IJ - --

112 + C OMPANY L AW
. to Section 21 ' a non executive direct or, whether an ·
(2) Accor d mg .
. iominee director' cannot authe nticate any docUJn ent orllldepei,dCiit
dtrector or a ifi II th .
f
1
the comp any unless spec 1ca y au onsed by the Board Pr0ce~A·
b l If ."lllJJg
on e 1a o 1n~
regard . 11

., ,=,-=-,...,., ,i:., '/

ange etc. [Section 22] ,':t:,:==:: : : :r: : : .;:;: =....:,,,.,,:,·.·,•:-:,::::~~f~
3• 21 Executl·on of Bill of Exch
. 22 f the companies Act, 2013 seeks to provide for execution of bill s ofr.1;:y~;,,
e h
Sccttoo o al .. . th' . Xe ano,
other deeds . The leg prov1S1ons m 1s regard "·e
Irnnd1,. pro1111·ssory notes and . . . "' given be! c,.
(I) According to Section 22(1 ), a bill of exchange, hund1 or promi
ssory note shall be o11 .
ny jeern ~
to have been made, accepted, drawn or endorsed on behalf of a compa
t of, the co lllad1,
accepted, drawn or endorsed ~ the nam~ of, or on beh~ of ?r on accoun
lllPany
by any person acting under its authonty, express or 1mphed.
common seal .
(2) According to Section 22(2), a company may, by writing under its ·
· respect of any specifi1ed matters, as its attorney'tau!holl!~
any person, either genera IIy or m
oexecute
other deeds on its behalf in any place either in or outside India.
behalf of the
(3) Section 22(3) provides that a deed signed by such an attorney on
were ma~ornp~y
and under his seal shall bind the company and have the effect as if it ellnuer
I
its common seal.

A. Multiple Choice Questions (MCQs)

1. The first step in the formation of a company is to prepa re-
(a) Memorandwn of Association (b) Articles of Association
(c) Prospectus (d) None of the above
randum means-
2. According to Section 2(56) of the Companies Act, 2013 Memo
(a) the Memorandum of Association of a company as orginally framed
ny law or of this Act
(b) as altered from time to time in pursuance of any previous compa
(c) both (a) and (b)
(d) either (a) or (b) or (c)
3. Memorandum of Association of a company is-
(a) the charter or the constitution of the company
(b) the fundamental document of the company
(c) a public document
(d) all of the above
4. Memorandum of Assoc1·ation may be called 'charter' of the company as-
.
(a) it regulates the relationship of the company with the outs1.ders mr1°'
(b
) ~ laysddo~ th~ powers and objects of a company, and the scope of the operati ons of the co .
go ...t1
eyon which its actions cannot . fo,,..
. I
ny is allowed to be
(c) ti contains the fundamental conditions upon which alone the compa
(d) all of the above
 Mf-MORAN IJUM r i ~ ,W,CX li\l lO•l & M

~
, A nr u ., OF A ,,c>:1A nos ♦ 113

rurr 0· of Mcmor11n1lum of A11~odatlon of a compan

y\
~- 'fh" ~
1 le ihc mlcn ding i;horcholdcrn to know r,,r wh.'11 prnn,
(ii) ll' cnn) th
1iscd ,. 11e e1r mv~'llment 1, gr,mg be
1111 10
\ I1le 1hc inlcnd11111, 11hurcholclcn1 lo know the mr mw,1
1) Ill 1.!l\ll ,.,.,,1 ,t
,.. in , ne1r tff1c1 tmen t
l1 nhlc \he person~ inlcnJmg lo deal with the
1 ) \ll cl\ I , comp any tr, r n< w ·.vhetL. L. •. rl
l ' f l! the mail ers w1I 11n Ihc o0Jcct~
• . ' , ner ln~ir ealm12, ar"" m
1[1\ l(l11 10 of the Vlm "?n•,
I'" I . -
II of 1hc nhovc
ld) fl
Whll'II 0 f the following statements 111 true?
Ii, n) lf thc com pany's acts go bcyon~ t~e pow
ers given in the Memorandum, n, ac.t w,U be
(, the company, and hence not bmdmg on the ult,ra -·irr~ "l
company
~J) The Memorandum of Association is a publ
ic document open for inspection by ~,er, per;x,n
with the company dealmg
(c) The Memorandum of Associ_ation enables
shareho~ders and other outsider,; ,,.,no deal wrth
company to know what are its powers, and the
what 1s the range of its activities
(d) All of the above

7 The Memorandum of Association of a company shall be in respect of fonm s]>«ifJed -

_
-
(a) Tables A, B, C, D and E in Schedule I
(b) Tables F, G, H, I aoo J in Schedule l
(c) Both (a) and (b)
(d) None of the above
S. Table A in Schedule I relates to Memoran
dum of Association of a compaay-
(a) Limited by shares
(b) Limited by Guarantee and not having share
capital
(c) Limited by Guarantee and having share capit
al
(d) None of the above
9, Table B in Schedule 1 relates to Memoran
dum of Association of a company-
(a) Limited by Guarantee and having share capit
al
lM (b) Limited by Guarantee and not having share
capital
(c) Limited by shares
(d) None of the above
10. Table D in Schedule I relates to Memoran
dum of Association of-
(a) an unlimited company and having share
capital
(b) an unlimited company and not having share
capital
(c) a company limited by Guarantee and havi
ng share capital
(d) a company limited by Guarantee and not
having share capital
11· Table E
in Schedule I relates to Memorandum of Association of-
(a) Company Limited by Shares
(b) Company limited by Guarantee
(c) Unlimited Company
(d) None of the above
12
· The Memorandum of Association of every
company must have the following number of clau
ses
00 4 oos
(c) 6
(d) 7
c. Law(II). e
114 + COMPANY LAw
~.
.,,,,,.,,.,,.~- \s " '11,bt·,,n,J ,,
13. The name of the company with the last word 'limited' or words 'Private L i n n ~ l .,,.sc " ·ith Ow ,•,\stlnv. tn,tl
~ tll• ti 1. 1,-11tic"1 "
(a) Public Company
.
Cb) Priv ate Company
t~
.
;s ' .
\V'at\lltl ti
pc•"''' ,,\.. ~ m,>11\hs
(t•) . ,.,.,,,d ,,\ l, " "'\\lhs
(c) Company registered under sections 8 (d) None of the above
(_b)
w,1h"'. II
1
,.. i<lcl ,,t
. .
t, 1\1\'l\lhs h
14. The punishment for improper use of the words 'limited' or 'private limited' With \,Vilh\ll II 1 1
incorporated with limited liability under this Act, with ftnc-- Ollt "b.!itig d~h- l•) I . n\Ul 'L>S<:
for t w '
(a) Which shall not be less than Rs. 500 for everyday for which that name has be · r the 11\->,>\'L'
. en Used I) N0nc 0
(b) Which shall not be less tha n Rs. 2,000 for everyday for which that nnme has be lt
• . . E•"'11C ,ns- '""' Nl\n~s lPr,·
(c) Which shall not be less tJ,an R s. )00 but may extend lo Rs. 2 ,000 for cvcryduy f en used ?I• 'fh'-',' c1nb\c1ns .,i:--
=~~~ ~~¾ 1111' ·
·tcLI N11IH>11s um \ I\ ""
11) tho \ ) 111
(d) none of tl,ese l \Yt ·itil se,,I ll\lll c ml•k
15. The name stated in the Memorandum of Associatfon shoultl-- (b) the O " . .
• lndilln N a111>m1\ l· l,11',
(a) not be identical with or 100 similar 10 the name of ru1 cxisti.ng company registered u , . . l•) 1h~
.. • 1
N~~ ~1 II of 1\to 11\w vu
(b) no\ be considered as undesirab1" by the op1ruon o f the Central Gov<:rnmcnt ld) II
' 'h' 1 of the wonb to IH· 1
(c) not be prohibited by ilic Emblems and Names (Preve ntion of Imprope r use) i\ct. l?, \'-, IC l
1950 (11) Fcch:1"11li1,11. C\111111\•,·1~
(d) all of ilie above
16. The proposed name of a company includ.:s the " ord ' stnte', the same shall be allowc,1.._ (c) 1:0 u11dlltit•n . \-\,nm,

