WorksheetsCompany Law Quiz
Total questions: 100
Worksheet time: 50mins
According to Section 2(20) of the Companies Act, 2013, what is the primary requirement for an entity to be legally recognized as a 'company' in India?
It must have a minimum of seven shareholders
It must undergo formal registration under the Companies Act
It must have a minimum paid-up capital of ₹1 crore
It must be listed on a recognized stock exchange
Which feature of a company ensures that its existence continues regardless of changes in membership, death of members, or transfer of shares?
Limited Liability
Separate Legal Entity
Perpetual Succession
Common Seal
What is the fundamental characteristic that distinguishes a company from a sole proprietorship or partnership?
Higher capital requirements
Separate legal entity status
Government ownership
Unlimited liability
In a company limited by shares, what is the maximum liability of a shareholder?
Unlimited personal liability for all company debts
Limited to the total assets owned by the member
Limited to the unpaid amount on shares held
Limited to twice the share capital invested
What does the saying 'Members may come and members may go, but the company goes on forever' illustrate?
Limited Liability
Perpetual Succession
Common Seal
Transferability of Shares
According to the Companies Act, 2013, the use of a common seal is now:
Mandatory for all companies
Optional, with documents signed by two directors or a director and company secretary as an alternative
Prohibited for private companies
Required only for public companies
Which innovative legal structure introduced by the Companies Act, 2013, allows a single individual to form a company with limited liability benefits?
Sole Proprietorship
One Person Company (OPC)
Micro Company
Single Member Private Limited
What is the mandatory CSR spending requirement for companies meeting specific financial thresholds under the Companies Act, 2013?
1% of average net profits from preceding three years
2% of average net profits from preceding three years
5% of total turnover
3% of paid-up share capital
What are the financial thresholds for mandatory CSR spending? (Select the correct combination)
Net worth ₹100 crore OR turnover ₹500 crore OR net profit ₹10 crore
Net worth ₹500 crore OR turnover ₹1000 crore OR net profit ₹5 crore
Net worth ₹250 crore OR turnover ₹750 crore OR net profit ₹7.5 crore
Net worth ₹1000 crore OR turnover ₹2000 crore OR net profit ₹10 crore
Which specialized tribunal was established by the Companies Act, 2013, to consolidate corporate dispute resolution?
Company Law Board (CLB)
Board for Industrial and Financial Reconstruction (BIFR)
National Company Law Tribunal (NCLT)
Securities Appellate Tribunal (SAT)
What is the primary advantage of e-governance initiatives under the Companies Act, 2013?
Increases paperwork requirements
Promotes transparency
Reduces compliance costs
Simplifies tax filing
Which provision of the Companies Act, 2013, deals with punishment for fraud and imposes severe penalties?
Section 100
Section 250
Section 447
Section 500
What is the minimum and maximum number of members required for a private company?
Minimum 1, Maximum 50
Minimum 2, Maximum 200
Minimum 3, Maximum 100
Minimum 7, Maximum 200
What suffix must be used in the name of a private company?
Limited
Private Limited
Pvt. Ltd.
Either B or C
What is the minimum number of members required to form a public company?
2 members
3 members
7 members
10 members
A private company that is a subsidiary of a public company is deemed to be:
Still a private company for all purposes
A public company for legal purposes
An unlimited company
A dormant company
A holding company is defined as one that:
Holds more than 25% of equity share capital
Holds more than 50% of equity share capital or controls the Board composition
Holds 100% of equity share capital
Is registered as a holding company by the ROC
A company in which not less than 51% of paid-up share capital is held by the Central Government or State Government(s) is classified as:
Public Sector Undertaking
Government Company
Statutory Corporation
State Enterprise
What defines 'significant influence' in the context of an Associate Company?
Control of at least 10% of voting power
Control of at least 20% of voting power or control over business decisions under agreement
Control of at least 30% of voting power
Control of at least 51% of voting power
What are the revised thresholds for a Small Company under the Companies Act, 2013?
Paid-up capital ≤ ₹50 Lakhs and turnover ≤ ₹2 crore
Paid-up capital ≤ ₹2 crore and turnover ≤ ₹20 crore
Paid-up capital ≤ ₹4 crore and turnover ≤ ₹40 crore
Paid-up capital ≤ ₹10 crore and turnover ≤ ₹100 crore
Which of the following companies CANNOT be classified as a Small Company?
