Company Act MCQ

1. What is the primary purpose of a Memorandum of Association (MOA) in a company?
a. Define the company’s objectives and powers
b. Outline the organizational structure
c. Specify the financial statements
d. None of the above

Answer: a. Define the company’s objectives and powers

2. What is the minimum number of members required to form a private company in most jurisdictions?
a. 1
b. 2
c. 5
d. 10

Answer: b. 2

3. Who is responsible for appointing the first auditor of a company in many jurisdictions?
a. Board of Directors
b. Shareholders
c. Company Secretary
d. Regulatory Authority

Answer: b. Shareholders

4. In a public limited company, what is the minimum number of directors required on the board?
a. 2
b. 3
c. 5
d. 7

Answer: b. 3

5. What is the purpose of an Annual General Meeting (AGM) in a company?
a. Electing the board of directors
b. Approving financial statements
c. Appointing auditors
d. All of the above

Answer: d. All of the above

6. What document contains the rules and regulations for the internal management of a company?
a. Articles of Association (AOA)
b. Memorandum of Association (MOA)
c. Prospectus
d. Certificate of Incorporation

Answer: a. Articles of Association (AOA)

7. Which financial statement provides a snapshot of a company’s financial position at a specific point in time?
a. Income Statement
b. Statement of Cash Flows
c. Balance Sheet
d. Statement of Retained Earnings

Answer: c. Balance Sheet

8. What is the term for the process of converting a private company into a public company?
a. Conversion
b. Privatization
c. Nationalization
d. IPO (Initial Public Offering)

Answer: d. IPO (Initial Public Offering)

9. What is the maximum tenure for an auditor in a company as per many regulations?
a. 1 year
b. 3 years
c. 5 years
d. 10 years

Answer: b. 3 years

10. Which regulatory body oversees company affairs and ensures compliance with company laws in many jurisdictions?
a. Securities and Exchange Commission (SEC)
b. Federal Reserve
c. Central Bank
d. Internal Revenue Service (IRS)

Answer: a. Securities and Exchange Commission (SEC)

11. What is the purpose of a company’s “Objects Clause” in its Memorandum of Association?
a. To define the company’s vision statement
b. To specify the company’s objectives and activities it can engage in
c. To outline the company’s ethical guidelines
d. To determine the company’s share structure

Answer: b. To specify the company’s objectives and activities it can engage in

12. What is the minimum notice period required for convening an Extraordinary General Meeting (EGM) in many jurisdictions?
a. 7 days
b. 14 days
c. 21 days
d. 30 days

Answer: c. 21 days

13. In the context of company law, what does the term “Corporate Governance” refer to?
a. The legal framework for establishing a company
b. The system of rules, practices, and processes by which a company is directed and controlled
c. The financial performance of a company
d. The marketing strategies employed by a company

Answer: b. The system of rules, practices, and processes by which a company is directed and controlled

14. What is the term for the amount of money a company raises by issuing shares to the public for the first time?
a. Market capitalization
b. Share premium
c. Authorized capital
d. Share capital

Answer: d. Share capital

15. In the context of company meetings, what is a “Proxy”?
a. A shareholder with a significant number of shares
b. An alternate director appointed by the board
c. A person appointed to vote on behalf of a shareholder who cannot attend the meeting
d. A legal advisor representing the company in legal proceedings

Answer: c. A person appointed to vote on behalf of a shareholder who cannot attend the meeting

16. What is the primary purpose of an Annual Report in a company?
a. To provide an overview of the company’s financial performance to shareholders
b. To outline the company’s marketing strategy
c. To present the minutes of the Annual General Meeting
d. To announce upcoming shareholder dividends

Answer: a. To provide an overview of the company’s financial performance to shareholders

17. What is the term for the process of reducing the nominal value of a company’s shares?
a. Stock split
b. Share buyback
c. Share consolidation
d. Capital reduction

Answer: d. Capital reduction

18. What is the primary function of the Registrar of Companies (RoC) in many jurisdictions?
a. Regulate stock exchanges
b. Maintain company records and ensure compliance with statutory requirements
c. Approve annual financial statements
d. Set interest rates for company loans

Answer: b. Maintain company records and ensure compliance with statutory requirements

19. What is the term for the document issued by a company inviting the public to subscribe to its shares?
a. Memorandum of Association (MOA)
b. Articles of Association (AOA)
c. Prospectus
d. Certificate of Incorporation

Answer: c. Prospectus

20. What does the term “Ultra Vires” mean in company law?
a. Beyond the powers
b. Internal affairs
c. Public interest
d. Majority vote

Answer: a. Beyond the powers