Company Incorporation and Liability
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Questions and Answers

What is the outcome when a company is registered with the Registrar of Companies (ROC)?

  • It becomes a separate legal entity (correct)
  • It becomes a partnership firm
  • It becomes a trust
  • It becomes a sole proprietorship

    • What is the limitation of the liability of the members of a company?

  • The liability is limited to the amount paid on the shares held by them
  • The liability is shared equally among all members
  • The liability is limited to the amount unpaid on the shares held by them (correct)
  • The liability is unlimited and extends to personal assets

    • What is the feature of shares or interests of a company?

  • They are freely transferable, subject to restrictions imposed by the company (correct)
  • They can only be transferred with the consent of all members
  • They can only be transferred through a court order
  • They are not transferable at all

    • What is the significance of perpetual succession in a company?

    <p>It ensures the company will continue to exist until legally dissolved</p> Signup and view all the answers

    What is the purpose of a common seal in a company?

    <p>It is used to authenticate documents and contracts</p> Signup and view all the answers

    What happens to a company when a member dies or becomes insolvent?

    <p>The company continues to exist until legally dissolved</p> Signup and view all the answers

    What is the restriction on the transfer of shares, according to the articles of the company?

    <p>The restrictions must be reasonable and not against public policy</p> Signup and view all the answers

    What is the significance of Section 8(1) of the Company Act 2013?

    <p>It deals with the liability of the members of a company</p> Signup and view all the answers

    What is the effect of the death or insolvency of a member on a company?

    <p>The company's existence is not affected</p> Signup and view all the answers

    What is the implication of Section 8(4) of the Company Act 2013?

    <p>A company may have a common seal, but it is not mandatory</p> Signup and view all the answers

    What is the significance of Section 8 of the Company Act 2013?

    <p>It deals with the incorporation of a company as a separate legal entity</p> Signup and view all the answers

    Study Notes

    Incorporation

    • Section 8 of the Company Act 2013 deals with the incorporation of a company as a separate legal entity.
    • A company is considered incorporated when it is registered with the Registrar of Companies (ROC) and a Certificate of Incorporation is issued.
    • The company comes into existence from the date of its incorporation.

    Liability

    • Section 8(1) states that the liability of the members of a company is limited to the amount unpaid on the shares held by them.
    • The liability of the members is limited to the extent of the unpaid amount on the shares, and they are not personally liable for the company's debts.
    • The liability of the members is limited, but the company itself is responsible for its debts and obligations.

    Transferability

    • Section 8(2) states that the shares or interests of a company are freely transferable, subject to the restrictions imposed by the articles of the company.
    • The transferability of shares is a key feature of a company, allowing members to easily buy and sell shares.
    • The articles of the company may impose restrictions on the transfer of shares, but these restrictions must be reasonable and not against public policy.

    Perpetual Succession

    • Section 8(3) states that a company has perpetual succession, meaning it will continue to exist until it is legally dissolved.
    • The company will continue to exist despite changes in its membership, and the death or insolvency of its members will not affect its existence.
    • Perpetual succession ensures that the company can continue to operate and fulfill its obligations despite changes in its membership.

    Common Seal

    • Section 8(4) states that a company may have a common seal, but it is not mandatory.
    • The common seal is a symbol of the company's authenticity and is used to authenticate documents and contracts.
    • The use of a common seal is optional, and the company can choose to use it or not, as it deems fit.

    Incorporation

    • A company is considered incorporated when it is registered with the Registrar of Companies (ROC) and a Certificate of Incorporation is issued.
    • The company comes into existence from the date of its incorporation, as specified in Section 8 of the Company Act 2013.

    Liability

    • The liability of the members of a company is limited to the amount unpaid on the shares held by them, as stated in Section 8(1).
    • Members are not personally liable for the company's debts, with their liability limited to the extent of the unpaid amount on the shares.

    Transferability

    • The shares or interests of a company are freely transferable, subject to the restrictions imposed by the articles of the company, as per Section 8(2).
    • The transferability of shares is a key feature of a company, allowing members to easily buy and sell shares.

    Perpetual Succession

    • A company has perpetual succession, meaning it will continue to exist until it is legally dissolved, as stated in Section 8(3).
    • The company will continue to exist despite changes in its membership, and the death or insolvency of its members will not affect its existence.

    Common Seal

    • A company may have a common seal, but it is not mandatory, as specified in Section 8(4).
    • The common seal is a symbol of the company's authenticity and is used to authenticate documents and contracts.

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    Description

    This quiz covers the incorporation of a company as a separate legal entity, including the registration process and limited liability of members.

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