COMPANY LAW SAMPLE QUESTIONS BY FINANCIAL DEREK

. Which of the following statements is not true?

(a) A company is an artificial person created by law.
(b) A company can do every act like a natural person except the acts which are purely of personal
nature.
(c) A company can be held liable for violation of the statutory provisions of the Companies Act.
(d) A company can be imprisoned for violation of such provision which attract penalty by way of
imprisonment only.
Answer: D
2. Which of the following is not the characteristic of a public company?
(a) It has a separate legal entity.
(b) It has a perpetual succession.
(c) It has a common seal and separate property.
(d) Its shares are non transferable.
Answer. D
3. A and B were the only members of a company who died in a road accident. In this case, the
company comes to end on the death of A and B.
(a) True (b) False (c) Partly True (d) Partly False
Answer: B
4. A company being a legal person is also a citizen under the Constitution of India
(a) True (b) False (c) Partly True (d) Partly False
Answer: B
5. A statutory company or corporation is one which is incorporated
(a) By an Act of Parliament
(b) By an Act of State Legislature
(c) Under the Companies Act, 2013
(d) By either (a) or (b)
Answer – D
6. In case of a company limited by guarantee, the liability of the members can be enforced
(a) At any time when the company so decides
(b) Only at the time of winding up of the company
(c) Only by an order of court
(d) Only by an order of Registrar of Companies
Answer: B
7. A Government Company is one in which 51% or more of the paid up share capital is held by
(a) Central Government alone
(b) State Government alone
(c) Central and State Government jointly
(d) Any of the above
Answer: D
8. At the time of registration the filing of Articles of Association with the Registrar of Companies is
compulsory for
(a) Private companies, unlimited companies and companies limited by guarantee
(b) Unlimited companies only
(c) Companies limited by shares only
(d) All types of companies
Answer: A
9. If at the time of registration, a company limited by shares does not file Articles of Association with
the Registrar, then
(a) The company cannot be registered without this document
(b) The company is deemed to be adopted Table F”
(c) The company is deemed to have become a company with unlimited liability
(d) The directors become liable to be punished with fine at the rate of 250 for each day during which
the default continues
Answer: B
10. On 14th July, the Registrar of Companies issued a Certificate of
Incorporation, but it was dated 10th July instead of 14th July. From which
date the company will legally come into existence?
(a) 10th July (b) 14th July
(c) 31stJuly (d) None of these
Answer: A
11. A company comes into existence when
(a) the memorandum of association is signed by the required number of members.
(b) the memorandum of association’ is submitted for registration to the Registrar of Companies.
(c) lt is registered under the Companies Act, 2013.
(d) It establishes its registered office and starts functioning there form.
Answer: C
12. A company formed for the promotion of commerce, art, science. religion, charity etc. may not
use the word limited at the end of its name, even if it is a limited company.
(a) True (b) False (c) Partly True (d) Partly False
Answer: A
13. The Registered office clause of Memorandum of Association contains
(a) The name of the state in which the registered office of the company is to be situated.
(b) The name of the city/town only and not that of the state.
(c) The name of Registrar of companies.
(d) The complete postal address.
Answer: A
14. The Object clause of Memorandum of Association must be divided into two Sub Clauses, namely
(i) main objects clause, and (ii) object in
furtherance of main object clause.
(a) True (b) False (c) Partly True (d) Partly False
Answer: A
15. which of the following statements is correct ?
(a) In limited companies, the liability of members holding fully paid up shares is nil.
(b) In companies limited by guarantee, the liability of members is limited to the amount which they
have agreed to pay.
(c) Both (a) and (b) are correct. (d) None of these is correct.
Answer: C
16. For which of the following companies it is not obligatory to have Articles of Association ?
(a) Public Companies Limited by Shares
(b) Public Companies Limited by Guarantee
(c) Private Limited Companies
(d) Unlimited Companies
Answer: A
17. Which of the following statements is correct ?
(a) The memorandum and articles’ are binding on the members in their relation to the company.
(b) The memorandum and articles are binding on the company in their relation to the members.
(c) None of these is true
(d) Both of these are true
Answer: D
18. Company’s memorandum and articles are public documents.
(a) True (b) False (c) Partly True (d) Partly False
Answer:A
19. In case ‘memorandum and ‘articles’ are inconsistent, then which shall prevail over the others ?
(a) Memorandum of Association
(b) Articles of Association
(c) The one approved by Registrar
(d) None of these
Answer: A
20. A public company having a share capital can start its business on obtaining
(a) Certificate of incorporation and approval of Company Law Board.
(b) Certificate to commence business and approval of Company Law Board.
