Unit 1

1. Define a company?
Answer: A company is a legal entity formed by individuals or entities to conduct business
activities, where ownership is divided into shares of stock.
2. Company is a legal entity. Elucidate ?
Answer: A company being a legal entity means it has a separate existence from its owners,
shareholders, and employees. It can own assets, incur liabilities, enter into contracts, and sue or
be sued in its own name.
3. Define limited liability of a company?
Answer: Limited liability of a company means that the shareholders’ liability is limited to the
amount they have invested in the company. Their personal assets are protected from the
company’s debts and obligations.
4. Explain lifting the corporate veil?
Answer: Lifting the corporate veil refers to the legal concept of disregarding the separate legal
personality of a company, holding its shareholders or directors personally liable for the
company’s actions in certain exceptional circumstances.

5. Define OPC (One Person Company).

Answer: OPC (One Person Company) is a type of company that can be formed with just one
shareholder. It allows a single individual to operate as a separate legal entity.
6. What is a dormant company?

Answer: A dormant company is a company that is registered and exists but is not actively
engaging in any significant business activities, operations, or trading.
7. Distinguish between a public company & a private company ?
Answer: A public company can offer its shares to the public and has no restrictions on the
transfer of shares. A private company, on the other hand, cannot offer shares to the public and
has limitations on the transfer of shares among its members.
8. Write the meaning and features of a small company ?
Answer: A small company typically has a lower turnover and fewer employees compared to
larger companies. Its features may include simplified compliance requirements, exemptions,
and certain benefits offered by the government.
 9. Who is a promoter?
Answer: A promoter is an individual or group of individuals who take the initiative to start and
incorporate a company, typically by conceiving the idea, organizing resources, and assuming the
initial financial risk.
10. What is a certificate of incorporation?
Answer: A certificate of incorporation is a legal document issued by the government after the
company’s registration process is completed. It signifies the company’s existence as a separate
legal entity and its compliance with the laws and regulations of the country.
11. Memorandum of Association (MOA):
The Memorandum of Association (MOA) is a legal document that sets out the fundamental
conditions and objectives upon which a company is incorporated. It defines the company’s
relationship with the outside world and acts as the constitution of the company. It specifies the
company’s name, registered office, objectives, authorized share capital, and association with
shareholders.
12. Object Clause:
The object clause, also known as the purpose clause, is a vital part of a company’s
Memorandum of Association. It defines the main objectives and activities for which the
company is formed. The object clause sets out the scope within which the company can operate
and conduct its business.
13. Features and Contents of MOA:

Features of MOA:
- It is a fundamental document for the company’s incorporation.
- It defines the company’s scope of operations and powers.
- Alterations to MOA require shareholder approval and legal compliance.

Contents of MOA:
- Name Clause: Specifies the name of the company.
- Registered Office Clause: States the address of the company’s registered office.
- Object Clause: Outlines the main and subsidiary objectives of the company.

- Liability Clause: States the liability of the company’s members (limited or unlimited).
- Capital Clause: Declares the authorized share capital of the company.
- Association Clause: Confirms the intention of the members to form the company and become
shareholders.
14. Articles of Association:

Articles of Association (AOA) is a document that contains the rules and regulations governing
the internal management, administration, and conduct of a company. It defines the rights,
duties, and powers of the company’s directors, shareholders, and officers. AOA works in
conjunction with the Memorandum of Association to govern the company.

15. Doctrine of Ultra Vires:

The doctrine of ultra vires means “beyond the powers.” It states that a company cannot
undertake activities or enter into contracts that are beyond the scope defined in its
Memorandum of Association. If a company engages in activities beyond its objects clause, those
actions are considered void and unenforceable. The doctrine protects shareholders and
stakeholders from the company’s actions that are outside its authorized scope.
16. Prospectus:
A prospectus is a legal document issued by a company that invites the public to subscribe to its
shares or debentures. It provides potential investors with essential information about the
company’s financial health, operations, and the securities being offered for sale.
17. Red Herring Prospectus:
A red herring prospectus is a preliminary version of the prospectus issued by a company
intending to go public. It contains all the necessary details about the company and the securities
but lacks the offer price and the number of securities being offered. It is used for getting initial
regulatory approvals before the final prospectus is issued.
18. Self Prospectus:
A self-prospectus is a type of prospectus used when a company is already listed on a stock
exchange, and it intends to issue further securities. Since the company is already known to the
investors, it does not require elaborate information about its operations in the prospectus,
making it more concise.
Unit 2

