MCQs on Company Law// Mcq on type of company (Q-1 o 24)

Types of company 

1. A company shall get the status of a small company if it has 

a) Paid up capital not exceeding 50 L and turnover as per the P/L account of the immediately preceding financial year not exceeding 2 cr 

b) Paid up capital not exceeding 50 L or turnover as per the P/L account of the immediately preceding financial year not exceeding 2 cr 

c) Paid up capital not exceeding 50 L 

d) turnover as per the P/L account of the immediately preceding financial year not exceeding 2 c

2- A private company incorporated under the Companies Act, 2013 may issue debentures to any number of persons and can accept deposits from the public. 

a) Yes provided the company gets permission from SEBI and CG 

b) Yes provided the company issues a prospectus 

c) Yes provided the company gets the permission from the tribunal 

d) The company can never issue debentures to the public or accept deposits from the public.

3. Only a naturally born person, who is an Indian citizen and resident in India, can form a One Person Company. 

a) This statement is true 

b) This statement is false 

4. Angel Infrastructures Pvt. Ltd. with a paid up capital of Rs.45 Lacs and annual turnover of Rs.175 Lacs, is a wholly owned subsidiary of Almightly Infrasturcture Development Ltd. a listed company. Can Angel Infrastructures be called a small company? 

a) Yes. The paid up capital and annual turnover of Angel Infrastructure Pvt. Ltd. is not exceeding the limit as specified under the definition of Small company. 

b) No. Because Angel Infrastructure Pvt. Ltd. is a wholly owned subsidiary company. 

c) No. Because Angel Infrastracture Pvt. Ltd. is not a subsidiary of a listed company. 

d) No. Because the paid up capital is Rs. 45 lacs less than prescribed limit of Rs. 50 Lacs but its turnover is exceeding Rs.100 Lacs. 

5. Seema Bulbs Ltd. is desirous of having significant influence in Shaukeen LED Bulbs and Tubes Ltd. so that the latter becomes its ‘associate company’. For exercising ‘significant influence’ one of the options available to Seema Bulbs is to control at least 20% of total voting power of Shaukeen LED Bulbs and Tubes. What is the other option available? 

a) To control or participate in the recruitment decisions relating to appointment of middle management personnel of Shaukeen LED Bulbs and Tubes under an agreement. 

b) To control or participate in the dividend decisions of Shaukeen LED Bulbs and Tubes under an agreement

c) To control or participate in the business decisions of Shaukeen LED Bulbs and Tubes under an agreement. 

d) To control or participate in the export decisions of Shaukeen LED Bulbs and Tubes under an agreement.

6. Rukmani, a fresh science graduate, wants to make available the farmers good quality seeds and manure. For her business she is contemplating to form a company and is weighing various options. Sometimes before, she came to know that a ‘one person company’ has minimum one member and one director whereas a private company has minimum two members and two directors. As regards a public company, she has vague idea that there should be minimum three directors but she does not know about the minimum members required in this case. Advise. 

a) When there is requirement of minimum three directors, the public company can be formed by minimum three persons. 

b) There should be minimum five persons for formation of a public company though requirement of minimum directors shall remain three. 

c) There should be minimum seven persons for formation of a public company though requirement of minimum directors shall remain three. 

d) There should be minimum nine persons for formation of a public company though requirement of minimum directors shall remain three.

7. Ravi is the owner of a grocery store. In March 2018, he got the idea of forming a ‘One Person Company’ and convinced his sister Ruchika, an Indian citizen who resides in London but visits India from time to time, to become nominee in his OPC. In the year 2017, Ruchika first came to India on 10th January and left for London on 26th February. Thereafter, she again visited India on 7th June and remained here till 10th October and boarded an evening flight for London on the same day. From then onward she did not visit India in the year 2017 but on 2nd January 2018 she came to India for a short duration and left for London on 14th February, 2018. Is it possible for Ravi to appoint Ruchika as nominee? 

a) Ruchika can be appointed as nominee by Ravi because she is a natural person, an Indian citizen and resided in India for more than 90 days during the year 2017. 

b) Ruchika can be appointed as nominee by Ravi because she is a natural person, an Indian citizen and resided in India for more than 182 days during the years 2017 and 2018 i.e. prior to March 2018 when Ravi contemplated to form his OPC. 

c) Ravi cannot appoint Ruchika as nominee in his OPC because she did not reside in India for 182 days or more during the year 2017 though she is a natural person and also an Indian citizen . 

d) Since Ravi is the sole member of his OPC who will look after all its affairs and the appointment of nominee is just a formality, a visit to India during 2017 for any number of days would make Ruchika eligible to be appointed as nominee.

