Rajasthan Board RBSE Class 11 Business Studies Chapter 3 Company
RBSE Class 11 Business Studies Chapter 3 Textual Questions and Answers
RBSE Class 11 Business Studies Chapter 3 Multiple Choice Questions
Question 1.
When did the President give consent for the present Indian Companies Act 2013?
(a) 20 Aug. 2013
(b) 28 Aug. 2013
(c) 1 Sept. 2013
(d) 29 Sept. 2013
Answer:
(b) 28 Aug. 2013
Question 2.
Which company was established through the Royal Charter?
(a) East India Company
(b) West India Company
(c) North India Company
(d) South India Company
Answer:
(a) East India Company
Question 3.
How many total sections are given under the Indian Companies Act, 2013?
(a) 420 sections
(b) 370 sections
(c) 470 sections
(d) 520 sections
Answer:
(c) 470 sections
Question 4.
What should be the maximum number of members for private companies according to the Indian Companies Act, 2013?
(a) 200
(b) 100
(c) 50
(d) 150
Answer:
(a) 200
Question 5.
Which of the following new concepts was introduced and brought into effect by the Indian Companies Act, 2013?
(a) One person company
(b) A company limited by guarantee
(c) Foreign company
(d) Subsidiary company
Answer:
(a) One person company
Question 6.
How much of per cent of paid-up share capital is to be owned by central or state government or by both jointly in case of a government company?
(a) 50%
(b) 51%
(c) 75%
(d) 49%
Answer:
(b) 51%
Question 7.
What is the minimum number of members in a public company?
(a) 10
(b) 20
(c) 7
(d) 15
Answer:
(c) 7
Question 8.
Which of the following document is not required to be made by a private company?
(a) MOA
(b) AOA
(c) Prospectus
(d) All of the above
Answer:
(c) Prospectus
Question 9.
What is the maximum number of directors for a private company?
(a) 2
(b) 3
(c) 4
(d) 7
Answer:
(a) 2
Question 10.
Before the Indian Companies Act 20 2013, which act was effective in India?
(a) Indian Companies Act, 1932
(b) Indian Companies Act, 1930
(c) Indian Companies Act, 1956
(d) Companies Act, 1865
Answer:
(c) Indian Companies Act, 1956
Question 11.
Which of the given forms, a company limited by shares can opt for articles of association?
(a) Form in Table A
(b) Form in Table B
(c) Form in Table C
(d) Form in Table D
Answer:
(a) Form in Table A
Question 12.
The name proposed for the formation of a company should not be undesirable. Here, undesirable means –
(a) any name identical to other company or identical to the approved name of limited liability partnership
(b) name identical to a trademark
(c) against traditions, beliefs and culture
(d) All of the above
Answer:
(d) All of the above
Question 13.
According to the Companies Act, 2013, what is the duration to finalise the registered office for the incorporation of a company so that the related information can be sent on the right address?
(a) 50 days
(b) 60 days
(c) 30 days
(d) 15 days
Answer:
(d) 15 days
Question 14.
How many subscribers or signatories are required to sign on the MOA of a public company?
(a) 2
(b) 3
(c) 7
(d) 10
Answer:
(c) 7
Question 15.
In which type of company, the name of a person is written in its MOA. who will become a member of the company in the condition of the death or loss of contracted capacity?
(a) In public company
(b) One person company
(c) Private company
(d) All the companies
Answer:
(b) One person company
Question 16.
If a company enters into a contract to do any business or activity which is outside the scope of MOA, then it will become –
(a) rectifiable
(b) void
(c) valid
(d) binding
Answer:
(b) void
Question 17.
Articles mean –
(a) charter of a company
(b) defines the area of operation
(c) guide to a company
(d) subsidiary to MOA
Answer:
(d) defines the area of operation
Question 18.
Internal rules are laid out in companies –
(a) prospectus
(b) AOA
(c) MOA
(d) shelf prospectus
Answer:
(b) AOA
Question 19.
The doctrine of constructive notice safeguards –
(a) company against outsiders
(b) outsiders against company
(c) directors against the company
(d) none of these
Answer:
(a) company against outsiders
RBSE Class 11 Business Studies Chapter 3 Very Short Answers Type Questions
Question 1.
Define the term Company.
Answer:
It is an artificial person whose business is run by a few natural persons in the interest or the profit of some natural persons.
Question 2.
When was limited liability of members of a company clause introduced in India?
Answer:
In the year 1857 (except insurance and banking).
Question 3.
How is the company an artificial person?
Answer:
The reason behind the company being an artificial person is that a company can buy or sell property in its own name. It can enter into contracts and can sue and be sued.
Question 4.
Explain the term Private Company.
Answer:
A private company, under Companies Act, means a company having authorised paid-up capital and which restricts by its articles:
- The right of members to transfer their shares.
- Prohibits any invitation to the public to subscribe to its shares and debentures.
Question 5.
What is a holding company?
Answer:
If a company can control the policies of another through the ownership of its shares or through control over the composition of its boards and directors, such a company is called a holding company.
Question 6.
What is a one-person company?
Answer:
The company has a single individual is called the one-person company.
Question 7.
Why was a need for company form of the organization felt?