*Question 1: Define the term director.*

The term "director" refers to an individual appointed to the board of a company to manage its
affairs and make decisions on its behalf. Directors are responsible for the company's overall
strategy, policy-making, and governance.
*Question 2: By whom the first director of a company appointed?*
The first director of a company is usually appointed by the promoters or initial shareholders
during the incorporation process. The specific procedure may vary depending on the country's
company law and regulations.
*Question 3: Who is a managing director?*
A managing director (MD) is a director who holds a significant executive position within the
company. They are responsible for day-to-day operations, implementation of policies, and
managing the company's business activities.
*Question 4: Who is a whole-time director?*
A whole-time director (WTD) is a director who is employed by the company on a full-time basis
and is involved in its management and operations. Unlike independent directors, whole-time
directors are engaged in the company's activities beyond board meetings.
*Question 5: Difference between MD and WTD?*
The main difference between a Managing Director (MD) and a Whole Time Director (WTD) lies
in their roles and scope of involvement. The MD is responsible for overall management and
strategic decision-making, while a WTD focuses on full-time operational management.

*Question 6: Write a brief note on small shareholders directors.*

Small shareholders directors are individuals who represent the interests of minority or small
shareholders on the company's board. They ensure that the concerns of small shareholders are
heard and considered in board discussions and decision-making.

*Question 7: How can directors be disqualified?*

Directors can be disqualified for various reasons, which may include non-compliance with legal
requirements, involvement in fraudulent activities, insolvency, or being declared of unsound
mind. Disqualification can lead to their removal from the board.
*Question 8: What is DIN?*
DIN stands for Director Identification Number. It is a unique identification number assigned to
individuals who wish to become directors of companies. It helps track the director's activities
and associations across different companies.
 UNIT 3
1. What is share ?
In financial markets, a share (sometimes referred to as stock) is a unit of equity ownership in the
capital stock of a corporation, and can refer to units of mutual funds, limited partnerships, and
real estate investment trusts. Share capital refers to all of the shares of an enterprise.
2. What is Equity share?
An equity share, normally known as ordinary share is a part ownership where each member is a
fractional owner and initiates the maximum entrepreneurial liability related to a trading
concern. These types of shareholders in any organization possess the right to vote.
3. What is bouns share ?
Bonus shares are shares distributed by a company to its current shareholders as fully paid
shares free of charge. To capitalise a part of the company’s retained earnings for conversion of
its share premium account, or distribution of treasury shares. An issue of bonus shares is
referred to as a bonus share issue.
4. What is meant by GDR ?
A global depositary receipt (GDR) is a negotiable financial instrument issued by a depositary
bank. It represents shares in a foreign company and trades on the local stock exchanges in
investors’ countries. GDRs make it possible for a company (the issuer) to access investors in
capital markets beyond the borders of its own country.
5. What is preference share ?

Preference shares are defined as those shares which are given priority over other equity shares
in terms of the payment of dividends. Preference shares are held by preference shareholders
who are the first to receive payouts in case the company decides to pay its investors any
dividends.
6. What is surrender of share ?
Surrender of shares is a process in which a shareholder voluntarily returns their shares to the
company, usually because they cannot pay for future calls on the shares. It is similar to
forfeiture, but instead of the company taking action to reclaim the shares, the shareholder
initiates the process.
7. What is authorised or registered capital?
Meaning of Authorised Capital is Known as the registered capital or nominal capital of the
company, Authorised Capital is the maximum amount of share capital that a company is allowed
to issue to its shareholders as per its constitutional documents.
 8. What is right shares ?
A rights issue or rights offer is a dividend of subscription rights to buy additional securities in a
company made to the company’s existing security holders. When the rights are for equity
securities, such as shares, in a public company, it can be a non-dilutive pro rata way to raise
capital.
9. What is blank transfer?

A document that someone who has lent another person money can write their name on in
order to become the owner of that person’s shares. They will only do this if the owner of the
shares does not pay their money back: Blank transfers can be deposited with a bank, when
shares are being used as a security for a loan.

10. What is meant by debentures?

A debenture is a marketable security that businesses can issue to obtain long-term financing
without needing to put up collateral or dilute their equity. A debenture is a type of long-term
business debt not secured by any collateral.
11. What is mortgage?

