Company Law & Corporate Veil
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Questions and Answers

What is a reason for the courts to pierce the corporate veil according to exchange control law?

  • To punish individuals who have violated the law. (correct)
  • To enhance the legal status of corporations.
  • To protect shareholders from personal liability.
  • To promote corporate transparency.

In which situation might the Court disregard the legal personality of a company?

  • In instances of market competition.
  • When the company is being used to avoid legal obligations. (correct)
  • When there are conflicts among shareholders.
  • In cases of employee misconduct.

What type of companies can be classified based on incorporation?

  • Sole proprietorships.
  • Statutory companies. (correct)
  • Non-profit companies.
  • Venture companies.

What defines public sector companies in India?

<p>They include government departments and statutory corporations. (D)</p> Signup and view all the answers

Which classification of companies is based on liability?

<p>Companies limited by shares. (D)</p> Signup and view all the answers

What is a characteristic of joint sector companies?

<p>They can have government investment between 26 to 50%. (D)</p> Signup and view all the answers

Which of the following is NOT a basis for classifying companies?

<p>Color. (C)</p> Signup and view all the answers

What type of company is defined by having only one member?

<p>One Person Company. (A)</p> Signup and view all the answers

What is the duration for which a company's name is registered after approval for a new company?

<p>20 days (A)</p> Signup and view all the answers

What penalty may a person face for applying with incorrect information if the company has not been incorporated?

<p>One lakh rupees (D)</p> Signup and view all the answers

How long can the reservation of a name be extended with an additional fee of one thousand rupees?

<p>40 days (C)</p> Signup and view all the answers

What action may the Registrar take if a name is reserved based on incorrect information for an incorporated company?

<p>Strike off the name from the register (B)</p> Signup and view all the answers

What is the fee for extending the reservation of a name by 60 days?

<p>2,000 rupees (A)</p> Signup and view all the answers

What is required for the reservation application of a company name?

<p>A web service application to the Registrar (A)</p> Signup and view all the answers

What is the maximum penalty for providing incorrect information when applying for a reserved name if the company is incorporated?

<p>One lakh rupees (D)</p> Signup and view all the answers

What is the web service used for extending the reservation of company names?

<p>SPICe+ (D)</p> Signup and view all the answers

What is one of the primary purposes of a company registered under Section 8?

<p>To promote various charitable and social objectives (B)</p> Signup and view all the answers

Which of the following is NOT a restriction imposed on Section 8 companies?

<p>Mandatory registration as a Private Limited company (A)</p> Signup and view all the answers

What could lead to the revocation of a license granted to a Section 8 company by the Central Government?

<p>Fraudulent conduct or violation of objects (C)</p> Signup and view all the answers

Which condition must a company meet if it wishes to convert its status from Section 8 to another type of company?

<p>Comply with prescribed conditions (D)</p> Signup and view all the answers

Who may be a member of a company registered under Section 8?

<p>Any firm or individual (C)</p> Signup and view all the answers

What happens if a company registered under any company law has objectives aligned with Section 8 characteristics?

<p>It may be registered under Section 8 with conditions (A)</p> Signup and view all the answers

What condition is necessary for the alteration of a company’s memorandum or articles under Section 8?

<p>Prior approval from the Central Government (C)</p> Signup and view all the answers

What is the distinction in naming for a company registered under Section 8 compared to one that is 'Limited'?

<p>It can omit 'Limited' or 'Private Limited' (A)</p> Signup and view all the answers

What is the first step a company must take to convert to a different class under the Companies Act, 2013?

<p>Alter its memorandum and articles of association (C)</p> Signup and view all the answers

Which statement about the debts and liabilities of a company after conversion is correct?

<p>They may still be enforced as if conversion had not occurred (A)</p> Signup and view all the answers

In the context of not-for-profit organizations, what is the primary use of surplus revenues?

<p>To further achieve the organization's objectives (A)</p> Signup and view all the answers

What must the Registrar do after receiving the application for conversion?

<p>Close the former registration if all provisions are complied with (C)</p> Signup and view all the answers

What is NOT a consequence of the company’s conversion process under the Companies Act?

<p>Cancellation of existing contracts (B)</p> Signup and view all the answers

Which of the following best defines a not-for-profit organization?

<p>An entity that uses surplus to achieve its mission without distributing profits (A)</p> Signup and view all the answers

Which of the following is a limitation of the doctrine of Indoor Management?

<p>Outsiders cannot claim protection based on information they could have known (B)</p> Signup and view all the answers

What must a company do to ensure compliance before its conversion is finalized?

<p>Ensure all documents are in order and compliant with the law (D)</p> Signup and view all the answers

What action can the Central Government take if a licence is revoked under Sub-Section (6)?

