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Test: Companies Act- 1 - CA Foundation MCQ


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20 Questions MCQ Test - Test: Companies Act- 1

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Test: Companies Act- 1 - Question 1

The term company is defined under which sec of the Act? 

Detailed Solution for Test: Companies Act- 1 - Question 1

Section 3 (1) (i) of the Companies Act, 1956 Section 2(20) of the companies act, 2013 (As per new applicable law in India)

Test: Companies Act- 1 - Question 2

Property of the company belongs to 

Detailed Solution for Test: Companies Act- 1 - Question 2
Property of the company belongs to:
- Company: The property of the company belongs to the company itself. This includes all the assets, intellectual property, and other tangible and intangible resources owned by the company.
- Shareholders: Shareholders are the owners of the company, as they hold shares in the company. However, they do not own the specific assets of the company individually. Their ownership is in the form of equity in the company.
- Members: Members of a company, particularly in the case of a company with limited liability, have certain rights and benefits. However, they do not have direct ownership of the company's property.
- Promoters: Promoters are individuals or entities who initiate the formation of a company. They play a crucial role in setting up the company and bringing it into existence. However, they do not have direct ownership of the company's property.
In conclusion, the property of the company primarily belongs to the company itself, as it is a separate legal entity. While shareholders, members, and promoters have certain rights and benefits associated with the company, they do not have direct ownership of the company's property.
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Test: Companies Act- 1 - Question 3

Which company shares can be freely transferable 

Detailed Solution for Test: Companies Act- 1 - Question 3

Free transferability of shares in public. restricts the right to transfer its shares, if any; While public company is a company which is not a private company and moreover, the shares of a public company are freely transferable.

Test: Companies Act- 1 - Question 4

Minimum number of members in case of public company 

Detailed Solution for Test: Companies Act- 1 - Question 4
Minimum number of members in case of public company:
- According to the Companies Act, 2013, a public company must have a minimum number of members. The minimum number of members required is 7.
- This means that a public company cannot be formed or incorporated with less than 7 members.
- The Companies Act also specifies that in the case of a public company, there is no maximum limit on the number of members.
- The minimum number of members is necessary to ensure that the company has a sufficient number of shareholders to share the ownership and responsibilities of the company.
- The requirement of a minimum number of members in a public company is intended to ensure that there is adequate representation and diversity of interests among the shareholders.
- The minimum number of members also provides a level of protection for the shareholders by ensuring that decisions are made collectively and not by a single individual.
- It is important for a public company to have a minimum number of members to maintain transparency, accountability, and proper governance.
- The requirement of a minimum number of members may vary in different jurisdictions, so it is essential to consult the relevant laws and regulations in the specific country or region.
Test: Companies Act- 1 - Question 5

Minimum number of members in case of private company is 

Detailed Solution for Test: Companies Act- 1 - Question 5
The minimum number of members in a private company is 2.
Explanation:
In order to understand the minimum number of members required in a private company, we need to refer to the Companies Act, 2013 in India. According to Section 2(68) of the Companies Act, a private company is defined as a company which has a minimum paid-up share capital of one lakh rupees or such higher amount as may be prescribed and which by its articles:
- Restricts the right to transfer its shares
- Limits the number of its members to two hundred
- Prohibits any invitation to the public to subscribe for any securities of the company
Based on this definition, the minimum number of members required for a private company is 2. This means that a private company can be formed with a minimum of two individuals as its members.
To summarize:
- The Companies Act, 2013 defines a private company as a company that restricts the right to transfer its shares, limits the number of its members to two hundred, and prohibits any invitation to the public to subscribe for any securities of the company.
- The minimum number of members required for a private company is 2.
Test: Companies Act- 1 - Question 6

Maximum no. of members in case of private company is 

Detailed Solution for Test: Companies Act- 1 - Question 6

200
Minimum 2 and maximum 200 members: A private company can have a minimum of just two members (but just one is enough if it a One Person Company), and a maximum of up to 200 members. Transferability of shares restricted: Private companies cannot freely transfer their shares to the public like public companies.

