11th SP Chapter 6 Exercise (Directors and Key Managerial Personnel of a Company) Maharashtra Board – Free Solution
Table of Contents
11th SP Chapter 6 Exercise
Chapter 6 – Directors and Key Managerial Personnel of a Company
Q.1 (A) Select the correct answer from the options given below and rewrite the statements.
1) ……….. comprises of a team of Directors.
a) Board of Directors
b) Board of Trustees
c) Board of Managers
2) ………… can be a director.
a) An Individual
b) A Firm
c) A Body corporate
3) Up to ………… as maximum directors are allowed to a company.
a) five
b) fifteen
c) fifty
4) A maximum of ……………. Directorships is allowed to a person.
a) two
b) ten
c) twenty
5) A maximum of ………….. Directorships of a public company is allowed to a person.
a) one
b) ten
c) twenty
6) …………….. is a unique identification number required to be a Director.
a) PIN
b) DIN
c) TIN
7) ………………….. powers are the powers given to Board under the Act.
a) Statutory
b) Managerial
c) Administrative
8) Director represents company in his role as ………….. .
a) Agent
b) Managing Partner
c) employee
9) Managing Director is appointed for a period of ……….. years.
a) 5
b) 10
c) 15
10) ……………. is required to work under the superintendence, control, guidance of the Board.
a) Government
b) ROC
c) Managing Director
11) ……….. is an employee of the company.
a) Alternate director
b) Non-executive Director
c) Whole-time director
12) …………. need not be a director of the company.
a) Manager
b) Managing Director
c) Whole-time director
13) ………. needs a whole-time director.
a) Listed company
b) Partnership
c) OPC
14) To provide guidance to Board is ……. duty of Company Secretary.
a) Personal
b) General
c) Statutory
15) Only a member of ……….. can be a practicing Company Secretary.
a) ICAI
b) ACCA
c) ICSI
16) …………. is to be prepared in prescribed form MR -3.
a) Annual Report
b) Auditors Report
c) Secretarial Audit Report
Q.1 (B) Match the pairs.
| Group A | Group B |
| a) Board of Directors | 1) Nominated by the Board |
| b) Managing Director | 2) Assists and advises the Board |
| c) Company Secretary | 3) Automatic Appointment |
| d) First Directors | 4) Appointed by ROC |
| e) Alternate Director | 5) Extensive Powers of management |
| 6) Substantial Powers of management | |
| 7) Appointed by Promoter | |
| 8) Assists and Advises the Government | |
| 9) Negligible Powers of management | |
| 10) Nominated by Council |
Answers.
a – 5. Extensive powers of management
b – 6. Substantial powers of management,
c – 2. Assists and advises the Board
d – 7. Appointed by promoters
e – 1. Nominated by the Board
| Group A | Group B |
| a) Public Company | 1) Arises due to Death of Director |
| b) Private Company | 2) Collective Powers |
| c) Secretarial Auditor | 3) Individual Powers to Directors |
| d) Casual Vacancy of a Director | 4) Arises due to additional work |
| e) Powers of the Board | 5) Appointed by Managing Director |
| 6) At least 2 (two) Directors | |
| 7) At least 3 (three) Directors | |
| 8) At least 15 (fifteen) Directors | |
| 9) At least 1 (one) Director | |
| 10) Appointed by the Board |
Answers.
a – 7. At least 3 (three) directors
b – 6. At least 2 (two) directors
c – 10. Appointed by the Board
d – 1. Arises due to death of a Director
e – 2. Collective powers
Q.1 (C) Write a word or a term or phrase which can substitute each of the following statements.
1) The organization with distinct features of separate ownership and management.
Answer: Joint-stock company
2) The officer responsible for company’s finances.
Answer: Chief Financial Officer
3) The body of elected representatives of company.
Answer: The Board of Directors
4) The officer who is a statutory and administrative officer and also acts as co-ordinator of the company.
Answer: Company Secretary
5) Qualification required to be a Company Secretary.
Answer: Member of ICSI
6) Agents, Trustees, and Managing Partners of the company.
Answer: The Board of Directors
7) Audit which checks compliance with different legislations.
Answer: Secretarial Audit
8) This KMP signs a document of the company requiring authentication by company.
Answer: Company Secretary
9) The nature of relationship of Director with the company.
Answer: Fiduciary
10) Name the secretarial standard -1
Answer: Secretarial Standards on meetings of the BOD
11) Name the secretarial standard – 2
Answer: Secretarial Standards on General Meeting
12) Name the secretarial standard – 3
Answer: Secretarial Standards on Dividend
Q.1 (D) State whether the following statements are True or False.
