Class 11 Business Studies

Formation of Company

NCERT Solution: MCQ

Minimum number of members to form a private company is

  • 2
  • 3
  • 5
  • 7

    Answer: (a) 2


  • Minimum number of members to form a public company is
    • 5
    • 7
    • 12
    • 21

      Answer: (b) 7
  • Application for approval of name of a company is to be made to
    • SEBI
    • Registrar of Companies
    • Government of India
    • Government of the State in which Company is to be registered

      Answer: (b) Registrar of Companies
  • A proposed name of Company is considered undesirable if
    • It is identical with the name of an existing company
    • It resembles closely with the name of an existing company
    • It is an emblem of Government of India, United Nations etc.
    • In case of any of the above

      Answer: (d) In case of any of the above
  • A prospectus is issued by
    • A private company
    • A public company seeking investment from public
    • A public enterprise
    • A public company

      Answer: (b) A public company seeking investment from public
  • Stages in the formation of a public company are in the following order
    • Promotion, Commencement of Business, Incorporation, Capital Subscription
    • Incorporation, Capital Subscription. Commencement of Business, Promotion
    • Promotion, Incorporation, Capital Subscription, Commencement of Business
    • Capital Subscription, Promotion, Incorporation, Commencement of Business

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


  • Preliminary Contracts are signed
    • Before the incorporation
    • After incorporation but before capital subscription
    • After incorporation but before commencement of business
    • After commencement of business

      Answer: (a) Before the incorporation
  • Preliminary Contracts are
    • binding on the Company
    • binding on the Company, if ratified after incorporation
    • binding on the Company, after incorporation
    • not binding on the Company

      Answer: (d) Not binding on the Company
True/False Questions
  • It is necessary to get every company incorporated, whether private or public. (True)
  • Statement in lieu of prospectus can be filed by a public company going for a public issue. (True)
  • A private company can commence business after incorporation. (True)
  • Experts who help promoters in the promotion of a company are also called promoters. (False)
  • A company can ratify preliminary contracts after incorporation. (False)
  • If a company is registered on the basis of fictitious names, its incorporation is invalid. (False)
  • ‘Articles of Association’ is the main document of a company. (False)
  • Every company must file Articles of Association. (False)
  • A provisional contract is signed by promoters before the incorporation of the company. (False)
  • 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. (False)

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