Samacheer Kalvi 11th Commerce Guide Chapter 6 Joint Stock Company

Tamilnadu State Board New Syllabus Samacheer Kalvi 11th Commerce Guide Pdf Chapter 6 Joint Stock Company Text Book Back Questions and Answers, Notes.

Tamilnadu Samacheer Kalvi 11th Commerce Solutions Chapter 6 Joint Stock Company

11th Commerce Guide Joint Stock Company Text Book Back Questions and Answers

I. Choose the Correct Answer

Question 1.
The relationship between outsiders and the company is defined in …………………..
a) Prospectus
b) Articles of Association
c) Memorandum of Association
d) Certificate of Incorporation
Answer:
a) Prospectus

Question 2.
Table A of the Companies Act is a ……………..
a) Model minutes book
b) Model form of Balance Sheet
c) Model of AOA
d) Model of MOA
Answer:
c) Model of AOA

Question 3.
Which of the following is created by a Special Act of Parliament or in State Assemblies?
a) Chartered company ,
b) Foreign company
c) Government company
d) Statutory Company
Answer:
d) Statutory Company

Question 4.
The Board of directors of a company is elected by ……………………………..
a) Creditors
b) Debtors
c) Debenture holders
d) Shareholders (members)
Answer:
d) Shareholders (members)

Question 5.
Companies established as a result of aeharter granted by the King or Queen of a country is called ………………..
a) Chartered companies
b) Statutory companies
c) Registered companies
d) Foreign companies
Answer:
a) Chartered companies

II. Very Short Answer Questions

Question 1.
What are the different types of companies?
Answer:

1. Incorporation
2. Membership
3. Member liability
4. Control
5. Nationality

Question 2.
Define a Company.
Answer:
According to L.H. Haney, “ A company is an artificial person created by law having a separate legal entity with a perpetual succession and a common seal.”

Question 3.
What is meant by Limited liability?
Answer:
The liability of a shareholder is limited. The risk of loss is limited to the unpaid amount on the face value of shares held.

Question 4.
Explain any two characteristics of a company.
Answer:

1. Separate Legal Entity: Under Incorporation, a company becomes a separate legal entity as compared to its members. The company is distinct and different from its members. It is considered an artificial person.
2. Capacity to sue and be sued: A company can sue or be sued in its own name as distinct from its members.

Question 5.
What is meant by Chartered Company?
Answer:
Chartered companies are established by the King or Queen of a country. The powers and privileges of the chartered company are specified in the charter. Power to cancel the charter is vested with King/Queen.

III. Short Answer Questions

Question 1.
What are the advantages of Companies? (Any 3)
Answer:
1. Large Capital:
A company can secure large capital compared to a sole trader or partnership. A large amount of capital is necessary for conducting business on a large scale.

2. Limited Liability:
The liability of a shareholder is limited. The risk of loss is limited to the unpaid amount on the face value of shares held. In the case of a company limited by shares, the liability of a shareholder is restricted to the unpaid amount on the shares held by him.

3. Transferability of Shares:
Transaction of Shares between two individuals is easy. So there is the liquidity of the investment. Any shareholder can easily convert his shares into money by selling his shares.

Question 2.
What is meant by a Private Company?
Answer:
Private Limited Company is a type of company which is formed with minimum of two shareholders and two directors. The minimum requirement with respect to authorized or paid-up capital of Rs. 1,00,000 has been omitted by the Companies Act 2015. Maximum 200 persons can become shareholders in a private company.

Question 3.
What is meant by Government Company?
Answer:
A public enterprise incorporated under the Indian Companies Act, 1956 is called a Government company. These companies are owned and managed by the central or the state government.

Section 617 of the Companies Act, 1956 defines “Government Companies” as any company in which not less than 51% of the paid-up share capital is held by the Central Government or any State Government or Governments or partly by the Central Government and partly by one or more State Governments. A subsidiary of a Government company shall also be treated as a Government company.