1) Large number of shareholders necessitates company to have separate managerial body. (True)
2) Maximum number of Directors allowed to a company are 15 (fifteen). (True)
3) A public company should have a minimum of 10 (ten) directors. (False)
4) DIN is required for Secretaryship. (False)
5) Executive Director is called as outside Director. (False)
6) Promoter of a company cannot be the Independent Director. (True)
7) Only individuals can be directors. (True)
8) Casual vacancy of Board is filled by the members. (False)
9) To function as per Articles of Association of the company is a statutory duty of the Board. (True)
10) A Director is an employee of the company. (False)
11) Managing Director is appointed by a resolution. (True)
12) Minimum and Maximum age to be a Managing Director is 21 and 70; respectively. (True)
13) A company may appoint more than one M. D. (True)
14) Indian companies prefer a Managing Director over a Manager. (True)
Q.1 (E) Find the odd one.
1) Woman Director, Promoter, Executive Director.
2) Absent at Board Meeting, failure to disclose interest, DIN.
Q.1 (F) Complete the sentences.
1) Separate ownership and management is a unique feature of company.
2) Minimum number of Directors for a private company should be Two.
3) Minimum number of Directors for a public company should be Three.
4) Minimum number of Directors for an OPC should be One.
5) First Directors of a company are appointed by Promoter.
6) At least one Woman Director is required by Listed Company company.
7) Casual vacancy on Board is filled by Board.
8) Director is the guardian of interest of company as Trustees.
9) First Secretary is appointed by Promoters.
10) The audit which checks the compliance of Companies Act is called as Secretarial Audit.
Q.1 (G) Select the correct option from the bracket
| Group A | Group B |
| 1) Rotational Director | Retire by Rotation |
| 2) Appointed in Place of a director who is absent | Alternate Director |
| 3) Woman Director | Every Listed company |
| 4) Appointed by Promoters | First Director |
Q.1 (H) Answer in one sentence.
1) Who is the officer responsible for the Company’s financial plan?
Answer: Chief Financial Officer (CFO) is responsible for the company’s financial plan.
2) What is the importance of Secretarial Standards?
Answer: The secretarial standards aim at and achieve integrating, harmonizing and standardizing fine corporate governance practices across all companies
3) Who provides guidance to the Board of Directors?
Answer: Company Secretary provides guidance to the Board of Directors.
4) What is the tenure of ‘Managing Director’?
Answer: The tenure of the Managing Director is 5 years.
Q.1(I) Correct the underlined word and rewrite the following sentences.
1) Public company must have minimum 15 Directors.
Answer: 3
2) First Directors are appointed by ROC.
Answer: Promoters
3) Secretarial Standards are given by the Companies Act, 2013.
Answer: ICSI
Q.2 Explain the following terms/concepts.
1) Director
Answer:
a) As per Section 2(34) of the Act, Director means a director appointed to the Board of the company. Simply speaking Director is a person appointed to manage, direct and supervise the affairs of a company.
b) Only an Individual can be appointed as Director. It means a body corporate, association or firm cannot be director of the company.
c) Director is the elected representative of the shareholders of the company.
2) Managing Director
Answer:
a) Managing Director is a Director who has been entrusted with substantial powers of management under an agreement or by a resolution passed by the company at its general meeting or by the Board of Directors.
b) Appointment of Managing Director is made for a term of 5 years.
c) The Managing Director is appointed to manage the affairs of the company.
d) The managing director works under the superintendence, control, and direction of the Board of Directors. He is responsible for the implementation of the policies framed by the Board.
3) Independent Director
Answer:
a) Any Director other than a Managing Director, Whole Time Director or a Nominee Director is Independent Director as per sections 149 of the Act.
b) He holds office for a term up to 5 consecutive years and is eligible for reappointment. He is expected to possess skills, experience, and knowledge of different fields like law, management. sales, market, administration, corporate governance etc,
c) In a listed Public Company, 1/3 % of its total number of directors should independent directors. In other public company at least 2 directors should be independent directors.
d) He cannot hold office for more than 2 consecutive terms.
4) Executive Director
Answer:
a) Executive Director can also be called Whole Time Director (WTD).
b) They are in a full-time employment with the company.
c) They play a big role in day-to-day management of the company.
d) For all practical purposes, they are given managerial responsibilities and suitable titles like Marketing Director, Finance Director, etc.
5) Non-Executive Director
Answer:
a) A non-executive director is a member of the company’s Board of Directors who is not part of the executive team. He holds no executive managerial position.
b) Non Executive Director is not involved in day-to-day management of the company and therefore hold
no executive managerial positions.
c) In fact Non-Executive Director is labelled as ‘Outside Director’.
d) The idea behind this appointment is to get independent ideas, perspective, second opinions, and alternate voice to the Board.
