Legal Aspect of Finance shared by Niharika

Legal Aspect Of Finance Notes(Shared by Niharika Bhagat)

1. The charges requiring registration with ROC are

• A charge on uncalled share capital
• A change for purpose of securing any issue of debentures
• A charge on any immovable property

2. The central government may exempt any class of companies from compliance with any of the requirements in Schdule VI. – True
3. The maximum rate of interest on the loan availed by a person resident in India from a no- resident india is –two percentage over the bank rate

4. The salary drawn by Mr. Shamkar is Basic 5,00, DA Rs 4,000, HRA Rs. 1000. The employer’s share of contribution to Provident fund is Rs. 900
5. The Balance Sheet and Profit and Loss Account shall be approved by the Board of Directors after they are signed on the behalf of Board – False
6. The maximum fine for not giving a copy of the balance sheet within 7 days to the person entitled to it is - Rs. 5,000
7. A company having paid up share capital of Rs.50 lakhs or more can appoint – a sole selling agent
8. Match

• Allocable surplus more than bonus payable – Carry Forward for set on
• Allocation surplus less than bonus payable—Carry forward for set off
• Allocation surplus is equal to bonus payable—No question of set on or set off
• Allocation surplus more than onus payable—No considered for set on or set off

9. In the case Ball v/s William hunt, it was help that, “incapacity for work ” includes – inability to get work
10. Banks maintaining NRE accounts are permitted to grant loans in india to the account holders

• For personal purposes
• For acquisition of house in india for his own residential use.

11. Gratuity shall be payable to an employee on his

• Superannuation
• Retirement or resignation
• Death or disablement

12. The maximum fine for not preserving the records for 8 yrs – 10,000
13. If the paid up capital of all companies is more than Rs. 25 lacs each, the maximum number of companies that a person can audit is – ten
14. Insurance of employer’s liability to pay gratuity under the act is compulsory , if the number of employees is less than 100. – False
15. An apprentice is not entitled to bonus – True

16. The books of account of every company relating to a period of not less than eight years immediately preceding the current year shall be preserved in the good order.
17. A person resident in india is free to send (export) any gift article of value not exceeding -5,00,000.
18. If an employer avoids payment of gratuity he can be punished with an imprisonment upto a maximum period of - Six months
19. Of the three copies received by him , ROC will return one copy and another copy to – Charge Holder.
20. These do not fall under the category of person resident in India.

• A person who has gone out of india or has taken up employment outside india.
• Body corporate register in india
• A branch or agency in india owned or controlled by a person resident outside india.

21. If the number of person employed is more than one thousand , the wages shall be paid – before the expiry of the tenth day.
22. The Committee for fixing minimum wages shall consist of persons representing the

• Employers
• Employees
• Independent persons

23. An auditor checks each and every transaction. – True
24. The following are not included in the basic wages

• HRA
• Bonus

25. Nomination facility can be availed by

• A share holder
• A depositor

26. A retrenched employee is eligible to get bonus provided he has worked for a minimum qualifying period. – True
27. If the salary payable is weekly on every Saturday and if the number of employees is less than 1,000 the last date for payment of wages for the period ending on 27-10-2007 will be 3-Nov-07
28. Balances in NRO accounts are not eligible for remittance outside India without the approval of the Reserve Bank of India
29. Reserve bank of india has issued Export Regulations which are effective from 1^st June,2000
30. These sectors require prior approval of Government for FDI

• Activities/items that require an industrial License.
• Proposals for acquisition of shares in an existing Indian company in Financial services sector.
• All proposals falling outside notified sectoral policy

31. ESI Corporation makes regulations for

• The manner and time for payment of contribution
• The entry in or upon books or cards of particulars of contribution paid and benefits distributed.
• The issue, safe custody, production , inspection and delivery of books or cards.

32. Foreign exchange for travel abroad can be purchase from banks against rupee payment in cash upto Rs. 50,000/-
33. The maximum amount of fine for violation of provisions of payment of bonus Act Rs. 1,000
34. A housing finance institution in india approved by National Housing bank cannot provide housing loan to a non – resident Indian. –False
35. The Functions of the debenture trustees shall generally be

• To protect the interest of holders of debentures
• To redress the grievances of holders of debentures

