Tag: Corporate Communication

Different types of banks, such as commercial banks, cooperative banks, rural banks, and private sector banks exist in India. The Reserve Bank of India (RBI) is the governing body for regulating and supervising the banks. Banking Regulation Act, 1949 is an Act that provides a framework for regulating the banks of India. The Act came into force on 16th March 1949. This Act gives RBI the power to control the behaviour of banks. This Act was passed as Banking Companies Act, 1949. It did not apply to Jammu and Kashmir until 1956. This Act monitors the day-to-day operations of the bank. Under this Act, the RBI can licence banks, put ​​regulation over shareholding and voting rights of shareholders, look over the appointment of the boards and management, and lay down the instructions for audits. RBI also plays a role in mergers and liquidation.

Objectives of the Banking Regulation Act, 1949

• To meet the demand of the depositors and provide them security and guarantee.
• To provide provisions that can regulate the business of banking.
• To regulate the opening of branches and changing of locations of existing branches.
• To prescribe minimum requirements for the capital of banks.
• To balance the development of banking institutions.

Provisons

1. Prohibition of Trading (Sec. 8):

According to Sec. 8 of the Banking Regulation Act, a banking company cannot directly or indirectly deal in buying or selling or bartering of goods. But it may, however, buy, sell or barter the transactions relating to bills of exchange received for collection or negotiation.

2. Non-Banking Assets (Sec. 9):

According to Sec. 9 “A banking company cannot hold any immovable property, howsoever acquired, except for its own use, for any period exceeding seven years from the date of acquisition thereof. The company is permitted, within the period of seven years, to deal or trade in any such property for facilitating its disposal”. Of course, the Reserve Bank of India may, in the interest of depositors, extend the period of seven years by any period not exceeding five years.

3. Management (Sec. 10):

Sec. 10 (a) states that not less than 51% of the total number of members of the Board of Directors of a banking company shall consist of persons who have special knowledge or practical experience in one or more of the following fields:

(a) Accountancy;

(b) Agriculture and Rural Economy;

(c) Banking;

(d) Cooperative;

(e) Economics;

(f) Finance;

(g) Law;

(h) Small Scale Industry.

The Section also states that at least not less than two directors should have special knowledge or practical experience relating to agriculture and rural economy and cooperative. Sec. 10(b) (1) further states that every banking company shall have one of its directors as Chairman of its Board of Directors.

4. Minimum Capital and Reserves (Sec. 11):

Sec. 11 (2) of the Banking Regulation Act, 1949, provides that no banking company shall commence or carry on business in India, unless it has minimum paid-up capital and reserve of such aggregate value as is noted below:

(a) Foreign Banking Companies:

In case of banking company incorporated outside India, aggregate value of its paid-up capital and reserve shall not be less than Rs. 15 lakhs and, if it has a place of business in Mumbai or Kolkata or in both, Rs. 20 lakhs.

It must deposit and keep with the R.B.I, either in Cash or in unencumbered approved securities:

(i) The amount as required above, and

(ii) After the expiry of each calendar year, an amount equal to 20% of its profits for the year in respect of its Indian business.

(b) Indian Banking Companies:

In case of an Indian banking company, the sum of its paid-up capital and reserves shall not be less than the amount stated below:

(i) If it has places of business in more than one State, Rs. 5 lakhs, and if any such place of business is in Mumbai or Kolkata or in both, Rs. 10 lakhs.

(ii) If it has all its places of business in one State, none of which is in Mumbai or Kolkata, Rs. 1 lakh in respect of its principal place of business plus Rs. 10,000 in respect of each of its other places of business in the same district in which it has its principal place of business, plus Rs. 25,000 in respect of each place of business elsewhere in the State.

No such banking company shall be required to have paid-up capital and reserves exceeding Rs. 5 lakhs and no such banking company which has only one place of business shall be required to have paid- up capital and reserves exceeding Rs. 50,000.

In case of any such banking company which commences business for the first time after 16th September 1962, the amount of its paid-up capital shall not be less than Rs. 5 lakhs.

(iii) If it has all its places of business in one State, one or more of which are in Mumbai or Kolkata, Rs. 5 lakhs plus Rs. 25,000 in respect of each place of business outside Mumbai or Kolkata? No such banking company shall be required to have paid-up capital and reserve excluding Rs. 10 lakhs.

5. Capital Structure (Sec. 12):

According to Sec. 12, no banking company can carry on business in India, unless it satisfies the following conditions:

(a) Its subscribed capital is not less than half of its authorized capital, and its paid-up capital is not less than half of its subscribed capital.

(b) Its capital consists of ordinary shares only or ordinary or equity shares and such preference shares as may have been issued prior to 1st April 1944. This restriction does not apply to a banking company incorporated before 15th January 1937.

(c) The voting right of any shareholder shall not exceed 5% of the total voting right of all the shareholders of the company.

