It is essential for students to carefully read, analyse, and understand every aspect of this question paper, since there is no major difference between the syllabus of the earlier Corporate Law (2nd Semester) and the current Corporate Law (5th Semester).
GU Corporate Law Solved Paper 2025
2025
4 (Sem-2/CBCS) COM HC 2 (CL)
COMMERCE (HONOURS CORE)
Paper: COM-HC-2026 (Corporate Law)
Full Marks: 80, Time: Three hours
The figures in the margin indicate full marks for the questions.
1. Choose the correct answer for the following questions: 1×10=10
(a) How many minimum number of persons are required to form a private company?
(i) 1 No.
(ii) 2 Nos.
(iii) 5 Nos.
(iv) 7 Nos.
Answer: (ii) 2 Nos.
(b) A public company must have at least ______ directors.
(i) 2 Nos.
(ii) 3 Nos.
(iii) 4 Nos.
(iv) 5 Nos.
Answer: (ii) 3 Nos.
(c) Voting rights will be given to:
(i) Equity shareholder
(ii) Preference shareholder
(iii) Debenture holder
Answer: (i) Equity shareholder
(d) A Managing Director’s ground of disqualification remains effective for:
(i) 5 years
(ii) 7 years
(iii) Whole of life
Answer: (i) 5 years
(e) First meeting of the Board of Directors must be held by every company within ____ days of its incorporation.
(i) 30 days
(ii) 40 days
(iii) 60 days
(iv) None of the above
Answer: (i) 30 days
(f) Write the full form of NSDL.
Answer: National Securities Depository Limited
(g) Who can be held responsible for misstatement in the prospectus?
(i) The company
(ii) Every director
(iii) Every promoter
(iv) All of the above
Answer: (iv) All of the above
(h) Who cannot convene an Extra-ordinary General Meeting?
(i) Board of Directors
(ii) Shareholders
(iii) National Company Law Tribunal
(iv) The Company Secretary
Answer: (iv) The Company Secretary
(i) Which of the following documents must authorise a company to issue bonus shares?
(i) Memorandum of Association
(ii) Articles of Association
(iii) Prospectus
(iv) Preliminary contract
Answer: (ii) Articles of Association
(j) For winding up a company under Companies Act 1956 submission of report by company liquidator is not required. This statement is:
(i) False
(ii) True
Answer: (i) False
2. Answer the following questions: 2×5=10
(a) What is the Registrar of Companies?
Answer: The Registrar of Companies (ROC) is an authority under the Ministry of Corporate Affairs who registers companies and ensures they comply with the Companies Act.
(b) Who is a promoter?
Answer: A promoter is a person who undertakes to form a company and takes necessary steps such as preparing documents and raising funds.
(c) How can a company convert shares into stock?
Answer: A company can convert fully paid-up shares into stock by passing an ordinary resolution in a general meeting and altering its Articles of Association, if required.
(d) Who is a depository participant?
Answer: A depository participant (DP) is an agent of a depository (like NSDL or CDSL) who provides investors with services of holding and trading securities in electronic form.
(e) Who determines the rate of dividend?
Answer: The Board of Directors recommends the rate of dividend, but the final approval is given by the shareholders in the general meeting.
1. Answer the following questions in about 200 words each: (any four) 5×4=20
(a) Describe the procedure relating to the formation of companies under the Companies Act 2013.
Answer: The procedure for forming a company under the Companies Act 2013 involves several steps:
Obtain Digital Signature Certificate (DSC): The first step is for the proposed directors to get a digital signature certificate to sign electronic documents.
Obtain Director Identification Number (DIN): Every proposed director must obtain a DIN from the Ministry of Corporate Affairs (MCA).
Name Approval: The promoters must choose a unique name for the company and apply to the MCA for approval. The name should not be identical or similar to any existing company.
Drafting Memorandum and Articles of Association (MOA & AOA): MOA defines the objectives of the company, while AOA contains rules for internal management.
