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Accounts, restructuring, oppression,winding up, and corporate authorities | Company Law | MCQ Quiz with Answers | Test Your Legal Knowledge

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Company Law MCQ Quiz

Company Law MCQ Quiz – Unit V (1–50)

(1). [AIBE 2021] The foundational common law principle that the company itself is the “proper plaintiff” for wrongs committed against it was established in:

  • [A]. Salomon v. Salomon & Co.
  • [B]. Foss v. Harbottle
  • [C]. Carlill v. Carbolic Smoke Ball
  • [D]. Derry v. Peek

(2). Which of the following is a recognized EXCEPTION to the rule in Foss v. Harbottle?

  • [A]. The act is perfectly legal and approved by the majority
  • [B]. The act is ultra vires the company or illegal
  • [C]. The directors declared a low dividend
  • [D]. The company changed its registered office

(3). [CLAT-PG 2019] Under Section 241 of the Companies Act, 2013, an application for “Oppression” can be filed if the company’s affairs are being conducted in a manner prejudicial to:

  • [A]. Public interest, the company, or any member(s)
  • [B]. The creditors only
  • [C]. The ROC only
  • [D]. Foreign investors only

(4). In Tata Consultancy Services v. Cyrus Investments (2021), the Supreme Court held that:

  • [A]. Every removal of a director constitutes oppression.
  • [B]. Mere removal of a director without a continuous course of oppressive conduct does not amount to oppression under Section 241.
  • [C]. Oppression petitions can be filed in civil courts.
  • [D]. Minority shareholders have absolute veto powers.

(5). [AIBE 2023] The statutory provision enabling a group of shareholders or depositors to file a “Class Action Suit” against the company or its auditors is found in Section:

  • [A]. 166
  • [B]. 135
  • [C]. 241
  • [D]. 245

(6). A Scheme of Compromise or Arrangement under Section 230 requires approval by a majority of persons representing ____________ in value of the creditors or members present and voting.

  • [A]. Half (1/2)
  • [B]. Two-thirds (2/3)
  • [C]. Three-fourths (3/4)
  • [D]. Unanimous (100%)

(7). [CLAT-PG 2020] Which of the following authorities sanctions a standard scheme of amalgamation under Section 232?

  • [A]. The Reserve Bank of India
  • [B]. The National Company Law Tribunal (NCLT)
  • [C]. The Registrar of Companies (ROC)
  • [D]. The Supreme Court of India

(8). A “Fast Track Merger” under Section 233 is available exclusively for:

  • [A]. Two or more large multinational companies
  • [B]. Two or more small companies, or a holding company and its wholly-owned subsidiary
  • [C]. Banking companies
  • [D]. Listed companies

(9). [AIBE 2018] Fast Track Mergers bypass the NCLT and require the approval of the:

  • [A]. Prime Minister
  • [B]. Central Government (delegated to the Regional Director)
  • [C]. Local District Judge
  • [D]. Police Commissioner

(10). When Company A acquires Company B, and Company B ceases to exist, leaving only Company A, the process is termed:

  • [A]. Amalgamation
  • [B]. Merger (Absorption)
  • [C]. Joint Venture
  • [D]. Spin-off

(11). [CLAT-PG 2022] Takeovers of listed companies in India are strictly regulated by the guidelines issued by:

  • [A]. NCLT
  • [B]. SEBI (Substantial Acquisition of Shares and Takeovers Regulations)
  • [C]. RBI
  • [D]. MCA

(12). Under the Companies Act, 2013, the mandatory rotation period for an individual statutory auditor is:

  • [A]. 1 year
  • [B]. 5 consecutive years
  • [C]. 10 consecutive years
  • [D]. 15 years

(13). [AIBE 2019] If an auditor during the course of audit has reason to believe that a severe fraud is being committed by the company’s officers, they must report it to:

  • [A]. The local police station
  • [B]. The Central Government (MCA)
  • [C]. The media
  • [D]. The trade union

(14). The Serious Fraud Investigation Office (SFIO) derives its statutory powers under which section of the 2013 Act?

  • [A]. Section 135
  • [B]. Section 211
  • [C]. Section 447
  • [D]. Section 245

(15). [CLAT-PG 2021] The investigation report submitted by the SFIO is treated legally as a:

  • [A]. Mere recommendation
  • [B]. Police report (charge-sheet) under Section 173 of the CrPC
  • [C]. Civil plaint
  • [D]. Public interest litigation

(16). Historically, the revival and rehabilitation of sick industrial companies was governed by the:

  • [A]. Sick Industrial Companies Act (SICA), 1985
  • [B]. FEMA
  • [C]. MRTP Act
  • [D]. Negotiable Instruments Act

(17). [AIBE 2022] With the enactment of the Insolvency and Bankruptcy Code (IBC) 2016, the provisions relating to the revival of sick companies in the Companies Act 2013 were:

  • [A]. Strengthened
  • [B]. Subsumed and entirely governed by the IBC’s Corporate Insolvency Resolution Process (CIRP)
  • [C]. Shifted to the Supreme Court
  • [D]. Made voluntary

(18). The legal distinction between Winding Up and Dissolution is that:

  • [A]. They are identical terms.
  • [B]. Dissolution is the process; Winding up is the end.
  • [C]. Winding up is the continuous process of realizing assets; Dissolution is the final order terminating corporate existence.
  • [D]. Winding up applies only to partnerships.

