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Question 1Business Environment and Forms of Business Organisation

Under the Companies Act, 2013, a private company is one whose articles restrict the transfer of shares and which limits the number of its members to a maximum of:

  1. 50
  2. 500
  3. 200 Correct answer.
  4. 100

Explanation

Section 2(68) of the Companies Act, 2013 defines a private company as one that restricts share transfers, limits members to 200 (excluding present and past employees who are members), and prohibits public invitations for securities. The cap of 200 is counted per joint-holder group as a single member.

Question 2Business Environment and Forms of Business Organisation

A One Person Company registered under the Companies Act, 2013 must be formed as:

  1. a limited liability partnership
  2. a public company
  3. a private company Correct answer.
  4. a producer company

Explanation

Section 2(62) read with Rule 3 of the Companies (Incorporation) Rules, 2014 requires an OPC to be incorporated as a private company with only one person as member. It enjoys the privileges of a private company, including the relaxed quorum and board-meeting norms.

Question 3Business Environment and Forms of Business Organisation

Which document governs the internal management of a company and is subordinate to the memorandum of association?

  1. The articles of association Correct answer.
  2. The annual return
  3. The prospectus
  4. The certificate of incorporation

Explanation

The articles of association contain the rules for the internal management of the company and are subordinate to the memorandum, which sets out the objects and scope of activity. Where the two conflict, the memorandum prevails.

Question 4Business Environment and Forms of Business Organisation

A partnership firm carrying on business in India is governed primarily by which statute?

  1. The Indian Partnership Act, 1932 Correct answer.
  2. The Limited Liability Partnership Act, 2008
  3. The Companies Act, 2013
  4. The Societies Registration Act, 1860

Explanation

The Indian Partnership Act, 1932 codifies the definition, formation, rights and dissolution of partnership firms. Registration under the Act is optional but affects the enforceability of rights in court.

Question 5Business Environment and Forms of Business Organisation

The liability of a partner in a limited liability partnership is:

  1. limited only in respect of tortious claims
  2. unlimited for all debts of the LLP
  3. limited to his agreed contribution Correct answer.
  4. joint and several with other partners for all obligations

Explanation

Under Section 26 of the LLP Act, 2008 a partner's liability is limited to the amount of contribution agreed in the LLP agreement. A partner is not personally liable for the obligations of the LLP merely by being a partner.

Question 6Business Environment and Forms of Business Organisation

Which of the following is the maximum number of partners permitted in a partnership firm governed by the Indian Partnership Act, 1932, as currently prescribed?

  1. 50
  2. 10
  3. No limit prescribed Correct answer.
  4. 20

Explanation

The erstwhile ceiling of 20 partners (10 for banking) was omitted by the Companies (Amendment) Act, 2000, so the Partnership Act now prescribes no maximum. The practical ceiling arises from the minimum-member requirements of other statutes only where applicable.

Question 7Business Environment and Forms of Business Organisation

A company registered under Section 8 of the Companies Act, 2013 is formed primarily for:

  1. manufacturing goods for export
  2. providing banking services
  3. promoting commerce, art, science, sports, education or charity Correct answer.
  4. trading in securities

Explanation

Section 8 permits incorporation of companies with charitable objects such as promotion of commerce, art, science, sports, education, research, social welfare or protection of the environment. Such companies must apply profits solely to their objects and are prohibited from paying dividends to members.

Question 8Business Environment and Forms of Business Organisation

The doctrine of lifting the corporate veil allows a court to:

  1. dissolve the company automatically on the filing of a suit
  2. convert a private company into a public company
  3. transfer the assets of the company to the Government
  4. ignore the separate legal personality of the company and look at the persons behind it Correct answer.

Explanation

The doctrine is a judicial exception to the rule in Salomon v Salomon, permitting courts to disregard separate personality where the corporate form is used for fraud, tax evasion, or to evade legal obligations. It does not automatically dissolve or convert the company.