Answer:
To resolve the issues of high risks, unlimited liability, problems of risky investment, need for company form of organization was felt.
Question 8.
What do you understand by Memorandum of Association?
Answer:
It is a principal document that defines the powers and objectives of the company and describes the scope of operations of a company.
Question 9.
Give two features of MOA.
Answer:
- It determines the scope of operations of a company.
- It defines the objectives of the company.
Question 10.
Which form of MOA is used by a limited company having share capital to frame its MOA?
Answer:
In Table C.
Question 11.
“MOA is the guide to the company”. Explain.
Answer:
MOA helps to provide the company with a clear vision and to take important decisions to operate the company.
Question 12.
What do you mean by Articles of Association?
Answer:
It is a document containing rules and regulations framed for the internal management of the company.
Question 13.
What do you mean by doctrine of constructive notice?
Answer:
The doctrine of constructive notice protects the company against outsiders.
Question 14.
Explain briefly the doctrine of indoor management.
Answer:
The doctrine of indoor management seeks to protect the outsiders against the actions of the company. This was propounded in 1856 in Royal British Bank Vs. Marquand Case.
RBSE Class 11 Business Studies Chapter 3 Short Answer Type Questions
Question 1.
Write down the salient features of the New Companies Act 2013.
Answer:
Features of New Companies Act 2013 are:
- maximum effort has been made to ensure the protection of stakeholders by making the rules more harsh and efficient.
- The maximum number of members has been increased to 200 from 50.
- The duration of the first annual general meeting of the company has been reduced from 18 to 9 months.
- For smooth operation of the company, the New Company Act 2013 encourages the provision of e – management/e-governance.
Question 2.
Explain the features of Joint Stock Company.
Answer:
- It is an artificial person.
- A company enjoys separate legal existence from its members and board of directors.
- The existence of any company is shown through a common seal.
- Company is an unhidden union of people which is formed with the aim of earning a profit.
- The liability of every member of the company is limited.
- The shares can easily be transferred.
- The issued shares and debentures are of less amount and that is why a common person can also invest in it.
Question 3.
Classify the companies on the basis of a number of members.
Answer:
Following are the companies on the basis of a number of members:
1. One Person Company – A company having a single member is called the one-person company. Their liability is unlimited.
2. Private Company – A private company, under Companies Act, means a company having authorised paid-up capital and which restricts by its articles –
- The right of members to transfer their shares.
- The number of its members (except OPC) is limited to 200.
- Prohibits any invitation to the public to subscribe to its shares and debentures.
3. Public Company – All the companies other than Private Companies or any company which does not have restrictions like the private company are called the public company.
Question 4.
What are the listed Companies?
Answer:
A listed company means a company which has any of its securities, shares or debentures listed on any recognised stock exchange. The shares and debentures issued by the companies can be freely traded on stock exchanges only when the company is registered with one of the recognized stock exchanges.
Question 5.
State the difference between partnership and company.
Answer:
Question 6.
State the difference between Public and Private Company.
Answer:
Difference between Public and Private Company:
Question 7.
Mention the important points to be considered while drafting the object clause of a company.
Answer:
This is an important clause of the company, therefore following things are to be kept in mind:
- The objective of the company must not be illegal.
- The objective must be stated clearly.
- Object clause must not be rigid, doubtful and ambiguous.
- The objects must not include anything which is prohibited by the Companies Act.
- The objects should be in favour of public policy.
Question 8.
MOA is a basic document for a company. Substantiate.
Answer:
MOA is a basic document for a company because it defines the powers and objectives of the company, by which the company runs its business. No company can run without framing this document. It gives information associated with the name of the company, place, objective, liability, etc.
Question 9.
Write a short note on the liability clause of MOA of a company.
Answer:
In an MOA of a company limited by shares, it is clearly mentioned that the liability of shareholders is limited to the nominal value of shares held by them. The MOA of a company limited by guarantee states that liability of members will be limited up to the amount of guarantee given by them at the time of winding up of the company.
Question 10.
What is the importance of the domicile clause of a company?
Answer:
The Registered office of the company will be in which state? Through this statement, the people can get this information, also the limit of law is also mentioned, by which it can easily be found out, whether the company is local or foreign. At the registered office only, the ‘index of members’ and other necessary public documents of the company are kept for inspection by members and others.
Question 11.
State four differences between MOA and AOA.
Answer:
Four differences between MOA and AOA are:
Question 12.
Clarify the clear concept of ultra vires transaction.
Answer:
Any activity which is carried outside the scope of legal power and authority of the company or is done out of the preview of MOA is known as ultra vires activity. In India, ‘Doctrine of ultra vires’ was expounded for the first time by Mumbai High Court in 1866 in the case of Jahangir R Mody Vs Shamji Laddha.
RBSE Class 11 Business Studies Chapter 3 Essay Type Questions
Question 1.
Explain the meaning of company and its features.
Answer:
A company is an artificial person whose business is run by a few natural persons in the interest or the profit of some natural persons. The word company has originated from two Latin words ‘corn’ and ‘Paris’, which mean ‘bread’ and ‘together’ respectively. Initially, the word company was used for the group of those persons who assemble to eat bread together.