Question 4.
What is meant by Foreign Company?
Answer:
Foreign company means a company which is incorporated in a country outside India under the law of that country. After the establishment of business in India, the necessary documents must be filed with the Registrar of Companies within 30 days from the date of establishment.

IV. Long Answer Questions

Question 1.
What are the contents of the Memorandum of Association?
Answer:
1. Name Clause:
The name clause requires you to state the legal and recognized name of the company. You are allowed to register a company name only if it does not bear any similarities with the name of an existing company.

2. Situation Clause:.
The registered office clause requires you to show the physical location of the registered office of the company. You are required to keep all the company registers in this office in addition to using the office in handling all the outgoing and incoming communication correspondence.

3. Objective Clause:
The objective clause requires you to summarize the main objectives for establishing the company with reference to the requirements for shareholding and use of financial resources. You also need to state ancillary objectives; that is, those objectives that are required to facilitate the achievement of the main objectives.

4. Liability Clause:
The liability clause requires you to state the extent to which shareholders of the company are liable to the debt obligations of the company in the event of the company dissolving. You should show that shareholders are liable only for their shareholding and/or to their commitment to contribute to the dissolution costs upon liquidation of a company limited by guarantee.

5. Capital Clause:
The capital clause requires you to state the company’s authorized share capital, the different categories of shares, and the nominal value (the minimum value per share) of the shares. You are also required to list the company’s assets under this clause.

6. Association Clause:
The association clause confirms that shareholders bound by the MOA are willingly associating and forming a company. You require seven members to sign an MOA for a public company and riot less than two people for an MOA of a private company. You must conduct the signing in the presence of witnesses who must also append his signature.

Question 2.
What are the contents in Articles of Association?
Answer:
Meaning:
The Articles of Association (AOA) is a document that contains the purpose of the company as well as the duties and responsibilities of its members.
Contents:

• Amount of shares, capital, value and type of shares
• Rights of each class of shareholders regarding voting, dividend, return of capital
• Rules regarding issue of shares and debentures
• Procedures as well as regulations in respect of making calls on shares.
• Manner of transfer of shares ® Declaration of dividends ® Borrowing powers of the company ® Rules regarding the appointment, remuneration, removal of directors
• Procedure for conducting proxy, quorum, meetings etc.,
• Procedures concerning the keeping of books and audits
• Seal of the company
• Procedures regarding the winding up of the company.

Question 3.
What is meant by Prospectus?
Answer:
According to Section 2(36) of the Companies Act, any document inviting the public to buy its shares or debentures comes under the definition of a prospectus. It also applies to advertisements inviting deposits from the public. A prospectus is “the only window through which a prospective investor can look into the soundness of a company’s venture”. Hence it must specify at least the following matters as per Schedule II:

1. The prospectus contains the main objectives of the company, the name, and addresses of the signatories of the Memorandum of Association, and the number of shares held by them.
2. The name, addresses, and occupation of directors and managing directors.
3. The number and classes of shares and debentures issued.
4. The qualification share of directors and the interest of directors for the promotion of the company.
5. The number, description, and the document of shares or debentures which within the two preceding years have been agreed to be issued other than cash.

Question 4.
What is meant by a Multi-National Company?
Answer:
A Multi-National Company (MNC) is a huge industrial organization which,

• Operates in more than one country
• Carries out production, marketing, and research activities on an international Scale in those countries.
• Seeks to maximize profits the world over.
• A domestic company or a foreign company can be an MNC.

Examples:
Microsoft Corporation, Nokia Corporation, Nestle, Coca-Cola, International Business Machine, Pepsi Co, Sony Corporation.

Question 5.
What is meant by Holding and Subsidiary Company?
Answer:
1. Holding Company:
As per Section 2(87) “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company:

• Controls the composition of the Board of Directors; or
• Exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.

2. Subsidiary Company:
“Subsidiary company” or “Subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company:

• Controls the composition of the Board of Directors; or
• Exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies:

Examples:
H Ltd., holds more than 50% of the equity share capital of S Ltd. Now H Ltd. is the holding company of S Ltd., and S Ltd. is the subsidiary of H Ltd.