(c) ‘Certificate of Incorporation
(d) Approval of High Court.
Answer: B
21. Company has ————–succession.
(a) Longer
(b) Continued
(c) Perpetual
(d) Limited
Answer: c
22. If company do not follow the principle of separate legal entity——————can be done.
(a) Lifting of corporate veil (b) Principle of equity
(c) Principle of natural justice (d) All of above
Answer: A
23. Total managerial remuneration in a public company cannot be ———of net profit.
(a) 10% (b) 11%(c) 18% (d) 11.5%
Answer. B
24. Audit of Government Company is done by C & AG. This statement is:
(a) True (b) False
(c) Partly True I (d) Partly False
Answer: A
25. Any Corporate Body/Association of Firm can be appointed as director of the company. This
statement is:
(a) True (b) False
(c) Partly True (d) Partly False
Answer: B

. What are the limits of number of members in a Private Company?

(a) Fifty (b) Seven (c) Twenty (d) Two hundred
Answer: D
2. If XYZ is the holding company of P&R Ltd. then, which of the following
statement is not true in this regard.
(a) XYZ Ltd. controls the composition of Board of P&R
(b) XYZ Ltd. holds more than 50% of the nominal value of the equity shares
(c) Both (a) & (b)
(d) None of the above
Answer: D
3. Which of the following is not a stage of the development of company?
(a) Promotion (b) ProductionD(c) Incorporation (d) Commencement of Business
Answer: B
4. which of the following company/companies are registered by the Companies Act, 2013?
(a) Government Company (b) Private Company (c) Public Company (d) All of the above
Answer: D
5. A public company must have at least————- directors whereas a private company must have at
least ——————-directors.
(a) 3;2 (b) 2;3 (C)2;5 (d)8;10
Answer: A
6. A subsidiary of a government company is also treated as a
(a) Government Company (b) Public Company
(c) Private Company (d) All of the above
Answer: A
7. The_____________ of a government company is appointed or reappointed by the Comptroller and
Auditor General of India.
(a) Auditor (b) Company Secretary (c) Both (a) and (b) (d) None of the above
Answer: A
8. Which of the following company is incorporated in a country outside India?
(a) Private Company (b) Foreign Companies (c) Government Company (d) None of the above
Answer: B
9. Which of the following statement is false?
(a) No legal formality is required to form a company.
(b) The shareholders of a company have limited liability.
(c) A company can own property in its own name.
(d) A company is managed by the elected representatives of shareholders.
Answer: A
10. A is one who performs the preliminary duties necessary to bring a company into being and float
it.
(a) Auditor (b) Promoter (c) Director I (d) Financer
Answer: B
11. The registered office clause of memorandum of association contains
(a) The name of the state in which the registered office of the company is to be situated.
(b) The name of the city/town only and not that of the state.
(c) The name of registrar of companies
(d) The complete postal address.
Answer: A
12. “One who undertakes to form a company with reference to a given object and set it going and
who takes the necessary steps to accomplish that purpose
(a) Promoter (b) Directors (c) C.E.O. (d) Board of Directors
Answer: A
13. Which of the following are the functions of a promoter?
(a) Decides name of a company
(b) Nomination of directors
(c) Settles the details of memorandum and articles
(d) All of these
Answer: D
14. A is neither an agent, nor a trustee of a company.
(a) Directors (b) Company Secretary
(c) Employees (d) Promoters
Answer: D
15. Which documents contains the constitution of a company?
(a) Memorandum of Association
(b) Articles of Association
(c) Both (a) and (b)
(d) None of these
Answer: A
16. Which documents contains the regulations relating to the internal management of a company?
(a) Memorandum of Association
(b) Articles of Association
(c) Both (a) and (b)
(d) None
Answer: B
17. For vetting the MOA and AOA, as per SPICE, eMOA and eAOA is required.
(a) True (b) False
(c) Partly True (d) None of the above.
Answer: A
18. The companies are regulated under .
(a) Companies Act, 1596 (b) Companies Act, 1957A(c) Indian Partnership Act,1932 (d) Companies
Act, 2013
Answer: D
19. The certificate of incorporation is that the company is entitled to commence business.
(a) Exclusive (b) Conclusive
(c) Supportive (d) Either (a) or (b)
Answer: D
20. The whole process of the company formation may be divided into three direct stages, the
sequence is-
(a) Promotion, incorporation by registration, commencement of business.
(b) Incorporation by registration, commencement of business, promotion.
(c) Commencement of business, promotion, incorporation by registration.
(d) Commencement of business, incorporation by registration, promotion.
