Legal Aspects of Business | Company Organization | MCQs
1. What does the Companies Act, 2013 state about the definition of a company?
a) It defines a company as a partnership entity.
b) It defines a company based on its features.
c) It defines a company as an entity formed and registered under the Act.
d) It does not provide a definition of a company.
Answer: c) It defines a company as an entity formed and registered under the Act.
2. Which of the following is NOT a feature of a company?
a) Limited Liability
b) Transferability of Shares
c) Perpetual Succession
d) Personal liability for shareholders
Answer: d) Personal liability for shareholders
3. What is meant by 'Lifting of Corporate Veil'?
a) Granting shareholders the right to dissolve a company.
b) Making the company itself liable for its actions.
c) Holding individuals personally liable for the actions of the company under certain circumstances.
d) Separating the personal and corporate assets.
Answer: c) Holding individuals personally liable for the actions of the company under certain circumstances.
4. Which of the following is a situation where the corporate veil may be lifted?
a) When the company exceeds its business objectives.
b) When the company carries out its business for fraudulent purposes.
c) When the company makes excess profits.
d) When the company has overpaid taxes.
Answer: b) When the company carries out its business for fraudulent purposes.
5. A 'Private Company' under the Companies Act, 2013 restricts which of the following?
a) Right to transfer its shares
b) Number of directors
c) Number of employees
d) Geographic scope of operations
Answer: a) Right to transfer its shares
6. What is the minimum number of members required to form a public company?
a) 2
b) 3
c) 7
d) 50
Answer: c) 7
7. Which of the following defines a 'Government Company'?
a) A company that has government employees as its directors.
b) A company in which the government holds 51% or more of the paid-up capital.
c) A company formed by the government for profit-making purposes.
d) A company exclusively owned by the government.
Answer: b) A company in which the government holds 51% or more of the paid-up capital.
8. Which type of company is formed with the primary aim of promoting social welfare and not for making profits?
a) Public Company
b) Section 25 Company
c) Producer Company
d) Holding Company
Answer: b) Section 25 Company
9. Which of the following is true about a 'Foreign Company'?
a) A company incorporated outside India, with no place of business in India.
b) A company incorporated outside India with a place of business in India.
c) A company that operates only in foreign markets.
d) A company that is formed under Indian law but operates outside India.
Answer: b) A company incorporated outside India with a place of business in India.
10. What is the main purpose of the 'Producer Company' concept introduced by the Companies Amendment Act, 2002?
a) To allow agricultural businesses to form a public company.
b) To enable cooperatives to corporatize and modernize.
c) To focus solely on the production of agricultural goods.
d) To restrict the number of members in agricultural businesses.
Answer: b) To enable cooperatives to corporatize and modernize.
11. Which of the following describes the legal position of a promoter?
a) Promoter is an agent of the proposed company.
b) Promoter is a trustee for the proposed company.
c) Promoter holds a fiduciary position towards the company to be formed.
d) Promoter has no legal relationship with the proposed company.
Answer: c) Promoter holds a fiduciary position towards the company to be formed.
12. Which of the following is NOT one of the duties of a promoter?
a) Not to make secret profit out of promotion.
b) To disclose any interest in transactions with the company.
c) To manage the day-to-day operations of the company.
d) To disclose untrue statements in the prospectus.
Answer: c) To manage the day-to-day operations of the company.
13. In the process of registering a company, what document defines the area within which the company can operate?
a) Memorandum of Association
b) Articles of Association
c) Statutory Declaration
d) Certificate of Incorporation
Answer: a) Memorandum of Association
14. What is the purpose of the 'Articles of Association' in the registration process of a company?
a) To define the company's operating area
b) To outline the internal management rules of the company
c) To declare the company's financial status
d) To provide details of the company's members
Answer: b) To outline the internal management rules of the company
15. When does a company come into existence?
a) As soon as it is registered.
b) After the promoter's declaration is made.
c) After the payment of registration fees.
d) Only after the issuance of the Certificate of Incorporation.
Answer: d) Only after the issuance of the Certificate of Incorporation.
