Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions

Chapter 6 Directors and Key Managerial Personnel of a Company Textbook Exercise Questions and Answers.

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
_____________ comprises of a team of Directors.
(a) Board of Directors
(b) Board of Trustees
(c) Board of Managers
Answer:
(a) Board of Directors

Question 2.
_____________ can be a director.
(a) An Individual
(b) A Firm
(c) A Body corporate
Answer:
(a) An individual



Question 3.
Upto _____________ as maximum directors are allowed to a company.
(a) five
(b) fifteen
(c) fifty
Answer:
(b) fifteen

Question 4.
A maximum of _____________ Directorships is allowed to a person.
(a) two
(b) ten
(c) twenty
Answer:
(c) twenty

Question 5.
A maximum of _____________ Directorships of a public company is allowed to a person.
(a) one
(b) ten
(c) twenty
Answer:
(b) ten

Question 6.
_____________ is a unique identification number required to be a Director.
(a) PIN
(b) DIN
(c) TIN
Answer:
(b) DIN

Question 7.
_____________ powers are the powers given to Board under the Act.
(a) Statutory
(b) Managerial
(c) Administrative
Answer:
(a) Statutory

Question 8.
Director represents company in his role as _____________
(a) Agent
(b) Managing Partner
(c) employee
Answer:
(a) Agent



Question 9.
Managing Director is appointed for a period of _____________ years
(a) 5
(b) 10
(c) 15
Answer:
(a) 5

Question 10.
_____________ is required to work under superintendence, control, guidance of the Board.
(a) Government
(b) ROC
(c) Managing Director
Answer:
(c) Managing Director

Question 11.
_____________ is an employee of the company.
(a) Alternate director
(b) Non-executive Director
(c) Whole-time director
Answer:
(c) Whole time Director

Question 12.
_____________ need not be a director of the company.
(a) Manager
(b) Managing Director
(c) Whole-time director
Answer:
(a) Manager

Question 13.
_____________ needs a whole time director.
(a) Listed company
(b) Partnership
(c) OPC
Answer:
(a) Listed company

Question 14.
To provide guidance to Board is _____________ duty of Company Secretary.
(a) Personal
(b) General
(c) Statutory
Answer:
(c) Statutory

Question 15.
Only a member of _____________ can be a practicing Company Secretary.
(a) ICAI
(b) ACCA
(c) ICSI
Answer:
(c) ICSI



Question 16.
_____________ is to be prepared in prescribed form MR-3.
(a) Annual Report
(b) Auditors Report
(c) Secretarial Audit Report
Answer:
(c) Secretarial Audit Report

1B. Match the pairs.

Question 1.

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) Assist and Advises the Government
	(9) Negligible Powers of management
	(10) Nominated by Council

Answer:

Group ‘A’	Group ‘B’
(a) Board of Directors	(5) Extensive Powers of management
(b) Managing Director	(6) Substantial Powers of management
(c) Company Secretary	(2) Assists and advises the Board
(d) First Directors	(7) Appointed by Promoter
(e) Alternate Director	(1) Nominated by the Board

Question 2.

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

Answer:

Group ‘A’	Group ‘B’
(a) Public company	(7) At least 3 (three) Directors
(b) Private company	(6) At least 2 (two) Directors
(c) Secretarial Auditor	(10) Appointed by the Board
(d) Casual Vacancy of a Director	(1) Arises due to death of Director
(e) Powers of the Board	(2) Collective Powers

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
The organization with distinct features of separate ownership and management.
Answer:
Joint-stock company

Question 2.
The officer is responsible for the company’s finances.
Answer:
Chief Financial Officer

Question 3.
The body of elected representatives of the company.
Answer:
The Board of Directors

Question 4.
The officer is a statutory and administrative officer and also acts as co-ordinator of the company.
Answer:
Company Secretary

Question 5.
Qualification required to be a Company Secretary.
Answer:
Member of ICSI



Question 6.
Agents, Trustees, and Managing Partners of the company.
Answer:
The Board of Directors

Question 7.
The audit which checks compliances of different legislations.
Answer:
Secretarial audit

Question 8.
This KMP signs documents of the company requiring authentication by the company.
Answer:
Company Secretary

Question 9.
The nature of the relationship of Directors with the company.
Answer:
Fiduciary

Question 10.
Name the Secretarial Standard – 1.
Answer:
Secretarial Standards on meetings of the BOD

Question 11.
Name the Secretarial Standard – 2.
Answer:
Secretarial Standards on General Meeting

Question 12.
Name the Secretarial Standard – 3.
Answer:
Secretarial Standards on Dividend

1D. State whether the following statements are True or False.

