Multiple Choice Questions

Unit 1- Basics of Company

Q1) In Roopali Marketing Company Private Limited (Authorised capital 50,000 shares of ₹ 10 each and paid-up share capital of ₹ 4,50,000), 1000 shares are jointly held by Abeer and Abheek; another 800 shares are jointly held by Seema and Srividya; and another 1200 are jointly held by Ramesh, Raksha and Rajneesh. Further, 42,000 shares are held by 193 individual persons in their individual capacity. Is it possible for the company to induct more persons?                                                                          

(a) The company is unable to induct more persons since it already has two hundred individual members.

(b) The company can induct four more persons as members.

(c) The company can induct another 20 persons (i.e. 10% of two hundred individual members) after seeking permission from the concerned ROC.

(d) If the company does not want to seek permission of the concerned ROC, it can induct only 10 more persons (i.e. 5% of two hundred individual members).

 

Q2) Vinay and Sanjay made a name reservation application accompanied by requisite fee to the Registrar for forming a new private company. The Registrar accorded its approval for reservation of most preferred name Vinanjay Softwares Private Ltd. on 7th July, 2018. By which date necessary documents for incorporation of the company must be submitted to the Registrar so that the reserved name does not get lapsed.                                                                                                                                    

(a) Latest by 20th July, 2018

(b) Latest by 27th July, 2018

(c) Latest by 4th August, 2018

(d) Latest by 4th September, 2018

 

Q3) Swastik Private Limited passed a Special Resolution to change its name to Swastik Darshan Private Limited on 30th May, 2019. Relevant MCA filing was done on due time and then Company got its new stationery printed on 1st July, 2019. However, there was a delay in issue of Certificate and Company received new certificate on 20th August, 2019 which was issued on 10th August, 2019. Company wants to enter into a lease agreement for new premise. When can they enter inter such agreement in new name of the Company?                                                                                                                  

(a) 30th May, 2019

(b) 1st July, 2019

(c) 20th August, 2019

(d) 10th August, 2019

 

 Q4) If a company changes its name; which of the following is most accurate:

(a) It is not allowed to use old name in any way

(b) New name should not be identical with old name

(c) Old name should be painted/printed for next 1 year along with new name

(d) Old name should be painted/printed for next 2 years along with new name

 

Q5) A Public company may be formed by:

(a) Only two persons

(b) Not more than three persons

(c) Not more than Seven Persons

(d) Seven or more Persons

 

Q6) Roma along with her six friends has got incorporated Roma Trading Ltd. in May 2019. She kept the paid-up share capital at ₹ 30 lacs. Further, in April 2020, she noticed that in the last financial year, the turnover of the company was well below ₹ 2 crores. Advise whether the company can be treated as a ‘small company’.

(a) Roma Trading Ltd. is definitely a ‘small company’ since its paid-up capital is much below ₹ 50 lacs and also its turnover has not exceeded the threshold limit of ₹ 2 crores.

(b) The concept of ‘small company’ is applicable only in case of a private limited company/OPC and therefore, despite meeting the criteria of ‘small company’ it being a public limited company cannot enjoy benefits of ‘small company’.

(c) Unlike a private limited company/OPC which automatically becomes a ‘small company’ as soon as it meets the criteria of ‘small company’, Roma Trading Ltd. being a public limited company has to maintain the norms applicable to a ‘small company’ continuously for two years so that, thereafter, it is treated as a ‘small company’.

(d) If all the shareholders of Roma Trading Ltd. give an undertaking to the ROC stating that they will not let the paid share capital and also turnover exceed the limits applicable to a ‘small company’ in the next two years, then it can be treated as a ‘small company’.

 

Q7) Abhilasha and Amrita have incorporated a ‘not for profit’ private limited company which is registered under Section 8 of the Companies Act, 2013. One of their friends has informed them that their company can be categorized as a ‘small company’ because as per the last profit and loss account for the year ending 31st March, 2019, its turnover was less than ₹ 2.00 crores and its paid up share capital was less than ₹ 50 Lacs. Advise.

(a) A section 8 company, which meets the criteria of ‘turnover’ and ‘paid-up share capital’ in the last financial year, can avail the status of ‘small company’ only if it acquires at least 5% stake in another ‘small company’ within the immediately following financial year.

(b) If the acquisition of minimum 5% stake in another ‘small company’ materializes in the second financial year (and not in the immediately following financial year) after meeting the criteria of ‘turnover’ and ‘paid-up share capital’ then with the written permission of concerned ROC, it can acquire the status of ‘small company’.

(c) The status of ‘small company’ cannot be bestowed upon a ‘not for profit’ company which is registered under Section 8 of the Companies Act, 2013.

(d) A section 8 company, if incorporated as a private limited company (and not as public limited company) can avail the status of ‘small company’ with the permission of concerned ROC, after it meets the criteria of ‘turnover’ and ‘paid-up share capital’.

