answer key

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

Scenario. Asterion Components Private Limited was incorporated on 4 April 2026 with share capital. Its memorandum states that it will manufacture precision components and provide technical consulting. Three subscribers agreed to take shares, and each paid the subscription amount by 24 April. The company's registered office premises in Indore became ready on the twenty-ninth day after incorporation, but Form INC-22 containing the registered-office verification was lodged with the Registrar only on the thirty-fifth day. Before that filing, the company signed its first supply contract and drew a bank borrowing on the thirty-second day. The director's declaration in Form INC-20A, stating that every subscriber had paid the value of the shares agreed to be taken, was lodged on the fortieth day. A person named Nandita, a practising company secretary, had advised the founders only on incorporation filings under her professional engagement. Dinesh, who was not involved in the initial formation, later arranged a substantial capital placement and began directing key commercial decisions; the Board routinely acted on his directions. The company delivered share certificates for the memorandum subscribers on 10 June 2026. It also allotted further shares to an investor on 1 May 2026 and delivered those certificates on 30 June 2026. The Board seeks advice on promoter status, the conditions for commencing business and borrowing, and the time allowed for delivering certificates to subscribers and later allottees.

Which person may be treated as a promoter of Asterion Components Private Limited on these facts?

1. Nandita, because any professional advice or guidance regularly accepted and acted upon by the Board of Directors invariably and automatically brings an external consultant within the statutory definition of promoter under Section 2(69).
2. Dinesh, because a person need not take part in the initial formation and his later capital-raising role and influence over Board decisions may bring him within the promoter definition. (correct answer)
3. Neither person, because only subscribers to the memorandum can be promoters.
4. Dinesh only if he was named in the incorporation certificate, because control or Board directions are irrelevant.

Answer: B — Dinesh, because a person need not take part in the initial formation and his later capital-raising role and influence over Board decisions may bring him within the promoter definition.

Working. Dinesh's role is assessed under the control and Board-directions limbs of section 2(69), together with the study material's explanation of subsequent capital-raising activity.

Explanation. Section 2(69) includes a person who controls company affairs or whose directions the Board is accustomed to follow, but excludes a person acting merely in a professional capacity. The study material also explains that a person who subsequently helps arrange the floating of capital may be a promoter. Dinesh's continuing influence and capital-raising role support that treatment; Nandita's professional engagement alone does not.

Where it goes wrong. Confusing a professional adviser with a promoter and assuming that promoter status requires involvement in initial incorporation.

Authority. Companies Act, 2013, section 2(69); ICAI Study Material, August 2025, Chapter 2, pp. 2.3–2.4.

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

What is the legal consequence of the bank borrowing drawn on the thirty-second day after incorporation?

1. The borrowing is valid because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, the company had physically established its registered office within thirty days of incorporation, which satisfies the fundamental operational requirement irrespective of pending formal filings.
2. The borrowing is valid because Form INC-20A may be filed at any time within 180 days and its filing deadline had not expired on the thirty-second day.
3. The borrowing was not permitted because section 10A requires the registered-office verification and the director's declaration to be filed before the company commences business or exercises borrowing powers; neither had been filed by that day. (correct answer)
4. The borrowing was not permitted because a company having share capital cannot exercise borrowing powers during its first 180 days, even when the required filings have been made.

Answer: C — The borrowing was not permitted because section 10A requires the registered-office verification and the director's declaration to be filed before the company commences business or exercises borrowing powers; neither had been filed by that day.

Working. Borrowing occurred on day 32. Form INC-22 was lodged on day 35 and Form INC-20A on day 40. Neither filing existed when the borrowing powers were exercised.

Explanation. Section 10A imposes cumulative conditions for a company having share capital incorporated after the relevant 2019 amendment: the registered-office verification must be filed with the Registrar and the director's declaration regarding payment by every subscriber must also be filed. These are prerequisites to commencing business or exercising borrowing powers. The physical availability of premises alone does not satisfy the filing requirement.

