Formation of a Company Very Short Answer Type Questions

Formation of a Company Very Short Answer Type Questions

Question 1.
What is share capital?
Answer:
Share capital means the amount of capital raised by a company through the issue of shares.

Question 2.
State any two features of issue capital.
Answer:

• Share capital is a raised by public limited company only.
• Share capital can be returned by the company only at the time of the winding up of the company.

Question 3.
What is authorized or registered or nominal capital?
Answer:
It is the sum stated in the capital clause of the memorandum of association as the capital of a company.

Question 4.
What is issued capital?
Answer:
It is the part of authorized capital which is issued or offered to the public for subscription.

Question 5.
What is unissued capital?
Answer:
It is the part of authorized capital which is not issued to the public for subscription.

Question 6.
What is subscribed capital?
Answer:
It is the part of the issued capital which taken up by the public.

Question 7.
Give the meaning of called up capital.
Answer:
It is the part of the subscribed capital which has been demanded or called up by the company.

Question 8.
What is paid up capital?
Answer:
It is the part of called up capital which has been actually paid by the share holders to the company.

Question 9.
What is calls -in-arrears? Or unpaid capital.
Answer:
It is unpaid capital. The balance of called up capital which has not been paid by the share holders is called as calls in arrears.

Question 10.
Give the meaning of reserve capital or reserve liability.
Answer:
Some times company may decide not to call a part of its uncalled capital till its winding up. Such amount of capital is called as reserve capital.

Question 11.
Define share.
Answer:
See 2(46) of Indian companies act 1956, defines share as “a share in the share capital of a company and includes stock except where a distinction between shares and stock is expressed of implied.

Question 12.
What is share?
Answer:
Share is a unit of share capital having a special value.

Question 13.
Give the meaning of deferred shares.
Answer:
Deferred share are also called as promoters shares. These share holders get the dividend only after the payment of dividend to preference and equity share holders.

Question 14.
What is share premium.
Answer:
Share premium is the difference between the price at which the shares are issued and the face value of the shares.

Question 15.
What is right shares?
Answer:
Right shares are additional shares issued first to existing share holders in proportion to the capital paid up on this shares.

Question 16.
What is Bonus shares?
Answer:
Bonus shares are shares issued to existing share holders at free of cost out of accumulated reserves or profits.

Question 17.
What is the difference between right shares and bonus shares.
Answer:
Right shares are issued by the company to existing share holders for money but bonus shares are issued by the company to existing share holders at free of cost.

Question 18.
What is stock?
Answer:
Stock is aggregate of fully paid shares of a company. It helps the stock holders to subdivide and transfer their stocks in any amount.

Question 19.
What is share certificate?
Answer:
Share certificate is a document contains the number of shares held by a member and the amount paid on each shares.

Question 20.
What is share warrant?
Answer:
It is a document issued by public limited company to its share holders is respect of fully paid shares.

Question 21.
What do you mean by allotment of shares?
Answer:
It means allotment or distribution of shares of the company to selected applicants in response to their application for shares.

Question 22.
What do you mean by calls on shares?
Answer:
It is a demand made by the company to its share holders to pay whole as part of unpaid balance of the face value shares held by them.

Question 23.
Write a note on Index of members.
Answer:
Index of Members contain the names of members and sufficient entries to indicate the relevant folio in the Register of Members. This book is to be maintained to facilitate quick reference.

Question 24.
What do you mean by D-Mat account?
Answer:
It is account which transfer (convert) securities from physical mode to electrical mode.

Question 25.
What are the contents of share certificate?
Answer:
Contents of share certificate are:

• Name of the company.
• Serial number of the certificate.
• Name and address of share holder.
• Number and class of shares.
• The face value and amount paid on each share.
• The date of issue of share certificate.

Question 26.
What is listing?
Answer:
“Listing of shares is the process of getting the shares of a company includes in the official trade, list of recognized Stock Exchange. The share of a company can be bought and sold in a stock exchange only when they are listed there in that stock exchange.

Question 27.
Write a note on corporate aggregate.
Answer:
It means number of individuals who associated in a group so that in the eyes of law they enjoy the status of a single person, e.g limited company.

