Samacheer Kalvi 12th Commerce Chapter 27 Company Management Exercise Solutions

How to Use This Page

This page provides complete exercise solutions for Chapter 27: Company Management from the Tamil Nadu State Board Class 12 Commerce textbook.

• Start with the Key Concepts table for a rapid review of definitions and provisions.
• MCQs test recall of numerical limits, section numbers, and classifications.
• Fill in the Blanks and True/False check your grasp of exact figures and legal requirements.
• Match the Following links director types to their characteristics.
• Brief and Detailed answers follow textbook language; present answers in sub-points in the exam.
• Common Mistakes highlights the most frequently confused concepts.
• Exam Checklist helps you verify your preparation before the exam.

Key Concepts (Quick Recap)

I. Choose the Best Answer (MCQs)

Textbook MCQs

Q1. A director shall hold office in a maximum of how many companies?

• a) 10   b) 15   c) 20   d) 25

Q2. A director appointed by a financial institution is called

• a) Nominee   b) Alternate   c) Shadow   d) Independent

Q3. Minimum number of directors for a private company

• a) 1   b) 3   c) 5   d) Two

Q4. Minimum number of directors for a public company

• a) 2   b) 5   c) Three   d) 7

Q5. Paid-up capital threshold for small shareholders director

• a) 1 crore   b) 2 crores   c) Five crores   d) 10 crores

Q6. Which power is exercised by the Board?

• a) Power to appoint auditor   b) Power to make call   c) Power to sell assets   d) Power to issue bonus shares

Q7. A director who need not hold qualifying shares

• a) Directors appointed by CG   b) Nominee director   c) Alternate director   d) Resident director

Q8. Directors who regulate money belonging to others are called

• a) Agents   b) Officers   c) Managing Directors   d) Trustees

Q9. Directors are appointed by

• a) Board   b) Government   c) Company in General Meeting   d) Shareholders' committee

Q10. The Board can appoint directors for

• a) Additional vacancy   b) Casual vacancy   c) Alternate vacancy   d) All (Additional, Casual vacancy, Alternate)

Additional MCQs

Q11. A director appointed in place of an absent original director

• a) Alternate   b) Nominee   c) Additional   d) Shadow

Q12. Maximum nominal value of qualification shares

• a) Rs 1,000   b) Rs 5,000   c) Rs 10,000   d) Rs 25,000

Q13. If shares are Rs 6,000 each, minimum qualification shares required

• a) One   b) Two   c) Three   d) None

Q14. Maximum managerial remuneration (for more than one MD/WTD/Manager)

• a) 5%   b) 10%   c) 11%   d) 15%

Q15. Most important document for external management

• a) MOA   b) AOA   c) Prospectus   d) Minutes

Q16. Maximum number of directors in a public limited company (without special resolution)

• a) 10   b) 12   c) 14   d) 15

Q17. Odd one out: CEO, CFO, Company Secretary, DEO

• a) CEO   b) CFO   c) Company Secretary   d) DEO

Q18. First Directors are mentioned in

• a) AOA   b) MOA   c) Prospectus   d) Annual Return

Q19. A director acts as

• a) Agent   b) Trustee   c) Officer   d) All (Agent, Trustee, Officer)

Q20. Only this type of person can be appointed as Director

• a) Individual   b) Company   c) Firm   d) HUF

Q21. First Board meeting must be held within

• a) 15 days   b) 30 days   c) 45 days   d) 60 days

II. Fill in the Blanks

1. The maximum number of companies a director can hold office in is 20. 2. For holding/subsidiary of a public company, the directorship limit is 10. 3. The minimum number of directors for a One Person Company is 1. 4. The minimum number of directors for a public limited company is 3. 5. DIN stands for Director Identification Number. 6. The maximum nominal value of qualification shares is Rs 5,000. 7. Maximum remuneration for a single MD/WTD/Manager is 5% of net profit. 8. Maximum remuneration for more than one MD/WTD/Manager is 11% of net profit. 9. First Board meeting must be held within 30 days of incorporation. 10. A residential director must have stayed in India for 182 days in the previous calendar year.

III. True or False (with corrections)

IV. Match the Following

Match Q1.

Match Q2.

V. Assertion and Reason

Assertion (A): Remuneration includes rent-free accommodation and sweat equity shares. Reason (R): Remuneration means money given for services, including concessions and benefits.

VI. Answer Briefly (2-mark)

Q1. What is a Director under Section 2(34)? A director is a person appointed or elected as a member of the Board of Directors of a company. The director is responsible for the management and governance of the company.

Q2. Which companies are required to appoint KMP? Every listed company and every public company with paid-up capital of Rs 10 crores and more is required to appoint Key Managerial Personnel under Section 2(51).

Q3. What is a Whole-Time Director? A Whole-Time Director (WTD) is a director who devotes all working hours to the company, has significant personal interest in the company, and treats the company as the main source of income.

Q4. What is a Managing Director? A Managing Director (MD) is a director employed by the company and given substantial powers of management. The MD operates under the superintendence, direction, and control of the Board of Directors.

Q5. What are the minimum and maximum number of directors? Minimum directors: OPC — 1, Private Company — 2, Public Company — 3. Maximum: 15 directors (more can be appointed with a special resolution and Central Government approval).

Q6. What is the directorship limit? A director can hold office in a maximum of 20 companies. However, for holding/subsidiary of a public company, the limit is reduced to 10.

Q7. In what capacities does a director act? A director acts in three capacities: as an Agent of the company, as a Trustee of the company's money and property, and as an Officer of the company.

