Explore topic-wise InterviewSolutions in Current Affairs.

i. True

ii. True

iii. False

iv. False

v. False

vi. True

vii. True

viii. False

ix. True

x. False

i. True

ii. True

iii. False

iv. True

v. False

i. True

ii. True

iii. True

iv. True

At the time of taking an important decision the partners gather and discuss it thoroughly, They share their experience, knowledge and opinions with respect to the decision. When everyone agrees and come to a common conclusion a decision is made. Hence, ………

Limitations of a partnership firm:
1. Limited capital:

• Considering the growth and development of today’s world and the large scale modern industries and trade the capacity of the partners to raise the capital is limited.
• It is difficult for a proprietorship firm to engage in expanding the business on a large scale, investing in research and development, etc.

2. Unlimited liability:

All the partners need to work honestly and efficiently. If a partner does not work properly and the business incurs loss then every partner becomes responsible for paying the debt collectively. Since the partners have unlimited liability, the partners may have to sell their personal assets to repay business debts in case the assets of the firm cannot repay.

3. Possibility of disagreement:

A partnership firm can run successfully and grow well only if all the partners work and think unitedly. If disagreements and disputes crops in among the partners, they may affect the firm too.

4. Difficulty in maintaining secrets:

Important business decisions are taken through discussion and meetings among partners. All the business aspects are discussed in such meetings and so all the partners know all the secrets of the business. As compared with sole proprietorship more than one person knows the business secrets which in a way can prove dangerous. If any partner leaks them out it may be harmful for the business.

5. Difficulty in transferring the share:

In a partnership firm one cannot easily transfer his share to another person unless remaining all partners agree.

6. Delay in decision making:

• As per the Partnership Act each partner can be a part of management and decision making. If there are disputes or disagreements between the partners the decision making may become poor and delayed. This can then result into weaker management.
• Sometimes disputes differences in opinions and decisions and enmity between partners increase so much that the partnership firm gets dissolved.

7. Short life span:

If any of the partner dies, becomes mentally unstable or insolvent, the partnership comes to an end.

The different types of partners are: 

(i) Active or Working Partners : In practice one or two partners take active part in the management. Such partners are called active or working partners. They contribute capital, shares profits or losses, and has unlimited, joint and several liability. They take an active interest in the day to day working of the firm. These partners are also known as ordinary / general / actual partners. 

(ii) Dormant or Sleeping Partners : A dormant or sleeping partner is one who contributes capital to the firm. He does not take any active part in the management of the firm. He shares the profits and losses of the firm like any other partner. He voluntarily surrenders the right of management. However, he is liable for the debts of the firm. 

(iii) Nominal Partners : A nominal partner is one who does not contribute any capital to the firm. He lends his name to the firm. He is simply obliging his friends by allowing the firm to use his name as a partner. He may or may not be given any share in the profits of the firm. His goodwill is used to attract business. However, he is liable for the debts of the firm.

(iv) Minor as Partner : According to the Indian Contract Act 1872, a person below 18 years is called a minor. But according to the Indian Partnership Act 1932, a minor can be admitted for the benefit of the firm with the consent of all other partners. He has a right to inspect the books of accounts. Minor partner has limited liability and is not liable for losses. He has the option to continue as a full-fledged partner or discontinue as a partner on attaining the age of majority. If he wishes to discontinue, he must give a public notice within 6 months from the age of majority.

Correct option is (B) Karta

• The company has a unique feature of separate ownership and management.
• Shareholders are its owner and Directors are its managers.
• Being an artificial person, it needs a human agent to manage and control the working of the company.
• Shareholders are scattered all over therefore management of the company by them is not possible.
• Also, the shareholders are not interested in the management of such a big organization.
• The company as an artificial person having no physical existence needs humans to control its affair.
• Thus, the company has a distinct feature of separate ownership and management.

An artificial person created by law- Joint Stock company.

Explanation: 

A joint stock company is created as a separate legal entity. It is independent of its members. It cannot be seen physically, but it has a name, it uses the common seal in place of its signature and it can enter into contracts.

The partners together manage the partnership firm. They may also put the duty of managing on one or few of the partners.