Where it goes wrong. Treating the thirty-day registered-office requirement and the 180-day declaration period as permission to borrow before filing the required documents.

Authority. Companies Act, 2013, sections 10A and 12(1)–(2); ICAI Study Material, August 2025, Chapter 2, pp. 2.56–2.60.

Question 3 · 2 marks · Chapter 4 – Share Capital and Debentures · hard

Which certificate-delivery timetable applies to the memorandum subscribers and the investor who received the subsequent allotment?

1. Certificates for subscribers must be delivered within two months from incorporation, while certificates for the later allotment must be delivered within two months from the date of allotment. (correct answer)
2. Both sets of share certificates must invariably be delivered within two months from the date on which the respective shareholders paid their subscription or allotment money in full to the company.
3. Certificates for subscribers must be delivered within one month from incorporation, while those for the later allotment must be delivered within one month from allotment.
4. Certificates for subscribers must be delivered within two months from the date of allotment, while certificates for every later share allotment may be delivered within six months.

Answer: A — Certificates for subscribers must be delivered within two months from incorporation, while certificates for the later allotment must be delivered within two months from the date of allotment.

Working. Subscribers: 4 April + two months = 4 June; delivery on 10 June is late. Later allotment: 1 May + two months = 1 July; delivery on 30 June is within time.

Explanation. Section 56(4) distinguishes between securities held by subscribers to the memorandum and shares subsequently allotted by the company. Subscriber certificates must be delivered within two months from incorporation, whereas certificates for a later share allotment must be delivered within two months from allotment. Thus, the 10 June delivery to subscribers was late, while the 30 June delivery for the 1 May allotment was within the applicable period.

Where it goes wrong. Starting the subscriber certificate period from payment of subscription money instead of incorporation, or applying the debenture certificate period to shares.

Authority. Companies Act, 2013, section 56(4)(a)–(b); ICAI Study Material, August 2025, Chapter 4, pp. 4.38–4.39.

Question 4 · 2 marks · Chapter 4 – Share Capital and Debentures · hard

Scenario. Vardhan Precision Private Limited, a private company, has 8% cumulative preference shares and equity shares. The last preference dividend was paid for the financial year ended 31 March 2024. No preference dividend was paid for either of the financial years ended 31 March 2025 and 31 March 2026 because of cash constraints. Its Articles do not disapply the ordinary voting-right rule under Section 47. At a general meeting on 20 September 2026, the company placed a resolution for approval of a new manufacturing line, unrelated to the rights attached to the preference shares. The preference shareholders asked to vote on that resolution. The Articles expressly permit variation of the rights of the preference class. On 5 October 2026, a separate class meeting considered a proposal to reduce the preference dividend rate from 8% to 6%. Holders representing 80% of the issued preference shares voted in favour. Holders of 12% of the issued shares of that class opposed the proposal and, on 22 October 2026, applied to the Tribunal challenging the variation. The company has not yet received the Tribunal's decision. Separately, the Board proposed a rights issue to existing equity shareholders. Vardhan is a private company, and 92% of its members consented in writing to a ten-day acceptance period. The notice gave shareholders the right to renounce their entitlements, and the Articles do not restrict renunciation. The Board also noted that any dividend distribution would be considered from current-year profits after depreciation. The Board seeks advice on the preference shareholders' voting rights, the proposed class-rights variation and the ten-day rights offer.

What voting entitlement did the Class P preference shareholders have at the general meeting held on 20 September 2026?

1. They could vote only on resolutions directly affecting their class rights because the manufacturing-line resolution did not affect their preference rights.
2. They could vote on all resolutions because the dividend in respect of their class had remained unpaid for a period of two years or more. (correct answer)
3. They could vote on all resolutions only if the Board passed a special resolution conferring that right upon them.
4. They could not vote on any resolution until all outstanding preference dividends had been paid.

Answer: B — They could vote on all resolutions because the dividend in respect of their class had remained unpaid for a period of two years or more.

