Maharashtra Board Class 11 Secretarial Practice Chapter 3 Formation of a Company Solutions

Class 11 Secretarial Practice Chapter 3 Exercise Solutions

Exercise 1A

Question 1. A company is
(a) a human being
(b) an artificial person created by law
(c) a natural individual
Answer: (b) an artificial person created by law
In simple words: A company is a legal entity separate from its owners, created by law, making it an artificial person.

🎯 Exam Tip: Understanding the legal nature of a company as an artificial person is fundamental to corporate law and governance.

 

Question 2. __________ are the persons who undertake the process of formation of a company.
(a) Promoters
(b) Directors
(c) Registrar of companies
Answer: (a) Promoters
In simple words: Promoters are individuals or groups responsible for conceiving the idea of a business and taking initial steps to form a company.

🎯 Exam Tip: Identify the key roles in company formation; promoters are crucial in the initial stage.

 

Question 3. A __________ company needs minimum two or more members.
(a) Public
(b) Private
(c) One person Company
Answer: (b) Private
In simple words: A private company requires at least two members to be formed and operate.

🎯 Exam Tip: Differentiate minimum member requirements for various company types to avoid common errors.

 

Question 4. In a public company there must be minimum __________ or more members.
(a) one
(b) two
(c) seven
Answer: (c) seven
In simple words: A public company needs a minimum of seven members to be legally established.

🎯 Exam Tip: Remember the minimum member count for public companies, as it's a key distinction from private companies.

 

Question 5. __________ refers to contracts entered into by the promoters on behalf of a proposed company.
(a) Pre-incorporation/Prehminary contracts
(b) Fiduciary contracts
(c) Memorandum of Association
Answer: (a) Pre-incorporation/Preliminary contracts
In simple words: Preliminary contracts are agreements made by promoters for the company before it is officially incorporated.

🎯 Exam Tip: Understand the concept of pre-incorporation contracts and their legal implications before a company legally exists.

 

Question 6. A Director must have a __________ to be appointed as a Director of a company.
(a) PAN
(b) DIN
(c) CIN
Answer: (b) DIN
In simple words: A Director Identification Number (DIN) is mandatory for any individual to be appointed as a director in a company.

🎯 Exam Tip: Know the essential identification numbers required for company officials; DIN is specific to directors.

 

Question 7. __________ has 21 digit alpha-numeric code which is a unique number assigned to every company at the time of Incorporation.
(a) DIN
(b) PIN
(c) CIN
Answer: (c) CIN
In simple words: Corporate Identity Number (CIN) is a unique 21-digit code given to every company upon its incorporation for identification purposes.

🎯 Exam Tip: Distinguish between DIN (for directors) and CIN (for the company) to ensure accurate knowledge.

 

Question 8. __________ is a document that invites the public to buy the shares of a company.
(a) Articles of Association
(b) Prospectus
(c) Certificate of Incorporation
Answer: (b) Prospectus
In simple words: A prospectus is a formal document inviting the public to subscribe for shares or debentures of a company.

🎯 Exam Tip: Recognize the purpose of a prospectus as the primary public invitation for investment in a company.

 

Exercise 1B

Question 1.

Group 'A'	Group 'B'
(a) Minimum 7 members	(1) Persons who conceive the idea of setting up a company
(b) DIN	(2) Public company
(c) Preliminary contracts	(3) Promoters
(d) Fiduciary duties towards the company	(4) Eight Digit alpha-numeric number
(e) CIN	(5) Private company
	(6) Unique number assigned to each Director
	(7) ROC
	(8) 21 digit alpha-numeric code number
	(9) One Person Company
	(10) Contracts entered by Promoters with third parties

Answer:

Group 'A'	Group 'B'
(a) Minimum 7 members	(2) Public company
(b) DIN	(6) Unique number assigned to each Director
(c) Preliminary contracts	(10) Contracts entered by Promoters with third parties
(d) Fiduciary duties towards the company	(3) Promoters
(e) CIN	(8) 21 digit alpha-numeric code number

In simple words: This matching exercise connects key terms in company formation, such as minimum member requirements, identification numbers, and types of contracts, to their correct definitions.

🎯 Exam Tip: Accurately matching terms and concepts demonstrates a strong understanding of fundamental company law definitions.

 

Exercise 1C

Question 1. A term which means registering a company as per provisions of Companies Act, 2013.
Answer: Incorporation
In simple words: Incorporation is the legal process of forming a company as a corporate entity under the Companies Act.