A newly incorporated private company
A holding or subsidiary company
A company with paid-up capital of ₹3 crore
A company with turnover of ₹30 crore
A foreign company is defined as one that:
Is incorporated outside India but has a place of business in India
Is incorporated in India but operates abroad
Has only foreign directors
Has only foreign shareholders
A listed company is one that:
Has more than 500 shareholders
Has any of its securities listed on a recognized stock exchange
Has a turnover exceeding ₹1000 crore
Is registered with SEBI only
What is a dormant company under Section 455?
A company that has ceased all operations permanently
A company formed for future projects with no significant accounting transactions
A company in liquidation
A company with no employees
What is the key distinction between "Body Corporate" and "Company" as per the Companies Act, 2013?
They are identical terms with no distinction
Every company is a body corporate, but not every body corporate is a company
Body corporate only refers to foreign companies
Company is a broader term than body corporate
Which of the following is NOT included in the definition of "Body Corporate"?
Companies incorporated under the Companies Act
Foreign companies operating in India
Co-operative societies registered under co-operative laws
Statutory corporations like LIC or SBI
In a company limited by guarantee, when does the liability of members primarily arise?
During normal operations
When the company is being wound up
When dividends are declared
When shares are transferred
Which type of company is most commonly used for non-profit purposes like promoting arts, sports, or education?
Company limited by shares
Company limited by guarantee
Unlimited company
One Person Company
What is the primary disadvantage of an unlimited company?
Limited access to capital
Personal assets of members can be used to pay company debts
Cannot enter into contracts
Must have more than 100 members
A One Person Company (OPC) must appoint:
At least two directors
A nominee who will become the member in case of the sole member's death or incapacity
A minimum of three shareholders
A board of at least five directors
How many stages are involved in the formation of a company?
Two stages
Three stages
Four stages
Five stages
Which stage involves conception of business idea, market research, and feasibility studies?
Incorporation Stage
Promotion Stage
Capital Subscription Stage
Commencement of Business Stage
According to Section 2(69), a promoter is defined as a person who:
Only invests money in the company
Is named in the prospectus, has control over company affairs, or whose advice the Board acts upon
Is appointed as the first auditor
Registers the company with ROC
Which of the following is NOT a typical function of a promoter?
Conducting feasibility studies
Drafting MOA and AOA
Auditing the company's financial statements
Entering into preliminary contracts
What is the full form of RUN service provided by MCA?
Register Unique Name
Reserve Unique Name
Request Unique Name
Regulate Unique Name
How many alternative names can typically be submitted in a RUN application?
1-2 names
2-6 names
5-10 names
10-15 names
What is the typical validity period of a Digital Signature Certificate (DSC)?
6 months to 1 year
2-3 years
5 years
Lifetime validity
What is the full form of DIN?
Director Identity Number
Director Identification Number
Director Information Number
Director Index Number
Once allotted, what is the validity of a Director Identification Number (DIN)?
5 years
10 years
Lifetime validity
Valid until resignation from all directorships
How many essential clauses must the Memorandum of Association (MoA) contain?
Four clauses
Five clauses
Six clauses
Eight clauses
Which clause of the MOA specifies the state where the company's registered office will be situated?
Name Clause
Registered Office (Situation) Clause
Objects Clause
Capital Clause
Which clause of the MOA defines the primary business activities for which the company is incorporated?
Name Clause
Liability Clause
Objects Clause
Association Clause
What does the Capital Clause of the MOA specify?
The company's paid-up capital
The company's authorized share capital
The company's reserve capital
The company's borrowed capital
Which table in Schedule I of the Companies Act provides the model form of MOA for companies limited by shares?
Table A
Table B
Table C
Table F
Altering the Objects Clause of the MOA generally requires:
Ordinary Resolution
Special Resolution
Board Resolution
Written Resolution
Changing the company's registered office from one state to another requires approval from:
Only shareholders through Special Resolution
Shareholders, Regional Director, and NCLT
Only the Board of Directors
Only the Registrar of Companies
The Articles of Association (AOA) is subordinate to:
Only the Memorandum of Association
Only the Companies Act
Both the MOA and the Companies Act
Neither the MOA nor the Companies Act
Which document governs the internal management and operations of a company?