6) Alternate Director
Answer:
a) It means a director who is nominated by Board to act in the place of a director in his absence.
b) This appointment cannot be for less than 3 months.
c) The Board of Directors of the company may appoint alternate directors in the place of an existing director who is going out of the state and Board meeting cannot be postponed till his arrival.
d) His appointment is valid until the existing director return to the state.
7) Casual vacancy of a Director
Answer:
a) Casual vacancy on Board arises due to different reasons such as death/resignation of a director, which is to be filled by the Board at the Board meeting.
b) Such an appointment is valid only upto the time of the vacating directors incomplete term.
c)The Board of directors has to fill up the casual vacancy by appointing additional or opted directors at the Board meeting.
8) Chief Financial Officer
Answer:
a) CFO is the officer of a company who is responsible for company’s finances. This extends to financial planning, management, financial risks, record keeping and financial reporting.
b) CFO helps in analyzing and recognizing company’s strengths and weaknesses. This leads to take timely corrective actions with respect to finances of the company.
c) The CFO is responsible for presenting and reporting accurate and timely financial information of the company.
d) Inputs by the CFO make the basis of the Board Report.
9) Company Secretary
Answer:
a) Company Secretary is appointed to perform functions of a Company Secretary under the Act. Person should be a member of the Institute of Company Secretaries of India (ICSI).
b) He serves as the organization’s co-ordinator, administrative officer, and statutory officer. He works as the company’s chief officer full-time.
c) The promoters of the company appoint the initial secretary. “Pro tem Secretary” is how they refer to him.
d) The Board of Directors makes the official appointment by adopting a board resolution to that effect. The salary and benefits that a secretary is entitled to are discussed in this resolution.
10) Secretarial Standard
Answer:
a) The Secretarial standards are formulated by the Institute of Company Secretaries of India
(ICSI) and approved by Central Government through the Ministry of Corporate Affairs.
b) The Companies Act 2013, makes compliance with the secretarial standards I and II mandatory.
c) The Secretarial standards are developed to standardize different practices.
d) The Secretarial Standard Board (SSB) reviews the secretarial standards once a year or, if a significant change in the law occurs earlier, whenever it occurs. Ten Secretarial Standards have been created and published by the Institute of Company Secretaries of India (ICSI).
11) Secretarial Audit
Answer:
a) This is an audit that checks the compliance of various legislations including the Companies Act and other corporate and economic laws applicable to the company.
b) It is a mechanism to monitor compliance requirements. It aims at detecting errors, and mistakes in compliance mechanisms.
c) It prevents the company from risk and losses due to non-compliance.
d) It gives confidence to regulators, management, and stakeholders that the company is following a
disciplined approach to evaluation and improve effectiveness, risk management, control
and governance.
12) The Board of Directors
Answer:
a) The company’s policy or management is directed, governed, or controlled by the directors, who are the shareholders’ elected representatives.
b) The Board as a whole uses the directors’ combined authority. As a result, the Board of Directors serves as the company’s arm for formulating policy and making decisions.
c) The Board of Directors, a body made up of Directors, is the company’s highest management. The Board of Directors, which consists of multiple Directors who are professionals in various industries and is chosen in accordance with the rules of the Companies Act, is the highest body of the corporation and has a wide range of authority.
d) To ensure effective operations, the firm’s Board of Directors is supported by a number of individuals, including the managing director, company secretary, chief financial officer, etc.
Solution of other subjects
Solution of all Chapters of SP
1 – 2 – 3 – 4 – 5 – 6 – 7 – 8
Q.3 Study the following case/situation and express your opinion.
1) Mr. A is a commerce graduate. He has vast experience in the field of finance and financial market. He wishes to become a director of PQR Co Ltd.
a) Is he required to obtain DIN?
b) Can PQR Co. Ltd. object to his directorship on lack of specialized qualification?
c) If he is appointed as director of PQR Co Ltd, is he entitled to remuneration?
Solution:
a) Yes, Mr. A is required to obtain the Director Identification Number (DIN).
b) PQR Co. Ltd. cannot object to Mr. A’s appointment as a director based on a lack of specialized training. This is due to the fact that the Companies Act is silent about any educational or professional requirements for the director.
c) Mr. A is eligible to receive managerial compensation in the form of a monthly payment such as salary, a specified percentage of net profits or commission, and sitting fees for attending board or committee meetings if he is appointed as a director of PQR Co. Ltd.
2) Mr. Z is a member of the Institute of Company Secretaries of India.
a) Can Mr. Z be appointed as pro-tem Secretary of LMN Ltd. which is under formation?
b) Can Mr. Z work as a Secretarial Auditor?
c) Mr. Z wishes to be employed as whole time Secretary in companies ABC Ltd. and OPC Ltd. Is he allowed?
Solution:
(a) Since Mr. Z belongs to the Institute of Company Secretaries of India (ICSI), he may be appointed as pro-tem Secretary of LMN Ltd.