Question 9Business Environment and Forms of Business Organisation

The memorandum of association of a company must contain, among other clauses, the:

  1. object clause, liability clause and capital clause Correct answer.
  2. list of directors and their remuneration
  3. borrowing powers and quorum for board meetings
  4. procedure for transfer of shares

Explanation

Section 4 of the Companies Act, 2013 requires the memorandum to state the name clause, registered office clause, object clause, liability clause and capital clause. Matters of internal procedure such as quorum and share transfer belong in the articles.

Question 10Business Environment and Forms of Business Organisation

The minimum number of members required to incorporate a public company under the Companies Act, 2013 is:

  1. 2
  2. 10
  3. 7 Correct answer.
  4. 5

Explanation

Section 3 of the Companies Act, 2013 requires a public company to be formed by at least seven persons subscribing their names to the memorandum. A private company needs only two, and an OPC needs one.

Question 11Business Environment and Forms of Business Organisation

Which body is the primary regulator for listed companies and securities markets in India?

  1. Securities and Exchange Board of India Correct answer.
  2. Insurance Regulatory and Development Authority of India
  3. Competition Commission of India
  4. Reserve Bank of India

Explanation

SEBI was constituted under the SEBI Act, 1992 to protect investors and regulate the securities market, including listed companies. Its powers cover issue of securities, intermediaries and market conduct.

Question 12Business Environment and Forms of Business Organisation

A Hindu Undivided Family carrying on business is treated for income-tax purposes as:

  1. a company
  2. an association of persons
  3. a firm
  4. a separate person distinct from its members Correct answer.

Explanation

Under Hindu law and the Income-tax Act, 1961, an HUF is a separate taxable entity distinct from its coparceners, managed by the karta. It is not a company, firm or AOP under the Act.

Question 13Business Environment and Forms of Business Organisation

A cooperative society registered under a State Cooperative Societies Act is characterised by:

  1. voting rights proportionate to shares held
  2. one member, one vote irrespective of shareholding Correct answer.
  3. unlimited liability of all members
  4. profit distribution to outside investors

Explanation

Cooperative societies follow the principle of democratic control, under which each member has one vote regardless of the number of shares held. Profits are distributed as dividends or patronage refunds to members, and liability is typically limited.

Question 14Business Environment and Forms of Business Organisation

A producer company under the Companies Act, 2013 must have at least:

  1. five individual producers and two institutional members
  2. twenty members and five directors
  3. ten individual producers or two producer institutions Correct answer.
  4. seven members and three directors

Explanation

Section 581C (now Section 378C) requires at least ten individual producers or two producer institutions to incorporate a producer company. There is no upper limit on the number of members.

Question 15Business Environment and Forms of Business Organisation

Which of the following best distinguishes a company from a partnership firm?

  1. A company cannot own property in its own name
  2. A firm must always be registered
  3. A company has perpetual succession while a firm does not Correct answer.
  4. A company cannot sue or be sued in its own name

Explanation

A company enjoys perpetual succession: it continues to exist despite changes in membership, whereas a partnership is dissolved by death or retirement of a partner unless the deed provides otherwise. A company can own property and sue in its own name, and firm registration is optional.

Question 16Business Environment and Forms of Business Organisation

The liability of members of a company limited by guarantee is limited to:

  1. their entire personal assets
  2. the market value of their shares
  3. the amount they have undertaken to contribute in the event of winding up Correct answer.
  4. the amount unpaid on their shares

Explanation

In a company limited by guarantee, members undertake in the memorandum to contribute a fixed amount in the event of winding up, and their liability is confined to that undertaking. Such companies usually have no share capital.

Question 17Business Environment and Forms of Business Organisation

The name of a company must end with which of the following for a company limited by shares?

  1. Limited or Private Limited as applicable Correct answer.
  2. Unlimited
  3. Private Limited only
  4. Corporation

Explanation

Section 13 of the Companies Act, 2013 requires the name of a limited company to end with the word 'Limited' and of a private limited company with 'Private Limited'. This signals limited liability to persons dealing with the company.