(a) if the company is a Government Compun) ,\ccnnlinll to Ruh., 9 of the I

ll,
for rcscrv1,tlon " f ,, nnn.e
(b) if the company is Non-Government Compan)
(n) Fnrm No. IN C' I
(c) if ilie company is registered w1dcr Secllon lo\
(d) if ilie company is Foreign Company (c) r, 01m No INC "\
17. Which of the following words shall not be used in the name of the eomp,ony unlC!ls the prevloui 14. On the redpt of 1m nppllc1
approval of the Centr.1I Govcmmcnt has been obtaine d '? ,mil 1locumcnl8 fon1hhc 1
(n) the name or pictorial rcpresen1a11on of R11shtrnpa11 , Rushtrapalt Bhavan or any Raj Bhavan, (a) for r, m ax 11num p.,r1 n<
Mahatma Gandhi and Prime Minister of l11d.ia (h) for I\ IY"l ll\111 1111) 1 {'C rlhl
(b) The Indian National Flag (c) for a m11x m11m, pc rn,
(c) The Name o f Chief Mmister, Mrn1s1e r, Fmam:ml C orporalmn , Small scale Industries (d) for a m 1\X11n11m pc m
(d) All of ilie above 15. Where after rc 11Cn>ath,1
18. The name s tated in the Memorandum of Association of a Company i~ Identical with the name or incorrec t lnformi.t\11
of existing company, in such a case, tht! hitter company- (a) the rc\eTV.:d n..r;1c •
(a) can apply to the Central Government for 1he purpose o f prohibilmB the use of such na!l't,
(h ) the pcri« 111 11111 k 11111.
(b) can apply lo the Tribunal for the purpose of prohibitms the us e of such name
(c) e ithe r (,q " ' <1,,
(c) can apply lo the court for an injunction so as to restrain the compan y from using such na!l't
(d ) hoth r,, 1 •1111 1 rl ,J
(d) can apply to the Res istrar of companies for the purpose of cancellation of Registra11on 16· Whert aft1;r r•·M·
n>11t1
19. In case a company is registered 'l\ith a name which, in the opinion of the Central Governmul, hr Incorrect lnfc,nn11
is identical with the name of an existing company, it may direct the company to chut,t 111 rni.y-
narne--
/ "' <hrr-<.I If,,, '·' ,rr,r,:11
(a) Within a period of 2 months from the issue of s uch dl!ccllon \ rt: ..,1,lutu , r,
(b) Within a period of 3 m onths from the issue o f s uch d1recuo n ll,, b.Vt; '11,11,,,. {, ,I
(c) Within a perio d of 3 months from the issue o f s uch dire<:llo n, after adopting an urdinar'f fCSll~ r,.J r,,;s~,-. ,, , .,, , 1\ 1, ,r,
for the purpose
'' l i •-11!-~:r 1:,/ ',T \
ld) None o f the above

:nm
 MF.MOP.A'-:Dl,1,i OF AS50C1A Tiro;' & AKTJC1£ S OF AS50ClAnos + 115

In case a company is registered l\ith a name which, in the opinion of the Centr,d Gonnunent,
zo. is identical with the existing trade mark, tbe1 it may direct the company to cbaage its n.ame-
(a) Within a period of 3 months from the issue of such direction
(bJ Within a period of 6 months from the isrue of such direction
(c) Within a period of 6 months from the issue of such direction, after adopting an ordinary resolution
for the purpose
(d) None of the above
zt. The Emhlcm~ and Namc.s (Prevention of Jmproptr UM:) Act, 1950 prohibits the use of the name
and emblems o~
(a) the United Nation'! and the World Health Organjsation
(b) the ollicial seal and emblc.-ms of the Central and Lhe State Government
(c) the lndwn National Flag
(d) all of the above
22. Which of the words to bt: used In the name of companies registered under section 8 ?
(a) l·cdcrat10n, Chambers (b) A~sociation, Council
{c) Foundatwn, Forum (d) AJl of the above
23. According to Ruic 9 of the Companies (Rcgislr-,.tion Offices and Fees) Rule 2014, an application
for rescn·ation of a name shall be made In-
(a) Form No INC I (h) Form No INC 2
(c) Form No INC 3 (d) Form No. fNC 4
?t On the rcdpt of an application under section 4(4), the Registrar may, on the barn of information
and documents fuml.oihcd along with application, reserve the na~
(a) fo r a ni,.lXlmum pcnnd of 30 days from the date of application
0J) for a mrnrmurn pcnod of 60 days from the date of applrcation
(c) for a nmx rrnum pcnod of 60 days from the date of applrcat1on
(d) for a maximum pcnod of 90 days from the date of apphcahon
25. Where after reservation of name, II Is found that the name was applied by furnishing wrong
or incorrect information, then, if the company has not been lncorporated--
(a) thi.: ri.:scrvcd flllmc shall be cancelled
(b) the person makmg appl1cat1on shall be liable to a penalty which may extend to R~. 1,00,(f>O
(c) , tthcr (a) or (h)
(d) both (a) and (b )
26. Where aflcr rcsen-ation of name, it ill found that the name was applied by furnishing wrong
or incorrect information, then, if the company has already been incorporated, the Registrar
may-
(11) Lhrect the company to change its name withing a period of 3 months after passing ordmary
n.:solut10n
(b) take action for striking off the name of the company from the register of companies
(c) make a pcht10n for winding up of the company
(d) either (a) or (b) or (c)
 - ◄- , /JV

C~n~~~ll:::·A~N~Y~L::,~w~------ ----- - - - - - - - - - - - - -
!_11..!.:6~+!..._~ ., ~ -------
~ / -f change of 1h 1
!'loticil O •
27. A compimy m11y ch1u1~c Us 11111no--
· d' , ·olut'1on for this purpose 36- coJIIpanies-- . days of e
(a) I)Y passmg ,m or mnry res 10
· . . · • v I of the Central. Government .in wn·1·ing
f1...) b)• obtammg the prev ious 11pp10 u 3
) .,r.•'-tn
vviu•
'" hy giving notice of chnnge of name lo the Rcg1strar n Iong with the approval ( Withtn • 60 days of c
(c)
. of th (c) coJJlpany hai
Government c C:en,,,1 Wbefi' a .
(d) all of tlie above 31. paint or affix
11
28. An application for ch11nge of name shall be filed wHh Regis1rar in--
(a) Sha 11 display its na
(b) Form No. INC 25 (b) Sha .
( a) Form No. INC 24 ,__ ,1 given nollce
(c) Form No. INC 32 (d) None o f these (c) Sfl"' (b) a\
(d) either (a) or
29. According to Rule 29 of 1he Companies (Incorporation) Rules, 2014, 1he chan ~d- ~ I
not be allowed to a company- Ille shan rocedure aor c
'fbC p
(a) Which has defaulted in filing its annual returns or financial statements or any document du 38. . by passing-
1s •
filing with the Registrar er~, Ordinary resolutlc
(b) Which has defaulted in repayment of matured deposits or debentures or interest on de . (a) 1 •
(b) special reso utior
debentures P<>sits or
dinaTY resolult•
(c) both (a) and (b) (c) Or .
(d) either (a) or (b) (d) Special resolulto1
30. When a company change its name or obtain a new name under Section 16(1), it shall give no . 39
change of registei:1'
of the change to the Registrar along with the approval of the Central Government l'k:t · falling under the J1
(a) Withing a period of 10 days from the date of such change tbe--
(b) Within a period of 15 days from the date of such change (a) Central Govenu
(c) Within a period of 30 days from the date of such change (c) Regional Direc1
(d) Withing a period of 60 days from the date of such change
40. Change of regis1cr
31. H the Registrar of companies f"mds that the provisions of change of name have been complitd under the jurisdic
with, a new certificate of incorporation shall be issued in--
(a) Form No. INC 24 (b) Form N o. INC 25
\ confirmation Jeth:
(a) 30 days fro m
(c) Form No . INC 32 (d) None of these
(c) 90 days from
32. Under Section 12, every registered company should have a registered office--
(a) From the date on which it begins to carry on business
\ ~l. An application st

(b) From the date on which it obtains Certificate of Incorporation I within the same
(a) Form N o INC
(c) From the 15th day after the date of its incorporation
(c) Form No INC
(d) From the 30th day after the date of its incorporation
33. The company shall furnish to the Registrar verification of its registered office witbin- 42. A company ma)
(a) a period of 15 days of its incorporation (b) a period of 30 days of its incorporation (a) Ordinary res,
(c) a period of 60 days of its incorporation (d) a period of 90 days of its incorporation (b) Special resol
34. The verification of the registered office shall be filed with the Registrar in-- (c) Special reso!
(a) Form No. INC 20 (b) Form No. INC 22 parties
(c) Form N o INC 23 (d) None of these \ (d) Special reso
35. The Registered Office clause of Memorandum of Association contains-- 43.
As regards shil
(a) the name of the state in which the registered office of the company is to be situated of such shlftin
(b) the name of the Cityffown only and not of the state \ (a) Form N o I!
(c) the name of the Registrar of Companies (c) Form N<> p
(d) the complete postal address of the company

a
 MEMORANDUM OF A~ OCIAllON & Al<TIC1£S Ofl N:60CJAflON ♦ J17

36
o!
_ Notice chllnge of the situation of the Registered Ofncc shall be given to the Regbtr~r of
Comp1m1c~
(n) Within 10 days of change (b) Within 15 days of change
lC) Within 60 days of change (d) Within 90 days of change
_ Where a company has changed its name during the last two years, the company-
37
(a) Shall paint or affix its fonner name along with the name of the company so changed
(b) Shall display its name in the manner prescribed by the Act
(c) Shall given notice to the Registrar within 15 days of the change
(d) either (a) or (b) above