36. If the aggregate value of the foreign exchange in the form of currency notes,bank notes or travellers cheques brought in exceeds USD 10,00/- or its equivalent and /or the value of foreign currency exceeds USD 5,000/- or its equivalent, it should be declared to the Customs Authorities at the Airport in the Currency Declaration Form
37. Preferences shares can be redeemed even if they are not fully paid up. False
38. If an employer violates the provisions of Payment of Bonus Act, he can be punished with an imprisonment upto a maximum period of Six months
39. A company has availed a loan of Rs. 10 lacs and cash credit facility of Rs. 5 lacs. It has repaid the laon. After this the charge is modified
40. Foreign Exchange management Act authorises the RBI to make such regulations as it may think fit to monitor the exports.
41. Foreign Investment in preference share fall outside the External Commercial Borrowing(ECB) guidelines. –True
42. A resident Indian going abroad for medical treatment abroad can purchase US Dollar 1,00,000 without RBI’s permission.
43. The Fund in RFC account are free from all restrictions regarding utilisation of foreign currency balances. True
44. Use of the International Credit Cards(ICCs)/ATMs/Debit Cards can be made for

• Making personal payments like subscription to foreign journals
• For travel abroad
• Meeting expenses while abroad

45. This Act authorizes the Central Government to formulate rules and regulation fir withdrawal of exchange for imports – FEMA
46. Type of chages – Section 125 of Companies Act

Date of notice of charge – Section 126 of companies Act

Registration of charges on properties acquired subject to charge – Section 127 of Comapnies Act

Register of charges to be kept by Registrar – Section 130 of Companies Act

47. This institute assists Employees’ State Insurance Corporation to discharge its functions efficiently

• Standing Committee
• Medical Benefit council

48. If at the time of making a nomination, the employee has no family then the nomination may be made in favour of any person. – True.
49. NRE accounts may be in the form of

• Savings Accounts
• Recurring Deposit Accounts
• Current Accounts

50. Minimum wages must provide for

• The bare sustenance of life
• The prevention of efficiency of the worker
• Some measure of education, medical requirement and amenities

51. Maximum Interest payable on gratuity is equal to 25% of gratuity payable
52. No individual FII/sub-account can acquire more than 10% of the paid up capital of an Indian company.
53. An Indirect tax Levied by Government on the goods manufactured in india is called as Excise Duty
54. The Preference shares be redeemed

• Out of the proceeds of fresh issue of shares
• Out of profits

55. The maximum % of net own funds that a company needs, to purchase the securities of other company is 60%
56. The Employees’ State Insurance Act,1948 provides for

• Medical care and treatment
• Payment of cash benefit during sickness
• Pension to the dependents on the death of a worker due to employment injury

57. An employee could not attend duty due to Bandh. The Action that can be taken by the employer will be – Treat the absence as authorised leave.
58. Mr. Vishal from Pune has received a guest from USA on tour to India. Mr. Vishal needs RBI permission to make expenses for his foreign guest – False
59. The compensation can be denied under WC Act

• If workman is under the influence of drink or drugs
• If accident is caused due to wilful disobedience of rules or order
• If there is disregard of safety devices.

60. This section of Central Excise Act,1944 deals with charging of Duty of Excise – Section 3
61. Accounting standard are issued by – ICAI
62. An Indian company, a proprietorship concern or a firm in india cannot accept deposits from a non- resident Indian on non- repatriation basis- False
63. The conditions applicable for the public deposits accepted by an Indian company from a Non-Resident Indian are

• The deposits are received under a public deposit scheme
• The amount representing the deposit is received by inward remittance from outside India through normal banking channels
• The company of aggregate deposits accepted by the company shall not exceed 35% of its net owned funds. Doubt

64. NRIs/PIOs can purchase/sell shares/convertible debentures of Indian companies on Stock Exchanges under – Portfolio Investment Scheme
65. FDI in sectors/activities to the extent permitted under automatic route requires prior approval either by the Government or RBI. – False
66. The maximum contribution that an employer has to contribute to meet the administrative expenses of the Deposit Linked Insurance fund is – ¼ th if their contribution to deposite Linked Insurance Fund.
67. The salary drawn by Mr. Shankar fir June 2007 is Basic Rs. 5,000/- DA Rs. 4,000/-,HRA Rs.1,000. During the month he was on leave without pay for 10days. The total credit PF wil be – Rs.600
68. The form for creation of a charge should be filed within 30 days from the date of execution of the document with the Registrar of Companies.
69. NRO account – Interest is taxable

NRE Account – Interest is tax free

FCNR(B) Account – Exchange risk borne by the depositor

FCNR(A) Account – Scheme discontinued

70. If a part of an year is less than six months, then it will be treated as a full year for the purposes of payment of gratuity – False
71. An employment in a factory or establishment to which the ESI Act applies is called –Insuable employment
72. The Employees’ Pension Scheme provides for

• Superannuation pension
• Widow or widower’s pension
• Children pension

73. The following sums shall be deducted from the gross profits as prior charges for computation of allocable surplus for bonus

