SEBI Grade A 2020
Company Law
Important MCQs - Chapter XI
Appointment and Qualifications of
Directors – Part 1
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Question 1
XYZ Ltd. is a public company. The minimum number of directors it should have is
a) 1
b) 2
c) 3
d) 4
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Explanation to Q 1
Minimum Number of Directors
One Person Company = 1 Private Company = 2 Public Company = 3
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Question 1
XYZ Ltd. is a public company. The minimum number of directors it should have is
a) 1
b) 2
c) 3
d) 4
Answer :- C
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Question 2
The minimum number of independent directors in case of a public listed company are
a) 1/4 of total directors
b) 1/3 of total directors
c) 1/2 of total directors
d) 2/3 of total directors
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Explanation to Q 2
Minimum number of Independent 1/3 of Total Number of
Directors in case of listed company Directors
Public companies as per last date of latest audited financial
statements
1.Paid up share capital >= 10 crores or Shall have at least 2
2.Turnover >= 100 Crore or independent directors
3.outstanding loans, debentures and deposits >= 50 crore
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Question 2
The minimum number of independent directors in case of a public listed company are
a) 1/4 of total directors
b) 1/3 of total directors
c) 1/2 of total directors
d) 2/3 of total directors
Answer :- B
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Question 3
Who among the following shall be eligible to be an Independent Director of a company XYZ Ltd. with paid up share
capital of Rs. 100 crores?
a) Mr A, who is a promoter of the subsidiary company
b) Mr. B, whose relative is holding security of the shares of the company worth Rs. 25 Lacs
c) Mr. C, whose relative has held the position of Key Managerial personnel of its associate company in the last year
d) Mr. D, is a partner in the cost auditors firm of the company.
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Explanation to Q 3
Qualifications of Independent Director
Independent directors is the one who must be different from managing director or a whole-time director or
a nominee director
Must posses Integrity and relevant experience and expertise
He must not be now or in past promoter of the company or its holding, subsidiary or associate company
He must not be related to promoters or directors in the company, its holding, subsidiary or associate company.
holding any security (more than 50 lakh or 2% 0f paid up
capital which ever is higher)
during the two
indebted (more than 50 lakh) immediately preceding
financial years
None of his
Giving guarantee to any third person who is indebted (more or during the current
relatives shall be
than 50 lakh) financial year
Doing any transaction including holding of security, loans
and guarantee which is 2% or more of its income or gross
turnover
Explanation to Q 3
Qualifications of Independent Director
Independent Directors or his relatives
Should not have held Should not have been employee Should not hold 2% or more Shall not be CEO
any key position or should or partner or owner of/in any voting or director of any Non-
not have been employee auditing firm or legal power either independently Profit Organization
consulting firm dealing or together with his relative which receives 25% or
more of its receipts
Of company or with company or In company from the company, any of
its holding, subsidiary its holding, subsidiary
its promoters, directors or
or associate company or associate company
its holding, subsidiary or
associate company or anyone who
holds two per cent or more of the
in any of the three financial years immediately preceding total voting power of the company;
the financial year in which he is proposed to be appointed
Question 3
Who among the following shall be eligible to be an Independent Director of a company XYZ Ltd. with paid up share
capital of Rs. 100 crores?
a) Mr A, who is a promoter of the subsidiary company
b) Mr. B, whose relative is holding shares of the company worth Rs. 25 Lacs
c) Mr. C, whose relative has held the position of Key Managerial personnel of its associate company in the last year
d) Mr. D, is a partner in the cost auditors firm of the company.
Answer :- B
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Question 4
No independent director shall hold office for more than two consecutive terms but such independent director shall be
eligible for appointment after the expiration of ………………..years of ceasing to become an independent director.
a) 2
b) 3
c) 4
d) 5
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Explanation to Q 4
An independent director shall hold Independent director shall be eligible
office for a term up to five consecutive for reappointment after first term
years on the Board of a company on passing of a special resolution by the
company and disclosure of such
appointment in the Board's report
After two consecutive terms he will again become eligible for
An Independent directors shall hold office appointment after a cooling of period of 3 years after his term
for a maximum of two consecutive terms ends provided that he is not associated with the company in
any capacity during these 3 years
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Question 4
No independent director shall hold office for more than two consecutive terms but such independent director shall be
eligible for appointment after the expiration of ………………..years of ceasing to become an independent director.
a) 2
b) 3
c) 4
d) 5
Answer :- B
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Question 5
Section 151 tells about the appointment of a small shareholder director. In this context, a small shareholder is a
shareholder holding shares of nominal value of maximum……………… rupees.
a) 5000
b) 10000
c) 20000
d) 50000
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Explanation to Q 5
A listed company, may upon notice of not less than one thousand small shareholders or one-tenth of the
total number of such shareholders, whichever is lower, have a small shareholders’ director elected by the
small shareholders
Tenure as small shareholders’ director shall not exceed a period of three consecutive years
On expiry of term small shareholder director is not eligible for reappointment
Small shareholders’ means a shareholder holding shares of nominal value (face value) of not more than twenty thousand
rupees
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Question 5
Section 151 tells about the appointment of a small shareholder director. In this context, a small shareholder is a
shareholder holding shares of nominal value of maximum……………… rupees.
a) 5000
b) 10000
c) 20000
d) 50000
Answer :- C
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Question 6
If a person obtains more than 1 DIN, then that person shall be liable to a penalty which may extend to …………..rupees
and in case of continuing default, with further penalty of Rs…………….. For each day after the first during which default
continues.
a) 50000,500
b) 100000,1000
c) 50000,1000
d) 100000,500
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Explanation to Q 6
Important provisions regarding DIN
Director identification number is a unique number allotted by Central government to each director which acts as an
source of unique identification for that director
A person appointed as a director shall not act as a director unless he gives his consent to hold the office as
director using form DIR- 2.
Penalty
No Individual shall apply for or
obtain another DIN if he already Violation Director of the company shall be liable to a
has one.
penalty upto fifty thousand rupees.
Once the DIN is allotted, the
In case of continuing default, further penalty of Rs.
director shall inform the company
500/- per day
within one month of the receipt of
DIN.`
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Question 6
If a person obtains more than 1 DIN, then that person shall be liable to a penalty which may extend to …………..rupees
and in case of continuing default, with further penalty of Rs…………….. For each day after the first during which default
continues.
a) 50000,500
b) 100000,1000
c) 50000,1000
d) 100000,500
Answer :- A
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Question 7
In absence of any provision in the articles of the company, who shall be deemed to be the first directors of the company?
a) Subscribers to memorandum
b) The Promoters of the company
c) The manager of the company
d) The directors of the holding company
Answer :- A
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Question 8
The director shall give his consent to act as a director which shall be filed with the ROC within ____________days his
appointment.
a) 10
b) 15
c) 30
d) 45
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Explanation to Q 8
Important provisions regarding DIN
Director identification number is a unique number allotted by Central government to each director which acts as an
source of unique identification for that director
A person appointed as a director shall not act as a director unless he gives his consent to hold the office as
director using form DIR- 2. Then the consent shall be filed with the ROC within 30 days of appointment in Form DIR 12.
Penalty
No Individual shall apply for or
obtain another DIN if he already Violation Director of the company shall be liable to a
has one.
penalty upto fifty thousand rupees.
Once the DIN is allotted, the
In case of continuing default, further penalty of Rs.
director shall inform the company
500/- per day
within one month of the receipt of
DIN.`
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Question 8
The director shall give his consent to act as a director which shall be filed with the ROC within ____________days his
appointment.
a) 10
b) 15
c) 30
d) 45
Answer :- C
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