KSLU Solved Question Papers
Company Law
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 6
2023 Mar Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 6 Company Law 2023 Mar Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Model answers written and edited by the munotes.in editorial desk.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2023 Mar examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2023 Mar examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2023 Mar examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all five Units. (2) One essay type question and short note/problem is compulsory from each Unit. (3) Figures to the right indicate marks. (4) Answer should be written either in English or Kannada completely.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Unit I
(a)What are the disadvantages of an incorporated company ?[10]
Answer
For full marks, cover: incorporation and its benefits in one line; the disadvantages, each explained: formality and cost, continuing compliance, loss of privacy, separation of ownership and control, limits on powers (objects clause), lifting of the veil and personal liability, no fundamental rights as a citizen, a member's lack of interest in the property, difficulty in winding up, risk to the minority; Macaura, Tata Engineering (TELCO), Lakshmanaswami Mudaliar and Skipper Construction explained; a balance.
Incorporation in brief
On registration under the Companies Act 2013, a company becomes a body corporate distinct from its members, with perpetual succession and limited liability (section 9). These are real advantages. But incorporation also has a price, and the law imposes it deliberately, because limited liability shifts risk to creditors and the public.
The disadvantages
1. Formality and cost of formation. A company can be formed only by filing the memorandum, articles, declarations and particulars of directors and subscribers under section 7. Fees and stamp duty must be paid, and professionals engaged. A partnership, by contrast, can be formed by simple agreement.
2. Continuing compliance. A company must keep statutory registers and books of account, have its accounts audited, and hold Board meetings and annual general meetings. It must also file financial statements and annual returns with the Registrar every year. Directors and officers are liable to penalties for default. Persistent default in filing for five years is itself a ground for winding up (section 271(d)).
3. Loss of privacy. The memorandum, articles, financial statements and annual return are public documents open to inspection (section 399). Competitors and the public can learn much about the business.
4. Separation of ownership and control. The members own the company, but the Board manages it (section 179). Directors may misuse their position. That is why the Act imposes duties (section 166) and remedies against oppression and mismanagement (sections 241 to 246).
5. Limits on powers. A company can act only within its objects. In A. Lakshmanaswami Mudaliar v. Life Insurance Corporation of India, AIR 1963 SC 1185, the shareholders of an insurance company sanctioned a donation of Rs 2 lakh to a trust for insurance education. The Supreme Court held it ultra vires the memorandum, and the directors had to restore the money. A sole trader faces no such limit.
6. The veil may be lifted. Limited liability is not absolute. The courts and the Act disregard the company where it is used for fraud. In Delhi Development Authority v. Skipper Construction Company (P) Ltd., (1996) 4 SCC 622, the company sold the same commercial space to several buyers and defied court orders. The Supreme Court disregarded the corporate form and reached the controlling family and their assets. Sections 3A, 7(7) and 339 also impose personal liability.
7. No fundamental rights as a citizen. A company is a person but not a citizen. In Tata Engineering and Locomotive Co. Ltd. v. State of Bihar, AIR 1965 SC 40, companies and some shareholders filed writ petitions under Article 19 against sales-tax demands. The Supreme Court held them incompetent. A company is not a citizen, and the veil would not be lifted to borrow its shareholders' citizenship.
8. A member has no interest in the property. In Macaura v. Northern Assurance Co. Ltd., [1925] AC 619, Macaura held all the shares of a timber company and insured the timber in his own name. When it was destroyed by fire, the House of Lords held that he had no insurable interest. The timber belonged to the company. Separate personality can thus work against the very person who controls the company.
9. Difficulty in winding up. A company cannot simply be closed by its owners. It must be wound up under the Act or the Insolvency and Bankruptcy Code, through a liquidator and an order of dissolution.
10. Risk to the minority. Decisions are taken by majority. A minority shareholder may be outvoted on matters of internal management, and must prove oppression to get relief.
A balance
These disadvantages are the price of limited liability and separate personality. The formalities and disclosure protect creditors and investors, who can no longer look to the members personally. For a large or growing business, the advantages usually outweigh the costs. For a small business with few owners, the burden of compliance may make a partnership or a limited liability partnership more suitable.
Conclusion. Incorporation brings formality and cost, continuing compliance and loss of privacy. It separates ownership from control, confines the company to its objects (Lakshmanaswami Mudaliar) and exposes controllers to the lifting of the veil (Skipper Construction). A company cannot claim a citizen's fundamental rights (TELCO), and its members have no interest in its property (Macaura). These are the price the law exacts for the privilege of limited liability.
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