Understanding Company Definition & Characteristics

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Questions and Answers

Which of the following best describes a company's 'separate legal entity' characteristic?

  • The company is considered distinct from its members, capable of entering contracts and owning property. (correct)
  • The company's existence depends on the continuous involvement of its original members.
  • The company's assets are directly owned by its shareholders.
  • Shareholders are personally liable for the company's debts up to their investment.

In the Salomon v. Salomon & Co. case, what was the main point the court emphasized?

  • A company is a separate legal entity, distinct from its shareholders, even if a shareholder holds the majority of shares. (correct)
  • A company is merely an agent of its principal shareholder.
  • Family members who own shares in a company are jointly liable for the company's debts.
  • A company's debts should be prioritized based on the shareholder's initial investment.

What does the term 'perpetual succession' imply for a company?

  • The company is dissolved upon the insolvency of a majority shareholder.
  • The company's lifespan is limited to the tenure of its initial board of directors.
  • The company continues to exist even after changes in ownership or the death of its members. (correct)
  • The company must be re-registered every 20 years to maintain its legal status.

Why is a 'common seal' significant for a company?

<p>It serves as the company's official signature, authenticating documents and contracts. (D)</p> Signup and view all the answers

What does 'transferability of shares' in a company typically entail?

<p>Shares can be freely transferred, with the new owner acquiring all rights of the previous owner, subject to certain conditions. (D)</p> Signup and view all the answers

A public company, according to the Companies Act 2013, must have at least how many members?

<p>Seven (B)</p> Signup and view all the answers

What is the minimum number of directors required for a public company?

<p>Three (A)</p> Signup and view all the answers

What is the purpose of a 'prospectus' issued by a public company?

<p>To invite the public to subscribe to the company's shares. (A)</p> Signup and view all the answers

A public company cannot continue business if it does not receive what percentage of the shares offered to the public?

<p>90 percent (D)</p> Signup and view all the answers

What document is essential for a public company to acquire before starting its business operations?

<p>Certificate of Commencement (D)</p> Signup and view all the answers

What is the definition of Corporate Identity Number (CIN)?

<p>A unique identification number assigned to companies by the Registrar of Companies. (D)</p> Signup and view all the answers

What is a key restriction that differentiates a private company from a public company?

<p>Private companies cannot invite the public to subscribe to their securities. (B)</p> Signup and view all the answers

What is the minimum paid-up capital requirement for a private limited company?

<p>Rs. 100,000 (B)</p> Signup and view all the answers

How many directors must a private company have?

<p>Minimum two directors (B)</p> Signup and view all the answers

What is a significant privilege or exemption available to a private limited company?

<p>Private companies can be exempted from filing board resolution under certain conditions. (B)</p> Signup and view all the answers

According to the practical problem, in a private limited company with 204 members, where 6 were former employees, what is the implication?

<p>The company must convert to a public limited company. (B)</p> Signup and view all the answers

Which of the following statements is most accurate regarding a One Person Company (OPC)?

<p>An OPC is established and managed by a single person. (D)</p> Signup and view all the answers

What is a key difference between an OPC and a private limited company concerning perpetual succession?

<p>Private limited companies have perpetual succession, while OPCs do not necessarily have perpetual succession. (D)</p> Signup and view all the answers

How many directors are required for a One Person Company (OPC)?

<p>Minimum one director (D)</p> Signup and view all the answers

Which of the following conditions applies to financial statements of a One Person Company (OPC)?

<p>Need not include cash flow statements. (B)</p> Signup and view all the answers

A petition is filed in labor court against Vineeth OPC Private Limited stating that Resolutions relating to HR related welfare rules are drafted by Director individually with out passing any resolutions in BOD or AGM Meeting, Is it a valid complain?

<p>No (A)</p> Signup and view all the answers

An OPC can get itself converted into a Private Company or Public Company other than Companies registered under which of the following sections?

<p>Section 8 of the Act (A)</p> Signup and view all the answers

Which form needs to be filled up for conversion of One Person Company in to Private or Public company electronically?

<p>Form SPICe (A)</p> Signup and view all the answers

What is the maximum paid-up capital for a private company to convert into a One Person Company?

<p>Rs. 50 Lakhs (A)</p> Signup and view all the answers

For a private company to convert to an OPC, its average annual turnover during the relevant period must be:

<p>Rs.2 crore or less (B)</p> Signup and view all the answers

What resolution is generally required by a private company to convert itself into a One Person Company?