Working. Last paid preference dividend: financial year ended 31 March 2024. No payment for FY 2024-25 and FY 2025-26. The two-year threshold is met by the meeting date.

Explanation. Ordinarily, preference shareholders can vote on resolutions directly affecting their rights and on specified matters such as winding up or repayment or reduction of share capital. However, the second proviso to section 47(2) extends their voting entitlement to all resolutions when the dividend in respect of their class has not been paid for two years or more. That threshold is met in this case.

Where it goes wrong. Applying the ordinary restricted voting entitlement without considering the two-year unpaid-dividend proviso.

Authority. Companies Act, 2013, section 47(2); ICAI Study Material, August 2025, Chapter 4, pp. 4.16–4.17.

Question 5 · 2 marks · Chapter 4 – Share Capital and Debentures · hard

What is the effect of the application made by holders of 12% of the issued Class P shares on 22 October 2026?

1. The variation took effect on 5 October because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, the supporting holders represented more than 75% of the issued preference shares, and a subsequent application cannot affect it.
2. The variation cannot take effect unless and until the Tribunal confirms it, because holders of at least 10% of the issued shares of that class who opposed the variation applied within 21 days. (correct answer)
3. The pledge is void against the company and all subsequent creditors because any unregistered security interest over company property is completely invalid for every purpose.
4. The variation can proceed only if 90% of the issued preference shares supported it, and the dissenting shareholders had no right to approach the Tribunal.

Answer: B — The variation cannot take effect unless and until the Tribunal confirms it, because holders of at least 10% of the issued shares of that class who opposed the variation applied within 21 days.

Working. Class consent: 80% ≥ 75%. Dissenting holding: 12% ≥ 10%. Application: 22 October, within 21 days of 5 October. Tribunal confirmation is therefore required before the variation takes effect.

Explanation. The Articles permit variation and the supporting 80% exceeds the section 48 requirement of at least 75% of the issued shares of the class. However, holders of at least 10% of that class who did not consent may apply to the Tribunal within 21 days. Here, the dissenters hold 12% and applied 17 days after the resolution. The variation therefore awaits Tribunal confirmation rather than taking immediate effect.

Where it goes wrong. Assuming that the 75% class-consent threshold alone makes a variation immediately operative despite a qualifying Tribunal application.

Authority. Companies Act, 2013, section 48(1)–(4); ICAI Study Material, August 2025, Chapter 4, pp. 4.17–4.18.

Question 6 · 2 marks · Chapter 4 – Share Capital and Debentures · medium

How should the ten-day acceptance period for Vardhan's rights offer be assessed?

1. Only the first extension was permitted because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, the Registrar can grant an extension of time only once and has no statutory authority to allow further rectification under Section 87.
2. It is permissible because a private company may provide a shorter period with written or electronic consent of at least 90% of its members, and the period must still be at least seven days under Rule 12A. (correct answer)
3. It is permissible only if every member consents, because the prescribed seven-day period applies regardless of the percentage of member consent.
4. It is impermissible because the prescribed period for a rights offer cannot be shorter than thirty days.

Answer: B — It is permissible because a private company may provide a shorter period with written or electronic consent of at least 90% of its members, and the period must still be at least seven days under Rule 12A.

Working. Member consent = 92%, which exceeds 90%. Offer period = 10 days, which exceeds the seven-day minimum.

Explanation. The ordinary acceptance period for a rights offer is not less than 15 days and not more than 30 days. The study material recognises a shorter period for a private company where at least 90% of members consent in writing or electronically. Rule 12A also prescribes a minimum of seven days. Vardhan has 92% consent and proposes ten days, satisfying both requirements.

Where it goes wrong. Applying the ordinary fifteen-day minimum without considering the private-company consent provision and the seven-day prescribed floor.

Authority. Companies Act, 2013, section 62(1)(a); Companies (Share Capital and Debentures) Rules, 2014, Rule 12A; ICAI Study Material, August 2025, Chapter 4, pp. 4.50–4.51.