Question 18Business Environment and Forms of Business Organisation

The registered office clause in the memorandum of association specifies:

  1. the authorised share capital
  2. the State in which the registered office is situated Correct answer.
  3. the names of the auditors
  4. the exact street address of every branch

Explanation

Section 4 requires the memorandum to state the State in which the registered office is to be situated. The exact address is intimated to the Registrar in Form INC-22, and changes within the State are governed by Section 12.

Question 19Business Environment and Forms of Business Organisation

A foreign company under the Companies Act, 2013 is one that:

  1. is incorporated in India but has shareholders abroad
  2. has foreign directors only
  3. exports goods from India
  4. is incorporated outside India but has a place of business in India Correct answer.

Explanation

Section 2(42) defines a foreign company as any company or body corporate incorporated outside India which has a place of business in India, whether by itself or through an agent. Mere foreign shareholding or directorship does not make an Indian company foreign.

Question 20Business Environment and Forms of Business Organisation

Which of the following statements about a company's separate legal personality is correct?

  1. The company is a legal person distinct from its members Correct answer.
  2. The company is a partnership of shareholders
  3. The company's property belongs to the shareholders
  4. The company is an agent of its shareholders

Explanation

The rule in Salomon v Salomon & Co Ltd established that a company is a legal person separate from its members, owning its own property and bearing its own liabilities. Shareholders have limited liability and no direct ownership of company assets.

Question 21Business Environment and Forms of Business Organisation

The minimum number of directors required in a public company under the Companies Act, 2013 is:

  1. 1
  2. 7
  3. 3 Correct answer.
  4. 2

Explanation

Section 149 requires a public company to have at least three directors, a private company at least two and an OPC at least one. The maximum is fifteen, extendable by special resolution.

Question 22Business Environment and Forms of Business Organisation

Which of the following is a characteristic of a company limited by shares?

  1. Liability of members is limited to the unpaid amount on their shares Correct answer.
  2. Shares cannot be transferred
  3. Members are personally liable for all company debts
  4. It cannot issue debentures

Explanation

Section 2(22) provides that in a company limited by shares, the liability of members is limited to any amount unpaid on the shares held. Once fully paid, no further liability attaches to the member.

Question 23Business Environment and Forms of Business Organisation

The concept of 'one person company' requires the sole member to nominate another individual who will become member in the event of the member's death or incapacity. This nominee must be:

  1. a minor
  2. an individual who is a citizen of India and resident in India Correct answer.
  3. a company registered in India
  4. a foreign national with no residence in India

Explanation

Rule 4 of the Companies (Incorporation) Rules, 2014 requires the nominee of an OPC to be a natural person who is an Indian citizen and resident in India. Only a natural person can become a member, so a corporate nominee is not permitted.

Question 24Business Environment and Forms of Business Organisation

Which of the following is a distinguishing feature of a public limited company compared with a private limited company?

  1. It may invite the public to subscribe to its securities Correct answer.
  2. It cannot have more than 200 members
  3. It may restrict the transfer of shares
  4. It must have at least two directors

Explanation

A public company may invite the public to subscribe to its securities, subject to the prospectus and SEBI requirements, whereas a private company is prohibited from doing so by Section 2(68). Public companies also require at least seven members and three directors.

Question 25Business Environment and Forms of Business Organisation

A partnership at will arises when:

  1. the partners agree to continue after dissolution
  2. the partnership deed fixes a term for its duration
  3. the partnership is registered with the Registrar of Firms
  4. no provision is made for the duration or determination of the partnership Correct answer.

Explanation

Section 7 of the Indian Partnership Act, 1932 defines a partnership at will as one where no provision is made for its duration or for determination of the partnership. It can be dissolved by notice by any partner.

Question 26Business Environment and Forms of Business Organisation

Under the Companies Act, 2013, a One Person Company must be formed as which type of company?