1. Karta

2. Co-parceners

i. Yes, Mr. M is 30 years old and the age required to be completed for MD’s post is 21 years. So he can be appointed as MD of a Company.

ii. Yes, It is necessary that Mr. M should be one of the directors on the board of QRS Ltd. He should be appointed by the board.

iii. QRS Ltd can appoint Mr. M. as a managing director for a period of 5 years.

The different types of partners are:

(i) Active or Working Partners : In practice one or two partners take active part in the management. Such partners are called active or working partners. They contribute capital, shares profits or losses, and has unlimited, joint and several liability. They take an active interest in the day to day working of the firm. These partners are also known as ordinary / general / actual partners

(ii) Dormant or Sleeping Partners : A dormant or sleeping partner is one who contributes capital to the firm. He does not take any active part in the management of the firm. He shares the profits and losses of the firm like any other partner. He voluntarily surrenders the right of management. However, he is liable for the debts of the firm.

(iii) Nominal Partners : A nominal partner is one who does not contribute any capital to the firm. He lends his name to the firm. He is simply obliging his friends by allowing the firm to use his name as a partner. He may or may not be given any share in the profits of the firm. His goodwill is used to attract business. However, he is liable for the debts of the firm.

(iv) Minor as Partner : According to the Indian Contract Act 1872, a person below 18 years is called a minor. But according to the Indian Partnership Act 1932, a minor can be admitted for the benefit of the firm with the consent of all other partners. He has a right to inspect the books of accounts. Minor partner has limited liability and is not liable for losses. He has the option to continue as a full-fledged partner or discontinue as a partner on attaining the age of majority. If he wishes to discontinue, he must give a public notice within 6 months from the age of majority.

(v) Partner in Profits only : A partner may clearly state that he will have a share only in the profits of the firm and that he will not share losses. Such a partner is known as “Partner in Profits Only”. He has no rights of management. He may not take active participation in the management of the firm.

(vi) Partner with Limited Liability : A limited partner has limited liability. A partner whose liability depends upon the extent of investment is called a limited partner. He has no right to take part in the day to day work. But such a partnership must have at least one partner having unlimited liability

(vii) Secret Partner : A person is a partner of the firm and not known to general public is a secret partner. Secret partners have all the features like other partners. He brings capital to the firm and also gets a share in profit. He has unlimited liability. He can take part in the working of the business.

(viii) Sub-Partner : A partner when agrees to share his own profit derived from the firm with third person, it is known as sub-partner. A sub-partner cannot call himself as a partner in the firm. 

(ix) Quasi Partner : A retired partner leaving his capital with the firm is called as Quasi Partner. He does not participate in the working of the firm, but share profit of the firm. He is also liable for the debts of the firm.

• DIN is a unique identification number for an existing director or person intending to be the director of the company.
• It is compulsory to acquire DIN by every Director.
• Din is Pre-require for e-filling of company’s documents.
• It helps the investors of the company to make a more accurate and informed decisions because they get to known the composition of the top management of the company.
• It also helps to handle the problems created due to a company after collecting or raising money from the public.
• Thus, I agree with the given statement.

i. (a) Board of Directors

ii. (a) An individual

iii. (b) fifteen

iv. (c) twenty

v. (b) ten

• The Secretarial Standards are formulated by the Institute of Company Secretaries of India and approved by the Central Government through the Ministry of Corporate Affairs.
• The Companies Act, 2013, makes compliance with the Secretarial Standard mandatory.
• It leads to provide better monitoring of compliances of law, strengthening the process of the Board, and create confidence in investors.
• The Secretarial Standards aim at achieving integrating, harmonizing, and standardizing fine corporate governance practices across all companies.
• Thus, Secretarial Standards should be in conformity with the Act.

Partnership Deed:

A written agreement that mentions in detail the rights and responsibilities of each partner for the partnership firm is known as a partnership deed.

