CA (Chartered Accountancy) Intermediate: Corporate and Other Laws Syllabus

Intermediate: Corporate and Other Laws syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Intermediate: Corporate and Other Laws in CA (Chartered Accountancy), not a summary of it.

1. 1

   Companies Act, 2013 - Part I

   4 topics

   • Preliminary and Incorporation of Companies
     • Memorandum and Articles of Association
   • Prospectus and Allotment of Securities
   • Share Capital and Debentures
   • Acceptance of Deposits by Companies
2. 2

   Companies Act, 2013 - Part II

   4 topics

   • Registration of Charges
   • Management and Administration
     • Annual return, registers and meetings of members
   • Declaration and Payment of Dividend
   • Accounts and Audit of Companies
3. 3

   Company Management and LLP

   4 topics

   • Appointment and Qualifications of Directors
     • Powers, duties and disqualifications
   • Meetings of Board and its Powers
   • Limited Liability Partnership Act, 2008
   • Companies Incorporated Outside India
4. 4

   Other Laws

   3 topics

   • General Clauses Act, 1897
   • Interpretation of Statutes
     • Rules of interpretation and aids to construction
   • Foreign Exchange Management Act, 1999
     • Current and capital account transactions

Intermediate: Corporate and Other Laws flashcards for CA (Chartered Accountancy)

21 of 58 cards from the Intermediate: Corporate and Other Laws deck — real questions with worked answers.

1. Under the Companies Act, 2013, what is the minimum number of members required to form a (a) private company, (b) public company, and (c) One Person Company (OPC)?

   (a) Private company: 2 members; (b) Public company: 7 members; (c) OPC: 1 member.

2. What is the maximum number of members permitted in a private company under the Companies Act, 2013?

   200 members (excluding present and past employees who are members). Joint holders are counted as a single member.

3. Define a 'small company' under Section 2(85) of the Companies Act, 2013 (current thresholds).

   A company (other than a public company) whose paid-up share capital does not exceed Rs. 4 crore (or higher amount up to Rs. 10 crore) AND turnover does not exceed Rs. 40 crore (or higher up to Rs. 100 crore). Holding/subsidiary companies, Section 8 companies, and companies governed by a special Act cannot be small companies.

4. What are the main contents (clauses) of the Memorandum of Association under Section 4 of the Companies Act, 2013?

   Name clause, Registered office (situation) clause, Object clause, Liability clause, Capital clause, and (for companies with share capital) the Subscription/Association clause. An OPC also has a Nominee clause.

5. Distinguish between the Memorandum of Association (MOA) and the Articles of Association (AOA).

   MOA is the charter defining the company's powers and its relationship with the outside world (scope of activities); AOA contains internal rules/bye-laws for management. MOA is supreme; AOA is subordinate to MOA and the Act. Acts beyond MOA are void (ultra vires the company); acts beyond AOA but within MOA can be ratified.

6. What is the doctrine of 'ultra vires' in company law and its effect?

   An act done beyond the powers conferred by the MOA is ultra vires the company. Such acts are wholly void and cannot be ratified even by unanimous consent of all members. The company can neither sue nor be sued on such transactions.

7. Explain the doctrine of 'constructive notice' and the doctrine of 'indoor management' (Turquand's rule).

   Constructive notice: outsiders dealing with a company are presumed to have read its public documents (MOA/AOA). Indoor management (rule in Royal British Bank v. Turquand): outsiders are entitled to assume that internal procedures/formalities have been duly complied with and need not inquire into internal irregularities.

8. What is a 'prospectus' as defined under Section 2(70) of the Companies Act, 2013?

   Any document described or issued as a prospectus including a red herring prospectus, shelf prospectus, or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of securities of a body corporate.

9. Differentiate between a 'Shelf Prospectus' and a 'Red Herring Prospectus'.

   Shelf prospectus: a prospectus issued by specified classes of companies for one or more issues of securities over a period (validity up to 1 year), avoiding fresh prospectus each time; only an information memorandum is filed for subsequent issues. Red herring prospectus: a prospectus that does not include complete particulars of the quantum or price of securities, issued prior to the issue.

