CLASS TEST

SUBJECT: Business Studies

Chapter 2

SECTION – A (1 x 3= 3)
1. The board of directors of a Joint Stock Company are elected by
(a) General Public (b) Government bodies (c) Shareholders (d) Employees.
2. Application for approval of name of a company is to be made to
(a) SEBI (b) Registrar of Companies
(c) Government of India (d) Government of state in which company is to be registered.
3. Assertion (A): Experts who assist in the preparation of necessary documents for registration
of a company are called promoters.
Reason (R): The experts who assist promoters in the preparation of necessary documents for
registration are professionals like merchant bankers, auditors, etc. They are not called
promoters.
Based on the above Assertion and Reason choose the correct answer from the options given
below.
(a) Both Assertion and Reason are correct and the Reason is a correct
explanation of the Assertion.
(b) Both Assertion and Reason are correct but Reason is not a correct
explanation of the Assertion.
(c) The Assertion is correct but Reason is incorrect.
(d)Both the Assertion and Reason are incorrect.
SECTION – B (4 x 2 = 8)

3. Climax India Pvt., Ltd. was formed as a Private Company by a group of five friends. Their
business has grown considerably over the years. Now, they want to expand their business and
for this, they need more funds. They are planning to convert their company into a public
company and raise more funds through issue of shares. Mention any five privileges that the
company will have to forgo as a Private Company after conversion.

4. Yash, a local vegetable trader, took first mover advantage to sell his vegetables and groceries
online. With the help of venture capitalists, he raised funds to grow his business, localyash.com.
In the first year, the business did well.
The industry was flooded with new entrants like, Grofers, Bigbasket, etc. In spite of sincere
efforts by Yash, the business suffered losses. The investors pressurised him for returns. In the
third year of operations, the company stopped paying salaries and repaying loans. The company
was served a legal notice and assets of the business were sold to repay the debts. Investors
demanded that 'Yash's personal assets should be sold but the auctioneer refused to do so.
(a) Name the form of business organisation followed by Yash.
(b) Are the investors justified while asking for Yash's personal assets to be sold? Explain by
highlighting the feature associated with the above situation.
(c) What is DIN
(d) what is Provisional Contract DURING FORMATION OF COMPANY
 SECTION – C (6 x 2 = 12)
5 Abhay is a Sole Proprietor. Over the past decade, his business has grown from operating a
neighbourhood corner shop selling kitchen utilities such as utensils, plastic containers, crockery sets,
etc., to a retail chain with three branches in the city. Although he looks after the varied functions in
all the branches, he is wondering whether he should form a company to better manage the business.
He also has plans to open branches countrywide.

What legal formalities will he have to undergo to operate business as a company?

6. A team of seven friends decided to jointly set up a public company. This company would be set up
in such a region where the people were suffering from unemployment. All of them jointly selected a
place where the company would run its business and where the company's registered office would
be set up. Along with it, with the advice of specialists, it was also decided what method would be
followed for the issue and Allotment of shares. All the friends wanted their company to have a
singular recognition and the people should get immediately attracted towards its products. It was
felt that the very name of the company could become a reason for its recognition. For the name of the
company they had several options before them. After a through consideration, the company was
named 'Seven Seas Limited. Before the registration of the company, the method of Ratification of the
contracts to be entered into by the company was also decided.
Besides, all the friends jointly completed the remaining formalities of the setting up of the company.
(a) The information of which two documents is obtained by us from the setting up of the company in
the paragraph above?
(b) Quoting relevant lines identify points of the two documents identified about the setting
up of the company•

OR

Mr. Abhishekh is a sole proprietor. He has been doing the wholesale business of tea for the last three
years. The brand name of his tea is 'Tadka Chai'. This is a popular brand of its region. Now, Mr.
Abhishekh has been worried about two issues. First, his business unit is situated in an unorganised
sector and therefore, he is unable to buy goods on credit from any trader easily. Similarly, banks and
other lending institutions hesitate to extend a long-term loan to him. Such a treatment by the people
produces the inferiority complex in him. The second issue worrying him is that he has unlimited
liability. If unfortunately he suffers a heavy loss in business, his business property and personal
property both will be finished. He wants to get rid of these worries. So, he contacts a business specialist,
who suggests a new form of business organisation which will remove all his problems.

In your opinion what advice must have been given to Mr. Abhishekh by the business specialist? Explain.