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CS Executive · Company Law and Practice · Annual Report - Concepts

Karnataka and Telangana are the only members of Deccan Minerals Ltd, a Government company, and the Central Government holds no shares. Which statement is correct under Section 395?

Every State Government that is a member must cause the annual report to be prepared. Where the Central Government is not a member, Section 395 places the duty on each member State Government, without any distinction based on the size of shareholding.

  1. AOnly the State Government with the larger holding must prepare the report
  2. BEvery State Government which is a member must cause the annual report to be preparedCorrect
  3. CNeither need prepare a report because the Central Government is absent
  4. DThe report must be prepared by the Central Government on their behalf

Explanation

Section 395(1) says every State Government which is a member of the company must cause the report to be prepared where the Central Government is not a member. The provision does not rank members by shareholding, so both States are covered.

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