 

Q8) Anu got incorporated ‘One Person Company’ with her sister Alpa as the nominee and about three years have passed satisfactorily. From time to time, Anu does a number of charitable works and is associated with three NGOs. In the meantime, her business under her OPC has also flourished. Now she is contemplating to convert the OPC either as a Section 8 company (i.e. formation of companies with charitable objects). Choose the correct option.

(a) Since company belongs to Anu, she has full discretion to convert the OPC either as a Section 8 company or as a private or public company

(b) Since the company was formed as a private company, the only option available with Anu is to convert it into a public limited company.

(c) There is specific prohibition on converting OPC into a Section 8 company; otherwise, it can be converted into a private or public company without any hindrance.

(d) Since Anu does a lot of charitable works there is no prohibition to converts his OPC into a Section 8 company (companies formed with charitable objects).

 

Q9) If a company is registered by furnishing incorrect information then its winding up may be ordered by:

(a) Central Government

(b) Registrar of Companies

(c) National Company Law Tribunal

(d) Court

 

Q10) ________________ cannot be a subscriber to the Memorandum of Association and Articles of Association.

(a) A company

(b) Government

(c) Minor

(d) Major

 

 

Q11) In case of a private company, the provisions for entrenchment may be made at the time of formation of the company or by amendment of articles,

(a) By passing a special resolution

(b) With the consent of all the members

(c) By passing a special resolution and approval of the Central Government

(d) With the consent of all the members and approval of the Central Government

 

Q12) Where a company is granted licence under section 8, it is not required to use the word …………… even though it is a limited company:

(a) Guarantee company

(b) Limited Liability Partnership

(c) Limited or Private Limited, as the case may be

(d) Development Authority

 

Q13) Where a company is granted licence under section 8, it is not required to use the word …………… even though it is a limited company:

(a) Guarantee company

(b) Limited Liability Partnership

(c) Limited or Private Limited, as the case may be

(d) Development Authority

 

Q14) A Ltd. is holding 61% shares in B Ltd. and B Ltd. holds 51% in C Ltd. State which is the correct statement here:

(a) C Ltd. is the holding company to A Ltd.

(b) C Ltd. is the holding company to B Ltd.

(c) B Ltd. is the Subsidiary to C Ltd.

(d) Both B Ltd. and C Ltd. are subsidiary to A Ltd.

 

 Q15) The Best Dry Fruits Ltd was incorporated under the Companies Act, 1913. Whether the provisions of the Companies Act, 2013 shall apply on it:

(a) No, the provisions of the Companies Act, 2013 shall not apply on it.

(b) Yes, the provisions of the Companies Act, 2013 shall apply on it.

(c) The Companies Act, 1913 was enacted by the British Government, hence only an Act made by British Government shall apply on such company.

(d) Since, this company was incorporated by the British Government, hence the Companies Act of UK Govt shall apply.

 

Q16) Namita Ceramic Goods Limited having 152 members was incorporated with the main objects of manufacture of ceramic goods, glazed, unglazed floor and wall tiles, etc. and to carry on trading in such products. After three years of successful operation, it wants to diversify its business by entering into the field of manufacturing electronic goods for which it is required to alter its objects clause. Advise the company in relation to alteration of Memorandum.

(a) The company can alter its Memorandum of Association by passing an ordinary resolution and obtaining the confirmation of the Regional Director (RD).

(b) The company can alter its Memorandum of Association by passing a special resolution at the shareholders’ meeting.

(c) The company can alter its Memorandum of Association in relation to the objects clause by passing a special resolution at the shareholders’ meeting and obtaining the confirmation of the Regional Director (RD).

(d) The company can alter its Memorandum of Association in relation to the objects clause by passing a special resolution at the shareholders’ meeting and simultaneously publishing the contents of special resolution in two newspapers (one in English and the other one in vernacular language) circulating in that area

 

Q17) Anupam incorporated a ‘One Person Company’ (OPC) with his sister Alpana as the nominee and about three years have passed satisfactorily. Anupam does a number of charitable works and is associated with three NGOs. His business under his OPC has also flourished. Now he is planning to convert the OPC into a Section 8 company (i.e. a company formed with charitable objects). Choose the correct option.

(a) Since the company belongs to Anupam, he has full discretion to convert the OPC either as a Section 8 company or as a private or public company

(b) Since the company was formed as a private company, the only option available with Anupam is to convert it into a public limited company.

(c) There is specific prohibition on converting OPC into a Section 8 company; otherwise it can be converted into a private or public company without any hindrance.

(d) Since Anupam does a lot of charitable works there is no prohibition on converting his OPC into a Section 8 company.

 

Case Scenario Question 

1. Purshottam Prasad, a business graduate from a leading B-School, has been running a chain of restaurants as a sole proprietor concern. The business is based in Chennai. Mr. Prasad, in order to develop the business; decided to corporatize his business but he is concerned with dilution of his control over business decisions.

