{"id":44968,"date":"2024-02-19T05:06:01","date_gmt":"2024-02-18T23:36:01","guid":{"rendered":"https:\/\/www.aplustopper.com\/?p=44968"},"modified":"2024-02-19T11:10:25","modified_gmt":"2024-02-19T05:40:25","slug":"plus-one-business-studies-chapter-wise-questions-answers-chapter-7","status":"publish","type":"post","link":"https:\/\/www.aplustopper.com\/plus-one-business-studies-chapter-wise-questions-answers-chapter-7\/","title":{"rendered":"Plus One Business Studies Chapter Wise Questions and Answers Chapter 7 Formation of a Company"},"content":{"rendered":"
Question 1.
\nApplication for approval of name of a company is to be made to
\nAnswer:
\nRegistrar of companies.<\/p>\n
Question 2.
\nA prospectus is issued by
\nAnswer:
\nPublic company<\/p>\n
Question 3.
\nPreliminary contracts are signed
\nAnswer:
\nBefore the incorporation<\/p>\n
Question 4.
\nAt which stage in the formation of a company does it interact with SEBI
\nAnswer:
\nCapital subscription<\/p>\n
Question 5.
\nThe first stage in the formation of a company is __________
\nAnswer:
\nPromotion<\/p>\n
Question 6.
\n\u201cI undertake to form a new company and carry out all the preliminary work in connection with its establishment\u201d Who am I?
\nAnswer:
\nPromoter<\/p>\n
Question 7.
\nPreliminary Contracts are signed
\n1. Before the incorporation
\n2. After incorporation but before capital subscription
\n3. After incorporation but before of commencement of business
\n4. After commencement business
\nAnswer:
\n1. Before the incorporation<\/p>\n
Question 8.
\nSpot the odd one and state the reason
\n1. Memorandum of Association
\n2. Articles of Association
\n3. Certificate of incorporation
\n4. Certificate of commencement of business
\nAnswer:
\n5. Certificate of commencement of business<\/p>\n
Question 9.
\n_____________ is the Magna Carta of the company.
\nAnswer:
\nMemorandum of Association<\/p>\n
Question 10.
\n_____________ is the birth certificate of a company.
\nAnswer:
\nCertificate of incorporation<\/p>\n
Question 11.
\nThe procedure for conducting company meetings, voting, quorum, poll and proxy will be mentioned in the
\n1. Prospectus
\n2. Memorandum of Association
\n3. Articles of Association
\nAnswer:
\n3. Articles of Association<\/p>\n
Question 12.
\nThe provision regarding the internal management of a company will appear in its
\nAnswer:
\nArticles of Association<\/p>\n
Question 13.
\nPublic Companies need __________ to commence the business.
\nAnswer:
\nCertificate of commencement of business<\/p>\n
Question 14.
\nDirectors of a public Ltd. Co. decided to give advertisement in all newspapers for subscribing their shares. Identify the document given below
\n1. table A
\n2. memorandum of association
\n3. prospectus
\nAnswer:
\n3. Prospectus<\/p>\n
Question 15.
\nThis clauses is the form of a declaration, it states that the subscribers express the willingness and agreement to form a company. Name the clause of memorandum of association.
\nAnswer:
\nAssociation Clause<\/p>\n
Question 16.
\nThis clause specifies the name of the state where the registered office of the Co. is situated. Identify the clause.
\nAnswer:
\nSituation clause<\/p>\n
Question 17.
\nThis clause specifies the name of the company.
\nAnswer:
\nName clause<\/p>\n
Question 18.
\nIdentify the document in which the following information about a company can be found.<\/p>\n
Answer:<\/p>\n
Question 19.
\nTABLE A is a model of _________ given in companies Act.
\nAnswer:
\nArticles of Association<\/p>\n
Question 20.
\nIdentify the documents in which following information about a company is found.<\/p>\n
Answer:<\/p>\n
Question 21.
\nIdentify the relevant clauses in the memorandum of association in which the following information can be included.<\/p>\n
Answer:<\/p>\n
Question 22.
\nState the odd item in the case of a private limited company.
