Company Law MCQ Quiz - Objective Question with Answer for Company Law - Download Free PDF

The correct answer is Charter of the Company.

Key PointsCompany - The term is derived from the Latin word (“com” meaning “with” or “together”; “panis” that is “bread”) Section 2(20) of Companies Act 2013 states that a company means any association of person registered under the present or the previous companies act.

Important PointsMemorandum of Association - 

• A legal document known as the Memorandum of Association outlines the reason the firm was founded.
• It outlines the company's authority and the circumstances under which it must function.
• It is a document that outlines all the guidelines that direct how a business interacts with the outside world.

• It is a foundation on which the company is made.

• The entire structure of the company is detailed in the Memorandum of Association. 

• It is the company charter, a crucial document that outlines the fundamental terms on which the business was founded.

The correct answer is (A), (B), (C), (D), (E)

Key Points Liquidation of Company

• Liquidation is the process through which a debt-ridden firm shuts down operations and sells its assets to pay off its debts and other commitments.
• A corporation is liquidated when it is determined that it is unable to continue operating.
• This could be owing to a variety of factors, including insolvency (which is usually the primary reason), unwillingness to continue operations, and so on.
• When a business goes bankrupt, the liquidator sells the company's assets to pay off all debts.
• After repaying the creditors, the remaining positive balance is transferred to the company's shareholders.
• When there is liquidation of a company, one or more persons are required to be appointed specially for conducting the liquidation or winding up proceedings of the company. Such a person’s are called Liquidator’s. He is required to realise the assets, discharge the liabilities and distribute the surplus, if any among shareholders. 

Important Points The liquidator after realizing the assets of the company should distribute the proceeds among below-mentioned claimants in the following order:

•  Legal charges - The insolvency resolution process costs and the liquidation costs paid in full
•  Liquidators remuneration and cost of expenses of winding up
•  Workman's dues and claims of the secured creditors - Wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date.
•  Preferential creditors and creditors secured by floating charge -  debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52 of Insolvency Code, 2016.
•  Unsecured creditors - Then the Financial debts owed to unsecured creditors are settled
• Any remaining debts and dues.
• Preference shareholders, if any, and
• Equity shareholders or partners, as the case may be.

The correct answer is The uninterrupted existence of the company is not affected by the death or insolvency of any member of the company.

Key Points

In company law, perpetual succession is the continuation of a corporation's or other organization's existence despite the death, bankruptcy, insanity, change in membership or an exit from the business of any owner or member, or any transfer of stock, etc.

Perpetual succession, along with the common seal, is one of the factors explaining a corporation's legal existence as separate from those of its owners. This principle states that:

1. any change in membership of a company does not affect the status of the company,
2. death, insolvency, insanity, etc. of any member of a company does not affect the continuity of the company. Thus the life of the company does not depend upon the life of its members.
3. it shall continue forever irrespective of continuity of its members or directors, except in case of liquidation (or "winding up") of a company.

The correct answer is Director ​Identification Number (DIN) is a pre-requisite to obtain a Digital Signature.

Key Points

• Statement 3 is false:
  • Director Identification Number (DIN) will be a pre-requisite only for filing certain company-related documents not to obtain a Digital signature.
  • Director Identification Number (DIN) is a unique identification number for an existing director or a person intending to become the director of a company.

Additional Information

• Statement 1 is true:
  • Certifying Authorities (CA) has been granted a license to issue a digital signature certificate under Section 24 of the Indian IT-Act 2000.
  • One can procure Class 2 or 3 certificates from any of the certifying authorities.
• Statement 2 is true:
  • The Certifying Authorities are authorized to issue a Digital Signature Certificate (DSC) with a validity of one or two years.
  • The maximum period for which the DSC is issued is only two years.
  • On the expiry of the term, the Digital Signature Certificate can be revalidated by paying the fees again.
• Statement 4 is true:
  • Digital signatures issued by licensed Certifying Authorities are legally valid in a court of law as per the IT Act, 2000.
  • Under Section 2(p) and Section 3 of the Act, digital signatures are considered reliable, legal, and secure because digital signatures employ hash functions and cryptosystems for electronic records.

The correct answer is Director ​Identification Number (DIN) is a pre-requisite to obtain a Digital Signature.

Key Points

• Statement 3 is false:
  • Director Identification Number (DIN) will be a pre-requisite only for filing certain company-related documents not to obtain a Digital signature.
  • Director Identification Number (DIN) is a unique identification number for an existing director or a person intending to become the director of a company.

Additional Information

• Statement 1 is true:
  • Certifying Authorities (CA) has been granted a license to issue a digital signature certificate under Section 24 of the Indian IT-Act 2000.
  • One can procure Class 2 or 3 certificates from any of the certifying authorities.
• Statement 2 is true:
  • The Certifying Authorities are authorized to issue a Digital Signature Certificate (DSC) with a validity of one or two years.
  • The maximum period for which the DSC is issued is only two years.
  • On the expiry of the term, the Digital Signature Certificate can be revalidated by paying the fees again.
• Statement 4 is true:
  • Digital signatures issued by licensed Certifying Authorities are legally valid in a court of law as per the IT Act, 2000.
  • Under Section 2(p) and Section 3 of the Act, digital signatures are considered reliable, legal, and secure because digital signatures employ hash functions and cryptosystems for electronic records.

The correct answer is Charter of the Company.

Key PointsCompany - The term is derived from the Latin word (“com” meaning “with” or “together”; “panis” that is “bread”) Section 2(20) of Companies Act 2013 states that a company means any association of person registered under the present or the previous companies act.

Important PointsMemorandum of Association - 

• A legal document known as the Memorandum of Association outlines the reason the firm was founded.
• It outlines the company's authority and the circumstances under which it must function.
• It is a document that outlines all the guidelines that direct how a business interacts with the outside world.

