Samacheer Kalvi 12th Commerce Guide Chapter 27 Company Management

Tamilnadu State Board New Syllabus Samacheer Kalvi 12th Commerce Guide Pdf Chapter 27 Company Management Text Book Back Questions and Answers, Notes.

Tamilnadu Samacheer Kalvi 12th Commerce Solutions Chapter 27 Company Management

12th Commerce Guide Company Management Text Book Back Questions and Answers

I. Choose the Correct Answers

Question 1.
A person Shall hold office as a director in …………… companies as per the Companies Act, 2013.
a) 5 companies
b) 10 companies
c) 20 companies
d) 15 companies
Answer:
c) 20 companies

Question 2.
Which …………… Director is appointed by a Financial Institution.
a) Nominee
b) Additional
c) Women
d) Shadow
Answer:
a) Nominee

Question 3.
A Private Company shall have a minimum of ………………….
a) Seven directors
b) Five directors
c) Three directors
d) Two directors
Answer:
d) Two directors

Question 4.
A Public Company shall have a minimum of …………….. Directors.
a) Twelve
b) Seven
c) Three
d) Two
Answer:
c) Three

Question 5.
A Public Company having a paid up Share Capital of Rs. ………………. or more may have a directter, elected by such small shareholders.
a) One crore
b) Three crores
c) Five crores
d) Seven crores
Answer:
c) Five crores

Question 6.
Under the companies Act, which one of the following powers can be exercised by the Board by Directors?
a) Power to sell the company’s undertakings.
b) Power to make call.
c) Power to borrow money in excess of the paid up capital.
d) Power to reappoint an auditor.
Answer:
b) Power to make call.

Question 7.
Which director need not hold qualifying shares.
a) Directors appointed to Central Government.
b) Directors appointed to Shareholders.
c) Directors appointed to Managing Director.
d) Directors appointed to Board of Directors.
Answer:
a) Directors appointed to Central Government

Question 8.
What is the statue of Directors who regulate money of the company.
a) Banker
b) Holder
c) Agent
d) Trustees
Answer:
d) Trustees

Question 9.
According to Companies Act, the Directors must be appointed by the
a) Central Government
b) Company Law Tribunal
c) Company in General Meeting
d) Board of Directors
Answer:
c) Company in General Meeting

Question 10.
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) All the above

II. Very Short Answer Questions

Question 1.
Define Director.
Answer:
The Companies Act 2013 section 2 (34) defines a director appointed to the board of a Company is:
“A person who is appointed or elected member of the Board of Directors of a company and has the responsibility of determining and implementing policies along with others in the board.

Question 2.
Name the companies required to appoint KMP.
Answer:

Every Listed Company.
Every Public Company [Paid up capital ₹ 10 crores and more]

Question 3.
Who is a Whole Time Director?
Answer:
A whole-time Director is one who devotes the whole of his time of working hours to the company and has a significant personal interest in the company as the source of his income.

Question 4.
Who is called Managing Director? [M.D]
Answer:

A Managing Director is one who is employed by the company.
He has substantial powers of management over the affairs of the company subject to superintendence, direction control of the Board.

Question 5.
Who can be an Executive Director?
Answer:
An executive director is a Chief Executive Officer (CEO) or Managing Director of an organization, company, or corporation, who is responsible for making decisions to complete the mission and for the success of the organisation.

III. Short Answer Questions.

Question 1.
When are Alternative Directors Appointed?
Answer:

Alternate Directors are appointed by the Board of Directors, as a substitute to a (original) Director who may be absent from India, for a period which is not less than 3 months.
It is authorised by AOA or by passing a resolution in the Annual General Meeting.
He is not a representative or agent of Original Director.

Question 2.
Who is a Shadow Director?
Answer:
A shadow director is a person who is not a member of the Board but has some power to run it and can be appointed as the director but according to his/her wish.

Question 3.
State the minimum number of Directors for a Private Company.
Answer:
Under section 149 (1) of the Companies Act, 2013 states that the requirement of Minimum/ Maximum Number of Directors in a Company.,

Private company:
In the case of One Person Company: The requirement of directors is one.
Other Private Companies: The minimum requirement of Directors is two.

IV. Long Answer Questions

Question 1.
Who is the KMP?
Answer:
Key Managerial Personnel – Section 2 (51) of Companies Act 2013,

CEO – Chief Executive Officer
MD – Managing Director or Manager
Company – Secretary
WTD – Whole Time Director
CFO – Chief Financial Officer
Such other officers as may be prescribed.