🎯 Exam Tip: "Incorporation" is the specific legal term for officially registering a company.

 

Question 2. Persons who undertake the necessary steps to set up a company.
Answer: Promoters
In simple words: Promoters are the individuals who initiate and oversee the entire process of setting up a company.

🎯 Exam Tip: Remember that promoters are the driving force behind a company's initial establishment.

 

Question 3. The term refers to contracts entered into by Promoters with third parties on behalf of the proposed company.
Answer: Preliminary contracts
In simple words: These are agreements made by promoters before the company is legally formed, acting on its future behalf.

🎯 Exam Tip: Understand that preliminary contracts occur before the company's legal existence and have specific legal treatment.

 

Question 4. The Birth Certificate of a company.
Answer: Certificate of Incorporation
In simple words: The Certificate of Incorporation is the legal document that confirms a company's official birth and legal existence.

🎯 Exam Tip: The Certificate of Incorporation is a crucial document, signaling the official start of a company's legal status.

 

Exercise 1D

Question 1. A company is an artificial person.
Answer: True
In simple words: A company is treated as a separate legal entity, distinct from its members, by law, making it an artificial person.

🎯 Exam Tip: This is a foundational concept in company law; understanding it is essential for grasping corporate legal personality.

 

Question 2. To form a Public company, there must be minimum of 2 persons/promoters.
Answer: False
In simple words: A public company requires a minimum of seven persons/promoters, not just two, for its formation.

🎯 Exam Tip: Be precise about the minimum number of members for public versus private companies.

 

Question 3. Promoters are persons who take the necessary steps to set up a company.
Answer: True
In simple words: Promoters are indeed the initiators who undertake all the preliminary actions to bring a company into existence.

🎯 Exam Tip: Correctly identify the role of promoters as the driving force in company formation.

 

Question 4. Promoters can make secret profits while setting up a company.
Answer: False
In simple words: Promoters have a fiduciary duty and are not allowed to make undisclosed profits from transactions related to company formation.

🎯 Exam Tip: Remember that promoters are fiduciaries and must act in the company's best interest, disclosing all benefits.

 

Question 5. In India, companies have to be incorporated as per the provisions of the Companies Act, 2013.
Answer: True
In simple words: The Companies Act, 2013, is the primary legislation governing the incorporation and functioning of companies in India.

🎯 Exam Tip: Knowing the relevant Companies Act year is important for legal context.

 

Question 6. DSC is needed by Directors when they have to sign documents for e-filing.
Answer: True
In simple words: Digital Signature Certificates (DSC) are legally required for directors to digitally sign documents submitted electronically to the Registrar of Companies.

🎯 Exam Tip: DSCs are essential for modern e-governance in corporate filings, ensuring authenticity.

 

Question 7. A company can be registered even without submitting a Memorandum of Association and Articles of Association.
Answer: False
In simple words: The Memorandum of Association and Articles of Association are fundamental legal documents required for a company's registration.

🎯 Exam Tip: Understand that MOA and AOA are foundational documents; incorporation is impossible without them.

 

Question 8. Every Director has to quote his DIN while giving his consent to be a Director of a company.
Answer: True
In simple words: A Director Identification Number (DIN) is a unique identifier that directors must use when providing consent to act as a director.

🎯 Exam Tip: DIN is crucial for transparency and tracking individuals holding director positions across companies.

 

Question 9. ROC issues CIN only to certain companies.
Answer: False
In simple words: The Registrar of Companies (ROC) issues a Corporate Identity Number (CIN) to *every* company upon its incorporation, not just specific ones.

🎯 Exam Tip: CIN is a universal identification for all registered companies, regardless of their type or size.

 

Question 10. All companies need a Certificate of Incorporation.
Answer: True
In simple words: A Certificate of Incorporation is the legal proof of a company's existence and is mandatory for all companies.

🎯 Exam Tip: The Certificate of Incorporation is a non-negotiable legal document for any company to commence operations.

 

Question 11. All companies need a Certificate of Commencement of business.
Answer: False
In simple words: Only public companies having a share capital (and incorporated after a certain date) typically need a Certificate of Commencement of Business to start operations.

🎯 Exam Tip: Differentiate between companies that require a Certificate of Commencement of Business and those that do not.