6. Payment of Commission, Brokerage etc. (Sec. 13):

According to Sec. 13, a banking company is not permitted to pay directly or indirectly by way of commission, brokerage, discount or remuneration on issues of its shares in excess of 2½% of the paid-up value of such shares.

7. Payment of Dividend (Sec. 15):

According to Sec. 15, no banking company shall pay any dividend on its shares until all its capital expenses (including preliminary expenses, organisation expenses, share selling commission, brokerage, amount of losses incurred and other items of expenditure not represented by tangible assets) have been completely written-off.

But Banking Company need not:

(a) Write-off depreciation in the value of its investments in approved securities in any case where such depreciation has not actually been capitalized or otherwise accounted for as a loss;

(b) Write-off depreciation in the value of its investments in shares, debentures or bonds (other than approved securities) in any case where adequate provision for such depreciation has been made to the satisfaction of the auditor;

(c) Write-off bad debts in any case where adequate provision for such debts has been made to the satisfaction of the auditors of the banking company.

Floating Charges:

A floating charge on the undertaking or any property of a banking company can be created only if RBI certifies in writing that it is not detrimental to the interest of depositors Sec. 14A. Similarly, any charge created by a banking company on unpaid capital is invalid Sec. 14.

8. Reserve Fund/Statutory Reserve (Sec. 17):

According to Sec. 17, every banking company incorporated in India shall, before declaring a dividend, transfer a sum equal to 20% of the net profits of each year (as disclosed by its Profit and Loss Account) to a Reserve Fund.

The Central Government may, however, on the recommendation of RBI, exempt it from this requirement for a specified period. The exemption is granted if its existing reserve fund together with Securities Premium Account is not less than its paid-up capital.

If it appropriates any sum from the reserve fund or the securities premium account, it shall, within 21 days from the date of such appropriation, report the fact to the Reserve Bank, explaining the circumstances relating to such appropriation. Moreover, banks are required to transfer 20% of the Net Profit to Statutory Reserve.

9. Cash Reserve (Sec. 18):

Under Sec. 18, every banking company (not being a Scheduled Bank) shall, if Indian, maintain in India, by way of a cash reserve in Cash, with itself or in current account with the Reserve Bank or the State Bank of India or any other bank notified by the Central Government in this behalf, a sum equal to at least 3% of its time and demand liabilities in India.

The Reserve Bank has the power to regulate the percentage also between 3% and 15% (in case of Scheduled Banks). Besides the above, they are to maintain a minimum of 25% of its total time and demand liabilities in cash, gold or unencumbered approved securities. But every banking company’s asset in India should not be less than 75% of its time and demand liabilities in India at the close of last Friday of every quarter.

10. Liquidity Norms or Statutory Liquidity Ratio (SLR) (Sec. 24):

According to Sec. 24 of the Act, in addition to maintaining CRR, banking companies must maintain sufficient liquid assets in the normal course of business. The section states that every banking company has to maintain in cash, gold or unencumbered approved securities, an amount not less than 25% of its demand and time liabilities in India.

This percentage may be changed by the RBI from time to time according to economic circumstances of the country. This is in addition to the average daily balance maintained by a bank.

Again, as per Sec. 24 of the Banking Regulation Act, 1949, every scheduled bank has to maintain 31.5% on domestic liabilities up to the level outstanding on 30.9.1994 and 25% on any increase in such liabilities over and above the said level as on the said date.

But w.e.f. 26.4.1997 fortnight the maintenance of SLR for inter-bank liabilities was exempted. It must be remembered that at the start of the preceding fortnights, SLR must be maintained for outstanding liabilities.

11. Restrictions on Loans and Advances (Sec. 20):

After the Amendment of the Act in 1968, a bank cannot:

(i) Grant loans or advances on the security of its own shares, and

(ii) Grant or agree to grant a loan or advance to or on behalf of:

(a) Any of its directors;

(b) Any firm in which any of its directors is interested as partner, manager or guarantor;

(c) Any company of which any of its directors is a director, manager, employee or guarantor, or in which he holds substantial interest; or

(d) Any individual in respect of whom any of its directors is a partner or guarantor.

Note:

(ii) (c) Does not apply to subsidiaries of the banking company, registered under Sec. 25 of the Companies Act or a Government Company.

12. Accounts and Audit (Sees. 29 to 34A):

The above Sections of the Banking Regulation Act deal with the accounts and audit. Every banking company, incorporated in India, at the end of a financial year expiring after a period of 12 months as the Central Government may by notification in the Official Gazette specify, must prepare a Balance Sheet and a Profit and Loss Account as on the last working day of that year, or, according to the Third Schedule, or, as circumstances permit.

At the same time, every banking company, which is incorporated outside India, is required to prepare a Balance Sheet and also a Profit and Loss Account relating to its branch in India also. We know that Form A of the Third Schedule deals with form of Balance Sheet and Form B of the Third Schedule deals with form of Profit and Loss Account.