Question 2.
Bring different types of Directors. [RASIAN]
Answer:

Residential Director: According to Section 149 (3) of the Companies Act 2013, every company should appoint a director who has stayed in India for a total period of 182 days.
Independent Director: An independent director is an alternate director other than a Managing Director who is known as a Whole-time director or Nominee director.
Small shareholder’s Director: Small shareholders can appoint a single director in a listed company.
Nominee Director: A director nominated by any financial institution in pursuance of the provisions of law.
Additional Directors: Any Individual can be appointed as Additional Directors by a company.
Alternate Directors: Alternate director is appointed by the Board of Directors, as a substitute who may be absent from India, for a period of 3 months.

Question 3.
State the Qualification of Directors.
Answer:
Qualifications of Director: As regards to the qualification of directors, there is no direct provision in the Companies Act, 2013. In general, a director shall possess appropriate skills, experience and knowledge in the fields of finance, law, management, sales, marketing, research, and other disciplines related to the business. The following are the qualifications:

A director must be a person of sound mind.
A director must hold share qualification if the article of association provides such.
A director must be an individual.
A director should be a solvent person.
A director should not be convicted by the Court for any offense, etc.

Question 4.
State the Criminal Liabilities of Directors.
Answer:
Directors will be liable with a fine and imprisonment or both for fraud of non-compliance of any statutory provisions in the following situations where:

There is a misstatement in Prospectus
There is a failure to file a return on the allotment with the registrar
Failure to give notice to the registrar for the conversion of share into stock
Failure to issue Share Certificate and Debenture Certificate
There is the default in holding Annual General Meeting
There is a failure to provide Financial Statements

12th Commerce Guide Company Management Additional Important Questions and Answers

I. Choose the Correct Answers

Question 1.
A director who is appointed in the place of an original director during the latter’s absence from the country is known as ……………….. Director.
a) Alternate
b) Additional
c) Women
d) NOTA
Answer:
a) Alternate

Question 2.
The aggregate nominal value of Qualification shares shall not exceed ………………….
a) ₹ 6000
b) ₹ 5000
c) ₹ 4000
d) ₹ 3000
Answer:
b) ₹ 5000

Question 3.
When a company has issued shares of ₹ 6000 each only, the minimum number of Qualification shares that a Director should hold is ………………….
a) One
b) Two
c) Three
d) Four
Answer:
a) One

Question 4.
The overall managerial remuneration should not exceed ……….. percent in the net profit.
a) 5
b) 10
c) 11
d) 12
Answer:
c) 11

Question 5.
The most important document of a company for External Management is ………………..
a) MOA
b) AOA
c) Prospectus
d) Prospectus in lieu of prospectus
Answer:
a) MOA

Question 6.
The maximum number of Directors in a public limited company is …………………
a) 2
b) 3
c) 5
d) 15
Answer:
d) 15

Question 7.
Pick the odd one out:
a) MO
b) CEO
c) MFO
d) DEO
Answer:
d) DEO

Question 8.
First Director is mentioned in ………………
a) AOA
b) MOA
c) Register
d) NOTA
Answer:
a) AOA

Question 9.
Director Act as ……………………
a) Agent
b) Trustee
c) Officer
d) All of these
Answer:
d) All of these

Question 10.
An ……………. can be appointed as Director.
a) Individual
b) Firm
c) HOF
d) NOTA
Answer:
a) Individual

Question 11.
The first Board meeting should be held within ………………… days of the date of incorporation,
a) 15
b) 30
c) 45
d) 60
Answer:
b) 30

II Match the following.
Question 1.

List – I	List – II
i. Alternate Director	1. Not less than 182 days
ii. Shadow Director	2. Substitute
iii. Residential Director	3. 1000 shareholders
iv. Small Shareholders Directors	4. Not the member of the Board

Samacheer Kalvi 12th Commerce Guide Chapter 27 Company Management 1
Answer:
a) (i) 2, (ii) 4, (iii) 1, (iv) 3

Question 2.