\n1. memorandum of association
\n2. articles of association
\n3. certificate of incorporation
\n4. certificate of commencement of business
\nAnswer:
\n4. Certificate of Commencement of business<\/p>\n
Question 23.
\nMention the name of the certificates\/documents relating to following activities \/ formalities<\/p>\n
Answer:<\/p>\n
Question 24.
\nName the following documents.<\/p>\n
Answer:<\/p>\n
Question 1.
\nName the stages in the formation of a company?
\nAnswer:<\/p>\n
Question 2.
\nName the stages in the formation of a company. (2)
\nAnswer:<\/p>\n
Question 3.
\nWhat do you mean by promotion? (2)
\nAnswer:
\nThe identification of business opportunities, analysis of its prospects and initiating steps to form a joint stock company is called promotion.<\/p>\n
Question 4.
\nFor incorporating a private limited company, Deepthi Pvt. Ltd., the directors submit all relevant documents to the registrar of company except Articles of Association. But the registrar insists that, registration will not be granted without filing Articles of Association. But the directors of Deepthi Pvt. Ltd., argue that the provisions of ‘Table A\u2019 can be adopted in the absence of Articles of Association. Whose argument is correct? Justify your answer. (2)
\nAnswer:
\nThe argument of the Company Registrar is right because filing of Articles of association is compulsory for Pvt. Ltd company by shares.<\/p>\n
Question 5.
\nArya Ltd. commences its business immediately on getting the certificate of incorporation. The registrar of companies serves a notice to them for remitting a fine of \u20b9500 for everyday of its operation. Is it legally enforceable? Give your suggestion. (2)
\nAnswer:
\nYes. Public Ltd. Company can commence business only after getting the certificate of commencement of business.<\/p>\n
Question 6.
\nIt is proposed to conduct a seminar on the topic \u2018important documents in the formation of joint stock company\u2019 in your class. You are selected as the leader of one of the groups and are directed to submit a seminar paper for the same. Suggest valuable points that should be included in the paper. (2)
\nAnswer:<\/p>\n
Question 7.
\nWhat do you mean by Minimum Subscription? (2)
\nAnswer:
\nMinimum subscription is the minimum amount of shares that must be subscribed by the public. This amount is stated in the prospectus. A company can allot shares only after receiving minimum subscription.<\/p>\n
Question 8.
\nI lay down the charter or the constitution of the company. I define the object and powers of the company.<\/p>\n
Answer:<\/p>\n
Question 1.
\nIs it necessary for a public company to get its shares listed on a stock exchange? What happens if a public company fails to get the permission from stock exchange? (3)
\nAnswer:
\nYes. A public company must list its shares with at least any one of the stock exchange for the allotment of shares. Therefore, the promoters must apply in a stock exchange for permission to deal in its shares or debentures. If permission is not granted before the expiry of ten weeks from the date of Closure of subscription list, the allotment shall become void and the application money must be returned to the applicants within eight days.<\/p>\n
Question 2.
\nState the difference between certificate of incorporation and certificate of commencement of business. (3)
\nAnswer:
\nCertificate of Incorporation gives legal status to the company. It is also known as birth certificate of the company. But certificate of commencement of business allows to start the operation.<\/p>\n
These two certificates are required by the public limited company, but in case of private limited company only certificate of Incorporation is required to start the operation.<\/p>\n
Question 3.
\nNisha, Shani and Sheena are promoters of a public company. But they do not want to raise capital by approaching the public. They decide to raise capital by issuing shares to a few persons. Is it possible? If yes, what document is used for raising capital? (3)
\nAnswer:
\nYes. They can raise capital by issuing shares to a few persons. For this they can issue Statement in lieu of prospectus.<\/p>\n
Question 1.
\nIdentify the documents required for commencing business for the following companies. (4)<\/p>\n
Answer:
\n1. Athira Pvt. Ltd – A private company must file the following documents for commencing business<\/p>\n
2. Aditya Ltd., a public company, must file the following documents for commencing business.<\/p>\n
Question 2.
\nThe details of a proposed private company having limited liability is given below. You are required to identify as to which clauses in the Memorandum of Association have to be rightly inserted. (4)
\nProposed names:
\nMahatma Gandhi Khadi – Company
\nPremier Mills (P) Ltd.
