Tag: promotion and formation of a company

Questions Related to promotion and formation of a company

A company operates its bank account only through _________.

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. Shareholder

  2. Investors

  3. Persons authorized by the Board of Directors

  4. Company Secretary

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Correct Option: C
Explanation:

Person who are authorized by board of directors are only authorized to operates company bank account.

For several reasons, it is important to be able to determine whether or not a person is a promoter. Which one of the following reasons is not a valid reason?

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. Promoters owe fiduciary duties to the unformed company.

  2. Promoters are subject to certain provisions contained in the Companies Act.

  3. Promoters may be liable for acts entered into on behalf of the unformed company.

  4. Promoters who sign their name on behalf of an unformed company can face criminal liability if the company is not subsequently fully incorporated.

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Correct Option: D
Explanation:

Promoter means a person—

 (a) who has been named as such in a prospectus or is identified by the Company in the annual return referred to in section 92; or
 (b) who has control over the affairs of the Company, directly or indirectly whether as a shareholder, director or otherwise; or

 (c) in accordance with whose advice, directions or instructions the Board of Directors of the Company is accustomed to Act
 (d) Promoters owe fiduciary duties to the unformed company.
 (e) Promoters may be liable for acts entered into on behalf of the unformed company.

XYZ private company had reduced to minimum number of members and continued business more than 6 months. The company's liability will 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. limited

  2. unlimited

  3. no change in liability

  4. all of the above

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Correct Option: B
Explanation:

Unlimited liability refers to the legal obligations of general partners and sole proprietors because they are liable for all business debts if the business can't pay its liabilities.

As a promoter is in a fiduciary relationship with the unformed company, he is never permitted to make a profit out of the companys promotion. Statement is true of false.

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. It depends on his own wish

  4. None of the above

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Correct Option: A
Explanation:

True

The promoter stands in a fiduciary relationship to the corporation and its investors, as well as any co-promoters. Promoters have a fiduciary duty to act in good faith and with utmost honesty, and they must always put the interests of the corporation and its shareholders above their own interests.

Which two types of business structure are created via a process 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. Companies and sole proprietorships.

  2. Partnerships and limited liability partnerships

  3. A company and limited liability partnerships

  4. Companies and partnerships

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Correct Option: C
Explanation:

Of the many business entities that owners consider, limited liability partnerships and limited liability company, company are the most popular which are created via process of incorporation.

Decision on which type of company should be formed depends on _______.

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. liability

  2. control

  3. both a&b

  4. none of the above.

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Correct Option: C
Explanation:
Liability and control are two important things which forms a platform for a company to start its operation.
Liability of shareholders, owners, directors should be fixed. 
Control of company is the most important factor after deciding over the liability.

Who conceives the idea of the business?

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. Promoters

  2. Directors

  3. Auditors

  4. None of the above

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Correct Option: A
Explanation:

A promoter is a someone who conceives the idea of business and works to start that business and make it successful.
A  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.

Who stands in the fiduciary position of the 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. Directors

  2. Promoters

  3. Auditors

  4. None of the above

Show answer
Correct Option: B
Explanation:

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.

One person can never be a quorum ___________.

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. Sometimes true

  4. In certain conditions

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Correct Option: D
Explanation:

The general rule is that at least two Directors or one-third of the total number of Directors, whichever is higher should be present in order to constitute a quorum of a meeting of the Board and for a General Meeting, at least five members of a company should be personally present in the case of public company (other than a public company which has become such by virtue of section 43A) and at least two members should be personally present in the case of any other company. In exception to the above provisions, there may be valid meeting with 'one person' present. Following are the cases of one-man meeting:

 (a) Where all of the shares of a particular class (Preference Shares) are held by one person, that person can constitute a meeting of preference shareholders., This may also happen in the case of debenture-holders' meeting where all the debentures issued by a company are held by one person. 
(b) Usually the articles of companies authorize the Board of Directors, subject to the provisions of the Companies Act, to delegate any of its powers to a committee consisting of such Director or Directors as it thinks fit, and if there is no stipulation in such delegation in regard to quorum, one person, if he forms such committee, shall constitute a valid meeting of that committee. 
(c) Regulation 75 of Table 'A' of Schedule I provides (and most of the companies' Articles of Association similarly provide) that if the number of Directors is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing Director or Directors may act for the purpose of increasing the number of Directors or for summoning a General Meeting. In such a case, one Director may form a valid meeting for the limited purpose of appointment of a new Director or Directors or for summoning a General Meeting of the company. 
(d) In the event of default of holding an Annual General Meeting of a company in accordance with section 166, Explanation under sub-section (1) of section 167 of the Act provides that with the direction of the 'Company Law Board', one member of the company shall be deemed to constitute a meeting (one member present in person or by proxy). 
(e) If a meeting other than the Annual General Meeting cannot be called according to the manner prescribed by the Act or the articles, Explanation to sub-section (1) of section 186 provides that the Company Law Board may order a meeting to be held by one member present in person or by proxy. 

The values, beliefs and traditions shared by the members of a company is called _____________.

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. Corporate culture

  2. Consortium

  3. Cross selling

  4. None of the above

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Correct Option: A
Explanation:
Corporate culture refers to the beliefs and behaviors that determine how a company's employees and management interact and handle outside business transactions. Often, corporate culture is implied, not expressly defined, and develops organically over time from the cumulative traits of the people the company hires. A company's culture will be reflected in its dress code, business hours, office setup, employee benefits, turnover, hiring decisions, treatment of clients, client satisfaction and every other aspect of operations.