Answer: A
21. Company is managed by
(a) Shareholders (b) Board of Directors (c) Karta (d) Both(a)&(b)
Answer: . B
22. H.U.F. consists of which type of members
(a) Both (b) & (c) (b) Heterogeneous
(c) Homogeneous (d) None of the above
Answer: C
23. Partnership is governed by Partnership Act
(a) 1956 (b) 1948 (c) 1932 (d) 1982
Answer: C
24. which is not a case of lifting of corporate veil
(a) Connors Bros. v. Connors (b) Jones v. Lipren
(c) Pearce v. Brookes (d) CIT v. Meenakshi Mills Ltd.
Answer: C
25. Word Corporation’ is———— than company
(a) Narrow (b) Wider (c) (a) or (b) I (d) All of the above
Answer: B

1. How many members should sign the MOA in case of public company?
(a) 1 (b) 5 (c) 3 (d) 7
Answer: D
2. —————-conceives the idea of the business.
(a) Promoters (b) Auditors (c) Directors (d) Shareholders
Answer: A
3. Shares of company are freely transferable.
(a) Private company (b) Public company (c) Both (a) & (b) (d) None of the above
Answer: B
4. Life Insurance Corporation Ltd. is formed under;
(a) Companies Act, 2018 (b) Special Act of Parliament (c) Both (a) and (b) (d) None of the above
Answer: B
5. Company’s corporate personality was brought forward in the case of:
(a) Macaura V. Northern Assurance Co. Ltd. (b) Jons V. Lip ran.
(c) CIT V. Meenakshi Mills Ltd. (d) Salomon V Salomon and Co. Ltd.
Answer: D
6. Which of the following is a non trading association ?
(a) Company (b) Partnership firm (c) Club (d) HUF
Answer: C
7. Promoter is both an agent and trustee of the proposed company.
(a) True (b) False (c) Partly True I (d) Partly False
Answer: B
8. Liability clause in MOA is required by:
(a) Company limited by shares
(b) Company limited by guarantee
(c) Company limited by both shares and guarantee
(d) All of the above
Answer: D
9. Articles of unlimited company having share capital is included in:
(a) Table I (b) Table G (C) Table H (d) Table F
Answer: A
10. Which one of the following is not a main clause of memorandum of association?
(a) Name clause (b) Capital clause (c) Object clause (d) Profit clause
Answer:
11. ————–is to be executed on a non judicial stamp paper.
(a) Share warrant (b) Power of attorney (b) Incorporation certificate (d) None of the above
Answer: B
12. The word company is derived from ————word Com Panis”.
(a) French (b) Latin (c) German (d) Indian
Answer: B
13. Which of the following are the characteristics of a company?
(a) Corporate Personality (b) Limited Liability
(c) Perpetual Succession (d) All of the above
Answer: D
14. The company has a capacity to sue and be——–
(a) Incorporated (b) Sued (c) Both (a) and (b) (d) None of the above
Answer: B
15. A company may be an
(a) Incorporated company (b) Unincorporated company (c) Both (a) and (b) (d) None of the above
Answer: C
16. A word corporation is derived from latin term “corpus” which means:-
(a) Body (b) Legal Person (c) Artificial Person (d) None of the above
Answer: A
17. The liability of the member of the company is limited to the extent of the of the shares held by
them.
(a) Unpaid value (b) Paid value (c) Nominal value (d) All of the above
Answer: C
18. Which of the following statement is correct?
(a) Partners are the agents of the firm but member of company are not its agents
(b) Partner cannot contract with his firm but a member of a company can
(c) Both (a) and (b)
(d) None of these is correct
Answer: C
19. In public company, the members of the company is not less than .
(a) Two (b) Seven (c) Ten (d) Twenty
Answer: B
20. In Private Company, member of the company is not less than
(a Seven (b) Ten (c) Two (d) Eight
Answer: C
21. A company is a on the other hand a club is a
(a) Trading association, non trading association.
(b) Non trading association, trading association.
(c) Trading association, trading association.
(d) None of these.
Answer: A
22. Which of the following are not the advantages of incorporation?
(a) Separate property (b) Unlimited liability
(c) Capacity to sue (d) Flexibility & autonomy
Answer: B
23. Which of the following are not the disadvantage of incorporation?
(a) Formalities and expenses (b) Corporate disclosure
(c) Limited liability (d) Both (a) and (b)