\nKerala Government Khadi Company
\nSobha Co-operative Company
\nMaximum capital which can be collected is 20 lakhs rupees
\nNature of shares
\nEquity shares at Rs. 10\/- share<\/p>\n
Address:
\nPushpa Nivas Kodunganoor (P.O)
\nThiruvananthapuram 13
\nKerala State
\nIndia.<\/p>\n
Nature of business:
\nTo produce Khadi clothes through machine To stitch Khadi ready wears Name of the persons who are wishing to form the company
\nP. Sudarsanan
\nK. Muraleedharan Nair
\nS. Renjith
\nAnswer:<\/p>\n
Question 1.
\n\u201cPromoter would be personally liable for the preliminary contracts if they are not ratified by the company after incorporation. Analyse the statement. (5)
\nAnswer:
\nPromotion:
\nPromotion is the first stage in the formation of a company. The identification of business opportunities, analysis of its prospects and initiating steps to form a joint-stock company is called promotion. The person who undertakes to form a company is called promoter.<\/p>\n
Functions of a Promoter:<\/p>\n
1. Identification of business opportunity:
\nThe first and foremost activity of a promoter is to identify a business opportunity.<\/p>\n
2. Feasibility studies:
\nAfter identifying a business opportunity, the promoters undertake some feasibility studies to determine the viability and profitability of the proposed activity.<\/p>\n
3. Name approval:
\nAfter selecting the name of company the promoters submit an application to the Registrar of companies for its approval. The selected name is not the same or identical to an existing company.<\/p>\n
4. Fixing up signatories to the Memorandum of Association:
\nPromoters have to decide about the members who will be signing the Memorandum of Association of the proposed company.<\/p>\n
5. Appointment of professional:
\nPromoters appoint merchant bankers, auditors etc. to assist them in the preparation of necessary documents.<\/p>\n
6. Preparation of necessary documents:
\nThe promoters prepare certain legal documents which are to be submitted to the Registrar of companies. They are<\/p>\n
Position of Promoters:
\nThe promoter is neither an agent nor a trustee of the company. The promoter stands in the fiduciary relationship with the company. He should not make any secret profits out of the dealings. Any, such gains are to be disclosed. The promoter must act honestly, in good faith and in the best interest of the company.<\/p>\n
The promoter is personally liable for all the preliminary contracts with the other parties before incorporation. The promoter is also liable for any omission of facts or false statements in the prospectus.<\/p>\n
Question 2.
\nMemorandum of Association is the charter or magna carta of the company. Elucidate the statement. (5)
\nAnswer:
\nMemorandum of Association:
\nIt is the charter or Magna Carta of the company. It defines the objects of the company and provides the framework beyond which the company cannot operate. It lays down the relationship of the company with outside world.<\/p>\n
Memorandum of Association must be printed, divided into paragraphs, numbered consecutively. The Memorandum of Association must be signed by at least seven persons in case of a public company and by two persons in case of a private company.<\/p>\n
Contents of Memorandum of Association
\n
\n1. The name clause:
\nUnder this clause the name of the company is mentioned. A company can select any name subject to the following restrictions.<\/p>\n
2. Registered office clause:
\nThis clause contains the name of the state, in which the registered office of the company is proposed to be situated. It must be informed to the Registrar within thirty days of the incorporation of the company.<\/p>\n
3. Objects clause:
\nThis is the most important clause of the memorandum. It defines the purpose for which the company is formed. A company is not legally entitled to undertake an activity, which is beyond the objects stated in this clause.<\/p>\n
4. Liability clause:
\nIt states that the liability of members is limited to the face value of shares held by them or the amount guaranteed to be paid on winding up.<\/p>\n
5. Capital clause:
\nThis clause specifies the maximum capital which the company will be authorised to raise through, the issue of shares.<\/p>\n
6. Association clause:
\nIn this clause, the signatories to the Memorandum of Association state their intention to be associated with the company and also give their consent to purchase qualification shares.<\/p>\n
Question 3.
