Corporate Law on Nominations and SBO
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Questions and Answers

What is the maximum penalty for a company and its officers for refusing inspection or making copies required under this section?

  • ₹50,000
  • ₹5,00,000
  • ₹1,00,000 (correct)
  • ₹10,000

    • Who has the authority to direct an immediate inspection of documents if required?

  • The Supreme Court
  • The Central Government (correct)
  • The shareholders
  • The Regional Director

    • According to Section 95, what is considered prima facie evidence?

  • Minutes of the directors' meetings
  • Financial statements of the company
  • Audits reports
  • Registers, indices, and copies of annual return (correct)

    • What is the daily penalty for each refusal of inspection by a company or its officer?

    <p>₹1,000</p> Signup and view all the answers

    What is the initial step mentioned before understanding the types of meetings according to the Companies Act, 2013?

    <p>Understanding the prerequisites of a meeting</p> Signup and view all the answers

    What is the definition of a Significant Beneficial Owner (SBO)?

    <p>An individual holding at least 10% shares or voting rights in a company.</p> Signup and view all the answers

    Which of the following best describes 'significant influence' as per the amended rules?

    <p>The power to participate in financial and operating policy decisions without controlling them.</p> Signup and view all the answers

    What constitutes a 'Majority Stake' according to the Amendment Rules?

    <p>Possessing more than half of the equity share capital in the company.</p> Signup and view all the answers

    Which scenario would NOT qualify an individual as having direct shareholding in the Reporting Company?

    <p>The shares are controlled by a partnership entity.</p> Signup and view all the answers

    Which of the following is NOT considered as indirect shareholding?

    <p>Direct ownership of shares in one’s name.</p> Signup and view all the answers

    Which of the following does not align with the criteria for significant beneficial ownership?

    <p>Holding less than 10% of the equity share capital.</p> Signup and view all the answers

    What does the term 'indirect shareholding' refer to?

    <p>Shares owned through different entities like trusts or partnerships.</p> Signup and view all the answers

    Which of these best describes the relationship between SBO and Majority Stake?

    <p>An SBO may hold a Majority Stake or lesser but qualifies differently.</p> Signup and view all the answers

    What is the maximum number of days a company may close its register at one time?

    <p>30 days</p> Signup and view all the answers

    What is the minimum notice period required before closing the registers for security holders?

    <p>7 days</p> Signup and view all the answers

    Which of the following is NOT part of the notice procedure for closing registers?

    <p>Notifying by only sending letters to shareholders</p> Signup and view all the answers

    For companies intending to list their securities, what additional notice criteria might apply?

    <p>The lesser period as specified by SEBI</p> Signup and view all the answers

    What must a company do if it intends to close its register for security holders?

    <p>Advertise in local newspapers as per stated regulations</p> Signup and view all the answers

    What is the role of SEBI in the closure of registers for listed companies?

    <p>SEBI can specify a notice period shorter than 7 days</p> Signup and view all the answers

    Which is an acceptable method of notifying about the closure of registers?

    <p>Advertisement in at least one vernacular and one English newspaper</p> Signup and view all the answers

    Which of the following statements about the closure of registers is true?

    <p>The maximum closure period allowed in a year is 45 days.</p> Signup and view all the answers

    What must be included in the registers maintained under section 88 regarding nominees?

    <p>Nomination details as referred to in section 72 of the Act</p> Signup and view all the answers

    Who is responsible for authenticating entries in the register of members?

    <p>The company secretary or an authorized person by the Board</p> Signup and view all the answers

    In the case of a minor being allotted shares, what is required to enter their name in the register?

    <p>Details of the guardian</p> Signup and view all the answers

    What action can joint holders of shares take regarding their names in the company records?

    <p>Request the company to enter their names in a certain order</p> Signup and view all the answers

    What detail must be mentioned alongside the authentication of entries in the register?

    <p>The date of the board resolution authorizing authentication</p> Signup and view all the answers

    What should be done if a minor is allotted shares and a guardian's details are not available?

    <p>The shares cannot be entered in the register without guardian details</p> Signup and view all the answers

    Which of the following is NOT a requirement for maintaining the register of members?

    <p>Segregating shares based on voting rights</p> Signup and view all the answers

    What implication does joint shareholding have on the company's register?

    <p>Names can be entered in any order instructed by the holders</p> Signup and view all the answers

    What is the prescribed form for the annual return of One Person Company and small company from the financial year 2020-2021?

    <p>Form No.MGT-7A</p> Signup and view all the answers

    Who is required to sign the annual return for a One Person Company?

    <p>The director or the company secretary</p> Signup and view all the answers

    Which companies must have their annual return certified by a Company Secretary in practice?

