CA Inter Corporate and Other Laws MCQ Test 13: answer key

Question 1 · 2 marks · Prospectus and Allotment of Securities · hard

Scenario. Nirvaan Agro Systems Limited is an unlisted public company whose equity shares are proposed to be listed on a recognised stock exchange. On 18 May 2026 its Board approved a public issue of equity shares and a prospectus dated 22 May 2026. A signed copy was delivered to the Registrar on 20 May 2026. The prospectus stated that the minimum subscription was 90% of the issue and that application money would be 18% of the issue price per share. The issue opened on 1 June 2026 and closed on 10 June 2026. Applications and application money were received for 87% of the issue. The company allotted shares on 25 June 2026. It filed Form PAS-3 with the Registrar on 31 July 2026. The finance head notes that ₹42 lakh received from applicants who were not allotted shares is still lying in the application bank account and asks whether delay in refund could attract the deposit rules. The Board seeks advice on the validity of the allotment, the application money requirement and the filing consequence.

Was the allotment made by Nirvaan Agro Systems Limited valid?

1. Yes, because the prospectus was filed before it was issued and remains valid for 90 days from filing.
2. No, because the allotment was made without receipt of the minimum subscription stated in the prospectus, which was 90% of the issue. (correct answer)
3. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, the Board may reduce the minimum subscription after the issue closes when applications fall short.
4. No, because the company did not obtain the Registrar's approval for the allotment.

Answer: B — No, because the allotment was made without receipt of the minimum subscription stated in the prospectus, which was 90% of the issue.

Working. Minimum subscription stated = 90%; received = 87%, so condition not met.

Explanation. Section 39(1) prohibits allotment unless the minimum subscription stated in the prospectus has been subscribed and application money received. The prospectus fixed 90%, while applications and money came for only 87%. Filing the prospectus and its 90-day validity do not cure the shortfall. The tempting option a is wrong because prospectus validity is separate from the minimum subscription condition.

Where it goes wrong. Confuses prospectus validity with minimum subscription.

Authority. Section 39(1), Companies Act 2013; Regulation 45(1), SEBI (ICDR) Regulations 2018 (as in study material)

Question 2 · 2 marks · Prospectus and Allotment of Securities · hard

How should the requirement of application money of 18% of the issue price be viewed?

1. Yes, because the amount is more than 5% of the nominal value of each share, so the statutory floor is met.
2. No, because for a proposed listed issue the amount payable on application must be at least 25% of the issue price for each security. (correct answer)
3. Yes, because SEBI has not prescribed any minimum application money for public issues.
4. No, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, the amount payable on application must be at least 10% of the nominal value in every public issue.

Answer: B — No, because for a proposed listed issue the amount payable on application must be at least 25% of the issue price for each security.

Working. 18% of issue price is less than 25% of issue price.

Explanation. Section 39(2) sets the Companies Act floor at 5% of nominal value or the amount specified by SEBI. For a proposed listed issue, the study material notes the SEBI requirement of at least 25% of the issue price per specified security. Since 18% is below 25%, option a is tempting but incomplete because it relies only on the 5% nominal-value floor.

Where it goes wrong. Uses 5% nominal value and ignores the SEBI 25% issue price rule.

Authority. Section 39(2), Companies Act 2013; Regulation 47(4), SEBI (ICDR) Regulations 2018 (as in study material)

Question 3 · 2 marks · Prospectus and Allotment of Securities · medium

What is the consequence of filing Form PAS-3 on 31 July 2026 after allotment on 25 June 2026?

1. No penalty is attracted because the return was filed within 45 days of allotment.
2. The company and every officer in default are liable to a penalty of ₹1,000 for each day of default, subject to ₹1,00,000. (correct answer)
3. Only the company is liable to a penalty of ₹5,000 for each day of default.
4. The company and every officer in default are liable to a penalty of ₹10,000 for each day of default, subject to ₹2,00,000.

Answer: B — The company and every officer in default are liable to a penalty of ₹1,000 for each day of default, subject to ₹1,00,000.

Working. 25 June to 31 July is 36 days; default beyond 30 days.

Explanation. Section 39(4) requires the return of allotment within 30 days. Filing on 31 July 2026 is beyond that period. Section 39(5) imposes on the company and its officer in default a penalty of ₹1,000 for each day of default or ₹1,00,000, whichever is less. Option a wrongly uses a 45-day period; option d uses amounts not found in section 39(5).

Where it goes wrong. Uses 45 days instead of 30 days.