It is interesting to note that a revised set of forms have been prescribed for Balance Sheet and Profit and Loss Account of the banking company and RBI has also issued guidelines to follow the revised forms with effect from 31st March 1992.

According to Sec. 30 of the Banking Regulation Act, the Balance Sheet and Profit and Loss Account should be prepared according to Sec. 29, and the same must be audited by a qualified person known as auditor. Every banking company must take previous permission from RBI before appointing, re­appointing or removing any auditor. RBI can also order special audit for public interest of depositors.

Moreover, every banking company must furnish their copies of accounts and Balance Sheet prepared according to Sec. 29 along with the auditor’s report to the RBI and also the Registers of companies within three months from the end of the accounting period.

Tax Law

In terms of business law, taxation refers to taxes charged upon companies in the commercial sector. It is the obligation of all companies (except a few tax-exempted small-time companies) to pay their taxes on time, failure to follow through which will be a violation of corporate tax laws.

Securities Law

Securities refer to assets like shares in the stock market and other sources of capital growth and accumulation. Securities law prohibits businesspersons from conducting fraudulent activities from taking place in the securities market. This is the business law section which penalises securities fraud, such as insider trading. It is, thus, also called Capital Markets Law.

Intellectual property Tax

Intellectual property refers to the intangible products of the working of the human mind or intellect, which are under the sole ownership of a single entity, such as an individual or company. The validation of this ownership is provided by intellectual property law, which incorporates trademarks, patents, trade secrets and copyrights.

Contract Law

A contract is any document which creates a sort of legal obligation between the parties that sign it. Contracts refer to those employee contracts, sale of goods contracts, lease contracts, etc.

Companies Act,2013

With an unprecedented change in the domestic and international economic landscape, India’s Government decided to replace the Companies Act, 1956, with the new legislation. The Companies Act, 2013, endeavors to make the corporate regulations in India more contemporary. In this article, we will focus on the meaning and features of a Company.

The Companies Act, 2013, completely revolutionized India’s corporate laws by introducing several new concepts that did not exist previously. One such game-changer was the introduction of the One Person Company concept. This led to the recognition of an entirely new way of starting businesses that accorded flexibility which a company form of entity can offer, while also providing the protection of limited liability that sole proprietorship or partnerships lacked.

Thus, as we can see, commercial contracts are a very essential part of the business world. Any business during its operation needs to follow all these laws, whether willfully or not. Thus, a person with any venture needs very substantial legal assistance so that any clash in legal matters won’t harm your endeavors.

The Limited Liability Partnership Act, 2008

LLP stands for a Limited Liability Partnership. Limited liability partnership definition is an alternative corporate business form that offers the benefits of limited liability to the partners at low compliance costs. It also allows the partners to organize their internal structure like a traditional partnership. A limited liability partnership is a legal body liable for the full extent of its assets. The liability of the partners, however, is limited. Hence, LLP is a hybrid between a company and a partnership. It is not the same as a limited liability company LLC.

The Indian Partnership Act,1932

The Indian Partnership Act 1932 defines a partnership as a relation between two or more parties to agree to share a business’s profits, either all or only one or more persons acting for them all. A partnership is contractual in nature. As the definition states, a partnership is an association of two or more persons. So a partnership results from a contract or an agreement between two or more persons. A partnership does not arise from the operation of law. Neither can it be inherited. It has to be a voluntary agreement between partners. A partnership agreement can be written or oral. Sometimes such an arrangement is even implied by the continued actions and mutual understanding of the partners.

The Sale of Goods Act,1930

Contracts and agreements regarding the sale of goods and services are governed under the Sale of Goods ACT, 1930. The sale of commodities constitutes one of the essential types of contracts under the law in India. India is one of the largest economies and a great country where and thus has adequate checks and measures to ensure its business and commerce community’s safety and prosperity. Here we shall explain The Sale of Goods Act, 1930, which defines and states terms related to the sale of goods and exchange of commodities.

The Indian Contract Act, 1872

It is the most prominent business law to exist in our country. It came into effect on 1st September 1872 and applied to the whole of India, with the exception of Jammu and Kashmir. It constitutes 266 sections. The Indian Contracts Act,1872 defines the essentials through various judgments in the Indian judiciary. Specific points for valid contracts are Free consent, consideration, competency, eligibility, etc. A valid contract must include at least two parties, or it will be deemed as null and void.

Resolutions in corporate meetings are formal decisions passed by a company’s board of directors or shareholders. They are legally binding and serve as documented evidence of the company’s decisions regarding its governance, operations, or strategic plans. Resolutions are integral to corporate decision-making and are required for actions that need the approval of shareholders, directors, or other stakeholders. These resolutions ensure compliance with laws, transparency, and accountability.

Types of Corporate Resolutions:

1. Ordinary Resolution

A resolution that is passed by a simple majority (more than 50%) of the votes cast by shareholders or members present at a meeting.

