Hand Book for Independent Director Exam 1125....

FOREWORD As we all know, Independent Directors (also sometimes known as Outside Directors) mean Directors who apart from receiving Director's remuneration, do not have any other material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiaries, which in judgment of the board may affect independence of judgment of the directors. The mandatory insertion of Independent Directors in specified classes of companies is highly appreciable and it is anticipated to pave the way for transparent and accountable corporate governance. Under the present parameters, the Government has started maintaining a database of professionals that can be used by companies looking to expand their board or making fresh appointments under the current regulations. It is in this context that CA Machar Rao Meenavalli has compiled the subject content/syllabus in a very lucid manner and to help the reader to study, analyse and develop knowledge as well as the requisite skill sets to appear for the examination being conducted by the IICA. The Multiple-Choice questions (MCQs) compiled by him at the end of the syllabus are going to help the persons taking the exam to revise and perform well in the examination and qualify with flying colours. It would be very apt to mention here that I have known CA Machar Rao Meenavalli from close quarters for quite some time now and I admire his sincerity, his diligence, his leadership qualities and his helping nature. His penchant for knowledge has made him acquire several academic qualifications and successfully complete several post qualification courses conducted by the Institute of Chartered Accountants of India as well as other Institutes, including his cracking the examination conducted by IICA with flying colours. In fact, this compilation is the result of his desire to help several professionals to acquire the requisite knowledge and qualify as Independent Directors by studying in a focussed manner. I appreciate CA Machar Rao Meenavalli for this wonderful and useful compilation and I wish all the readers a happy learning and successful stints as Independent Directors of several corporates in the years to come. I sign off quoting Mahatma Gandhi…… \"True education must correspond to the surrounding circumstances or it is not a healthy growth.\" I am sure that all will agree that this compilation by CA Machar Rao is a step in this direction. CA Bhanu Narayan Rao Y.V Chairman (2019-2020), The Hyderabad Branch of SIRC of ICAI. Date: 20th April, 2020. Place: Hyderabad. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 1 | Page

Compilator: CA.MACHAR RAO MEENAVALLI, B.Com, MA, MFM, FCA, DISA Insolvency Professional - IBBI Registered Valuer – SFA – IBBI Qualified Independent Director Post Qualifications Courses from ICAI: Information Systems Audit, Certificate Course on Valuation, Certificate Course on Concurrent Audit of Banks, Certificate Course on Anti-Money Laundering Laws, Certificate Course on Forex and Treasury Management. He is a Practicing Chartered Accountant, Having 18 Plus years of handful experience in the fields of Auditing, Finance, Banking, Corporate Law, Forensic Audits, Mergers and Acquisitions, Business Valuation and Insolvency Laws. About the Independent Director Examination: Before you take up the examination, you need to first register yourself at mca.gov.in the process of which is as under: 1. Create User Login in www.mca.gov.in 2. Go to “Independent Director Registration” Tab in MCA website and Login — enter all the required details — “Submit” — “Verify OTP”, on successful verification, click “Proceed” button to receive Login Credentials for the “DATABANK” on the registered Mobile and E Mail. 3. Login as Individual in www.independentdirectorsdatabank.in 4. The Indian Institute of Corporate Affairs (IICA) under the MCA within a period of one year from the date of inclusion of his name in the data bank, failing which, his name shall stand removed from the databank of the institute. The said IICA started conducting the exam since December 2019 and to make the process stringent, a score of 60 percent marks is mandatory to qualify in the online exam. Disclaimer: The information contained in this book is as per relevant act. Whilst every care has been taken in the preparation of this book, it may contain inadvertent errors for which we shall not be held responsible. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of. The information given in this book provides a bird’s eye view on the overall subject required for Independent Director Examination as on the date. As required to refer under each circumstance would call for specific reference of the relevant statutes, rules, notification and circulars etc. This book is only meant for internal circulation and not for any commercial use. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 2 | Page

S.No CONTENTS Page Particulars No. 4 1 Types of Director of Companies Act 2013 8 - Independent Director 13 2 Board of Directors Composition 17 - LODR for Listed Companies 18 - Appointment, Removal of Directors 19 - Duties of Directors 22 - Code of conduct 24 27 3 Board Meetings 28 - Notice, Quorum, Powers - 33 4 Annual General Meeting - Quorum for Annual General Meeting - 5 Key Managerial Personnel under Companies Act, 2013 6 Audit Committee - Section-177 7 Auditor: Sections 139 to 148 - Appointment, Rotation, Cooling Period - 8 Accounts of Companies: Sec 128 to 138 9 Prospectus: Sec 2(70) 10 Miscellaneous Topics in brief for Examination: - Political Contributions - Corporate Social responsibility ( CSR) - Deposits : Sec 73 to 76 - Committees required under Companies Act, 2013 - Merger & Amalgamation Section 230 & 232. - Compounding of Offences - Related Party Transaction - Some of the FORMs to be filed with ROC - 11 Multiple Choice Questions ( MCQs) ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 3 | Page

TYPES OF DIRECTOR AS PER COMPANIES ACT 2013 As per Section 2(34) of Companies Act 2013 Director means a director appointed to the Board of a Company. The board of directors of a company is primarily responsible for: · Determining the company’s strategic objectives and policies; · Monitoring progress towards achieving the objectives and policies; · Appointing senior management; · Accounting for the company’s activities to relevant parties, e.g. shareholders. Minimum Directors Required for a Company:- i. One Person Company :- One Director. ii. Private Limited Company:- Two Directors. iii.Public Limited Company: - Three Directors. Types of Directors: 1.Independent Director:- As per section 149(6) an independent director in relation to a company, means a director other than a Managing Director, Whole Time Director Or Nominee Director. Companies which have to appoint Independent Director:- As per Rule 4 of Companies (Appointment and Qualification of Directors) Rules,2013 the Every Listed Companies and the following class of companies have to appoint at least two independent directors even if one condition is satisfied:- A} Public Companies having Paid up Share Capital of Rs.10 Crores or More; B} Public Companies having Turnover of Rs.100 Crores or More; C} Public Companies have total outstanding loans, debenture and deposits of Rs. 50 Crores or More. Person Qualified for Independent Directorship is a person: 1. who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience. 2. who is or was not a promoter of the company, or its holding, subsidiary or associate company 3. who is not related to promoters or directors of the company or any of its associate companies. 4. who has or had no pecuniary relationship, other than remuneration as such director or having transaction not exceeding ten percent of his total income or such amount as may be prescribed with any of the above persons/companies during the current or two immediately preceding financial years. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 4 | Page

5. None of his relatives (i) is holding any security of or interest in the company, its holding, subsidiary or associate company during the two immediately preceding financial years or during the current financial year: Provided that the relative may hold security or interest in the company of face value not exceeding fifty lakh rupees or two per cent. of the paid-up capital of the company, its holding, subsidiary or associate company or such higher sum as may be prescribed; (ii) is indebted to the company, its holding, subsidiary or associate company or their promoters, or directors, in excess of such amount as may be prescribed during the two immediately preceding financial years or during the current financial year; (iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company, for such amount as may be prescribed during the two immediately preceding financial years or during the current financial year; or (iv) has any other pecuniary transaction or relationship with the company, or its subsidiary, or its holding or associate company amounting to two per cent. or more of its gross turnover or total income singly or in combination with the transactions referred to in sub-clause (i), (ii) or (iii);] 1. who, neither by himself or his relatives – 1. holds or has held the position of key managerial personnel or as employee of the company or any of its associate companies in any of the 3 financial years immediately preceding the year of his appointment. 2. is or has been an employee, proprietor or partner of the following during any of the 3 preceding financial years. § A firm of Auditors, Company Secretaries or Cost Auditors of the company or any of its associate companies. § Any legal or consulting firm which has or had transaction with the company in or any of its associate companies amounting to 10% or more of the gross turnover of the firm. 3. Holds, together with his relatives, 2% or more of the Voting power of the company. 4. Is a Chief Executive or director of any non-profit organization that receives 25% or more of its receipts from the company, any of its promoters, directors or its associate companies or that hold 2% or more of the total voting power of the company. 2. who is not a Managing/Whole Time/Nominee Director. 3. He shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the Company’s business. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 5 | Page

Tenure of Independent Director:- An Independent Director can, subject of provisions of section 152 of the Act, hold office for a term of 5 consecutive years. He can be appointed as such for a further term, not exceeding 5 years, if the members pass a special resolution and disclosure of such appointment is made in the Board Report. After the expiry of 10 years period he cannot be re-appointed as an Independent Director. He can, however, be appointed as such director after expiry of 3 years provided he was not directly or indirectly associated with the company in any other capacity either directly or indirectly. It may be noted that the period during which the Independent Director has held office as such director before the commencement of the new Act shall not be counted for computing the period of 10 years, stated above. Further, an Independent Director shall not be liable to retire by rotation as provided in section 152 (6) and (7) of the Act. The appointment of Independent Director shall be approved by the company in General Meeting as provided in section 152(2) of the Act. Remuneration to Independent Director:- An independent director shall not be eligible for any stock option as per section 149(9) of Act but may receive remuneration by way of fee provided under section 197(5) of the Act. Sitting fees for Board meeting and other committee meeting shall not be exceed Rs.1,00,000 per meeting. Limit of Directorship as an Independent Director: Unlisted Public Company – Not more than 10 companies, Listed company – Not more than 7 companies, Not more than 3 Listed companies, if such perosn is also a WTD in any Listed Company. Composition of Independent Directors: Note: SEBI (LODR) Regulations, 2015 applicable in place of Listing Agreement. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 6 | Page