Authority. Sections 39(4) and 39(5), Companies Act 2013; Rule 12, Companies (Prospectus and Allotment of Securities) Rules 2014

Question 4 · 2 marks · Acceptance of Deposits by Companies · hard

Scenario. Kaveri Spice Foods Limited is a public company with paid-up capital ₹40 crore, reserves ₹50 crore and securities premium ₹20 crore; its net worth is ₹130 crore and turnover ₹420 crore. On 1 July 2026 the Board passed an ordinary resolution to invite deposits from the public and from members and filed it with the Registrar on 5 July 2026. It obtained a credit rating of adequate safety. It issued an advertisement in newspapers on 20 July 2026. On 1 August 2026 it accepted ₹9 crore from members for four months, stating that the money was for short-term needs, and accepted ₹12 crore from the public as secured deposits. On 25 August 2026 it created a charge on tangible assets valued at ₹12 crore in favour of trustees for depositors. It did not create any charge on intangible assets. The Board seeks advice on whether the public deposit invitation was valid, whether the four-month member deposit was permissible and whether the security created for public deposits met the legal requirement.

Was the invitation to the public for deposits valid?

1. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, the net worth exceeds ₹100 crore and an ordinary resolution filed with the Registrar is enough for public deposits.
2. No, because an eligible company must pass and file a special resolution before inviting public deposits, and the ordinary resolution route is available only within section 180(1)(c) limits. (correct answer)
3. Yes, because a credit rating of adequate safety substitutes for the special resolution requirement.
4. No, because a public company with turnover below ₹500 crore cannot accept public deposits even if net worth exceeds ₹100 crore.

Answer: B — No, because an eligible company must pass and file a special resolution before inviting public deposits, and the ordinary resolution route is available only within section 180(1)(c) limits.

Working. Net worth ₹130 crore satisfies eligibility; ordinary resolution does not satisfy section 76(2).

Explanation. Kaveri meets the eligible-company net worth test, but section 76(2) requires prior consent by special resolution filed with the Registrar before inviting public deposits. An ordinary resolution is enough only where the deposits are within section 180(1)(c) limits. Option a is tempting because eligibility is met, but it ignores the resolution requirement.

Where it goes wrong. Eligibility is confused with the special resolution requirement.

Authority. Sections 76(1) and 76(2), Companies Act 2013; Rule 2(1)(e), Companies (Acceptance of Deposits) Rules 2014

Question 5 · 2 marks · Acceptance of Deposits by Companies · medium

Was the acceptance of ₹9 crore from members for four months permissible?

1. Yes, because a company may accept deposits from members for less than six months up to 10% of the aggregate of paid-up capital, reserves and securities premium, if for short-term needs and repayable after three months. (correct answer)
2. No, because no deposit from members may be accepted for less than six months in any case.
3. Yes, because the 10% limit applies to deposits from the public and not to members.
4. No, because short-term deposits are capped at 5% of the aggregate and must run for at least six months.

Answer: A — Yes, because a company may accept deposits from members for less than six months up to 10% of the aggregate of paid-up capital, reserves and securities premium, if for short-term needs and repayable after three months.

Working. Aggregate = 40 + 50 + 20 = ₹110 crore; 10% = ₹11 crore; ₹9 crore is within.

Explanation. The normal tenure is six to thirty-six months, but the study material notes an exception for short-term needs: deposits repayable earlier than six months may be accepted if they do not exceed 10% of the aggregate of paid-up capital, reserves and securities premium and are repayable only after three months. The aggregate here is ₹110 crore, so 10% is ₹11 crore; ₹9 crore for four months fits.

Where it goes wrong. Treats the six-month minimum as having no short-term exception.

Authority. Section 73(2), Companies Act 2013; Rule 3(1), Companies (Acceptance of Deposits) Rules 2014

Question 6 · 2 marks · Acceptance of Deposits by Companies · hard

Did the security created for the public deposits meet the legal requirement?

1. Yes, because the charge was created on tangible assets within 30 days of accepting the deposits.
2. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, a charge on tangible assets equal to the deposit amount is sufficient and interest need not be covered.
3. No, because security for secured deposits must be at least the amount of deposits plus interest payable, and the charge value fell short. (correct answer)
4. No, because secured deposits may be secured only by intangible assets and not by tangible assets.

Answer: C — No, because security for secured deposits must be at least the amount of deposits plus interest payable, and the charge value fell short.

Working. Deposits ₹12 crore + interest > charge value ₹12 crore.