Test: Companies Act- 1 - Question 7

Maximum no .of members in case of public company is 

Detailed Solution for Test: Companies Act- 1 - Question 7
Maximum number of members in case of a public company:
The maximum number of members allowed in a public company depends on the legal requirements and regulations of the specific jurisdiction in which the company is registered. However, in general, a public company has the advantage of being able to invite an unlimited number of members to invest in and own shares of the company.
Here is a breakdown of the options given and the correct answer:
A: 1
- This is incorrect. A public company is not limited to only one member.
B: Unlimited
- This is the correct answer. Public companies have the advantage of being able to invite an unlimited number of members to invest in and own shares of the company.
C: 50
- This is incorrect. The maximum number of members in a public company is not limited to 50.
D: 100
- This is incorrect. The maximum number of members in a public company is not limited to 100.
In conclusion, the correct answer is Unlimited. Public companies have the advantage of being able to invite an unlimited number of members to invest in and own shares of the company. However, it is important to note that specific legal requirements and regulations may vary depending on the jurisdiction in which the company is registered.
Test: Companies Act- 1 - Question 8

How many months did the company can continue its business u/s 45 _______ 

Detailed Solution for Test: Companies Act- 1 - Question 8

Correct Answer :- D

Explanation : Under section 45, Company can continue its business upto 6 month.

Test: Companies Act- 1 - Question 9

Minimum subscription should be received with in ______days 

Detailed Solution for Test: Companies Act- 1 - Question 9

To determine the minimum subscription that should be received within a certain number of days, we can follow these steps:
1. Identify the given options: A, B, C, and D.
2. Analyze the options:
- Option A: 130 days
- Option B: 125 days
- Option C: 120 days
- Option D: 135 days
3. Determine the minimum subscription period:
- The minimum subscription period would be the shortest duration among the given options.
4. Compare the options:
- Option A (130 days) is longer than Option C (120 days).
- Option B (125 days) is longer than Option C (120 days).
- Option D (135 days) is longer than Option C (120 days).
- Therefore, Option C (120 days) is the shortest duration among the given options and is the minimum subscription period.
5. Conclusion:
- The minimum subscription should be received within 120 days.
Answer: Option C (120 days)
Test: Companies Act- 1 - Question 10

If minimum subscription is not received application money should be refunded with in ______days 

Detailed Solution for Test: Companies Act- 1 - Question 10

Allotment of securities can be made even after completion of the time limit. In case the minimum subscription is not reached, the application deposit should be refunded. The refund should be made within fifteen days from the date of closure of the issue.

Test: Companies Act- 1 - Question 11

Liability of a member in case of a private company is 

Detailed Solution for Test: Companies Act- 1 - Question 11

The liability of the members of a Private Limited Company is limited to the amount of shares respectively held by them. Shares of Private Limited Company cannot be publically traded.

Test: Companies Act- 1 - Question 12

Maximum no. of persons in case of partnership banking business ______ 

Detailed Solution for Test: Companies Act- 1 - Question 12
  • It has no separate legal identity distinct from the partners, and each partner is personally liable for the debts of the partnership firm. The maximum no of partners in a partnership firm can be 50-100.
  • Every partner has separate roles and duties assigned to them and is entitled to take part in the decision-making and management of the firm.
  • The interest of any partner cannot be transferred in the firm without the mutual accord of all the other partners.
  • If the partner contributes shares in the firm, then the individual only receives financial profit and does not become a partner unless the other partners have agreed upon it.
  • The partnership firm can be registered or not; registration of the partnership firm is not mandatory, even with a maximum no of partners in the partnership firm.
  • The minimum capital is not a specific amount in the case of a partnership firm as the maximum no of partners in a partnership firm helps in a maximum contribution if possible.
  • The profit is distributed among all the partners as settled upon in the partnership deed, which can be a little complicated if there are a maximum no of partners in a partnership firm.
  • A partnership firm has no legal bounds in case of voluntary dissolution.
  • The business can be carried on by any partner on behalf of another partner. The members can be active or inactive and can reach the maximum no of partners in partnership firms.
  • The maximum no of partners in partnership firms as approved by the “Companies Act 2013” is 100. The previous no was 10 to 20 for banking business and other types of businesses as decided by the “Companies Act 1956”.
Test: Companies Act- 1 - Question 13

Minimum paid up share capital in case of a private company is _______ 

Detailed Solution for Test: Companies Act- 1 - Question 13
Minimum Paid Up Share Capital in Case of a Private Company:
The minimum paid-up share capital requirement for a private company is as follows:
- Option A: 1 Lakh
- This is the correct answer.
- The Companies Act, 2013, mandates that a private company must have a minimum paid-up share capital of 1 Lakh.
- This capital is the amount of money that shareholders have invested in the company in exchange for shares.
- Option B: 2 Lakhs
- This is not the correct answer.
- The minimum paid-up share capital requirement for a private company is 1 Lakh, not 2 Lakhs.
- Option C: 3 Lakhs
- This is not the correct answer.
- The minimum paid-up share capital requirement for a private company is 1 Lakh, not 3 Lakhs.
- Option D: 4 Lakhs
- This is not the correct answer.
- The minimum paid-up share capital requirement for a private company is 1 Lakh, not 4 Lakhs.
In conclusion, the minimum paid-up share capital required for a private company is 1 Lakh.
Test: Companies Act- 1 - Question 14

Minimum paid up share capital in case of a public company is ________ 

Detailed Solution for Test: Companies Act- 1 - Question 14
Minimum Paid-up Share Capital in Case of a Public Company
The minimum paid-up share capital required in case of a public company is 5 Lakhs. This means that the company must have at least 5 Lakhs worth of shares issued and paid for by its shareholders.
Here are the key points to remember about the minimum paid-up share capital for a public company:
1. Definition: A public company is a type of company that offers its shares to the general public and is listed on a stock exchange.
2. Legal Requirement: As per the Companies Act, 2013, a public company must have a minimum paid-up share capital of 5 Lakhs or such higher amount as may be prescribed.
3. Memorandum of Association: The Memorandum of Association of a public company must specify the amount of share capital with which the company is registered. This amount should be at least 5 Lakhs.
4. Capital Structure: The share capital of a company is divided into shares of fixed value. The shareholders of the company contribute towards this share capital by purchasing shares.
5. Importance of Paid-up Share Capital: The paid-up share capital represents the actual amount of money that has been paid by the shareholders for the shares they hold. It is an important indicator of the financial strength and stability of a company.
6. Utilization: The paid-up share capital can be utilized by the company for various purposes such as business expansion, investment in assets, repayment of debts, and meeting working capital requirements.
In conclusion, the minimum paid-up share capital in case of a public company is 5 Lakhs. This requirement ensures that the company has a sufficient financial base to operate and meet its obligations to the shareholders and other stakeholders.
Test: Companies Act- 1 - Question 15

Minimum number of Directors in case of a public company is __________ 

Detailed Solution for Test: Companies Act- 1 - Question 15
Minimum number of Directors in case of a public company is 3.
Public companies are required to have a certain number of directors to ensure proper governance and decision-making. The Companies Act, 2013 in India specifies the minimum number of directors for a public company.
Explanation:
- Public Companies: Public companies are those that issue shares to the general public and are listed on a stock exchange. They have a large number of shareholders and are subject to greater scrutiny and regulations compared to private companies.
- Directors: Directors are individuals who are appointed or elected to manage and oversee the affairs of a company. They are responsible for making important decisions and ensuring compliance with legal and regulatory requirements.
- Minimum Number: According to the Companies Act, 2013, a public company must have a minimum of three directors.
- Having at least three directors ensures a diversity of perspectives and reduces the concentration of power in the hands of a few individuals.
- The directors collectively form the board of directors, which is responsible for setting the company's strategic direction, monitoring performance, and safeguarding the interests of shareholders.
- The board of directors plays a crucial role in ensuring transparency, accountability, and good corporate governance practices in a public company.
In conclusion, the minimum number of directors in a public company is three, as mandated by the Companies Act, 2013. This requirement ensures a balance of power and diverse perspectives in decision-making.
Test: Companies Act- 1 - Question 16

Minimum number of Directors in case of private company is _______ 

Detailed Solution for Test: Companies Act- 1 - Question 16
Minimum number of Directors in case of private company
- The Companies Act, 2013 in India specifies the minimum number of directors required for a private company.
- According to Section 149(1)(a) of the Companies Act, 2013, a private company must have a minimum of two directors.
- However, the act provides an exception for certain private companies.
- If a private company fulfills the following conditions, it can have a minimum of one director:
- It is a One Person Company (OPC).
- It is a small company (as defined in the act).
- It is a dormant company (a company formed and registered under the act for a future project or to hold an asset or intellectual property).
- Therefore, in most cases, a private company must have a minimum of two directors. However, certain exceptions allow a private company to have only one director.
- It is important to note that while the minimum number of directors is defined by law, a company can choose to have more directors as per its requirements and governance structure.
Test: Companies Act- 1 - Question 17

