CS Executive: Setting Up of Business common mistakes
CS Executive: Setting Up of Business · Understand the traps and how to avoid them.
Treating 'private company', 'public company', 'OPC' and 'small company' as interchangeable labels and applying the wrong threshold (members, paid-up capital, turnover) when a question asks which exemptions or compliance duties apply.
Candidates memorise definitions in isolation and never build a comparison table, so under time pressure they default to the label that 'sounds right' rather than checking the statutory criteria for each category.
What to do instead
Build a one-page comparison grid with columns for minimum/maximum members, directors, capital and turnover thresholds, and tick which relaxations (board meeting frequency, quorum, rotation of auditors, cash flow statement, filing) attach to each category. Rehearse by classifying five short company fact patterns per study session before answering any exemption question.
Confusing the promotion-stage documents with the incorporation-stage documents - mixing up the memorandum of association, articles of association, prospectus, statement in lieu of prospectus and the various e-forms filed with the Registrar.
The syllabus presents promotion and incorporation as one narrative, and candidates skim it, so they cannot say which document is constitutive, which is contractual between the company and outsiders, and which is merely a filing.
What to do instead
Draw a timeline from idea to certificate of incorporation and pin each document to a stage. For each document write three lines: who prepares it, what it binds, what happens if it is defective or omitted. Then practise 'which document would you amend to change X' questions until the mapping is automatic.
Answering corporate governance questions by describing good practice in general terms instead of citing the specific statutory mechanism - for example naming the wrong provision for independent directors, audit committee composition, related-party transactions or board meeting intervals.
Governance is taught discursively, so candidates absorb the vocabulary of 'transparency' and 'accountability' but never anchor it to sections, schedules and thresholds, and then write plausible-sounding but unverifiable answers.
What to do instead
Convert each governance topic into a fact card: mechanism, statutory source, numeric threshold, consequence of breach. For board constitution, memorise quorum, meeting frequency, maximum directorships, independent director criteria and committee composition as numbers, not prose. Test yourself by writing the number before the explanation.
Mixing up the instruments and limits for raising capital and managing funds - treating share capital, debentures, deposits, loans and internal accruals as freely substitutable, and ignoring the conditions attached to each.
Candidates learn the definitions but not the conditions, so they miss that acceptance of deposits, issue of debentures and preferential allotment each carry separate limits, approvals and filing duties.
What to do instead
Create a source-of-funds matrix: instrument, who can issue, ceiling, approvals needed, security or charge implications, and default consequences. Pair it with a working-capital versus long-term funding distinction. Answer practice questions by first identifying the instrument, then listing its conditions in order.
Analysing contract questions by intuition about fairness rather than by identifying offer, acceptance, consideration, capacity, free consent and legality in sequence, and then missing the remedy that follows.
Scenario questions read like everyday disputes, so candidates jump to a verdict on who 'should' win without testing each ingredient of a valid contract or checking whether the contract is void, voidable or unenforceable.
What to do instead
Use a fixed checklist for every contract scenario: offer, acceptance, consideration, capacity, free consent, lawful object, then formality. Only after the checklist, decide the status and the remedy (damages, specific performance, restitution, rescission). Write the checklist out at the start of the answer to earn method marks even if the conclusion is contested.
Treating all intellectual property as one right - applying copyright duration to patents, assuming registration is a prerequisite for copyright, or missing that trademarks protect source identification rather than the idea itself.
The four regimes are taught in parallel chapters, and candidates memorise each in isolation without a cross-comparison, so durations, registration requirements and infringement tests bleed into one another.
What to do instead
Build a four-column table for patents, trademarks, copyright and designs: subject matter protected, whether registration is required, term and renewal, infringement test, and remedies. Add a row for trade secrets, which have no registration at all. Then practise classifying ten real-world examples into the correct regime.
Missing the distinction between a director's statutory duty, a disclosure obligation and a penal consequence, so compliance questions are answered with 'the company must inform the authorities' instead of the specific filing, timeline and penalty.
Compliance topics are dense and candidates study them passively, recognising the words on the page but unable to retrieve the timeline or the form when the question supplies only the facts.
What to do instead
Build an event-driven compliance calendar: for each triggering event (appointment, resignation, charge creation, change of registered office), record the form, the authority, the deadline and the penalty for default. Rehearse by reading an event and reciting the filing without looking. Keep the calendar to one page so it is genuinely memorisable.
Confusing the start-up recognition and tax-incentive regime with the general incorporation regime - assuming every newly incorporated company qualifies for start-up benefits, or that recognition is automatic on incorporation.
Start-up content is often skimmed as 'current affairs' rather than studied as a regulatory framework, so candidates do not grasp that eligibility is time-bound, turnover-bound and requires an application and an inter-ministerial recognition.
What to do instead
Write a short eligibility checklist for start-up recognition: age of entity, turnover ceiling, nature of business, innovation requirement, and the application route. Then note separately which benefits flow from recognition and which require a further tax filing. Contrast this with an ordinary private company on the same facts.
Ignoring the business-environment and forms-of-organisation questions as 'general knowledge' and answering them with vague advantages and disadvantages rather than the legal and economic characteristics that distinguish a sole proprietorship, partnership, LLP, company and joint venture.
These questions look easy, so candidates spend their revision on heavy compliance topics and then lose easy marks by writing unsupported generalities about 'limited liability' and 'ease of formation' without linking them to the specific form.
What to do instead
Prepare a comparison table across all forms on liability, legal personality, perpetual succession, ownership transferability, taxation, compliance burden and capital-raising ability. For each form, memorise two decisive characteristics that settle any 'which form suits this situation' question, and practise applying them to a short business scenario.
Writing answers to scenario-based questions without stating the applicable provision or principle first, so the reasoning is invisible and marks are lost even when the conclusion is correct.
Candidates practise by reading model answers rather than writing their own under time pressure, so they never build the habit of leading with the rule and then applying the facts.
What to do instead
Adopt a fixed answer skeleton for every scenario: identify the issue, state the rule with its source, apply the facts point by point, then give the conclusion and remedy. Practise writing three such answers per week under timed conditions and self-mark against the skeleton, not against whether the final line feels right.