Details included in a partnership deed:

• Name and address of the firm
• Name, age, address and telephone numbers of each partner
• Purpose of starting the partnership and its duration
• Date of establishing the partnership and its duration
• Details of capital invested by each partner and the interest on capital if it is to be given to the partner
• The limit of money a partner can draw from the business
• Rate of interest on loans given by the partners to the firm
• The ratio of distribution of profit or loss among the partners
• Distribution of work among the partners
• Details of salary or commission of partners or other facilities that the partner can get
• Provision related to keeping the accounts and book-keeping of the firm
• Provision about the power for opening a bank account and power of transactions for each partner
• The method of evaluating the goodwill of the firm
• Provision of involving an intermediary person for solving disputes and differences
• Signing authority for various documents
• Provision of admitting a new partner and retirement of an old
• Rights and duties of a partner
• Provision for admitting a minor partner
• Process of setting the accounts during dissolution of the firm

All the above details are mentioned in the Partnership deed. If the deed is not in a written form then the provisions of Partnership Act 1932 gets automatically applicable to the partnership firm created on the basis of oral agreement.

Partnership Deed

The senior most family member of Joint Hindu Family Firm- Karta. 

Explanation: 

The eldest male member of a joint Hindu family business is called Karta. He controls and manages the business. Other members are called coparceners.

Board of Directors elected by the members, as per the Memorandum of Association and Articles of Association.

Alternate Director is a director who is nominated by the board in the place of absence director. He is appointed for a minimum of 3 months.

• It means Director Identification Number.
• DIN is a Unique Identification Number for an existing director or person intending to be the director of a company.
• It is compulsory to acquire DIN by Director.
• It helps in the detection and handling of offenses committed by a director.
• It is obtained through an online process by filing an application.

Correct option is (D) 6

Correct option is (A) Any partner holds the power to dissolve the partnership

• Directors have to work as a team of “Board of Directors” and not individually.
• He exercises the power as a Board which is subject to provision of the Act.
• Director is a representative of shareholders so he has to work collectively in the best interest of the company and its shareholders.
• He cannot take decisions alone on behalf of the company.
• Thus, directors have to work as a team.

• Companies follow diverse practices based on differing business cultures and varied usages over a period of time.
• The Secretarial Standards aim at achieving integrating, harmonizing, and standardizing fine, corporate governance across all companies
• It leads to provide better monitoring of compliance of the law, strengthening the process of the Board, and create confidence in investors.
• Secretarial Standards are reviewed by Secretarial Standard Board (SSB) once a year or whenever changes are made in the law.
• Thus, Secretarial Standards lead to better legal compliance

It is formulated by ICSI and approved by Central Government through the Ministry of Corporate Affairs (MCA). The main purpose of setting Secretarial Standards is to standardized fine corporate government practices prevailing in companies.

Correct option is (D) 9

Correct Answer is: (d) Registrar

The casual vacancy is created due to the death of a director, which is filled by the board at the board meeting. It is valid till the vacating director’s incomplete term.

They neither contribute capital nor take active participation in day to day transactions of the firm. They are not entitled for any share in profit but they are liable for business losses.

(a) Minor partners

Director is a person appointed to manage, direct and supervise the affairs of the company.

The elected representatives of the shareholders are called Directors.

Role of the Directors:

• He helps the investors to take accurate decision.
• He has to fill casual vacancies on the board.
• He has to recommend dividends.
• He has to issue securities in India or abroad.
• He manages a company on behalf of the shareholder.
• He appoints the first auditor of the company.
• He can appoint or remove Key Managerial Personnel.
• He can borrow the money on behalf of the company.
• His role is full of trust, loyalty, care, and good faith.
• Directors act as a trustee, agent and managing partner for the company.

The Registrar issues the certificate of Registration.

Correct Answer is: b)1932

Meaning:

• Secretary is an employee of the company and he is appointed to perform functions of a company secretary,
• He should be a member of the Institute of Company Secretaries of India (ICSI).
• The first secretary is appointed by the promoter of the company and he is called a ‘pro-tem’ secretary.
• He holds liable for non-compliance with the provisions of the Act.

Duties of a Company Secretary:

It is categorized as (A) Statutory Duties and (B) General Duties.

(A) Statutory Duties:

• To organize and attend meetings of the company.
• To prepare minutes of meetings.
• To communicate with shareholders on various matters.
• To issue notices and circulars to the members of the company.
• To maintain various Registers and books of the company
• To file returns with the ROC.