List – I	List – II
i. Statutory powers	1. To fill a casual vacancy
ii. Managerial powers	2. To sell or lease any asset of the company
iii. Powers only with the resolution	3. To contract with a third party
iv. Other powers	4. To make loans

Samacheer Kalvi 12th Commerce Guide Chapter 27 Company Management 2
Answer:
a) (i) 4, (ii) 3,(iii) 2, (iv) 1

III. Assertion and Reason

Question 1.
Assertion (A): The Term Remuneration means any money or its equivalent is given or passed to any person for services rendered by him.
Reason (R): It includes Rent-free, Sweat Equity shares, Concessions, Free of cost etc.
a) (A) and (R) are True
b) (A) and (R) False
c) (A) is true (R) is False
d) (A) is False (R) is True
Answer:
a) (A) and (R) are True

IV. Very Short Answer Questions

Question 1.
Define Director.
Answer:

“A person who is appointed or elected member of the Board of Directors of a company and has the responsibility of determining and implementing policies with others in the Board.
It is not necessary to hold any shares in the company or be an employee.
Director act on the basis of resolutions made in the Board of Directors meeting according to their powers stated in the Articles of Association of the Company”. – The companies Act 2013, Section 2(34)

Question 2.
What are the Minimum and Maximum number of Directors and the Number of Directorship?
Answer:
Minimum:

One Person Company – ONE
Private Company – TWO
Public Company – THREE

Maximum:

A company can appoint maximum 15 Directors out of which one must be Resident Director.
By passing the resolution and approval of the Central Government, a company can appoint more than 15 Directors.

Directorship:

A person can hold the position of Directorship in different companies up to a maximum of 20.
Holding or subsidiary of a public company shall be limited to 10.

V. Short Answer Questions.

Question 1.
Differentiate Executive and Non-Executive Directors. [DR]
Answer:

Basis of Difference	Executive Director	Non-Executive Director
1. Director	An Executive Director is a CEO or MD of the company.	He is Neither CEO nor an MD of the company.
2. Responsible	He is responsible for making decisions to complete the mission and for the success of the organization.	He is responsible for monitoring the CEO and acting in the interest of the company.

Question 2.
When are alternative directors appointed?
Answer:
An alternate director is appointed by the Board of Directors, as a substitute to a director who may be absent from India, for a period which is not less than three months.

VI. Long Answer Questions.

Question 1.
Distinguish Manager and Director. [NIL] [R]
Answer:

Basis of Difference	Manager	Director
1. Nature of work	He is a person who is in charge of a particular department of the company and is responsible for the performance of that department.	He is appointed by the shareholders to lead the company to achieve its goals.
2. Implements	He allocates works to the subordinates.	He implants the policies and fundamental guidelines to carry out a job to the concerned manager.
3. Level of Management	Middle level	Top-level.
4. Responsibilities	He is responsible for implementation plans and policies approved by the Board.	He is responsible for formulation plans and policies from time to time to achieve the goal.

Question 2.
Difference between Managing Director and Whole Time Director. [P] [PAD]
Answer:

Basis of Difference	Managing Director	Whole Time Director
1. Powers	MD is entrusted with substantial powers.	His power is stated in the term of employment.
2. Prohibition	Prohibits to act both MD and Manager.	He may be appointed as Manager.
3. Appointment	Consent of the shareholders and resolutions are not necessary to appoint MD.	Both are necessary to appoint WTD.
4. Duration.	More than 5 years at a time.	No such restrictions.

Question 3.
Who is the KMP?
Answer:
Companies Act, 2013 has introduced many new concepts and Key Managerial Personnel (KMP) is one of them. KMP covers the traditional roles of managing director and whole-time director and also includes some functional heads.
Key Managerial Personnel: The definition of the term Key Managerial Personnel is contained in Section 2(51) of the Companies Act, 2013. This Section states:

The Chief Executive Officer
The Managing Director or Manager
The Company Secretary
The Whole-time Director
The Chief Financial Officer
Such other officer as may be prescribed

Question 4.
Explain the Composition of the Board of Directors.
Answer:
a) General Optimum Combination:
Board of Directors Comprises:

Executive Directors.
Non – Executive Directors.
Atleast one Women Director.
Not less than 50 % of the Board – shall comprise Non – Executive Directors.

b) When the Non – Executive Director is the Chairperson:

1/3 of the Board Comprises of Independent Directors. [ID].
Where the company does not have a regular non – executive chairperson at least 1/2 of the Board Shall Comprise Independent Directors.

c) When the non-executive chairperson is a promoter – Relatives of promoter or person occupying management position or at one level below the Board of Directors :

In this case 1/2 of the Board of Directors shall consist of Independent Directors.
Whole Time Director.
Managing Director.
Executive Director.
Non – Executive Directors.