Question 1.
A large number of shareholders necessitates the company to have a separate managerial body.
Answer:
True

Question 2.
The maximum number of Directors allowed to a company is 15 (fifteen).
Answer:
True



Question 3.
A public company should have a minimum of 10 (ten) directors.
Answer:
False

Question 4.
DIN is required for Secretaryship.
Answer:
False

Question 5.
Executive Director is called an outside Director.
Answer:
False

Question 6.
The promoter of a company cannot be the Independent Director.
Answer:
True

Question 7.
Only individuals can be directors.
Answer:
True

Question 8.
The casual vacancy of the Board is filled by the members.
Answer:
False

Question 9.
To function as per Articles of Association of the company is the statutory duty of the Board.
Answer:
True

Question 10.
A Director is an employee of the company.
Answer:
False

Question 11.
The Managing Director is appointed by a resolution.
Answer:
True

Question 12.
The minimum and maximum age to be a Managing Director is 21 and 70 respectively.
Answer:
True



Question 13.
A company may appoint more than one M.D.
Answer:
True

Question 14.
Indian companies prefer a Managing Director over a Manager.
Answer:
True

1E. Find the odd one.

Question 1.
Woman Director, Promoter, Executive Director.
Answer:
Promoter

Question 2.
Absent at Board Meeting, failure to disclose an interest, DIN.
Answer:
DIN

1F. Complete the sentences.

Question 1.
Separate ownership and management is a unique feature of _____________
Answer:
Company

Question 2.
Minimum number of Directors for a private company should be _____________
Answer:
Two

Question 3.
Minimum number of Directors for a public company should be _____________
Answer:
Three

Question 4.
Minimum number of Directors for an OPC should be _____________
Answer:
One



Question 5.
First Directors of a company are appointed by _____________
Answer:
Promoter

Question 6.
At least one Woman Director is required by _____________ company.
Answer:
Listed Company

Question 7.
Casual vacancy on Board is filled by _____________
Answer:
Board

Question 8.
Director is the guardian of interest of company as _____________
Answer:
Trustees

Question 9.
First Secretary is appointed by _____________
Answer:
Promoters

Question 10.
The audit which checks the compliance of Companies Act is called as _____________
Answer:
Secretarial Audit

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Rotational Director	…………………..
(2) ……………………….	Alternate Director
(3) Woman Director	…………………..
(4) ……………………….	First Director

(Every Listed Company, Appointee by Promoters, Appointed in Place of a director who is absent, Retire by Rotation)
rotation)
Answer:

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) Appointee by Promoters	First Director

1H. Answer in one sentence.

Question 1.
Who is the officer responsible for the company’s financial plan?
Answer:
Chief Financial Officer is responsible for the company’s financial plan.

Question 2.
What is the importance of Secretarial Standards?
Answer:
The main aim of Secretarial Standards is to standardize all diverse secretarial practices prevailing in the corporate world.



Question 3.
Who provides guidance to the Board of Directors?
Answer:
Company Secretary provides guidance to the Board of Directors.

Question 4.
What is the tenure of ‘Managing Director?
Answer:
The tenure of the Managing director is Five Years.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
A public company must have a minimum of 15 directors.
Answer:
A public company must have a minimum of 03 directors.

Question 2.
First Directors are appointed by ROC.
Answer:
First Directors are appointed by Promoters.

Question 3.
Secretarial Standards are given by the Companies Act, 2013.
Answer:
Secretarial Standards are given by the Institute of Company Secretaries of India.

2. Explain the following terms/concepts.

Question 1.
Director
Answer:
Director is a person appointed to manage, direct and supervise the company. According to Sec-2(34) of the act, “Director means a director appointed to the Board of the company”.

Question 2.
Managing Director
Answer:
Managing Director is a director appointed by virtue of an agreement with the company; or by passing a resolution in the general meeting or by its Board of Directors or by virtue of Memorandum of Associations or Articles of Association. He is entrusted with substantial powers of management of the affairs of the company. He is appointed for a period of 5 years.



Question 3.
Independent Director
Answer:
As per section 149 of the Companies Act, 2013, any director other than a managing director, whole-time director, or a nominee director is termed as an independent director.