Question 7 · 2 marks · Chapter 8 – Declaration and Payment of Dividend · hard

Scenario. Nivara Foods Limited has total paid-up share capital of ₹4 crore, consisting of ₹3.5 crore equity share capital and ₹50 lakh preference share capital. The equity share capital is divided into 35 lakh shares of ₹10 each. Its latest financial statements, after statutory audit, show ₹8 crore of qualifying accumulated reserves available for dividend distribution; a separate revaluation surplus of ₹1 crore is not included in that figure. The company declared equity dividends at 8%, 12% and 10% in the three immediately preceding financial years. For the year ended 31 March 2026, it incurred a loss of ₹20 lakh, after providing for depreciation. At its Board meeting on 15 May 2026, the directors proposed to draw ₹80 lakh from the accumulated reserves and recommend an equity dividend of 9%. The Board's calculation records that the current-year loss will first be adjusted against the proposed withdrawal. After the withdrawal, the reserve balance would be ₹7.2 crore. The company also has cumulative preference shares carrying preferential dividend rights, and the Board proposes to meet the preference dividend entitlement before considering any distribution to equity shareholders. The shareholders declared the recommended dividend at the annual general meeting on 25 May 2026. Some dividend payments remained unclaimed after the thirty-day period from declaration. The finance team transferred the unpaid amount to a separate account in a scheduled bank on the ninth day after that thirty-day period expired. The Board seeks advice on the permissible dividend from accumulated reserves and the consequence of the delayed transfer of unpaid dividend.

What conclusion should the Board reach about declaring the proposed 9% equity dividend from accumulated reserves?

1. The proposed declaration is permissible because the rate is within the three-year average, the proposed withdrawal is within the prescribed amount limit, the current-year loss is set off first and the remaining reserves exceed the required minimum. (correct answer)
2. The dividend cannot be paid from profits of earlier financial years because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, interim dividend must be declared exclusively out of current-year profits generated up to the end of the preceding quarter.
3. The proposed declaration is impermissible because the withdrawal ceiling is 10% of paid-up share capital alone, which is ₹40 lakh.
4. The proposed declaration is impermissible because a company incurring a current-year loss can never declare an equity dividend from accumulated profits.

Answer: A — The proposed declaration is permissible because the rate is within the three-year average, the proposed withdrawal is within the prescribed amount limit, the current-year loss is set off first and the remaining reserves exceed the required minimum.

Working. Three-year average = (8% + 12% + 10%) ÷ 3 = 10%. Withdrawal ceiling = 10% × (₹4 crore + ₹8 crore) = ₹1.2 crore. Proposed withdrawal = ₹80 lakh. Amount remaining after loss set-off = ₹60 lakh; proposed equity dividend = 9% × ₹3.5 crore = ₹31.5 lakh. Minimum reserve balance = 15% × ₹4 crore = ₹60 lakh; actual balance = ₹7.2 crore.

Explanation. The three-year average dividend rate is 10%, so the proposed 9% rate is within the prescribed limit. The withdrawal ceiling is 10% of ₹4 crore plus ₹8 crore, or ₹1.2 crore. The ₹20 lakh current-year loss is set off first. The remaining reserve balance of ₹7.2 crore also exceeds 15% of paid-up capital, which is ₹60 lakh. The stated conditions are therefore satisfied.

Where it goes wrong. Confusing the 10% withdrawal ceiling with the permissible dividend rate and ignoring the separate loss-adjustment and minimum-reserve conditions.

Authority. Companies Act, 2013, section 123(1); Companies (Declaration and Payment of Dividend) Rules, 2014, Rule 3; ICAI Study Material, August 2025, Chapter 8, pp. 8.10–8.12.

Question 8 · 2 marks · Chapter 8 – Declaration and Payment of Dividend · medium

What consequence follows from the company's transfer of the unpaid dividend amount on the ninth day after expiry of the thirty-day period?