(b) Because Mr. Z is a member of ICSI and possesses a certificate of practice, he is qualified to function as a secretarial auditor.
(c) Mr. Z is not permitted to serve as the Secretary for ABC Ltd. and CFO Ltd. full-time. This is so that the same secretary cannot serve in more than one corporation at once.
3) Mr. M wishes to be the Managing director of QRS Ltd.
a) The age of MR. M is 30 years. Can he be appointed as MD of a company?
b) Is it necessary that Mr. M should be one of the directors on the Board of QRS Ltd.?
c) For how long a period QRS Ltd. can appoint Mr. M. as Managing Director?
Solution:
a) Mr. M is 30 years old. He may be chosen to serve as the company’s managing director (MD). He is at least 21 years old but not more than 70.
b) Mr. M must be one of the directors on the board of QRS Ltd. (necessarily).
c) For a period of five years, Mr. M may be appointed as the managing director by QRS Ltd.
Q.4 Distinguish between the following.
1) Director and Managing Director
| Sr. No. | Points | Director | Managing Director |
| 1 | Meaning | Director is the elected representative of the shareholders of the company. | Managing Director represents the Board in the day-to-day activities of the business. |
| 2 | Appointment | Is elected at the Annual General Meeting by the members of company. | Appointed by the Board of Directors. |
| 3 | Number of Companies | Director can work in 20 companies at a time out of which not more than 10 public companies at a time. | A person can be a Managing Director of two companies at a time by passing a unanimous resolution by the Board of the second company. |
| 4 | Tenure | a) Directors of public company retire by rotation. b) 1/3 rd Independent Director is not liable to retirement by rotation. c) This post can have maximum tenure of three years. | Appointment of Managing Director is made for a term of five years. |
| 5 | Positions Held | Director is only a person/member on the Board. | This is a post of dual identity. Managing Director is the Director on the Board. M. D. is the head of the management of the company by being a whole time manager. |
| 6 | Remuneration | Specific Provision entitles the directors for remuneration for their services. The director is given fees to attend Board Meeting which may be upto Rs. 1 lakh plus prescribed remuneration. | If more than one managing director is appointed, the maximum remuneration cannot be more than ten percent of net profits. M.D. is entitled to either a monthly salary or five percent of net profits. |
| 7 | Status | Directors are elected representatives of the shareholders managing company on their behalf. They can be agents of the company but not employees of the company. | As the duties of Managing Director are more than that of an ordinary director with more contribution, efforts and timewise; M. D. can be treated as the employee of the company. |
2) Managing Director and Manager
| Sr. No. | Points | Managing Director | Manager |
| 1 | Meaning | The Managing Director is the representative of the Board as far as the day-to-days administration of company is concerned. | The Manager is a person in charge of whole or substantially whole management of the affairs of the company. |
| 2 | Power | Managing Director is entrusted with substantial powers of management. | The manager is entrusted with whole or substantially whole powers of management. |
| 3 | Position Held | The Managing Director must be the director of the company. | The manager need not be a director of the company. |
| 4 | Number of Posts | A Company may have more than one Managing Directors. | The company can have only one Manager. |
| 5 | Appointment | The managing director may be appointed by virtue of an agreement with company or resolution passed by company’s general meeting or Board meeting or memorandum or articles of the company. | Manager is appointed under a contract of service. |
| 6 | Remuneration | In case of more than one managing director the maximum remuneration payable would be 10% of the net profit. | Maximum remuneration to a manager cannot be more than 5% of the net profit. |
3) Managing Director and Whole Time Director
| Sr. No. | Points | Managing Director | Whole Time Director |
| 1 | Meaning | The managing Director represent the Board in day-to- day management of the company. | The Whole-time Director is a director who devotes whole time to the working of the company |
| 2 | Powers | Managing Director is entrusted with substantial powers of management. | A whole time director does not have discretionary powers to take decision on policy matters. |
| 3 | Number of Post | A person can be a Managing Director of more than one company if the Board of second company unanimously approves his appointment. | A person cannot have whole -time employment of more than a company at a time. so more than one whole-time directorship is not possible. |
Q.5 Answer in brief.
1) What is DIN?
Answer:
Director Identification Number:
1) DIN is a unique identification number for an existing director or person intending to be the director of the company.
2) It is compulsory to acquire DIN by every director.
3) Only a single DIN is needed by an individual irrespective of number of directorship held by him.
4) On the resignation of a person as a director of a company, DIN should not be cancelled.
5) DIN is obtained through an online process of filing an application which includes photograph, proof of residence etc., duly attested by a Notary/gazetted officer/company Secretary etc.,
6) DIN is a pre-requisite for e-filing of company’s documents.
7) Every document authorized by a director should mention his DIN along with his name.