According to Prof. Haney, “A joint-stock company is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership”. According to the definition given by the Companies Act, 2013 Section 2(20), Company means any company formed and registered under the Act or under any previous company law.
Characteristics of a Company:
1. Artificial Person – According to the provisions of the company act, Company is an artificial person created by law. Marshall has stated that the company is an artificial, invisible, intangible entity and existing only in the eyes of law. However, it is not regarded as an imaginary or false person but as a real person. Reasons behind these are that a company can buy or sell property in its own name, can enter into a contract, can sue and be sued in its own name by other – natural persons.
2. Separate Legal Entity – A company enjoys separate legal existence from its members and board of directors. The company is separate and independent from its shareholders or owners.
3. Perpetual Succession – The company continues forever. In other words, it enjoys the benefit of perpetual succession. A company never terminates, as it is given birth by the law. The death, lunacy or insolvency of members does not, in any way, affect the corporate existence of the company.
4. Limited Liability – The shareholders of a company have limited liability. Generally, the liability of the members of a company limited by shares is limited to the extent of the unpaid value of the shares they have acquired. The liability of members of a company limited by guarantee is limited to the guaranteed amount. They have to pay this amount at the time of winding up of the company.
5. Transferability of shares – The share of a company can be transferred by its members. The shareholders of a public limited company can fully transfer their shares.
6. Corporate Economy – Transferability of share helps in attracting more and more capital in lesser time. Being an independent identity, it is the owner of its assets and is bound by its financial liabilities.
7. Indirect Management – The shareholders don’t have a direct say in the management of the company.
8. The permanence of Capital and stability of the company – The incorporated company has a low unit value of shares and debentures issued by the company, which enables an ordinary investor to invest his capital in shares with the risk being shared by a large number of persons. For such persons, the company form of organization is very beneficial and convenient.
9. Protection to investors against loss – In section II of IPC that persons include any association of persons and company whether it is incorporated under General Clauses Act 1897 section 2(42) or not. Hence, criminal limited liability can’t be imposed on a company that gives adequate protection to investors against any losses.
Question 2.
State the important features of Company Act 2013.
Answer:
Companies Act. 2013 contains 29 chapters, 470 sections, 7 schedules. Features of Company Act are:
- The maximum efforts have been made to ensure the protection of interest of stakeholders and bringing transparency in the company’s working system.
- The duration for the first annual general meeting of the company is within 9 months.
- The maximum number of members for a private company has been increased to 200.
- If a company fails to pay 50% of its secured creditors it is assessed to be a sick company and 2013 Act contains provisions for revival and rehabilitation of such sick industries.
- Adequate provisions have been made to prohibit illegal insider trading.
- Under the Act of 2013, National Company Law Tribunal (NCLT) was constituted to take action against reported cases as well as to deal with the company problems.
- Central corporate law has made it compulsory for some special type of companies to at least have one female member.
- Allotted bonds by the company will not be included in the loan.
- For smooth operation of the company, E – management/e-governance has been introduced.
- The rules of prospectus have been made more stringent and effective to safeguard the issue of investors’ interest.
- OPC came into existence.
- The arrangement for the registration of the dormant company was also done in this act.
- A company can give 7.5% of the gross profit earned in the past 3 years as a donation to local parties.
- It is compulsory for every company to give 2% of their income in CSR.
- This act also provides for the registration of defunct companies.
Question 3.
What is a company? Explain its types.
Answer:
A company is an artificial person whose business is run by a few natural persons in the interest or the profit of some natural persons.
1. On the basis of Mode/Source of Incorporation
(a) Chartered Company – This type of company is incorporated under a royal charter issued by the king or head of the state. These were popular in England. East India company is its example.
(b) Statutory Company (Incorporated under special Act) – These companies are formed under a special Act of parliament or a state legislature to work in the national interest.
2. On the Basis of Liability of members –
(a) Companies limited by share – The shareholders of such companies are not liable to pay anything more than the value of shares held by them. These companies have to use the word ‘limited’ on compulsory basis
(b) Companies limited by Guarantee – The amount of guaranteed money is limited and they are not liable to pay more than this amount. Chambers of commerce is the best example of such companies.
3. On the basis of the number of members –
(a) One Person Company – A company having only one member. He/she has limited liability unless it is an unlimited company.
(b) Private Company – A private company under Companies Act means a company having authorised paid-up capital and which is restricted by its articles. The number of its members (except OPC) is limited to 200. It is mandatory for such a company to use the word ‘Private limited’ at the end of its name.
(c) Public Company – All the companies other than private companies on any company which does not have restrictions like a private company.
4. On the basis of Control –
(a) Holding Company – If one company can control the policies of another, it is called a holding company.
(b) Subsidiary Company – The company which is controlled by some other company.
(c) Associate Company – The company which is controlled by some other company, but is not its subsidiary company.
5. On the basis of Capital/Stock Market –
(a) Listed Company – The shares and debentures issued by the companies can be freely traded in stock exchanges (BSE, NSE) only when the company is registered with one of the recognised stock exchanges as per SEBI’s guidelines and rules.
(b) Unlisted Companies – Any company which is not registered/listed with any stock exchange is an unlisted company. The securities, shares and debentures issued by such companies are not freely traded in stock markets.