Memorandum of Association
Articles of Association
Prospectus
Certificate of Incorporation
The Articles of Association can be altered by passing a:
Ordinary Resolution
Special Resolution
Board Resolution
Written Resolution
What is the full form of SPICe+?
Simple Proforma for Incorporating Company Electronically Plus
Simplified Proforma for Incorporating Company Electronically Plus
Standard Proforma for Incorporating Company Electronically Plus
Special Proforma for Incorporating Company Electronically Plus
Which form is used for the SPICe+ integrated application?
Form INC-1
Form INC-7
Form INC-32
Form DIR-3
What is the typical timeline for ROC verification of incorporation documents?
1-3 working days
7-15 working days
21-30 working days
45-60 working days
What is the most vital document issued by the ROC confirming a company's legal existence?
Incorporation Application
Certificate of Incorporation
MOA
AOA
What is the full form of CIN?
Company Identity Number
Corporate Identification Number
Corporate Identity Number
Company Index Number
How many digits does a Corporate Identity Number (CIN) contain?
11 digits
15 digits
21 digits
25 digits
A misstatement in a prospectus includes:
Only untrue statements
Only material omissions
Both untrue/misleading statements and material omissions
Minor typographical errors
What is the minimum imprisonment term for criminal liability due to misstatement in a prospectus?
3 months
6 months
1 year
2 years
What is the maximum imprisonment term for criminal liability due to misstatement in a prospectus?
5 years
7 years
10 years
14 years
Within what timeframe must a company hold its first Board Meeting after incorporation?
15 days
21 days
30 days
45 days
Within what timeframe must a company hold its first AGM from the closing of its first financial year?
3 months
6 months
9 months
12 months
According to Section 2(84), a "share" fundamentally means:
A bond issued by the company
A share in the share capital of a company, including stock
A debenture of the company
A loan to the company
What is the primary characteristic that distinguishes equity shares from preference shares?
Equity shares have fixed dividends; preference shares have variable dividends
Equity shares have voting rights and variable dividends; preference shares have preference in dividends and capital repayment
Equity shares cannot be traded; preference shares can be traded
There is no difference between them
Equity shares with differential voting rights (DVRs) provide:
Higher voting rights with lower dividends
Different voting rights compared to normal equity shares, often limited or no voting but compensating features
No dividends but maximum voting rights
Equal voting and dividend rights
Cumulative preference shares differ from non-cumulative preference shares in that:
They can be converted to equity shares
Unpaid dividends accumulate and must be paid in future profitable years
They have higher voting rights
They are always redeemable
Redeemable preference shares are:
Never repaid by the company
Repaid after a fixed period or upon specified conditions
Converted into debentures
Only issued by private companies
What is a private placement in the context of share issuance?
Inviting the general public to subscribe
Issuing shares to a select group of identified persons through a private offer letter
Selling shares on stock exchanges
Distributing shares to employees only
What is an Initial Public Offer (IPO)?
The second time a company offers shares to the public
The first time a company offers its shares to the general public
A private sale of shares
A buyback of shares
In the book building process, what is the purpose of establishing a price band?
To fix the exact share price before bidding
To allow price discovery based on investor demand during the bidding period
To prevent any bidding
To eliminate underwriters
What is allotment of shares?
The initial application for shares
The formal process of accepting applications and assigning shares to successful applicants
The cancellation of share applications
The transfer of shares between investors
When a share issue is oversubscribed, shares are often allotted on a:
First-come, first-served basis
Pro-rata (proportionate) basis
Random selection basis
Highest bidder basis
What is the primary purpose of an Employee Stock Ownership Plan (ESOP)?
To reduce company profits
To motivate employees, align their interests with shareholders, and aid in retention
To exclusively benefit directors
To eliminate salary payments
Under Section 68, what is a buyback?
The company selling its assets
The company repurchasing its own shares from the market or shareholders
The company issuing new shares
The company declaring dividends
What is the maximum buyback value limit that requires only a Board Resolution?