38. The procedure for change of registered office from one city to another within the same state
is by passing-
(a) Ordinary resolution and approval of the Central Government
(b) Special resolution and approval of the Central Government
(c) Ordinary resolution only
(d) Special resolution only
39, Change of registered office of a company from one city to another city in the same state but
falling under the jurisdiction of two Registrars of Companies is required to be approved by
the-
(a) Central Government (b) Registrar of Companies
(c) Regional Director (d) National Company Law Tribunal
40. Change of registered office of a company from one city to another city in same state but falling
under the jurisdiction of two Registrars, the company is required to file a certified copy of the
confirmation Jetter of the Regional Director with the Registrar within a period of-
(a) 30 days from the date of confmnation (b) 60 days from the date of confirmation
(c) 90 days from the date of confmnation (d) 120 days from the date of confirmation
41. An application seeking confirmation from the Regional Director for change of registered office
within the same state shall be filed by the company in-
(a) Fonn No INC 22 (b) Fonn No INC 23
(c) Fonn No INC 24 (d) Fonn No INC 25
42. A company may change its registered office from one state to another state by passing the-
(a) Ordinary resolution and approval of the Central Government
(b) Special resolution and approval of the Central Government
{c) Special resolution and confinnation of the Central Government and consent of all the affected
parties
{d) Special resolution only
43• As regards shifting of registered office from one state to another, an application for approval
of such shifting, shall be filed with the Central Government in-
(a) Form No INC 22 (b) Fonn No INC 23
(c) Form No INC 24 (d)_Fonn No INC 25
118 + COMPAN Y L\W
d m Involving shifting of registered office froin ~'
I
Slate to"
, tf aP
,z.
lief JS

aY c
. intra-,i res the memon11. 11d1un bi

altogeth er
.
hange the Articles and ratify
.
v01d and
.
m
lb~ • c
opcmu,·e
44, The allcn,tlon of M cmoran u 00
th,,
(a) t1l
y not
.
will be effective only-
r of Compar ues (c) 01a ultra-v ires act has been don•
. b th Registra . . case anY
(n) if the snme is registered Y e ly to the Central Government for
. . . db the Registrar of Comparues and issue a fresh Certificate of lnco'l>o 53
, IP
01aY apP .
(b) 1fthe same 1s regis1ere Y ration ( 3) bt ·n an injunctJ on forrn the coun
indicating the alteration . an O a1
.f th Regis . trar records the new location of registered office on the Register of Cornpan; (b) c Jy to the Registrar of Compani
(c) I e . •s •n 01aY app
place of t)le former locatJon ()c f the above
d) none o
(d) both (a) and (c) ( any's money is used for any pu
prospectus and has any llnuti.
45, Where the company has raised money from the public through 5~. If ~olllP the directo rs of the compa ny-
listd obJects,
amount of money so raised, it shall-- . be persona lly liable for the smae
money so raised is to be applied
(a) change the objects for which the (a) \\II11
(b) not change the objects for which the money so raised
is to be applied (c) either (a) or (b)
the objects for which the money so raised is to be applied, unless a special resolutio d'rectors of a compa ny paid divi,
(c) not change " .d end out o f cap1.
n 55' Theth I paymen t of d 1V1
is passed through postal ballot (a) e
(d) both (a) and (b) (b) the director s were held liable_to ref•
46, The term 'ultra-vires the company' means (c) the director s were not held lmble tc
(a) doing an act which is beyond the powers of the directors (d) both (a) and (b) in above
(b) doing an act which is beyond the powers given by the
Articles of Association
andwn of Association If directors induce any third party,
(c) doing an act which is beyond the powers given by the Memor 56' company has no power to act, in th
(d) all of the above (a) the director s will. b e persona lly lia
47. The term 'intra-vires the company' means- - (b) the company w ill liable to make
s
(a) doing an act which is beyond the powers of the director
by the Articles of Association (c) the director s will be personally Ii
(b) doing an act which is beyond the powers given
(d) both (a) and (c) in above
(c) doing an act which is within the powers of the compan y
57, When the compa ny's fund is lnvei
(d) both (b) and (c)
is beyond the powers -- (a) the company's right over such f
48. An act is said to be 'ultra vires a company' when it
(b) of the company (b) the compan y's right over such I
(a) of the directors
(c) of the directors but not the compan y (d) conferred on the company by the Articles (c) the propert y althoug h wrongly :
49. Which of the following statements is correct ? (d) both (a) and (c) in above
by the whole body of shareholdm 58, Where the Mcmor -,mdum of Ass,
(a) If an act is ultra vires the company, it cannot be ratified even
the powers of director s), but intra vires the company, a company, any borrow ing In e,
(b) It an act is ultra vires the directors (i,e, beyond
the shareho lders by a resoluti on in a general meeting (a) is known as ultra-v ires borrov
it can be ratified by
ratified by altering the Articles by a special Resolution
(c) If an act is ultra vires the Articles , it can be (b) such borrow ing is void and 1\-
at a general meeting relation of debtor and credilo
(d) All of the above (c) such borrow ing which is ultn
50, An act which is 'ultra-vires the compan y', i!r-- (d) all of the above
(b) not altogeth er void and in-operative 59,
(a) Wholly void and in-operative ~ railway compa ny was autho1
00~~~ ~~00~~ 1 e person s across In a boat). I
is in fact-- When the boats were otherw b
51. As a matter of fact, an act ultra-vires the memor andum
(b) Ultra-v ires the Articles (a) Ultra-vi res
(a) Ultra-vi res the compan y
(d) None of these (c) lntra-vires
(c) Ultra-vires the directors
 MEMORANDUM OF AS.SOCIATION & ARTICLES OF A!.SOCIATION ♦ ] J9 i
I
52. If an act is intra-vircs the memorandum but ultrn-vircs the articles., the mcmhers-- I
(a) may change the Articles and ratify the act (b) may not chage the Articles and ratify the act
(c) may not altogether void and in operative (d) both (a) and (c) in above
53. In case any ultra-vires act has been done or is to be done, any member of the company-
(a) may apply to the Central Government for restraining the company from doing the ultra-vircs act;
(b) can obtain an injunction form the court restraining the company from doing the ultra-vires act,
(c) may apply to the Registrar of Companies for cancellation of registration
(d) none of the above
54. If company's money is used for any purpose which is in no way connected with company's
objects, the directors of the company-
(a) will be personally liable for the smae; (b) can be compelled to make good the funds used;
(c) either (a) or (b) (d) both (a) and (b)
55. The directors of a company paid dividends on shares out of capital. In this case--
(a) the payment of dividend out of capital is ultra-vires;
(b) the directors were held liable to refW1d the money, so paid, to the company;
(c) the directors were not held liable to make good the funds used
(d) both (a) and (b) in above
56. If directors induce any third party, to contract with the company in a matter in which the
company has no power to act, in this case-
(a) the directors will. be personally liable for any loss suffered by the third party;
(b) the company will liable to make good the loss suffered by the third party;
(c) the directors will be personally liable to third party for breach of warranty of authority;
(d) both (a) and (c) in above
57. When the company's fund is invested, ultra-vires, to acquire some property, in this case--
(a) the company's right over such property is held to be secured
(b) the company's right over such property is held not to be secured
(c) the property although wrongly acquired represents the asset of the company
(d) both (a) and (c) in above
58. Where the Memorandum of Association fixes a limit on borrowing power of the directors of
a company, any borrowing in excess of that limit--
(a) is known as ultra-vires borrowing
(b) such borrowing is void and the lender cannot sue the company because it does not create any
relation of debtor and creditor
(c) such borrowing which is u]tra-vires cannot be ratified even by the whole body of shareholders
(d) all of the above
59. A railway company was authorised to keep steam boats for the ·purpose of a ferry (i,e, to carry
the persons across in a boat). It used the boats for excursion trips (i,e, pleasure trip) to the sea
when the boats were othenvise unemployed. The act of the company wa9-
(a) Ultra-vires (b) not ultra-vires
(c) lntra-vires (d) either (a) or (c)
 , ... ~ i n g statements are~
120 + COMPANY LAW
th 0
---------- \ ~jcb of e ; :~dwUill' and 'Articles' are \:
II such things as aro-- 1· <vi 'fhe 't-,1.errt andUill' and ' Arti.c les·· are \
60. A companv has the power t o d o 11
.• to be done bY the Companies Act,_2013_ (3) , t-,1.ernor
(a) authonscd
• · t f ·ts obiects specified m the memorandum (b) 'fhe of these are true
(h) cssentml to the attammen o 1 , • 1one true
\ (c) 1' f these are
(c) both (n) and (b) in above O
d) 130th f )lowing statements are
(d) either (a) or (b) ( of tbe o
\ "'bicb f Association r~gulates the
61. The purpose of doctrine of ultra-vires is-- _ _ 8, ·cleS o . .
(a) to protect investors of the company so that they may know the obJects m which their llloney is (3) p.r1l durn of Associallon regulate
Jv1ernoran
to be employed; (b) f these are true
(b) to protect the creditors of the company by ensuring that the company's funds are not Wasted . °NOile O
(c) f these are true
authorised activities lJ\ 130th 0
(d) d beyond the scope of A
(c) either (a) and (b) actsone
9. 'fbe ti fied by the shareholders
(d) both (a) and (b) can be ra
(a) be ratified by the sharehold
B. Multiple Choice Questions (MCQs) (b) cannot t" fied by the body of share
I. A company shall file with the Registrar of companies, in respect of alteration of its Mellloran. ) canbera1
dum-- (c of Association
(a) the special resolution passed by it as per section 13(1) (d) either (a) or (b)
(b) the approval of the Central Government under Section 13(2) for change of its name; ti \es of Association of a co
10 Tbe Ar c
(c) the alteration of memorandum will be effective only if the same is registered with the Registrar . (a) Tables F, G, H • l and J in Sched
of Companies (c) Either (a) or (b)
(d) all of the above
2. The Articles of Association of a company- 11 _ A Company may-
(a) adopt all of the regulations con
(a) is the second important document which has to be filed with Registrar at the time of registration
(b) adopt any of the regulations co
of the company;
(b) contains the rules, regulations and bye-laws for the internal management of the company; (c) either (a) or (b)
(c) is subordinate to and controlled by the Memorandum of Association (d) none of these
(d) all of the above 12. Table 'F' in Schedule 1 to the Co
3. Section 2(5) of the Companies Act, 2013 defines Articles-- (a) a company limite d b y shares
(a) as the Articles of Association of a company as originally framed (b) a company limited b y guarani
(b) as altered from time to time in pursuance of any previous company law (c) a company limited b y guaran
(c) as altered from time to time in pursuance of present company law (d) an unlimited company and h
(d) either (a) or (b) or (c) 13. Table 'G' in Schedule I relate,
4. The Articles or its alteration should not be inconsistent with- (a) a company limited by sharei
(a) the Companies Act, 2013 (b) the Memorandum of Association (b) a company limite d b y guara
(c) both (a) and (b) (d) none of the above. (c) a company limited b y guari
5. The Articles of Association of a company- (d) an unlimited company and
(a) should not be illegal (b) should not oppose to any public policy 14
· Table 'H' in Schedule I relal
(c) should not oppose to order of the court (d) all of the above (a) a company lim ile<l b y shar
?
6. In case 'Memorandum' and 'Articles' are inconsistent, then which shall prevail over the 0thers · (b) a company limited by gua
(a) Memorandum of Association (b) Articles of Association (c) a com P"ny
, 11m1tc<l
· · b v 1m:,
(c) The one approved by the Registrar (d) None of these (d) an u r1 · ·
n m1tcd company :,n
 MEMO l{ANDUM O F A&,< >CIAH CJN & AR 11( I J:', Of- /'S ,or f,\ m i N ♦ J2 I