\nExplain the contents of prospectus. (5)
\nAnswer:
\nProspectus:
\nProspectus is a document issued by the public companies inviting the public to subscribe for shares or debentures of the company. It contains all information regarding the company\u2019s affairs and its future prospects. A prospectus must be dated and signed by all the directors. A copy of the prospectus must be filed with Registrar before it is issued to public.<\/p>\n
Contents of prospectus<\/p>\n
Question 4.
\nThe details of a proposed limited company are given below. You are required to identify them as to which clause of the memorandum of association they have to be inserted. (5)<\/p>\n
Answer:<\/p>\n
Question 5
\nA public company can commence business only after getting the certificate of commencement of business. Abhijith, a plus two student wants to know the conditions to be fulfilled to obtain the certificate of commencement of business.
\nAnswer:
\n
\nCommencement of Business:
\nA public company can commence business only after getting certificate of commencement of business from the Registrar. The company must file the following documents to obtain the certificate of commencement of business.<\/p>\n
The Registrar shall examine these documents. If these are found satisfactory, a \u2018Certificate of Commencement of Business\u2019 will be issued. This certificate is conclusive evidence that the company is entitled to do business. With the grant of this certificate the formation of a public company is complete and the company can legally start doing business.
\nDocuments used in the formation of a company<\/p>\n
Question 1.
\nI govern the internal affairs of the company. Explain who am ‘I’? List out my contents.
\nOR
\nFor the purpose of registering a new company, the promoter requires a document containing the rules and regulations governing its internal affairs. (6)<\/p>\n
Answer:
\nArticles of Association:
\nThe Articles of Association is the second important document of a company. The Articles define the rights, duties and powers of the officers and the Board of directors. It contains the rules regarding internal management of the company. It shows the relationship between the company and its members.<\/p>\n
Contents of Articles of Association:<\/p>\n
Table A:
\nA public limited company may adopt Table A which is a model set of articles given in the Companies Act. Table A is a document containing rules and regulations for the internal management of a company. If a company adopts Table A, there is no need to prepare separate Articles of Association.<\/p>\n
Question 2.
\nVishnu, a promoter of a public company, approaches you to get information relating to raising of capital from public. As a commerce student mention the document required for inviting the public to purchase or subscribe to its shares and debentures. Explain. (6)
\nAnswer:
\nProspectus:
\nProspectus is a document issued by the public companies inviting the public to subscribe for shares or debentures of the company. It contains all information regarding the company\u2019s affairs and its future prospects. A prospectus must be dated and signed by all the directors. A copy of the prospectus must be filed with Registrar before it is issued to public.<\/p>\n
Contents of prospectus:<\/p>\n
Companies which do not want to issue a prospectus may submit a statement in lieu of prospectus to the Registrar of Companies. It is a copy of the prospectus but is not issued to the public.<\/p>\n
Question 3.
\nIt is often said that Memorandum of Association and Articles of Association are the first and second important documents of a company. As a commerce student can you differentiate between these two documents? (6)
\nAnswer:<\/p>\n
Memorandum of Association<\/td>\n | Articles of Association<\/td>\n<\/tr>\n |
It defines the object for which the company is formed<\/td>\n | They are rules of internal management of the company. They indicate how the objectives of the company are to be achieved<\/td>\n<\/tr>\n |
It is the main document of the company<\/td>\n | It is a subsidiary document of the Memorandum of Association<\/td>\n<\/tr>\n |
It defines the relationship of the company with outsiders<\/td>\n | It defines the relationship of the company with members<\/td>\n<\/tr>\n |
Acts beyond the Memorandum of Association are invalid and cannot be ratified.<\/td>\n | Acts beyond the Articles of Association can be ratified by the members. But they do not violate memorandum<\/td>\n<\/tr>\n |
Filing of Memorandum is compulsory<\/td>\n | Filing of Articles is not compulsory for public company<\/td>\n<\/tr>\n |
Alteration of Memorandum is very difficult<\/td>\n | It can be altered by passing a special resolution<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\nPlus One Formation of a Company Eight Mark Questions and Answers<\/h3>\nQuestion 1. 1. Application for incorporation: 2. Filing of documents:
|