SEBI REGULATIONS : It may be noted under Regulation 17 of SEBI LODR has provided as under. 1. The Board of Directors of a listed company shall have an optimum combination of executive and non-executive directors with at least one woman Director and not less than 50% of the Board comprising of non-executive directors. Uday Kotak Committee proposed that the Board of directors of the top 500 listed entities shall have at least one independent woman director by April 1, 2019 and the Board of directors of the top 1000 listed entities shall have at least one independent woman director by April 1, 2020. 1. Where the Chairman of the Board is a non-executive director, at least one-third of the Board shall comprise of Independent Directors. 2. If the company does not have a regular non-executive Chairman, at least 50% of the Board should comprise of Independent Directors. As per SEBI LODR regulation 25(1) No person shall be appointed or continue as an alternate director for an independent director of a listed entity. A person may serve as an Independent Director in maximum seven (7) listed companies. (b) Any person serving as a Whole-time Director in any listed company shall serve as an Independent Director in maximum three (3) listed companies. 2.Residential Director:- As per Section 149(3) of Companies Act,2013 every company shall have one director who has stayed in India for a total Period of not less than 182 days in the Previous calendar year. 3.Small Shareholders Directors:- A listed company, may upon notice of not less than 1000 or one-tenth of the total number of small shareholders, whichever is lower, have a Small Shareholders’ Director elected by the small shareholders. A listed company may suo moto (on its own accord) opt to have a director representing small shareholders. Thus the Small Shareholder’s Director’s appointment is optional and made available to listed companies only. 4.Women Director:- As per Section 149 (1) (a) second proviso requires certain categories of companies to have At Least One Woman director on the board. Such companies are any listed company, and any public company having- Paid Up Capital of Rs. 100 crore or more, or Turnover of Rs. 300 crore or more. 5. Additional Directors: Any Individual can be appointed as Additional Directors by a company under section 161(1) of the Companies Act, 2013. 6. Alternate Directors:- As per Section 161(2) A company may appoint, if the articles confer such power on company or if a resolution is passed (if an Director is absent from India for at least three months). ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 7 | Page

ü An alternate Director cannot hold the office longer than the term of the Director in whose place he has been appointed. ü Additionally, he will have to vacate the office, if and when the original Director returns to India. ü Any alteration in the term of office made during the absence of the original Director will apply to the original Director and not to the Alternate Director. 7. Shadow Director:- A person, who is not appointed to the Board, but on whose directions the Board is accustomed to act, is liable as a Director of the company, unless he or she is giving advice in his or her professional capacity. 8. Nominee Directors:- They can be appointed by certain shareholders, third parties through contracts, lending public financial institutions or banks, or by the Central Government in case of oppression or mismanagement. 9. Difference Between Executive and Non-Executive Director:- An Executive Director can be either a Whole-time Director of the company (i.e., one who devotes his whole time of working hours to the company and has a significant personal interest in the company as his source of income), or a Managing Director (i.e., one who is employed by the company as such and has substantial powers of management over the affairs of the company subject to the superintendence, direction and control of the Board). In contrast, a non-executive Director is a Director who is neither a Whole-time Director nor a Managing Director. COMPOSITION OF BOARD OF DIRECTORS The board of directors can be called as the brain of the company. They are responsible for taking all the big decisions and making policy changes. These decisions are taken in meetings of members of the board held together, called ‘Board Meetings’. Section 149 of the Companies Act states that every company’s board of directors must necessarily have a minimum of three directors if it is a public company. two directors if it is a private company Maximum 15 directors can be appointed in any format of Company (OPC, Public, Private), Bypassing Special Resolution Company can increase the number of Directors beyond 15. Out of appointed directors at least one director, who has lived in India for a minimum of 182 calendar days of the previous year, shall be appointed by every company’s board. It is a mandatory rule. The maximum number of companies that an individual can become a director of, is 20 companies. All listed companies must have at least one-third proportion of their board of directors as independent directors and At least, one woman director must be appointed. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 8 | Page

For Listed Companies as per Listing Obligations and Disclosure Requirements: The members of the board shall have an optimum combination of executive and non- executive directors and at least one woman director. At least 50% of the board of directors must be non-executive directors. Where chairman is a non-executive director, At least one-third directors shall be made up of independent directors. Where company does not have regular non-executive director chairman, a minimum of half of the board of directors shall comprise of independent directors. However, in case a non-executive chairman is a promoter of the said listed company or directly related to a promoter or a high-level manager, at least half of all directors should comprise of independent directors. Appointment of Directors In public or a private company, a total of two-thirds of directors are appointed by the shareholders. The rest of the one-third remaining members are appointed with regard to guidelines prescribed in the Article of Association. In the case of a private company, their Article of Association can prescribe the method to appoint any and all directors. In case the Articles are silent, the directors must be appointed by the shareholders. The Companies Act also has a clause that permits a company to appoint two-thirds of the company directors to be appointed according to the principle of proportional representation. This happens if the company has adopted this policy. Nominee directors will be appointed by third party authorities or the Government to tackle mismanagement and misconduct. The duties of directors are to act honestly, exercise reasonable care and skill while performing their duties on behalf of the organization. Appointment of Managing Directors A managing director must be an individual (a real person) and can be appointed for a maximum period of five years. There is no age limit laid down under the Act. However, if the company is appointing: Managing Director, Manager, Whole Time Director, Then in such case it attracts the provisions of section 196(3)(a) which lays down that no company shall appoint or continue the employment of any person as its managing director, whole time director or manager who is below the age of twenty one years or has attained the age of 70 years. However special resolution can be passed with justification of such appointment stated in notice (in explanatory statement to the Special Resolution). ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 9 | Page

SEBI (LODR) Regulations, 2015: For appointment of independent director, there is mention of requirement of minimum age of 21 years under clause 16(1)(vii) of the LODR Regulations. A managing director of a pre-existing company can be appointed as a managing director of another company as long as the board of directors of the first company are aware and approve of this new appointment. Disqualifications of Directors: Section 164, 188, 152 and 165 1. He is of unsound mind; 2. He is an undischarged insolvent; 3. He has applied to be adjudicated as an insolvent and his application is pending; 4. He has been convicted by a court of any offence, involving moral turpitude or not, and sentenced for imprisonment for not less than six months and a period of five years has not been elapsed from the expiry of date of sentence. 5. Further, in case a person has been convicted and sentenced for more than seven years or more, then he shall not be eligible for appointment as Director in any Company; 6. An order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force; 7. He has been convicted of an offence with respect to related party transactions at any time during the last preceding five years; 8. He has not paid any calls in respect of any shares of the Company held by him, and six months have elapsed from the last day fixed for the payment of the call; 9. He has been appointed as an Director in Company without Director Identification Number (DIN); 10. He is a Director in more than twenty Companies violating the limits as specified in Section 165 of the Companies Act, 2013. 11. The status of the Director in this case would be “Disqualified due to non-filing of DIR-3 KYC” on the MCA portal. 12. The status of the Director in this case would be “Director of ACTIVE non-compliant company” due to non-filing of ACTIVE Form (INC-22A). 13. In case he is appointed as a Director in a Company which: · has not filed financial statements or annual returns for any continuous period of three financial years; or · has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, then the person shall not be eligible to be the Director for five years from the date on which the said company fails to do so. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 10 | Page

Rotation of Directors As per section 152(6) of the Companies Act, 2013 at every AGM out of total directors (excluding independent directors and nominee directors) 2/3rd of the directors are liable for rotation and if such numbers are in decimals then it should be rounded off to next number. Out of these 2/3 directors Minimum 1/3rd directors must retire at the AGM and if such number are in decimals then it should be rounded off to nearest number. The directors who retire by rotation are those who has been longest in the office as compare to others. (i. e on FIFO basis) MD and WTD can be set aside for rotation of directors. However if such 2/3rd or 1/3rd conditions are not satisfying then you have to include them in retirement. However if they get retire by rotation, they can be reappointed in same AGM if they are not disqualified for reappointment. Note - This rotation conditions are not applicable to private company, 100% Government company and its subsidiary company. Removal of Directors The company in general meeting A company can remove a director from the board before his term of office expires. They can pass a resolution in a general meeting upon special notice. · This does not apply to a director appointed by the Central Government. · This does not apply to companies who have adopted two-thirds of its directors by the principle of proportional representation. · Directors appointed by financial institutions under an agreement like IDBI, IFCI under their respective acts. · Directors that have been appointed by the Board for Industrial and Financial Reconstruction. Removal by the Government A director can be removed from office under advice from Central Government. The Central Government chooses to use this power on the recommendation of the Company Law Board/National Company Law Tribunal. Duties of Directors The duties of directors and the Board are primarily responsible for leading the organisation on behalf of the stakeholders. As well as they are responsible for ensuring the legal entity of the company. It means that the company must remain viable and properly functioning in the present and the future as well. Under the common law, directors have to be honest, exercise delicacy and skill when dealing with company issues, while working on behalf of the company. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 11 | Page