Question 4.
Executive Director
Answer:
Executive Director is also called as ‘Whole Time Director’, He is in full-time employment with the company. He plays an important role in the day-to-day management of the company.

Question 5.
Non-Executive Director
Answer:
Non-Executive Director is known as ‘Outside Director’. Non-Executive Director is not involved in the day-to-day management of the company. He is appointed to get second opinions from the board.

Question 6.
Alternate Director
Answer:
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.

Question 7.
Casual vacancy of Director
Answer:
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.

Question 8.
Chief Financial officer
Answer:
An officer responsible for the company’s finances is called Chief Financial Officer. He need not be a director of the company. He has to compulsory sign the audited financial statements of the company.

Question 9.
Company Secretary
Answer:
The company secretary is appointed to perform functions of the company and he is appointed by a resolution of the Board. He has to follow the terms and conditions decided by the board. He should be a member of ICSI.

Question 10.
Secretarial Standard
Answer:
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.



Question 11.
Secretarial Audit
Answer:
It is an audit that monitors the compliance requirements of the company. The main aim of such an audit is to detect errors and mistakes in compliance with the rules and regulations of the Companies Act. It builds confidence among regulators, management, and shareholders of the company.

Question 12.
The Board of Directors
Answer:
Representatives elected by the Equity Shareholder in their Annual General Meeting are called as Board of Directors. They are allotted certain powers to control and manage the business of the firms.

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 the financial market. He wishes to become a director of PQR Co. Ltd.

Question (a).
Is he required to obtain DIN?
Answer:
He was required to obtain DIN. It is compulsory to acquire DIN for every Director.

Question (b).
Can PQR Co. Ltd. object to his directorship on lack of specialized qualification?
Answer:
The company act has not prescribed any academic or professional qualification for directors, so he can obtain directorship.

Question (c).
If he is appointed as director of PQR Co. Ltd, is he entitled to remuneration?
Answer:
The managerial position entitles him to get managerial remuneration so if Mr. A is appointed as director of PQR Co. Ltd then he is entitled to remuneration.

2. Mr. Z is a member of the Institute of Company Secretaries of India.

Question (a).
Can Mr. Z be appointed as pro-tem Secretary of LMN Ltd. which is under formation?
Answer:
Yes, Mr. Z can be appointed as pro-tem secretary of LMN Ltd. which is under formation. The First Secretary is appointed by the promoters of the company.

Question (b).
Can Mr. Z work as Secretarial Auditor?
Answer:
Yes, Mr. Z can work as Secretarial Auditor because he is a member of ICSI.

Question (c).
Mr. Z wishes to be employed as whole time Secretary in companies ABC Ltd. and OPC Ltd. Is he allowed?
Answer:
Mr. Z, as a whole-time secretary, cannot hold office in more than one company. So, Mr. Z can be employed either in ABC Ltd or One Person Company and not in both.



3. Mr. M wishes to be the Managing director of QRS Ltd.

Question (a).
The age of Mr. M is 30 years. Can he be appointed as MD of a company?
Answer:
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.

Question (b).
Is it necessary that Mr. M should be one of the directors on the Board of QRS Ltd?
Answer:
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.

Question (c).
For how long a period QRS Ltd. can appoint Mr. M. as a Managing Director?
Answer:
QRS Ltd can appoint Mr. M. as a managing director for a period of 5 years.

4. Distinguish between the following.

Question 1.
Director and Managing Director
Answer:

Basis	Director	Managing Director
1. Meaning	Director is the elected representative of the shareholders of the company.	The managing director represents the board in the day-to-day activities of the business.
2. Appointment	He is elected at the Annual General Meeting by the members of the company.	He is appointed by the board of directors.
3. Tenure	Directors of public companies retire by rotation. Maximum tenure is of 3 years, 1/3 of Independent Director is not liable to retire by rotation.	The tenure of managing director is for a term of five years.
4. Remuneration	Remuneration for services is given as per specific provisions. The director is given sitting fees to attend the board meeting which may extend up to ₹ 1 lakh plus remuneration.	M.D is entitled to either a monthly salary or 5 % of the net profit. If more than one M.D. is appointed then maximum remuneration cannot be more than 10% of the net profit.
5. Status	Directors are elected representatives of the shareholders managing company in absence of shareholders. They can be agents of the company but not employees of the company.	Managing Director has dual status i.e. a director and a manager (employee).
6. Positions held	Director is the only member or person on the board.	The managing director is the director on the Board. M.D. is the whole time manager in the company.
7. Number of companies	Director can work in 20 companies at a time wherein a maximum of 10 public companies at a time.	A person can be an M.D. of a maximum of 2 companies at a time.

