Chapter Exam

Chapter 7: Formation of a Company — Online MCQ Test

Q: The document that contains the fundamental conditions on which the company is allowed to be incorporated is called:

Answer: C. Memorandum of Association — The Memorandum of Association defines the scope and powers of the company and its relation with the outside world.

Q: If a company acts beyond the powers stated in its Memorandum of Association, such an act is called:

Answer: A. Ultra vires — Ultra vires means beyond the powers of the company as stated in the Memorandum, and such acts are generally void.

Q: Which of the following correctly matches the document with its function?

Answer: C. Prospectus — invitation to subscribe to shares — A prospectus is an invitation to the public to subscribe to shares or debentures. The other documents serve different legal purposes.

BUSINESS STUDIES · CLASS 11 FIRST PUC · Karnataka State Board

Practice Chapter 7: Formation of a Company with a free chapter-wise online MCQ test for Karnataka State Board CLASS 11 FIRST PUC BUSINESS STUDIES. This chapter covers: Focusing on corporate setup this chapter details promotion stage key documents Memorandum and Articles of Association Incorporation procedures and capital subscription process.. AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 7: Formation of a Company — Important Questions & Answers (FAQ)

Frequently asked questions from Karnataka State Board CLASS 11 FIRST PUC BUSINESS STUDIES — Chapter 7: Formation of a Company, with answers and explanations. These are sample questions; the exam has its own separate question set.

Who is a promoter in the formation of a company?

A. A person who manages the company after incorporation
B. A person who conceives the idea and takes steps to form the company ✓
C. A shareholder who buys shares after the company is formed
D. A government officer who approves the company

Answer: B. A person who conceives the idea and takes steps to form the company
A promoter is the person who undertakes the initiative of setting up a company and carries out the necessary preliminary work.

The document that contains the fundamental conditions on which the company is allowed to be incorporated is called:

A. Articles of Association
B. Prospectus
C. Memorandum of Association ✓
D. Certificate of Commencement

Answer: C. Memorandum of Association
The Memorandum of Association defines the scope and powers of the company and its relation with the outside world.

A group of promoters wants to start a company for manufacturing medicines. Which step should they take first?

A. Get the certificate of commencement
B. Prepare the Memorandum and Articles of Association ✓
C. Start business operations immediately
D. Declare dividends

Answer: B. Prepare the Memorandum and Articles of Association
Before incorporation, promoters must prepare the necessary documents such as the Memorandum and Articles of Association.

If a company acts beyond the powers stated in its Memorandum of Association, such an act is called:

A. Ultra vires ✓
B. Intra vires
C. Voidable contract
D. Pre-incorporation contract

Answer: A. Ultra vires
Ultra vires means beyond the powers of the company as stated in the Memorandum, and such acts are generally void.

Which of the following correctly matches the document with its function?

A. Memorandum of Association — internal management rules
B. Articles of Association — external scope of business
C. Prospectus — invitation to subscribe to shares ✓
D. Certificate of Incorporation — invitation to invest

Answer: C. Prospectus — invitation to subscribe to shares
A prospectus is an invitation to the public to subscribe to shares or debentures. The other documents serve different legal purposes.

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