Importance of DIN
1) It helps the investors of the company to take more accurate and informed decisions because they get to know the composition of the top management of the company.
2) It helps to handle the problems arising due to a company disappearing after collecting/ raising money from the public.
3) It helps in the detection and handling of offenses committed by a Director.
2) State any four powers of Board of Directors.
Answer:
i) Directors have to work as a team via. Board of Directors and not individually.
ii) Board cannot exercise the powers which are required to be exercised by the shareholders in the general meetings as given to them by the Act, Memorandum, and Articles.
iii) The exercise of powers by the Board is subject to provision of the Act, Memorandum, and Articles.
iv) The Powers of Directors can be exercised in two ways –
(i) At the Board Meeting by passing a Resolution
(ii) By Delegation to different committees created by the Board.
Some examples of the powers of Board of directors are –
a) To borrow money
b) To invest funds of the company
c) To issue securities whether in India or abroad.
d) To diversify the business of the company.
e) To appoint or remove Key Managerial Personnel.
f) To fill casual vacancies on the Board.
g) To recommend dividends.
h) To appoint the first auditors of the company.
i) To remit or give time for repayment of any debt due from a director.
3) Mention any four ways in which the office of a Director becomes vacant.
Answer:
The office of a director becomes vacant in the following ways:
1) Any disqualification u/s 164: As per this section, a person cannot be appointed as a Director if he is of unsound mind, insolvent, convicted by Court, etc.
2) Absentee at Board Meaning u/s 167: Director has been absent in the meeting of the Board of Directors held during a period of (12) Twelve months with or without taking a leave of absence from the Board.
3) Contravention of Provisions of Act: Director has acted in contravention of a provision of section 184 which is about entering into contracts or arrangements where he is directly or indirectly interested.
4) Failure to Disclose Personal Interest: If a Director fails to disclose his personal interest in any contract where director is directly or indirectly interested.
4) State any four powers of Managing Directors.
Answer:
The following are the powers of the Managing Director:
i) The power (right) to preside over meetings of the board. He is entitled to attend Board meetings and take part in the formulation of company policies.
ii) He is eligible to cast his vote on each motion approved at the board meeting. He has the authority to speak up during all crucial policy decisions.
iii) He has the authority to invest excess or unused cash of the firm as well as borrow money for business purposes. In the normal course of business, he is able to grant loans.
iv) He has the power to select employees for the company. He has the authority to oversee and manage the entire organization. He has the authority to give instructions to senior executives and department heads for the effective implementation of board decisions.
5) State the Statutory duties of a Company Secretary.
Answer:
The following are the Statutory duties of a Company Secretary:
1) To organize and be present at all meetings of the company including the Board meetings.
2) To make minutes of all meetings.
3) Conducting correspondence with the shareholder on matters like the Issue of shares, transfer of shares, etc.
4) Issuing notices and circulars to members of the company and others as guided by the Board.
5) Maintain and update different Registers and books of the company like Register of Members and Debenture-holders etc.
6) Filing all necessary returns with the Registrar of Companies.
Solution of other subjects
Solution of all Chapters of SP
1 – 2 – 3 – 4 – 5 – 6 – 7 – 8
Q.6 Justify the following statements.
1) Directors are Managing Partners.
Answer:
a) Directors have to work as a team as a Board of Directors, not as an individual.
b) The powers of the Board are subject to provisions of the Companies Act and Memorandum and Articles of Associations.
c) Director is required to perform his functions. He represents shareholders to conduct and manage the business of the company on their behalf.
d) They are entrusted with vast powers of management and perform several functions which are proprietary in nature like allotment of shares, raising of loans, and investing funds of the company.
e) This is because they themselves are significant shareholders of the company. In fact, they are the most active shareholders of the company.
f) Thus, Directors are the managing partners of the company.
2) A Director is an agent of the Company.
Answer:
a) Since the company is an artificial person, it needs to be represented by the Director.
b) They deal on behalf of the company. Directors should deal skillfully, carefully, and diligently.
c) Directors are held liable as an, while company is held liable as the principal.
d) A Director is an agent as he acts between the company and shareholders.
e) Thus, a director is an agent of the company.
3) Company has a distinct feature of separate ownership and management.
Answer:
a) The corporation has the distinctive quality of having independent ownership and management.
b) Directors are its managers, and shareholders are its owners. Being an artificial person, it requires a human agent to oversee and manage how the business is run.
c) Since shareholders are dispersed across the globe, they cannot oversee the business. Additionally, the stockholders have no interest in how such a huge company is run.
d) The firm needs people to manage its affairs because it is an artificial person without a physical presence.
e) Thus, the company has a distinct feature of separate ownership and management.
4) DIN helps investors of the company.