  1. A public company limited by shares
  2. An unlimited liability company
  3. A Section 8 charitable company
  4. A private company limited by shares or by guarantee Correct answer.

Explanation

Section 2(62) defines a One Person Company as a company with only one person as its member, and the proviso to Section 3(1)(c) restricts OPC formation to a private company. The OPC therefore carries the 'private limited' designation and the private-company compliance framework, with relaxations such as board meeting and annual return exemptions. It cannot be incorporated as a public company.

Question 27Business Environment and Forms of Business Organisation

A group of seven individuals wishes to float a company with the object of promoting research in renewable energy and intends to apply its profits, if any, solely to that object. Which incorporation route fits this object?

  1. A Section 8 company with a licence from the Central Government Correct answer.
  2. A foreign company registered under Section 379
  3. A producer company registered under Part XXIA
  4. A company limited by guarantee with a share capital

Explanation

Section 8 permits the Central Government to license a company formed for charitable, research, or similar objects that applies its profits only to promoting those objects and prohibits dividend payment to members. Such a company enjoys privileges such as exemption from the 'Limited' suffix and relaxed compliance. A guarantee company or producer company does not carry this profit-application restriction.

Question 28Business Environment and Forms of Business Organisation

Which statement correctly describes the position of a minor admitted to the benefits of a partnership under the Indian Partnership Act, 1932?

  1. The minor can be made personally liable for the firm's obligations, but only after electing to become a partner on attaining majority
  2. The minor is entitled to inspect and copy the firm's accounts only after attaining majority and giving public notice
  3. The minor becomes personally liable for all firm debts incurred after admission
  4. The minor's share is liable for the firm's acts, but the minor's personal liability is limited to that share Correct answer.

Explanation

Section 30 allows a minor to be admitted to the benefits of partnership with the consent of all partners. The minor's share in the firm's property and profits is liable for the firm's acts, but the minor is not personally liable for the firm's obligations. On attaining majority, the minor must elect within six months whether to become a partner, and personal liability arises only from such election.

Question 29Business Environment and Forms of Business Organisation

A private limited company incorporated in 2019 has, over the years, received deposits from 220 persons. Its articles contain no restriction on the transfer of shares. Which compliance position is most accurate?

  1. It remains a private company because the 200-member ceiling counts only equity shareholders
  2. It has ceased to be a private company unless the Central Government grants an exemption
  3. It remains a private company because its members have not exceeded 200
  4. It has ceased to be a private company because the number of persons whose deposits it accepts exceeds 200 Correct answer.

Explanation

The proviso to Section 2(68) treats persons who have accepted deposits from the company, whether jointly or severally, as members for the purpose of the 200-member ceiling. Where that ceiling is breached, the company loses its private character and must comply with public company requirements. The restriction on share transfer is only one of the three conditions in the definition.

Question 30Business Environment and Forms of Business Organisation

A statutory corporation and a government company both pursue public objectives. Which comparison of their legal and operational character under Indian law is most accurate?

  1. A statutory corporation is created by a special Act and its powers and functions derive from that Act, whereas a government company is incorporated under the Companies Act, 2013 and governed by its memorandum and articles Correct answer.
  2. A statutory corporation has perpetual succession, but a government company lacks perpetual succession because its shares are held by the State
  3. Both bodies are subject to the audit of the Comptroller and Auditor General, so their accountability regimes are identical
  4. A government company cannot be treated as an instrumentality of the State for fundamental rights purposes because it is not created by statute

Explanation

A statutory corporation owes its existence and powers to the special Act that creates it, and that Act sets out its objects, functions, and accountability. A government company is a company incorporated under the Companies Act, 2013 in which the government holds not less than 51 per cent of the paid-up share capital. Both may be audited by the CAG, but their governing frameworks differ.

Question 31Promotion and Incorporation of Companies

Under the Companies Act, 2013, what is the minimum number of persons required to subscribe their names to the memorandum of a public company?