16. Which of the following is required to be filed with the Registrar of Companies (ROC) for the registration of a company?
a) Articles of Incorporation
b) Memorandum of Association
c) Statutory Declaration
d) All of the above
Answer: d) All of the above
17. What is the main purpose of the 'Certificate of Incorporation'?
a) To provide evidence that the company has a constitution.
b) To serve as conclusive evidence that the company has complied with all the legal requirements for registration.
c) To approve the company’s financial status.
d) To indicate the types of shareholders in the company.
Answer: b) To serve as conclusive evidence that the company has complied with all the legal requirements for registration.
18. Which type of company can be registered with only one member and one director under the Companies Act, 2013?
a) Public Company
b) Private Company
c) One Person Company
d) Foreign Company
Answer: c) One Person Company
19. Which of the following companies is formed with the goal of promoting a social cause rather than making profits?
a) Public Company
b) Government Company
c) Section 25 Company
d) Producer Company
Answer: c) Section 25 Company
20. Which of the following companies is defined by the government’s shareholding of not less than 51% of its paid-up capital?
a) Private Company
b) Holding Company
c) Government Company
d) Foreign Company
Answer: c) Government Company
21. In the context of company formation, which document contains rules for the company's internal management?
a) Memorandum of Association
b) Articles of Association
c) Statutory Declaration
d) Certificate of Incorporation
Answer: b) Articles of Association
22. The promoters of a company are considered to be in a fiduciary relationship with which of the following?
a) Government
b) Shareholders
c) The company being formed
d) Creditors
Answer: c) The company being formed
23. What is the statutory minimum paid-up capital required for a public company under the Companies Act, 2013?
a) Rs. 1 Lakh
b) Rs. 5 Lakhs
c) Rs. 10 Lakhs
d) Rs. 50 Lakhs
Answer: b) Rs. 5 Lakhs
24. Which of the following types of companies restricts the right to transfer its shares?
a) Public Company
b) Private Company
c) Foreign Company
d) Producer Company
Answer: b) Private Company
25. What is the minimum number of members required to form a 'Private Company' under the Companies Act, 2013?
a) 1
b) 2
c) 3
d) 7
Answer: b) 2
26. What is the minimum number of members required to form a 'Government Company'?
a) 2
b) 3
c) 7
d) 1
Answer: a) 2
27. In which of the following circumstances can the corporate veil be lifted?
a) When the company enters into a joint venture agreement
b) When the company is used for fraudulent purposes
c) When the company is performing well financially
d) When the company changes its registered office
Answer: b) When the company is used for fraudulent purposes
28. Which of the following is NOT a type of company as per the Companies Act, 2013?
a) Private Company
b) Public Company
c) Government Company
d) Non-profit Company
Answer: d) Non-profit Company
29. Which of the following statements is true about the 'One Person Company' (OPC)?
a) It requires a minimum of 2 directors.
b) It can have a maximum of 100 members.
c) It allows only one member and one director.
d) It must have a minimum paid-up capital of Rs. 1 crore.
Answer: c) It allows only one member and one director.
30. Who is responsible for the preparation of the Memorandum and Articles of Association in the process of company formation?
a) The company's board of directors
b) The company's promoters
c) The company's shareholders
d) The government
Answer: b) The company's promoters
31. Which of the following is required to be filed with the Registrar of Companies before registering a company?
a) Memorandum of Association only
b) Articles of Association only
c) Both Memorandum of Association and Articles of Association
d) Statutory Declaration only
Answer: c) Both Memorandum of Association and Articles of Association
32. Which of the following is true regarding the 'Certificate of Incorporation'?
a) It serves as a proof of the company’s tax registration.
b) It signifies that the company has completed all required formalities for registration under the Companies Act, 2013.
c) It is issued once the company has filed its annual returns.
d) It is issued only after the company’s first general meeting.
Answer: b) It signifies that the company has completed all required formalities for registration under the Companies Act, 2013.
33. What is the role of the 'Common Seal' in a company?
a) It represents the personal signature of the directors.
b) It is used to legally validate documents on behalf of the company.
c) It is used to declare the company’s assets.
d) It is an emblem used only for marketing purposes.
Answer: b) It is used to legally validate documents on behalf of the company.