8. Ruchir Marcons Ltd. which provides marketing and consultancy services is keen to have a ‘significant influence’ in Ruchika Marketing Ltd. so that it becomes its ‘associate company’. For having ‘significant influence’ Ruchir Marcons Ltd. needs to control certain percentage of total voting power of Ruchika Marketing Ltd. What is that? 

a) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 5% of total voting power of Ruchika Marketing Ltd. 

b) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 10% of total voting power of Ruchika Marketing Ltd. 

c) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 15% of total voting power of Ruchika Marketing Ltd. 

d) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least 20% of total voting power of Ruchika Marketing Ltd.

9. Jatin is desirous of forming a ‘One Person Company (OPC)’ for which he wants to nominate his wife Jasmin who in the event of his death shall become the member of OPC. However, he is not aware of as to which document should contain the name of the nominee. Advise him in the matter. 

a) Name of the nominee should be mentioned in the Articles of Association after the names of the directors. 

b) Name of the nominee should be mentioned in the Memorandum of Association 

c) Either Articles of Association or Memorandum of Association may contain the name of the nominee. 

d) There is no need to mention the name of the nominee in either Articles of Association or Memorandum of Association; a simple consent letter obtained from the nominee and kept in the records is sufficient. 

10. Mr. Pushkar wishes to start his own venture with an idea of recycling of plastic waste. He approaches you for your advice so as to decide on which type of entity he should incorporate mainly based on the aspects of taxation, capital funding and other monetary benefits to the promoters. Kindly suggest a suitable form of entity from the following – 

a) Limited Liability Partnership; 

b) Private Limited Company; 

c) Section 8 Company; 

d) Producer Company.

11. Mahesh is a creditor of an unlimited company. The company was wound-up. Mahesh, therefore, wants to sue the members of the company to recover the dues. Advise Mahesh regarding the remedy available to him. 

a) As it is an unlimited liability company Mahesh can sue the members 

b) As it is an unlimited liability company Mahesh can sue the members as well as the company 

c) Mahesh cannot sue the members or the company even though the liability is unlimited

d) Mahesh can sue the company but not the members as the members liability is unlimited towards the company and not towards the creditors.

12. Six persons are the only members of Tab (Pvt.) Ltd. All of them went to USA on a pleasure trip by aeroplane. On the way, the plane crashed and all the six members died. Does Tab (Pvt.) Ltd. still exist ? 

a) As all the members forming the company are dead the company shall also die. 

b) As all the members of the company are dead the Tribunal shall decide as to whether the company shall continue or not 

c) As the company has a separate legal entity having an existence separate from its members the death of the members shall not affect the existence of the company. 

d) As all the members of the company are dead the ROC shall strike off the name of the company. 

13. A section 8 company was incorporated under the Companies Act, 2013. After 2 years the company decided to declare dividend to its members as a token of their participation. The CG decided to revoke the license of the company. What orders can the CG pass on such revocation? 

a) The company should be converted into a private or a public company 

b) The company shall amalgamate with another section 8 company with similar objects 

c) The company shall be ordered to windup. 

d) Any of these. 

14. Prabhu was desirous of starting an OPC in Delhi and wanted to know how many days he needs to be in India to form this OPC 

a) 182 days or more in the immediately preceding financial year 

b) 182 days in the year of incorporation 

c) 182 days in the immediately preceding year 

d) 182 days in the immediately 3PFY. 

15. Which of the following is not a significant accounting transaction? 

a) Expenses for maintenance of office and records 

b) Allotment of securities for fulfillment of this Act 

c) Payment of fee by the company to the Registrar 

d) All of these are significant accounting transactions. 