  1. Five
  2. Two
  3. Three
  4. Seven Correct answer.

Explanation

Section 3(1)(a) of the Companies Act, 2013 requires a public company to be formed by at least seven persons subscribing their names to the memorandum. A private company needs only two and a one person company needs one. The number of subscribers is a formation requirement independent of the minimum paid-up capital.

Question 32Promotion and Incorporation of Companies

A promoter of a company yet to be incorporated signs a contract with a supplier in the company's proposed name. The company is later registered but does not ratify the contract. What is the promoter's position?

  1. The promoter is personally liable because the company did not exist when the contract was made and has not adopted it Correct answer.
  2. The promoter is automatically discharged once the certificate of incorporation is issued
  3. The contract is void ab initio and neither party can enforce it
  4. The supplier can enforce the contract only against the company because the name was used

Explanation

A company has no legal existence before incorporation, so it cannot be bound by a pre-incorporation contract unless it adopts the contract after registration. In the absence of ratification or a fresh contract, the promoter who contracted remains personally liable. The use of the proposed name does not shift liability to a non-existent entity.

Question 33Promotion and Incorporation of Companies

Which document filed with the Registrar contains the objects for which a company is formed and the liability of its members?

  1. Prospectus
  2. Articles of association
  3. Board resolution
  4. Memorandum of association Correct answer.

Explanation

The memorandum of association is the charter of the company and states the name, registered office, objects, liability of members and capital clause. The articles contain internal management rules. The memorandum defines the scope of the company's permitted activities.

Question 34Promotion and Incorporation of Companies

Two individuals wish to incorporate a company in which the liability of members is limited by guarantee with a share capital. Which statement is correct under the Companies Act, 2013?

  1. A company limited by guarantee may be formed with or without share capital, but the form must be chosen in the memorandum Correct answer.
  2. A company limited by guarantee cannot be registered without share capital
  3. A guarantee company must always be a public company
  4. A guarantee company must have at least seven members

Explanation

Section 3(2) permits a company limited by guarantee to be formed with or without share capital, and the memorandum must state the form. The subscribers' liability is limited to the amount they undertake to contribute on winding up. Guarantee companies may be public or private.

Question 35Promotion and Incorporation of Companies

Which of the following is a recognised classification of promoters based on their role in floating a company?

  1. Statutory promoters appointed by the Registrar of Companies
  2. Judicial promoters appointed by the tribunal
  3. Professional promoters who float companies for clients and hand over control Correct answer.
  4. Nominal promoters appointed by the stock exchange

Explanation

Promoters are commonly classified by function, for example professional promoters who promote companies for others and then transfer control, and occasional promoters who float a company for their own venture. The Registrar, tribunal and stock exchange do not appoint promoters. The classification turns on the promoter's relationship to the enterprise.

Question 36Promotion and Incorporation of Companies

A private company proposes to adopt articles that are silent on any matter. Which model set of articles applies by default?

  1. Table H of Schedule I
  2. Table C of Schedule I
  3. Table F of Schedule I Correct answer.
  4. Table A of Schedule I

Explanation

Where a company does not register its own articles or leaves a matter unprovided for, Table F of Schedule I applies to companies limited by shares. The tables in Schedule I supply model regulations for different company forms. Adopting Table F by default keeps the internal rules statutory.

Question 37Promotion and Incorporation of Companies

What is the effect of the doctrine of indoor management in relation to a company's internal proceedings?

  1. An outsider dealing in good faith may assume that internal procedures have been duly complied with Correct answer.
  2. An outsider is deemed to know every internal irregularity of the company
  3. Directors can bind the company only if internal formalities are proved by the outsider
  4. The doctrine applies only to transactions with the government

Explanation

The doctrine of indoor management, associated with Royal British Bank v Turquand, protects outsiders who deal in good faith by presuming that internal procedures have been followed. It complements the rule in constructive notice that outsiders are deemed to know the public documents. The doctrine does not apply where the outsider has actual knowledge of the irregularity or is an insider.

