Question

A company can accept calls in advance, if authorized by

• A. Shareholders
• B. Articles of Association
• C. Board of Directors
• D. Memorandum of Association

Answer 1

The Correct Option is B

In accountancy and corporate law, a company's ability to accept calls in advance is governed by specific rules and regulations outlined in key documents. The document that facilitates this authority is the Articles of Association. Here's why: 

• Articles of Association: This document plays a crucial role in defining the management's powers within a company. It specifies how calls in advance can be accepted and authorized, outlining procedures and conditions under which these calls can be made by the company.
• Shareholders: These are owners of the company but cannot directly authorize calls in advance unless such power is explicitly provided in the Articles of Association.
• Board of Directors: While they manage the company’s day-to-day operations, their actions need to align with the Articles of Association and cannot unilaterally decide on accepting calls in advance if not supported by the Articles.
• Memorandum of Association: This document primarily defines the company's scope and objectives but does not typically address operational issues like calls in advance.

Therefore, the correct authority for accepting calls in advance is stipulated within the Articles of Association.

Answer 2

Under the Companies Act, a company may accept calls in advance (i.e., request shareholders to pay for shares before the call is made) under specific conditions.

The company can only do so if it is explicitly authorised by the Articles of Association of the company. The Articles of Association act as the rules or the internal regulations of the company, and they dictate whether the company can accept calls in advance from shareholders.

Let’s examine each option:

(1) Shareholders:
Although shareholders might approve certain actions, the authority to accept calls in advance does not rest solely with the shareholders. It requires a provision in the company’s Articles of Association.

(2) Board of Directors:
The Board of Directors cannot independently accept calls in advance unless the Articles of Association provide specific authority for the same. Without a clear provision in the Articles, the board cannot take such action.

(3) Articles of Association:
This is the correct answer. The Articles of Association is the key document that governs the internal workings of the company. It can explicitly allow the company to accept calls in advance. The provision must be included in the Articles to make it legally valid.

(4) Memorandum of Association:
The Memorandum of Association defines the scope of a company’s operations and its objectives. It does not typically deal with internal management or procedures like the acceptance of calls in advance. Hence, the Memorandum is not the governing document for this action.

Therefore, the correct answer is: (2) Articles of Association