Filing Incorporation Forms: The company must file Form SPICe (INC-32) along with MOA, AOA, DIN, and other required documents with the Registrar of Companies (ROC).
Payment of Fees: The required registration fees must be paid based on the company’s authorized capital.
Certificate of Incorporation: If everything is found correct, the ROC issues a Certificate of Incorporation. This certificate legally brings the company into existence.
Once incorporated, the company becomes a separate legal entity, capable of owning property, entering into contracts, and suing or being sued in its own name.
Read: Corporate Law Question Paper 2025 CBCS Pattern
(b) What is a prospectus? Who are liable for mis-statements in a prospectus? (2+3=5)
Answer: A prospectus is a formal document issued by a company to the public to invite them to subscribe to its shares or debentures. It provides important information about the company, such as its financial position, objectives, risks, and details of the securities offered. The purpose of a prospectus is to help investors make informed decisions.
Liability for Mis-statements: If there are any false or misleading statements in the prospectus, the following people can be held liable:
Directors of the company at the time of issuing the prospectus.
Promoters who are involved in the formation of the company and the offer.
Experts such as auditors, lawyers, or financial advisors who contributed to the preparation of the prospectus.
Underwriters if they are responsible for the contents of the prospectus.
Those found guilty of making or authorizing mis-statements may face civil and criminal liability, including fines and imprisonment under the Companies Act 2013.
(c) What is meant by allotment of shares? Discuss the rules relating to the allotment of shares. (2+3=5)
Answer: Allotment of shares means the process by which a company formally assigns shares to applicants who have applied for them. It is a legal way of deciding who becomes a shareholder and how many shares each investor gets.
Rules relating to allotment of shares:
Authority: Only the Board of Directors can allot shares, as authorized by the company’s articles.
Timely Allotment: Shares must be allotted within 60 days of receiving the application money.
Return of Application Money: If shares are not allotted within 60 days, the company must return the application money to the applicants.
Minimum Subscription: A company cannot proceed with allotment if the minimum subscription stated in the prospectus is not received.
Proper Record: The company must maintain a register of allotment of shares.
Allotment completes the process of issuing shares, making the applicants official shareholders with rights to dividends and voting.
(d) What is meant by quorum and how is it determined at a general meeting of a company?
Answer: A quorum is the minimum number of members who must be present at a general meeting of a company to make the proceedings valid. Without a quorum, the meeting cannot legally take any decision.
Determination of Quorum:
Private Company: At least 2 members should be present.
Public Company:
Up to 1,000 members – 2 members
1,001 to 5,000 members – 5 members
5,001 to 10,000 members – 15 members
More than 10,000 members – 30 members
Articles of Association: The company’s articles may specify a higher number for quorum.
Chairman’s Role: The chairman of the meeting ensures quorum is present before starting the meeting.
If quorum is not present, the meeting is either adjourned or dissolved according to company rules.
(e) Discuss the duties and responsibilities of a company secretary.
Answer: A company secretary is a key officer responsible for ensuring legal compliance and proper administration of a company.
Duties and Responsibilities:
Compliance with Law: Ensure the company complies with the Companies Act and other relevant laws.
Board Meetings: Organize board and general meetings, prepare agendas, and record minutes.
Filing Documents: File annual returns, financial statements, and other documents with the Registrar of Companies.
Corporate Governance: Advise the board on corporate governance, ethics, and best practices.
Shareholders Communication: Maintain the register of shareholders and handle investor grievances.
Legal Advice: Provide legal advice to directors on company matters.
Statutory Records: Maintain statutory registers, records, and ensure proper documentation.
The company secretary acts as a bridge between the management, shareholders, and regulatory authorities.
(f) Mention the various clauses of a Memorandum of Association.
Answer: A Memorandum of Association (MOA) is a fundamental document that defines the company’s objectives, scope, and powers. It contains the following main clauses:
Name Clause: States the legal name of the company with “Limited” or “Private Limited” as applicable.
Registered Office Clause: Specifies the state in which the company’s registered office is situated.