6. Other Companies –
(a) Government Company – Company in which not less than 51% of its paid-up share capital is held by central or state government.
(b) Foreign Company – Any company incorporated outside India, but has a place of business in India through its branches or agencies.
(c) Foreign Exchange Regulation Act – The companies which are operating in India under the Foreign Exchange Regulation Act.
(d) Defunct/Dormant Company – When a company does not file an annual return/ financial statements for two consecutive financial years, ROC can enter its name in the dormant companies category.
Question 4.
Explain Memorandum of Association and its clauses.
Answer:
Memorandum of Association is the principal document for both Public and Private companies. It defines the power and objectives of the company, describes the scope of its operations and its relationship with its stakeholders.
1. Name Clause – It states the name of the company. Under the following conditions, a company can select its name:
- The name should not be identical or closely – related to an existing company.
- The public company should be ‘listed’ while the private company must use ‘Private limited’ at the end of the name.
- The proposed name must not be undesirable in the opinion of the central government.
- The name should have ‘cooperative’ word in it.
2. Registered office clause – The MOA of every company must mention the name of the state in which the registered office of the company is to be situated. It determines the area of jurisdiction.
3. Object Clause – This is a very important clause. This clause determines the rights and powers of the company and also defines its sphere of activities. No activity can be taken up by the company which is not mentioned in the object clause. The clause offers protection to shareholders and creditors by ensuring that funds raised are not going to be used for any other undertaking.
These things need to be kept in mind before making this clause –
- The objectives of the company must not be illegal.
- It should not be against public policy.
- Objects should not be immoral.
4. Liability Clause – It states the liabilities of its members. In the MOA of a company limited by shares, it is clearly mentioned that their liabilities are limited to the nominal value. Similarly, if MOA of a company is limited by guarantee, then the liability of · members will be limited up to the guarantee held by them.
5. Capital of Company or Capital Clause – Under this clause, the total capital of the company is stated. The division of capital into equity share capital and preference share capital is also mentioned.
6. Association Clause – The association clause contains a declaration by several persons whose names and addresses are described and who have the desire of forming into a company.
7. Nomination Clause – In case of OPC’s MOA, the name of (nominee), such person to be stated who will become a member of the company in case of death or incapability to carry on the contracts of the subscriber.
Question 5.
Explain the Significance of Memorandum in the life of a company.
Answer:
Following points highlight the importance of MOA:
1. Fundamental Document – It is a fundamental document defining the objectives of a company. It is said to be the foundation stone, upon which the future of the company stands and its existence depends.
2. Determines Company Scope – It determines the scope of operation of a company. A company has to operate within the framework laid down by MOA.
3. Guide to the Company – It contains information about capital, liability, objectives, etc.
4. Creditors Protection – The object clause offers protection to the creditors by ensuring that funds raised for undertakings are not going to be risked in any other undertakings.
5. Protection to Investors – The purpose of the memorandum is to enable the intending investors to know the purpose for which their money is going to be used, and within what fields, they are taking a risk in making the investment.
6. Help Other Parties – MOA also helps other persons dealing with the company. It enables the persons intending to deal with the company to know with certainty as to whether the contractual relationship which they intend to enter into the company is right or not.
Question 6.
What do you understand by MOA? Explain the difference between MOA and AOA.
Answer:
Memorandum of Association is the principal document for both Public and Private companies. It defines the powers and objectives of the company, the scope of its operations and its relationship with all the stakeholders. It also determines the relation of the company with the outside world. According to Justice Charelworth – It is the charter of a company defining and confining the powers of the company.
Difference between MOA and AOA Objective:
Question 7.
What do you mean by Articles of Association? Explain the contents of AOA.
Answer:
AOA is an important document which defines the mode in which the business of the company is to be carried out. It regulates the internal management of the company and defines the duties, rights and powers of governing body or board of directors as between themselves and company at large. AOA plays an important role in the company’s day to day management.
- According to Section 2(5) of Indian Company Act 2013, AOA of a company as originally framed or altered from time-to-time in pursuance of any previous companies law or of this act.
- According to Justice Charlesworth, AOA is a document which defines the mutual rights of members of the company and regulates the modes and form in which the business of the company is to be carried on.
- According to the Supreme Court of India, Articles of Association regulates the internal management and defines the powers of the governing body of the company. (based on Naresh Chand Sanyal versus Calcutta Stock Exchange Ltd. (1971) case).
Contents of AOA:
- Issue of Preference shares.
- Approval for Preliminary contracts.
- Lien on shares.
- Calls on shares.
- Transfer and transmission of shares.
- Conversion of shares into stock.
- Share warrants and share certificates.
- Alteration of Capital.
- Repurchase of shares and share certificates.
- Share warrants and dematerialisation.
- Voting rights.
- The appointment of directors, and their powers, duties and remuneration.
- Manager/Secretary.
- Dividends and Reserves.
- The capitalisation of Profits.
- Seal.
- Compensation.
- Conversion of shares into stock.
- Winding – up – procedure.
- Date and time of signature.
RBSE Class 11 Business Studies Chapter 3 Additional Questions and Answers
RBSE Class 11 Business Studies Chapter 3 Multiple Choice Questions
Question 1.