    <p>Listed companies and companies with at least 10 crores paid-up capital</p> Signup and view all the answers

    What is the minimum paid-up share capital for a company to be obliged to have its annual return certified?

    <p>10 crores</p> Signup and view all the answers

    What clause was omitted in Section 92(1) by the Companies (Amendment) Act, 2017?

    <p>Clause (c)</p> Signup and view all the answers

    To whom does the specified signing rule for private companies apply according to the provision of Section 92?

    <p>One Person Company and small companies</p> Signup and view all the answers

    What is the purpose of the certification by a Company Secretary in practice in relation to the annual return?

    <p>To verify that the annual return is accurate and compliant with regulations</p> Signup and view all the answers

    Which of the following companies must comply with the signing procedure described for small companies under Section 92?

    <p>One Person Company and small companies</p> Signup and view all the answers

    Study Notes

    Nomination Details in the Register

    • Form MGT-1 and MGT-2 require details of nominations as per Section 72 of the Act and Rule 19 of the Companies (Share Capital and Debentures) Rules, 2014.
    • These nominations must be entered in the register of members, register of debenture-holders, or other security holders.
    • Minors are not competent to enter into contracts and cannot be entered in the register of members without guardian details.
    • Joint holders of shares can request the company to enter their names in a specific order or execute transfers to split their holdings.

    Significant Beneficial Owner (SBO)

    • SBO is an individual exercising rights or entitlements in a Reporting Company through:
      • Holding 10% shares or 10% voting rights
      • Right to receive 10% or more dividends, including direct and indirect holdings
      • Exercising significant influence or control in the Reporting Company, directly or indirectly
    • Significant influence means the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company.
    • Majority Stake means:
      • Holding more than half of the equity share capital in the body corporate
      • Holding more than half of the voting rights in the body corporate
      • Right to receive or participate in more than half of the distributable dividend or any other distribution by the body corporate
    • Direct shareholding occurs when the shareholder holds shares in their own name or has acquired a beneficial interest under Section 89(2).
    • Indirect shareholding occurs when a shareholder is a body corporate, Hindu Undivided Family, partnership entity, trust, or pooled investment vehicle.
    • Section 91(2) specifies penalties for contravention of Section 91(1) provisions.

    Time Limits for Closure of Registers

    • Section 91(1) allows companies to close their registers for a total of 45 days in a year, with a maximum of 30 days at any one time.
    • Section 91(1) requires a minimum 7-day notice for closure, or a lesser period specified by SEBI for listed companies.
    • Rule 10 of the Companies (Management & Administration) Rules, 2014 specifies the manner of closure:
      • The company must publish an advertisement at least once in a vernacular newspaper in the district where the registered office is located, and at least once in an English newspaper circulating in the same district.
      • The notice must be published on the website notified by the Central Government and on the company's website, if any.

    Abridged Form of Annual Return

    • Second Proviso to Section 91(1) allows the Central Government to prescribe abridged forms for annual returns for One Person Companies, small companies, and other specified classes of companies.
    • Rule 11(1) requires One Person Companies and small companies to file the annual return in Form No. MGT-7A from the financial year 2020-2021 onwards.

    Signing of Annual Return

    • The annual return must be signed by a director and the company secretary, or a company secretary in practice if there is no company secretary.
    • For One Person Companies and small companies, the annual return must be signed by the company secretary, or by the director if there is no company secretary.

    Certification of Annual Return

    • Section 92(2) and Rule 11(2) require the annual return of listed companies and companies with paid-up share capital of ₹10 crore or more or a turnover of ₹50 crore or more to be certified by a company secretary in practice.
    • The certificate must state that the annual return discloses facts correctly and adequately and that the company complies with all the provisions of the Companies Act, 2013, and must be in Form No. MGT-8.

    Penalty for Forcing Inspection or Making Copies

    • Section 94 (4) imposes a penalty of ₹1,000 per day, up to a maximum of ₹1,00,000, on a company and its defaulting officers for refusing inspection or the making of extracts or copies required under Section 94.
    • Section 94 (5) allows the Central Government to order an immediate inspection or authorize the taking of the required extract by the person requesting it.

    Registers and Annual Returns As Evidence

    • Section 95 states that the registers, indices, and copies of annual returns are prima facie evidence of any matter directed or authorized to be inserted into them under the Companies Act, 2013.

    Meeting Convening Terms

    • Companies Act, 2013 provides the procedure for convening meetings.
    • Types of meetings are important to understand for convening a meeting.

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    Description

    This quiz covers the details of nominations required under Section 72 of the Act and the roles of Significant Beneficial Owners (SBO) in a Reporting Company. Understand the regulations surrounding nominations in registers and the implications for shareholders and joint holders. Test your knowledge on corporate law compliance and ownership criteria.

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