Important Company Formation MCQs with Explanations for Class 11 Students
MCQs for Business Studies Class 11 Chapter 7 focus on the formation of a company—a vital process in the business world and a high-weightage topic in CBSE exams. Understanding this subject is crucial for excelling in school tests, competitive exams, and for grasping how companies are established and operated.
| Company Document | Main Function | Submitted For |
|---|---|---|
| Memorandum of Association (MOA) | Defines company’s objectives and relationship with outsiders | Company Registration |
| Articles of Association (AOA) | Details internal rules and regulations | Company Registration |
| Prospectus | Invitation to public to subscribe to shares | Raising Public Capital |
| Statement in lieu of Prospectus | Submitted if shares are not offered to the public | Alternative to Prospectus |
What is Formation of a Company in Class 11 Business Studies?
Formation of a company in Class 11 Business Studies means the sequence of legal steps taken to set up a new company. It involves preparing and filing statutory documents, meeting all legal requirements, and officially registering the business.
MCQs for Business Studies Class 11 Chapter 7: Formation of a Company
Practicing multiple-choice questions (MCQs) is essential for mastering the chapter. Below are exam-oriented MCQs covering legal documents, roles, and company registration processes, along with clear answer explanations. Use these for end-term revision and self-assessment.
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Which document defines a company’s relationship with outsiders?
- a) Articles of Association
- b) Memorandum of Association
- c) Prospectus
- d) Preliminary Contract
Answer: b) Memorandum of Association
The MOA specifies a company's objectives and relationship with the outside world, making it the charter of the company. -
Who is responsible for promoting the idea and feasibility of forming a company?
- a) Directors
- b) Promoters
- c) Shareholders
- d) Customers
Answer: b) Promoters
Promoters are individuals or firms who initiate the process, conduct feasibility studies, and bring the company into existence. -
Which of the following is NOT a statutory requirement for company incorporation?
- a) Memorandum of Association
- b) Articles of Association
- c) Certificate of Commencement of Business
- d) Statement of Capital
Answer: c) Certificate of Commencement of Business
This certificate is required only for public companies after incorporation, not during initial registration. -
What is DIN in the context of company formation?
- a) Document Identification Number
- b) Director Identification Number
- c) Director Indexed Number
- d) Department Index Number
Answer: b) Director Identification Number
DIN is a unique number allotted to a person wanting to become a director in a company. -
Preliminary contracts entered by promoters before incorporation are:
- a) Binding on the company
- b) Non-binding unless adopted after incorporation
- c) Illegal
- d) None of the above
Answer: b) Non-binding unless adopted after incorporation
Preliminary contracts do not bind the company unless the company accepts them post-incorporation. -
Which of these companies is formed under a special Act of Parliament or State Legislature?
- a) Government Company
- b) Registered Company
- c) Statutory Company
- d) Private Company
Answer: c) Statutory Company
Statutory companies are created by a special legislative act. Example: Reserve Bank of India. -
Which clause of the Memorandum states the company’s main objectives?
- a) Name Clause
- b) Object Clause
- c) Situation Clause
- d) Liability Clause
Answer: b) Object Clause
Object clause states the main and ancillary objectives for which the company is formed. -
A private company cannot:
- a) Issue prospectus to the public
- b) Restrict share transfer
- c) Limit its number of members below 200
- d) Use the word Limited in its name
Answer: a) Issue prospectus to the public
Private companies are prohibited from inviting public to subscribe its shares. -
To apply for company name approval, one should approach:
- a) SEBI
- b) Registrar of Companies
- c) Ministry of Finance
- d) CBI
Answer: b) Registrar of Companies
The Registrar of Companies (ROC) handles name approval requests in India. -
Which feature allows a company to exist even if shareholders change?
- a) Separate Legal Entity
- b) Perpetual Succession
- c) Transferability of Shares
- d) Limited Liability
Answer: b) Perpetual Succession
Companies continue to exist despite changes in membership due to perpetual succession.
Exam Tips for MCQs: Formation of a Company
- Practice MCQs regularly using Vedantu’s resources for accuracy and speed.
- Memorise the differences between Memorandum of Association and Articles of Association.
- Understand the steps and statutory documents required for incorporation.
- Read answer explanations for clearing concept-based doubts.
- Revise tables and lists of definitions and features for each company type.