In ancient India, the draft of the company that started in the year 1600, was founded through which company?
(a) East India Company
(b) West India Company
(c) North India Company
(d) South India Company
Answer:
(a) East India Company
Question 2.
Why did companies become popular in the business world?
(a) High Risk
(b) Limited Investment
(c) Unlimited Liability
(d) All of the above
Answer:
(d) All of the above
Question 3.
Which all acts were made on the basis of Joint Stock Company Act 1844 by The British government?
(a) Company Act, 1956
(b) Joint Stock Company Act, 1850
(c) Company Act, 1913
(d) All of the above
Answer:
(b) Joint Stock Company Act, 1850
Question 4.
Company Act of 1956 was effective –
(a) Till 30 August 2013
(b) Till 29 August 2013
(c) Till 8 August 2013
(d) Till 18 December 2013
Answer:
(a) Till 30 August 2013
Question 5.
How many chapters does Company Act 2013 have?
(a) 12
(b) 470
(c) 29
(d) None
Answer:
(c) 29
Question 6.
How many schedules does Indian company act 2013 have?
(a) 12
(b) 7
(c) 6
(d) 15
Answer:
(b) 7
Question 7.
The duration for the first annual general meeting of the company has been reduced from 18 months to –
(a) 10 months
(b) 12 months
(c) 15 months
(d) 9 months
Answer:
(d) 9 months
Question 8.
According to Company Act. 2013, how many female candidates have been made compulsory to be included in the Board of directors?
(a) One
(b) Two
(c) Three
(d) Four
Answer:
(a) One
Question 9.
The word ‘company’ has originated from which language?
(a) Latin
(b) German
(c) French
(d) None of these
Answer:
(a) Latin
Question 10.
“A company is transparent, abstract and an artificial person whose existence lies in the eyes of law only” – Who said this?
(a) Haney
(b) Chief Justice Marshall
(c) Lord Lindsey
(d) None of them
Answer:
(b) Chief Justice Marshall
Question 11.
A feature of the company is –
(a) Artificial Person
(b) Separate Legal existence
(c) Eternal Successor
(d) All of them
Answer:
(d) All of them
Question 12.
The company has the right to citizenship:
(a) under Company Act 2013
(b) under to Indian Citizenship Act 1955
(c) under Company Act 1956
(d) None of these Acts
Answer:
(b) under to Indian Citizenship Act 1955
Question 13.
The company which is made through the passing of letter of right from him of state or king is –
(a) Chartered Company
(b) Statutory Company
(c) Registered Company
(d) None of them
Answer:
(a) Chartered Company
Question 14.
Maximum number of members that can be in OPC are –
(a) 7
(b) 18
(c) 15
(d) 12
Answer:
(c) 15
Question 15.
The concept of OPC was firstly adopted in India by which act?
(a) Indian Company Act, 1932
(b) Indian Company Act, 1956
(c) Indian Company Act, 1930
(d) None of them
Answer:
(d) None of them
Question 16.
Under which act is FERA company employed –
(a) Indian Company Act, 2013
(b) Indian Company Act, 1956
(c) Foreign Exchange Regulation, 1973
(d) Indian Company Act. 1930
Answer:
(c) Foreign Exchange Regulation, 1973
Question 17.
Name the company, whose securities can independently be traded in the stock market.
(a) FERA Company
(b) Associate Company
(c) Unlisted Company
(d) Listed Company
Answer:
(d) Listed Company
Question 18.
How many maximum numbers of members can be part of a public company?
(a) 200
(b) 50
(c) No limit
(d) None of them
Answer:
(c) No limit
Question 19.
How many independent directors can be there out of total directors in a public company?
(a) 1/3
(b) 1/2
(c) 1/4
(d) 1/6
Answer:
(a) 1/3
Question 20.
The document that states the constitution of a company and the limit of its powers is –
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
(d) None of them
Answer:
(a) Memorandum of Association
Question 21.
The fundamental document of a company is –
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
(d) None of these
Answer:
(b) Articles of Association
Question 22.
MOA of an unlimited company having share capital is in which schedule of the Memorandum of Association?
(a) Table B
(b) Table C
(c) Table D
(d) Table E
Answer:
(d) Table E
Question 23.
How many days can a company take to register important documents?
(a) 50 days
(b) 60 days
(c) 30 days
(d) 15 days
Answer:
(c) 30 days
Question 24.
If a company doesn’t follow the provisions published in the Registrar’s office, then each member is liable to pay:
(a) 50 thousand
(b) 1 lakh
(c) 2 lakh
(d) 3 lakh
Answer:
(b) 1 lakh
Question 25.
While preparing the objects clause of MOA, what things should be kept in mind?
(a) Objectives of the company must not be against the law.
(b) Objectives must be clear.
(c) Objectives should be detailed.
(d) All of the above
Answer:
(d) All of the above
Question 26.
Which clause doesn’t exist in the company not having share capital?
(a) Object Clause
(b) Capital Clause
(c) Liability Clause
(d) None of them
Answer:
(b) Capital Clause
Question 27.
“The contracts outside the rights are void and they can be unlimited through the confirmation of stakeholders” – Who said it?