1. • Purpose: Used for routine decisions such as the appointment of directors, approval of financial statements, and declaration of dividends.
   • Example: Approving the annual accounts of the company.

2. Special Resolution

A resolution that requires at least 75% of the votes cast by members to be in favor.

1. • Purpose: Reserved for significant decisions like altering the articles of association, issuing new shares, or approving a merger.
   • Example: Amending the company’s constitution.

2. Board Resolution

A resolution passed by the board of directors during a board meeting.

1. • Purpose: Addresses operational and managerial decisions, such as approving budgets, appointing officers, or entering into contracts.
   • Example: Approval of a major investment.

2. Unanimous Resolution

   Resolution that requires all members or directors to vote in favor.

   • Purpose: Used for decisions where complete agreement is necessary.
   • Example: Appointment of an independent auditor in special circumstances.

Drafting and Passing Resolutions

Corporate resolutions must be clearly worded and include:

• The title indicating the type of resolution.
• A statement of purpose or intent.
• The details of the decision being approved.
• The names of members/directors involved in the voting process.

Resolutions are passed through voting mechanisms, such as:

1. Show of Hands: Common for ordinary resolutions.
2. Poll: Ensures weighted voting based on shareholding.
3. Postal Ballot/Electronic Voting: Used for decisions requiring broader shareholder involvement.

Importance of Corporate Resolutions

1. Legal Compliance: Ensures adherence to corporate laws and regulatory requirements.
2. Transparency: Promotes clear decision-making processes.
3. Record Keeping: Provides documented evidence of decisions for future reference.
4. Stakeholder Confidence: Demonstrates accountability to shareholders and stakeholders.

The winding up of a company is a formal legal process that involves the liquidation of its assets, settlement of its debts, and the distribution of remaining assets among shareholders.

• Dissolution of the Company:

The most significant consequence of winding up is the dissolution of the company. Once the company has completed the liquidation process and all legal requirements are met, it ceases to exist as a legal entity. The company’s name is struck off the register of companies by the Registrar of Companies (RoC), and it no longer holds any legal rights or obligations.

• Termination of Business Operations:

Winding up means the termination of the company’s business activities. It can no longer carry on any of the operations it previously undertook. The focus shifts from day-to-day business to liquidating assets and resolving outstanding liabilities. All contracts and dealings are brought to an end, although some may continue temporarily for the purpose of liquidation.

• Liquidation of Assets:

During winding up, the company’s assets are sold off, and the proceeds are used to settle its debts. The liquidator is responsible for identifying and valuing the company’s assets, including property, inventory, and receivables. The funds are then distributed to creditors, and any remaining surplus is given to shareholders.

• Settlement of Liabilities:

One of the primary objectives of the winding-up process is to settle the company’s debts. The company must fulfill its obligations to creditors, which may include banks, suppliers, employees, and other stakeholders. If the company’s assets are insufficient to cover its debts, creditors may only receive a partial payment.

• Impact on Shareholders:

Once the liabilities are settled, the remaining funds (if any) are distributed among the shareholders. However, in the case of insolvency, shareholders often do not receive anything. Shareholders risk losing their investments, especially when the company’s liabilities exceed its assets.

• Disqualification of Directors:

The directors of the company may face disqualification from holding future directorships in other companies, particularly if the winding up is due to misconduct, fraud, or negligence. They may also be held personally liable if it is found that they acted improperly during the company’s operations.

• Termination of Employee Contracts:

The winding-up process leads to the termination of employee contracts, unless otherwise determined by the liquidator. Employees may receive severance pay or unpaid wages as part of the liquidation process, but their claims rank lower than those of secured creditors. In some cases, employees may not receive the full amount owed to them if the company lacks sufficient assets.

• Legal Proceedings Cease:

Once winding up begins, legal proceedings against the company are generally halted, except in cases of fraud or other exceptional circumstances. The liquidator takes over the role of defending the company in ongoing legal matters, and any legal actions for debt recovery are channeled through the liquidation process.

The minutes of a meeting are the official written record of the discussions, decisions, and actions taken during a formal meeting. They provide a comprehensive account of the key points deliberated and serve as a reference for participants and stakeholders. Properly documented minutes are vital for legal compliance, organizational transparency, and tracking progress.

Purpose of Minutes of Meeting:

1. Documentation: Minutes capture the essence of the meeting, including the agenda, discussions, and resolutions.
2. Accountability: They ensure that responsibilities assigned during the meeting are tracked and executed.
3. Reference: They act as an official record for reviewing past decisions and actions.
4. Legal Compliance: For corporate meetings, such as board or shareholder meetings, minutes are a legal requirement under company law.