Objects Clause: Lists the main and ancillary objects for which the company is formed.
Liability Clause: Defines the liability of members, whether limited by shares or guarantee.
Capital Clause: States the company’s authorized capital and the division into shares.
Association/Subscription Clause: Contains the declaration of subscribers to the MOA and the number of shares each takes.
These clauses are essential for defining the company’s legal identity, powers, and relationship with its members.
4. Answer the following questions in about 600 words each: 10×4=40
(a) Discuss the powers and duties of auditors under the Companies Act 2013.
Answer: An auditor is a person appointed to examine a company’s accounts and financial statements to ensure accuracy and compliance with the law. Under the Companies Act 2013, auditors have specific powers and duties that help maintain transparency and accountability in a company’s financial matters.
Powers of Auditors:
Access to Books and Records: Auditors have the right to access all books of accounts, vouchers, and other financial records of the company at any time.
Right to Information: Auditors can require the company’s officers or employees to provide any information, explanations, or documents necessary for auditing.
Right to Attend Meetings: Auditors may attend general meetings of the company and have the right to speak on matters relating to their duties.
Right to Report Fraud: If auditors detect any fraud, they can report it to the board or relevant authorities.
Inspection of Subsidiaries: In case of a holding company, auditors can inspect records of its subsidiaries to ensure accurate consolidation of accounts.
Duties of Auditors:
Examine Accounts: Auditors must examine financial statements and verify that they represent a true and fair view of the company’s financial position.
Check Compliance: They ensure that the company complies with the provisions of the Companies Act 2013 and other applicable laws.
Report Misstatements: Auditors must report any errors, fraud, or misstatements in the accounts to the members or the authorities.
Certification: They certify whether the accounts are prepared in accordance with the accounting standards.
Report to Members: Auditors prepare an audit report and present it to the shareholders, highlighting any irregularities or concerns.
Ensure Internal Control: Auditors review the company’s internal control system and advise improvements if needed.
In short, auditors act as a bridge between the management and shareholders, protecting investors’ interests and maintaining trust in the company’s financial integrity. Their powers allow them to access all necessary information, while their duties ensure accurate reporting, compliance, and accountability.
(b) “A company is an artificial person, created by law with a perpetual succession and a common seal.” Explain this statement.
Answer: A company is called an artificial person because it is created by law, not by natural birth or human effort. Unlike a human being, a company cannot act on its own—it acts through its directors, officers, and employees.
Explanation of the Statement:
Artificial Person: A company has a separate legal identity from its members. It can own property, enter into contracts, sue or be sued in its own name. This concept is called the “corporate veil.”
Created by Law: A company exists only because it is registered under the Companies Act 2013. It does not exist naturally like a human being. The law grants it rights, powers, and duties.
Perpetual Succession: The company continues to exist even if its members, directors, or shareholders change or die. This ensures stability and long-term operation, unlike partnerships or individuals, which may dissolve on the death or insolvency of members.
Common Seal: A common seal is the official signature of the company. It is used to execute documents, contracts, and agreements in the company’s name. Though in modern practice, electronic signatures are also used.
This statement emphasizes that a company has legal recognition, ongoing existence, and the ability to act collectively as a single entity. These characteristics differentiate a company from other forms of business organizations.
(c) What do you understand by the forfeiture of shares? State the liabilities of a shareholder after forfeiture. (3+7=10)
Answer: Forfeiture of Shares: Forfeiture of shares occurs when a shareholder fails to pay the call money or any amount due on their shares, and the company decides to cancel those shares. Once forfeited, the shareholder loses all rights over the shares, including voting rights and entitlement to dividends. The company may then reissue the forfeited shares to new investors.
Liabilities of a Shareholder after Forfeiture:
Liability to Pay Calls Due: The shareholder remains liable to pay any unpaid call money that was due before forfeiture.
No Claim to Dividends: The shareholder cannot claim any dividend for the forfeited shares.
Loss of Voting Rights: All voting rights attached to the forfeited shares are lost.