1. The transfer is timely because the company receives an additional thirty days after the initial thirty-day period expires.
2. The entire amount must be credited directly to the Investor Education and Protection Fund within thirty days because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, interim dividends are not subject to the unpaid dividend account transfer rules.
3. The transfer is delayed because the amount must be transferred within seven days after expiry of the thirty-day period, and interest at 12% per annum is payable from the date of default on the amount not transferred. (correct answer)
4. Interest becomes payable only after the amount has remained unclaimed in the Unpaid Dividend Account for seven years.

Answer: C — The transfer is delayed because the amount must be transferred within seven days after expiry of the thirty-day period, and interest at 12% per annum is payable from the date of default on the amount not transferred.

Working. Permitted transfer period = seven days after expiry of the initial thirty-day period. Actual transfer = ninth day after expiry. The transfer is late; interest applies from the default date.

Explanation. Under section 124, unpaid or unclaimed dividend remaining after thirty days from declaration must be transferred to the Unpaid Dividend Account within seven days from expiry of that thirty-day period. A transfer on the ninth day is late. The company must pay interest at 12% per annum from the date of default on the amount not transferred in time.

Where it goes wrong. Confusing the transfer deadline to the Unpaid Dividend Account with the later seven-year period for transfer to IEPF.

Authority. Companies Act, 2013, section 124; ICAI Study Material, August 2025, Chapter 8, pp. 8.17–8.18.

Question 9 · 2 marks · Foreign Exchange Management Act, 1999 · hard

Scenario. On 1 August 2026, Mr. Yash Malhotra, resident in India, approached an authorised dealer for several outward remittances. Earlier in the same financial year, he had drawn USD 2,40,000 for private visits and gifts. He now proposes to send a further USD 20,000 as a gift to his cousin who lives abroad. He also has a separate medical invoice for treatment abroad amounting to USD 2,80,000, supported by an estimate issued by the overseas hospital. Yash has additionally asked the dealer to remit USD 5,000 representing prize money won in a lottery in India. The dealer has cautioned him that the current-account rules distinguish between transactions that are prohibited, transactions requiring prior approval of the Central Government and transactions requiring prior approval of the Reserve Bank. At the same time, Yash's company, Meridian Robotics Limited, an Indian company, is considering raising a foreign-currency loan from a lender outside India and investing in equity securities of a foreign company. Its finance director treats both proposals as ordinary payments because the funds would move through an authorised dealer. The Board wants to know whether these proposals alter assets or liabilities across borders and whether the regulatory treatment depends on the nature of the instrument. The Board seeks advice on the remittances requiring RBI approval, prohibited drawals and the regulatory treatment of the company's proposed capital-account transactions.

Which of the following proposed drawals requires prior RBI approval, rather than being prohibited outright or falling within the stated medical-treatment exception?

1. The remittance requires prior approval of the Reserve Bank of India because every outward gift remittance exceeding USD 10,000 in a financial year is classified as a restricted capital account transaction.
2. The USD 2,80,000 medical-treatment remittance automatically requires prior RBI approval because every drawal exceeding USD 250,000 is prohibited without exception.
3. The additional USD 20,000 gift requires prior RBI approval because the individual's total drawal for the listed purposes would exceed USD 250,000 in the financial year; the medical-treatment remittance supported by the hospital estimate falls within the stated exception. (correct answer)
4. The USD 5,000 lottery prize-money remittance requires only Central Government approval under Schedule II, while the additional gift is a capital-account transaction.

Answer: C — The additional USD 20,000 gift requires prior RBI approval because the individual's total drawal for the listed purposes would exceed USD 250,000 in the financial year; the medical-treatment remittance supported by the hospital estimate falls within the stated exception.

Working. Earlier drawals: USD 2,40,000. Proposed gift: USD 20,000. Aggregate: USD 2,60,000. Excess over USD 2,50,000: USD 10,000. The excess gift drawal requires prior RBI approval.