11th Commerce Guide Joint Stock Company Additional Important Questions and Answers

I. Choose the Correct Answer

Question 1.
The maximum number of members in a private limited company is ……………..
(a) 25
(b) 50
(c) 100
(d) 200
Answer:
(d) 200

Question 2.
The maximum number of members in a private company is ……………………………….
a. 10
b. 20
c. 50
d. unlimited
Answer:
c. 50

Question 3.
A new class of company is of “One Person Company” and it is included in …………….. Act.
(a) 1956
(b) 1952
(c) 2013
(d) 2015
Answer:
(c) 2013

Question 4.
On the basis of liability, companies are classified in to ………………………………. types.
a. 2
b. 3
c. 4
d. 5
Answer:
a. 2

Question 5.
…………….. companies are established by a Special Act made in Parliament/State Assembly.
(a) Chartered
(b) Statutory
(c) Private
(d) Unlimited
Answer:
(b) Statutory

Question 6.
Memorandum Association consists of ……………………. clause.
a.5
b.6
c.7
d.8
Answer:
b.6

Question 7.
The share capital of the government company must not be less than ……………..
(a) 75%
(b) 60%
(c) 95%
(d) 51%
Answer:
(d) 51%

Question 8.
Who has the power to convene the meetings of the Board of Directors?
a) Shareholders
b)Board of Directors
c) Chairman
d) None of these
Answer:
b)Board of Directors

Question 9.
…………….. is a document containing rules and regulations for the internal management of a company.
(a) Table A
(b) Memorandum
(c) Prospectus
(d) Statutory declaration
Answer:
(a) Table A

II. Very Short Answer Questions

Question 1.
What is Perpetual succession?
Answer:
A company does not cease to exist unless it is specifically wound up or the task for which it was formed has been completed. Membership of a company may keep on changing from time to time but that does not affect the life of the company.

Question 2.
What is meant of Articles of Association?
Answer:
The Articles of Association (AO A) is a document that contains the purpose of the company as well as the duties and responsibilities of its members. It is an important document which needs to be filed with the Registrar of Companies.

Question 3.
What is the Objective clause?
Answer:
The objective clause requires you to summarize the main objectives for establishing the company with reference to the requirements for shareholding and use of financial resources. You also need to state ancillary objectives; that is, those objectives that are required to facilitate the achievement of the main objectives.

III. Short Answer Questions

Question 1.
What is meant by Joint and Several Liability?
Answer:
Every partner is jointly and severally liable for all acts of the firm. It means that in case the assets are inadequate for meeting the claims of creditors, even their personal properties should be made available. The creditors can recover their claims from all the partners.

Question 2.
Write a note on one share – one vote.
Answer:
The principle of voting in a company is one share-one vote i.e. if a person has 10 shares; he has 10 votes in the company. This is in direct distinction to the voting principle of a co-operative society where the “One Member – One Vote” principle applies i.e. irrespective of the number of shares held, one member has only one vote.

IV. Long Answer Questions

Question 1.
Classify the Companies According to its Incorporation:
Answer:
1. Chartered Companies:
Chartered companies are established by the King or Queen of a country. The powers and privileges of these companies are specified in the charter. The cancellation of power is in the hands of the King/Queen. E.g East Indian Company, Bank of England, etc.

2. Statutory Companies:
Companies are established by a Special Act made in the Parliament/State Assembly. The Constitution of the company is specified in the Memorandum of Association. The rules are specified in the Articles of Association. Statutory companies enjoy autonomous status. It need not use the word ‘Limited’ next to its name.

3. Association Not for Profit:
According to section 25, the Central Government may, by license, grant that an association may be registered as a company with limited liability, without using the words ‘limited’ or ‘private limited’ as part of its name. The license will be granted only in the case of ‘association not for profit’. Such companies may be public or private companies and may or may not have share capital.