Structure of Minutes

1. Header: Includes the meeting title, date, time, venue, and type (e.g., board meeting, annual general meeting).
2. Attendance: Lists the names of participants, including those present, absent, or excused.
3. Agenda Items: Summarizes the topics discussed during the meeting.
4. Discussion Points: Provides a brief overview of key points raised by participants.
5. Decisions Made: Records resolutions, approvals, or actions agreed upon.
6. Action Items: Details the tasks assigned, responsible persons, and deadlines.
7. Conclusion: Notes the meeting’s end time and the date of the next meeting, if applicable.

Steps to Write Effective Minutes:

1. Prepare Before the Meeting: Familiarize yourself with the agenda and distribute it to attendees in advance.
2. Record Key Points: Focus on capturing essential details like decisions, action points, and deadlines. Avoid unnecessary commentary.
3. Use Clear Language: Write in a concise, formal, and neutral tone to ensure clarity.
4. Organize Chronologically: Follow the sequence of the agenda items discussed.
5. Review for Accuracy: Cross-check with meeting participants or the chairperson to confirm the accuracy of the notes.

Benefits of Maintaining Minutes:

1. Transparency: Minutes foster an environment of openness and accountability in decision-making.
2. Continuity: They provide continuity for participants who may not have attended the meeting, keeping them informed.
3. Dispute Resolution: Official records can clarify misunderstandings or resolve disputes.
4. Audit Trail: They serve as evidence for audits, legal matters, or regulatory inspections.

Best Practices

1. Use Templates: Employ a consistent format or template for uniformity.
2. Timely Circulation: Share minutes promptly to ensure tasks are started on time.
3. Digital Archiving: Store minutes electronically for easy retrieval and backup.

1. The exchange of goods and services are known as …………………………

• Domestic Trade
• International Trade
• Trade
• None of these.

 

2. Which of the following is not considered as factors of production?

• Land
• Labour
• Money
• Capital

 

3. Trade between two countries is known as ………….

• External
• Internal
• Inter-regional
• None of Above

 

4. International Trade is most likely to generate short-term unemployment in:

• Industries in which there are neither imports nor exports
• Import-competing industries
• Industries that sell to domestic and foreign buyers.
• Industries that sell to only foreign buyers

 

5. Free traders maintain that an open economy is advantageous in that it provides all the following except:

• Increased competition for world producers
• A wider selection of products for consumers
• Relatively high wage levels for all domestic workers
• The utilization of the most efficient production methods

 

6. Which of the following is not a benefit of international trade?

• Lower domestic prices
• Development of more efficient methods and new products
• A greater range of consumption choices
• High wage levels for all domestic workers

 

7. Which is not an advantage of international trade:

• Export of surplus production
• Import of defence material
• Dependence on foreign countries
• Availability of cheap raw material

 

8. Trade between two countries can be useful if cost ratios of goods are …………..

• Equal
• Different
• Undetermined
• Decreasing

 

9. Foreign trade creates among countries ………………

• Conflicts
• Cooperation
• Hatred
• Both a. and b.

 

10. All are advantages of foreign trade except ………….

• People get foreign exchange
• Cheaper goods
• Nations compete
• Optimum utilization of countries’ resources

 

Q.2. Fill in the blanks.

1. International Trade means trade between …………………. (Provinces/ Countries/ Regions)
2. Two countries can give from foreign trade if ………… are different. (Effect/ Tariff/ Cost)
3. ………….. encourages trade between two countries. (Different tax system/Reduced tariffs/ National currencies)
4. Drawback of protection system is ……… (Consumers have to pay higher prices/ Producers get higher profits/ Quality of goods may be affected/ All above)
5. ………….. is a drawback of free trade. (Prices of local goods rise/ Govt. looses incomes from custom duties/National resources are underutilized)
6. International trade is possible primarily through specialization in production of …… goods. (All/ One/ Few)
7. A country that does not trade with other countries is called …… country. (Developed/ Closed/ Independent)
8. Policy of Protection in trade ……… (Facilitates trade/ Protects foreign producers/ Protects local producers/ Protects exporters)
9. The largest item of Indian import list is ……….. (Consumer goods/ Machinery/ Petroleum/ Computers)
10. Trade between two states in an economy is known as …… (External/ Internal/None)

 

SET 2

Q.1. Multiple Choice Questions.

1. Who among the following enunciated the concept of single factoral terms of trade?

• Jacob Viner
• G.S.Donens
• Taussig
• J.S.Mill

 

2. ‘Infant industry argument’ in international trade is given in support of:

• Granting Protection
• Free trade
• Encouragement to export oriented small and tiny industries
• None of the above

 

3. Terms of trade that relate to the Real Ratio of international exchange between commodities is called:

• Real cost terms of trade
• Commodity terms of trade
• Income terms of trade
• Utility terms of trade

 

4. The main advantage in specialization results from:

• Economies of large-scale production
• The specializing country behaving as monopoly.
• Smaller Production runs resulting in lower unit costs.
• High wages paid to foreign workers.