(19). [CLAT-PG 2018] Under the current legal regime, Voluntary Winding Up of a solvent company is initiated under:

  • [A]. Section 271 of the Companies Act, 2013
  • [B]. Section 59 of the Insolvency and Bankruptcy Code (IBC), 2016
  • [C]. The SEBI Act
  • [D]. The Contract Act

(20). Which of the following is a valid ground for Compulsory Winding Up by the Tribunal under Section 271 of the Companies Act, 2013?

  • [A]. The company has acted against the sovereignty and integrity of India
  • [B]. The company has filed all its tax returns
  • [C]. The company made 10% less profit than last year
  • [D]. A director resigned

(21). [AIBE 2023] The ground of “inability to pay debts” for compulsory winding up was deleted from the Companies Act and shifted to:

  • [A]. The IBC 2016 (triggering CIRP)
  • [B]. The SARFAESI Act
  • [C]. The RERA Act
  • [D]. The Consumer Protection Act

(22). When an order for winding up is passed, the powers of the Board of Directors:

  • [A]. Increase dramatically
  • [B]. Remain unchanged
  • [C]. Cease entirely, and the Official Liquidator takes custody of all assets
  • [D]. Transfer to the shareholders

(23). [CLAT-PG 2019] The “Just and Equitable” ground for winding up allows the NCLT to order winding up when:

  • [A]. The company’s main object has completely failed (substratum is gone)
  • [B]. There is a complete deadlock in management (like in a quasi-partnership)
  • [C]. The company is a mere bubble/sham
  • [D]. All of the above

(24). The apex central government ministry dealing with the administration of the Companies Act is the:

  • [A]. Ministry of Finance
  • [B]. Ministry of Commerce
  • [C]. Ministry of Corporate Affairs (MCA)
  • [D]. Ministry of Law and Justice

(25). [AIBE 2020] The Company Law Board (CLB) established under the 1956 Act was abolished and its adjudicatory functions were taken over by the:

  • [A]. Supreme Court
  • [B]. National Company Law Tribunal (NCLT)
  • [C]. Securities Appellate Tribunal (SAT)
  • [D]. High Courts

(26). The NCLT is a:

  • [A]. Constitutional Court
  • [B]. Specialized quasi-judicial tribunal
  • [C]. Private arbitration panel
  • [D]. Legislative committee

(27). [CLAT-PG 2022] Appeals against the orders of the NCLT lie to the:

  • [A]. High Court
  • [B]. Supreme Court directly
  • [C]. National Company Law Appellate Tribunal (NCLAT)
  • [D]. Registrar of Companies

(28). Section 430 of the Companies Act, 2013 is highly significant because it:

  • [A]. Grants civil courts exclusive jurisdiction over company matters
  • [B]. Strictly bars Civil Courts from entertaining any suit or proceeding in matters which the NCLT or NCLAT is empowered to determine
  • [C]. Allows High Courts to try minor company disputes
  • [D]. Abolishes the NCLT

(29). [AIBE 2018] Who serves as the central administrative nodal officer for filing incorporation forms, annual returns, and maintaining the corporate registry?

  • [A]. The Regional Director (RD)
  • [B]. The Registrar of Companies (ROC)
  • [C]. The SFIO Director
  • [D]. The Official Liquidator

(30). A Public Trustee is an authority appointed to:

  • [A]. Manage bankrupt companies
  • [B]. Exercise voting rights on behalf of public trusts holding significant corporate shares
  • [C]. Dissolve companies
  • [D]. Conduct audits

(31). [CLAT-PG 2021] Which authority handles administrative approvals like shifting a registered office from one state to another under the 2013 Act?

  • [A]. NCLAT
  • [B]. Central Government (delegated to Regional Directors)
  • [C]. Civil Court
  • [D]. Local Police

(32). During the winding-up process under the IBC, the priority of payment of debts (the “waterfall mechanism”) heavily favors:

  • [A]. Unsecured creditors over secured creditors
  • [B]. Insolvency costs, workmen’s dues, and secured creditors
  • [C]. Equity shareholders above everyone else
  • [D]. Promoters

(33). [AIBE 2019] If the NCLT finds that an oppression petition under Sec 241 is valid, but winding up the company would unfairly prejudice the members, the Tribunal may:

  • [A]. Dismiss the petition entirely
  • [B]. Pass any order under Sec 242 (e.g., directing purchase of shares, restricting transfers) to bring an end to the matters complained of
  • [C]. Execute the directors
  • [D]. Order the police to run the company

(34). Under the Foss v. Harbottle rule, if a director steals money from the corporate treasury, who is the proper plaintiff to sue the director?

  • [A]. Any individual shareholder
  • [B]. The trade union
  • [C]. The Company itself (as a separate legal entity)
  • [D]. The Registrar of Companies

(35). [CLAT-PG 2023] Which of the following is NOT an exception to the rule in Foss v. Harbottle?