Question 28.
What are the steps in the formation of a company.
Answer:

• Promotion
• Incorporation or registration.
• capital subscription.
• Commencement of business.

Question 29.
What are the steps in promoting a new company?
Answer:

• Discovery of new idea
• Detailed investigation of business proposition
• Assembling of various requirements of business proposition.
• Financing the business proposition

Question 30.
Who is a promoter?
Answer:
Promoter is a person who under takes the work of promotion of company. He originates a scheme for formation of the company and carries out at the preliminary work for the formation of a compnay to run the business.

Question 31.
What is minimum subscription?
Answer:
It is the minimum amount mentioned in the memorandum of association must be raised by the issue of shares to meet the expenditure of the company .

Question 32.
What is business commencement certificate?
Answer:
It is a document issued to public limited company to run the business in a formal way. This certificate is a conclusive evidence that the company is entitled to commence business from the date of issue of the certificate.

Question 33.
What is meant by listing of securities?
Answer:
Listing of securities means company shares are listed in any recognized stock exchange. It improves marketability of shares.

Question 34.
Give the meaning of memorandum of association.
Answer:
It is the constitution of the company which defines the objects and scope of the company’s ‘ activities and its relation with the outside world.

Question 35.
Give the meaning of Articles of association of a company.
Answer:
It is a document containing the rules and regulations relating to the internal management of the company.

Question 36.
What is book building?
Answer:
Book building method uses investors demand for share at various prices as an important input to arrive at an offer price.

Question 37.
Who are the users of book building in India?
Answer:
IPCL, HUDCO, HAL, IOC, Hindalco Industries.

Question 38.
Who is Retail investor?
Answer:
He is an investor who bids for securities of a company for a value of not more than Rs 1 lakh.

Question 39.
Expand QIB.
Answer:
Qualified institutional buyer. It is apublic financial institution bids for securities.

Question 40.
What is RHP?
Answer:
RHP Means Red Herring Prospects. In this type of prospectus company is not disclosing the details of price and number of shares being offered till the date of issue open.

Question 41.
Give the meaning of Syndicate member.
Answer:
It refers to a person, who collect the entire bid forms in a book built issue.

Question 42.
What is prospectus?
Answer:
It is an invitation to general public by the public company to apply for the shares of company.

Question 43.
What is table-A?
Answer:
Table A is the model set of 99 articles given at the end of the Companies Act. A public companies limited by shares has an option as far as filling Articles of Association with the Registrar at the time of incorporation. When it chooses not to have Articles of Association, it can adopt Table A.

Question 44.
What is underwriting contract?
Answer:
The act of ensuring the sale of shares or debentures of a company, even before offering to the public is called underwriting and those engaged in such activities are called underwriters. The underwriters take upon themselves the responsibility of selling the securities to the public. If some securities remain unsold, the underwriters will have to buy them.

Question 45.
What is share?
Answer:
A share is a fractional part of the capital of company which forms ownership.

Question 46.
What do you mean by priliminary expenses?
Answer:
Any expenses incurred by the company before its incorporation is known as preliminary expenses. These are the expenses incurred in the initial stage of the formation of the company.

Question 47.
State any two functions of promoters.
Answer:
Two functions of promoters:

• They fixes the company’s name and ascertains that it will be accepted by the rules of the companies act.
• They arranges for the printing of the memorandom & Articles.

Question 48.
What do you mean by “Statement in Hue of prospectus?
Answer:
When a public company does not invite public to subscribe for its shares but arranges to get money from private sources, it need not issue a prospectus to the public. In such a case the promoter are required to prepare a draft of prospectus known as statement in lieu of prospectus.

Question 49.
What is incorporation?
Answer:
Incorporation is the second stage of formation of a company when the requisite documents are filed with the registrars of company he returns and registers the memorandum, the articles and other documents filed with him and issues a certificate of incorporation.

Question 50.
What is incorporation?
Answer:
Incorporation of a company means the process of getting a company registered under companies act.

Question 51.
Give the meaning of Doctrine of constructive notice.
Answer:
Doctrine of constructive notice means a doctrine declaring that the memorandum and articles of association are public document after being registered with the register of companies and every one dealing with the company is deemed to have constructive notice of them.

