I. Choose the Correct Answer:

Question 1.
The maximum number of members in a private limited company is ……………..
(a) 25
(b) 50
(c) 100
(d) 200
Answer:
(d) 200

Question 2.
…………….. is considered as an artificial person.
(a) Sole trader
(b) Joint Hindu family business
(c) Joint stock company
(d) Co – operative society
Answer:
(c) Joint stock company

Question 3.
A new class of company is of “One Person Company” and it is included in …………….. Act.
(a) 1956
(b) 1952
(c) 2013
(d) 2015
Answer:
(c) 2013

 

Question 4.
One share – one vote principle is followed in ……………..
(a) Company
(b) Partnership
(c) Co – operative
(d) Sole trading concern
Answer:
(a) Company

Question 5.
…………….. companies are established by a Special Act made in Parliament/State Assembly.
(a) Chartered
(b) Statutory
(c) Private
(d) Unlimited
Answer:
(b) Statutory

Question 6.
East India Company is an example of …………….. companies.
(a) Chartered
(b) Statutory
(c) Public
(d) Private
Answer:
(a) Chartered

Question 7.
The share capital of the government company must not be less than ……………..
(a) 75%
(b) 60%
(c) 95%
(d) 51%
Answer:
(d) 51%

Question 8.
…………….. company operates in more than one country.
(a) Multinational
(b) Foreign
(c) Domestic
(d) Private
Answer:
(a) Multinational

Question 9.
…………….. is a document containing rules and regulations for the internal management of a company.
(a) Table A
(b) Memorandum
(c) Prospectus
(d) Statutory declaration
Answer:
(a) Table A

Question 10.
…………….. is “the only window through which a prospective investor can look into the soundness of a company’s venture”.
(a) Prospectus
(b) Memorandum
(c) Articles
(d) Minutes
Answer:
(a) Prospectus

II. Very Short Answer Questions

Question 1.
What is perpetual succession?
Answer:
A company does not cease to exist unless it is specifically wound up or the task for which it was formed has been completed. Membership of a company may keep on changing from time to time but that does not affect life of the company.

Question 2.
What is Common seal?
Answer:
A company is an artificial person and does not have a physical presence. Thus, it acts through its Board of Directors for carrying out its activities and entering into various agreements. Such contracts must be under the seal of the company. The common seal is the official signature of the company.

Question 3.
What is Domestic company?
Answer:
A company which cannot be termed as foreign company under the provision of the Companies Act should be regarded as a domestic company.

 

Question 4.
What is Situation clause?
Answer:
The registered office clause requires you to show the physical location of the registered office of the company. You are required to keep, all the company registers in this office in addition to using the office in handling all the outgoing and incoming communication correspondence.

Question 5.
What is Objective clause?
Answer:
The objective clause requires you to summarize the main objectives for establishing the company with reference to the requirements for shareholding and use of financial resources. You also need to state ancillary objectives; that is, those objectives that are required to facilitate the achievement of the main objectives.

III. Short Answer Questions

Question 1.
What is meant by Joint and Several Liability?
Answer:
Every partner is jointly and severally liable for all acts of the firm. It means that in case the assets are inadequate for meeting the claims of creditors, even their personal properties should be made available. The creditors can recover their claims from all the partners.

Question 2.
What do you mean by Company limited by Guarantee?
Answer:
A company limited by guarantee is a company in which the liability of its members is limited by its memorandum to such an amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up. Such companies are generally formed for the promotion of Commerce, Art, Science, Religion, Charity or any other useful object. The companies limited by guarantee may be either private companies or public companies.

Question 3.
What do you mean by Holding Companies?
Answer:
As per Section 2(87) “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company –

1.    Controls the composition of the Board of Directors; or

2.    Exercises or controls more than one – half of the total share capital either at its own or together with one or more of its subsidiary companies.

Case Study

Case 1:
Ashok is an industrial designer by training. He had the opportunity to learn the technology of fibre glass manufacture while he was in Germany for his training. He plans to set up a plant for the manufacture of fibre glass in India and is able to interest some financiers and technologists. It is estimated that the initial investment in the plant will be of the order of ₹ 50 lakhs. Ashok and others decide to set up a company for the purpose. Should they set up a public limited company for the purpose? If so, how should they go about it? If not, what alternative would you suggest? What formalities will be required of Ashok and his associates if they choose the alternative form of organization suggested by you?
Answer:
1. If he and his friends selected to start public limited company. They can start with more formalities.

  • Issue of prospectus
  • Huge capital
  • Shares can be issued and substituted in huge level of capital (i.e. Authorized capital)
  • Minimum 7 members to start a public company.
  • Maximum number of limit
  • The public company does not restrict the right to transfer its share

2. If he decides to start private limited company, my suggestions are as follows

  • Investment arranged privately with his friends
  • He can collect capital with limited capital
  • Private company cannot issue prospectus
  • One person company also can start, but capital of initial investment can be arranged privately.

 

Case 2:
Collect any 10 items of daily use (Packed items) and list the names of the company’s manufacturing those items. Classify those companies as public and private limited companies. Which of them are Multinational Companies?

Edible items:

1.    Milk – AAVINFSSAT, Chennai – 98.

2.    Tea powder – Brook Bond – Red Label
Hindustan Unilever Ltd., (HUL)
Mumbai – 400099

3.    Bread – Modem Foods Enterprises Private Ltd.
Haryana, India – 122002

4.    Biscuit – Britannia Industries Ltd., Chennai.

Other uses:

1.    Toothpaste – Anchor Health & Beauty Care Private Ltd.,

2.    Tooth Brush – Uttarkhand – 249404

3.    Soap – Hamam
Hindustan Unilever Limited
Himachal Pradesh – 174103

4.    Detergent powder – Ariel – The Procter & Gamble
Home Products Private Ltd.,
Mumbai – 400099

5.    Shampoo – Oriflame,
Oriflame India Private Ltd.,
New Delhi – 110076

6.    Hand wash – Cosmic Product Private Ltd.,
Palghar (E) – 401404.