• Depreciation
• Employment rebate
• Direct tax

74. The consignee abroad is not entitled to deduct the charges and his fee from the sale proceeds- false
75. A typical GDR is denominated in - US$
76. The maximum amount that a company can contribute to charitable and other funds not directly relating to the business of the Company in terms of percentage of average profits is 5%.
77. The maximum limit in terms of percentage of its average net profits which may be contributed by a Company in any financial year is 5%.
78. Taking personal jewellery out of India is governed by – Baggage Rules
79. A “private company means”

• A company which has a minimum paid-up capital of one lakh rupees
• A company which restricts the right to transfer its shares
• A company which limits the number of this member fifty

80. A memorandum containing such salient features of a prospectus as may be prescribed is called as – abridge prospectus
81. These books of accounts are to be kept by the company

• The profit and loss account
• The auditor’s report
• The board’s report

82. The “Value” on which the excise duty is payable as a percentage is called as – Invoice Price
83. The date of agreement for a foreign Technical collaboration is 10-3-2000. The date of commencement if commercial production is 20-1-2002. The last date upto which payment of royalty can be made to the foreign collaborator would be -1/20/12
84. An individual resident in India may borrow from a non- resident Indian or a person of Indian origin on the following conditions

• The loan should be in rupees
• The amount borrowed shall not be allowed to be repatriated outside india
• The period of loan shall not exceed three years

85. A workman has worked for 250 days on daily wages basis. Daily wages paid to him is Rs. 30,000/-, the average monthly wages for the purpose of compensation will be – 3,600
86. A person resident in india, who has acquired immovable property outside india may transfer it by way of gift to his relative who is a person resident in India. – True
87. A company should give intimation of appointment to every auditor within 7 days of appointment.
88. Any trade settlements can be freely made through Rupee accounts of Bhutanese and Nepalese nations.
89. Preference shares can be

• Cumulative Redeemable Preference shares
• Non-cumulative Redeemable Preference shares

90. Certificate from statutory Auditors or chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside india should be send to RBI.- True
91. The maximum deduction from salary is 50% if the recovery of co-operative society is not involved.
92. The salary drawn by Mr. Shankar is Basic Rs. 5,000/- , DA Rs. 4,00/- HRA Rs. 1,000. The total credit to PF will be – Rs. 900/-
93. In case of death of an employee, the amount of balance in EPF account is paid to nominee/legal heirs.- True
94. A company can keep books of account at any other place than the registered office of the company – True
95. Employer’s contribution to EPF as % of eligible wages – 10%

Interest payable by employer for delayed payment of EPF – 12%

Employer’s contribution to Pension Fund as % of eligible wages – 8.33 %

Employer’s contribution to Deposit Linked Insurance Fund as % of eligible wages – 1%

96. For the purpose of the section 9 of the Excise Act, a fact is said to be proved only when

• The Court believes it to exist

97. Deductions made by the employer from the salary payable to employee which are authorised by the Payment of Wages Act are called as authorised deductions.
98. Every notification under clause(f) of the first proviso to sub-section(2) of 11B of the Excise Act shall be laid before each House of Parliament.
99. Provisions relating to Investment shall not relate to these companies

• Insurance company
• Housing company

100. A non-executive Chairman is not entitled to maintain a Chairman’s office at the company’s expense – False
101. A foreign company can set up Liaison , Project and Branch Offices in India after obtaining – approval from RBI
102. The EPF Act was accordingly extended to many additional industries by the end of March,1957. – true
103. Besides authorised dealer, full-fledged money changers are also permitted to release exchange for business and private visits
104. Persons resident in india are permitted to maintain foreign currency accounts in India. under the following schemes

• EEFC Account
• RFC Account

105. A charge which is not registered is void against these persons

• Liquidators
• Creditors

106. A company has to execute this document if the period of debenture redemption exceeds 18 months. – Trust Deed
107. However , it is also possible for an FII to declare itself a 100% debt FII in which case it can make – its entire investment in debt instruments
108. Manager- Has the management of the whole or substantially the whole of the affairs of the company.

