CORP · S01Introduction of the SubjectAsked in 3 of 7 papers (Dec ’23, Jun ’24, Jan ’25)
Under the Companies Act, 2013: An education company licensed under section 8 earns a surplus from tuition. Its board proposes distributing half of that surplus to members as a dividend and using the balance for classrooms. Which proposal is incompatible with the licensed form?
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AUsing the whole surplus for classrooms is prohibited because a section 8 company may not own assets.
BEarning any surplus automatically cancels the licence, even if all of it supports education.
CThe proposed dividend to members is incompatible with the section 8 conditions.
DRetaining the whole surplus for future educational facilities is necessarily prohibited.
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