16. Rajesh has formed a ‘One Person Company (OPC)’ with his wife Roopali as nominee. For the last two years his wife Roopali is suffering from terminal illness and due to this hard fact he wants to change her as nominee. He has a trusted and experienced friend Ramnivas who could be made nominee or his (Rajesh) son Rakshak who is of seventeen years of age. Whom should he nominate as nominee in place of his wife? 

a) Since blood relation can only be appointed as nominee in case of OPC, Rajesh needs to appoint his son Rakshak. 

b) Rajesh can appoint his friend Ramnivas as nominee in his OPC 

c) Roopali is not agreeable to the proposal of Rajesh and hence, Rajesh cannot change her as the nominee d) Either Rakshak or Mr. Ramnivas can be appointed as nominee 

17. Abha formed a ‘One Person Company (OPC)’ on 15 -10-2017 with her husband Akhil as nominee and Rs. 10 lacs as Authorised and paid-up share capital. In the month of April 2018 she got in touch with a foreigner and is expecting to receive a substantial export order by May 2018 whose final delivery must be completed by December 2018. She is contemplating to convert her OPC into a private limited company before she receives the export order in May 2018. 

a) Since Abha is the sole member of OPC she is having full discretion to voluntarily convert it into a private limited company any time after 15-10-2017. 

b) Abha can voluntarily convert her OPC into a private limited company only after the expiry of first financial year by which the accounts are closed (i.e. after 31-3-2018 without any restriction.) 

c) Abha can voluntarily convert her OPC into a private limited company only after she delivers duly audited first financial statements and Annual Return to the concerned Registrar of Companies by due date and without making payment of any additional fee. 

d) Abha can voluntarily convert her OPC into a private limited company only after expiry of two years from 15-10-2017 (i.e. on 15-10-2019 or thereafter). 

18. Anupam got incorporated ‘One Person Company’ with his sister Alpana as the nominee and about three years have passed satisfactorily. From time to time Anupam does a number of charitable works and is attached with three NGOs undertaking such assignments. In the meantime his business under his OPC has also flourished. Now he is contemplating to convert the OPC either as a Section 8 company (i.e. formation of companies with charitable objects) or as a private or public company. Select the best option for him. 

a) Since OPC belongs to Anupam, he has full discretion to convert the OPC either as a Section 8 company or as a private or public company 

b) Since OPC was formed as a private company, the only option available with Anupam is to get it converted into a private limited company. Moreover, there is specific prohibition on converting OPC into a public limited company 

c) There is specific prohibition on converting OPC into a Section 8 company; otherwise it can be converted into a private or public company without any hindrance. 

d) Since Anupam does a lot of charitable works there is no prohibition if he converts his OPC into a Section 8 company (companies formed with charitable objects). 

19. Arshi, is the sole member of his OPC and he has appointed Vishal (his dear friend) as his nominee. Now, Vishal is leaving India permanently and has set up his own business in Italy. Due, to this fact, he has withdrawing his consent to continue as nominee in the said OPC.  

a) Vishal cannot withdraw his consent to act as a nominee of the OPC 

b) Only Arshi has a right to remove Vishal as a nominee 

c) Vishal can withdraw his consent to act as a nominee of the OPC by giving proper notice 

d) Vishal cannot withdraw his consent only when he is disabled but not due to the reason that he has set up his own business. 

20. Vivek is in trading business whereby he supplies handmade gloves and socks to many charitable trusts who supports the elderly people. Vivek now wants to expand his business and wants to reap the benefits of company form of oragnisation by opening his business as an OPC registered under section 8 of the Companies Act, 2013. Advise Vivek: 

a) Vivek cannot form an OPC as he is in trading business 

b) Vivek cannot form an OPC to be registered under section 8 of the Companies Act, 2013 

c) Vivek can form an OPC to be registered under section 8 of the Companies Act, 2013 

d) Vivek can form an OPC as a private company and then convert it into a section 8 company 

21. Roma along with her six friends has got incorporated Roma Trading Ltd. in May 2017. She kept the paid-up share capital at Rs. 30 lacs. Further, in April 2018, she noticed that in the last financial year, the turnover of the company was well below Rs. 2 crores. Advise whether the company can be treated as a ‘small company’. 