Duties of Directors: · Deciding the company’s future goals and priorities. · Communicating with the stakeholders to inform them of the company’s growth and ensuring their input plays a part in the company’s future. · Checking the external market conditions to ensure that the company is headed in the right direction. · Monitoring the performance of employees and encouraging them to achieve their targets is one of the primary duties of directors. · Setting the budget for the company’s operations and keeping tabs on the profit and loss margin. · Reporting back to the stakeholders at the Annual General Meeting (AGM). · Establishing rules and regulations and forming policies that everyone in the company would follow. · Making sure the organisation has a good system of governance and that there is no gap in communication. · Being in an advisory capacity to the CEO. · Doing effective risk management assessment. Code of Conduct · To not use company information for personal gain or insider training. · To not take advantage of the power of their authority. · Avoid conflict of interest between personal interests and the company. · To maintain the reputation of the organisation and not do anything that could dishonour the company. · To diligently follow the lead and orders of the Chief Executive Officer of the company and not go against him. · Attend all board meetings and give useful insights and ideas. · Respect the authority of fellow colleagues. · To have a debate in a logical, calm-headed manner and come to conclusion with the approval of the majority. · Maintain confidentiality about important company information. Not to leak it to the press or competition which will be detrimental to the company’s growth. · To accept the decisions once they have been passed. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 12 | Page

· Act in an honest, professional and respectful manner with members of the board and employees of the company. · Recognise that all is his actions must lead to proper growth and development of the company. · Perform the duties assigned to them without fail. Code of conduct is an effective tool to define the things expected from the directors and to make them understand which behaviour is appropriate and which behaviour is not. BOARD MEETINGS The board of directors is the supreme authority in a company and they have the powers to take all major actions and decisions for the company. The board is also responsible for managing the affairs of the whole company. As per Section 173 of the Companies Act, 2013 and Secretarial Standards 1, all companies whether private limited companies or public companies are required to hold at least four meetings of its Board of Directors in each quarter every year where the gap between two consecutive board meetings is not more 120 days. Section 173 of Companies Act, 2013 provides that In the case of a Public Limited Company, the first board meeting has to be held within the first 30 days, since the incorporation date. In the case of small companies or one-person company, at least two meetings must be conducted, one in each half of the financial year. In a situation where the meeting is held at a short notice, at least one independent director must be attending the meeting. In case of a Section 8 company, the Board of Directors of the company shall hold at least one meeting within six calendar months. In case of an OPC, if there is only one director on the Board of Director, the quarterly board meetings are not required to be held. However, if the OPC has more than one director or in case of small or dormant companies, it will suffice the requirement, if they hold at least one meeting in each half of the calendar year and the gap between two meetings should not be less than ninety days. Further, any business which is required to be transacted at the meeting of the Board of Directors of a company, it shall be sufficient if, in case of such OPC, the resolution by such director is entered in the minutes book. Notice of Board Meeting The notice of Board Meeting refers to a document that is sent to all directors of the company. This document informs the members about the venue, date, time, and agenda of the meeting. All types of companies are required to give notice at least 7 days before the actual day of the meeting to every director of the company. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 13 | Page

Shorter Notice: A meeting of Board of Directors can be called by shorter notice subject to the conditions: · If the company is require to have independent director:- v Presence of at least one Independent director is required. v In case of absence, decision taken at such meeting shall be circulated to all the directors, and shall be final only on ratification thereof by at least one Independent Director · In case the company does not have an Independent Director: v the decisions shall be final only on ratification thereof by a majority of the Directors of the company, unless such decisions were approved at the Meeting itself by a majority of Directors of the company. As per Secretarial Standards-1 effective from 1 July 2015, a company is required to state the fact that the board meeting is convened at a short notice in the notice calling the meeting. However, the Companies Act 2013 is silent in this regard Quorum for the Board Meeting The quorum for the Board Meeting refers to the minimum number of members of the Board to conduct a valid Board Meeting. According to Section 174 of Companies Act, 2013, the minimum number of members of the board required for a meeting is 1/3rd of a total number of directors. At any rate, a minimum of two directors must be present. However, in the case of One Person Company, the Section 174, does not apply. Participation in Board Meeting All directors are encouraged to actively attend board meetings and in case that’s not possible at least attend the meetings through a video conference. This is so that all directors can take part in the decision-making process. A director participating in a meeting through video conferencing or other audio visual means (OAVM) shall be counted for the purpose of quorum. Director who intends to participate through video conferencing / OAVM shall give prior intimation at the beginning of calendar Year to Chairman / CS of the Company (In the absence of intimation it shall be assumed that Director will attend in person). Such declaration is valid for the One calendar Year. A company cannot restrict a director from participating in a meeting through video conference if he has not given intimation at the beginning of the year. If Director has given an intimation to the company or chairman on receipt of the notice calling the board meeting, it would be sufficient requirement for attending the meeting through video conferencing. The matters which cannot be considered at a meeting held through video conferencing or other audio /visual means As per Rule 4 of the Companies (Meetings of the Board and its Powers) Rules, 2014, ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 14 | Page

following matters shall not be considered through video conferencing or other audio/ visual means: (i) Approval of annual financial statements; (ii) Approval of boards report; (iii) Approval of prospectus; (iv) Audit Committee Meetings for consideration of financial statement including consolidated financial statement, if any, to be approved by the Board of Directors pursuant to Section 134(1) of the CA, 2013; (v) Approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover. Participation of Interested Director in meeting As per provisions of Section 188 of the CA 2013, if any director is directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement then such director shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting. However, in case of a private limited company, as per notification No. GSR 464E dated 5th June 2015, an interested director can participate and vote in a board meeting after disclosing his interest in the particular transaction. The interested director, will be included for the purpose of determining the quorum of the meeting. Powers of Board of Directors According to Section 179, CA 2013, the powers of the board of directors are as follows. · Board of Directors can exercise all such powers for which the company is authorised. · Board of Directors can take all actions on matters in which the company has authority. Power of Board subject to other Provisions’ While using the power vested in the board of directors, the board must adhere to the rules and provisions of the following – 1. The Companies Act 2. The Memorandum of Association 3. The Articles of Association 4. Any Regulation, made by the company during general meetings. The power of the board can be restricted by the Companies Act, the Memorandum, the Articles. Resolutions passed by shareholders can also limit the powers of the board. The board of directors are not allowed to exercise any power or take any decisions, which are specifically to be exercised or a decision to be taken in a General Meeting. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 15 | Page

New Regulations does Not Invalidate Acts made by the Board According to Section 179, Companies Act 2013, any resolutions that are passed in a General Meeting cannot invalidate any provisions that the board of directors made prior to the resolution. Power Exercised by Passing Resolution at Board Meetings There are also certain powers of the board that those resolutions can only be passed by calling a board meeting. This is done as per Section 175, Companies Act 2013. Thus, the board of directors can exercise the following powers, only by passing a resolution in the meetings of the board: · Make calls on shareholders · Authorise the buyback of securities and shares · Issue securities and shares · Borrow monies · Investing the funds · Grant loans · Approve the financial statement · Approve amalgamation/merger · Diversify the business · Take over a company Also, in accordance with Section 117, a copy of every board resolution must be submitted with the Registrar within 30 days of the passing of the resolution. In addition to this, Rule 8 of Companies Rules 2014 has given certain more powers to the board. Namely, resolutions that can be passed at board meetings: 1. Making political contributions 2. Appointing or removing key managerial personnel. 3. Appointing internal auditors and secretarial auditors. The Delegation of Powers of the Board The Board of Directors may delegate powers such as investing monies, granting loans, giving guarantee or security by passing a resolution in the board meeting: 1. Committee of Directors 2. Managing Director ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 16 | Page

3. Manager 4. Any other principal officer of the company 5. The principal officer of a branch office Restrictions of Powers of the Board In accordance with provisions of Section 179, the company can impose restrictions and conditions on the power of the board of directors. Moreover, the shareholders are responsible for imposing restrictions and conditions of the power of the board. Thus, the shareholders pass an ordinary resolution at a general meeting to do this. ANNUAL GENERAL MEETING As per Companies Act, an annual general meeting must be held by every company once a year without fail. There cannot be a gap of more than 15 months between two AGMs. However, the first AGM of a company can be held at any date, within a period of 18 months, since the date of incorporation of the company. Annual general meetings help members understand the company’s rate of growth and potential for improvement. An AGM gives insights into what steps made the company more successful and which steps caused loss. AGM can be held any day between 9am to 6pm except on national holiday and to be held at registered office or within the city of registered office of the company. Unlisted company can be held any place in India if the consent is given by writing or electronic mode by all the members of the company w.e.f 13/06/2018.If the Government declares a public holiday on the day of the scheduled AGM, it will be considered as a proper AGM. Legal Requirements for holding an Annual General Meeting Legally, a notice period of 21 days must be given to all the members before the meeting. However, there is an exception to this rule. If all the voting members consent, the meeting may be held at an earlier date. Further, the following documents are also to be sent with the notice. Articles of Association, company bylaws, and jurisdiction specifies the rules that govern annual general meeting. · Copy of annual accounts of the company · Director’s report on the company’s position for the given year · Report by the Auditor of the annual accounts. Members are allowed to use proxies in their absence. The proxy does not need to be a member of the company. However, the proxy forms have to be submitted to the company at least 48 hours before the meeting. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 17 | Page