Explanation. Section 76(4) and Rule 6 require a charge on tangible assets within 30 days, and the value of security must not be less than the deposits accepted and interest payable. Here the charge was ₹12 crore for ₹12 crore deposits plus interest. Option a is tempting because timing and asset type are correct, but the value is insufficient.

Where it goes wrong. Timing and tangible-asset condition are met, but security value is short.

Authority. Section 76(4), Companies Act 2013; Rule 6, Companies (Acceptance of Deposits) Rules 2014

Question 7 · 2 marks · Management and Administration · hard

Scenario. Vedansh Retail Ventures Limited is a listed public company with 1,250 members and paid-up capital ₹15 crore. Its financial year ended 31 March 2026. The Board issued notice on 4 September 2026 for the annual general meeting to be held on 28 September 2026 at 7:30 p.m. at a hotel in another city in the same State, not being the city of the registered office. The notice stated the business. A member holding 12% of the paid-up capital appointed one person as proxy. The meeting was held with the required quorum. Later the company prepared its annual return. Its turnover for the year was ₹65 crore. The company secretary in practice was asked to certify the annual return. The Board seeks advice on whether the AGM was validly convened, and whether the annual return needs certification and who must sign it.

Was the annual general meeting validly convened?

1. Yes, because the meeting was held after 21 clear days' notice and with quorum.
2. Yes, because a listed company may hold its AGM at any place in India if the Board approves.
3. No, because an annual general meeting must be held between 9 a.m. and 6 p.m. and at the registered office or in the city, town or village of the registered office, unless the stated exception applies; being listed, the exception does not. (correct answer)
4. No, because the notice was shorter than 21 clear days.

Answer: C — No, because an annual general meeting must be held between 9 a.m. and 6 p.m. and at the registered office or in the city, town or village of the registered office, unless the stated exception applies; being listed, the exception does not.

Working. Meeting at 7:30 p.m. and outside the registered-office city.

Explanation. Section 96(2) requires the AGM during business hours between 9 a.m. and 6 p.m., on a day that is not a National Holiday, at the registered office or within the city, town or village where it is situated. The unlisted-company place exception is not available to a listed company. A 7:30 p.m. meeting at a hotel in another city fails these conditions, even if notice and quorum are otherwise in order.

Where it goes wrong. Notice and quorum are in order, but time and place are not.

Authority. Section 96(2), Companies Act 2013

Question 8 · 2 marks · Management and Administration · medium

What is the requirement for certification and signing of the annual return?

1. No certification is needed because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, the turnover is below ₹50 crore; the annual return may be signed by a director alone.
2. Certification is needed only if paid-up capital is ₹10 crore or more, and here signing by two directors is enough.
3. Certification by a company secretary in practice is needed, and the annual return must be signed by a director and the company secretary, or by a company secretary in practice where there is no company secretary. (correct answer)
4. No certification is needed because a listed company is exempt from certification if it has 1,250 members.

Answer: C — Certification by a company secretary in practice is needed, and the annual return must be signed by a director and the company secretary, or by a company secretary in practice where there is no company secretary.

Working. Listed status and turnover ₹65 crore both attract section 92(2).

Explanation. Section 92(2) requires certification by a company secretary in practice for a listed company and for a company with paid-up capital of ₹10 crore or more or turnover of ₹50 crore or more. The company is listed and also crosses the turnover test. Under section 92(1), the return is signed by a director and the company secretary, or by a company secretary in practice if there is no company secretary.

Where it goes wrong. Ignores that listing itself requires certification.

Authority. Sections 92(1) and 92(2), Companies Act 2013; Rule 11(2), Companies (Management and Administration) Rules 2014

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

Scenario. Ananya Rao, an Indian citizen, worked in Singapore from 2018 to 2023. While there she opened a foreign currency account and bought shares of a Singapore technology company. She returned to India in April 2023 and has since been resident in India. In June 2026 she sold part of those shares and kept the sale proceeds in her Singapore bank account. She also received USD 25,000 in that account as a gift from her uncle, who has been resident outside India for many years. Her mother, who was resident in India, held shares of a US company and died in 2025; Ananya inherited those shares. In July 2026 Ananya wants to use USD 18,000 from the sale proceeds to buy shares of another Singapore company and wants to keep the remaining sale proceeds abroad. Based on these facts and FEMA, answer the MCQs.

May Ananya hold the sale proceeds of the Singapore shares abroad and use part to buy other Singapore shares?

