Corporate and Other LawsMCQQuestion 5993 of 221
All Questions

2. For the purpose of, or in connection with, a purchase or subscription made or to be made, by any person of or for any shares in the company or in its holding company. As per section 67(3) of the Act, a company may provide the financial assistance, in case of lending money by a company to its employees (other than its directors or key managerial personnel), not exceeding six-month salary of the employees to enable them to buy or subscribe fully paid shares in the company or its holding company and to hold them by way of beneficial ownership. In the given question, Silk Segment Private Ltd. (SSPL) is a wholly owned subsidiary of Silk Block Ltd. (SBL). Thus, SSPL will also be deemed as a public company [by virtue of Section 2(71)]. Hence, considering the above provisions we can answer the following to the questions asked: (i) Mr. Sohan is the Deputy Marketing Manager of SSPL; hence loan may be provided to him upto the limit of his 6 months’ salary i.e. ₹ 6,00,000. Thus, proposal to grant loan of ₹ 15,00,000 to Mr. Sohan for purchase of shares in SBL is not valid. Ms. Subarna is a KMP (being the Chief Financial Officer of SSPL), hence, proposal to grant loan to her for purchase of shares in SBL is not valid. (ii) Section 67 of the Act shall not apply to private companies in whose share capital no other body corporate has invested any money. In case where Silk Block Ltd. (SBL) held only 25% shares of Silk Segment Private Ltd. (SSPL), the latter would not be termed as a subsidiary of the former and hence would not be a deemed public company. It will still be regarded as a private limited company. Further, SBL is holding shares in SSPL, thus SSPL will not fall in the exempted class of private companies and accordingly, the provision of section 67(3) of the Companies Act, 2013 shall apply. In view of the above provisions, the answer would remain the same in case only 25% shares of SSPL are held by SBL. (b) Exemption to certain Private Companies: Notification No. GSR 464 (E) dated 5th June 2015, provided certain exemptions to Private Limited Companies relaxing the provisions of the Companies Act 2013 with respect to certain restrictions for acceptance of deposits. The restrictions specified in the clauses (a) to (e) of sub-section (2) of section 73 with respect to certain restrictions for acceptance of deposits like issue of circular, filing the copy of such circular with the Registrar, CORPORATE AND OTHER LAWS depositing of certain amount and certification as to no default committed shall not apply to a private company. They are as follows:

Select Your Answer (Keyboard: A, B, C, D)
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option A — above, i.e. not exceeding one hundred percent of aggregate of the paid-up share capital, free reserves and securities premium account. Therefore, the maximum amount of deposit it can accept from members will be limited to ₹ 15 crore. In terms of the options given in the question, the company has no option but to choose Proposal 2 — Acceptance of Deposits of ₹ 14,00,00,000, to be repaid with interest @ 8% per annum. (c) According to section 3(18) of the General Clauses Act, 1897, ‘Document’ shall include: - any matter written, expressed or described upon any substance; - by means of letters, figures or marks or by more than one of those means; - which is intended to be used or which may be used, for the purpose or recording that matter. For example, books, file, painting, inscription and even computer files are all documents. However, it does not include Indian Currency Notes. (i) Power of Attorney It is a written legal instrument by which a person (the principal) authorizes another person (the agent) to act on their behalf. It meets the criteria of a document as it is written or expressed, contains information describing the authority granted and is intended to record and communicate the legal relationship. (ii) Cheque A cheque is a negotiable instrument that directs a bank to pay a specified sum of money from the drawer's account to the payee. It qualifies as a document because it is written or printed, records details such as the amount, date, and parties involved and serves as evidence of a financial transaction. Hence, both a Power of Attorney and a Cheque fall within the definition of a "document" within the meaning of Section 3(18) of the General Clauses Act, 1897. They are tangible representations of written information intended for legal or transactional purposes.