Answer:
a) DIN is a unique identification number for an existing director or person intending to be the director of the company.
b) It is compulsory to acquire DIN by every Director. Din is Pre-require for the e-filling of company documents.
c) It helps the investors of the company to make more accurate and informed decisions because they get to know the composition of the top management of the company.
d) It also helps to handle the problems created due to a company after collecting or raising money from the public.
e) Thus, I agree with the given statement.
5) Directors have to work as a team.
Answer:
a) Instead of operating independently, directors must function as a “Board of Directors” team.
b) He has the authority in the form of a Board under the Act’s provisions.
c) Since a director represents shareholders, he or she must act in the company’s and shareholders’ best interests. d) He is unable to make choices on the company’s behalf by himself.
e) Thus, Directors have to work as a team.
6) Directors play a triple role.
Answer:
a) Directors serve in three capacities: as trustees, managing partners, and agents.
b) As an agent, the director conducts business with third parties on behalf of the company in a professional, considerate, and stylish manner.
c) The director administers the business on behalf of the shareholder in their capacity as managing partner.
d) The director serves as a trustee, protecting the interests of shareholders and the company.
e) They prudently and in the best way possible use the company’s funds. Additionally, they are the trustee for all of the business’s assets.
f) Thus, directors play a triple role.
7) Company Secretary plays a triple role.
Answer:
a) As a statutory officer, a coordinator, and an administration officer, the company secretary performs a triple function.
b) As a statutory officer, the secretary authenticates the document, submits annual returns to ROC, keeps track of numerous statutory registers, and assures legal compliance.
c) The secretary serves as a network between the Board of Directors and other executive officers at various levels as a coordinator. He serves as the company’s internal and external coordinator.
d) The secretary’s duties as an administrative officer include overseeing and controlling the operation of the company’s numerous departments as well as ensuring that the company’s various policies are implemented.
e) Thus, Company Secretary plays a triple role.
8) A Director cannot be called employee of the company.
Answer:
a) A company’s members have the sole authority to decide important corporate matters, such as changing the registered office clause in the memorandum of association, raising the authorized capital if it requires more money for modernization or development, and changing the object of the company, by adopting the necessary resolution at the general meeting of the company.
b) By adopting the necessary resolutions at the company’s general meetings, the members of the company have the authority to alter the company’s articles of association, as well as authorize acquisitions, mergers, and takeovers, the appointment of a sole-selling agent, and the winding-up of the company.
9) Managing Director has substantial powers of management.
Answer:
a) A transfer of shares is when a shareholder gives ownership and possession of their shares to another person through a gift or sale. By merely delivery, the shares cannot be transferred.
b) A document known as an “Instrument of Transfer” must be registered with the corporation in order for shares to be transferred.
c) The Secretary removes the name of the seller (transferor) from the Register of Members once the company authorizes the transfer, terminating the membership of the shareholder who transferred the shares.
10) Indian companies prefer to appoint a M. D. than Manager.
Answer:
a) A transfer of shares is when a shareholder gives ownership and possession of their shares to another person through a gift or sale. By merely delivery, the shares cannot be transferred.
b) A document known as an “Instrument of Transfer” must be registered with the corporation in order for shares to be transferred.
c) The Secretary removes the name of the seller (transferor) from the Register of Members once the company authorizes the transfer, terminating the membership of the shareholder who transferred the shares.
11) Pro-tem Secretary is helpful to the company.
Answer:
a) A transfer of shares is when a shareholder gives ownership and possession of their shares to another person through a gift or sale. By merely delivery, the shares cannot be transferred.
b) A document known as an “Instrument of Transfer” must be registered with the corporation in order for shares to be transferred.
c) The Secretary removes the name of the seller (transferor) from the Register of Members once the company authorizes the transfer, terminating the membership of the shareholder who transferred the shares.
12) Secretarial Standards should be in conformity with the Act.
Answer:
a) A transfer of shares is when a shareholder gives ownership and possession of their shares to another person through a gift or sale. By merely delivery, the shares cannot be transferred.
b) A document known as an “Instrument of Transfer” must be registered with the corporation in order for shares to be transferred.
c) The Secretary removes the name of the seller (transferor) from the Register of Members once the company authorizes the transfer, terminating the membership of the shareholder who transferred the shares.
13) Secretarial Standards leads to better legal compliance.
Answer:
a) A transfer of shares is when a shareholder gives ownership and possession of their shares to another person through a gift or sale. By merely delivery, the shares cannot be transferred.
b) A document known as an “Instrument of Transfer” must be registered with the corporation in order for shares to be transferred.
c) The Secretary removes the name of the seller (transferor) from the Register of Members once the company authorizes the transfer, terminating the membership of the shareholder who transferred the shares.
14) Secretarial Audit is required under the laws.