Quorum for Annual General Meeting : Unless the articles of the company state otherwise, the quorum for an Annual General Meeting is as follows · Public companies: Number of Members as on the Date of Meeting Quorum (Personally Present) Not More than - 1000 5 Members More than – 1000 & Not More than - 5000 15 Members More than - 5000 30 Members · Private Limited Companies – At least 2 members Issues to be Undertaken at Annual General Meeting The issues of business undertaken at a typical annual general meeting are listed as follows: · The declaration of dividend among shareholders · Consideration of annual accounts · Discussion of the director’s report and the auditor’s report · Appointment and fixing of the remuneration of the statutory auditors · Appointing replacement directors in place of existing directors retiring To address any issue other than the five mentioned above, a special notice regarding the issue is to be served to members before the meeting. This is sent with the notice for calling the meeting. KEY MANAGERIAL PERSONNEL UNDER COMPANIES ACT, 2013 Under Section 2 of the Companies Act 2013, Key Managerial Personnel in reference to a company are as follows: Chief Executive Officer/Managing Director, Company Secretary Whole Time Director, Chief Financial Officer. Appointment of Key Managerial Personnel Section 203 of the Companies Act 2013 has the provisions for the appointment of key managerial personnel. The Board appoints them. Also, the Board of Directors is responsible to fill any vacancies in the KMP within a period of six months. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 18 | Page

It is mandatory for any listed company and any company with a paid up capital of more than or equal to 10 crore to appoint a whole time company secretary. Secretarial audit must for company having outstanding loans or borrowings from banks/PFIs of 100 crore or more Roles and Responsibilities of Key Management Personnel The KMPs are basically are basically responsible for taking the most important decisions and managing all the employees. They are also liable if they do not follow compliances laid down by the Companies Act 2013. The growth and development of the company depend on the effectiveness of the KMPs at their jobs. The main responsibilities and functions of the KMP are: · As per Section 170 of the Companies Act, the details about the securities held by the KMPs in the company or its holdings and subsidiaries must be disclosed and thus recorded in the Register. · KMPs have a right to voice their opinion especially in meetings of the Audit Committee. However, they don’t have a voting right. · According to Section 189, Companies Act, KMPs should disclose their interests in other companies and associations, at least within 30 days of the start of the employment period. AUDIT COMMITTEE Section 177 of the Companies Act,2013 and Rule 6 and 7 of Companies (Meetings of Board and its Powers) Rules,2014 deals with the Audit Committee. Applicability of Audit Committee: The Board of directors of every listed companies and the following classes of companies, as prescribed under Rule 6 of Companies (Meetings of Board and its powers) Rules,2014 shall constitute an Audit Committee. (i) all public companies with a paid up capital of Rs.10 Crores or more; (ii) all public companies having turnover of Rs.100 Crores or more; (iii) all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs.50 Crores or more. The paid up share capital or turnover or outstanding loans, or borrowings or debentures or deposits, as the case may be, as existing on the date of last audited Financial Statements shall be taken into account for the purposes of this rule. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 19 | Page

The Audit Committee shall consist of a minimum of 3 directors with independent directors forming a majority. The majority of members of Audit Committee including its Chairperson shall be persons with ability to read and understand, the financial statement. The Board’s report under section 134(3) shall disclose the composition of an Audit committee and where the Board had not accepted any recommendation of the Audit Committee, the same shall be disclosed in such report along with the reasons there for. Composition: The meetings of Audit Committee can be held through video conference except the meeting where financial statements including consolidated financial statements is considered for approval u/s.134(1). Functions of Audit Committee: Every Audit Committee shall act in accordance with the terms of reference specified in writing by the Board which shall, inter alia, include,— (i) the recommendation for appointment, remuneration and terms of appointment of auditors of the company; (ii) review and monitor the auditor’s independence and performance, and effectiveness of audit process; (iii) examination of the financial statement and the auditors’ report thereon; (iv) approval or any subsequent modification of transactions of the company with related parties; (v) scrutiny of inter-corporate loans and investments; (vi) valuation of undertakings or assets of the company, wherever it is necessary; (vii) evaluation of internal financial controls and risk management systems; (viii) monitoring the end use of funds raised through public offers and related matters. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 20 | Page

Powers of Audit Committee: The Audit committee shall have the authority – · To call for the comments of the auditors about internal control systems, the scope of audit, including the observations of the auditors and review of financial statement before their submission to the Board · To discuss any related issues with the internal and statutory auditors and the management of the company. · To investigate into any matter in relation to the items or referred to it by the Board · To obtain professional advice from external sources · To have full access to information contained in the records of the company. The auditors of a company and the KMP shall have a right to be heard in the meetings of the Audit Committee when it considers the auditor’s report but shall not have the right to vote. As per Section 177 of CA, 2013 read with Rule 6 and 6A of the Companies (Meetings of Board and its Power) Rules, 2014, a company is required to obtain approval of the Audit Committee for all the transactions entered into with related parties. Also, the Audit Committee has an option to grant omnibus approval which shall be valid for a period of one financial year. Establishment of Vigil Mechanism: Every listed company and the companies belonging to the following class or classes, as prescribed under Rule 7 of Companies (Meetings of Board and its powers) Rules,2014 shall establish a vigil mechanism for their directors and employees to report their genuine concerns or grievances- · Companies which accept deposits from the public · Companies which have borrowed money from Banks and PFI in excess of Rs.50 Crores. Mandatory Companies Other Companies The companies which are required to The Board of directors shall nominate a constitute an audit committee shall operate director to play the role of audit the vigil mechanism through the audit committee for the purpose of vigil committee and if any of the members of the mechanism to whom other directors committee have a conflict of interest in a and employees may report their given case, they should recuse themselves concerns and the others on the committee would deal with the matter on hand. The existence of the mechanism may be appropriately communicated within the organization. The details of establishment of Vigil mechanism shall be disclosed by the company in the website, if any, and in the Board’s Report. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 21 | Page

Safeguard to employees & Directors: The vigil mechanism shall provide adequate safeguards against victimization of employees and directors who avail of the Vigil mechanism and also provide for direct access to the chairperson of the Audit committee or the director nominated to play the role of audit committee, as the case may be, in exceptional cases. Action against Frivolous complaints: In case of repeated frivolous complaints being filed by a director or an employee, the audit committee or the director nominated to play the role of audit committee may take suitable action against the concerned director or employee including reprimand. Penalty: Company - `Fine of Rs.1 Lakh to Rs.5 Lakhs Officer in Default - Imprisonment up to 1 year or Fine of Rs.25,000/- to Rs.1,00,000 or Both AUDITOR: As per Sections 139 to 148 of the Companies Act, 2013 along with Companies (Audit and Auditors) Rules, 2014, deal with the provisions with respect to various aspects regarding Auditors. Below is the summary of all the sections within the ambit of this Chapter: Section Section Title 139 Appointment of Auditors 140 Removal, Resignation of auditor and giving of special notice. 141 Eligibility, qualifications and disqualifications of auditors. 142 Remuneration of auditors. 143 Powers and duties of auditors and auditing standards. 144 Auditor not to render certain services. 145 Auditors to sign audit reports, etc. 146 Auditors to attend general meeting. 147 Punishment for contravention. 148 Central Govt to specify audit of items of cost in respect of certain companies. (Cost Audit) ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 22 | Page

SECTION 139 – Appointment of Auditors: 1) Appointment of Auditors other than First: A company shall, at the 1st AGM, appoint an individual or an audit firm (always includes LLP) as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its 6th AGM i.e Five Years and thereafter till the conclusion of every 6th AGM. 2) Appointment of First Auditors: However, the first Auditors of a company are to be appointed always by the BOD within 30 days of registration of company and in case of failure to do so, the members shall be informed who shall within 90 days at an EGM appoint such auditor and such auditor shall hold office till conclusion of 1st AGM. 3) Ratification at every AGM : Company shall place the matter relating to such appointment for ratification by members at every AGM. Note : If the appointment is not ratified, the rules prescribe that the Board of Directors shall appoint another individual or firm as its auditor or auditors after following the procedure laid down in this behalf under the Act. 4) Compliance after Appointment by Company: A Company shall inform the auditor of his appointment & is to file a notice of appointment with ROC within 15 days of the meeting in which auditor is appointed. (Form ADT – 1) 5) Mandatory Rotation of Auditors in case of Listed Companies & Certain classes of Companies : All Listed companies and Companies prescribed by CG shall not appoint or re-appoint– · an individual – for more than one term of 5 consecutive years · an audit firm – for more than two terms of 5 consecutive years Classes of Company prescribed by CG under the Rules : (a) all unlisted public companies having paid up share capital of rupees ten crore or more; (b) all private limited companies having paid up share capital of rupees twenty crore or more; (c) all companies having paid up share capital of below threshold limit mentioned in (a) & (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 23 | Page