(B) General Duties:

• To provide guidance to the Board of Directors as needed.
• To discharge duties towards regulators and authorities of the company.
• To assist the Board of Directors in conducting the business of the company.
• To perform duties allotted by the Board.

Rights of a Secretary:

• To control and supervise the working of departments of the company.
• To get indemnified by the company, if any loss is suffered by the secretary.
• To sign documents requiring authentication.
• To get remuneration from the company.

It is one of the oldest and simplest forms of business organizations. It is owned and managed by a single person. It is easy to start a business. These concerns are run by the sole traders for profits.

1. Capital is limited. 

2. Cannot expand the business. 

3. Since it is run by a single person the managerial ability is limited. 

4. Life of the sole trading concerns may be short.

Correct Answer is: (a) 1932

A director’s relationship with a company is regarded as fiduciary in nature. It means his duty is full of trust, care, and good faith.

The duties of directors can be categorized into two heads:

1. Statutory Duties:

• To file a return of Allotment. 
• To act in accordance with the Articles of the company. 
• To disclose an interest in a transaction. 
• To attend Board meetings.
• To appoint first Auditors of the company.

2. General Duties:

• Duty of good faith i.e. he must act in the best interest of the company.
• Duty of care i.e. he must take utmost care in the performance of work assigned.
• Duty not to delegate i.e. he is required to perform his function personally. He may delegate in case of emergency.

Rights of a Company Secretary: Rights are given to the Secretary by the Companies Act, Board of Directors, and the Shareholders. The rights of the Company Secretary are given below:

• Right to control and supervise the working of his department. 
• Right to be indemnified by the company if any loss is suffered by Secretary while performing or discharging his duties. 
• Right to sign a document requiring authentication. 
• Right to get remuneration as an employee of the company.

d) Sole trading concerns

Correct Answer is: (c) Owner

Definition: The Companies Act, has defined a Managing Director as “A Director who by virtue of an agreement with the company or of a resolution passed by a company in the general meeting or by its Board of Directors or by virtue of its Memorandum or Articles of Association, is entrusted with substantial powers of management of the company”.

Disqualification:

• Any person less than 21 years of age and more than 70 years of age.
• A person who is an undischarged insolvent person or has at any time been adjudged as an insolvent.
• A person who has suspended payment to his creditors or made a composition with them.
• A person who is, or has been convicted by a court of an offense with a sentence of more than 6 months period.

Appointment:

A Managing Director may be appointed by any one of the following ways:

• by an agreement with a company.
• by the resolution passed at the general meeting.
• by the Board of Directors.

Term of office:

The term of office of the Managing Director cannot exceed 5 years at a time, but he can be reappointed as such for a further period of five years.

The number of Managing Directorship:

A Managing Director can not act as such for more than two companies at the same time.

Remuneration:

The remuneration paid to the Managing Director is subject to the maximum limit of 5% of the net profit of a company or a monthly salary. If a company has more than one Managing Director then total remuneration paid to them (all) shall not exceed 10% of the net profit.

Powers of a Managing Director:

• To act as a link between the Board of Directors and the managerial staff.
• To look after the management and administration of a company.
• To appoint the company employees.
• To participate in policymaking as well as policy execution.
• To sign contracts on behalf of a company.
• To decide about the investment of funds of a company.
• To receive remuneration from a company.

Duties of a Managing Director:

• To act on behalf (agent) of the Board of Directors.
• To implement the decision of the Board.
• To supervise, direct, control, and guide the day-to-day affairs of the business.
• To guide the senior executives in their administrative work.
• To report to the Board about programmes made or any problem faced by a company.
• To chair the Board meetings and general meetings, if necessary.
• To manage routine work of a company.
• To sign all the contracts and documents on behalf of the company.

(d) Sole trading concerns

They are only found in India. They are in accordance with ‘Hindu Law’. They are the firms which consist of all the male members of the Hindu family, descendants from a common male ancestor. Only three successive generations of male members namely sons, grandsons and great grandsons acquire the birth right or interest in the ancestral property. The eldest or senior most member of the family manages the business and he is called ‘Karta’. The liability of Karta is unlimited.