A mortgage is an agreement between you and a lender that gives the lender the right to take
your property if you fail to repay the money you’ve borrowed plus interest. Mortgage loans are
used to buy a home or to borrow money against the value of a home you already own.
12. What is floating charges ?

A floating charge, also known as a floating lien, is a security interest or lien over a group of non-
constant assets that may change in quantity and value. Companies will use floating charges as a
means of securing a loan.
13. What is interim dividend?
An interim dividend is a dividend payment that is made before the annual general meeting
(AGM) and the publishing of complete financial results by a firm. This declared dividend is
typically announced alongside the company’s interim financial reporting.
14. What do you mean by allotment of share?

Allotment of shares refers to the process of creating and issuing new shares by the company to
the new or existing shareholders in exchange for cash or otherwise to raise more capital.
Typically, a company issues new shares to attract new investors and to make them a partner in
the business. Private companies can allot new shares only after filling the “Return of Allotment
of Shares”. While public companies are free to allot new shares anytime but they also have to fill
the “Return of Allotment of Shares” transaction within 14 days of allotment.
15. What are the condition for issue of sweat equity share?

Sweat equity shares are issued to employees or directors as a form of compensation for their
services subject to conditions set by the company and regulatory authorities.
16. what are the conditions for valid forfeiture?
Valid forfeiture of shares occurs when a share holder fails to pay the due amount on shares and
the company reclaims the shares according to the provisions stated in its articles of association.
17. State the meaning and contents of share warranty?
A Share Warrant is a document issued by the company under its common seal, stating that its
bearer is entitled to the shares or stock specified therein. Share warrants are negotiable
instruments. They are transferable by mere delivery without registration of transfer.
Unit 4
1.What is meant by a meeting?
A meeting is a gathering of individuals who come together to discuss, deliberate, or make
decisions on specific topics or issues.

2.what is annual general meeting?

An Annual General Meeting (AGM) is a mandatory yearly gathering of a company’s
shareholders. It is an opportunity for shareholders to receive updates on the company’s
performance, elect directors, and discuss important matters related to the company.

3.what is extraordinary general meeting?

An Extraordinary General Meeting (EGM) is a special meeting held outside the regular AGM to
address urgent or exceptional matters that cannot wait until the next AGM.
4.what is ordinarily resolution?

An ordinary resolution is a type of resolution passed in a meeting that requires a simple

majority (usually more than 50% of votes) to be approved.
5.what do you mean by proxy?
Proxy refers to the authority given to another person (the proxy holder) to vote on behalf of
someone else (the shareholder) during a meeting, particularly in cases where the shareholder
cannot attend the meeting in person.
6. What is meant by e-voting?
E-voting, short for electronic voting, is a method of casting votes using electronic means, such
as through online platforms or electronic voting machines.
7.what is meant by minute?
Minutes are written records that capture the key discussions, decisions, and actions taken
during a meeting. They serve as an official documentation of the meeting’s proceedings.

8.what is meant by quorum?

Quorum refers to the minimum number of members or shareholders required to be present at a
meeting for it to be valid and make decisions.
9.explain the meaning and process of e- voting ?

E-voting is a process that allows shareholders to cast their votes electronically, typically using a
secure online platform. The process involves providing shareholders with login credentials and a
secure channel to submit their votes.
10.what is meant by winding up of a company?
Winding up of a company, also known as liquidation, is the process of closing down a company’s
operations, selling its assets, and distributing the proceeds among its creditors and
shareholders.
11. Name different modes of winding up ?
Different modes of winding up include voluntary winding up (by shareholders’ resolution),
compulsory winding up (by court order), and creditors’ voluntary winding up (initiated by
creditors).
12.differnce between winding up and dissolution of companies ?
Winding up refers to the process of closing down a company, while dissolution of a company
marks the final legal termination of its existence.
13.explain liabilities of a liquidator ?
The liquidator of a company is responsible for managing the winding-up process and has various
liabilities, including acting in the best interest of creditors and stakeholders, providing accurate
financial reports, and distributing the company’s assets fairly among the stakeholders according
to the law and priority of claims.
 18. What are the condition for issue of sweat equity share?
There are certain conditions that need to be fulfilled by the company before issuing sweat
equity shares.

• A special resolution is passed for authorizing the issue of sweat equity share.
• The Listed companies have to follow the provisions of SEBI for the issue of Sweat equity
shares while the unlisted company can issue as per Section 54 of the Companies Act,
2013.
• These shares can be issued by the company after the expiry of one year from the date of
commencement of business.