Cooling Period: An individual or audit firm as the case may be who/which has completed the abovementioned terms shall not be eligible for re-appointment as auditor in the same company for 5 years from the completion of such term Common Partners Restriction: As on the date of appointment, no audit firm having a common partner/s to the other audit firm, whose tenure has expired in a company immediately preceding the F.Y., shall be appointed as auditor of the same company for a period of 5 years. Comptroller & Auditor General of India (CAG): CAG appoints the statutory auditors of a Government company under Section 139 (5) & (7) of the Companies Act, 2013. CAG has a right to conduct a supplementary audit and issue comments upon or supplement the Audit Report of the statutory auditor. Statutes governing some corporations require that their accounts be audited by the CAG and a report be given to the Parliament. ACCOUNTS OF COMPANIES: ( Sec 128 to 138, Schedule III ) Some of the important provisions in relation Accounts of Company as per Act: ü Accounts to be kept at Registered office of the Company, ü Accounts which needs to be kept for 8 financial years, ü Re-opening of accounts – up to 8 Years ü Voluntary revision of financial statements or board’s report - Preceding 3 FY’s, approval of tribunal. Birds eye view of various provisions under Companies Act, 2013, 2013 with respect to Accounts: S.No Section Highlights of section in brief 1 128 To be kept at Registered office: Books of account etc. of the Company (including its branch or office) shall be prepared and kept at its registered office 2 128 To be kept for 8 FY’s: The books of account including all vouchers relevant to any entry shall be kept for the period of not less than 8 FY’s immediately preceding FY 3 129 True and fair/Accounting standard/Schedule III: The financial statement shall give true and fair view, comply with accounting standards and prepared in form as provided in schedule III 4 129 Lay before AGM: The BOD shall lay the financial statements at every AGM. 5 129 Consolidated financial statement: Where company has one or more subsidiaries or associate companies, in addition to financial statement prepare a consolidated financial statements. Also required separate ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 24 | Page

S.No Section Highlights of section in brief 6 130 statement containing silent feature of subsidiaries and 7 131 associates Co. 8 132 Re-opening of accounts : 9 133 10 134 A Company can open and recast its books of accounts upto 8 FYs based on application made by the Central Govt, Income Tax Department, SEBI, any other statutory body or (any person concerned-fees Rs. 5000) and by an order court or tribunal to rectify the earlier accounts if: a) the accounts are prepared in fraudulent manner; or b) affairs of the Company are mismanaged during the said period for which the financial statements seem to be unreliable. Voluntary revision of financial statements or board’s report: If appears to Directors that FS not comply with section 129 or section 134- may prepare revised financial statements or report in respect of any of preceding 3 FY’s after obtaining approval of tribunal on application made. Constitution of National financial reporting authority (NFRA): Central Govt. may constitute NFRA – to provide for matters related accounting and auditing standard – have power to investigate for such class of body corporate or persons into the matter of professional misconduct of any member CA or firm of CA under ICAI (provided that no other institute or body shall initiate of continue any proceeding where NFRA has initiated has initiated an investigation). – have the same power of civil code under code of civil procedure Central Govt. to prescribed accounting standard as recommended by ICAI and after consultation with NFRA Approval & signing of financial statement (FS), Board Report (BR): FS (including consolidated FS-if any) – approved by BOD, signed by chairperson (if authorise) or by two Director (out of that one MD-if any) and CEO/CFO/CS wherever appointed, One person Co.- only by one Director for submission to auditors for his report. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 25 | Page

S.No Section Highlights of section in brief 11 135 12 136 Board Report –signed by chairperson (if authorise) or by two 13 137 Director (out of that one MD-if any) or director where there 14 138 is one director. Signed FS include- notes forming part, audit report and Board report Corporate Social Responsibility (CSR):- – Applicable to Co. having networth of Rs. 500 Crores or more or turnover of Rs. 1000 Crores or more or net profit of Rs. 5 Crore or more in immediate preceding FY. – Need to spend at least 2% of average net profit of preceding 3 FY’s – Need to constitute CSR committee and comply with other provisions Audited FS need to send to each member before 21 days of general meeting (refer other provisions). Refer this section if listed Co. / foreign subsidiary / subsidiary Co. etc.) Copy of FS to be filled with Registrar: – within 30 days of AGM – within 180 days from closure of FY (in case of 1 person Co.) – attached accounts of subsidiaries incorporated outside India (where not audited/not required in local laws of that country then English translation of unaudited FS) Internal audit: Companies required to appoint internal auditors – Listed Co. – Unlisted public Co. (in preceding FY- paid up share capital of Rs. 50 crores or more or turnover Rs. 200 crores or more or O/s loan or borrowing from banks or public financial institutions of Rs. 100 crores or more or o/s deposit of Rs. 25 crores or more – Private Co.- in preceding FY – Turnover of Rs. 200 Crores or more or O/s loan or borrowing from banks or public financial institutions of Rs. 100 Crores ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 26 | Page

PROSPECTUS: Section 2(70) Prospectus can be defined as “any document which is described or issued as a prospectus”. This also includes any notice, circular, advertisement or any other document acting as an invitation to offers from the public. Such an invitation to offer should be for the purchase of any securities of a corporate body. Statement in lieu of prospectus: Every public company either issue a prospectus or file a statement in lieu of prospectus. This is not mandatory for a private company. But when a private company converts from private to public company, it must have to either file a prospectus if earlier issued or it has to file a statement in lieu of prospectus. Types of the prospectus as follows: 1) Red Herring Prospectus, 2) Shelf Prospectus, 3) Abridged prospectus, 4) Deemed Prospectus Shelf Prospectus: Shelf prospectus can be defined as a prospectus that has been issued by any public financial institution, company or bank for one or more issues ( phase wise) of securities or class of securities as mentioned in the prospectus. Information Memorandum [Section 31(2)] : The company which is filing a shelf prospectus is required to file the information memorandum. It should contain all the facts regarding the new charges created, what changes have undergone in the financial position of the company since the first offer of the security or between the two offers. Valid for One year. Red Herring Prospectus : Red herring prospectus is the prospectus which do not have the complete particulars about the quantum of the price of the securities. A company may issue a red herring prospectus prior to the issue of prospectus when it is proposing to make an offer of securities. Abridged Prospectus: The abridged prospectus is a summary of a prospectus filed before the registrar. It contains all the features of a prospectus. An abridged prospectus contains all the information of the prospectus in brief so that it should be convenient and quick for an investor to know all the useful information in short. Generally this is filed before filing the Prospectus. Deemed Prospectus: When any company to offer securities for sale to the public, allots or agrees to allot securities, the document will be considered as a deemed prospectus through which the offer is made to the public for sale. The document is deemed to be a prospectus of a company for all purposes and all the provision of content and liabilities of a prospectus will be applied upon it. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 27 | Page

MISCELLANEOUS TOPICS IN BRIEF FOR EXAMINATION: 1.Compliance with Schedule IV: Both the company and independent directors have to comply with the provisions specified in Schedule IV. The essence of guidelines is that professional conduct is expected from independent directors i.e Code of conduct of ID. 2.Political Contributions: Section 182 of the Companies Act, 2013 deals with the prohibitions on contributions to political parties. 1) All companies except Government companies and companies in existence for less than 3 years are covered by this section; 2) The maximum amount that a company can contribute to a political party(ies) in year shall not exceed 7.5% of its average net profits during the three preceding financial years; 3) Before making the contribution, the Board should approve of the same by way of resolution passed at its Board meeting. 3. Corporate Social responsibility ( CSR): Section 135(5) of the Act, the first of its kind, requires both public and private companies in India which have (1) net worth of Rs. 500 crore or more; or (2) turnover of Rs. 1000 crore or more; or (3) net profit of Rs. 5 crore or more; in any of the previous 3 financial years to contribute to CSR initiatives. The board of the company should ensure that the company contributes 2% of its average net profit during the 3 preceding financial years to CSR activities.. The CSR activities should not be undertaken in the normal course of business and must be with respect to any of the activities mentioned in Schedule VII of the 2013 Act. Contribution to any political party is not considered to be a CSR activity and only activities in India would be considered for computing CSR expenditure. Note: CSR Committee shall consist of 3 or more directors out of which one director shall be independent director 4. Deposits : Sec 73 to 76 of the Companies Act 2013 read with Rules made under Chapter V of the Companies Act, 2013 regulate the invitation and acceptance of deposits. The eligible companies can accept deposits from the public i.e, public company, With net worth of Rs. 100 crore or turnover of Rs. 500 crore. Deposits cannot be for less than 6 months or more than 36 months, Less than 6 months permitted for short term requirements. Deposit amount cannot exceed 10% of the aggregate paid up share capital and free reserve. Penalty: · Company is liable for Rs. 1 crore to 10 crore. · Individual would be liable for 25 lakh to Rs. 2 Crore & 7 years imprisonment or both. · Willful default would attract the liability of corporate frauds. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 28 | Page