 

Exercise 1E

Question 1. CIN, DIN, PAN
Answer: PAN
In simple words: CIN (Corporate Identity Number) and DIN (Director Identification Number) are specific to company and director identification, whereas PAN (Permanent Account Number) is a general tax identification for individuals and entities.

🎯 Exam Tip: Understand the specific purpose of each identification number; PAN is broader, while CIN/DIN are corporate-specific.

 

Question 2. Promoter, Prospectus, Incorporation of a company
Answer: Prospectus
In simple words: Promoter and Incorporation of a company are stages or roles in the company formation process, while Prospectus is a document used for inviting public investment, typically after incorporation.

🎯 Exam Tip: Recognize the sequence of company formation steps and distinguish physical entities/processes from specific documents.

 

Exercise 1F

Question 1. Promoters are the persons who undertake the process of __________
Answer: Formation of a company
In simple words: Promoters are key individuals responsible for initiating and carrying out all the tasks required to establish a new company.

🎯 Exam Tip: The primary role of promoters is to manage the company's formation, from idea to incorporation.

 

Question 2. The document issued by the Registrar of Companies when a company is incorporated is called as __________
Answer: Certificate of Incorporation
In simple words: The Certificate of Incorporation is the official document from the ROC confirming the legal existence of a company.

🎯 Exam Tip: The Certificate of Incorporation is the conclusive proof of a company's registration and legal birth.

 

Question 3. On incorporation of a company the ROC allows a unique identity number called as __________
Answer: Corporate Identity Number (CIN)
In simple words: Upon registration, the Registrar of Companies assigns a unique Corporate Identity Number (CIN) to each company for its identification.

🎯 Exam Tip: CIN is a unique digital identifier assigned to a company at the time of its incorporation by the ROC.

 

Question 4. On behalf of a proposed company, preliminary contracts with third parties are entered by __________
Answer: Promoters
In simple words: Before a company is legally formed, its promoters engage in preliminary contracts to secure assets or services necessary for the future business.

🎯 Exam Tip: Promoters undertake preliminary contracts on behalf of the company before its official legal existence.

 

Exercise 1G

Question 1.

Group 'A'	Group 'B'
(1) Promoter
(2)	Certificate of Incorporation
(3) CIN
(4) RUN is used for

(Corporate Identity Number, Reserving name of a company, Formation of a company, Birth certificate of a company)
Answer:

Group 'A'	Group 'B'
(1) Promoter	Formation of a company
(2) Birth Certificate of a company	Certificate of Incorporation
(3) CIN	Corporate Identity Number
(4) RUN is used for	Reserving name of a company

In simple words: This exercise matches key terms related to company formation, such as the role of a promoter, the significance of the Certificate of Incorporation, the meaning of CIN, and the purpose of the RUN form.

🎯 Exam Tip: Correctly identifying the function of each term and document is vital for understanding the company incorporation process.

 

Exercise 1H

Question 1. Who is a Promoter?
Answer: A person/a group of persons who take initiative efforts for a formation of a company is/are called as 'Promoter/s'.
In simple words: A promoter is an individual or group who conceives a business idea and takes all necessary steps to legally establish a company.

🎯 Exam Tip: Define a promoter by their initiating role in the company formation process.

 

Question 2. What is CIN?
Answer: It is the Corporate Identity Number, issued by ROC at the time of incorporation of the Company.
In simple words: CIN is a unique 21-digit alphanumeric code assigned by the Registrar of Companies to every registered company at its incorporation.

🎯 Exam Tip: Explain CIN as the company's unique identification number issued by the ROC upon incorporation.

 

Question 3. Which company needs a Certificate of Commencement of Business?
Answer: Public and Private companies having share capital and which are incorporated after 2nd November 2018 need a Certificate of Commencement of Business.
In simple words: Companies, specifically public and private companies with share capital incorporated after November 2, 2018, require a Certificate of Commencement of Business to legally start trading.

🎯 Exam Tip: Specify the types of companies and the relevant incorporation date that necessitate a Certificate of Commencement of Business.

 

Question 4. What are Preliminary Contracts?
Answer: Promoter entering into a contract with third parties on behalf of the company before incorporation is called as Preliminary Contracts.
In simple words: Preliminary contracts are agreements made by promoters with external parties for the benefit of the future company, before the company is legally incorporated.

🎯 Exam Tip: Define preliminary contracts as pre-incorporation agreements made by promoters for the nascent company.