Explanation. Gift or donation is a current-account purpose covered by Schedule III. Yash's earlier USD 2,40,000 drawal and proposed USD 20,000 gift would total USD 2,60,000, exceeding the individual limit. The excess requires prior RBI approval. Medical treatment abroad has a stated exception where an amount above the limit is supported by the prescribed medical-institution estimate. Lottery winnings are dealt with separately under Schedule I.

Where it goes wrong. Treating the USD 250,000 limit as a per-payment limit and overlooking the specific medical-treatment exception.

Authority. Foreign Exchange Management Act, 1999, section 5; Foreign Exchange Management (Current Account Transactions) Rules, 2000, Schedule I and Schedule III; ICAI Study Material, August 2025, FEMA Chapter, pp. 3.19–3.22.

Question 10 · 2 marks · Foreign Exchange Management Act, 1999 · medium

Into which category under the current-account transaction rules does Yash's proposed remittance of USD 5,000 from lottery winnings fall?

1. It is a prohibited drawal under Schedule I and is not merely a transaction requiring RBI approval. (correct answer)
2. It is permitted under the general rule for current-account transactions because the amount is below USD 250,000.
3. It requires prior Central Government approval under Schedule II and may be released after that approval.
4. It is a capital-account transaction because the lottery prize originated in India.

Answer: A — It is a prohibited drawal under Schedule I and is not merely a transaction requiring RBI approval.

Working. Remittance out of lottery winnings is specifically listed as a prohibited transaction in Schedule I, without regard to the amount involved.

Explanation. Schedule I to the Foreign Exchange Management (Current Account Transactions) Rules, 2000 prohibits remittance out of lottery winnings. The general rule allowing current-account drawals does not override the specific prohibition in Schedule I. The transaction is therefore prohibited, rather than being treated as an ordinary remittance requiring approval under Schedule II or Schedule III.

Where it goes wrong. Assuming that every current-account transaction is permitted if it falls below the individual remittance limit.

Authority. Foreign Exchange Management Act, 1999, section 5; Foreign Exchange Management (Current Account Transactions) Rules, 2000, Schedule I; ICAI Study Material, August 2025, FEMA Chapter, pp. 3.19–3.20.

Question 11 · 2 marks · Foreign Exchange Management Act, 1999 · hard

Which allocation of regulatory authority applies to Meridian Robotics Limited's proposed foreign-currency borrowing and foreign equity investment?

1. The payment is prohibited under FEMA because all transactions involving foreign consultants require prior approval of the Central Government before any remittance can be processed.
2. The RBI regulates the foreign equity investment, while the Central Government regulates the foreign-currency borrowing.
3. The RBI regulates the foreign-currency borrowing as a debt instrument, while the Central Government regulates the foreign equity investment as a non-debt instrument. (correct answer)
4. Neither authority may regulate these transactions because both categories are listed as permissible capital-account transactions.

Answer: C — The RBI regulates the foreign-currency borrowing as a debt instrument, while the Central Government regulates the foreign equity investment as a non-debt instrument.

Working. Foreign-currency borrowing = debt instrument = RBI regulatory framework. Foreign equity securities = non-debt instrument = Central Government regulatory framework.

Explanation. The study material explains that the regulatory powers over capital-account transactions involving non-debt instruments were transferred to the Central Government, while the RBI continued to regulate debt instruments. A foreign-currency loan is a debt transaction, whereas an investment in foreign equity securities is a non-debt transaction. Their inclusion as permissible classes does not remove applicable limits, terms or conditions.

Where it goes wrong. Assuming that the same authority regulates all capital-account transactions or that listing in a permissible schedule removes regulatory conditions.

Authority. Foreign Exchange Management Act, 1999, section 6(2); Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, Schedule I; ICAI Study Material, August 2025, FEMA Chapter, pp. 3.25–3.31.