(a) Lord Keyerns
(b) Justice Charlesworth
(c) Lord Sailborn
(d) Justice Boven
Answer:
(a) Lord Keyerns
Question 28.
‘The rule outside rights’ was enacted in which year?
(a) In the year 1956
(b) In the year 1866
(c) In the year 1600
(d) In the year 1960
Answer:
(b) In the year 1866
Question 29.
This is not the feature of MOA:
(a) It is a public document
(b) It contains the internal rules of the company
(c) It is the fundamental document of a company
(d) It is an associate document
Answer:
(c) It is the fundamental document of a company
Question 30.
Which schedule of AOA of a company is limited by share –
(a) Table F
(b) Table G
(c) Table H
(d) Table I
Answer:
(a) Table F
RBSE Class 11 Business Studies Chapter 3 Very Short Answer Type Questions
Question 1.
How many chapters, sections and schedules are there in Company Act, 2013?
Answer:
Total 29 chapters, 170 sections and 7 schedules.
Question 2.
State two features of New Company Act, 2013.
Answer:
- Company doesn’t assimilate loans in Bonds.
- The number of members in a private company has been increased to 200.
Question 3.
State two companies formed under a special act of parliament.
Answer:
- Industrial Finance Corporation Limited.
- Damodar Valley Corporation.
Question 4.
What is a subsidiary company?
Answer:
The company which is controlled by some other company is a subsidiary company.
Question 5.
What is a government company?
Answer:
A company in which more than 17% of its paid-up capital is held by either central or state govt.
Question 6.
With the permission of the central government, how many members can be there in a partnership?
Answer:
100.
Question 7.
What is the minimum number of directors that should be there in a public company?
Answer:
3.
Question 8.
How much percentage does the company give to its directors from the profit earned?
Answer:
Up to 11%
Question 9.
State the capital clause of MOA.
Answer:
This clause states the ‘Capital’ of the company by which the company gets registered. The capital is distributed equally just like shares.
Question 10.
How many signatures must be there on the memorandum of Association in OPC?
Answer:
One.
Question 11.
The Name clause of MOA is used by which type of company?
Answer:
One-person company.
Question 12.
Where was the name right outside the law initiated in India?
Answer:
In the year 1866, In the justice court of law, with the contention of R. Modi versus Shamji Laddha.
Question 13.
State two features of AOA.
Answer:
- It states the rules and regulations of the company.
- It is a public document.
Question 14.
Which schedule is assigned for a company limited by a share in MOA?
Answer:
Table F.
Question 15.
Which is called ‘Fundamental document of the company’?
Answer:
Memorandum of Associations.
Question 16.
What is the objective behind the Article of Association?
Answer:
It regulates the internal activities of the company.
Question 17.
Which provision states the help of the people who are in contract with the company?
Answer:
Through the arrangement of internal management.
Question 18.
Internal Management was launched in –
Answer:
In the year 1856.
RBSE Class 11 Business Studies Chapter 3 Short Answer Type Questions (SA – I)
Question 1.
What were the reasons behind the emergence of company business methodology in the business world?
Answer:
Due to the high risk and limited shares in the business world, the need for such committee was there where the investment of shareholders would be safe, personal property would not be at stake in case of loss, business gain could be achieved in the absence of business know-how and skill, therefore business system came into existence.
Question 2.
Throw light on the history of Company Act, 1956.
Answer:
Many companies evolved in the business administration due to industrial revolution after the second world war. By the end of 1950, the government of Independent India appointed a special committee under the chairmanship of H.C. Bhabha to go into the entire question of the revision of Indian companies act with particular reference to it’s bearing the development of Indian trade and industry.
Question 3.
What is the Company? Explain.
Answer:
A company is an artificial person who does business through its few natural persons in the interest or the profit of some natural persons.
Question 4.
What do you understand by the separate legal existence of the company?
Answer:
The company’s existence is different and independent from the persons who have founded the company, or who buy shares of the company. Even with its separate legal existence, the company doesn’t have citizenship under the Indian Citizenship Act 1955.
Question 5.
What is an Unlisted Company?
Answer:
The companies that are not listed in the stock market (BSE, NSE) are called unlisted companies. The securities, shares and debentures issued by such companies are not freely traded in the stock markets.
Question 6.
State the important features of MOA.
Answer:
- It is a fundamental document.
- It defines the scope of powers of the company.
- It is compulsory for every company to frame it.
- It is a public document, therefore every person who deals with the company is presumed to have knowledge of its content.
- It is formed under the Company Act.
Question 7.
According to which schedule under Table A what are the contents of MOA of a company limited by shares?
Answer:
Schedule 1 of Table A contains the following contents of MOA of a company limited by shares:
- Name of the company.
- Registered office.
- Objects of the company.
- Liability of Members.
- Capital of Company.
- Declaration for a subscription.
- Nomination Clause.
Question 8.
State ‘Name Clause’ of MOA.
Answer:
It is an important clause because it gives an identity to the company. Legal provisions are to be considered while selecting the name of the company. The name must not be identical with the other existing names. Each public company must contain, the word ‘limited’ at the end of its name and each private company must have the words, Private limited’ at the end of its name.
Question 9.