Question 52.
What is shelf prospectus?
Answer:
Shelf prospectus means a prospectus issued by any financial institution or bank for one or more issues of the securities or class of securities specified in that prospectus.

Question 53.
What is red herring prospectus?
Answer:
According to 60 B (4) of Indian companies act 1956. Red herring prospectus means a prospectus which does not have complete particulars on the price of the securities offered and the quantum of securities offered.

Question 54.
Give the meaning of small deposit holder.
Answer:
Small deposit holder is a depositor who has deposited in a financial year a sum not exceeding Rs 20,000. in a company and includes his successor nominees and legal representatives.

Question 55.
Define ‘Share’.
Answer:
Section 2(46) of companies act defines shares as “share in the share capital of a company and includes stock except where in distinction between stock and share is expressed or implied.

Question 56.
What is buy-back?
Answer:
Buy back is the power of company to purchase its own securities as per certain condition it is given under section 77(A) of Indian companies act 2000.

Question 57.
Define share certificate.
Answer:
Share certificate is defined under section 84(1) of company act as a share certificate is a certificate issued by the company under its common seal specifying the shares held by any member.

Question 58.
What is Blank transfer?
Answer:
Blank transfer means transfer hands over to the transfer the share certificate with a transfer form duly signed and completed by him except for the name and signatures of the transferee.

Question 59.
What is firm under writing?
Answer:
Firm underwriting is an underwriting where in the underwriter agrees to subscribe himself for securities of the company irrespective of his potential liability under the underwriting contract.

Question 60.
What is lien on shares?
Answer:
Lien on shares is a right of the company on its shares held by a member of the company for the debts due from the share holder. Member who is indebted to the company shall not be permitted to transfer his shares without paying the debts of the company.

Question 61.
Name the two persons who are share holders without being a member of the company.
Answer:

• Share Warrant holder
• Transferee or the legal representatives of the decreased.

Question 62.
Define debenture.
Answer:
According to 2( 12) of Indian companies act debenture is defines as “ debenture stock bonds and any other securities of a company whether constituting a charge on the assets of the company or not”.

Question 63.
What is debenture stock?
Answer:
Debenture stock is the aggregate and consolidated amount of borrowings. It is the total debt an can be divided and transferred in any convenient parts.

Question 64.
What is naked debentures?
Answer:
Naked debentures are those which do not carry any charge on the assets of the company. They are nit given any security as to the payment of interest and repayment of capital.

Question 65.
What is bearer debentures?
Answer:
Bearer debentures are treated as negotiable instruments and are transferable by mere delivery.

Question 66.
What is mortgage debenture?
Answer:
Mortgage debentures are Debentures which are secured by a mortgage or charge on the whole or a part of the assets of the company.

Question 67.
What is registered debentures?
Answer:
Registered debentures means the names of the debentures holders are entered in the register of the debenture holders.

Question 68.
Expand DRR.
Answer:
DRR- Debenture Redemption reserves.

Question 69.
Define debenture.
Answer:
According to Sec(12) Debenture is a document issued by a company as an evidence of a . debt due from the company with or without a charge on the assets of the company.

Question 70.
Who is a member of a company.
Answer:
Share holder of a company is a member of the company.

Question 71.
Define prospectus.
Answer:
According to companies act 1956 prospectus means. “Any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in or debentures of a body corporate”.

Question 72.
State the provisions of e-filing.
Answer:
(a) such applications, balance sheet, prospectus, return, declaration, memorandum, articles, particulars of charges, or any other particulars or document as may be required to be filed or delivered under this Act or the rules made thereunder, shall be filed in the electronic form and authenticated in such manner as may be prescribed.

(b) such document, notice, any communication or intimation, as may be required to be served or delivered under this Act, in the electronic form and authenticated in such manner as may be prescribed.

Question 73.
How to sign an e-form?
Answer:
An e-form can be signed by the authorized signatory/ representative using the Digital Signature Certificate (DSC). Click the red colour signature box in the e-form to affix the digital signature. To avoid increase in size of the e-form beyond permissible limit of 2.5 MB, always affix the DSC using the ‘Sign and Save As’ option.