5. Committiees required under Companies Act, 2013: The Committees mandated by the new Act are: i. Audit Committee-Section 177 ii. Nomination & Remuneration Committee-Section 178 iii. Corporate Social Responsibility(CSR) Committee-Section 135 iv. Stakeholders Relationship Committee-Section 178 Type of Audit Nomination & CSR Committee Stakeholders Relationship Company Committee Remuneration Independent Committee Directoir is required Not Applicable Committee on CSR Committee if: It Applies if the Private Not Applicable Not Networth >= 500 Cr Company has Company Turnover >= 1000 Cr 1000 or more Public Applicable Net Profit >= 5 Cr stock holders Unlisted Compnay Both the commitees are required If : Paid Up Capital >= 10 crores; or Turnover >=100 Crores: or Aggregate outstanading of Loans, Browings, Debentures and deposites >= 50 crores. Public Applicable Applicable It Applies if the Listed Company has Compnay 1000 or more stock holders Note: A director can't be a member in more than 10 committees (Audit and Stakeholders' Relationship) and Chairman of more than 5 committees across all the Boards of Indian listed companies. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 29 | Page

Non Mandatory Committees: Ø Corporate Governance Committee Ø Corporate Compliance committee Ø Risk management committee Ø Strategic committee Ø Capital expenditure (CAPEX) committee 6. Mergers & Acquisitions: Section 230 to 240 of the Companies Act, 2013 cover the statutory provisions governing M&As including arrangements involving companies, their members and creditors. Horizontal Mergers: The entities are in the same line of business in this form of merger. Vertical Mergers : Vertical Mergers is a business process where the companies are in different lines of business. A classic example of a vertical merger is between a company that is producing drinks and a company that is providing tetrapak containers for storing juices. Conglomerate Merger: It is a merger between two entities that are in totally different business segments. This form of merger is where businesses are not associated with each other in any way. A classic example of this is a merger between a food company and a finance company. Tripartite Merger: In this form of a merger, there would be three entities where the merger is between the target and the acquirer subsidiary. There will be some form of tripartite arrangement between the parties to the merger agreement. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 30 | Page

REASON OF M&A TERMS · Expansion and Diversification Amalgamation – means combination of two · Optimum Economic Benefit or more independent business corporations · De-risking Strategy into a single enterprise · Scaling up of operation for competitive Demerger– means transfer and vesting of an advantages undertaking of a company into another · Increase the Market capitalization company · Cost reduction by reducing overheads · Increasing the efficiencies of operations Reconstruction- means re- · Tax benefits · Access foreign markets organization of share capital in any manner; varying the rights of shareholders and/or creditors Arrangement- All modes of reorganizing the share capital, including interference with preferential and other special rights attached to shares 7. Compounding of Offences: The Companies Act, 2013 under its Section 441 holds following provisions for compounding of offences committed by companies or by any officer of any company under the Act : The defaulting company or the appropriate person/officer of the company in default shall only be liable for four types of punishments: which can either be the imposition of fines, fines or imprisonment, fine with imprisonment or imprisonment only. Offences under the first two categories can be compounded while the 3rd and 4rth category offence are not permitted under compounding provisions. 8. Related Party Transaction: “Related Party Transaction” means transaction in the nature of contract involving transfer resources, services or obligations between a company and a Related Party, regardless of whether a price is charged or not under the relevant provisions of the Companies Act, 2013, 2013 or the Listing Agreement or any other related law or regulation, etc. As per Section 188 of the Companies Act, 2013, Related Party Transactions are: a) Sale, purchase or supply of any goods or materials; b) Selling or otherwise disposing of, or buying, property of any kind; c) Leasing of property of any kind; d) Availing or rendering of any services; e) Appointment of any agent for purchase or sale of goods, materials, services or property; f) Such related party’s appointment to any office or place of profit in the Company, its subsidiary Company or associate Company; and g) Underwriting the subscription of any securities or derivatives thereof, of the company. ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 31 | Page

A Director who is also a member of a private company participate can and vote at a meeting for the transaction related to payment of remuneration to such directors Granting of Loan to its directors by a private company Sec 185 of the Companies Act, 2013 2013 restricts loans to directors including private limited companies. However as per the notification dated 6th Jun 2015, a private company may grant loan to its directors subject to fulfilment of all of the following conditions: Ø No body corporate has invested in the share capital of the company; Ø Borrowings from banks/financial institutions/any other body corporate is less than twice the paid up share capital of the company (OR) fifty crores whichever is lower; and Ø There is no subsisting default in repayment of existing borrowings at the time of the transaction. Loan given by a holding company to its wholly owned subsidiary company or a guarantee given or security provided by a holding company to any loan made to its wholly owned subsidiary As per the proviso to Section 185(1) loan given by a holding company to its wholly owned subsidiary company or a guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company is exempt from the purview of Section 185 of Companies Act, 2013, 2013 provided the same is utilised for the principal business activities by the subsidiary. Loans to Employees Vs Section 186 : There is a difference between advance and loan. Loan is lending of money with absolute promise to repay whereas advance is to be adjusted against supply of goods and services. Advance given to employees against current months salary will not be in the nature of loan and the same will not fall within the purview of Section 186. Hence loans and/or advances made by the companies to their employees, other than the managing or who-time director are not governed by the requirement of Section 186 of the CA,2013. Provision of interest free loans by Company? The Company shall not provide any loan without interest. As per Section 186(7) of the CA, 2013, no loan shall be given at a rate lower than the prevailing yield of one year, three-year, five year or ten-year Government Security closest to the tenor of the loan. Some of the Important FORMs to be filed with ROC: Form.2 Declaration by Director before appointment Form 12. Appointment / Resignation of Director CHG.1 Application for registration of creation, modification of charge DIR .3 Application for allotment of Director Identification Number (DIN) ADT 1 Information to the Registrar by Company for appointment of Auditor ADT 3 Notice of Resignation by the Auditor MGT 17 Form for filing annual return by a company. AOC 4 Form for filing financial statement and other documents with the Registrar SPICe Simplified Proforma for Incorporating Company Electronically ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 32 | Page

MULTIPLE CHOICE QUESTIONS ( MCQs) 1. Assets of a company belongs to A. Company B. Share holders C. Directors D. Promoters Answer: A 2. The first directors of a Public Company are appointed by the A. Public B. Share Holders C. Promoters D. Government Answer: C 3. How many names can be applied through form SPICe (INC-32)? A. Five B. One C. Three D. None of the Above Answer: B 4. Companies are now allotted a unique Number ________ in addition to their name A. PAN B. DIN C. TAN D. CIN Answer: D 5. Independent Directors are supposed to have true independence. Their professional independence is a subset of which one of the following pairs of fundamental principles A. Integrity and due care B. Integrity and Objectivity C. Integrity and professional competence D. Objectivity and professional behaviour Answer: B 6. Invitation to public offering any securities in case of Private Company are A. Prohibited B. Allowed C. Acceptable D. None of the Above Answer: A 7. What is the nominal value of share ? A. The book value of the share B. A fixed amount that represents the notional value of the share’s worth C. The current market value of the share as stock exchange D. The maximum value that can be paid for a share by buyer Answer: A ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 33 | Page

8. How do one can apply a name of company? A. RUN Service B. INC-32, SPICe C. (A) or (B) D. None of the Above Answer: C 9. Before joining a board, the Independent Director must look at? A. Diversity and expertise of the board B. Level of influence of the Chairman and Managing Director C. The Statute of other Directors D. Relationship amongst the board members Answer: A 10. The allotment of shares is a process where by a person’s name is entered into the register of members. A.True B. False Answer: A 11. Liability of a member in case of a Private Limited Company is A. Limited B. Unlimited C. Limited to the unpaid value of shares subscribed by him D. None of the Above Answer: C 12. The amount to be collected on application of shares should be: A. Not less than 5% of nominal value of shares B. More than 5% of called up price of shares C. Not more than 5% of paid up value of shares D. Not more than 5% of issue price of shares Answer: A 13. MOA should be in form ____ in case of company limited by guarantee not having share capital. A. Table F B. Table B C. Table A D. Table D Answer: B 14. What an Independent Director should understand before joining a board? A. Roles, responsibilities and liabilities of Independent Director B. History of the penalties on the company for noncompliance of Regulatory Framework C. Details of regulatory investigation on the company, its promoters or directors D. Track record of the companies sales and profits Answer: A, B & C ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 34 | Page

15. The dividend on preference capital is paid when : A. There are profits B. There is loss C. After dividend is paid to equity shares D. Even if there are no profits Answer: A 16. The liability of members, in case of a company limited by guarantee A. Unpaid value of shares B. Guarantee Amount C. Unlimited Liability D. None of the Above Answer: B 17. What to ask from self before joining a board? A. Whether you want to get noticed in the public B. Whether you wish to enhance your profile value C. Whether you are friendly with the existing board members D. Whether you are suitable and have expertise and time to add value to the company Answer: D 18. Transmission of shares takes place in the following case A. Theft of shares B. Sale of shares C. Operation of any law D. All of these Answer: C 19. In case of Guarantee Company having no share capital the liability of shareholders will be A. To the extent of guarantee B. Unpaid value of shares C. Unlimited D. None of the Above Answer: A 20. Contents of prospectus include the consent of the directors? A. False B. True Answer: A 21. In any proceedings, a director could seek relief on the ground that he or she acted honestly and reasonably and that having regard to all the circumstances of the case, such director ought to be executed. This is also referred to as: A. Safe Harbour B. Indemnities C. Red Flags D. Liability for Fraud Answer: A ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 35 | Page