 

Exercise 1I

Question 1. ROC prepares draft Memorandum and Articles of Association.
Answer: Promoter prepares draft Memorandum and Articles of Association.
In simple words: It is the promoters, not the ROC, who are responsible for preparing the initial drafts of the Memorandum and Articles of Association.

🎯 Exam Tip: Correctly identify the party responsible for drafting foundational company documents (MOA and AOA).

 

Question 2. Certificate of Commencement of Business is like a birth certificate of a company.
Answer: Certificate of Incorporation is like a birth certificate of a company.
In simple words: The Certificate of Incorporation officially marks the birth and legal existence of a company, similar to a birth certificate for a person.

🎯 Exam Tip: Distinguish between the Certificate of Incorporation (legal birth) and the Certificate of Commencement of Business (permission to start trading).

 

Exercise 1J

Question 1.
(a) Appoint First Directors
(b) Prepare Draft Memorandum of Association and Articles of Association.
(c) Come up with the business idea
Answer:
(a) Come up with the business idea
(b) Appoint first Directors
(c) Prepare draft Memorandum of Association and Article of Association.
In simple words: The logical order of steps in company formation begins with conceiving the business idea, followed by preparing foundational legal documents, and then appointing the first directors.

🎯 Exam Tip: Arrange the steps of company formation in a chronological and logical sequence to demonstrate understanding of the process.

 

Question 2.
(a) Incorporation of a company
(b) Commencement of a company
(c) Promotion
Answer:
(a) Promotion
(b) Incorporation of a company
(c) Commencement of Business
In simple words: The stages of company formation occur in the order of promotion (idea generation), followed by incorporation (legal registration), and then commencement of business (starting operations).

🎯 Exam Tip: Understand the three main stages of company formation in their correct chronological order: Promotion, Incorporation, and Commencement of Business.

 

Exercise 2

Question 1. Promoters
Answer: A person who take lead to form the company is called a "Promoter". As per Companies Act, 2013; Section 2(69) Promoter is defined as,
• A person, who has been named in the prospectus or identified by the company in Annual Return or
• Who has control on company's affairs directly or indirectly whether as a shareholder, director or otherwise or
• In accordance with whose advice, directions, or instructions, the Board of Directors is accustomed to act.
In simple words: Promoters are individuals who play a central role in conceptualizing a business, taking initiative, and assembling the necessary resources and legal documentation to establish a company.

🎯 Exam Tip: Provide a comprehensive definition of a promoter, including their role and the legal definition as per the Companies Act.

 

Question 2. Promotion
Answer: It is the first stage of Company formation. It means taking necessary steps to incorporate a company as per the provisions of the Companies Act, 2013.
In simple words: Promotion is the initial phase of company formation, involving all the activities from conceiving the business idea to preparing for legal incorporation.

🎯 Exam Tip: Describe promotion as the crucial preliminary stage where the business idea is developed and planned before legal formalization.

 

Question 3. Certificate of Incorporation
Answer: It is a certificate issued by the ROC, after verifying all the documents and information provided by the promotors. It is like the Birth Certificate of the company. The company becomes a legal person or a body corporate having perpetual succession on getting incorporation certificate.
In simple words: The Certificate of Incorporation is a legal document issued by the Registrar of Companies that officially confirms a company's registration and legal existence, granting it a separate legal identity and perpetual succession.

🎯 Exam Tip: Explain the Certificate of Incorporation as the official legal document that marks the birth of a company and confers perpetual succession.

 

Question 4. Simplified Proforma for Incorporating Company Electronically (SPICe)
Answer: As per new rule 38 of Companies (Incorporation) (Fourth Amendment) Rules, only one form like FORM INC-32 (SPICe) needs to be submitted at the time of incorporation.
SPICe is to be filed for applying for:
• Reservation of Name of Company
• Incorporation of the new company
• DIN for Directors
• PAN and TAN for a new company.
In simple words: SPICe (Simplified Proforma for Incorporating Company Electronically) is an integrated electronic form (FORM INC-32) that streamlines the company incorporation process by allowing applications for name reservation, incorporation, DIN, PAN, and TAN through a single submission.

🎯 Exam Tip: Highlight SPICe as a simplified, single-form electronic process for multiple registrations during company incorporation.

