Section 55 of Companies Act 2013: Preference Shares Quiz and Flashcards

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Questions and Answers

What is a requirement for a company to issue preference shares according to Section 55 of the Companies Act 2013?

The preference shares must carry voting rights in the general meetings.

The preference shares must be convertible into equity shares.

The preference shares must be fully paid-up at the time of issue. (correct)

The preference shares must be issued without any approval from the NCLT.

Under what condition can preference shares be redeemed within 30 years from the date of issue, as per Section 55 of the Companies Act 2013?

If they are not fully paid-up at the time of issue.

If they carry voting rights in the company's general meetings.

If they are issued for infrastructure projects. (correct)

If they are exclusively held by the company directors.

What action should a company take before issuing preference shares that exceed 20% of the paid-up equity share capital and free reserves?

Issue the shares without any approval from NCLT.

Redeem all existing preference shares before issuing new ones.

Obtain approval from the National Company Law Tribunal (NCLT). (correct)

Create a capital redemption reserve without any approvals.

What should a company have in order to create a capital redemption reserve for the redemption of preference shares, as per Section 55 of the Companies Act 2013?

Sufficient free reserves or securities. Signup and view all the answers

What type of resolution is required for authorizing the issue of preference shares by a company, as per Section 55 of the Companies Act 2013?

Special resolution in the general meeting of the company. Signup and view all the answers

In what period should preference shares be redeemable according to Section 55 of the Companies Act 2013, unless they are issued for infrastructure projects?

20 years from the date of issue. Signup and view all the answers

What is the minimum number of directors required for forming a corporation in California?

One Signup and view all the answers

How often must the board of directors hold meetings in a corporation?

At least once a year Signup and view all the answers

What is the responsibility of the board of directors in a corporation?

Overseeing the business and affairs Signup and view all the answers

In what way can the board of directors conduct meetings in a corporation?

In person, by telephone, or by video conference Signup and view all the answers

What key document must be filed for forming a corporation in California?

Articles of Incorporation Signup and view all the answers

Which legal process involves filing articles of dissolution with the Secretary of State?

Dissolution process Signup and view all the answers

What type of taxation are corporations subject to?

Separate taxation Signup and view all the answers

How are shareholders' liabilities related to the corporation's debts and obligations?

Shareholders have limited liability for the corporation's debts Signup and view all the answers

What does California's company law allow in terms of business structures?

Various business structures including for-profit and nonprofit corporations, LLCs, and partnerships are allowed Signup and view all the answers

Why is understanding company law crucial for anyone looking to start a business in California?

To comply with formation, management, and operational requirements Signup and view all the answers

Study Notes

Companies Act 2013: Preference Shares

A company can issue preference shares if authorized by its articles and the issue is authorized by a special resolution.
Preference shares can be redeemed within 30 years from the date of issue if they are redeemable, or if they are issued for infrastructure projects.

Pre-Issuance Requirements

Before issuing preference shares that exceed 20% of the paid-up equity share capital and free reserves, the company must obtain a special resolution.
To create a capital redemption reserve for the redemption of preference shares, the company needs profits that are available for dividend.

Authorizing Resolution

A special resolution is required to authorize the issue of preference shares.

Redeemability

Preference shares must be redeemable within 20 years from the date of issue, unless they are issued for infrastructure projects.

Corporation Formation (California)

The minimum number of directors required to form a corporation in California is not specified.
There is no specific requirement for the frequency of board of directors' meetings.

Board of Directors

The board of directors is responsible for making major business decisions, overseeing management, and representing shareholders' interests.
The board of directors can conduct meetings in person, via video conference, or through written consent.

Forming a Corporation (California)

The key document that must be filed to form a corporation in California is the Articles of Incorporation.

Dissolution

Articles of dissolution must be filed with the Secretary of State to dissolve a corporation.

Taxation

Corporations are subject to double taxation, where the corporation is taxed on its profits, and then shareholders are taxed on dividends received.

Shareholders' Liability

Shareholders' liabilities are limited to their investment in the corporation, and they are not personally responsible for the corporation's debts and obligations.

Business Structures

California company law allows for various business structures, including corporations, limited liability companies, partnerships, and sole proprietorships.

Importance of Company Law

Understanding company law is crucial for anyone looking to start a business in California to ensure compliance with legal requirements and to make informed decisions about business structure and operations.

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Description

Test your knowledge of Section 55 of the Companies Act 2013, which pertains to the issue and redemption of preference shares by limited companies. Explore the conditions required for the issuance of preference shares and the authorization process as per the act.

Companies Act 2013 Section 55: Issue and Redemption of Preference Shares Quiz

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