• It is a foundation on which the company is made.

• The entire structure of the company is detailed in the Memorandum of Association. 

• It is the company charter, a crucial document that outlines the fundamental terms on which the business was founded.

The correct answer is (A), (B), (C), (D), (E)

Key Points Liquidation of Company

• Liquidation is the process through which a debt-ridden firm shuts down operations and sells its assets to pay off its debts and other commitments.
• A corporation is liquidated when it is determined that it is unable to continue operating.
• This could be owing to a variety of factors, including insolvency (which is usually the primary reason), unwillingness to continue operations, and so on.
• When a business goes bankrupt, the liquidator sells the company's assets to pay off all debts.
• After repaying the creditors, the remaining positive balance is transferred to the company's shareholders.
• When there is liquidation of a company, one or more persons are required to be appointed specially for conducting the liquidation or winding up proceedings of the company. Such a person’s are called Liquidator’s. He is required to realise the assets, discharge the liabilities and distribute the surplus, if any among shareholders. 

Important Points The liquidator after realizing the assets of the company should distribute the proceeds among below-mentioned claimants in the following order:

•  Legal charges - The insolvency resolution process costs and the liquidation costs paid in full
•  Liquidators remuneration and cost of expenses of winding up
•  Workman's dues and claims of the secured creditors - Wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date.
•  Preferential creditors and creditors secured by floating charge -  debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52 of Insolvency Code, 2016.
•  Unsecured creditors - Then the Financial debts owed to unsecured creditors are settled
• Any remaining debts and dues.
• Preference shareholders, if any, and
• Equity shareholders or partners, as the case may be.

The correct answer is Director ​Identification Number (DIN) is a pre-requisite to obtain a Digital Signature.

Key Points

• Statement 3 is false:
  • Director Identification Number (DIN) will be a pre-requisite only for filing certain company-related documents not to obtain a Digital signature.
  • Director Identification Number (DIN) is a unique identification number for an existing director or a person intending to become the director of a company.

Additional Information

• Statement 1 is true:
  • Certifying Authorities (CA) has been granted a license to issue a digital signature certificate under Section 24 of the Indian IT-Act 2000.
  • One can procure Class 2 or 3 certificates from any of the certifying authorities.
• Statement 2 is true:
  • The Certifying Authorities are authorized to issue a Digital Signature Certificate (DSC) with a validity of one or two years.
  • The maximum period for which the DSC is issued is only two years.
  • On the expiry of the term, the Digital Signature Certificate can be revalidated by paying the fees again.
• Statement 4 is true:
  • Digital signatures issued by licensed Certifying Authorities are legally valid in a court of law as per the IT Act, 2000.
  • Under Section 2(p) and Section 3 of the Act, digital signatures are considered reliable, legal, and secure because digital signatures employ hash functions and cryptosystems for electronic records.

The correct answer is Charter of the Company.

Key PointsCompany - The term is derived from the Latin word (“com” meaning “with” or “together”; “panis” that is “bread”) Section 2(20) of Companies Act 2013 states that a company means any association of person registered under the present or the previous companies act.

Important PointsMemorandum of Association - 

• A legal document known as the Memorandum of Association outlines the reason the firm was founded.
• It outlines the company's authority and the circumstances under which it must function.
• It is a document that outlines all the guidelines that direct how a business interacts with the outside world.

• It is a foundation on which the company is made.

• The entire structure of the company is detailed in the Memorandum of Association. 

• It is the company charter, a crucial document that outlines the fundamental terms on which the business was founded.

The correct answer is The uninterrupted existence of the company is not affected by the death or insolvency of any member of the company.

Key Points

In company law, perpetual succession is the continuation of a corporation's or other organization's existence despite the death, bankruptcy, insanity, change in membership or an exit from the business of any owner or member, or any transfer of stock, etc.

Perpetual succession, along with the common seal, is one of the factors explaining a corporation's legal existence as separate from those of its owners. This principle states that:

1. any change in membership of a company does not affect the status of the company,
2. death, insolvency, insanity, etc. of any member of a company does not affect the continuity of the company. Thus the life of the company does not depend upon the life of its members.
3. it shall continue forever irrespective of continuity of its members or directors, except in case of liquidation (or "winding up") of a company.

The correct answer is (A), (B), (C), (D), (E)

Key Points Liquidation of Company

• Liquidation is the process through which a debt-ridden firm shuts down operations and sells its assets to pay off its debts and other commitments.
• A corporation is liquidated when it is determined that it is unable to continue operating.
• This could be owing to a variety of factors, including insolvency (which is usually the primary reason), unwillingness to continue operations, and so on.
• When a business goes bankrupt, the liquidator sells the company's assets to pay off all debts.
• After repaying the creditors, the remaining positive balance is transferred to the company's shareholders.
• When there is liquidation of a company, one or more persons are required to be appointed specially for conducting the liquidation or winding up proceedings of the company. Such a person’s are called Liquidator’s. He is required to realise the assets, discharge the liabilities and distribute the surplus, if any among shareholders. 

Important Points The liquidator after realizing the assets of the company should distribute the proceeds among below-mentioned claimants in the following order:

•  Legal charges - The insolvency resolution process costs and the liquidation costs paid in full
•  Liquidators remuneration and cost of expenses of winding up
•  Workman's dues and claims of the secured creditors - Wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date.
•  Preferential creditors and creditors secured by floating charge -  debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52 of Insolvency Code, 2016.
•  Unsecured creditors - Then the Financial debts owed to unsecured creditors are settled
• Any remaining debts and dues.
• Preference shareholders, if any, and
• Equity shareholders or partners, as the case may be.