Key Differences: Memorandum vs Articles of Association
| Memorandum of Association (MOA) | Articles of Association (AOA) |
|---|---|
| Defines objectives, powers, and scope of the company | Lays down rules for internal management |
| Mandatory for registration | Mandatory, but can be adopted from Table F in Companies Act |
| Governs company’s relations with outsiders | Governs company’s relations with internal members |
Related Topics for Further Study
- Sources of Business Finance
- Features of Company
- Memorandum of Association
- Statutory Bodies and Corporations
- Registration and Incorporation of a Company
- Promotion of a Company
- Types of Companies
- Articles of Association
- Legal Aspects in Business
- Difference Between Partnership Firm and Company
In summary, mastering MCQs for Business Studies Class 11 Chapter 7 ensures a clear understanding of company formation, statutory documents, roles of promoters, and types of companies. With focused practice and reference to Vedantu resources, students can score well in school and competitive exams, and grasp basic business formation procedures confidently.
FAQs on MCQs for Business Studies Class 11 Chapter 7: Formation of a Company
1. How to score full marks in Business Studies Class 11 MCQs?
Mastering Class 11 Business Studies MCQs requires consistent effort. Begin with a strong understanding of Chapter 7: Formation of a Company concepts.
- Regularly practice chapter-wise MCQs, focusing on areas like Memorandum of Association and Articles of Association.
- Carefully review answer explanations to understand the reasoning behind each correct answer.
- Create flashcards or summaries to memorize key definitions and processes.
- Take regular mock quizzes to simulate exam conditions and identify weak areas.
- Utilize online resources and practice tests to enhance your preparation.
2. Which documents are mandatory for registering a company in India?
To register a company in India, two core documents are essential. These documents are integral to company formation.
- Memorandum of Association (MoA): This document outlines the company's objectives, registered office, and share capital. It defines the company's relationship with the outside world.
- Articles of Association (AoA): This document governs the internal management and operations of the company. It dictates the relationships between the company and its members (shareholders).
3. What are the main functions of a promoter?
Promoters play a crucial role in the formation of a company. Their responsibilities span various stages of company creation.
- Conducting feasibility studies to assess the viability of the business idea.
- Appointing professionals such as lawyers and accountants to handle legal and financial aspects.
- Obtaining name approval from the Registrar of Companies.
- Preparing the necessary documentation, including the Memorandum and Articles of Association.
- Overseeing the incorporation process and ensuring compliance with relevant regulations.
4. Is Class 11 Business Studies difficult?
The difficulty of Class 11 Business Studies depends on individual learning styles and preparation strategies. Consistent effort and a systematic approach are key to success.
- Regular study and practice are vital for mastering the concepts.
- Focusing on understanding the underlying principles rather than rote memorization is crucial.
- Utilizing resources like MCQs, practice questions and summary notes will aid comprehension.
- Seeking clarification from teachers or tutors when encountering difficulties will greatly help.
5. Where can I download MCQs for Class 11 Business Studies Chapter 7 PDF?
Access to downloadable Class 11 Business Studies Chapter 7 MCQs PDFs is often available through educational websites or learning platforms. Check the relevant online resources for downloadable content. Look for reliable sources aligned with the CBSE syllabus.
6. What legal status does a company acquire after incorporation?
Upon successful incorporation, a company gains significant legal standing. This is crucial in understanding company law. It becomes a separate legal entity, distinct from its owners.
- Separate legal entity: The company is independent from its shareholders and directors, with its own rights and liabilities.
- Perpetual succession: The company's existence continues indefinitely, unaffected by changes in ownership.
- Limited liability: Shareholders are typically only liable for the amount they have invested in the company.
7. How are preliminary contracts handled if signed before a company’s incorporation?
Contracts signed before a company's formal incorporation require careful consideration. They are not automatically binding on the newly formed entity.
- Promoters' liability: Preliminary agreements are generally the responsibility of the promoters until the company adopts them.
- Adoption after incorporation: The newly incorporated company may choose to adopt these contracts; otherwise, they remain contracts of the promoters.
- Legal implications: Failure to adhere to the terms can create significant legal issues.
8. Why is the minimum subscription important during share capital collection?
The minimum subscription requirement protects investors and ensures the company's financial stability. It's a vital aspect of company registration.
- Financial viability: It ensures the company raises sufficient funds to commence operations.
- Investor protection: It prevents the company from proceeding with insufficient capital, safeguarding investor interests.
- Regulatory compliance: It's a legal requirement to protect investors and maintains the integrity of the capital market.
9. What is the difference between a statutory company and other company types?
Statutory companies differ from other company types primarily in their creation. Understanding this distinction is key to company law.
- Statutory companies: Established by a special act of Parliament, often for specific public purposes. They operate under the terms of that particular Act.
- Registered companies: Formed under the Companies Act, which defines their structure and regulations. They are subject to the general provisions of the Act.
10. Can a private company invite the public to subscribe for shares?
Private companies have restrictions on how they can raise capital. This differentiates them from public companies. No, a private company is not permitted to invite the public to subscribe to its shares or debentures. This is a fundamental difference between private and public companies.