 

Question 5. Corporate Identity Number (CIN)
Answer: The company needs to incorporate with the Registrar of Companies. Such ROC gives CIN to the company. It is a unique identity number. CIN is a 21 digit alphanumeric code. It is to be quoted in every form and correspondence. CIN includes details of the company like listed or unlisted, industry code, state of the location, year of registration, type of ownership, and registration number.
E.g. CIN of Air India Ltd. - U62100DL1992GOI048581
In simple words: Corporate Identity Number (CIN) is a distinctive 21-digit alphanumeric code assigned by the Registrar of Companies to every registered company, serving as its primary identifier for all legal and official purposes and containing vital company information.

🎯 Exam Tip: Define CIN, its format (21-digit alphanumeric), and its importance as a unique identifier containing key company details.

 

Exercise 3

1. Mr. Ram, Mr. Sam, and Mr. Tom who are partners have come together to convert their business into a company. They have finalized all the details about the business they want to do, the capital needed, etc. However, they do not know how to proceed with the legal formalities. Hence they appoint Mr. Shah who is a Practicing Company Secretary to help them prepare documents needed for incorporating the proposed company.

Question (a). Can Mr. Ram, Mr. Sam, and Mr. Tom convert their partnership firm into a company?
Answer: Mr. Ram, Mr. Sam, and Mr. Tom can convert their partnership firm into a company easily.
In simple words: Yes, a partnership firm can be converted into a company by fulfilling the necessary legal requirements and procedures.

🎯 Exam Tip: Understand that conversion of a partnership into a company is a common and legally recognized process.

 

Question (b). Name 2 most important documents needed to incorporate a company.
Answer: Memorandum of Association and Articles of Association are the two most important documents for the Incorporation of the Company.
In simple words: The Memorandum of Association defines the company's scope and objectives, while the Articles of Association outline its internal management rules; both are essential for incorporation.

🎯 Exam Tip: Always remember MOA and AOA as the foundational legal documents for company incorporation.

 

Question (c). Will Mr. Shah be considered a Promoter of the Company? Why?
Answer: Mr. Shah will not be considered a Promoter. Mr. Shah is an advising company secretary and will help to prepare documents needed for incorporation. Promoter means a person or group of persons who take initiative efforts for the formation of the company. Here Mr. Ram, Mr. Sam, and Mr. Tom are in the role of Promoter.
In simple words: Mr. Shah acts as a professional advisor, assisting with legal formalities, whereas Mr. Ram, Mr. Sam, and Mr. Tom are the promoters as they initiated the business idea and conversion.

🎯 Exam Tip: Differentiate between professional advisors (like Company Secretaries) and promoters, who take the entrepreneurial initiative.

 

2. Mr. T along with his 5 friends have submitted all the necessary documents for incorporation of TRIM private limited company.

Question (a). How many minimum promoters are needed to incorporate a private company?
Answer: Minimum 2 promoters/persons are needed to incorporate a private company.
In simple words: For a private company, the law requires at least two promoters or members to begin the incorporation process.

🎯 Exam Tip: Recall the specific minimum promoter/member requirement for a private company (two persons).

 

Question (b). When can TRIM Private limited company be said to have come into existence?
Answer: After getting Incorporating Certificate, TRIM Private limited company be said to have come into existence.
In simple words: TRIM Private Limited Company will legally exist the moment it receives its Certificate of Incorporation from the Registrar of Companies.

🎯 Exam Tip: The date of issue of the Certificate of Incorporation is the legal birth date of a company.

 

Question (c). Name the two most important documents that must be submitted at the time of Incorporation of a company.
Answer: There are various documents, which are needed for the Incorporation of a company like Memorandum of Association, Articles of Association, Director's consent, etc.
In simple words: The Memorandum of Association (MOA) and Articles of Association (AOA) are paramount, defining the company's constitution and internal rules, respectively, and are essential for incorporation.

🎯 Exam Tip: While many documents are needed, MOA and AOA are always the most critical for company incorporation.

 

3. Sagar company limited got its Certificate of Incorporation on 1st September 2018. The application for Incorporation was submitted on 16th August 2018. There were 10 promoters who took the steps to incorporate the company.

Question (a). State the date on which Sagar company limited came into existence legally?
Answer: Sagar Company Limited came into existence legally after receiving an incorporation certificate on 1st September 2018.
In simple words: A company's legal existence begins on the date printed on its Certificate of Incorporation, which for Sagar Company Limited is September 1, 2018.

🎯 Exam Tip: The date of incorporation is directly linked to the date the Certificate of Incorporation is issued, not the application date.