 

5. Net export equals ……

• Export * Import
• Export + Import
• Export – Import
• Exports of service only

 

6. A tariff ………………….

• Increase the volume of trade
• Reduces the volume of trade
• Has no effect on volume of trade
• Both a. and c.

 

7. Terms of Trade of developing countries are generally unfavourable because …….

• They export primary goods
• They import value added goods
• They export few goods
• Both a. and b.

 

8. Terms of Trade a country show ……………

• Ratio of goods exported and imported
• Ratio of import duties
• Ratio of prices of exports and imports
• Both a. and c.

 

9. Terms of trade between two countries refer to a ratio of …..

• Export prices to import prices
• Currency values
• Export to import
• Balance of trade to Balance of payments

 

10. Rich countries have deficit in their balance of payments ……..

• Sometimes
• Never
• Alternate years
• Always

 

Q.2. Fill in the blanks.

1. BOP means balance of Receipts and payments of …… (all banks/ State bank/ Foreign exchange by a country/ Government)
2. Favourable trade means exports are ……. than imports. (More/ Less/ Neutral)
3. Net barter terms of trade is also known as …. Terms of trade.(Commodity/ Income/Utility)
4. ….. is not a factor affecting TOT. (Reciprocal demand/ Size of demand/ Price of demand)
5. If tariff is higher, then the imports will …… (Increase/ Decrease/ Same as before)
6. ……. has given the concept of reciprocal demand. (Mills/ Adam/ Ricardo)
7. ……… is the curve, which expresses the total demand for one good (imports) in terms of the total supply of another good (exports). (Offer/ Official / Corporate)
8. Balance of payment is prepared by an economy ……. (Yearly/ Monthly/ Weekly)
9. …….. kinds of accounts are included in BOP. (2/ 3/4)
10. …….is not a type of disequilibrium in BOP. (Cyclical/ Seasonal/ Frictional/ Disguised)

 

SET 3

Q.1. Multiple Choice Questions.

1. The first classical theory of International Trade is given by …………………..

• Keynes
• Adam Smith
• Friedman
• Heckscher-Ohlin

 

2. In classical theory of International Trade, the exchange of goods and services takes on the basis of ………….. system?

• Barter
• Money
• Labour
• capital

 

3. If capital is available in large proportion and labour is less, then that economy is known as ……………..

• Capital Intensive
• Labour Intensive
• Both a. and b
• None of above

 

4. In Heckscher Ohlin theory, what is assumed to be same across the countries?

• Transportation cost
• Technology
• Labour
• capital

 

5. Opportunity cost is also known as ……………………

• Next Best alternative
• Transformation cost
• Both a. and b
• None of above.

 

6. Factor proportions theory is also known as the

• comparative advantage theory
• laissez faire theorem.
• HeckscherOhlin theorem
• product cycle model.

 

7. Trade between two countries can be useful if cost ratios of goods are:

• Equal
• Different
• Undetermined
• Decreasing

 

8. According to Hecksher and Ohlin basic cause of international trade is:

• Difference in factor endowments
• Difference in markets
• Difference in political systems
• Difference in ideology

 

9. The theory explaining trade between two countries is called:

• Comparative disadvantage theory
• Comparative cost theory
• Comparative trade theory
• None of the above

 

10. David Ricardo presented the theory of international trade called:

• Theory of absolute advantage
• Theory of comparative advantage
• Theory of equal advantage.
• Theory of total advantage

 

Q.2. True or False.

1. Absolute advantage theory is given by Adam Smith.

True

2. Ricardo has supplemented Absolute advantage theory.

 True

3. Heckscher and Ohlin have given comparative cost advantage theory of International Trade.

False

4. Multilateral trade means one country comes into trade with more than one country.

True

5. Opportunity cost means unforgiving cost.

False

6. Modern theory of International Trade is given by Ricardo.

False

7. 2×2×2 model of International Trade is known by Heckscher Ohlin model.

True

8. Transformation cost is also known as opportunity cost.

True

9. Gravity model of trade was first used by Jan Tinbergen.

True

10. Adam Smith advocated free trade and specialized.

True

 

Set 4

Multiple Choice Questions.

1. GATT was made in the year ………………..

• 1945
• 1947
• 1950
• 1951

 

2. The new world Trade organization WTO., which replaced the GATT came into effect from____

• 1ST January 1991
• 1st January 1995
• 1st April 1994
• 1st May 1995

 

2. 5 banks of BRICS nations have agreed to establish credit lines in ….. currencies.