<p>Direct that the company be wound up or amalgamated (D)</p> Signup and view all the answers

What must be specified in the order of amalgamation according to the content?

<p>Liabilities, duties, and obligations of the new entity (C)</p> Signup and view all the answers

What happens to the assets remaining after the winding up of a company registered under this Section?

<p>They may be transferred to another company or credited to the Rehabilitation Fund (D)</p> Signup and view all the answers

Which companies can amalgamate under this section?

<p>Companies registered under this Section with similar objects (C)</p> Signup and view all the answers

What is the obligation of a member in a company limited by guarantee in the event of winding up?

<p>To contribute to the company's assets for settling debts (C)</p> Signup and view all the answers

When registering a company having a share capital, what must be included in the memorandum?

<p>The amount of share capital and the number of shares subscribed (D)</p> Signup and view all the answers

What is the minimum fine imposed on a company for defaulting on the requirements laid out in this Section?

<p>Ten lakh rupees (A)</p> Signup and view all the answers

What is the penalty for each officer in default of the company?

<p>Fine not less than <code>25,000 but which may extend to </code>25 lakh (C)</p> Signup and view all the answers

Which of the following is NOT a restriction placed on the name stated in the memorandum of a company?

<p>It must include the word 'Limited' (B)</p> Signup and view all the answers

Which form must persons apply with to get a licence under Section 8?

<p>Form INC-12 (D)</p> Signup and view all the answers

What happens if a member ceases to be a member within one year before winding up?

<p>They must still contribute for debts contracted before cessation (D)</p> Signup and view all the answers

What is a requirement for a company name that contains certain prescribed words?

<p>The Central Government approval is mandatory (C)</p> Signup and view all the answers

Which document must contain an estimated income and expenditure statement for the next three years?

<p>Application Form INC-12 (B)</p> Signup and view all the answers

Under what condition can a company's name suggest a connection to the government?

<p>If obtaining prior consent from the Central Government (C)</p> Signup and view all the answers

For One Person Companies (OPC), what must be stated in the memorandum?

<p>The successor in case of subscriber's death (D)</p> Signup and view all the answers

In registering a company, which of the following is considered undesirable for a company name?

<p>Names implying a government endorsement (A)</p> Signup and view all the answers

Flashcards

Piercing the corporate veil

A legal action where a court ignores the company's separate legal existence and holds the people behind it responsible for actions or debts.

Quasi-criminal cases

Legal cases that have elements of both civil and criminal law.

Corporate veil lifting

The act of a court making an exception to the principle of separate legal personality of a company.

Transfer of shares

The process of changing ownership of shares in a company.

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Public Sector

Companies, departments, and organizations largely owned or controlled by the government.

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Joint Sector

Business organizations containing investments from government and private sources.

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Statutory Companies

Companies established by an act of a legislature with specific functions.

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Registered Companies

Companies formed according to the rules and regulations of a country's company law.

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Company Limited by Guarantee

A company where members agree to contribute a specific amount if the company is wound up.

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Share Capital

The total value of shares issued by a company.

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Share

A unit of ownership in a company.

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OPC Member Succession

Arrangement for the company's membership in the event of a member's death in an One Person Company (OPC).

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Company Name Restrictions

Company names cannot be identical or too similar to existing companies or offensive to any law.

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Government-Associated Names

Company names cannot suggest connections to the government without explicit approval.

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Company Registration

Companies must select a name meeting all legal criteria before registering.

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Member Liability

Members' contribution to company debts in event of winding up.

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Company name reservation

The process of reserving a company name before incorporation.

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Reservation period (new company)

The company name is reserved for 20 days from approval, before incorporation.

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Reservation period (existing company)

The company name is reserved for 60 days from approval if the company already exists.

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Incorrect information

Applying for a name utilizing false details.

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Unincorporated company penalty

If a company name is reserved using false information, fines (up to Rs.1 lakh) apply.

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Extension of reservation

Increasing the reserved time period for a specific fee amounts.

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Extension Period Limits

Increasing the time period of a reserved name up to a maximum of 60 days.

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Registrar's Cancellation power

The power of the registrar to revoke a reserved name according to the Companies Act, 2013.

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Indoor Management Doctrine Limitation

This doctrine cannot be used if outsiders had reasonable access to information and should have known it with minimal effort before engaging in a transaction.

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Company Conversion

A company can transform into another class of company by altering its memorandum and articles of association, going through a registration process, and issuing a new certificate of incorporation.

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Company Conversion: Alteration

A company changes its class by altering its memorandum and articles of association to reflect the new class according to the Companies Act.

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Company Conversion: Application and Registration

After altering its documents, the company applies to the Registrar for conversion. Once the Registrar confirms compliance, the company's original registration is closed.