Question 38Promotion and Incorporation of Companies

Which of the following names would the Registrar be most likely to reject as being too close to an existing company name?

  1. A name identical to an existing company except for the addition of the word 'India' Correct answer.
  2. A name that includes the promoter's surname and no existing company uses that surname
  3. A name that reflects the objects of the proposed company without resembling any existing name
  4. A name that is entirely different in wording and phonetics from any registered company

Explanation

Under the name availability rules, a proposed name is rejected if it is identical or too nearly resembles an existing name, including where only words such as 'India' are added. Distinctiveness in wording and phonetics supports availability. The test is resemblance likely to deceive or cause confusion.

Question 39Promotion and Incorporation of Companies

Which form is used to apply for reservation of a name for a proposed company with the Registrar?

  1. INC-22
  2. SPICe+ Part A Correct answer.
  3. MGT-14
  4. DIR-12

Explanation

Reservation of a name for a new company is made through Part A of the SPICe+ form, which is the integrated incorporation application. INC-22 is used for notice of the registered office. DIR-12 concerns appointment of directors and MGT-14 concerns board resolutions. The reservation step precedes incorporation filing.

Question 40Promotion and Incorporation of Companies

A promoter reserves a name for a proposed company but fails to incorporate it within the validity period. What is the consequence?

  1. The Registrar converts the reservation into a registered company
  2. The reservation is automatically extended for a further identical period
  3. The reserved name lapses and may be allotted to another applicant Correct answer.
  4. The name remains blocked permanently in favour of the promoter

Explanation

A reserved name is valid only for the period prescribed by the rules, and if incorporation is not completed within that period the name lapses. The Registrar may then allot the name to another applicant. Reservation does not create a permanent right to the name.

Question 41Promotion and Incorporation of Companies

Which of the following is a document that must accompany the incorporation application for a company with a share capital?

  1. The annual return for the year of incorporation
  2. The minutes of the first annual general meeting
  3. The memorandum and articles subscribed by the subscribers, with their particulars Correct answer.
  4. The audited financial statements of the first financial year

Explanation

The incorporation application must include the memorandum and articles signed by the subscribers together with their particulars, and declarations and address proofs as prescribed. Financial statements, first annual general meeting minutes and annual returns relate to events after incorporation. They cannot exist at the time of formation.

Question 42Promotion and Incorporation of Companies

A subscriber to the memorandum of a proposed company is a foreign national residing abroad. Which requirement applies to the subscriber's signature and particulars?

  1. The subscriber must sign and the documents must be duly notarised or apostilled as prescribed for foreign subscribers Correct answer.
  2. The foreign subscriber must physically be present before the Registrar
  3. The foreign subscriber's signature is unnecessary if a resident director signs
  4. A foreign subscriber cannot subscribe to an Indian company's memorandum

Explanation

Foreign subscribers may subscribe to the memorandum, but their signatures and identity documents must be authenticated as prescribed, typically through notarisation or apostille. Physical presence before the Registrar is not required. There is no bar on foreign nationals subscribing to an Indian company.

Question 43Promotion and Incorporation of Companies

Which of the following is a consequence of the issue of a certificate of incorporation by the Registrar?

  1. The company acquires a permanent exemption from filing annual returns
  2. The company's directors are automatically absolved of liability for pre-incorporation acts of the promoter
  3. The company becomes a body corporate capable of exercising all functions of an incorporated company Correct answer.
  4. The subscribers become immune from liability under the memorandum

Explanation

On registration the Registrar issues a certificate of incorporation, and from that date the company is a body corporate with perpetual succession and a capacity to act. The certificate is conclusive evidence of incorporation. It does not extinguish promoter liability or create filing exemptions.

Question 44Promotion and Incorporation of Companies

A company's articles contain a clause restricting the transfer of shares. A member transfers shares in breach of that clause. What is the likely effect?