 

Question (b). On which date will the company get its Corporate Identity Number?
Answer: At the time of issuing the Incorporation Certificate, ROC allows a CIN to the company, which is 1st September 2018.
In simple words: The Corporate Identity Number (CIN) is assigned simultaneously with the issuance of the Certificate of Incorporation, so Sagar Company Limited received its CIN on September 1, 2018.

🎯 Exam Tip: CIN is intrinsically linked to incorporation; both are effective from the same date.

 

Question (c). How many minimum promoters are needed for incorporating a public company?
Answer: There are three types of companies like Public Company, Private Company and One Person Company, in which Public Company needs minimum 7 Promoters/Persons for incorporating.
In simple words: A public company requires a minimum of seven promoters or individuals to be legally incorporated.

🎯 Exam Tip: Clearly state the minimum number of promoters required for a public company (seven).

 

Exercise 4

Question 1. State the contents of the Certificate of Incorporation.
Answer: Contents of Certificate of Incorporation:
• The name of the company.
• Date of issue of Certificate of Incorporation.
• Corporate Identity Number (CIN).
• Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) of the company.
• Signature of Registrar with the date and his seal.
In simple words: A Certificate of Incorporation typically includes the company's official name, the date it was incorporated, its unique Corporate Identity Number (CIN), its PAN and TAN, and the Registrar's signature and seal.

🎯 Exam Tip: List the essential elements found on a Certificate of Incorporation, as these signify its legal validity and details.

 

Question 2. State the importance of the Certificate of Incorporation.
Answer: Importance of Certificate of Incorporation:
• Certificate of Incorporation is like a Birth Certificate of a Company.
• It is proof by which company comes into existence.
• After getting an Incorporation Certificate, the company becomes a legal person distinct from its members.
• It is a document that gives status to the company about its perpetual succession from its date of Incorporation.
• After getting such a certificate, the company can sue and be sued by others.
In simple words: The Certificate of Incorporation is vital as it signifies the legal birth of a company, grants it a separate legal identity, enables perpetual succession, and allows it to engage in legal actions like suing and being sued.

🎯 Exam Tip: Emphasize the legal significance of the Certificate of Incorporation in establishing a company's existence, legal personality, and powers.

 

Question 3. Write a note on - Role of the Promoter.
Answer: Role of Promoter:
• To conceive (discover) the idea of forming a business.
• To decide aims and objects of business, amount of capital, scale/size of business, etc.
• Drafting the 'Memorandum of Association' and 'Articles of Association'.
In simple words: The promoter's role is foundational, encompassing the initial conception of a business, detailed planning of its structure and capital, and the drafting of essential legal documents like the MOA and AOA.

🎯 Exam Tip: Focus on the comprehensive nature of the promoter's role, from ideation to preparing the company's legal framework.

 

Question 4. Draw the flow chart of steps in the promotion of a company.

Answer: Steps in promotion of a company:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह एक फ्लो चार्ट है जो कंपनी के प्रवर्तन में शामिल चरणों को दर्शाता है। यह "Coming up with business idea" से शुरू होता है, जिसके बाद "Preparing Financial Plan" आता है। फिर, "Entering into Preliminary Contracts or Pre-incorporation Contract" और "Appointing first Directors of the Company" समानांतर में या एक-दूसरे से जुड़े हुए होते हैं। अंत में, "Preparing draft Memorandum of Association and Articles of Association" का चरण आता है।
In simple words: This diagram illustrates the sequential stages involved in promoting a company, starting from conceptualizing the business idea and leading up to preparing core legal documents. It outlines the foundational steps before actual incorporation.

🎯 Exam Tip: Understanding the sequence of steps in company promotion is crucial for describing the company formation process in detail.

 

5. Justify the following statements.

 

Question 1. Certificate of Incorporation is like a Birth Certificate of a company.

Answer:
• Certificate of Incorporation is issued by 'Registrar of Companies, after successful completion of the Incorporation step of formation.
• It is proof by which company comes into existence.
• An incorporation Certificate brings legal status to the company.
• After getting the Incorporation Certificate company achieves the status of 'Perpetual Succession'.
• The company can sue and can be sued after getting an Incorporation Certificate.
• The company can enter into various contracts.
• After getting an Incorporation Certificate, the company is considered an artificial person.
• Thus, a Certificate of incorporation is like a Birth Certificate of a company.
In simple words: The Certificate of Incorporation acts as the official document proving a company's legal existence and birth, granting it a distinct legal identity, perpetual succession, and the ability to enter contracts and be sued.