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Company Conversion: Certificate of Incorporation

After successful registration of the conversion change, the Registrar issues a new certificate of incorporation, marking the company's new status.

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Company Conversion: Debt and Liability

Converting a company does not affect its past debts, liabilities, obligations, or contracts. These remain in effect.

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Not-for-Profit Company

A company formed with objectives that don't involve distributing profits to shareholders. Any surplus generated is used to achieve the company's goals.

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Not-for-Profit Company: Surplus Use

Instead of distributing profits, the surpluses of a not-for-profit company are used to further its purpose or mission, like achieving a social or environmental goal.

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Section 8 Company

A company formed for non-profit purposes like promoting commerce, art, science, or social welfare. It restricts dividend payments to its members and requires government approval for significant changes.

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Profit Distribution Restriction

Section 8 companies are prohibited from paying dividends to their members. Any profits generated must be used to support the company's stated objectives.

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Government Approval for Changes

Section 8 companies need permission from the Central Government for altering their Memorandum or Articles of Association.

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Conversion to Other Company Type

Section 8 companies can transform into other types of companies, but only with specific government conditions.

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Government Licensing

Existing limited companies can be registered under Section 8 if they meet specific non-profit criteria and receive government approval.

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Revocation of License

The Central Government can revoke a Section 8 license if the company operates fraudulently or contrary to its objectives.

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Company Name (Section 8)

Section 8 companies can be registered without the words 'Limited' or 'Private Limited' in their name.

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Firm Membership in Section 8

A business firm (partnership) can be a member of a Section 8 company.

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Winding Up

The process of dissolving a company, liquidating assets, and distributing funds to creditors and shareholders.

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Amalgamation

Merging one company into another, forming a single entity with combined assets, liabilities, and operations.

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Rehabilitation and Insolvency Fund

A government fund that receives proceeds from the sale of assets of dissolved companies, intended to support struggling businesses.

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Non-Profit Company Conversion

The transformation of an existing company into a non-profit organization, where profits are not distributed to shareholders.

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Application for Non-Profit License

The process of applying for a license to operate as a non-profit company, involving specific forms and documentation.

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Default Consequences

Penalties faced by companies that fail to comply with requirements set by the law, including fines for directors and officers

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Fraudulent Actions

When a company's affairs are conducted dishonestly, potentially leading to criminal charges against officers.

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Study Notes

BCCA Paper 13: Corporate and Economic Laws

  • The document is a study guide for BCCA Paper 13, Corporate and Economic Laws.
  • It covers topics from the Companies Act, 2013, SEBI, FEMA, competition law and more.

Part 1: Company Law

  • Introduction to Companies Act: Covers the basic definitions and features of companies, including perpetual existence and separate legal personality. Includes the Companies Act, 2013 and previous company law. Details the incorporation process and specifics of company types.
  • Accounts & Audit: Focuses on the accounting and auditing aspects of company law, including board meetings, inspections, and investigations.
  • Board of Directors & KMP: Focuses on board members, their roles and responsibilities, and key managerial personnel. Covers board meetings.
  • Board meetings: Procedures and requirements for board meetings. Covers minutes, actions, and quorum requirements.
  • Inspection, Inquiry, Investigation: Procedures for company inspections, inquiries, and investigations. Covers what may cause such actions.
  • Compromises, Arrangements and Amalgamation: Describes compromises, arrangements, and amalgamation processes in companies. Covers the procedures.
  • Dividends : Procedures and legal aspects related to dividend payments in companies.
  • IBC: Covers the Insolvency and Bankruptcy Code, 2016, likely its procedures and outcomes.
  • Corporate governance: General overview of corporate governance principles.

Part 2: Economic Laws

  • SEBI: Details SEBI laws and regulations relating to the stock market and securities.
  • Competition act: Details competition laws and regulations intended to promote competition.
  • FEMA: Focuses on the Foreign Exchange Management Act, 1999, dealing with financial transactions and exchange of foreign currency.
  • Law and Regulations related to Banking sector: Covers laws and regulations for the banking sector.
  • Law and regulating related to Insurance sector: Covers laws and regulations related to the insurance sector.
  • Specific provisions related to MSME sector: Covers specific legal provisions for Micro, Small and Medium Enterprises (MSMEs).
  • Laws and regulations related to Cyber security and data privacy: Covers laws and regulations protecting cyber security and data privacy, including related offences, and the role of the Information Technology Act of 2000.
  • Laws and regulations related to Anti Money laundering Act: Details laws and regulations covering money laundering.

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Description

This quiz explores key concepts in Company Law, focusing on the circumstances under which courts may pierce the corporate veil, classify different types of companies, and understand regulations for company name reservation in India. Test your knowledge of company types, liabilities, and legal nuances related to corporate identity.

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