22. Which company shares can be freely transferable? A. Private Company B. Public Company C. One Person Company D. None of the Above Answer: B 23. The following are different types of prospectus A. Abridged Prospectus B. Red herring Prospectus and Deemed Prospectus C. Shelf Prospectus D. All of the Above Answer: D 24. Who may be appointed as a director of a company? A. An Individual B. Body Corporate C. A Firm D. An Association Answer: A 25. Which one of the following statement is most likely to lead an effective code of ethics in any company? A. If the rules on ethical behaviour in the code of ethics are prescriptive and explicit B. When the unwritten code of ethics is effective in influencing behaviour C. If leadership reflects management’s personal values D. When management behaviour is congruent with the principle of corporate code of ethics Answer: D 26. The amount of capital that a company can issue at par value is called A. Authorised Capital B. Paid Up Capital C. Issued Capital D. Recorded Capital Answer: A 27. The Board of Directors can exercise the power to appoint directors in the case of. A. Additional Directors B. Filling up the Casual Vacancy C. Alternate Directors D. All the Above Answer: D 28. Which of the following is a governance failure in the case of Enron Corporation? A. Board Committee was in place but the overnight mechanism was not effective B. Audit Committee was not focused and failed to do its job C. Minimal Disclosures, Conflict of Interest, scandalous compensations to make the overnight mechanism and discharge of fiduciary responsibilities failed D. All of the Above Answer: D ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 36 | Page

29. Sec. 168 provides for the provisions related to A. Appointment of Directors B. Removal of Directors C. Vacation of Directors D. Resignation of Directors Answer: D 30. “Relative” as per the Companies Act, 2013 means with reference to any person, means anyone who is related to another, if they are members of a Hindu Undivided Family; they are husband and wife; or one person is related to the other in such manner as may be prescribed, which is as follows – A. True B. False Answer: A 31. It is mandatory for a director to hold minimum number of shares in the Articles of Association of a company. A. True B. False Answer: B 32. Every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting A. False B. True Answer: B 33. Time gap between to AGM’s should not exceed – A. 12 Months B. 15 Months C. 20 Months D. None of the Above Answer: B 34. Every AGM shall be called during business hours (9:00 a.m to 6:00 p.m) on any day that is not a National Holiday A. False B. True Answer: B 35. A Financial instrument which shows the obligation of the borrower towards the lender is known as Bond. A. True B. False Answer: A 36. What type of report is sent by the Directors to its members? A. Statutory B. Audit C. Annual D. None of the Above Answer: C ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 37 | Page

37. All General Meetings of a company, other than AGM and the Statutory Meeting are called – A. Statutory Meeting B. General Meeting C. Extraordinary General Meeting D. All of the Above Answer: C 38. A general meeting of company may be called ordinarily by giving not less than – A. 10 Days B. 21 Days C. 5 Days D. None of the Above Answer: B 39. Ms. Pranathi, a scientist, was appointed as an Independent Director on the Board of IT Ltd. She having no financial background seeks your help to enhance her financial knowledge. Ms. Pranathi had gone through the balance sheet of IT Ltd and had certain doubts. To start with she wanted to clarify what are the key heads of balance sheet? Choose the appropriate answer to clarify Ms. Pranathi. A. Assets, Liabilities and borrowings B. Assets, Liabilities and Owner’s Equity C. Current Assets and Current Liabilities D. Trade receivables and Trade payables Answer: B 40. Meeting given as an opportunity to the member to know and discuss on promotion and formation of the company is called A. General B. EGM C. Statutory D. None of the Above Answer: C 41. There must be at least one – woman director on the Board of every listed company and every other public company having A. Paid up share capital of Rs.100 Crores or more B. Turnover of Rs.300 Crores or more C. Both (A) and (B) D. Either (A) or (B) Answer: D 42. A Member who is related party is ………… entitled to vote on a Resolution relating to approval of any contract or arrangement in which such member is a related party A. Always B. Sometimes C. Not D. None of the above Answer: C ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 38 | Page

43. The concept of Executive and Non – Executive Director comes from A. SEBI Act, 1992 B. Listing Agreement C. Companies Act, 1956 D. None of the Above Answer: B 44. Section 135 of the Companies Act, 2013 lays down constitution, composition and the roles and responsibilities of the Corporate Social Responsibility Committee. A. Agree B. Disagree Answer: A 45. Every business transacted at an EGM is a business _____. A. Ordinary B. Special C. Both (A) and (B) D. None of the Above Answer: B 46. Which is not an explicit responsibility of most boards? A. Governance of the Organization B. Setting Strategic Direction C. Executive Planning D. Policy and Position Development Answer: C 47. In which of the following case, voting right can’t be exercised? A. Calls in advance B. Calls in arrears C. Both (A) and (B) D. None of the Above Answer: B 48. A Special Resolution is passed with _______. A. Simple Majority B. 60% majority of members present C. 75% D. None of the Above Answer: C 49. Which of the following is not a lesson learnt from Enron case? A. The committees of the board should be effective in their functions and duties B. Those occupying positions of responsibility should ensure due diligence in discharge of their duties be it independent directors or auditors C. One should ignore duty of care and duty of loyalty towards the company D. The processes followed in financial and Non-Financial matters should be governed by code or culture Answer: C ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 39 | Page

50. Remuneration Committee is made up of ________. A. Non – Executive Directors B. Executive Directors C. Auditors D. Investors Answer: A 51. Audit Committee shall act in accordance with the terms of reference to be specified by A. Statutory Auditors B. SEBI C. Board of Directors D. Central Government Answer: C 52. Which of the following are known as Board Committees? A. Audit Committee B. Remuneration Committee C. Nomination Committee D. All of these Answer: D 53.AGM should be held at A. Company B. Registered Office C. Corporate Office D. None of the Above Answer: B 54. Which of the following is the key to good corporate governance? A. The systems and process should provide assistance to the members of the board, independent directors B. Monitoring mechanism and responsibility of the board and sub committees should be robust C. Effective duty of care and duty of loyalty needs to be exercised by the Board D. All of the Above Answer: D 55. The Enron case highlights specific communication obligations of – A. Senior Management B. Employees of the Company C. Stakeholders D. Creditors of the Company Answer: A 56. Which of the following is the reason for Satyam’s failure? A. Weak auditing Process B. Ineffective board oversight costs C. Leader intent on committing fraud D. All of the Above Answer: D ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 40 | Page

57. In which of the four perspectives of a balanced scorecard would Return on Capital Employed (ROCE) be likely to appear? A. Financial B. Customer C. Internal processes D. Learning and growth Answer: A 58. Which of the following committee was formed after the Satyam’s Failure? A. Corporate Governance and Ethics Committee B. Corporate Governance and Ethical Committee C. Corporate Social Responsibility Committee D. Corporate Social and Ethics Committee Answer: B 59. Nomination and Remuneration Committee shall identify persons who are qualified to become _______. A. Statutory Auditors B. Cost auditors C. Secretarial Auditors D. None of the Above Answer: D 60. Independence, competence and commitment and role of auditors must be scrutinized by the audit committee in an effective manner- A. True B. False C. To be scrutinized by the board of directors D. To be scrutinized by the nomination and remuneration committee Answer: A 61. Executive Directors are those directors who A. are men from outside the Board B. occupy management position C. are independent directors D. elect the board committee Answer: B 62. Proxy should not be ________ of the company. A. Shareholders B. Members C. Both (A) and (B) D. None of the Above Answer: C 63. Which of the following would be considered a related-party? A. A director or his relative B. A Key Managerial Personnel or his relative C. A firm, in which a director, manager or his relative is a partner D. All of the above Answer: D ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 41 | Page

64. Criminal Liability for Misstatement will attract A. Imprisonment for a term which may not be less than six months but which may extend to 10 years; or B. Amount not less than the amount involved in fraud but it may extend to three times the amount of fraud; or C. Section 447 of the Companies Act, 2013 D. Any one of the Above Answer: C 65. Which best describes the difference between mission and strategy? A. The mission sets goals for the board of directors while the strategy sets targets for managers B. The mission includes objectives for the next five years whereas the strategy sets them out for just the year ahead C. Mission sets the vision of a business while strategy sets out the plan to achieve the mission D. The mission describes the business plan in words while the strategy sets it out in numbers Answer: A 66. A resolution shall be valid only if it is passed in respect of an item of business contained in the notice convening the meeting or it is specifically permitted under the Act - A. True B. False C. The item of business need not be included in the notice convening the meeting D. No provision under the Act is required for passing the resolution Answer: A 67. Which of the following conclusions could be drawn if the gross profit ratio falls from 25% to 18%? a) There has been a deliberate change in trading policy b) There has been a mistake in counting or valuing closing inventory c) There has been an increase in costs which could not be passed on to the customers d) There has been shop-lifting by customers or pilferage by staff not accounted for A. b, c & d B. All Four C. a, b & c D. a & b Answer: A 68. A company decides to hold its AGM on a given day and Ex PM of India dies on that day. The GOI declares a holiday. Will the meeting be postponed? A. No B. No, because only national holidays are exempted when AGM’s cannot be conducted C. Yes, though there are only 3 national holidays. D. None of the above Answer: B ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 42 | Page