10. What is the minimum subscription requirement, and within what time must allotment money/application money be returned if minimum subscription is not received?

    Minimum subscription stated in the prospectus must be received within 30 days of the issue of prospectus (or as per SEBI). If not received, application money must be repaid within the prescribed period (15 days from closure of issue); if not repaid in time it must be repaid with interest at 15% p.a.

11. What is the difference between equity share capital and preference share capital?

    Preference shares carry a preferential right to (a) dividend at a fixed rate and (b) repayment of capital on winding up, ahead of equity. Equity capital is all share capital that is not preference capital; equity carries residual rights and voting rights, while preference shares have restricted voting rights.

12. State the time limit and rate for redemption of preference shares under the Companies Act, 2013.

    A company cannot issue irredeemable preference shares. Redeemable preference shares must be redeemed within a maximum period of 20 years from issue (except infrastructure projects which may issue up to 30 years, redeeming a minimum 10% per year from year 21 at the option of holders).

13. What is a 'Capital Redemption Reserve' (CRR) and when must it be created?

    When preference shares are redeemed (or shares bought back) out of profits otherwise available for dividend, a sum equal to the nominal value of shares redeemed must be transferred to the Capital Redemption Reserve. CRR may be used to issue fully paid bonus shares.

14. Under Section 68, out of which sources can a company buy back its own shares, and what are the key quantitative limits?

    Buy-back may be made out of: free reserves, securities premium account, or proceeds of an earlier issue of different shares. Limits: (a) up to 10% of paid-up equity capital + free reserves by Board resolution; (b) up to 25% of aggregate paid-up capital + free reserves by special resolution; and post-buyback debt-equity ratio must not exceed $2:1$.

15. Define a 'debenture' and state whether a debenture holder is a member or a creditor of the company.

    A debenture is an instrument of debt issued by a company acknowledging indebtedness, usually secured by a charge. A debenture holder is a creditor of the company, not a member, and is entitled to fixed interest whether or not the company makes profits.

16. What is a 'Debenture Redemption Reserve' (DRR) and its purpose?

    DRR is a reserve created out of the profits of the company available for dividend, earmarked exclusively for the redemption of debentures. It is created to protect debenture holders, ensuring funds are available for redemption (the company also maintains a debenture redemption investment/deposit).

17. Under Section 73-76, what is a 'deposit' and which receipts of money are excluded from the definition of deposit?

    Deposit includes any receipt of money by way of deposit or loan or in any other form, but excludes (among others): amounts received from the government, banks, financial institutions; share application money pending allotment; amounts received from directors (out of own funds) and from members within limits; and amounts received in the ordinary course of business as advances.

18. What is the maximum tenure and minimum tenure for which a company may accept deposits?

    Deposits cannot be accepted/renewed for a period less than 6 months or more than 36 months from the date of acceptance. (Short-term deposits up to 10% of paid-up capital, free reserves and securities premium may be for a period not less than 3 months to meet short-term needs.)

19. What is a 'charge' under the Companies Act, and within what time must it be registered with the Registrar?

    A charge is an interest or lien created on the property or assets of a company as security for a loan. It must be registered with the Registrar within 30 days of its creation. The Registrar may allow registration within a further 30 days (total 60 days) on payment of additional fees, and a further 60 days with ad valorem fees (total 120 days for charges created on/after the Ordinance).

20. What is the consequence of non-registration of a charge with the Registrar of Companies?

    An unregistered charge is void against the liquidator and any creditor of the company (it becomes unsecured), though the contract/obligation to repay the money remains valid and the money becomes immediately payable. The charge is, however, valid between the company and the chargeholder.

21. What is the difference between a 'fixed charge' and a 'floating charge'?

    A fixed charge attaches to specific, identifiable, ascertained assets (e.g. land, machinery) and prevents the company from dealing with them freely. A floating charge hovers over a class of fluctuating assets (e.g. stock-in-trade) leaving the company free to deal with them in the ordinary course of business until the charge 'crystallises' (becomes fixed) on a default or winding up.

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