Question 12 · 2 marks · The Limited Liability Partnership Act, 2008 · medium

Scenario. On 12 October 2026, two individuals, Kavya Rao and Sameer Bhat, together with Orion Analytics Private Limited, agreed to establish a limited liability partnership named Orion Data Services LLP for carrying on a lawful data-consulting business with a view to earning profit. The proposed registered office is in Bhopal. The incorporation document states the LLP's name, proposed business, registered-office address, and the names and addresses of all proposed partners and designated partners. The incorporation document and prescribed fee were filed with the Registrar for the State in which the registered office is situated. Along with the document, a statement confirming compliance with the LLP Act and Rules was signed by a practising chartered accountant engaged in the formation of the LLP and by one subscriber. The Registrar received the complete set of documents on 14 October 2026. The incorporation document names Kavya and Ritesh, an individual nominated by Orion Analytics Private Limited, as designated partners. Both have given prior consent to act. During financial year 2026-27, Kavya has stayed in India for 122 days, while Ritesh has stayed in India for 116 days. The LLP filed the prescribed particulars of both designated partners with the Registrar within 30 days of their appointment. The partners seek advice on the Registrar's time for registration and whether the designated-partner composition satisfies the statutory requirements.

Within what period must the Registrar register the incorporation document and issue the incorporation certificate after receiving the complete filing on 14 October 2026?

1. The Registrar must do so within 14 days, provided that the minimum requirement of two persons under section 11(1)(a) has also been met. (correct answer)
2. The Registrar must do so within 30 days, even where the minimum requirement of two persons has not been met.
3. The Registrar must issue the certificate immediately upon receipt of the incorporation document, without considering the accompanying statement.
4. The Registrar may issue the certificate at any time because the LLP Act does not prescribe a registration period.

Answer: A — The Registrar must do so within 14 days, provided that the minimum requirement of two persons under section 11(1)(a) has also been met.

Working. The filing contains the incorporation document, prescribed fee and required compliance statement. Three persons have subscribed, satisfying the minimum-person requirement. The fourteen-day period therefore applies.

Explanation. Under section 12, once the requirements under section 11(1)(b) and (c) have been complied with, the Registrar is required to register the incorporation document and issue the certificate within 14 days. This obligation is subject to the requirement under section 11(1)(a), which requires two or more persons to subscribe to the incorporation document.

Where it goes wrong. Applying the fourteen-day registration period without considering the statutory requirement for two or more subscribing persons.

Authority. Limited Liability Partnership Act, 2008, sections 11(1) and 12(1)–(4); ICAI Study Material, August 2025, Chapter 12, pp. 12.15–12.17.

Question 13 · 2 marks · The Limited Liability Partnership Act, 2008 · hard

Which conclusion correctly assesses Orion Data Services LLP's designated-partner composition and related filings?

1. The composition is deficient because every designated partner must have stayed in India for at least 120 days during the financial year.
2. The composition is sufficient even if neither designated partner is an individual, provided the incorporation document names them.
3. The composition is deficient because a body corporate cannot be a partner in an LLP and therefore cannot nominate an individual as a designated partner.
4. The composition satisfies the stated requirements because both designated partners are individuals and at least one of them, Kavya, satisfies the 120-day residence test; prior consent and filing within 30 days have also been completed. (correct answer)

Answer: D — The composition satisfies the stated requirements because both designated partners are individuals and at least one of them, Kavya, satisfies the 120-day residence test; prior consent and filing within 30 days have also been completed.

Working. Kavya: 122 days, satisfying the 120-day test. Ritesh: 116 days, not satisfying it. Both are individuals; at least two designated partners are present and one is resident. Consent and filing fall within the stated periods.

Explanation. Section 7 requires at least two designated partners who are individuals, with at least one resident in India. The residence test in the study material is a stay of not less than 120 days during the financial year. Kavya satisfies this test with 122 days; Ritesh's 116 days do not disqualify the LLP because both designated partners need not be residents. Consent and particulars have also been dealt with within the prescribed requirements.

Where it goes wrong. Mistaking the requirement for at least one resident designated partner for a requirement that every designated partner must be resident in India.

Authority. Limited Liability Partnership Act, 2008, sections 7(1)–(5) and 9; ICAI Study Material, August 2025, Chapter 12, pp. 12.13–12.15.