What do you understand by Information of Registration of office?
Answer:
Within 15 days of incorporation of the company, address of registered office should be decided so that information and documents can be sent. Notice of the location of the registered office and of every change therein must be given to the registrar within 30 days of the date of incorporation or of the date of the change.
Question 10.
In the case of one – person company, what are the provision of MOA in case of the death of the person or not having the condition of entering into a contract?
Answer:
Nomination Clause:
In case of one – person company’s MOA, the name of (nominee) such person is to be stated who will become a member of the company in case of death or incapability to make contracts of the subscriber. Such name is written by taking written consent of the nominee. This consent is sent to the ROC along with MOA and AOA at the time of company formation.
Question 11.
How can alteration be done in MOA?
Answer:
MOA is a basic document of the company. Therefore by following the procedure and regulations under the companies act, a company can make changes in name, registered office, objective, liability and capital clause.
Question 12.
How are the investors protected by MOA?
Answer:
The purpose of the memorandum is to enable the intending investors to know the purpose for which their money is going to be used and within what fields, they are taking a risk in making the investment. Investors assess the objectives mentioned in MOA to invest in high credit-rated companies. Therefore their capital remains protected.
Question 13.
What is Article of Association? Explain.
Answer:
It is the second most important document of the company containing rules and regulations framed for the internal management in the company. The articles deal with the bye-laws relating to day – to – day management of the company.
Question 14.
When and where is the registration of AOA done?
Answer:
A company is required to file its AOA with the registrar of companies at the place where it has its registered office. Each subscriber to the memorandum must sign the articles in the presence of at least one witness.
RBSE Class 11 Business Studies Chapter 3 Short Answer Type Questions (SA – II)
Question 1.
Explain the concept of company Act, 2013 in brief.
Answer:
In place of the Companies Act 1956, a new Companies Bill was presented and approved in Lok Sabha on 18th December 2012 and in Rajya Sabha on 8th August 2013. On 29th August 2015, the Hon’ble President of India gave his assent to this bill, and Company Act 2013, came into existence. This Act contains 29 chapters, 470 sections and 7 schedules. This act is considered to be landmark legislation in the corporate world.
Question 2.
“Company is an artificial person’. Explain.
Answer:
A company can be formed and closed by legislation only and it works like a normal person. Its existence is different from its members, therefore it is called an artificial person. Like a person, a company can buy property in its name, can enter into contracts, an can also the cases in court.
Justice Marshall said, “Company is invisible intangible and an artificial person, whose existence lies in the eyes of law only.”
Question 3.
Explain the type of companies on the basis of formation.
Answer:
On the basis of formation, the following are the type of companies:
1. Incorporated by Royal Charter – This type of company is incorporated under a royal charter issued by the king or head of the state. East India company is its example.
2. Statutory Company – These companies are formed under a special Act of Parliament or a state legislature to work in the national interest.
3. Registered Companies – These are the companies formed and registered under the ‘Provisions of Companies Act 2013’, as well as Companies Act prevalent before.
Question 4.
What do you understand by Dormant Company?
Answer:
A company that is formed and registered under the Companies Act 2013 for a future project. A dormant company may become an active company by submitting an application to the registrar, accompanied by the required documents. When a company does not file an annual return for two consecutive years, ROC can enter its name in Dormant company’s category.
Question 5.
Explain subscriber clause of MOA.
Answer:
This clause contains names of signatories to the MOA. The association clause contains a declaration by the subscribers as “We the several persons whose name and address are subscribed, are desirous of being formed into a company.” Such declaration must be signed by at least seven persons in case of a public company or 2 persons in case of a private company and by 1 person in case of OPC. The signatures of the subscribers must be attested by at least one witness each.
Question 6.
Explain the Doctrine of Constructive Notice.
Answer:
Under Doctrine of Constructive Notice, it expects from each member associated with the company that the person has thoroughly clarified the contents of MOA and AOA and the person is well informed about its contents and only then he has entered into the contract. If a person enters into the contract without having proper knowledge of the contents, then the person would himself be responsible for that.
Question 7.
Explain the features of AOA.
Answer:
Features of Articles of Association are:
- It is an important document which regulates the internal management of a company.
- It contains laws, by-laws, rules and regulations of the company.
- It is an alterable document. Changes can be made in AOA according to the provisions of Companies Act.
- Articles are framed according to the pursuance of the present Companies Act.
- It defines the rights, power and duties of the directors.
- For Private companies, there is no formal model of AOA. It is compulsory for them to make their own AOA.
Question 8.
Which form of companies are applicable in section 5(6) of Companies Act and schedule I contain the different form of AOA.
Answer:
Various forms of AOA are:
- Table F – AOA of a company limited by shares.
- Table G – AOA of a company limited by guarantee and having share capital.
- Table H – AOA of a company limited by guarantee not having share capital.
- Table I – AOA of an unlimited company having share capital.
- Table J – AOA of an unlimited company not having share capital.
Question 9.
How can the alternation of AOA be done?
Answer:
A company can alter its AOA. A company can do so by passing a special resolution, within the purview of MOA by following the provisions of Companies Act. The changes made in articles should not be contrary to any law or company’s act. If by making a provision in AOA changes in AOA are restricted, then such provision will be void. Hence, changes in AOA must be legal and in the interest of the company. Changes are made effective only when they are registered with BOC.