~ t h e following stlltcmcnb arc truc'l

7,
Whichc ' Memorandum' and ' Attic . I ' · b' ti'
cs arc m mg o n the m cmhcrn in the ir relation t,, th,; compan y
(n) Th
' M , m orandum an ,-uitc cs ' me
' d ' A· · I ,,, h'm d'mg o n the company
· · the ·ir
m rela tio n to the mem hcrr;
(h) The e ·
of these arc true
(c) }'lone
th of these are true
(d) Bo
. O f the following statements arc correct?
Which . . . .
S, Aft.icles of Associauon r~gulates the relation of the company w1th the outsiders;
(a) ... A
(b) 1viemo
· ·
random of Association re gu1ates the mterna
· 1 management of the company

N ne of these are true

(c) o
(d) Both of these are true
_ The acts done beyond the scope of A_r ticles of Asso~iation of a Company-
9
(a) C an
be ratified by the shareholders m general m eeting
(b) cannot be ratified by the shareholders in general meeting
(c) can be ra~~ed by the body of shareholders, provided these acts are not beyond the Memorandum
of Association
(d) either (a) or (b)
10. The Articles of Association of a company shall be in respective forms specified in-
(a) Tables F, G, H, I and J in Schedule I (b) Tables A, B, C, D and E in Schedule I
(c) Either (a) or (b) (d) None of these
11. A Company may-
(a) adopt all of the regulations contained in the model Articles applicable to such company
(b) adopt any of the regulations contained in the model Articles applicable to such company
(c) either (a) or (b)
(d) none of these
12. Table 'F' in Schedule I to the Companies Act, 2013 specifies the model Articles applicable to--
(a) a company limited by shares
(b) a company limited by guarantee and having a share capital
(c) a company limited by guarantee and not having share capital
(d) an unlimited company and having a share capital
13. Table 'G' in Schedule I relates to Articles of-
(a) a company limited by shares
Cb) a company limited by guarantee and having a share capital
(c) a company limited by guarantee and not having share capital
(d) an unlimited company and not having share capitai
Table 'ff' in Schedule I relates to model Articles of-
(a) a company limited by shares
(b) a company limited by guarantee and having a share capital
(c) a company limited by guarantee and not having share capital
(d) an unr1 · d . •
m1te company and having a share capital
 Ml

pia\u!s any ddaall Ii

IS. Ti,hk ',1' In Sdll•,lu k t n•l11h-s to m111ld /\1·tlch-s of- coll'IP11nYfli •er In ,lcfault shall
If II r)' 0 1c
(.t1) :, "'""I'"'~· limil1.HI hy !!,lllll'lllltc e m11I hnving II s lum, iJ• cl c"c ror everyda y during ,
c npilnl ~P I ()00 .
1,1') i, coml'lll\~· limi1e ,I hy g1111ranle u 111\ll not lmving
shnrc cnpilnl (o) \~$- ,•,ooO for e veryday durml!, ,
(.\') nn unlimitc ,1 cnmpnny and hnvin!!, 11 s hnrn cnpilnl (b) RS· for everyda y dunng w
(d) an nnlimitcc l c,,m1>1m y and not having slmrc cnpilnl ~s soO
(c) . · er (a) or (e)
16. The Artlcks of Assoch,t ion m11y contnln pnwlslo ns
for cnfrenc luncnt (d) eith with any compan )
Jcalln!!.
pnwlslo ns of the Articl,• ,r- while . f the compan y. Even
1,11) may 1\0the nltcr<'d in m1y wuy ,, ~. •ssocl·atwn o Th"1s ty
,. 0 w the docuJUCnts.
(b) may be altered only if conditio ns or procedur es ns lhnl are to \al . f Indoor Manage ml
more restrictiv e than th . •tnnc 0
to a speical resolutio n. an: complied \\~th (a) DOC . • of Ultra-vi rcs
osc applicable
(c) either (a) or (b) Qoctnne
(c) rson enters into a con1
(d) none of these 1( If anY pc ti m and Articles of 1
,-· 1 inor.1n u
17. The entrenc hment provisio ns in the Articles of Associat r,, e
11 e l right under such
.
(a) Shall only be m ade on the fom1ation of a company
ion
(a) he w\
f\..) he w1 g
gel damages from th
(b) Shall o nly be made by an amendm ent in the Articles
11 not aet any right Un<
\V -
(c) he WI o
(c) either (a) or (b)
d) both (a) and (b) .
(d) none of these ( d trinc of constru ctive 1
26 The oc .
18. The entrenc hment pro,'isio ns in the Articles shall only . (a) protects o utsiders agamsl th
be madc--
(a) by an amemdm enl in the Aliicles agreed lo by all the member (c) either (a) or (b)
s of a private company
(b) by an amendm ent in the Articles of public company by passing nerson dealing with a co
a special resolution 27. Any r-
(c) both (a) and (b) how its interna l mac' l i ·•
ncry 1•
(d) none of the above (a) Doctrine of Indoor M anagi
19. The procedu re for alteratio n of Articles of Associa (c) Doctrine of Ultra-vi res
tion which has the effect of converting a public
compan y into a private compan y is by passing _
28 The doctrin e of Indoor Man
(a) special resolutio n and approval of the Central Governm ent (a) Saloman V. Saloma n & C,
(b) special resolutio n and approva l of the Tribunal (c) Ryland V Turquan d
(c) ordinary resolutio n and approval of the Central Governm 19. Accordi ng to the tloctrin e of
ent
(d) ordinary resolutio n and approva l of the Tribunal to assume that--
20. The general procedu re for alteratio n of Articles of Associa (a) everythi ng has been done r•
tion is by passing -
(a) Special resolutio n (b) the things h ave been don
(b) Ordinary resolutio n
randum and Articles of P
(c) Special resolutio n and approva l of court (d) None of the above (c) the details of interal pro<
21. The alteratio n of Articles of Associa tion of a compan y register
ed under section 8 cannot be done (d) all of the above
unless- -
30. The doctrin e of indoor ma
(a) the previous approva l of the Tribunal is obtained
(a) Protects the compan y ag
(b) the previo us approval of the Central Govemm enl is obtained
(c) e ither (a) or (h)
(c) the previous approva l of Court is obtained 31. The rule of indoor
manag
(d) n one of the above
(a) Which are void ab-ini1i,
22. A compan y shall, on the request of Its member , send to him
a copy of the Memorimdumand compan y
Articles within -
(b) Whe re the outsider s ha \
(a) S days of the request (b) 7 days of the request compan y have nol lhc
(c) 10 days of the request (d) 15 days of the request (c) when, lhe c irc ums lancc
(d) all o f the ahovc tran_<~