a) Roma Trading Ltd. is definitely a ‘small company’ since its paid -up capital is much below Rs. 50 lacs and also its turnover has not exceeded the threshold limit of Rs. 2 crores. 

b) The concept of ‘small company’ is applicable only in case of a private limited company/OPC and therefore, despite meeting the criteria of ‘small company’ it being a public limited company cannot enjoy benefits of ‘small company’. 

c) Unlike a private limited company/OPC which automatically becomes a ‘small company’ as soon as it meets the criteria of ‘small company’ , Roma Trading Ltd. being a public limited company has to maintain the norms applicable to a ‘small company’ continuously for two years so that, thereafter, it i s treated as a ‘small company’. 

d) If all the shareholders of Roma Trading Ltd. give an undertaking to the ROC stating that they will not let the paid share capital and also turnover exceed the limits applicable to a ‘small company’ i n the next two years, then i t can be treated as a ‘ small company’. 

22. H Ltd. is the holding company of S Pvt. Ltd. As per the last profit and loss account for the year ending 31st March, 2018 of S Ltd. its turnover was to the extent of Rs. 1.50 crores; and paid up share capital was Rs. 40 lacs. Since S Pvt. Ltd., as per the turnover and paid up share capital norms, qualifies for the status of a ‘small company’ it wants to be categorized as small company. Advise. 

a) If H Ltd. converts itself into a private limited company, S Pvt Ltd. being its subsidiary can be categorized as a ‘ small company’ since it meets turnover and paid up share capital norms applicable to a ‘small company’ . 

b) So long as S Pvt. Ltd. meets the turnover and paid up share capital norms applicable to a ‘small company’ (which at present is the case), it shall be categorized as a ‘small company’ . 

c) S Pvt. Ltd. cannot be categorized as a ‘ small company’ because i t is the subsidiary of another company. 

d) Categorisation of S Pvt. Ltd. is possible only if H Ltd., the holding company, also meets the turnover and paid up share capital norms applicable to a ‘small company’ . 

23. Abhilasha and Amrita have incorporated a ‘not for profit’ private limited company which is registered under Section 8 of the Companies Act, 2013. One of their friends has informed them that their company can be categorized as a ‘ small company’ because as per the last profit and loss account for the year ending 31st March, 2018, its turnover was less than Rs. 2.00 crores and its paid up share capital was less than Rs. fifty lacs. Advise. 

a) A section 8 company, which meets the criteria of ‘ turnover’ and ‘paid -up share capital’ in the last financial year, can avail the status of ‘small company’ only if it acquires at least 5% stake i n another ‘small company’ within the ensuing financi al year. 

b) If the acquisition of minimum 5% stake in another small company materializes in the second financial year (and not in the ensuing financial year) after meeting the criteria of ‘turnover’ and ‘paid-up share capital ’ then with the written permission of concerned ROC, it can acquire the status of ‘small company’ . 

c) The status of ‘small company’ cannot be bestowed upon a ‘not for profit’ company which is registered under Section 8 of the Companies Act, 2013. 

d) A section 8 company, if incorporated as a private limited company ( and not as public limited company) can avail the status of ‘small company’ with the permission of concerned ROC, after it meets the criteria of ‘ turnover’ and ‘ paid -up share capital ’. 

24. Savita and her husband Sukesh have got incorporated Savi Trading Company Private Limited with authorised and paid up share capital of Rs. 40 lacs. As per its last profit and loss account relating to the FY 2017-18, the turnover was Rs. one crore and seventy lacs. Accordingly, their company is considered as a small company in the FY 2018-19. They think that the status of ‘small company’, once bestowed, will continue till next 10 financial years. Advise. 

a) Their contention that the status of ‘small company’ , once bestowed, will continue till next 10 financial years is absolutely correct. 

b) The status of ‘ small company’ , once bestowed, can continue till next 7 financial years only. 

c) The status of ‘small company’ will keep on changing from time to time, for it is not permanent for any particular period. 

d) If ROC permits, the status of ‘ small company’ can continue maxi mum for three years including the year in which it is attained