Answer: C
24. Which of the following are kinds of companies?
(a) Private companies (b) Producer companies
(c) Both (a) and (b) (d) None of the above
Answer: C
25. Provisions related to accounts, winding up, calls on shares, forfeiture, etc. are contained in
(a) Articles of Association (b) Memorandum of Association
(c) Prospectus (d) Statement in lieu of prospectus
Answer: A
1. Advantage of incorporated company is
(a) Corporate disclosures (b) Common seal
(c) Capacity to sue (d) Windier up procedure
Answer: C
2. Find the odd one out:-
(a) Private Company (b) Public Company (c) Consumer Company (d) Producer Company
Answer: C
3. Joint shareholders are counted as
(a) Two (b) No limit (c) 50 (d) One
Answer: D
4. Example of company limited by guarantee
(a) Clubs (b) Both (a) & (c) (c) Societies (d) None of the above
Answer: B
5. Which is not a registered company
(a) Company limited by share (b) Company limited by guarantee
(c) Both (a) & (b) (d) None of the above
Answer: D
6. Public company shares are dealt in
(a) Stock exchange (b) Public (c) Market (d) All of the above
Answer: A
7. Is there any limit on borrowings to a Private Company
(a) Limit up to RS 50,000 (b) Limit up to 1 lakh
(C) No limit (d) None
Answer: C
8. Unlimited company may be subsequently converted into limited company
(a) True (b) Partly true (c) False (d) None of the above
Answer: C
9. Non Profit companies are also called
(a) Holding companies (b) Licensed companies
(c) Subsidiary companies (d) Government companies
Answer: .B
10. Government company comes under section
(a) 2(46) (b) 2(44) (c) 2(43) (d) 2(45)
Answer: D
11. Foreign company must issue prospectus
(a) True (b) Partly true (c) False (d) None of these
Answer: A
12. Company’s memorandum & articles are public documents
(a) True (b) False (c) Partly True (d) Partly False
Answer: A
13. For incorporation or registration
(a) MOA must be subscribed (b) AOA must be subscribed (c) Only MOA (d) Both (a)&(b)
Answer: D
14. MOA contains of company
(a) Constitutions (b) Regulations (c) Declaration (d) None of these
Answer: A
15. MOA has clauses
(a) 9 (b) 7 (c) 6 I (d) 10
Answer: C
16. AOA is also called as of the company
(a) Regulations (b) Bye Laws (c) Provisions (d) Both (a) or (b)
Answer: D
17. Tables I includes articles of
(a) Unlimited company having share capital
(b) Company limited by guarantee
(c) Company limited by shares
(d) Public company
Answer: A
18. which amongst the following documents is not required to be filed by a foreign company with the
Registrar?
(a) Address of the registered office of the company
(b) Address of the principles place of business in India
(c) Declaration of Solvency
(d) Articles of Association
Answer: C
19. Lifting of corporate veil is permitted
(a) By statue (b) Voluntary (c) Any time (d) None of these
Answer: A
20. which one of the following is NOT an essential feature of a company?
(a) Perpetual Succession (b) Unlimited Liability (c) Separate Property (d) Transferability of shares
Answer: B
21. which one of the following statement is not true regarding a company?
(a) The shares of a company can be transferred
(b) lt is very simple and easy to form a company
(c) It is a separate legal entity
(d) It has independence to form its policies
Answer: B
22. Which one of the following is NOT a disadvantage of a company?
(a) It does not has a capacity to sue
(b) It has more social responsibility
(c) Greater tax burden
(d) More disclosures
Answer: A
23. Which of the following statement is NOT true regarding a private company?
(a) It cannot invite public to subscribe to shares or debentures
(b) Restricts the right to transfer its share
(c) At least five members are required to form a company
(d) It should have at least two directors
Answer: C
24. The auditor of a Government company is appointed by
(a) Central Government
(b) Comptroller and Auditor General of India
(c) Directors of the Company
(d) Shareholders of the Company
Answer. B
25. The maximum managerial remuneration which can be paid by a private company is
(a) 11% of net profit (b) 11% of turnover
(c) 5% of share capital (d) None of the above
Answer: D
26. In case of a company limited by shares, the members are liable to the extent of
(a) Nominal value of share
(b) Called up value of shares
(c) They are personally liable
(d) None of the above
Answer: A
27. Which one of the following is not true with reference to an unlimited company?
(a) The liability is extended to their personal property
(b) The members are not liable directly to the creditors of the company
(c) It cannot convert itself into a public company
(d) All of the above
Answer: C
28. A “not for profit” company is permitted as per which section of the Companies Act, 2013?
(a) Sec. 2(i) (iv) (b) Sec. 5 (c) Sec. 8 (d) Sec. 12.
Answer . C
29. The licence to form a company not for profit” is granted by
(a) State Government
(b) Registrar
(c) High Court
(d) Central Government
Answer: . D
30. Government company is defined under which section of the Companies
Act, 2013?
(a) Sec. 2(45) (b) Sec. 2(44) (c) Sec. 2(43) (d) None of the above
Answer: A