5% of paid-up capital and free reserves
10% of paid-up capital and free reserves
25% of paid-up capital and free reserves
50% of paid-up capital and free reserves
Sweat equity shares are issued to directors or employees:
At market price for cash
At a discount or for non-cash consideration like know-how or intellectual property
Only for cash payments
At a premium to market price
Bonus shares are:
Shares sold at a discount to employees
New shares issued free of cost to existing shareholders from accumulated profits or reserves
Shares issued only to new investors
Shares that must be purchased at market price
What is the primary purpose of issuing bonus shares?
To raise fresh capital
To capitalize accumulated profits, conserve cash, and increase market liquidity
To reduce the number of shareholders
To eliminate reserves
Right shares are offered:
Only to new investors
Exclusively to existing shareholders in proportion to their current shareholding
To the general public
Only to institutional investors
The primary purpose of right shares is to:
Dilute existing shareholders' ownership
Protect existing shareholders' proportionate ownership and prevent dilution
Force shareholders to invest more
Transfer ownership to new investors
The key difference between right shares and bonus shares is:
Both are free of cost
Right shares are offered for a price; bonus shares are issued free of cost
Bonus shares require payment; right shares are free
There is no difference
Capital reduction under Section 66 requires confirmation by:
Only the Board of Directors
Only the shareholders through Special Resolution
Special Resolution and confirmation by NCLT
Only the Registrar of Companies
A share certificate must be issued within how many months from the date of allotment?
1 month
2 months
3 months
6 months
What is the Demat system?
A system for physical share certificates
A process of converting physical share certificates into electronic form
A system for issuing new shares
A system for calculating dividends
The two main depositories in India are:
BSE and NSE
NSDL and CDSL
SEBI and RBI
MCA and ROC
What is the key difference between transfer and transmission of shares?
Both are voluntary processes
Transfer is voluntary; transmission occurs by operation of law
Transmission is voluntary; transfer is involuntary
There is no difference
When preference shares are redeemed out of distributable profits, a sum equal to the nominal amount must be transferred to:
General Reserve Account
Dividend Account
Capital Redemption Reserve (CRR) Account
Profit and Loss Account
According to Section 123, from which sources can a company declare and pay dividends?
Only from current year's profits
From current year's profits, previous years' profits, or money provided by government for dividends
From borrowed funds
From share capital
Declared dividend must be paid to shareholders within how many days?
15 days
30 days
45 days
60 days
If dividend remains unpaid or unclaimed for 7 years, it must be transferred to:
Company's General Reserve
State Government Treasury
Investor Education and Protection Fund (IEPF)
Shareholder's bank account
According to Section 2(30), a debenture is:
An ownership certificate in the company
A debt instrument evidencing a debt of the company
A voting right document
A dividend entitlement certificate
The key difference between debenture holders and shareholders is:
Debenture holders are owners; shareholders are creditors
Debenture holders are creditors with no voting rights; shareholders are owners with voting rights
Both have equal rights
Debenture holders have voting rights; shareholders do not
Corporate meetings are formal gatherings primarily to:
Discuss only social matters
Make decisions on company affairs, ensure accountability, and comply with statutory requirements
Distribute refreshments
Conduct employee training
An Annual General Meeting (AGM) must be held by every company:
Once every two years
Once in every financial year
Twice in every financial year
Only when required
The first AGM must be held within how many months from the closing of the first financial year?
3 months
6 months
9 months
12 months
Subsequent AGMs must be held within how many months from the closing of the financial year?
3 months
6 months
9 months
12 months
What is the maximum interval allowed between two consecutive AGMs?
6 months
9 months
12 months
15 months
The ordinary business transacted at an AGM includes all EXCEPT:
Consideration of financial statements
Declaration of dividends
Appointment of auditors
Alteration of Memorandum of Association
An Extraordinary General Meeting (EGM) is convened to transact:
Ordinary business
Special business that cannot wait until the next AGM
Only auditor appointments
Social events
Members holding at least what percentage of paid-up share capital can requisition an EGM?
5%
10%
15%
20%
If the Board fails to call an EGM after a valid requisition, the requisitionists can call the meeting within:
One month
Two months
Three months
Six months
A company must hold at least how many Board Meetings in each calendar year?
2 meetings
3 meetings
4 meetings
6 meetings
