Formation of Company

NCERT Solution

MCQ Answers

Question 1: Minimum number of members to form a private company is

  1. 2
  2. 3
  3. 5
  4. 7

    Answer: (a) 2

Question 2: Minimum number of members to form a public company is

  1. 5
  2. 7
  3. 12
  4. 21

    Answer: (b) 7

Question 3: Application for approval of name of a company is to be made to

  1. SEBI
  2. Registrar of Companies
  3. Government of India
  4. Government of the State in which Company is to be registered

    Answer: (b) Registrar of Companies

Question 4: A proposed name of Company is considered undesirable if

  1. It is identical with the name of an existing company
  2. It resembles closely with the name of an existing company
  3. It is an emblem of Government of India, United Nations etc.
  4. In case of any of the above

    Answer: (d) In case of any of the above

Question 5: A prospectus is issued by

  1. A private company
  2. A public company seeking investment from public
  3. A public enterprise
  4. A public company

    Answer: (b) A public company seeking investment from public

Question 6: Stages in the formation of a public company are in the following order

  1. Promotion, Commencement of Business, Incorporation, Capital Subscription
  2. Incorporation, Capital Subscription. Commencement of Business, Promotion
  3. Promotion, Incorporation, Capital Subscription, Commencement of Business
  4. Capital Subscription, Promotion, Incorporation, Commencement of Business

    Answer: (c) Promotion, Incorporation, Capital Subscription, Commencement of Business

Question 7: Preliminary Contracts are signed

  1. Before the incorporation
  2. After incorporation but before capital subscription
  3. After incorporation but before commencement of business
  4. After commencement of business

    Answer: (a) Before the incorporation

Question 8: Preliminary Contracts are

  1. binding on the Company
  2. binding on the Company, if ratified after incorporation
  3. binding on the Company, after incorporation
  4. not binding on the Company

    Answer: (d) Not binding on the Company

True/False Questions

  1. It is necessary to get every company incorporated, whether private or public.
  2. Statement in lieu of prospectus can be filed by a public company going for a public issue.
  3. A private company can commence business after incorporation.
  4. Experts who help promoters in the promotion of a company are also called promoters.
  5. A company can ratify preliminary contracts after incorporation.
  6. If a company is registered on the basis of fictitious names, its incorporation is invalid.
  7. ‘Articles of Association’ is the main document of a company.
  8. Every company must file Articles of Association.
  9. A provisional contract is signed by promoters before the incorporation of the company.
  10. If a company suffers heavy issues and its assets are not enough to pay off its liabilities, the balance can be recovered from the private assets of its members.

Answer: (1) T, (2) T, (3) T, (4) F, (5)F, (6) F, (7) F,(8) F, (9) F, (10) F



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