  1. The transfer is valid only if approved by the tribunal
  2. The transfer is void and the shares vest in the Registrar
  3. The transfer is automatically valid because the articles cannot restrict share transfers
  4. The transfer may be refused registration by the board because the articles govern transferability Correct answer.

Explanation

The articles are a contract between the company and its members, and a restriction on transfer in the articles can be enforced by the board refusing registration of a transfer made in breach. The shares remain with the transferor until a valid transfer is registered. Tribunal approval is not a general requirement for share transfers.

Question 45Promotion and Incorporation of Companies

Which of the following statements about the registered office of a company is correct at the time of incorporation?

  1. The registered office must always be the promoter's residence
  2. The company may operate without a registered office for the first year
  3. The registered office can be outside India if the board so resolves
  4. The company must have a registered office capable of receiving communications from the date of incorporation Correct answer.

Explanation

A company must have a registered office from the date it begins business or within the period prescribed, and it must be capable of receiving communications. The address is disclosed in the incorporation documents and verified. The registered office must be in India and cannot be the promoter's residence merely by default.

Question 46Promotion and Incorporation of Companies

A first director of a company is proposed in the articles or appointed by the subscribers. Which form is filed with the Registrar to record the appointment?

  1. DIR-12 Correct answer.
  2. SH-7
  3. ADT-1
  4. INC-7

Explanation

Particulars of appointment of the first directors and other directors are filed in Form DIR-12 along with consent and declaration. The incorporation application itself may contain the first directors' details, but the appointment record is filed in DIR-12. Other forms deal with capital, incorporation or auditor appointment.

Question 47Promotion and Incorporation of Companies

Which of the following persons is disqualified from being appointed as a director of a company under the Companies Act, 2013?

  1. A person who is a resident of a different state
  2. A person who is a shareholder of another company
  3. An undischarged insolvent Correct answer.
  4. A person who holds a degree in commerce

Explanation

Section 164 disqualifies a person who is an undischarged insolvent, of unsound mind, convicted of certain offences, or who has failed to comply with statutory requirements. Holding a commerce degree, being a shareholder elsewhere, or residing in another state are not disqualifications. The disqualifications are personal and specific.

Question 48Promotion and Incorporation of Companies

A company wishes to change its registered office from one state to another. Which additional approval is required beyond the board and members' resolution?

  1. Approval of the Registrar of the destination state only
  2. No approval is required if the members pass a special resolution
  3. Approval of the Central Government through the Regional Director Correct answer.
  4. Approval of the stock exchange only

Explanation

A change of registered office from one state to another requires a special resolution of members and approval of the Central Government, exercised through the Regional Director. The Regional Director considers objections before confirming the change. A special resolution alone is insufficient for an inter-state shift.

Question 49Promotion and Incorporation of Companies

Which of the following best describes the liability of members of a company limited by shares?

  1. Liability is limited to the amount of the company's paid-up capital as a whole
  2. Liability is unlimited for all debts of the company
  3. Liability is limited to a fixed guarantee amount stated in the articles
  4. Liability is limited to the amount unpaid on the shares held by them Correct answer.

Explanation

In a company limited by shares, a member's liability is limited to any amount unpaid on the shares held. Once shares are fully paid, the member has no further liability to contribute. This is distinct from a guarantee company, where liability is limited to the guaranteed amount.

Question 50Promotion and Incorporation of Companies

A promoter makes a secret profit while selling property to the company he is promoting. What remedy is available to the company?

  1. The company has no remedy because the promoter acted before incorporation
  2. The company may recover only if the property was overvalued by the Registrar
  3. The company may recover the secret profit from the promoter Correct answer.
  4. The company may only terminate the promoter's directorship

Explanation

A promoter stands in a fiduciary position towards the company and must not make secret profits. If a promoter makes an undisclosed profit, the company may recover it or rescind the transaction. The remedy exists even though the acts occurred before incorporation.