Q.1 Which of the following is the primary legislation governing companies in most jurisdictions?
Contract Act
Companies Act
Criminal Code
Civil Code
Explanation - The Companies Act is the main legislation that regulates the formation, management, and dissolution of companies.
Correct answer is: Companies Act
Q.2 What is a 'limited liability company'?
A company where shareholders are personally liable for debts
A company where liability is limited to shares held
A company owned by the government
A company with unlimited shareholders
Explanation - In a limited liability company, shareholders’ personal assets are protected; they are only liable to the extent of their investment in the company.
Correct answer is: A company where liability is limited to shares held
Q.3 Which document outlines the internal management rules of a company?
Memorandum of Association
Articles of Association
Share Certificate
Board Resolution
Explanation - The Articles of Association contain the rules for the internal governance of the company and its management structure.
Correct answer is: Articles of Association
Q.4 Who is responsible for managing the day-to-day operations of a company?
Shareholders
Directors
Auditors
Regulators
Explanation - Directors are appointed to manage the day-to-day business and affairs of the company on behalf of the shareholders.
Correct answer is: Directors
Q.5 A 'public company' differs from a 'private company' in that it:
Cannot issue shares to the public
Can invite public investment through shares
Has no shareholders
Is owned only by the government
Explanation - A public company can raise capital from the public by issuing shares, whereas a private company cannot do so.
Correct answer is: Can invite public investment through shares
Q.6 The main purpose of a 'memorandum of association' is to:
Define the scope of the company's activities
Set the company's accounting policies
Outline employee benefits
Record board meeting minutes
Explanation - The memorandum of association specifies the objectives and powers of a company, guiding its legal capacity to operate.
Correct answer is: Define the scope of the company's activities
Q.7 Which of the following is a key duty of company directors?
Maximizing personal gain
Avoiding disclosure of company finances
Acting in the best interest of the company
Issuing shares without approval
Explanation - Directors have fiduciary duties to act honestly, diligently, and in the best interests of the company and its shareholders.
Correct answer is: Acting in the best interest of the company
Q.8 What is 'corporate veil' in corporate law?
A type of financial statement
The legal distinction between the company and its shareholders
A type of business license
A director’s personal guarantee
Explanation - The corporate veil protects shareholders from being personally liable for company debts, separating legal identity of the company from its owners.
Correct answer is: The legal distinction between the company and its shareholders
Q.9 Which of the following actions can lead to piercing the corporate veil?
Properly declaring dividends
Fraud or misuse of the company structure
Holding annual meetings
Issuing share certificates
Explanation - Courts may pierce the corporate veil to hold shareholders personally liable if the company is used to commit fraud or injustice.
Correct answer is: Fraud or misuse of the company structure
Q.10 A company limited by guarantee usually:
Is formed for profit
Has members who guarantee a nominal amount
Issues shares to the public
Is owned by a single shareholder
Explanation - Companies limited by guarantee are often non-profit entities where members' liability is limited to the amount they have guaranteed to contribute.
Correct answer is: Has members who guarantee a nominal amount
Q.11 What is the role of company auditors?
To manage daily operations
To examine financial statements for accuracy
To approve company mergers
To hire and fire employees
Explanation - Auditors provide independent verification of a company’s financial records to ensure accuracy and compliance with accounting standards.
Correct answer is: To examine financial statements for accuracy
Q.12 Which of the following types of companies can have unlimited liability?
Public limited company
Private limited company
Unlimited company
Non-profit company
Explanation - In an unlimited company, members have joint liability without limit for company debts, unlike limited companies.
Correct answer is: Unlimited company
Q.13 The term 'share capital' refers to:
The total assets of the company
The funds raised by issuing shares to shareholders
The profits retained in the business
The money borrowed from banks
Explanation - Share capital is the money a company raises by issuing shares to investors in exchange for ownership stakes.
Correct answer is: The funds raised by issuing shares to shareholders
Q.14 A 'holding company' is:
A company that manufactures goods
A company that owns controlling shares in other companies
A company in liquidation
A company formed for charity
Explanation - A holding company does not usually engage in business operations itself but controls other subsidiary companies through majority shareholding.
Correct answer is: A company that owns controlling shares in other companies
Q.15 Which of the following best describes 'dividends'?
Fees paid to directors
Profits distributed to shareholders
Taxes paid to the government
Loans issued to employees
Explanation - Dividends are payments made by a company to its shareholders from its profits, usually in proportion to shares held.
Correct answer is: Profits distributed to shareholders
Q.16 The legal principle 'one share, one vote' typically applies to:
Private agreements
Shareholder meetings
Director appointments
Employee benefits
Explanation - In corporate governance, 'one share, one vote' ensures that voting power is proportional to ownership of shares during shareholder meetings.
Correct answer is: Shareholder meetings
Q.17 Which type of company is most commonly used for large-scale public investment?
Private limited company
Public limited company
Unlimited company
Non-profit company
Explanation - Public limited companies can issue shares to the public, making them suitable for raising large amounts of capital.
Correct answer is: Public limited company
Q.18 What is the minimum number of directors required for a private limited company in most jurisdictions?
1
2
5
10
Explanation - Most laws require a minimum of two directors for private limited companies to ensure proper management and compliance.
Correct answer is: 2
Q.19 Which document is essential for a company’s registration with the regulatory authority?
Articles of Association
Memorandum of Association
Director’s Resolution
Shareholder Agreement
Explanation - The memorandum of association is a core document submitted to register a company, outlining its objectives and powers.
Correct answer is: Memorandum of Association
Q.20 What is a 'subsidiary company'?
A company that operates independently
A company controlled by another company
A company with unlimited liability
A government-owned company
Explanation - A subsidiary is controlled by a parent or holding company that owns the majority of its shares.
Correct answer is: A company controlled by another company
Q.21 Which of the following is a duty of shareholders?
Managing company operations
Appointing auditors
Investing capital and voting in meetings
Setting employee salaries
Explanation - Shareholders provide funds to the company and participate in governance decisions through voting rights.
Correct answer is: Investing capital and voting in meetings
Q.22 The 'Companies Registrar' primarily serves to:
Audit company accounts
Maintain records of company registrations
Appoint directors
Issue loans to companies
Explanation - The registrar is a government authority that oversees company registration, legal compliance, and public records.
Correct answer is: Maintain records of company registrations
Q.23 A 'joint venture' refers to:
A merger of two companies
A contractual business partnership for a specific project
A government-owned enterprise
A subsidiary company
Explanation - A joint venture is a business arrangement where two or more parties collaborate on a particular project, sharing profits and responsibilities.
Correct answer is: A contractual business partnership for a specific project
Q.24 Which of the following is considered an advantage of incorporating a company?
Unlimited personal liability
Ability to sue and be sued separately
No need to maintain accounts
Direct taxation on directors
Explanation - Incorporation gives a company its own legal identity, separate from its owners, allowing it to enter contracts, own property, and take legal action.
Correct answer is: Ability to sue and be sued separately