• Legal
• Plastic
• Crypto currency
• National

 

3. Where was the 11th meeting of BRICS Trade Ministers held from 13 Nov 2019 – 14 Nov 2019?

• Shanghai
• Beijing
• Tokyo
• Brasilia

 

4. What is the name of the SAARC satellite to be launched on May 5, 2017?

• South Asia Satellite
• South Asian Association Satellite
• South East Asia satellite
• SAARC satellite

 

5. Full form of SAFTA is ……………………..

• South Asia Free Trade Agreement
• South Asia Foreign Trade Agreement
• South Asia Framework Trade Agreement
• Both a and b

6. Which of the following commitments has not been made by India to WTO?

• Reduction in tariffs
• Increase in quantitative restrictions
• Increase in qualitative restrictions
• Trade related Intellectual Property Rights

 

7. The European Union was formally established on …..

• November, 1993
• April, 1995
• January, 1997
• May, 1996

 

8. SAARC was established in …..

• 1980
• 1985
• 1990
• 1995

 

9. NAFTA came into effect in …..

• 1990
• 1994
• 1998
• 2004

10. The dominant member state of OPEC is ……………..

• Iran
• Iraq
• Kuwait
• Saudi Arabia

 

Q.2. Fill in the blanks.

1. Headquarter of WTO is in ………….. Geneva/USA/Germany.
2. Before WTO, ……………… was working instead of that. GATY/ GATR/ GATT.
3. …………….. round negotiations initiated the establishment of WTO. Uruguay/ Urdun/ Urbuny .
4. India had joined WTO in the year …………. (1995/ 1996/ 1997)
5. In …………….. , SAARC was established. (1985/ 1986/ 1987)
6. The first SAARC summit was organized at …….. (Dhaka/ Kathmandu/ Nepal)
7. ……..is not a country in SAFTA. (India/ Nepal/ Pakistan/ USA)
8. ……… countries are member of OECD. (34/ 35/ 36)
9. ………… is not a country under OECD. (Norway/ Canada/ China)
10. ………….. are the member states of European Union. (28/ 29/30)

Audit Committee is typically composed of independent non-executive directors, with at least one member having expertise in finance, accounting, or auditing. Its main purpose is to assist the board of directors in fulfilling its oversight responsibilities, particularly related to financial reporting, internal control, and compliance with laws and regulations. The committee works closely with both external and internal auditors to monitor the effectiveness of the audit process and ensure that financial statements provide a true and fair view of the company’s financial performance and position.

Composition of the Audit Committee:

• Independent Directors:

The audit committee must include a majority of independent non-executive directors to ensure impartiality and prevent conflicts of interest. The inclusion of independent directors ensures objectivity in overseeing the audit process.

• Financial Expert:

At least one member of the audit committee must have financial expertise to understand complex accounting principles, financial statements, and audit processes.

• Chairperson:

The chairperson of the audit committee is typically an independent director. This role is crucial in ensuring the proper functioning of the committee and its collaboration with auditors and the board.

Role and Responsibilities of the Audit Committee:

• Overseeing Financial Reporting:

The committee ensures that the company’s financial statements are prepared in accordance with applicable accounting standards and regulatory requirements. It reviews the annual financial reports before submission to the board and shareholders.

• Monitoring Internal Control Systems:

The audit committee evaluates the effectiveness of the company’s internal control systems, ensuring that policies and procedures are in place to mitigate risks, prevent fraud, and ensure the accuracy of financial records.

• Reviewing the External Audit Process:

The committee selects and appoints external auditors and ensures their independence. It meets regularly with auditors to discuss their audit findings, key concerns, and any issues that may affect the company’s financial reporting.

• Risk Management Oversight:

The audit committee is involved in reviewing the company’s risk management framework and processes. It assesses potential risks (financial, operational, or compliance-related) and evaluates how they are being managed or mitigated.

• Compliance with Laws and Regulations:

The committee ensures that the company complies with legal and regulatory requirements, such as tax laws, securities regulations, and corporate governance standards. It plays a key role in overseeing compliance with laws that affect financial reporting.

• Internal Audit Function:

The audit committee is responsible for overseeing the internal audit function, which evaluates the company’s internal controls and operational effectiveness. The committee works with internal auditors to identify areas for improvement and ensures timely action is taken.

Importance of the Audit Committee

• Enhancing Transparency:

By ensuring proper oversight of the financial reporting process and the internal and external audits, the audit committee enhances transparency and accountability in the company’s financial disclosures. This boosts the confidence of shareholders, investors, and other stakeholders in the financial health of the company.

• Strengthening Corporate Governance:

The audit committee is a cornerstone of good corporate governance. It promotes transparency, ethical conduct, and sound financial practices, helping the company to operate in a manner that is aligned with the best interests of its shareholders.

• Improving Internal Controls and Risk Management:

The audit committee helps identify weaknesses in internal controls and ensures corrective actions are implemented. This strengthens the company’s ability to manage risks effectively and ensures that operations are running efficiently and securely.

• Facilitating Effective Auditing:

The audit committee ensures that auditors have the resources, access, and independence they need to perform their duties. It facilitates the smooth functioning of the auditing process by acting as a bridge between the auditors and the company’s management.