69. If, for reasons beyond the control of the Board, a Meeting cannot be held on the date originally fixed, the Board may reconvene the Meeting, to transact the same business as specified in the Original Notice, after giving not less than ……………… days intimation to the members A. Five B. Three C. Two D. Seven Answer: B 70. Which of the following statements are correct? a) Accounting ratio should always be expressed as a percentage. b) Accounting ratio compares two amounts appearing on the statement of financial position c) Accounting ratio traces the relations between two amounts in financial statements d) Accounting ratio may be expressed in one of four alternative forms A. a & b B. a & c C. c & d D. b & c Answer: A 71. Sec. 167 provides for the provisions related to A. Appointment of Directors B. Removal of Directors C. Vacation of Directors D. DIN Answer: C 72. A transaction between two related parties that is conducted on terms as if they were unrelated, so that there is no conflict of interest is known as ________. A. Related Party transaction B. Arm’s Length transaction C. Office of Profit D. None of the above Answer: B 73. Enron Corporation is a good example of an ethical incident related to accounting- A. True B. False C. Enron Corporation is a good example of an ethical incident related to auditing D. Enron Corporation is a good example of an ethical incident related to money laundering Answer: A 103.If a new company get registered with a name which resembles the name of existing company then it should apply to whom? A. NCLT B. SEBI C. ROC D. None of these Answer: A ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 43 | Page

74. Which of the following would be a related-party transaction? A. Sale, purchase or supply of any goods or materials B. Selling or otherwise disposing of, or buying, property of any kind C. Leasing of property of any kind D. All of the Above Answer: D 75. Majority of Directors in an Audit Committee are – A. Nominee Directors B. Executive Directors C. Small Shareholders Directors D. Independent Directors Answer: D 76. Details related to Audit Committee, Shareholders Committee and other committees are submitted in – A. Directors Report B. Audit Report C. Corporate Governance Report D. None of the above Answer: A 77. Board Committees function in accordance with the terms of reference established by the _________ A. Shareholders B. Board of Directors C. Chairman D. Independent Directors Answer: B 78. The majority of members of Audit Committee including its Chairperson shall be persons with ability to read and understand the – A. Managerial Remuneration Policy B. Regional Languages C. Financial statements D. None of the above Answer: C 79. Great boards possess the following features to the effective: A. Small and selective B. Reputed Professionals on the board C. Right composition and size D. Board members capable of independent working Answer: C 80. For information needs, Independent directors must focus on the following: A. Agenda served for the meetings B. Information briefing provided by the chair C. Seeks information feeds from the management wherever needed D. Basing decisions on the information supplied Answer: C ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 44 | Page

81. As a consequence of Enron debacle, the Indian Government formed which of the following committee to examine and recommend inter alia amendments to the law involving the auditor-client relationships and the role of independent directors? A. Cadbury Committee B. Naresh Chandra Committee C. T.K Viswanathan Committee D. Kumara Mangalam Birla Committee Answer: B 82. The board and management review the objectives, related processes and effectiveness of stakeholder communications and other disclosures about the strategy A. No, this can be done only by the top management B. No, board has no role in driving company strategy C. Yes D. None of the above Answer: C 83. In the absence of a quorum, the proceedings of the meeting will be A. Valid B. Void C. Voidable D. None of the Above Answer: B 84. A strategy can be discussed only in four mandatory Board meetings as per law A. Yes B. No C. Not necessarily as this can be done beyond statutory board meetings D. Both B and C Answer: D 85. Every company shall hold its first Annual General meeting within ……… months from the date of closing of the first financial year of the company and thereafter in each calendar year within six months of the close of the financial year, with an interval of not more than ……… months between two successive Annual General Meetings A. 9, 15 B. 9, 16 C. 9, 12 D. 8, 15 Answer: A 86. Which of the following statements is/are correct? a) It is always bad to invest in a highly geared company b) Redemption of long-term loans will reduce a company’s gearing c) Paying dividends to its shareholders will increase its company gearing d) If Loan Notes form less than 5% of a company’s capital employed it is not geared A. b & d B. a & b C. b only ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 45 | Page

D. b & c Answer: D 87. Which of the following steps will result in lowering the capital gearing of a company: A. Pay dividends to its shareholders B. Make a rights issue of ordinary shares C. Make a bonus issue of shares to ordinary shareholders D. Issue Loan Notes with long redemption date Answer: D 88. What is ‘strategy mapping’ in the balanced scorecard? A. Identifying casual links between the four perspectives B. Mapping the business’ processes C. Setting the mission D. Agreeing the strategy with the director of the business Answer: A 89. Which best describes the process of Benchmarking? A. Comparison of actual performance with budget B. Comparison of the costs of one product with another C. Comparison of direct competitors’ performance D. Comparison of the performance of one operation or business with another Answer: A 90. Which of the following changes in accounting ratios would please a company management concerned with cash flow problems in their company: A. Decrease in payables turnover without obtaining extended credit period from suppliers B. Increase in inventory turnover C. Increase in gross profit ratio D. Decrease in trade receivables turnover Answer: A 91. Debentures can be classified based on the following: A. On the basis of Security and Priority B. On the basis of Convertibility C. On the basis of Negotiability & Permanency D. All of the above Answer: D 92. An instrument includes debentures stock, bonds or any other instrument of a company that is evidence of a debt, whether it has or not constituted a charge on the assets is called: A. Debenture B. Net Owned fund on not less than rupees 1 crore C. Net Owned fund on not less than rupees 1 crore D. None of the above Answer: A ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 46 | Page

93. The following are the different types of bonds : A. Zero Coupon Bonds B. Double option bonds C. Option bonds D. All of the above Answer: D 94. The company shall create a Debenture Redemption Reserve for the purpose of redemption of debentures : A. True B. False Answer: A 95. Which of the following is not the Key Managerial Personnel (KMP) under the Companies Act, 2013? A. Company Secretary B. Chief Financial Officer C. Independent Director D. Whole Time Director Answer: C 96. _________ shall not be entitled to any stock option and may receive remuneration by way of fee. A. Additional Director B. Independent Director C. Nominee Director D. Whole Time Director Answer: B 97. A corporation cannot be charged with crimes that carry mandatory sentencing of imprisonment and fine in India. A. True B. False Answer: B 98. An independent director and a non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attribute through Board processes, and with his consent or connivance or where he had not acted diligently. A. Agree B. Disagree Answer: A ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 47 | Page

99. As per the definition fraud under Section 447 of the 2013 Act, Which of the following is not true? A. It should necessarily be in relation to affairs of a company anybody corporate; B. Should be an act, omission, concealment of any fact or abuse of position committed. C. There must be a wrongful gain or wrongful loss from the fraud. D. The intent should be to deceive, to gain undue advantage from, or to injure the interests of the company or its shareholders or its creditors or any other person Answer: C 100. What is the time span with in which company shall hold the first meeting of the Board of directors, of the date of its incorporation? E. 7 Days F. 10 Days G. 15 Days H. 30 Days Answer: D 104. Public company should start business only after getting certificate of _______________. A. Incorporation B. Commencement of business C. Both of these D. None of these Answer: B 105. How many days shall intervene between two consecutive meetings of the Board A. 30 Days B. 60 Days C. 90 Days D. 120 Days Answer: D 106. Shares can be allotted immediately after the issue of prospectus A. True B. False Answer: B 107. Any change in the address of the registered office must be communicated to the registrar with in: A. 15 Days B. 30Days C. 1 Month D. 12 Months Answer: C 108. What is the maximum number of companies, a person can hold office as a director including any alternate directorship? ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 48 | Page

A. 5 B. 10 C. 20 D. 50 Answer: C 109. When there is any untrue statement in the prospectus. The shareholder who was a subscriber to the memorandum can sue the company A. True B. False Answer: B 110. Which section of Companies Act 2013 establishes Serious Fraud Investigation Office? A. 208 B. 209 C. 210 D. 211 Answer: D 111. How many months did the company can continue its business u/s 45 _______ A. 1 Month B. 2 Months C. 5 Months D. 6 Months Answer: D 112.Age limit of Directors in case of private company is _________ A. 65 Years B. 55 Years C. 75 Years D. No limit Answer: D 113.Under which sec. a private company can automatically converted into a public company ______ A. Sec.34 B. Sec.43 C. Sec.53 D. Sec.35 Answer: B ------------------------------------------------------------------------------------------------------------------------------------------ CA.Machar Rao Meenavalli , E-Mail: [email protected] 49 | Page