Answer:
a) A transfer of shares is when a shareholder gives ownership and possession of their shares to another person through a gift or sale. By merely delivery, the shares cannot be transferred.
b) A document known as an “Instrument of Transfer” must be registered with the corporation in order for shares to be transferred.
c) The Secretary removes the name of the seller (transferor) from the Register of Members once the company authorizes the transfer, terminating the membership of the shareholder who transferred the shares.
Q.7 Answer the following questions
1) Explain the Role of Directors.
Answer:
The following are the Role of Directors:
I) Directors as Agents:
a) Since the company is an artificial person; it needs to be represented by the Director.
b) They act on its behalf. Directors should deal skillfully, carefully, and elegantly.
c) Their liability is as agents while company is held liable as the Principal.
II) Directors as Managing Partners:
a) Directors represent owners of the company viz. shareholders to conduct and manage business of the company on their behalf .
b) They are entrusted with vast powers of management and perform several functions which are proprietary in nature like allotment of shares, raising of loans, investing funds of the company etc.
c) This is because they themselves are significant shareholders of the company. In fact they are the most active shareholders of the company.
d) Board acts as the supreme policy and decision-making body. It is commented that the directors are commercial men who manage a trading concern for the benefit of themselves and all the other shareholders of company.
III) Directors as Trustees:
a) Directors are required to act in the most honest ways. They are the guardians of interest of company and shareholders.
b) They should account for all money are entrusted with. They have to utilize and apply funds of the company most cautiously. They are the trustees of all the assets of the company.
IV) Directors as Employee:
a) Directors are elected representatives of the company’s shareholders and enjoy well-defined rights and powers.
b) Whereas status of an employee is within the limits of his contract of service and his employer holds the ultimate control to guide his activities and functions.
c) These limits cannot be applied to directors in the context of their roles and powers we have already studied.
d) Directors therefore cannot be regarded as employees of the company.
2) Explain the duties of Director.
Answer:
A Director’s relationship with the company is regarded as fiduciary in nature i.e. his duty is full of trust, loyalty, obedience, care, and utmost good faith. The director should not exploit his or her position of trust and confidence for personal gain, at the expense of the company or shareholders.
The director will not involve in any situation where the Directors’ interests conflict with that of the company. The director should not achieve any undue gain or advantage for self or family or associates.
Directors duties can be under two heads –
I) Statutory Duties:
These are imposed by the Act Examples of Statutory Duties:
1) To file Return of Allotments
2) To act in accordance of Articles of the company
3) To disclose an interest in a transaction
4) To attend Board Meetings.
5) To appoint the first auditors of the company
II) General Duties:
These can be described as:
1) Duty of good faith:
The director must act in the best interest of company and its present and future members.
2) Duty of Care:
The director must display care in performance in work assigned. A director is required to display care as much as a person of ordinary prudence would.
3) Duty not to delegate:
The director is an agent who cannot delegate further. A director is required to perform his functions personally. A director may delegate if permitted by Act or Articles or required to be delegated in urgent conditions.
3) Explain the Managing Director.
Answer:
It means a Director who by virtue of Articles or agreement with company or Resolution passed in General Meeting or by its Board; is entrusted with substantial powers of management of the affairs of the company.
Appointment of the Managing Director:
This appointment can be made by
(a) An Agreement with the Company
(b) A Resolution passed by the company in the General Meeting
(c) A Resolution passed by the Board of Directors
d) A clause in the Articles of Association of the company.
The Act states that a Managing Director be appointed by the Board of Directors. Terms and conditions of the appointment and remuneration should be approved by the Board of Directors at its meeting. This appointment is subject to approval by Resolution at the next General Meeting.
Term of Appointment:
Appointment of Managing Director is made for a term of 5 years.
Disqualification for the post of Managing Director:
1) Any person less than 21 years of age and more than 70 years of age.
N.B. If a person of age above 70 years is required to be appointed as Managing Director, there should be passed a special Resolution with an explanatory statement attached to its notice that justifies such an appointment.
2) Any person who is an undischarged insolvent person or at any time been adjudged as an insolvent.
3) Any person who has suspended payment to his creditors at any time or made compromise with them.
4) Any person who has been convicted by a court of law of an offense with a sentence of more than six months period.
Powers and Duties of the Managing Director:
1) The Managing Director is appointed to manage the affairs of the company.
2) Powers and Duties of the post of Managing Director are defined by
a) Agreement made with company on the basis of which this appointment to made
b) By Memorandum and Articles of Association of the company
c) By Resolutions passed by Board and Members.
3) Managing Director is entrusted with substantial powers of management.
4) The power of Managing Director may relate to particular division/s of the business.
5) There may be more than one Managing Director in the business/company.
6) The Managing Director is required to function and exercise his powers subject to superintendence control and directions of the Board of Directors.
7) Managing Director must be a Director of the company.