<p>Special Resolution (A)</p> Signup and view all the answers

According to the content, what defines a 'small company' under Section 2(85) of the Companies Act 2013?

<p>A company with paid-up share capital not exceeding two crore rupees and sales not exceeding 20 crores. (C)</p> Signup and view all the answers

If 'Radiant Private Limited' has 500,000 equity shares of Rs.10 each fully paid and two shareholders sold their shares to 'Srilakshmi Limited' at Rs.15 per share. What is the implication of this share transfer assuming it adheres to all regulations?

<p>The share transfer is permissible, and Srilakshmi Limited becomes a shareholder of Radiant Private Limited. (B)</p> Signup and view all the answers

Which of the following is a primary objective of registering a Section 8 company in Karnataka?

<p>Promoting arts, commerce, education, or social welfare. (A)</p> Signup and view all the answers

When a company's Memorandum of Association mentions that shareholders liability is limited by a Guarantee in the Liability Clause, how is the company classified?

<p>Limited by Guarantee (D)</p> Signup and view all the answers

What minimum percentage of paid-up share capital must be held by the government for a company to be classified as a Government Company?

<p>51% (D)</p> Signup and view all the answers

According to the provided information, regarding the appointment of Independent Director for Government Company, what is the condition regarding share holding?

<p>It will be done by Central Govt of 100% share holding by Central Government or State Government 100% share holding by state Government (D)</p> Signup and view all the answers

When is a company referred to as a 'Domestic Company'?

<p>If the company receives its certificate of incorporation from within the country (B)</p> Signup and view all the answers

Under U/S 2 (42)of Companies Amendment Act 2013, when is a company or body called foreign company?

<p>If Minimum 50% of capital is held by Indian Resident. (C)</p> Signup and view all the answers

What is the timeline within which a foreign company must furnish documents to the Registrar of Companies after establishing a business in India?

<p>30 days (B)</p> Signup and view all the answers

Which document is required from RBI for bringing capital in foreign currency in India as a foreign company?

<p>Form FC-1 (B)</p> Signup and view all the answers

What information related to directors should be provided to Registrar of companies by a foreign company?

<p>Declaration that none of the debarred. (B)</p> Signup and view all the answers

Flashcards

What is a Company?

A voluntary association of persons with divisible capital (shares), contributing money/worth for trade/business, sharing profit/loss.

Separate Legal Entity

A company is legally separate from its members; it can enter contracts, own property, and sue/be sued independently.

Salomon vs. Salomon Case

Salomon transferred his boot making to Salomon Ltd., his family owned shares and debentures.

Perpetual Succession

Even with changing members, a company continues to exist unless wound up specifically.

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Common Seal

A company's official signature, used to authenticate contracts and agreements.

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Transferability of Shares

Shares can be transferred freely, allowing members to change easily.

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Public Company

It is registered under Companies Act 2013, Sec 2(11), min. 7 members, unlimited max, free share issue/transfer, min 3 directors.

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Private Company

Sec.2 (68), voluntary association, 2-200 members, restricts share transfer, prohibits public subscription, adds 'Private Limited'.

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One Person Company (OPC)

A company with only one person as its member, as per Section 2(62) of Companies Act 2013

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Contents of Memorandum

MOA contains: Name, place, capital, liability, and objects of the company.

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Government Company

A Government Company is one where at least 51% of share capital is held by the government.

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Define: Foreign Company

A business incorporated outside the country that has a place of business in India.

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Corporate Viel

It shields members from company debts, and is seen as an independent unit during legal proceedings.

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What is CIN?

CIN is a unique identification number assigned to every company registered in India.

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Minimum paid up capital for a public limited company

Rs. 500,000

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Minimum paid-up share capital for OPCs

Companies act 2013 has not prescribed any such minimum paid-up 'capital for OPCs.

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Average annual turnover to become an OPC

Rs. 2 crores or less may get itself converted in to One Person Company by passing a Special Resolution in general meeting.

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Capital to become an OPC

Paid up capital of Rs.50 Lakhs or Less

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Limited liability

The members of the company is limited up to the face value of shares held by him.

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Study Notes

Company Definition

  • A company is a voluntary association of people established for business activities
  • It has capital divided into shares
  • An association where members contribute money or assets to a common stock
  • This stock is used in a trade or business for a common purpose
  • Members share profits or losses

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