• Protecting Stakeholder Interests:

By ensuring proper financial reporting and compliance, the audit committee helps protect the interests of stakeholders, including shareholders, employees, regulators, and creditors.

Regulatory Framework Governing Audit Committees

In many countries, including India, the establishment of an audit committee is mandated by law for listed companies and certain public interest entities. In India, the Companies Act, 2013 and SEBI (Securities and Exchange Board of India) regulations require that listed companies form an audit committee. Some key requirements under Indian law include:

• The committee must consist of at least three directors, with a majority of independent directors.
• The committee must meet at least four times a year, with a quorum of two members present for meetings.
• The audit committee must review and discuss financial statements, the internal audit process, the external audit’s scope, and the company’s risk management strategy.

Corporate Social Responsibility (CSR) Committee is a specialized committee formed within a company’s board of directors to oversee and implement its CSR activities. The committee ensures that the company fulfills its social, environmental, and ethical obligations in accordance with the law and promotes sustainable development. It plays a vital role in strategizing, monitoring, and evaluating CSR initiatives to align them with the organization’s vision and regulatory requirements.

Meaning and Legal Mandate

CSR Committee is mandated under Section 135 of the Companies Act, 2013 in India for companies that meet specific criteria related to net worth, turnover, or net profit. It is responsible for formulating and monitoring CSR policies and ensuring compliance with statutory obligations. The formation of a CSR Committee underscores the growing importance of corporate accountability towards societal and environmental welfare.

Composition of CSR Committee

• Members:

CSR Committee should consist of at least three directors, with at least one being an independent director. For private companies, the committee may include only two directors, and for unlisted public companies without independent directors, it is not mandatory to have an independent director on the committee.

• Chairperson:

The committee often elects a chairperson from among its members to lead its activities.

The composition ensures diversity in perspectives and expertise, enabling the committee to design and execute effective CSR strategies.

Role and Responsibilities of CSR Committee

The CSR Committee is tasked with several critical responsibilities, including:

a. Formulating CSR Policy

• Developing a detailed CSR policy that outlines the company’s CSR vision, objectives, and areas of focus, such as education, healthcare, environmental sustainability, and community welfare.
• Aligning the policy with the company’s long-term goals and the provisions of Schedule VII of the Companies Act, 2013.

b. Recommending CSR Activities

• Identifying specific CSR projects or programs to be undertaken.
• Ensuring that these activities align with the objectives mentioned in the CSR policy.

c. Budget Allocation

• Recommending the amount of expenditure to be incurred on CSR activities.
• Ensuring that the prescribed percentage of profits (2% of the average net profit of the preceding three years) is allocated for CSR activities.

d. Monitoring and Implementation

• Monitoring the implementation of CSR projects to ensure compliance with the CSR policy and timelines.
• Evaluating the impact of CSR initiatives and ensuring that they contribute positively to the targeted beneficiaries.

e. Reporting

• Preparing an annual report on CSR activities, including details of projects undertaken, expenditure incurred, and outcomes achieved.
• Ensuring that the report is included in the company’s board report and submitted to regulatory authorities.

Importance of CSR Committee

CSR Committee plays a pivotal role in bridging the gap between corporate objectives and societal needs. Its importance can be summarized as follows:

• Strategic Oversight: Provides a structured approach to CSR by integrating it into the company’s strategic framework.
• Compliance: Ensures adherence to legal mandates and regulatory requirements related to CSR.
• Sustainability: Promotes sustainable development through impactful initiatives addressing social and environmental concerns.
• Accountability: Enhances transparency and accountability by monitoring and reporting CSR activities.
• Corporate Reputation: Strengthens the company’s image as a socially responsible organization, fostering goodwill among stakeholders.

Key Activities of the CSR Committee

Some of the typical activities undertaken by the CSR Committee:

• Identifying key areas of intervention such as education, healthcare, sanitation, rural development, and environmental sustainability.
• Partnering with non-governmental organizations (NGOs), government bodies, or other organizations for effective project implementation.
• Reviewing and approving CSR proposals and budgets.
• Assessing the long-term impact of CSR projects and making necessary adjustments to the CSR policy or projects as needed.

Challenges Faced by CSR Committees

• Limited Resources: Balancing financial constraints with the need for impactful CSR initiatives.
• Measuring Impact: Accurately assessing the outcomes of CSR projects can be challenging.
• Stakeholder Engagement: Ensuring alignment with the expectations of all stakeholders, including communities, employees, and shareholders.
• Regulatory Compliance: Keeping up with changes in CSR regulations and ensuring adherence.

CSR Committee in India

In India, the Companies Act, 2013 makes CSR mandatory for companies meeting certain financial thresholds:

• Net worth: ₹500 crore or more.
• Turnover: ₹1,000 crore or more.
• Net profit: ₹5 crore or more.

Such companies must spend at least 2% of their average net profit from the preceding three financial years on CSR activities. The CSR Committee ensures that these requirements are met effectively.