n
 &c ART1Cl1 ...S OF AS.SO ClATKJ''- ♦ 123
\ MEMO RANDU M OF ASSOCIATION

If a company make s any defau lt in complying with

the provisions of Section J7, the company
default, to a penalty of:-
23· and every office r in defau lt s_halJ b~ liable for each
ues or Rs. 1,00,0 00 v,ilichever is less
(a) Rs. 1,000 for every day ~ g w~ch the default cont_in
ues or Rs. 1,00,000 which ev er ts more
(b) Rs. 1,000 for every day d~g ~hich the default contm
or Rs. 50,000 which ever is less
(c) Rs. 500 for every day dunng which the default continues
(d) either (a) or (c)
the Mem orand um and Articles of
While dealing with any comp any every person should read
24
' Association of the company. Even if the person does not
read the documents he will be presumed
of these documents is calle d--
to J<now the documents. This Cype of presumed knowledge
(a) Doctr ine of Indoo r Mana geme nt (b) Doctr ine of Const ructiv e Notic e
(c) Doctrine of Ultra- vires (d) None of these
contrary to any pro..-isions of
25• If any
person enter s into a contr act with the company which is
-
Memorandum and Artic les of Association, in such a case-
(a) he will get right under such contra ct
(b) he will get dama ges from the comp any
(c) be will not get any right under such contra ct
(d) both (a) and (b)
26. The doctrine of const ructiv e notic e--
(a) protec ts outsid ers again st the comp any (b) protec ts the comp any again st the outsiders
(c) either (a) or (b) (d) both (a) and (b)
the comp any is being mana ged and
27. Any person dealin g with a comp any need not know-how
is caUe d-
how its intern al mach inery is handled by its officers, this
(a) Doctr ine of Indoo r Mana geme nt (b) Doctr ine of Const ructiv e Notic e
(c) Doctr ine of Ultra- vires (d) None of these
in the famous case- -
28. The doctrine of Indoo r Mana geme nt bas its origin
(a) Salom an V Saloman & Co. Ltd. (b) Royal Britis h Bank V. Turqu and
(c) Rylan d V Turqu and (d) None of these
29. According to the doctr ine of indoo r management, a
person dealin g with the comp an~· is entitl ed
to assume that -
proce eding s of the comp any are conce rned~
(a) every thing has been done regula rly so far as the internal
and proce dure laid down in the Mem o-
(b) the things have been done accor ding to the provis ions
randu m and Articl es of Assoc iation
open for public inspe ction
(c) the detail s of intera l proce dure of the comp any are not
(d) all of the above
30. The doctrine of indoo r mana geme nt--
ts outsid ers again st the comp any
(a) Protec ts the comp any again st the outsid ers (b) protec
(c) either (a) or (b) (d) none of the above
31. The rule of indoo r mana geme nt does not apply to tran sacti on~
Mem orand wn or Articl es cllnno t bind the
(a) Whic h are void ab-ini tio e.g., an act ultra- vires the
comp any
, that the direct ors or other office rs of the
(b) Wher e the outsiders have notice , actual or constr uctive
ct
comp any have not the autho rity to enter into the contra
suspic ious and, theref ore, call for enqui ry
(c) where the circum stance s surrou nding the contra ct are
(d) al] of the above transa ctions
124 ♦ C o ~tl'ANY L\\'J

. not take the benefit of indoor rnana

32. A person dealing with the company can gernent-
. ·I · "orged by the officer of the company bee
(a) he relics upon a document wh1c 1 15 1' ' aUSe forgtri i
nullity of law 'a
(b) he e~ters into a contract with the company through its officer who has no authority to
act (in
behalf of the company
(c) he enters into a contract without making any enquiry to remove his suspicion of irregularn-
regarding the internal management Y
(d) all of the above
33. The directors of the bank were authorised by its Articles to borrow on bond such
di t f th b s111n as
authorised by a resolution passed in a ?eneral meetin g. The rec ors O e ank gave a bobd
to Turquand without any such resolution. In such a case-
(a) the company was bound by the loan
(b) Turquand could sue the bank on the basis of the bond as he was entitled to assume that necessary
resolution has been passed '
(c) Turquand could recover the amount of bond from the company
(d) all of the above
34. Every alteration of the Articles and a copy of the order of the Tribunal shall be filed llith th
Registrar, together with a printed copy of the altered articles, within- e
(a) 10 days (b) 15 days
(c) 30 days (d) 60 days
35. The companies which need not have their own Articles of Association are-
(a) Unlimited Companies (b) Companies Limited by Guarantee
(c) Private Companies Limited by Shares (d) Public Companies Limited by Shares

Xi~n!lir~:\K
A. 1. (a), 2. (d), 3. (d), 4. (cl), 5. (d), 6. (d), 7. (a), 8. (a), 9. (b), 10. (b), 11. (c), 12. (c), 13. (c),
14. (c), 15. (d), 16. (a), 17. (d), 18. (c), 19. (c), 20. (c), 21. (d), 22. (d), 23. (a), 24. (c), 25. (cl),
26. (d), 27. (d), 28. (a), 29. (d), 30. (b), 31. (b), 32. (c), 33. (b), 34. (b), 35. (a), 36. (b). 37. (cl),
38. (d), 39. (c), 40. (b), 41. (b), 42. (c), 43. (b), 44. (b), 45. (c), 46. (c), 47. (d), 48. (b), 49. (cl),
50. (a), 51. (a), 52. (d), 53. (b), 54. (cl), 55. (d), 56. (d), 57. (d), 58. (d), 59. (b), 60. (c), 61. (cl).
B. I. (d), 2. (d), 3. (d), 4. (c), 5. (d), 6. (a), 7. (d), 8. (c), 9. (c), 10. (a), 11. (c), 12. (a), 13. (b),
14. (c), 15. (d), 16. (b), 17. (c), 18. (c), 19. (b), 20. (a), 21. (b), 22. (b), 23. (a), 24. (b), 25. (c),
26. (b), 27. (a), 28. (b), 29. (d), 30. (b), 31. (d), 32. (d), 33. (d), 34. (b), 35. (d).

A. Short Questions :
1. Define Memorandum of Association. [3.1] [C.U.B.Com 2008, 2009, 2012]
2. State two purposes of Memorandum of Association. [3.2]
3. What are the important clauses of the Memorandum of Association of a company ? [3.4]
4. Give an idea about the ' registered office clause' of Memorandum of Association. [3.4]
5. What do you mean by the object clause of Memorandum of Association ? [3.4]
6. What is liability clause of Memorandum of Association ? [3.4]
7. What is Capital Clause? [3.4]
8. State two purposes of Object Clause. [3.8]
 MEMORANDUM OF A'>',(K fA lf()N & .
~ ' , , ARrl<.1.1-.', fJF A'HJl'. 1A n0r, ♦ 125
. c1111 t by company lnrnlod hy share~• ? 1141
' Wh:11 is 111 . . ..
9, \,\~1111 do you mcnn by com~uny hmtlcd hy guarantee? ll 4I
10. · doctrine of Ultra Vtrcs'I 13.101
\,\~till IS .
1I. d u·inc of Ultra Vires accepted as void ? 13 I01
12 Is oc . .
~iat arc the exceptions lo the doctrine of Ultra Vires ? ll lO]
IC. U. B.Com. 201),i l
ll Mention two procedures of alteration of name clause. 13. I l]
it r: e Articles of Association. [3.12] ICU
15. I)e,tn . . . . · · 8.C,,m. 2011 , WJ2, 21)131
tion two pomts of distmction between Memorandum and Art"ices 1 of Assocat1on.
J6. Men [3. 1~]
. What is doctrine of Indoor Management ? [3.17]
17 !C.U.B.Com. 20131
Mention two exceptions to the doctrine of indoor management. [3. l7]
JS.
What is service of documents ? [3.19]
J9.
What do you mean by Doctrine of Constructive Note ? [3.16]
20.
1. What do you mean by authentication of documents, proceedings and contracts ? [3. 20]
2
What do you mean by execution of bill of exchange ? [3.21]
22'
]3. Medium type Questions :
1. Define 'Memorandum of Association' and mention its clauses. [3.1 & 3.4) [C.U.B.Com. 2013]
2. Briefly explain the contents of Memorandum of Association. [3.4) (C.U.B.Com. 2012]
3. Discuss the form of Memorandum of Association. [3.3]
4. Define and distinguish between Memorandum of Association and Articles of Association. [3.1 & 3.8]
[C.U.B.Com. 2012, 2009, 2005]
5. Discuss the procedure for change of name clause of Memorandum of Association. [3.]
[C.U.B.Com. 2011]
6. Explain the doctrine of Ultra Vires and its effect. [C.U.B.Com. 2012, 2009, 2007]
7. Define Articles of Association. What is the procedure for alteration of Articles of Association ? [3.14]
(C.U.B.Com. 2012]
8. Discuss the legal requirements as to the Name Clause of Memorandum of Association. [3.5]
.
9. Discuss the legal requirements as to the rectification of name of a company. [3.6]
10. Discuss the legal requirements as to registered office of company. [3.7]
II. Discuss the rules regarding change of registered office of company. [3.7]
12. Discuss the legal effects of the Memorandum of Association. [3.9]
13. Discuss the effects of Ultra Vires transactions. (3.10)
14. Mention the exceptions to the Doctrirte of Ultra Vires. [3.10]
IS. Discuss the legal provisions regarding alteration of registered office from one state to another. [3.11]
16· Discuss the legal provisions regarding alteration of Memorandum in specific clause. [3.11]
17 · Discuss the contents and model Articles of Association. [3.12]
18· Disscuss the effects of Memorandum and Articles of Association. [3.IS]
19. Explain the doctrine of Indoor Management and State its exceptions to its application. [3.17]
[C.U.B.Com. 200S, 2011)
20
· Discuss the conditions for availability of privilege of doctrirte of Indoor Management. (3. l 7]
126 + C m\PAX\ L,w