8) In context of above, he has to fulfill the duties, responsibilities, and liabilities also of an ordinary director of the company.
4) Explain the Company Secretary.
Answer:
Section 2(24) defines Company Secretary. It states that:
1) Company Secretary is appointed to perform the functions of Company Secretary under the Act.
2) Person should be a member of the Institute of Company Secretaries of India (ICSI).
3) Following classes of companies must appoint a whole-time company Secretary
a) Listed companies
b) All other companies with a paid-up share capital of Rs. Five crores or more.
4) The whole-time Company Secretary is appointed by a resolution of the Board. The Board decides terms and conditions and remuneration.
5) The whole-time Company Secretary cannot hold office in more than one company.
6) The whole-time Secretary can be the director of a company with the permission of the Board.
7) The first Secretary of the company is appointed by the Promoters of the company.
a) The first Secretary is called ‘Pro-tem Secretary’.
b) The Pro-tem Secretary appointed by Promoters may or may not be appointed as a regular Secretary by the Board.
c) The ‘Pro-tem’ Secretary helps in fulfilling different formalities during the formation of the company.
8) The appointment of the Secretary must be recorded in the ‘Register of Directors and key managerial
personnel and their shareholdings.
Duties of Company Secretary:
I) Statutory Duties
As given to the Secretary by the Act. Some of these are –
1) To organize and be present at all meetings of the company including the Board meetings.
2) To make minutes of all meetings.
3) Conducting correspondence with the shareholder on matter like Issue of shares, transfer of shares, etc.
4) Issuing notices and circulars to members of the company and others as guided by the Board.
5) Maintain and update different Registers and books of the company like Register of Members and Debenture-holders etc.
6) Filing all necessary returns with the Registrar of Companies.
II) General Duties
This depends on size and nature of business and the terms of arrangement made between Secretary and the company. Some of these are:-
1) To provide guidance to the Board of Directors of the company with respect to their duties responsibilities and powers.
2) To represent before different regulators and authorities with discharge of different duties under the Act.
3) To assist the Board in the conduct of the affairs of the company.
4) To assist and advise the Board in ensuring good corporate governance.
5) To perform all the duties that may be assigned by the Board from time to time.
5) Explain the Role of Company Secretary.
Answer:
Company Secretary plays a crucial and important role in administration of the company. It can be best explained as a three -fold role as follows
1) Secretary as a Statutory Officer:
As the principal officer of a company he is responsible for strict compliance of the different provisions of the Act. like :
a) Sign any document for authentication.
b) To sign and deliver Annual Returns and other documents and forms of Company to the Registrar of Companies
c) To maintain different statutory registers like
i) minutes of General and Board Meetings of Company,
ii) Registers of Members and Debenture-holders,
iii) Register of Directors and KMP and their shareholdings etc.
d) Ensure necessary compliance of law.
2) Secretary as a Coordinator:
a) The Board of Directors as the supreme managerial authority decides the broad policies to be followed by the company.
b) Effective implementation of the same is the duty of Secretary. Secretary is required to work as network between the Board and other executives at different levels. Secretary is mouthpiece / spokesperson of the Board. Secretary is a coordinator in two ways:
c) As Internal coordinator, Secretary’s activities involve the Board, the M. D., the chairperson on one hand and the executive of different cadres, trade union and auditors of the company on the other hand.
d) As External coordinator, Secretary needs to create a relationship between company and shareholders, Government and public at large.
3) Secretary as Administrative officer
a) Secretary as a general administrative officer is required to ensure implementation of the policies of the company. Supervision, control and functioning of different departments of company is Secretary’s job
b) The position of Secretary enables him / her to have an overall view of different aspects of company’s administration and develop a strong and efficient organizational set up.
c) Secretary contributes in administration of the company, whereby recruitment, training, remuneration,
promotion etc. of staff members is included.
Solution of other subjects
Solution of all Chapters of SP
1 – 2 – 3 – 4 – 5 – 6 – 7 – 8
11th SP Textbook Solutions
| Chapter Name | Solution Link |
| 1) Secretary | Click Here |
| 2) Joint Stock Company | Click Here |
| 3) Formation of a company | Click Here |
| 4) Documents related to formation of a company | Click Here |
| 5) Members of a company | Click Here |
| 6) Directors and Key Managerial personnel of a company | Click Here |
| 7) Company Meetings – I | Click Here |
| 8) Company Meetings – II | Click Here |
| 9) Business Communication Skills of Secretary | Click Here |
| 10) Correspondence with Directors | Click Here |
| 11) Correspondence with Banks | Click Here |
| 12) Correspondence with Statutory Authorities | Click Here |
Check out other posts related to 11th Commerce
| Textbook Solutions of 11th Commerce (All Subjects) | Click Here |
| Free pdf of 11th Commerce Textbooks | Click Here |