  • [A]. An act requiring a special resolution was passed by a simple majority
  • [B]. The directors made a poor but bona fide commercial business decision that lost money
  • [C]. An ultra vires act was committed
  • [D]. A fraud was perpetrated on the minority

(36). The Insolvency and Bankruptcy Code (IBC) 2016 consolidated and amended laws relating to reorganization and insolvency of:

  • [A]. Corporate persons, partnership firms, and individuals
  • [B]. Government departments
  • [C]. International treaties
  • [D]. Trusts only

(37). [AIBE 2021] Under the IBC 2016, once an application for CIRP is admitted by the NCLT, what happens immediately?

  • [A]. The company is dissolved.
  • [B]. A ‘Moratorium’ is declared, prohibiting all debt recovery suits against the company.
  • [C]. The directors are arrested.
  • [D]. All employees are fired.

(38). The “Resolution Professional” (RP) appointed under the IBC is tasked with:

  • [A]. Liquidating the company immediately
  • [B]. Taking over the management from the Board of Directors and managing the company as a going concern during CIRP
  • [C]. Auditing previous years’ taxes
  • [D]. Lobbying the government

(39). [CLAT-PG 2020] If a Resolution Plan is not approved within the statutory timeframe (normally 330 days max) under the IBC, the NCLT must:

  • [A]. Forgive the debt
  • [B]. Order the Liquidation of the corporate debtor
  • [C]. Arrest the creditors
  • [D]. Extend the time indefinitely

(40). The impact of the Companies Act 2013 on the audit profession included the introduction of:

  • [A]. Lifetime appointments for auditors
  • [B]. Mandatory rotation and prohibition on auditors providing certain non-audit services to the same company
  • [C]. Verbal audit reports
  • [D]. Exemption of public companies from audits

(41). [AIBE 2017] When two companies amalgamate to form a new company under Section 232, the transferor companies are:

  • [A]. Put on hold
  • [B]. Dissolved without being formally wound up
  • [C]. Kept alive as subsidiaries
  • [D]. Re-registered in foreign jurisdictions

(42). Can the SFIO initiate an investigation suo motu (on its own)?

  • [A]. Yes
  • [B]. No, it investigates only when assigned by the Central Government.
  • [C]. Only if requested by a foreign government.
  • [D]. Only if the Supreme Court orders.

(43). [CLAT-PG 2019] If an inspector appointed by the MCA requires a director to produce books and the director refuses, the director is:

  • [A]. Immune due to right against self-incrimination
  • [B]. Liable for penal consequences under the Companies Act for non-cooperation
  • [C]. Protected by the Board
  • [D]. Promoted

(44). The threshold required for members to file an Oppression/Mismanagement petition under Section 244 (for companies with share capital) is:

  • [A]. 1 member
  • [B]. Not less than 100 members, or 10% of total members, or members holding 10% of issued share capital
  • [C]. 51% of members
  • [D]. 100% of members

(45). [AIBE 2022] Which chapter of the Companies Act 2013 was essentially rendered obsolete regarding corporate rescue because the IBC 2016 took over its function?

  • [A]. Chapter covering Prospectus
  • [B]. Chapter XIX (Revival and Rehabilitation of Sick Companies)
  • [C]. Chapter covering Board Meetings
  • [D]. Chapter covering Dividends

(46). What is the significance of the “Waterfall Mechanism” under Section 53 of the IBC?

  • [A]. It controls corporate plumbing.
  • [B]. It dictates the strict priority of distributing sale proceeds to creditors during liquidation.
  • [C]. It governs dividend payouts.
  • [D]. It dictates the election of directors.

(47). [CLAT-PG 2021] The ultimate goal of the CIRP under the IBC is:

  • [A]. Rapid liquidation and death of the company
  • [B]. Revival and resolution of the corporate debtor as a going concern, maximizing asset value
  • [C]. Imprisoning all directors
  • [D]. Freeing the company from all taxes forever

(48). Under the 2013 Act, if a company fails to commence its business within 1 year of incorporation, the ROC has the power to:

  • [A]. Execute the promoters
  • [B]. Initiate action to strike off the name of the company from the register (Sec 248)
  • [C]. Take over the company
  • [D]. Appoint a Supreme Court judge as CEO

(49). [AIBE 2023] The NCLAT also hears appeals against orders passed by which other major regulatory body?

  • [A]. Reserve Bank of India (RBI)
  • [B]. Competition Commission of India (CCI)
  • [C]. Election Commission of India
  • [D]. National Green Tribunal (NGT)

(50). The synergy across Unit V demonstrates that the 2013 Act and the IBC 2016 together aim to:

  • [A]. Maximize bureaucratic delays.
  • [B]. Foster a modern, transparent corporate environment where viable companies can restructure, sick companies can be swiftly resolved, and terminal ones are efficiently liquidated without civil court interference.
  • [C]. Abolish all forms of corporate enterprise.
  • [D]. Prevent minority shareholders from having any rights.

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