C. Long Questions :
l. What is Memorandum of Association? How can the name and registered office of a corn
altered ? [3. l & 3.11] IC.U Bc J)any be
. . ' • Otn, 2
2. Define Memorandwn of Association and mention its clauses. 13.1 & 3.4] IC.U.B.Coin. 004]
3. ''The Memorandum of Association is the fundamental law or charter defining the objects . 20131
8nd
the powers of a company"-Explain. [3.9] IC.U B c limiting
. , . Otn, 200
➔. Explain the doctrine of Ultra Vrres and its effects on Ultra Vires transactions. [3.10] 51
(C.U.B.Cotn. 2007
5. Discuss the procechues for alteration of the registered office of the company from one state t '' 26091
[3.11 l o another.
6. Explain the doctrine of Ultra Vrres and State its exceptions to its application. (3.1 O]
7. Discuss the doctrine of indoor management and state the exceptions to its application. 13. l?]
8. (a) Define Articles of Association. [3.13)
(b) What are the procechues for alteration of Articles of Association ? (3 .14)
9. Discuss the legal effects of the Memorandum and Articles of Association of a company. 13. lS]
IO. Discuss the contents and model Articles of Association. [3.12)
 ~ 1 OF SEci -~

Registrar of cornpanjes a return of aJJotzn . - • 1-B

'th thC he J te r t o f aJJ Secnrity-ho
ent
Jde In SUch
. manner as mav be
~-, JJ incJudc t . comp e is
\
'I • It sh.a. of securities aJJotted and such other rel ,
rs_ With their foll n~ Prescnl>ed_
ntJ.l11~ 42(9)]. evant lllformation as mav be es, addre~ ,
5cctJOD . . - "' Prescnbed
f ftt' {or def auJt ID cornpJy1n g with the pro,·· .
peoa •,; isions of Section .. 2
(i) oropanY makes an ·offer or accepts monJ·es m . "' (Sectioa 42(I0))
Jf the c contra - ·
tion 42, the company, 11:5 promoters and directors shall ~~bon of the pro,isions of
sec tend to the amount mvolved in the offer O . . . or habJe for a penaJtv whi h
maY e'X r m,1.tation Rs 2 ·. · c
. higher. · crore, whichewr
is company shall also refund all monies to subscribers . .
T}le der imposing the penalty. \\'lthin a period of 30 dars of
the or .

1 The. provisjons of Section 42 seek to ensure

. . d J. bl more transparenc v d
abihty an are app 1ca e to aJJ companies includin .. . an account-
. . . g pm ate compall\·
. ··
2 Section 2(68) of the Compan,e.s Act 20 I 3 pro,,·des a rensed d fin1· ·
•
1
• . ,
term ' Prl\'atc Company by increasing the ma~mu be e 1100 of the
50 to 200. But any private placement of securities~ ~um r of memb~rs from
c;o I · ) a company· contmues
be Jim ,red to ~ persons. un css a higher number is scperate1Y prescnbed .
to
These
contrad1c rory prov1sons may be needed to be clarified. · ·
J. Prh are Placemen I offer deemed lo he an offer to the publ' IE 1antion ..
· • 2(2)' I 1c xp
to .SCCflO D "'

-;If a com pan~, l1s1cd or unlis ted, mnl.es an offer to allot or invites subscription , or allots,
or cnfcrs info on ogreemcnt to aJlot, secunLJcs 10 more than the prescribed number of persons,
whcfhcr ihc pay mcnl fo r th e sccunt,es hos been reccn ed or n~I or \\ hether the company intends
to lisl its sccun11cs or nor on an) rccognist:d stod . exchange in or outside India, the same shaJI
be deemed 10 be an o/Tcr to the public and shall ::iccordmgly be governed by the provisions of
Part J of Choprcr 111
■ According to Seerion 42 (~). iln) offer or 1m 1ta11on not in compliance with the provisions
of Scclion 42 shnJJ be 1rea1ed as tl public offer nnd 11 has to comply \\i th the provisions of this
.
Acl 1hc Securities Contrac ts ( Regulau on) Act, J956 and the Securities and Exchange Board of
India Acl. 1992 apphc nble to a p ublic offe r
I'!?

) Extrcilt and Hints (

A. Multiple Choke Questions (MCQs)

I. A JO<'ument inYiting offers from the public for the subscriptio n or purchase of any securities
of a bod~· corporate is c-alJed--
(ll) Memorandum of Association (b) Articles of Association
( C) Prnspec tus (d) None of the abo\'e
2. Wh · h .. • tus jf it wishes to r.,1ise public
K' . or the following compa.nJ' .u reqll.lffd to m■e a prospec
hlon{·_\·?

Publte L1.I11J ted Company

\.1) .-\
(b) A Private Limited Company
: 8-,th (a) and (b) (d) None of the above
144 + Co~ll'ANY L,w

rospcc1~
J. A 'P"""""''' 111,,.,n, ,my doruni,nl dmrlb,d or bm,1 "' • p
. . , .. . U lldc~
(11) n ' n•d hc1Ting prospec tus rcfcncd to 111 Scct1011 •
(h) n · Shelf pr11spcct11s• referred to in Section 31
offers frorn the .
(c) any notice. circular. a<lvc,1iscmcnt or other document inviting
te PUhl1c for the
suhscii ption or pmchnsc of any securiti es of a body corpora
td) either ta) or 0)) or (c)
4. Which of the following is 11 component part of a prospectus ?
(a) There must be an invitation to the public
(b) The invitation must be to subscribe or purchase securities of the
company
to a pro
(c) The invitation must be made by or on behalf of the company or in relation posed conip
any
(d) All of the above
5. Which of the following is not a prospectus ?
(a) An offer of shares to the existing members of the company
(b) An invitation is made to the friends or relatives of the directors
the company
(c) An invitation is made to anyone who wishes to invest his money in
(d) Both (a) and (b)
available for sale .
6. An advertisement in a newspaper stated that "some shares are still
The advertise-~ccto rdiJig
to the terms of the company which may be obtained on application". un.:n Was-

(a) a prospectus as it invited the public to purchase shares

(b) not a prospectus as it not an invitation to the public at large
(c) either (a) or (b)
(d) both (a) or (b)
7. The offer so made through prospectus may be-
(a) Public offer (b) Private Placement

(c) Both (a) and (b) (d) Either (a) or (b)

8. A public company may issue securities-

(a) through public offer (b) through private placement
(c) through right issue or bonus issue (d) either (a) or (b) or (c)
9. A private company may issue securities-
(a) through public offer (b) through private placement
(c) through right issue or bonus issue (d) either (b) or (c)
10. The term 'public offer' through issue of prospectus includes-
by a company
(a) initial public offer or further public offer of securities to the public
(b) an offer for sale of securities to the public by an existing shareholder
(c) both (a) and (b)
(d) either (a) or (b)