34. Which of the following is NOT a characteristic of a 'Private Company'?
a) Restricts the transfer of shares
b) Limits the number of members to 200
c) Can invite the public to subscribe to its shares
d) Cannot accept deposits from the public
Answer: c) Can invite the public to subscribe to its shares
35. Which type of company can have a membership of more than 200 members?
a) Private Company
b) Public Company
c) Section 25 Company
d) One Person Company
Answer: b) Public Company
36. Under which circumstance can a promoter be held liable?
a) When he discloses confidential company information to competitors.
b) When he makes untrue statements in the prospectus.
c) When he becomes a shareholder of the company.
d) When he changes the company’s name without approval.
Answer: b) When he makes untrue statements in the prospectus.
37. Which of the following is a type of company where the shares are offered to the public for subscription?
a) Private Company
b) Public Company
c) One Person Company
d) Foreign Company
Answer: b) Public Company
38. Which of the following is required to be submitted when applying for the registration of a company?
a) A copy of the company's annual report
b) The names of the company’s shareholders
c) A proposed company name for approval
d) The company’s financial statements
Answer: c) A proposed company name for approval
39. What document serves as the constitution of a company and sets the parameters for its activities?
a) Articles of Association
b) Memorandum of Association
c) Statutory Declaration
d) Certificate of Incorporation
Answer: b) Memorandum of Association
40. Which of the following is true about the formation of a ‘Holding Company’?
a) A holding company is formed when it has control over another company’s board of directors.
b) A holding company is required to have a minimum of 7 members.
c) A holding company is not allowed to control more than 50% of another company’s share capital.
d) A holding company cannot be a public company.
Answer: a) A holding company is formed when it has control over another company’s board of directors.
41. What is the minimum number of directors required for a Public Company under the Companies Act, 2013?
a) 1
b) 2
c) 3
d) 5
Answer: c) 3
42. Which of the following is NOT a valid ground for lifting the corporate veil?
a) If the company is used to avoid welfare legislation.
b) If the company is engaged in fraudulent activities.
c) If the company is carrying out business for an ultra vires purpose.
d) If the company is generating profits.
Answer: d) If the company is generating profits.
43. In which case is a company considered as an ‘artificial person’?
a) When it is owned by a government entity.
b) When it has separate legal personality from its shareholders.
c) When it conducts business across national borders.
d) When its directors make important financial decisions.
Answer: b) When it has separate legal personality from its shareholders.
44. What document outlines the rules and procedures for the internal management of a company?
a) Articles of Association
b) Memorandum of Association
c) Shareholder Agreement
d) Statutory Declaration
Answer: a) Articles of Association
45. What is the significance of the 'Statutory Declaration' in the company registration process?
a) It confirms that the company is complying with tax regulations.
b) It verifies that the company's documents meet the legal requirements for registration.
c) It outlines the company’s objectives.
d) It acts as proof that the company has been approved by the government.
Answer: b) It verifies that the company's documents meet the legal requirements for registration.
46. A foreign company is required to furnish specific documents to the Registrar of Companies under which section of the Companies Act, 2013?
a) Section 588
b) Section 592
c) Section 602
d) Section 617
Answer: b) Section 592
47. Which of the following companies has its shares restricted from being transferred to the public?
a) Government Company
b) Private Company
c) Public Company
d) Holding Company
Answer: b) Private Company
48. Which of the following is NOT a key feature of a 'Producer Company'?
a) It is formed by producers of primary produce.
b) It focuses on providing financial benefits to its members.
c) It can invite investment from the public.
d) It deals with activities like agriculture and handloom production.
Answer: c) It can invite investment from the public.
49. A company formed to promote charity, art, or science without the intention of making profits is known as a:
a) Private Company
b) Public Company
c) Section 25 Company
d) Government Company
Answer: c) Section 25 Company
50. The promoters of a company are considered liable for which of the following?
a) To ensure the company’s first meeting is held.
b) To make secret profits during the promotion of the company.
c) To manage day-to-day business operations once the company is incorporated.
d) To approve the company’s financial statements annually.
Answer: b) To make secret profits during the promotion of the company.