1. Yes, because foreign securities acquired while she was resident outside India may be held, transferred or invested abroad under section 6(4), and the sale proceeds may be used from those eligible assets without prior approval. (correct answer)
2. No, because every sale of foreign securities by a resident requires prior RBI approval.
3. Yes, because all foreign exchange held in a foreign bank account is outside FEMA once the person returns to India.
4. No, because she must bring the entire sale proceeds to India immediately after sale.

Answer: A — Yes, because foreign securities acquired while she was resident outside India may be held, transferred or invested abroad under section 6(4), and the sale proceeds may be used from those eligible assets without prior approval.

Working. Shares bought while she was resident outside India; sale proceeds are eligible assets.

Explanation. Section 6(4) permits a person resident in India to hold, own, transfer or invest in foreign currency, foreign security or immovable property outside India if it was acquired, held or owned when that person was resident outside India or inherited from a person resident outside India. The study material also permits use of such eligible assets abroad for fresh investments without approval, if the funds come from those assets.

Where it goes wrong. Thinks every sale by a resident needs RBI approval.

Authority. Section 6(4), FEMA 1999; AP (DIR Series) Circular No. 90 dated 9 January 2014 (as in study material)

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

May Ananya retain abroad the USD 25,000 gift received from her uncle who is resident outside India?

1. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, a gift from a person resident outside India is a current account transaction and she may retain it abroad without any condition.
2. Yes, because the uncle is resident outside India and any amount received from him becomes an eligible asset under section 6(4).
3. No, because the gift was received while she was resident in India and section 6(4) does not cover a gift from a person resident outside India as an eligible foreign asset; holding it abroad needs a permitted route. (correct answer)
4. No, because gifts in foreign currency are prohibited under FEMA in every case.

Answer: C — No, because the gift was received while she was resident in India and section 6(4) does not cover a gift from a person resident outside India as an eligible foreign asset; holding it abroad needs a permitted route.

Working. Gift received while resident in India; not acquired while resident outside India, not inherited from a non-resident.

Explanation. Section 6(4) covers foreign assets acquired when the person was resident outside India or inherited from a person resident outside India. A gift received while Ananya is resident in India is not listed there. The study material also states that a resident who receives foreign funds from a relative abroad cannot simply retain them abroad. Option b wrongly treats any receipt from a non-resident as an eligible asset.

Where it goes wrong. Treats gift as automatically covered by section 6(4).

Authority. Sections 4 and 6(4), FEMA 1999

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

May Ananya hold the US shares inherited from her mother, who was resident in India?

1. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, inheritance from any person, whether resident in India or outside India, is covered by section 6(4).
2. No, because a resident cannot inherit foreign securities under FEMA in any situation.
3. Yes, because shares inherited by a resident are always treated as acquired when she was resident outside India.
4. No, because section 6(4) covers inheritance from a person resident outside India, not from a person resident in India; holding the US shares needs a permitted route. (correct answer)

Answer: D — No, because section 6(4) covers inheritance from a person resident outside India, not from a person resident in India; holding the US shares needs a permitted route.

Working. Mother was resident in India, so section 6(4) exception not available.

Explanation. The section 6(4) route applies where the foreign asset was acquired, held or owned when the person was resident outside India or inherited from a person who was resident outside India. Ananya's mother was resident in India, so this inheritance does not fall within that route. Option a is tempting because inheritance is mentioned, but the residence status of the person from whom it is inherited matters.

Where it goes wrong. Reads 'inherited' but ignores 'from a person resident outside India'.

Authority. Section 6(4), FEMA 1999

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

Scenario. Chandrika Advisory LLP has three partners: Meera (resident individual), Kabir (non-resident individual) and Sona Traders Private Limited, whose nominee is Ritu. Meera and Kabir are designated partners. Kabir ceased to be a designated partner on 10 January 2026 and no new designated partner was appointed till 25 February 2026. During this period the LLP carried on business. The LLP filed its annual return for 2025-26 on 30 May 2026 though its financial year ended 31 March 2026. In the return, Ritu knowingly stated that Kabir continued as a designated partner on 31 March 2026. The Registrar noticed the position. The LLP asks about penalty for the delay in appointing a designated partner and whether the false statement can be compounded by the Regional Director.

What is the penalty position for the delay in appointing a designated partner after Kabir ceased on 10 January 2026?

1. No penalty is attracted because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, every partner becomes a designated partner when only one remains.
2. Only the LLP is liable to ₹5,000 and no daily penalty.
3. Only Kabir is liable because he resigned without arranging a replacement.
4. The LLP and every partner are liable to a penalty of ₹10,000 and a further ₹100 for each day of continuing contravention, subject to the caps in section 10. (correct answer)

Answer: D — The LLP and every partner are liable to a penalty of ₹10,000 and a further ₹100 for each day of continuing contravention, subject to the caps in section 10.