VII. Answer in Detail (5-mark)

Q1. Explain Key Managerial Personnel (Section 2(51)). Key Managerial Personnel (KMP) includes the following officers: Chief Executive Officer (CEO), Managing Director or Manager, Company Secretary, Whole-Time Director, Chief Financial Officer (CFO), and other officers as may be prescribed. Every listed company and every public company with paid-up capital of Rs 10 crores and more must appoint KMP. KMP are responsible for the day-to-day management and compliance functions of the company. They have specific statutory duties and can be held liable for non-compliance.

Q2. Explain the types of directors. 1. Residential Director — Must have stayed in India for 182+ days in the previous calendar year. Every company must have at least one resident director. 2. Independent Director — Has no material relationship with the company; provides objective judgement and independent oversight. Required for listed companies and certain classes of companies. 3. Small Shareholders Director — Elected by small shareholders in companies with paid-up capital of Rs 5 crores and above having at least 1000 small shareholders. 4. Nominee Director — Appointed by financial institutions to safeguard their interests when they have provided loans or investment to the company. 5. Additional Director — Appointed by the Board between two Annual General Meetings. Holds office only until the next AGM. 6. Alternate Director — Appointed by the Board for an original director who is absent from India for 3 or more months. Not a representative or agent of the original director.

Q3. What are the qualifications of directors? There is no direct provision in the Companies Act specifying qualifications. Generally, a director should possess: skills in finance, law, management, and sales. Specific qualifications: must be of sound mind, must hold share qualification if the AOA requires (maximum nominal value Rs 5,000), must be an individual (not a firm or company), must be solvent (not an undischarged insolvent), must not have been convicted of an offence with imprisonment of 6+ months, and must possess a valid Director Identification Number (DIN).

Q4. Explain the criminal liabilities of directors. Directors can face fine or imprisonment for the following offences:

• Misstatement in the prospectus
• Failure to file returns with the Registrar
• Failure to give notice for share conversion
• Failure to issue share certificates within the prescribed time
• Default in holding the Annual General Meeting
• Failure to provide financial statements to members

These liabilities arise because directors are officers of the company and are responsible for ensuring statutory compliance.

Q5. Distinguish between a Manager and a Director.

Q6. Distinguish between Managing Director and Whole-Time Director.

Q7. Explain Board composition requirements. The Board of Directors must include: Executive Directors, Non-Executive Directors, and at least one Woman Director. At least 50% of the Board should be Non-Executive Directors. When the Non-Executive Chairperson is a promoter, at least half the Board should be Independent Directors. When the Non-Executive Chairperson is not a promoter, at least one-third of the Board should be Independent Directors. This ensures proper governance and prevents concentration of power.

Q8. What are the disqualifications of directors (Section 164)? A person cannot be appointed as a director if they: (i) are of unsound mind, (ii) are an undischarged insolvent, (iii) have been convicted of an offence with imprisonment of 6+ months (within last 5 years), (iv) have unpaid calls on shares, (v) have been disqualified by a court order, (vi) do not possess a valid DIN.

Q9. How can a director be removed? (i) By Shareholders — Under Section 169, a director can be removed by giving special notice and passing an ordinary resolution. (ii) By Central Government — On recommendation of the Company Law Board (now NCLT). (iii) By Company Law Board — On grounds of oppression or mismanagement.

Q10. Explain the maximum remuneration limits. For one Managing Director, Whole-Time Director, or Manager: maximum 5% of net profit. For more than one: maximum 11% of net profit. Without Central Government approval:

Q11. What are the duties of directors? Collective duties: Approve accounts, appoint first auditor, pass resolutions, report to shareholders on company affairs. General duties: Delegate power as necessary, issue instructions to subordinates, appoint subordinates, act in good faith and in the best interests of the company.

Q12. What are the powers of directors? Statutory powers: Issue debentures, make loans, borrow money, diversify business, approve financial statements. Managerial powers: Appoint MD/Manager/Secretary, supervise management, contract on behalf of company, allot and forfeit shares. Powers only with resolution: Sell/lease company assets, appoint sole agent for 5+ years, issue bonus shares, borrow beyond paid-up capital. Other powers: Fill casual vacancy, appoint alternate/additional/KMP, appoint first auditor, remove KMP.

Common Mistakes to Avoid

• MD vs WTD: MD has substantial management powers; WTD simply devotes full time. MD cannot be MD of more than 2 companies.
• Director limits: Max 20 companies, but only 10 for holding/subsidiary of public company.
• Qualification shares: Not every director must hold shares — only if AOA requires; max nominal value Rs 5,000.
• Remuneration limits: 5% for one MD/WTD/Manager; 11% for more than one.
• Board meeting: First Board meeting within 30 days, not 15 days.
• Directorship limit: 20 companies is the general limit; 10 is the limit for holding/subsidiary of a public company only.
• Small shareholders director threshold: Paid-up capital of Rs 5 crores (not Rs 10 crores) and at least 1000 small shareholders.
• KMP requirement: Every listed company AND every public company with Rs 10 crores+ paid-up capital must appoint KMP.

Exam Checklist

• [ ] 6 types of directors with brief description
• [ ] Minimum directors: OPC-1, Private-2, Public-3
• [ ] KMP under Section 2(51) with all 5 categories
• [ ] MD vs WTD on 4 parameters
• [ ] Disqualifications under Section 164
• [ ] 3 methods of removal of directors
• [ ] Remuneration: 5% (single), 11% (multiple)
• [ ] Powers: Statutory, Managerial, With Resolution
• [ ] 30 days for first Board meeting, 182 days for residential director
• [ ] Qualification shares: only if AOA requires, max Rs 5,000 nominal value
• [ ] Director acts as: Agent, Trustee, Officer
• [ ] Board composition: Executive + Non-Executive + Woman director; 50% Non-Executive