Question 2.
Managing Director and Manager
Answer:

Basis	Managing Director	Manager
1. Meaning	The Managing Director is appointed by the Board to look after the day-to-day administration of the company.	The manager is in charge of the whole management affairs of the company.
2. Appointment	The managing director is appointed by an agreement with the company or by resolution passed by the company in a Board meeting or by virtue of its Articles of Associations of the company.	The manager is appointed under a contract of service.
3. Remuneration	MD is entitled to either a monthly salary or 5% of net profit. If there is more than one managing director, the maximum remuneration payable is 10% of the net profit.	Maximum remuneration to a manager cannot be more than 5% of the net profit.
4. Number of posts	A company may have more than one Managing Director. He can be M.D. in maximum of 2 companies.	The company can have only one post of manager.
5. Power	He is given substantial powers of management.	He is entrusted with whole powers of management.
6. Position held	The managing director must be the director of the company.	The manager need not be a director of the company.

Question 3.
Managing Director and Whole Time Director
Answer:

Basis	Managing Director	Whole Time Director
1. Meaning	The managing director represents the board in the day-to-day management of the company.	The whole time director devotes whole time to the working of the company.
2. Powers	The Managing Director is given substantial powers of management.	A whole-time director does not have the power to take decisions on policy matters.
3. Number of posts	A person can be an M.D. of a maximum of 2 companies at a time.	More than one whole-time directorship is not possible at a time.
4. Performance	He manages the affairs and business of the company.	He performs important administrative functions of the company.

5. Answer in brief.

Question 1.
What is DIN?
Answer:



Question 2.
State any four powers of the Board of Directors.
Answer:

Question 3.
Mention any four ways in which the office of a director becomes vacant.
Answer:
The office of a Director shall automatically become vacant in the following ways:

Question 4.
State the powers of a Managing Director.
Answer:
As it is stated in the definition itself the Managing Director is entrusted with the substantial powers of management, which clearly indicates that he has been given certain important powers of routine business matters of a company.
The powers exercised by him are fellows:

Question 5.
State the statutory duties of a company secretary.
Answer:
Secretary is an employee of the company. He enjoys the power and advises the management.
Statutory duties of a company secretary are as follows:



6. Justify the following statements.

Question 1.
Directors are managing partners.
Answer:

Question 2.
A Director is an agent of the company.
Answer:

Question 3.
The company has a distinct feature of separate ownership and management.
Answer:



Question 4.
DIN helps investors of the company.
Answer:

Question 5.
Directors have to work as a team.
Answer:

Question 6.
Directors play a triple role.
Answer:

Question 7.
Company Secretary plays a triple role.
Answer:



Question 8.
A director cannot be called an employee of the company.
Answer:

Question 9.
The managing Director has substantial powers of management.
Answer:
As it is stated in the definition itself the Managing Director is entrusted with the substantial powers of management, which clearly indicates that he has been given certain important powers of routine business matters of a company.
The powers exercised by him are as follows:

Question 10.
Indian companies prefer to appoint a Managing Director than a Manager.
Answer:

Question 11.
Pro-tem secretary is helpful to the company.
Answer:

Question 12.
Secretarial Standards should be in conformity with the Act.
Answer:



Question 13.
Secretarial Standards lead to better legal compliance.
Answer:

Question 14.
A secretarial Audit is required under the laws.
Answer:

7. Answer the following questions.

Question 1.
Explain the Role of Directors.
Answer:
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:

Question 2.
Explain the duties of a Director.
Answer:
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:



Question 3.
Explain the Managing Director.
Answer:
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:

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

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:

Duties of a Managing Director:

Question 4.
Explain the Company Secretary.
Answer:
Meaning:

Duties of a Company Secretary:
It is categorized as (A) Statutory Duties and (B) General Duties.

(A) Statutory Duties:

(B) General Duties:

Rights of a Secretary:



Question 5.
Explain the role of the Company Secretary.
Answer:
The company secretary plays a crucial and important role in the administration of the company.
The emphasis on good governance has increased the role of the secretary in protecting the interest of investors.

Role of Company Secretary:

(ii) Secretary as a Co- ordinator:

(iii) Secretary as an Administration officer: