Practice Questions

Introduction to Companies Act

Q.1) A company limited by shares means

[a] a company having the liability of its members limited by the MOA to the amount unpaid on the shares
respectively held by them.

[b] a company having the liability of its members limited by the AOA to the amount unpaid on the shares
respectively held by them.

[c] a company having the liability of its members limited by the MOA to the amount uncalled on the shares
respectively held by them.

[d] a company having the liability of its members limited by the AOA to the amount uncalled on the shares
respectively held by them.

[e] a company having the liability of its members limited by MOA to such amount as the members may
respectively undertake to contribute to the assets of the company in the event of its being wound up

Answer: Option A

A ‘company limited by guarantee’ is a company having the liability of its members limited by MOA to such
amount as the members may respectively undertake to contribute to the assets of the company in the
event of its being wound up.

Q.2) Which of the following statements is incorrect?

[a] The Companies Act 2013 extends to the whole of India including Jammu and Kashmir.

[b] The Companies Act 2013 Act is divided into 29 chapters containing 470 sections and has 7 schedules.

[c] Listed company means a company which has any of its securities listed on any recognised stock
exchange.

[d] The provisions of Companies Act 2013 are not applicable to banking companies.

[e] The Companies Act 2013 received the assent of President of India on 29th August 2013.

Answer: Option D

The provisions of Companies Act 2013 are applicable to banking companies, except in so far as the said
provisions are inconsistent with the provisions of the Banking Regulation Act, 1949.

Q.3) Also called privately held company, a private company is solely owned by its founders or a group of
other investors. It cannot offer shares of stock for sale to the general public. The articles of association of a
private company restrict the transferability of shares and prevent the public at large from subscribing to
them. Except for one person companies, private companies can have a maximum of

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[a] 100 members

[b] 200 members

[c] 50 members

[d] 150 members

[e] 250 members

Answer: Option B

A private company can have a minimum of just two members and a maximum of up to 200 members.

Q.4) Consider the below statements:

Statement 1: A Government Company means any company in which minimum 51% of the paid-up share
capital is held by the Central Government, or by any State Government or Governments, or partly by the
Central Government and partly by one or more State Governments.

Statement 2: The memorandum of association (MOA) is the document that sets up the company and the
articles of association (AOA) set out how the company is run, governed and owned.

Statement 3: A person holding fully paid-up shares in a company is not considered as a Contributory as per
Companies Act 2013.

Which of the above statement(s) is/are correct?

[a] Only 2 and 3

[b] Only 1 and 3

[c] Only 2

[d] Only 1 and 2

[e] All are correct

Answer: Option D

Contributory means a person liable to contribute towards the assets of the company in the event of its
being wound up. A person holding fully paid-up shares in a company shall be considered as a contributory
but shall have no liabilities of a contributory while retaining rights of such a contributory.

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Q.5) Associate company, in relation to another company, means a company in which that other company
has a significant influence. “Significant influence” means control of at least ______ of total voting power.

[a] 30 per cent

[b] 25 per cent

[c] 20 per cent

[d] 40 per cent

[e] 15 per cent

Answer: Option C

An associate company, also known as an affiliate company, is a company in which a notable portion of
shares is owned by a parent company. The portion usually lies between 20% and 50%. Ownership of higher
than 50% of the stock legally turns it into a subsidiary of the parent company.

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