RBSE Class 11 Business Studies Chapter 3 Essay Type Questions
Question 1.
Explain the difference between Partnership and company.
Answer:
Difference between company and partnership are –
Question 2.
What is a company? State the difference between Private and Public company.
Answer:
Company is an artificial person whose business is run by a few natural persons in the interest or the profit of some natural persons.
Difference between Private and Public Company:
Question 3.
Can the company of public sector compete with the company of the private sector on the basis of profit and loss?
Answer:
A public company, on the basis of profit and loss, cannot compete with a private company. The reasons are:
1. More human resources than needed – There are more human resources in a public company than needed. Their human resource department cannot employ human power effectively. The result of this is that some workers are always at standby, by which the production cost per unit of goods and services is unnecessarily more.
2. Industrial Agitation – Every now and then, in defence of various policies, several strikes and lockouts are done in public companies.
3. Defective Project Planning – Project planning is found to be defective in these companies because their rules and objectives are not clarified. Generally, these projects depend upon government action and hence cannot be completed on time.
4. Defective Financial Planning – The most common flaw in public companies is their capitalization. Poor financial planning cannot give suitable returns. Therefore, profits are also less here.
5. Many Overheads – Public company spends a lot on school, houses, canteen, etc. for their workers due to their social motive that increases their overheads.
6. No full use of Production Capacity – Generally, the use of production capacity is not up to the mark in public sector company. Therefore, the production cost increases.
7. Defective Production Planning – No scientific planning is done for the production units, because of which production is sometimes done more than required or sometimes it doesn’t meet the requirement. Sometimes, things do no reach on time.
8. Lack of Appropriate system of Employees Training – In these companies, at the time of selecting the employees, their applications are read thoroughly, but their skills are not evaluated. Therefore, such non – skilled employees do not work efficiently.
9. Defective Promotion Policy – There is no scientific promotion policy are used here. The promotion is done on the basis of government policies only.
10. Objectives – Like private companies, their motive is not just to earn profits. Their objectives include social growth, to fulfil government policies and to fulfil the requirements of society, etc.
Question 4.
Explain ‘Name clause’ of MOA.
Or
What provisions should be kept in mind while forming a ‘Name clause’?
Answer:
1.Name of the Company or Name Clause – This is an important clause because it gives an identity to the company. A company is a separate legal entity must have a name with which it is incorporated and known by others. The word ‘limited’ must be used at the end of the name of the public company and ‘private limited’ should be used by a private company. A non-profit making association formed for promoting commerce, art, science, religion, charity or any other useful object may be registered without adding the word limited or private limited. [Section 4 and 8]
Legal provisions to be considered while selecting the names of the company [Section 4(2) and 4(3)]:
- The name should not be identical or closely resembling an existing company.
- It should not be in the contravention of the guidelines issued by the department of company affairs (Government of India).
- The proposed name must not be undesirable in the opinion of the central government.
- The proposed name should not contain any such word or give such impression that the company enjoys government patronage.
- Prior permission from the central government should be taken before using the name having prohibited words.
Reservation of Name with Registrar:
The company should present an application in the prescribed form along with the required fees, before the ROC to get the proposed name registered. [Section 4(4)].
After receiving the application, the registrar scrutinises the information and documents furnished along with application form, and if found satisfactory, he reserves that name for the company. The reservation is valid until sixty days. (Section 4(5)]
Reservation of Name on the Basis of Wrong Information and Consequences:
If it is found that name was applied by furnishing incomplete or false information provided by the company, then the following consequences have to be faced –
(a) If the company has not been incorporated, the reserved name shall be cancelled and the person making an application under subsection (4) shall be liable to a penalty which may extend to one lakh rupees.
(b) If the company has been incorporated, the registrar may after giving the company an opportunity of being heard –
- Either direct the company to change its name within a period of 3 months after passing an ordinary resolution.
- Take action by striking off the name of the company from the registrar of companies.
- Make a petition for winding up the company.
Question 5.
“What do you mean by ‘Rights outside the Rules’. Explain the effects of “Rights outside the Theory”. ‘
Answer:
The object clause of MOA defines the objectives, whose fulfilment helps in the foundation of the company. But, when a company works outside the limit, those activities are called ‘Rights outside the theory’. In India, it was first enacted in 1866 in Mumbai in the Justice court in the case of Jahangir Modi v/s Shamji Laddha.
Effects of Ultra Vires Transactions:
1. Ultra Vires Contract – Any work/activity carried or a contract by the company effected outside its powers and authority is void from the beginning.
2. Personal liability of directors – The directors of the company should use the company’s fund for authorised works only. They will be personally liable if the funds raised are misused.
3. Injunctions – Any member of the company can bring an injunction against the company restraining it from doing ultra vires acts.
4. Ultra Vires Lending – When the company makes an ultra vires lending, it can be sued by the company to recover the amount.
5. Get out of Property Rights and Powers – If the property has been traded from the company’s property or the outside powers, then it is under the company’s right.
6. No legal case field – Any act done outside the purview of MOA is illegal and void.