Question 5.
List the disqualification of a director.
Answer:
Disqualifications of a Director: Section 164 of Companies Act, 2013, has mentioned the disqualification as follows:
A person shall not be capable of being appointed director of a company if the director is

Of unsound mind
An undercharged insolvent
Has been convicted by a court for any offense
Has not paid any calls in respect of shares of the company held by him
An order disqualifying him for appointment as director has been passed by a court
He has not got the Director Identification Number

Question 6.
Explain How the Director of a company can be removed from the office?
Answer:
A Director of a company can be removed from his office before the expiry of his term by:

Shareholders
Central Government
Company Law Board.

a) Removed by Shareholders: [Section 169]
In Annual General Meeting the shareholders of a company [Public or Private] by giving special notice and passing ordinary resolution can remove the director before the expiry of his period of office without the proof of Mismanagement, Breach of Trust, Misfeasance, Misconduct and the policies pursued by the Director are not appropriate.

b) Removed by Central Government:
The Central Government can remove the Director from office on the recommendation of the Company Law Board under the following circumstances.

If cause injury or damage to the interest of the business.
If conduct and management affairs are Guilty of Fraud, Misfeasance, Persistent negligence in carrying out his obligations.
If the business has not been conducted and managed with sound business principles.

c) Removal by the Company Law Board:
If an application has been made to the CLB against the oppression and mismanagement of the company’s affairs by a Director, then the CLB may order for the termination.

Question 7.
What is the maximum limit for the Managerial Remuneration?
Answer:

When a company has only one MD (or) WTD (or) Manager the – remuneration payable shall not exceed 5% of Net profit.
If it is more than one MD or WTD or Manager [The overall] the remuneration payable should not exceed 11% of Net profit.

Maximum Remuneration Payable to its Managerial Personnel:
Remuneration payable by the company in case there is no profit or inadequacy of profit without central Government
and to pay remuneration in excess of the above limit is detailed below:

Where Effective Capital is	Limit of yearly Remuneration payable shall not exceed ₹
i. Negative or less than Rs. 5 crore.	₹ 30 lakhs.
ii. ₹ 5 crore and above but less than ₹ 100 crore.	₹ 42 lakhs.
iii. ₹ 5 crore and above but more than ₹ 100 crore	₹ 60 lakhs.
iv. ₹ 250 crore and above.	₹ 60 lakhs + 9.91 % of the effective capital in excess 250 crores.

Question 8.
What are the duties of a director?
Answer:
Directors act as agents of the shareholders and act as a trustee of shareholders. The following are the duties of directors:

Collective Duties of Directors: Directors as apart of the Board perform certain duties collectively. The duties are as follows:

Approval of annual accounts and authentication of annual accounts
Appointment of First Auditors
Passing of resolutions at board meetings
Directors report to shareholders highlighting the performance of the company.

General duties of Directors:

Delegating power to any committee
Issuing instructions to employees for implementation of policy
Appointing their subordinates like Managing director, Manager, Secretary and other employees
Actin Good faith in order to promote the objectives of the company.

Question 9.
State the powers of the Directors.
Answer:
Statutory powers:

To issue Debentures.
To make Loans.
To Borrow money other than Debenture.
To diversify the company business.
To Approve Financial Statement and Board Report.

Managerial powers:

To Appoint MD, Manager and Secretary.
To control and supervise the work of coordinates.
To contract with the third party.
To Allot – Forfeit and Transfer shares.
To decide terms and conditions to issue debentures.

Powers only with a Resolution :

To sell or lease any asset of the company.
To appoint a sole Agent for more than 5 years.
To allow time to the director for repayment of the loan.
To Issue Bonus Shares.
To Borrow money in excess of paid-up capital and free reserves.

Other powers:

To Fill Casual Vacancy.
To Appoint Alternate and Additional Directors and KMP.
To Appoint the first Auditor of the company.
To remove KMP.
To Declare Solvency Position of the company.

Question 10.
Mr.Raghu is appointed as a Director in a company. Is he personally liable to third parties? If so, under what circumstances is he liable?
Answer:
Liability to outsiders:

The directors are not personally liable to outsiders if they act within the scope of powers vested in them.
The general rule in this regard in that wherever an agent is liable, those directors would be liable, but where the liability would attach to the principal only, the liability is the liability of the company.
The directors are personally liable to third parties of contracts in the following cases:
a. They contract with outsiders in their personal capacity
b. They contract as agents of an undisclosed principal
c. They enter into a contract on behalf of a prospective company.
d. When the contract is ultra-vires the company.

In default of statutory duties, the directors shall be personally liable to third parties in the following cases:

Mis-statement in the prospectus.
Irregular allotment.
Failure to repay application money if the minimum subscription is not received.
Failure to repay application money if allotment of shares and debentures is not dealt in on the stock exchange as specified in the prospectus.