Managing Director-Is entrusted with substantial power of management which would not be otherwise be exercisable by him

Office-Included any director, manager or secretary

Board-Means the Board of Directors of the policy formulation committee

109. A person resident in India is not free to hold, own, transfer or invest in foreign currency ,foreign security or any immovable property situated outside India if such currency, security or property was acquired ,held or owned by such person when he was resident outside India or inherited from a person who was resident outside India –false
110. All pecuniary relationship or transactions of the non-executive directors vis-à-vis the company shall be – disclosed in the annual report
111. Allocable surplus means 60% of the avaible surplus in an accounting year.
112. A person resident in india , not being a company incorporated in india, may borrow in rupees on non-repatriation basis from a non- resident Indian or a person of Indian origin

• The amount of loan shall be received by way of inward remittance from outside india
• The period of loan shall not exceed three years
• The rate of interest on the loan shall not exceed two percentage points over the bank

113. No gratuity shall be liable to attachment in executing of any decree or order of any civil, revenue or criminal court
114. Salary and wages does not include dearness allowance – false
115. Words ‘Internation Global Continental being the first name-

Words ‘Internation Global Continental’ being used within the name with bracket-

Word ‘Hindustan, India, Bharat, being used within the name without brackets-

For use of word ‘Enterprise’ within the name

116. The Reserve Bank has made Foreign Exchange Management Regulation ,2000 which came into force – 1^st day of June 2000
117. FIIs are required to allocate their investment between equity and debt instrument in the ratio of 70:30:00
118. In relation of any other establishment which is not a factory , the term employer includes the person – who has the ultimate control over the affairs
119. Dependents include

• A widow
• A minor legitimate or adopted sin
• An unmarried daughter

120. Premature withdrawal of FCNR(B) deposits for the purpose of opening NRNR Rupee Deposit accounts with an authorised dealer other that the one with whom the account FCNR(B) is maintain, will attract penalty – true
121. The company articles require a person to hold the qualification shares before his appointment or to obtain them within shorter time – than two months
122. The main purpose of the payment of wages act 1936 is to ensure

• Regular and timely payment of wages to the employed person
• To prevent unauthorized deductions being made from wages P 2

123. The ESI act extends to the whole of India – True
124. All payment made under the foreign investment and technology transfer includes the levy of cess under the Research and Development cess act,1986 – true
125. Rate of interest applicable to these accounts shall be in accordance with the direction/instructions issued by – Reserve bank from time to time
126. In connection with private visit abroad , viz., for tourism , etc. Foreign exchange upto USD 10,000, in any one calendar year may be – obtained from an authorised dealer
127. The court has to record reasons in writing – for imposing lesser punishment
128. ‘Contribution’ means the sum of money payable to the Corporation by the principal employer.
129. Any person resident outside India may open NRO account .
130. Main types of shares – Equity shares, preference shares
131. A Liaison office can carry on only – liaison activity
132. Import Licenses are for the CIF value and cannot be utilized to the full amount to cover the FOB value of import. – True
133. Nothing in the bonus act shall apply to any other financial institution other than a banking company which the central government may specify having regard to

• Its capital structure
• Its objectives and the nature of its activities
• The nature and extent of financial assistance or any concession given to it by the government

134. Deduction may be on account of – the absence of employed person from the place where he is required to work

Such absence may be for whole or any part of the period during which –he is so required to work

An employed person shall be deemed to be absent if, he refuses to carry out his work- In pursuance of a stay or strike

The amount of such deductions must bear to his wages the same proportion as - his absence bears to the total wage period

135. Words and expression defined in the industrial disputes act shall have – the same meaning in the bonus act
136. Debenture – A secured Loan redeemable after a specified period

Preference share-Preference in dividend and redemption

Equity share- Residual shareholder

Commercial Paper- Negotiable instrument to raise short term finance

137. A person who ultimate controls is the employer
138. The situation that investors could invest in equities of overseas listed firms that hold at least 20% in a listed Indian firm which was made in terms of our A.P.(DIR series) Circualr No. 66 dated January 13,2003 continues as an additional facilit
139. The auditor’s report shall state

• Whether he has obtained all the information and explanations
• Whether in his opinion, proper books of account as required by law have been maintained

140. For the purpose of the section 9 of the Excise Act, a fact said to be proved only when

• Court believes it to exist

141. Every Inquiry by the Excise authority shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code.
142. Steps that might be Initiated by a debenture trustee

• Ensure that the assets of the Company are sufficient to discharge the principal amounts
• Ensuring that the terms of prospectus are not inconsistent with the terms of the debentures
• Call meetings of the debenture holders

143. Balance sheet or profit and loss account shall include any notes thereon or – in documents annexed thereto
144. Offences under section 9 of the Excise act shall be deemed to be – Non – Cognizable
145. GDR- global Depository Receipts are essentially those instrument , which possess a certain number of underlying- shares in the custody of depository bank
146. Form 8 & 13 – creation of charge, modification of charge
147. No amount of foreign exchange can be remitted outside India to become eligible or for earning point or credits for immigration. – True
148. Any nomination made by an employee in favour of a person who is not the member of his family, shall be void.- true
149. In respect of job works under notification No. 214/86, the Merchant Manufacturer is liable to pay the excise duty.