Mr. Prasad, during a journey met Mr. Chinmay Dass; one of his old school friends. Mr. Chinmay Das is presently working in one of leading corporate advisory firms. Mr. Prasad seeks advice from Mr. Dass, regarding conversion of sole proprietorship concern to company and also explain his intention to keep the entire control in his hand. Mr. Dass informed Mr. Prasad, about a new type of company, called One Person Company (OPC), which can be formed under Companies Act, 2013. Mr. Dass quoted section 2(62), which defines ‘one person company’ as a company which has only one person as a member.

Mr. Prasad, felt OPC is correct form of business for him, hence he promoted an OPC ‘Casa Hangout Private Limited’ (One Person Company) on 14^th September 2019, to which he sold his sole proprietory business and became the sole member. Mr. Prasad, appointed his younger son Mr. Vijay, who was 21 year old then, as Nominee to OPC. Mr. Anand who is a famous food blogger and old friend of Mr. Prasad was appointed as director of OPC, Mr. Prasad himself also become director of company.

Mr. Vijay is a professional photographer, and went abroad for a certification course on 23^rd October 2019. He came back on 1^st of March 2020. He established a photo-studio as an OPC called ‘Best Click Private Limited’ (one Person Company) on 20^th March 2020, in which Mr. Prasad is nominee and he became sole member. In the mean time, Mr. Vijay also gave his consent as nominee to another OPC in which his elder brother Mr. Shankar is sole member.

Mr. Prasad met an accident on 25^th March 2020, in which he lost his life. Nomination clause was invoked, as a result Mr. Vijay has to take charge over ‘Casa Hangout Private Limited’ (One Person Company) as member with immediate effect. On 30^th March 2020 Mr. Shankar was appointed as a new nominee to ‘Casa Hangout Private Limited’ (One Person Company), who gave written consent on 31^st March 2020. Mr. Shankar who is an investment banker by profession, is of the opinion that ‘Casa Hangout Private Limited’ (One Person Company) needs to amend its object clause and add ‘carry out investment in securities of body corporate’ as one of the objects.

The Financial year closed on 31^st March 2020. Financial statements of ‘Casa Hangout Private Limited’ (One Person Company), which is not containing cash flow statements were signed by Mr. Anand who left as only director after death of Mr. Prasad.

Multiple Choice Questions

1.1 With reference to appointment of Mr. Vijay and Mr. Shankar as nominee to ‘Casa Hangout Private Limited’ (One Person Company)’, out of followings, who is eligible to be nominee of OPC?

(a) Any natural person excluding minor

(b) Any legal person excluding minor

(c) Any natural person, who is resident of India; but excluding minor

(d) Any natural person as well as citizen of India; but excluding minor

 

1.2 Shankar if he wishes to withdraw his consent as nominee, can do so by giving written notice to

(a) Director of OPC and to sole member of company

(b) Director of OPC and to Registrar of companies

(c) Sole member of company and to OPC

(d) Sole member of company and to Registrar of companies

 

1.3 In case of change of Nominee in ‘Casa Hangout Private Limited’ (One Person Company), a notice shall be given to ROC by OPC; in form number INC -4 along with written consent of Nominee in form INC-3 from Mr. Shankar; within

(a) 30 days from appointment of Mr. Shankar

(b) 30 days from withdrawal (because he will become member) of consent as nominee by Mr. Vijay,

(c) 30 days from written consent of Mr. Shankar

(d) 15 days from written consent of Mr. Shankar

 

1.4 With reference to legal position of Mr. Vijay as member/s and nominee/s to various OPCs, which of the following statement is correct with reference to ceiling limit in relation to membership and being nominee to OPC? A person, other than minor; at specific point of time;

(a) Can be member in any number of OPCs but nominee in one OPC

(b) Can be member in one OPC and nominee in any number of OPCs

(c) Can be member in one OPC and nominee in another one OPCs

(d) Can be member and nominee both in any number of OPCs

 

1.5 Which of following statement is correct, with reference to requirement for financial Statements of ‘Casa Hangout Private Limited’ (One Person Company)

(a) Must be signed by one director

(b) Must be signed by at-least two directors

(c) Must contain cash flow statement as part of financial statements

(d) None of the above

 

20.6 With reference to opinion of Mr. Shankar to add ‘carry out investment in securities of body corporate’ object, ‘Casa Hangout Private Limited’ (One Person Company)

(a) Cannot carry out non-banking financial investment activities & investment in securities of body corporate’

(b) Cannot carry out non-banking financial investment, but can invest in securities of body corporate’

(c) Can carry-out non-banking financial investment & invest in securities of body corporate’

(d) None of the above

 

Watch this video for Answer discussion and explanation

 

 

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