All Options:

  • Aabove, i.e. not exceeding one hundred percent of aggregate of the paid-up share capital, free reserves and securities premium account. Therefore, the maximum amount of deposit it can accept from members will be limited to ₹ 15 crore. In terms of the options given in the question, the company has no option but to choose Proposal 2 — Acceptance of Deposits of ₹ 14,00,00,000, to be repaid with interest @ 8% per annum. (c) According to section 3(18) of the General Clauses Act, 1897, ‘Document’ shall include: - any matter written, expressed or described upon any substance; - by means of letters, figures or marks or by more than one of those means; - which is intended to be used or which may be used, for the purpose or recording that matter. For example, books, file, painting, inscription and even computer files are all documents. However, it does not include Indian Currency Notes. (i) Power of Attorney It is a written legal instrument by which a person (the principal) authorizes another person (the agent) to act on their behalf. It meets the criteria of a document as it is written or expressed, contains information describing the authority granted and is intended to record and communicate the legal relationship. (ii) Cheque A cheque is a negotiable instrument that directs a bank to pay a specified sum of money from the drawer's account to the payee. It qualifies as a document because it is written or printed, records details such as the amount, date, and parties involved and serves as evidence of a financial transaction. Hence, both a Power of Attorney and a Cheque fall within the definition of a "document" within the meaning of Section 3(18) of the General Clauses Act, 1897. They are tangible representations of written information intended for legal or transactional purposes. ✓
  • Bwhich is a start-up, for five years from the date of its incorporation; or
  • Cabove, as its borrowings from banks is not less than twice of its paid-up share capital or fifty crore rupees, whichever is lower, (i.e. 8 crore*2=₹ 16 crore and amount already borrowed is ₹ 17 crore (i.e Term Loan of ₹ 12 crore and Working Capital of ₹ 5 crore), it has to go for the restricted amount as stated in clause
  • D

Detailed Solution & Explanation

Correct Answer: Option **A** Explanation: As per the official suggested answer, option **A** is correct. Hence, **Option A** is the correct answer.

Key Concepts to Understand

Acceptance

When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Acceptance must be absolute and unqualified (Section 7, ICA 1872). A conditional acceptance is a counter-offer.

Limit

The value that a function f(x) approaches as the input x approaches a particular value. Written as lim(x→a) f(x) = L. It is the foundational concept of Calculus and is essential for defining derivatives and integrals.

More Questions from Corporate and Other Laws

If 3x+y+2x−y=−1\displaystyle 3x+y+2x−y\displaystyle \frac{3}{x+y} + \frac{2}{x-y} = -1 and 1x+y−1x−y=43\displaystyle 1x+y−1x−y=43\displaystyle \frac{1}{x+y} - \frac{1}{x-y} = \frac{4}{3} then (x,y)\displaystyle (x, y) is:

2x+510+3x+1015=5\displaystyle \frac{2x+5}{10} + \frac{3x+10}{15} = 5, find x\displaystyle x

Find value of x2−10x+1\displaystyle x^2 - 10x + 1 if x=15−26\displaystyle x = 15−26\displaystyle \frac{1}{5-2\sqrt{6}}

The cost of 2\displaystyle 2 oranges and 3\displaystyle 3 apples is $28$. If the cost of an apple is doubled then the cost of $3orangesand\displaystyle oranges and5$ apples is $75$. The original cost of 7\displaystyle 7 oranges and 4\displaystyle 4 apples (in Rs) is:

In a multiple choice question paper consisting of $100questionsof\displaystyle questions of1\displaystyle mark each, a candidate gets $60\% marks. If the candidate attempted all questions and there was a penalty of $0.25$ marks for wrong answers is:

The values of x\displaystyle x and y\displaystyle y satisfying the equations 3x+y+2x−y=3\displaystyle 3x+y+2x−y=3\displaystyle \frac{3}{x+y} + \frac{2}{x-y} = 3 and 2x+y+3x−y=233\displaystyle 2x+y+3x−y=233\displaystyle \frac{2}{x+y} + \frac{3}{x-y} = \frac{23}{3} given by

Ready to Master Corporate and Other Laws?

Practice all 221 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free