No Right to Share in Profits: The shareholder loses the right to participate in company profits arising after forfeiture.
No Right to Assets: The shareholder cannot claim any part of the company’s assets on winding up for the forfeited shares.
Forfeited Amount Recovery: The company may retain any amount already paid on the shares and adjust it toward losses or reissue proceeds.
Reissue of Shares: The company can sell the forfeited shares to a new investor, and the original shareholder has no claim on the reissue proceeds.
In summary, forfeiture is a serious action, protecting the company’s financial stability while making the defaulting shareholder lose all rights associated with the shares.
Or
Who is a Managing Director? Discuss the restrictions imposed on the appointment and payment of remuneration to the Managing Director.
Answer: A Managing Director (MD) is a director who is entrusted with the management of the company and has substantial powers to act on behalf of the company. The MD combines the roles of a director and an executive officer, handling day-to-day operations while remaining accountable to the board.
Restrictions on Appointment and Remuneration:
Appointment:
Cannot be appointed if disqualified under Section 164 of the Companies Act 2013 (e.g., convicted of fraud, undischarged insolvency).
Appointment requires approval from the board and, in certain cases, shareholders’ approval.
The tenure is usually specified in the articles of association and cannot exceed five years without reappointment.
Remuneration:
Remuneration must comply with limits set in the Companies Act and approved by the shareholders.
Remuneration should be reasonable and linked to the company’s profits or as fixed by the board.
If the company makes a loss, remuneration must be within statutory limits or as approved by the central government.
Thus, the MD has significant responsibility but operates under strict legal restrictions to ensure accountability and fairness in management and compensation.
(d) What do you understand by the winding up of a company? Discuss the circumstances in which a company may be wound up by Tribunal. (3+7=10)
Answer: Winding up of a Company: Winding up of a company refers to the process of closing or liquidating a company. During winding up, the company ceases its business operations, sells its assets, pays off its liabilities, and distributes any remaining funds among its shareholders. After completion of this process, the company is legally dissolved and ceases to exist. Winding up ensures that the company’s debts are cleared and remaining assets are properly distributed.
Circumstances in which a Company may be Wound Up by Tribunal: The National Company Law Tribunal (NCLT) has the authority to order winding up of a company under the Companies Act 2013. The following are the main circumstances:
Inability to Pay Debts: If a company is unable to pay its debts as they become due, creditors can file a petition to the Tribunal for winding up.
Failure to Commence Business: If a company has not started its business within one year of incorporation or has remained inactive for a long period, it may be wound up.
Company’s Activities are Illegal or Fraudulent: If the company is conducting business with unlawful or fraudulent activities, the Tribunal may order its closure.
Just and Equitable Clause: The Tribunal may order winding up if it is “just and equitable” to do so. This may include cases of:
Deadlock in management leading to disputes.
Oppression or mismanagement affecting shareholders.
Loss of substratum, meaning the company’s primary purpose can no longer be achieved.
Default in Filing Statutory Documents:
If the company repeatedly fails to file statutory reports or annual returns as required by law, the Tribunal may order winding up.Special Resolution by Members:
If the shareholders pass a special resolution to wind up the company voluntarily but fail to complete it properly, the Tribunal may step in.Reduction of Members Below Minimum Limit:
If the number of members falls below the legal minimum required for a private or public company, the Tribunal may direct winding up.
Process of Winding Up by Tribunal:
A petition is filed by creditors, members, or the company itself.
The Tribunal examines the petition and may issue a winding-up order.
A liquidator is appointed to sell assets, pay debts, and distribute surplus among shareholders.
After completion, the liquidator submits a final report and the company is officially dissolved.
Conclusion: Winding up is a formal legal procedure that ensures orderly closure of a company, protects creditors’ interests, and avoids misuse of company resources. Tribunal intervention ensures fairness and compliance with the Companies Act 2013.
Or
Discuss the various kinds of meetings that can be held by a company.