t &)
 P R<'Jll.rr C n ' A..'-T> A l I cma~, i:. SfCL.rn;: ♦ J..S

~
tcrDl, pri,·afc placement' me•h!I •ny offer of sttuitin or la\'ltatio1t to Hii«rilM .nridr.-
tl, fbc
fO--
)ect group of persons hy o company through issue of a pra\"lllt' r t-«mc:nt , lfn kncr 43 ,.....,
l3) sc f I A t t~
Sc~tiOO 42 0 l lC C ,
b) select i;roup of persons by a company (other than b) \\ll)' of pubh" offer, throo~ u:sue of• pm,"l:t~
offer letter as per Section 42 of the Act. -
l r~ 1 -emcnt
le) both (3) and (b)
td) either (a) or (b) . .
Which of the followmg statements 1s rorrect ?
12. . ..
a) Prospectus must be m wntmg
~ ) An oral invitation to sub~cribe for securities will not be considered as prospectus
(c) Television or film advertisement cannot be treated as prospectus
(d) All of the above
l3. Where a company allots or agrees to allot any securities of the compaaJ· 'ftifla a ,irw t.o aD or
any of those securities being offered for sale to the public, any docameaf bJ· wlaicla die o ffer
for sale to the public is made-
(a) shall be treated as prospectus issued by the company,
(b) Shall be deemed to be prospectus issued by the company,
(c) Shall not be treated as prospectus issued by the company,
(d) either (a) or (b)
14. Where a person making an offer to which Section 2S of the Act relates, is a compa11y or a firm.
it shall be sufficient if the document is signed on behalf of the company or firm b~· -
(a) one director of the company
(b) two directors of the company
(c) one-half of the partners in the firm
(d) two directors of the company or by not less than one-half of the partners in the firm
15. A prospectus is required to be issued to the public, l\·ithin-
(a) 30 days after the copy of prospectus is filed with the Registrar,
(b) 60 days after the copy of prospectus is filed with the Registrar,
(c) 90 days after the copy of prospectus is filed with the Registrar
(d) 120 days after the copy of prospectus is filed with the Registrar
16. The money paid by the subscribers must be returned forthl\·ith, if the miaim11m .s11bscriprio11
is not raised within--
(a) 30 days after the issue of prospectus
(b) 60 days after the issue of prospectus
(c) 120 days after the issue of prospectus
(d) 180 days after the issue of prospectus
17
· The copy of a prospectus to be delivered for registration to the Registrar is to be siglied by-
(a) the promoters of the company
(b) the authorised agents of the promoters
(c) the persons named in the prospectus as directors or proposed directors or their duly authorised
agents
(d) none of these
146 + COMPANY LAW
relation to an intended co1n
18. A prospectus issued by or on behalf of a company or in Pany shall
be dated, and that date shall, unless the contrary is proved,
be taken as-
(a) the date of registration of the prospectus (b) the date of publication of the prospectus
(c) the date of incorporation of the company (d) none of these
any for sale of securities to th
19. Every prospectus issued by or on behalf of a public comp e Pllblic
is required to stat ~
bankers, underwriters , COllJpan
(a) names and address of the registered office of the company,
y
secretary etc.
about the issue of allotment letter
(b) dates of the opening and closing of ~e issue, and declatation
s
and refunds within the prescribed tune
(c) details about underwriting of the issue
(d) all of the above
20. Which of the following statements is correct?
(a) Prospectus shall not be issued before the date of publication
ation as required under Secf
(b) Every prospectus shall be dated and signed and contain the inform ~
um
red for registration to the Registrar
(c) Every prospectus issued shall state that a copy has been delive
(d) all of these
dinir
21. A prospectus issued shall contain the information regar
expert's opinion,
(a) Consent of the directors, auditors and bankers to the issue,
t of premium payable
(b) Capital structure of the company, minimum subscription, amoun
(c) Main object of public offer, terms of present issue
(d) all of the above
fmancia) information regarding-
22. A prospectus shall set out the reports for the purpose of the
and losses and assets and liabilities,
(a) reports by the auditors of the company with respect to its profit
years immediately preceding the
(b) reports relating to profit and loss for each of the five financial
of its subsidiaries
financial year of the issue of prospectus including such reports
of the securities are to be applied
(c) reports about the business or transaction to which the proceeds
directly or indirectly
(d) all of the above
23. The prospectus to be issued shall contain-
by any Ministry or Department of
(a) the details of any litigation or legal action pending or taken
the last 5 years immediately
the Government against any promoter of the issuer company during
preceding the year of the issue of prospectus
ter, director, subsidiaries whose
(b) the details of pending litigation involving the issuer, promo
issuer
outcome could have material adverse effect on the position of the
(c) the details of default and non-payment of statutory dues
(d) all of the above details
24. The objects of registration of a prospectus are--
issue of securities
(a) to keep authenticated record of the terms and conditions of
of prospectus for statement made
(b) to pinpoint the responsibility of the persons relating to the issue
by them in the prospectus
(c) both (a) and (b)
(d) none of the above
 ·--
"ii'' -
~ PROSPF.cn;s AND At I.O'rMF.NT OP 5P.CUJOTJF,s
• + 147
rospectus is Issued In contravention of fh e ptovl1ion1 of Se t•--
If • P i h fl h c ""' 26, fhe company ,laaU
z5, be punishable w f ne w lch •hall not be leu thaa -
(a) Rs, SO,OOO (b) Rs. 3,00 000
Do 50 000 to R-;, 3,00,000 (d) N '
(c) I'-'· ' one of these
Jf II prospectus is issued in contravention of the ii
z6. •-owingly a party to the Issue of •uch pro1pectpurovh1lolnbe1of Section 26, every per'°n who JI
''" . . .
1 1 a punl1hable-
(a) with unpnsonme nt for a term which may be extended to 3 years
,
h
(b) with fine which shall not be less than Rs 50 000 b t h' may extend to Rs. 3,00,000
(c) with both (a) and (b) . , u w ic

(d) either (a) or (b) or (c)

27· A company shall not vary terms of a contract referred t0 in fb e prospectus or object5 for which
the prospectus was issued except by way of-
nment
(a) passing special resolution and approval of the Central Gover
(b) passing special resolution and approval of the Tribunal
(c) passing ordinary resolution
(d) passing special resolution
zs. Every public company making public offer shall issue the securities-
(a) only in physical fonn (b) only in dematerialised form
(c) both (a) and (b) (d) either (a) or (b)
hed, it shall specify therein-
29. Where an advertisement of any prospectus of a company is publis
objects, the liability of members
(a) the contents of its Memorandum of Association as regards the
and the amount of share capital of the company
iation and the number of shares
(b) the name of the signatories to the Memorandum of Assoc
subscribed by them
(c) its capital structure
(d) all of the above
30. Shelf-prospectus means a prospectus in respect of whic
b-
over a certain period without the
(a) the securities are issued for subscription in one or more issues
issue of a further prospectus;
(b) the class of securities included therein are issued for subscr
iption in one or more issues over a
certain period without the issue of a further prospectus
(c) both (a) and (b)
(d) either (a) or (b)
file a shelf-prospectus with the
31. Any class or classes of companies prescribed by the SEBI may
Registrar of companies (ROE)-
year
(a) at the stage of the first offer of securities for a period of one
(b) at the stage of the first offer of securities for a period of
two years
years
(c) at the stage of the first offer of securities for a period of 3
(d) none of these
32· The ftliag of shelf-prospectus has been made compulsory for-
(a) Any public financial institution (b) Public Sectors Bank
(c) A Schedule Bank (d) Any class of Companies guided by SEBI
148 + C OMPANY L AW
--
33. A company filln~ 11 'Shclf-pnlspcctus' with fhc RcgMrar of companiclr-
..
(a) Shall be required lo file p1 ospectus in respect of a second or subsequent offer of sccurit1cs with·
tl)c period of one ycnr in
(b) Shall not be required to file prospectus in respect of a second or subsequent offer of .
·t1 · tl · j' SCcur1tics
w1 un ie pcnod o one year

(e) Shall he required to file i.nfonnation Memorandum prior to the issue of a second Or SU11se L

oITcr · quen1

(d) both (b) and (c)

34. A company filing the shelf-prospectus is also required to file with the Registrar, an 'Jnfonnati
Memorandum' on all material facts relating to- Oil

(a) any new charges created

(b) any change in financial position occwring ""
between the first offer of securities, previous Ouer
.. of
securities and succeeding offer of secunhes
(c) both (a) and (b)
(d) either (a) or (b)
35. In case of changes in the material facts of prospectus relating to. new charges created , changes
in the financial position of the company between the first/previous offer of securities and th
succeeding offer of securities, an option has been given such applicants, who had applied fo;
subscription of securities before such change-
(a) to withchaw their application
(b) to withdraw their application and seek refund of all the monies within 15 days thereof
(c) to withdraw their application and seek refund of all the monies within 10 days thereof
(d) both (a) and (c) in above.
36. The Shelf-Prospectus shall remain valid for a period o1-
(a) one year from the date of opening of the first issue of securities under such prospectus
(b) two years from the date of opening of the first issue of securities under such prospectus
(c) three years from the date of opening of the first issue of securities under such prospectus
(d) both (b) and (c) in above
37. Where an Information Memorandum is filed, every time an offer of securities is made under
Section 31(2), such memorandum together with the Shelf-prospectus will be-
(a) treated as a prospectus (b) deemed to be a prospectus
(c) deemed to be a Memorandum of Association(d) none of the above
0
38. 'Red herring prospectus' means a prospectus which does not include complete particulars ~
(a) the quantum of the securities offered (b) the price of the securities offered
(c) both (a) and (b) (d) either (a) or (b)
39. A company proposing to make an offer of securities may issue a red herring prospectu9-
(a) prior to the issue of a prospectus (b) at the time of issue of a prospectus
(c) after the issue of prospectus (d) both (b) and (c) in above

t TI
.,~,...._
f lJ<, 1\ PKO'·,J>l ( . ff A -:.f~<~l!! 4~9
i P'.!:f~fl::F'r!.._'~♦~1~
--.: ..:.::. :_::~ ...'._: '.~
::: ·~N~--r~r~Jf~
~ !,_l~ l~f!.:_(J~J_'v!!;IJ
- - -- - - -
~ -------

1•ro~pccfu ".. , t•~ ,1.

II fi• - it ... 1 ., the Red , tn r o r
1,nY pro pos in~ Co Issu e a re d hc rrlnJ< ... ,c: "
A con•P •
.ffl. omp anic ~ " r
o f the suhsc ripti,m 1,·.,., 1 •,in,J th e <, f',e
• l ·
C
. t J diy s pno r to t,1e ope n mg
(II) 11 I Ii.;115• • •
•

of 1hc subsc ription 1,-.,t ~n I l ff

lc ,,st 5 day s pno.r to the opc nmg . •' ,. ' 1ne o er
(h) a t " r
'.ng of the subs cription lis t and the ,,ffe
(c) :it least JO day s pr~o r to the opcn
r
(d) at least 15 day s pno r to the ope
ning o f the subscription list and the offe
y shal l car ry-
A red her ring pro spe ctus of a com pan
.f 1.
the sam e obli gati ons as are appl icab
le lo a pros pect us
(:l) ted as •;ana ti,,r. s
vari atio n betw een the red herr ing pros pect us and a pros pectus shall be hJgh hgh
(b) any
in the pros pect us
(c) both (a) and (b) in abo ve
(d) none of the abo ve
the Regisn-ar
ing of the offe r of secu ritie s und er Section 32, a com pan y shaJJ file with
42. Upon clos tus stat ing the rein -
of com pan ies and the SEB I pro spec
way of debt or share capital
(a) the tota l capi tal rais ed, whe ther by
(b) the clos ing pric e of the secu ritie
s
d in the red herr ing pros pect us
(c) any othe r deta ils as are not incl ude
(d) all of the abo ve
43. 'Ab ridg ed Pro spe ctus ' mea ns- - ified by the A.ct
nt feat ures of a pros pect us as may be spec
(a) a mem oran dum con tain ing such salie
by mak ing regu latio ns in this beh alf
aini ng all mat eria l fact s of a pros pect us
(b) an info rma tion •me mor and um cont
ified by the SEB I
nt feat ures of a pros pect us as may be spec
(c) a mem oran dum con tain ing such salie
by mak ing regu latio ns in this beh alf
(d) both (a) and (b) in abo ve
of its s~u riti es unress
lica tion form for the pur cha se of any
44. A com pan y sha ll not issu e an app
such form is acc omp anie d by - ent
the SEB I (b) an approval of the Cen tral Gov ernm
(a) an appr oval of
(d) an Abr idged Pros pectus
(c) an appr oval of the Trib una l
45. The req uire men t that app lica tion form for pur cha se
of secu ritie s to be acco mpa nied with
to- -
Abridged Pro spec tus sha ll not app ly pers on to enter into
ecti on with a bona fide invi tatio n to a
(a) issu e of form of app lica tion in conn
ect to such secw-itie s
an und erw ritin g agre eme nt with resp
the pub lic
(b) issu e of such form in rela tion
to secu ritie s whi ch are not offe red to