Age limit of Directors in case of public company is ______ 

Detailed Solution for Test: Companies Act- 1 - Question 17
Age limit of Directors in case of public company is 70
The age limit for directors in a public company is set by the Companies Act, 2013. According to the Act, the maximum age limit for directors in a public company is 70 years.
Here are the key points to consider:
- Age limit: The age limit for directors in a public company is set at 70 years. This means that individuals who have reached the age of 70 cannot be appointed or continue as directors in a public company.
- Companies Act, 2013: The Companies Act, 2013 is the legislation that governs the functioning and management of companies in India. It sets out various rules and regulations, including the age limit for directors in a public company.
- Public company: The age limit applies specifically to directors in public companies. Public companies are those companies that are listed on a stock exchange and have shares that are available for public trading.
- Other requirements: Apart from the age limit, directors in public companies must also meet other requirements as per the Companies Act, 2013. These requirements include qualifications, experience, and other eligibility criteria.
It is important for public companies to comply with the age limit for directors as prescribed by the Companies Act, 2013. This ensures that there is a balance of experience and fresh perspectives in the boardroom, promoting good governance and effective decision-making.
Test: Companies Act- 1 - Question 18

Age limit of Directors in case of private company is _________ 

Detailed Solution for Test: Companies Act- 1 - Question 18
Age Limit of Directors in Case of Private Company

The age limit of directors in a private company can vary depending on the jurisdiction and the company's Articles of Association. However, in general, there is no specific age limit imposed on directors of private companies.


Here are the possible age limits for directors in a private company:



  1. 65: Some jurisdictions may have a default retirement age of 65 for directors, unless stated otherwise in the Articles of Association.

  2. 70: In certain cases, the age limit for directors may be extended to 70 years, again subject to the Articles of Association.

  3. 75: In rare cases, the age limit for directors may be extended up to 75 years, depending on the specific laws and regulations of the jurisdiction.

  4. No Limit: In many jurisdictions, there is no upper age limit for directors of private companies. As long as the director is competent and capable of fulfilling their duties, they can continue to hold the position regardless of their age.


It is important to note that the company's Articles of Association may specify a retirement age for directors, and it is essential to comply with these provisions. Additionally, the director's performance and ability to carry out their responsibilities effectively should always be taken into consideration, regardless of their age.

Test: Companies Act- 1 - Question 19

The company’s nationality is decided by its 

Detailed Solution for Test: Companies Act- 1 - Question 19
The company's nationality is decided by its Registered Office.
Explanation:
The nationality of a company refers to the country in which it is considered to be incorporated or registered. This determines the legal framework and regulations that apply to the company. The registered office plays a crucial role in determining the nationality of a company. Here's why:
1. Registered Office: The registered office is the official address of a company that is recorded with the relevant authorities. It is the place where official documents and communications are sent. The location of the registered office is significant in determining the company's nationality.
2. Legal Jurisdiction: Each country has its own set of laws and regulations governing companies. The registered office establishes the legal jurisdiction under which the company operates and is subject to the laws of that country.
3. Nationality: The registered office determines the nationality of the company because it defines the country under whose legal system the company operates. It affects various aspects of the company's operations, including taxation, compliance requirements, and legal obligations.
4. Change of Registered Office: If a company decides to change its registered office, it may also change its nationality, as it will now be subject to the laws of the new jurisdiction.
In conclusion, the registered office is a key factor in determining the nationality of a company. It establishes the legal jurisdiction and framework under which the company operates and is subject to the laws of that country.
Test: Companies Act- 1 - Question 20

The liability of members if company is limited by guarantee. 

Detailed Solution for Test: Companies Act- 1 - Question 20
The liability of members if a company is limited by guarantee can be explained as follows:
Liability of members:
- When a company is limited by guarantee, the liability of its members is limited to a specific amount known as the guarantee amount.
- Members of such a company are not liable to contribute any unpaid value of shares like in a company limited by shares.
- The liability of members in a company limited by guarantee is limited to the guarantee amount they have agreed to contribute in the event of the company being wound up.
Key points:
- The liability of members in a company limited by guarantee is limited to the guarantee amount.
- Members are not liable for any unpaid value of shares.
- The guarantee amount is the maximum amount that members are obligated to contribute in case of winding up the company.
- Unlike a company limited by shares, where members can be liable for unpaid shares, a company limited by guarantee offers limited liability to its members.
Therefore, the correct answer is B: Guarantee amount.
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