Question 14 · 2 marks · The General Clauses Act, 1897 · medium

Scenario. The Narmada Cultural Association, an association of 18 individuals that has not been incorporated, submitted an application to a statutory authority on 6 January 2026. A company, Maple Infra Limited, submitted a separate application in the same proceeding. The Central enactment governing the proceeding uses the expressions person, month and year but does not define them. It contains no indication that those expressions are intended to have a special meaning in the context of either application. The Association's secretary argued that the Association could not be treated as a person because it had no incorporation certificate. Maple Infra Limited argued that month must mean thirty days and that year must always mean the financial year beginning on 1 April. The authority also had to classify assets listed in a schedule filed by the Association: a parcel of land, trees still rooted in an orchard, timber already cut and stacked in a yard, a building permanently attached to the land, and shares held in another company. The authority noted that the General Clauses Act supplies common definitions for Central Acts and Regulations where the subject or context does not indicate a contrary intention. It therefore sought to determine which applicants fall within the expression person, how the time expressions should ordinarily be understood, and which listed assets are immovable property. The authority seeks advice on applying the relevant definitions of the General Clauses Act, 1897.

Which interpretation should the authority apply to the expressions person, month and year in the Central enactment, in the absence of a contrary intention?

1. Only incorporated entities are persons, a month always means thirty days, and a year means the financial year beginning on 1 April.
2. An unincorporated association is a person only if it has a registered office, while month and year have no meaning under the General Clauses Act.
3. Only natural individuals are persons, a month means thirty-one days, and a year is reckoned from 1 April to 31 March in every enactment.
4. An association or body of individuals may be a person whether incorporated or not, a month is reckoned according to the British calendar, and a year is reckoned according to the British calendar. (correct answer)

Answer: D — An association or body of individuals may be a person whether incorporated or not, a month is reckoned according to the British calendar, and a year is reckoned according to the British calendar.

Working. Association of individuals: included under section 3(42). Month: British calendar month under section 3(35). Year: British calendar year under section 3(66).

Explanation. Section 3(42) includes a company, association and body of individuals whether incorporated or not within the definition of person. Section 3(35) defines month as a month reckoned according to the British calendar, and section 3(66) defines year on the same calendar basis. The specific definition of financial year is distinct and should not automatically replace the word year.

Where it goes wrong. Confusing the ordinary statutory definition of year with financial year and excluding an unincorporated association from the definition of person.

Authority. General Clauses Act, 1897, sections 3(35), 3(42) and 3(66); ICAI Study Material, August 2025, Chapter 1, pp. 1.19–1.21.

Question 15 · 2 marks · The General Clauses Act, 1897 · hard

Which classification of the assets listed by the Narmada Cultural Association follows the definitions in the General Clauses Act, 1897?

1. Rooted trees and cut timber are immovable property, whereas land, buildings and shares are movable property.
2. All five assets are immovable property because each is connected with land or ownership of land.
3. Land and shares are immovable property, whereas rooted trees, cut timber and buildings are movable property.
4. Land, trees still rooted in the orchard and a building permanently attached to the land are immovable property, whereas cut timber and shares are movable property. (correct answer)

Answer: D — Land, trees still rooted in the orchard and a building permanently attached to the land are immovable property, whereas cut timber and shares are movable property.

Working. Immovable: land, rooted trees and permanently attached building. Movable: cut timber and shares.

Explanation. Section 3(26) includes land, benefits arising out of land, things attached to the earth and things permanently fastened to anything attached to the earth within immovable property. The study material distinguishes standing trees from timber that has been cut. Shares are movable property under section 3(36), which covers property of every description other than immovable property.

Where it goes wrong. Treating harvested timber as immovable merely because it originated from trees attached to land, or confusing shares with immovable property.

Authority. General Clauses Act, 1897, sections 3(26) and 3(36); ICAI Study Material, August 2025, Chapter 1, pp. 1.13–1.20.