(c) both (a) and (b) in abo ve

(d) eith er (a) or (b)
d Pro spec tus,
46
com pan y mak es any defa ult in com plyi ng with the pro visio ns of Abr idge
· ~he re a
It shall be liab le to a pen alty
of-
(b) Rs. 30,0 00 for each defa ult
(a) R.s. 20,00 0 for eac h defa ult
) Ra. d) Rs. 75,0 00 for each defa ult
150 + C OMPANY LAw

47. Wh ich of the following cases a

the pro spc ctu ~
pro11pcchu issued or drcu l,ttc d Is lmown
as ••us- ------
-• state
hlellt 111

h is untrne or misleading in fonn ;

(a) includes any statement whic
(b) where any inclusion or omission of
any matter is likely to mislead;

(c) either (a) or (b)

(d) none of the above nt Jn th
Uable and punishable for untrue stateJDe
48. Which of the following persons are e ProsJlet.
tu~
us
company at the time of issue of prospect
(a) every person who is a director of the
ed to beco
self in the prospectus as a director or agre
(b) every person who bas authorised him rne a
director
company
(c) every person who is a promoter of the
(d) all of the above
for nlis-stateine
, 2013 deals with the criminal liability
49. Whlch Section of the Companies Act Ill
in pro spe ctu -
(b) Section 34
(a) Section 33
(d) Section 36
(c) Section 35
mis-statemellt in
, 2013 deals with the civil liability for
50. Whlch Section of the Companies Act
pro spe ctu ~
(b) Section 34
(a) Section 33
(d) Section 36
(c) Section 35
prospectus shall be
on who authorises the issue of untrue
51. The criminal liability of every pers
liable for act ion -
fraud)
(a) Under Section 447 (punishment for
false statement)
(b) Under Section 448 (punishment for
false evidence)
(c) Under Section 449 (punishment for
of repeated default)
(d) Under Section 451 (punishment in case
untrue prospectus),
ty of fraud (i.e. authorises the issue of
52. Any penon who is found to be guil
shall be panishable-
3 years where
l not be Jess than 6 months (not less than
(a) with inprisonment for a term which shal
may extend to 10 years
fraud involves public interest) but which
(b) with a fine which shall not be Jess
than the amount involved in the fraud
times the amount involved in the fraud
(c) with a fine which may extend to 3
(d) both (a), (b) and (c) in above
on does not arise if he proves tha t-
53. The criminal liability of any pers
aterial
(a) such statement or omission was imm
(b) he had reasonable grounds to beli
eve that the statement is true
y
that the inclusion or omission is necessar
(c) he had reasonable grounds to believe
(d) either (a) or (b) or (c)
l~
~ ,.
~
"•
PROSPECI US AND
'
A
LtoTMF.NT OP SECUIUTIF.s ♦ 151
-.
at is the re~dy available to a person who has been Ind
54. Wb anY by nusrepresentation of material facts in p uced to purchase 1CC11rities of a
coPIP · rospectus ?
Be can recover the loss or damages sufTered by him firom the company
(a) .
(b) Be can rescind the contract to purchase of securities
(c) Both (a) and (b)
(d) :None of these
Under Section 39, whenever a company having a share capital make
55, I tu f 11 t t ith h R s any a 11otment of 1ha-res
it must fi c a re m o a o men w t e egistrar of companies within-- '
(a) 7 days (b) 15 days
(c) 30 days (d) 60 days
. A company may issue deposbitory receipt in any foreign country in such manner a■d n bject
56
to such conditions, as may e prescribed aftei--
(a) passing a special resolution in its general meeting of shareholders
(b) passing an ordinary resolution in its general meeting of shareholders
(c) passing a speical resolution and approval of the Tribunal
(d) passing an ordinary resolution and approval of the Tribunal

A. I. (c), 2. (a), 3. (d), 4. (d),
14. (d), 15. (c), 16. (a), 17.
26. (d), 27. (d), 28. (b), 29.
38. (d), 39. (a), 40. (a), 41.
50. (c), 51. (a), 52. (d), 53.
5. (d), 6. (a), 7. (d), 8. (d), 9. (d), 10. (d), 11. (b), 12. (d), 13. (b),
(c), 18. (b), 19. (d), 20. (d), 21. (d), 22. (d), 23. (d), 24. (c), 25. (c),
(d), 30. (d), 31. (a), 32. (d), 33. (d), 34. (d), 35. (b), 36. (a). 37. (b),
(c), 42. (d), 43. (c), 44. (d), 45. (d), 46. (c), 47. (c), 48. (d), 49. (b),
(d), 54. (c), 55. (c), 56. (a).

B. Short Questions :
1. Define the term public offer. [ 4.1]
2. Define the term private placement. [4.1)
[C.U.B.Com. 2005, 2007]
3. What is a prospectus ? [4.3.1)
4. State two essential features of prospectus. [4.2]
5. What is a Shelf Prospectus ? [4.10]
6. What is a Red herring Prospectus ? [4.11]
7. What is an Abridged Prospectus ? [4. 12)
[C.U.B.Com. 2012)
8. What do you understand by ' misstatement in prospectus' ? [4.13]
9. What is minimum application money ? [ 4.17]
lO. What is allotment of Securities? [4.17]
l 1. What is Global Depository Receipts ? [4. 19]
12· Who are liable for mis-statement of prospectus ? [ 4 -131

C. Mediuhl Questions :
[C.U.B.Com. 2010)
1. Give a brief idea about prospectus.[4.3.1]
[C.U.B.Com. 2005)
2. What is prospectus and discuss its characteristics ? (4 -3 -1 & 4 ·3 •21
152 ♦ C OMPANY LAW

3. , A public company may issue securities through public offer or through private placcrncnt'_ .
[4.1l D1sc~ s.
4. Discuss the powers of Securities and Exchange Board to regulate issue and transfer of secu ·1·
n ies.14 2
5. What are essential features of prospectus? [4.3.2) ·I
6. When document containing offer of securities for sale deemed to be prospectus. [4.4)
7. What are the effects of variation in terms of contract or object in prospectus ? [4.6)
8. Discuss the legal provisions of offer of sale of securities by certain members of cornpany I
9. Write a note on public offer of secunbes· · to be m. dematena . 1·1sed form. [4.8] . 4·71
10. Discuss the legal provisions relating to advertisement of prospectus. [4.9)
I I. State the legal provisions relating to issue of shelf prospectus. [4.10)
12. The legal provisions relating to issue of red herring prospectus. [4.11]
13. The legal provisions of abridged prospectus. [4.12]
14. The criminal liability for misstatement in prospectus. [4.13]
15. The civil liability for misstatement in prospectus. [4.13]
16. What are the punishment for fraudulently inducing persons to invest money or to obtain credit f; . ..
ac111ties
from any bank. [4.14]
17. Discuss the provisions of disclosure in every prospectus and application form for securities. [ _
4 161
18. State the punishment for personation for acquisition of securities. (4.16]
19. Discuss the legal provisions as to allotment of securities. [4.17]
20. Discuss the rules regar~g listin~ ~~ssion to be o~~ined bef~re ma~g a public offer. [4_
181
21. What is 'Global Depository Receipt? Qiscuss the prov1S1ons relatmg to issue of Global Depository
Receipt. [4.19)
22. Under what circumstances a company may make an offer or invitation of securities by way of private
placement ? (4.20]
D. Long Questions :
1. What are the modes of issuing securities of a company ? (4.1]
2. What is prospectus ? State the essential features of prospectus. [4.3)
3. Discuss the matters to be stated in prospectus. (4.5)
4. What is Shelf Prospectus? State the legal provisions relating to the issue of Shelf prospectus. [4.10]
5. What is Red herring Prospectus ? State the legal provisions relating to the issue of Red herring
prospectus? [4.11]
6. What is an abridged prospectus ? Discuss the legal provisions of abridged prospectus. [4.12)
7. What do you mean by misstatement in prospectus ? Who are liable for such misstatement ? State
the extent of liability for untrue statement. [4.13) [C.U.B.Com. 2011, 2007, 2009]
8. State the defences available to charge of misstatement in prospectus (a) against the company (b) against
the directors or promoters and (c) against experts. (4.13]
9. What do you mean by allotment of securities by company? State the legal provisions as to allotment
of securities offered to public. [4.17]
10. When a company may make ari offer or invitation of securities by way of private placement. [4.20]