Tag: formation and promotion of a company

Questions Related to formation and promotion of a company

The company has a capacity to sue and be _______.

business organisation and correspondence joint stock company 3 - promotion and formation of a company formation and promotion of a company promoter promotion and formation of a company

  1. Incorporated

  2. Sued

  3. Both (a) and (b)

  4. None of the above

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Correct Option: B
Explanation:
Under Companies Act, a company becomes a separate legal entity as compared to its members. The company is distinct and different from its members in law. It has its own seal and its own name, its assets and liabilities are separate and distinct from those of its members. It is capable of owning property, incurring debt, and borrowing money, employing people, having a bank account, entering into contracts and suing and being sued separately.

Which of the following are not the disadvantages of incorporation?

business organisation and correspondence joint stock company 3 - promotion and formation of a company formation and promotion of a company promoter promotion and formation of a company

  1. Formalities and expenses

  2. Corporate disclosure

  3. Limited liability

  4. Both (a) and (b)

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Correct Option: C
Explanation:
Limited Liability:
The liability of the members of the company is limited to contribution to the assets of the company upto the face value of shares held by him. A member is liable to pay only the uncalled money due on shares held by him. If the assets of the firm are not sufficient to pay the liabilities of the firm, the creditors can force the partners to make good the deficit from their personal assets. This cannot be done in the case of a company once the members have paid all their dues towards the shares held by them in the company

Which of the following company is incorporated in a country outside India?

business organisation and correspondence joint stock company 3 - promotion and formation of a company formation and promotion of a company promoter promotion and formation of a company

  1. Private Company

  2. Foreign Company

  3. Government Company

  4. None of the above

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Correct Option: B
Explanation:
Definition of Foreign Companies under the Act: The Act clearly defines a foreign company under Section 2(42). A foreign company is any company or body corporate incorporated outside India which—
  • has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
  • conducts any business activity in India in any other manner.
Hence, a foreign entity to be considered as a foreign company, has to fulfill both the criteria mentioned above, i.e., having a place of business in any manner specified above, and conducting any business activity in India.

A company may be an ____________.

business organisation and correspondence joint stock company 3 - promotion and formation of a company formation and promotion of a company promoter promotion and formation of a company

  1. Incorporated company

  2. Unincorporated company

  3. Both (a) and (b)

  4. None of the above

Show answer
Correct Option: C
Explanation:
An incorporated business, or a corporation, is a separate entity from the business owner and has natural rights. Conversely, a business owner and an unincorporated business are the same, and the owner personally bears all results of the business. Unincorporated businesses are usually sole proprietor or partnership companies. The main difference between an incorporated and unincorporated business is the way owners shoulder business activities.

Which of the following are not the advantages of incorporation?

business organisation and correspondence joint stock company 3 - promotion and formation of a company formation and promotion of a company promoter promotion and formation of a company

  1. Separate property

  2. Unlimited liability

  3. Capacity to sue

  4. Flexibility & autonomy

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Correct Option: B
Explanation:

Unlimited liability is not an advantage of incorporation.

The company bears Limited Liability:
The liability of the members of the company is limited to contribution to the assets of the company upto the face value of shares held by him. A member is liable to pay only the uncalled money due on shares held by him. If the assets of the firm are not sufficient to pay the liabilities of the firm, the creditors can force the partners to make good the deficit from their personal assets. This cannot be done in the case of a company once the members have paid all their dues towards the shares held by them in the company.

Promoter is both an agent and trustee of the proposed company.

business organisation and correspondence joint stock company 3 - promotion and formation of a company formation and promotion of a company promoter promotion and formation of a company

  1. True

  2. False

  3. Partly True

  4. Partly False

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Correct Option: B
Explanation:

False

A promoter is neither a trustee nor an agent of the company which he promotes because there is no trust or principal in existence at the time of his efforts. But certain fiduciary duties, like an agent, have been imposed on him under the Companies Act. As such he is said to be in & fiduciary position (a position full of trust and confidence) towards the company and the original allottee of shares. Consequently, a promoter must make full disclosure of the relevant facts, including any profit made.

A ________ is one who performs the preliminary duties necessary to bring a company into being and float it. 

business organisation and correspondence joint stock company 3 - promotion and formation of a company formation and promotion of a company promoter promotion and formation of a company

  1. Auditor

  2. Promoter

  3. Director

  4. Financer

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Correct Option: B
Explanation:

A corporate promoter is a firm or person who does the preliminary work incidental to the formation of a company, including its promotion, incorporation, and flotation, and solicits people to invest money in the company, usually when it is being formed.