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Formation of Company

Q. By whom the qualification shares are subscribed?

Ans: - The directors of the company subscribe the qualification shares.

 Q. How many signatories are required for the Memorandum of Association of a public Limited Company?

Ans: - Seven members are required to sign the Memorandum of Association of a public limited Company. 

Q. How many signatories are required for the Memorandum of Association of a Private Company?

Ans: - Two members are required for the Memorandum of Association of a private company.

 Q. When can a private company commence business?

Ans: - A private company can commence business after obtaining Certificate of Incorporation.

 Q.  When can a public company commence business?

Ans: - A public company can commence business after obtaining certificate to commence business.

 Q. What documents specify the objectives of the company?

Ans: - Memorandum of Association specifies the objects of the company.

 Q. Which document is issued by a company to invite public to purchase its shares?

Ans: - Prospectus is issued by a company to invite public to purchase its shares.

 Q. What is a company?

Ans: - An association of a number of individuals for the purpose of carrying on some legitimate business.

 Q. How many signatories are required for the Memorandum of Association of a public Limited Company?

Ans: - Seven members are required to sign the Memorandum of Association of a Public limited Company.

 Q. How many signatories are required for the Memorandum of Association of a Private Company?

Ans: - Two members are required for the Memorandum of Association of a private company.

 Q. When can a private company commence business?

Ans: - A private company can commence business after obtaining Certificate of Incorporation.

 Q. When can a public company commence business?

Ans: - A public company can commence business after obtaining certificate to commence business.

 Q. What document specifies the objectives of the company?

Ans: - Memorandum of Association specifies the objects of the company.

 Q. Name the document called ‘Doctrine of indoor management’.

Ans: - Articles of association

 Q. Name the document called ‘Charter of the Company’.

Ans: - Memorandum of association

 Q. Which Clause defines the powers of the Company?

Ans: - Object Clause

 Q. Who is a promoter of a company?

Ans: - A promoter is the person who does the required work before the formation of the company for its incorporation. A promoter plans and organises the business and fulfills all the legal formalities so that new company can come into existence. It may be an individual, a firm, an association of persons.

 Q. Discuss the importance of Memorandum of association.

Ans: - It is the foundation of a business. It shows the capacity to contract of a company. It is constitution of a company which relates with the outside world. No company is allowed to temper with its contents without the sanction of Central Government or court of law. Any act of the company outside the scope of activities as laid down in the memorandum is said to be ultra vires and non binding on it.

 Q. What is Return on Allotment?

Ans: - Return on Allotment is a statement consisting of all the details related to the allotment of shares .It is signed by directors. It has to be filed by registrar within 30 days of allotment Return of allotment gives the following information:

  1. Name and address of the shareholders
  2. Number of shares allotted to each of them

 Q. What is certificate of Incorporation?

Ans: - Whenever the promoters apply for the incorporation he has to file a lot of documents with the registrar of the company. If the registrar gets satisfied he issues the certificate of incorporation. A certificate of Incorporation is a certificate issued by the Registrar of the companies that company is incorporated. With this certificate the company becomes a separate legal entity.

 Q. What is Prospectus? What is its importance?         

Ans: - Prospectus is the circular or invitation given to the general public to subscribe to the shares of the company or invest money in the company.

Importance of Prospectus:  A prospectus serves the following purposes

i.         It is an invitation to the public to subscribe to the shares and debentures of the company.

ii.       It informs about the background and future prospects of the company.

iii.      It informs the general public regarding the business policies and programmes of the company.

 Q. Give any two privileges of Private ltd. Co. over Public Ltd. Company.

Ans: - (i) it can commence business after obtaining the certificate of incorporation.

           (ii) No compulsion to issue Prospectus.

           (ii) No compulsion to maintain index of members.

 

Q. What is meant by Incorporation of a company?

Ans: - Incorporation of a company means the registration of company as a corporate body under the provisions of Companies Act 1956.A Company comes into existence from the date of incorporation.

 Q. What are the stages in the formation of a company?

Ans: - There are four stages in the formation of a company:

  • Promotion
  • Incorporation
  • Subscription of Capital
  • Commencement of Business.

 Q. What is meant by promotion of a company?

Ans: - Promotion means conceiving a business opportunity and translating it in the form of a new company. Promotion includes the preliminary work of the formation of the company. It laying down the foundation of a company for its incorporations. It plays the most important role in giving birth to the company.

 Q. Mention the steps to be taken to obtain certificate of commencement.

Ans: - To commence a business a public company has to obtain a certificate to commence business .Following documents have to be filled with the registrar of the company :-

i.       Prospectus

ii.     Declaration that amounts of minimum subscription has received in cash

iii.    Declaration regarding qualification shares

iv.   Return on Allotment

v.     Declaration that the company has applied for the listing of its shares in a recognised stock exchange

vi. Statutory declaration

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