Working. Vacancy 10 January; 30 days ended 9 February; appointment on 25 February.

Explanation. Section 9 requires appointment of a designated partner within 30 days of a vacancy. Section 10(3) provides that contravention of section 9 attracts on the LLP and every partner a penalty of ₹10,000 and a further ₹100 per day of continuing contravention, subject to the stated maximums. The deeming provision for every partner to be a designated partner does not remove the section 10 penalty.

Where it goes wrong. Thinks deemed designated partner status removes penalty.

Authority. Sections 7, 9 and 10, LLP Act 2008

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

Can the Regional Director compound Ritu's false statement in the annual return under section 39 of the LLP Act?

1. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, the Regional Director may compound any offence under the LLP Act by collecting a sum within the fine range.
2. No, because no offence is made out unless the Registrar suffered loss.
3. Yes, because the false statement is a technical default and compounding is available after paying ₹10,000.
4. No, because section 39 permits compounding only of offences punishable with fine only, and the false statement carries imprisonment as well. (correct answer)

Answer: D — No, because section 39 permits compounding only of offences punishable with fine only, and the false statement carries imprisonment as well.

Working. Section 37 offence includes imprisonment; section 39 covers fine-only offences.

Explanation. Section 37 punishes a false statement in a return, statement or document with imprisonment up to two years and fine. Section 39 permits compounding only where the offence is punishable with fine only. Since the false statement carries imprisonment, the section 39 compounding route is not available. Option a is tempting because compounding exists under the LLP Act, but it is limited.

Where it goes wrong. Assumes every LLP offence can be compounded.

Authority. Sections 37 and 39, LLP Act 2008

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

Scenario. Under the National Waterways Development Act, 2019, a Central Act, the Central Government may issue orders for regulating cargo movement. The Act was amended in 2024 and the expression 'Director-General' was substituted by 'Chief Commissioner'. Before the amendment, the Central Government had issued an order under the Act. After the amendment, the Central Government issued a notification adding a new port to a schedule and later rescinded another notification. A cargo operator argues that the earlier order lapsed on amendment and that the rescission is invalid because the Act does not expressly provide for it. The authority also made rules after previous publication and finalised them without discussing objections. Based on the General Clauses Act, answer the MCQs.

Was the later rescission of a notification issued under the Act valid?

1. Yes, because the power to issue a notification includes power to add, amend, vary or rescind it in the like manner and subject to like conditions. (correct answer)
2. No, because a notification once issued cannot be rescinded without express words in the parent Act.
3. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, the authority may rescind any notification even in a different manner and without conditions.
4. No, because only Parliament can rescind a notification issued under a Central Act.

Answer: A — Yes, because the power to issue a notification includes power to add, amend, vary or rescind it in the like manner and subject to like conditions.

Working. Power to issue includes power to rescind in like manner.

Explanation. Section 21 of the General Clauses Act, 1897 provides that where a power to issue notifications, orders, rules or bye-laws is conferred, that power includes the power to add to, amend, vary or rescind them in the like manner and subject to the like sanction and conditions. Option c is wrong because the manner and conditions must be similar, not different.

Where it goes wrong. Thinks rescission needs express words or can be done arbitrarily.

Authority. Section 21, General Clauses Act 1897

Question 15 · 2 marks · General Clauses Act, 1897 · medium

What is the effect on the earlier order after the Act was amended and re-enacted with a change in designation?

1. Yes, because orders made under the repealed provision continue and are deemed made under the re-enacted provision unless a different intention appears. (correct answer)
2. No, because every order lapses when the parent Act is amended.
3. Yes, because the order remains valid only for six months after re-enactment.
4. No, because the order must be reissued in the name of the new officer.

Answer: A — Yes, because orders made under the repealed provision continue and are deemed made under the re-enacted provision unless a different intention appears.

Working. Repeal and re-enactment; earlier order continues unless contrary intention.

Explanation. Section 24 of the General Clauses Act, 1897 provides that where a Central Act is repealed and re-enacted with or without modification, appointments, notifications, orders, schemes, rules, forms or bye-laws made under the repealed Act continue in force and are deemed made under the re-enacted provisions unless a different intention appears. The change of designation does not by itself lapse the order.

Where it goes wrong. Thinks amendment or change of designation automatically lapses orders.

Authority. Section 24, General Clauses Act 1897