Answer: Companies hold meetings to take decisions collectively and maintain transparency. Meetings are mainly of two types:
General Meetings:
These are meetings of shareholders and are classified as:Annual General Meeting (AGM): Held once a year to discuss the company’s performance, approve financial statements, declare dividends, and appoint directors and auditors.
Extraordinary General Meeting (EGM): Held to address urgent or special matters that cannot wait until the AGM. Examples include mergers, winding up, or changes in share capital.
Board Meetings: Meetings of the Board of Directors to manage daily operations and strategic decisions. Examples of matters discussed: approving budgets, business plans, appointment of key executives, and compliance issues.
Class Meetings: Meetings of a particular class of shareholders, such as preference shareholders, to take decisions that affect only that class, like variation of rights or conversion of shares.
Committee Meetings: Meetings of sub-committees formed by the board, such as audit committees or remuneration committees, to address specialized matters and make recommendations to the board.
Key Features of Meetings:
Proper notice must be given.
Quorum must be present for validity.
Minutes of the meeting should be recorded.
Decisions are made by voting, often requiring a majority.
Conclusion: Meetings are an essential part of corporate governance. They ensure accountability, transparency, and participation of members in decision-making processes.
(e) Write short notes on: (i) Articles of Association, (ii) Agenda of the meeting. (5+5=10)
Answer:
(i) Articles of Association (AOA): The Articles of Association is a document that defines the internal rules and regulations of a company. It governs the management of the company, rights of members, and powers of directors. It acts as a guide for daily operations and decision-making.
Key Points about AOA:
Purpose: It provides rules for the internal administration of the company.
Content: Usually contains rules regarding share transfers, issue of shares, voting rights, appointment and powers of directors, dividend declaration, and general meetings.
Binding Document: It is binding on the company and its members. No one can act contrary to it.
Relation with Memorandum of Association (MOA): AOA complements the MOA. While MOA defines the company’s objectives, AOA defines how those objectives will be achieved.
Legal Importance: Companies Act 2013 requires every company to have AOA at the time of incorporation.
In short, the AOA ensures smooth functioning of the company and prevents disputes among members and management.
(ii) Agenda of the Meeting: An agenda is a list of items or topics to be discussed at a meeting. It helps participants know the purpose of the meeting and prepare in advance.
Key Points about Agenda:
Purpose: To organize the meeting, inform members about matters to be discussed, and ensure efficient use of time.
Preparation: Prepared by the secretary or chairperson of the meeting and circulated in advance to members.
Contents: Includes items like approval of previous minutes, financial reports, proposals for decision, appointments, and any other business.
Importance: Helps maintain order during the meeting, avoids confusion, and ensures all important matters are discussed.
Legal Requirement: For company meetings like AGM or EGM, agenda is often sent along with notice of the meeting as per Companies Act 2013.
An agenda ensures that meetings are systematic, focused, and productive.
Or
What is a depository? What are the benefits of the depository system? (2+8=10)
Answer: A depository is a financial institution that holds securities like shares, bonds, and debentures in electronic form on behalf of investors. It eliminates the need for physical share certificates, making the transfer and trading of securities easier and faster. Examples in India include NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited).
Benefits of the Depository System:
Eliminates Paperwork: Investors do not need physical share certificates, reducing the risk of loss, theft, or damage.
Easy Transfer of Shares: Shares can be transferred electronically, making the buying and selling process faster.
Safety: Reduces risks of forgery, theft, and loss of physical certificates.
Cost-Effective: Reduces costs of printing, storing, and handling physical certificates.
Efficient Settlement: Speeds up settlement of trades in stock exchanges, ensuring timely delivery of securities and payment.
Automatic Updates: Dividend, bonus shares, or rights issues are automatically credited to the investor’s account.
Transparency: Investors can track their holdings online, providing better control and information.
Nomination Facility: Depositories allow investors to nominate persons to inherit securities in case of death.
In short, the depository system modernizes and simplifies securities trading, making it safe, fast, and efficient for investors and companies alike.
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