🎯 Exam Tip: When justifying this statement, emphasize the legal personhood, perpetual succession, and contractual capacity that the certificate bestows upon a company.

 

Question 2. Every Company on incorporation gets a CIN.

Answer:
• CIN means Corporate Identity Number.
• ROC allots CIN to every company at the time of issue of Incorporation Certificate after completion of all formalities.
• It is a unique identification number that is given to every company.
• It shows details like whether a company is listed or unlisted, industrial code, state-wise location, year of incorporation, type of ownership, and registration number.
• All correspondence with ROC is conducted on basis of such CIN.
• It is compulsory given to all types of companies.
• Thus, every company gets CIN on incorporation.
In simple words: Every company, upon successful incorporation, is assigned a unique Corporate Identity Number (CIN) by the Registrar of Companies, which acts as its distinct digital identifier for all official communications and specifies key company details.

🎯 Exam Tip: Highlight that CIN is a unique, alphanumeric code provided by ROC upon incorporation, used for all official correspondence and indicating essential company details.

 

Question 3. Promoters play important role information of a company.

Answer:
• Promoter discovers the idea of business formation.
• Promoter decides aims and objects of business, amount of capital, scale/size of business.
• Drafting the 'Memorandum of Association' and 'Articles of Association'.
• Drafting prospectus to invite investors.
• To appoint first directors and first subscribers of Memorandum of Association and Articles of Association,
• To enter into 'Preliminary Contracts' like hiring office premises, etc.
• To protect and promote the interest of the proposed company.
• Thus, promoters play important role in the formation of a company.
In simple words: Promoters are crucial for a company's formation, initiating the business idea, defining its objectives, drafting foundational documents like the Memorandum and Articles of Association, and undertaking preliminary contracts.

🎯 Exam Tip: Focus on the initiator and foundational roles of promoters, covering their responsibilities from idea generation to initial contract formation.

 

6. Answer the following questions.

 

Question 1. Explain briefly the steps involved in the incorporation of a company.

Answer:
(i) Obtaining Digital Signature Certificate (DSC): Promoters and the proposed first directors has to obtain a DSC for e-filing.
(ii) Register DSC in the name of the Director with MCA: DSC has to be registered with MCA (Ministry of Corporate Affairs). MCA maintains details of every Director including their DIN, personal details, etc.
(iii) Obtain Director Identification Number (DIN): Proposed first Directors must apply for DIN in electronic form SPICe-32 at the time of incorporation. Every director must have DIN.
(iv) Apply for Reservation of Name: Promoter has to get the name of company approved from Central Registration Centre (CRC) by filling form RUN (Reserve Unique Name) along with prescribed fees on MCA portal. Promoters have to suggest more than one name in order of their preference. CRC will approve the name within 20 days from the date of application.
(v) Finalize Memorandum of Association and Articles of Association: It states the aims and objectives of the business. It contains legal and technical information. The promoter should finalize it. The promoters finalize both the documents with the help of the Company Secretary, legal experts, etc.
(vi) Signing, Stamping, and Dating of Memorandum and Articles of Association: Both documents must be signed by each subscriber and shall add his name, detailed address, occupation, etc. The signature of at least one witness is needed. Due stamp duty as per the Indian Stamp Duty Act, 1899 is required to be paid at the time of incorporation.
(vii) Preparation of other necessary documents for incorporation:
• Consent of Directors: Directors should give written consent in the prescribed format, about their approval to act as a director.
• Details of manager, secretary, etc Articles of Association include the names of the manager, secretary, etc.
• Declaration by subscribers to the Memorandum and First Directors: A declaration by first Directors should be taken who has subscribed to Memorandum of Association stating that he is not convicted of any offense in connection with the promotion, formation of company and has not found guilty of any fraud, etc.
(viii) Address for communication and notice of Registered office address: A company is required to have a Registered office within 30 days of incorporation. The promoter has to provide an address for communication at the time of incorporation.
(ix) Obtain a statutory declaration from Declaration by Company Secretary, Chartered Accountant, advocates, etc. is also necessary to be obtained along with Director, manager, etc. declaration status that all necessary requirements are fulfilled related to incorporation.
(x) Filing of application and document for incorporation of a company: Finally, after preparation of all documents, it has to be submitted to ROC in the prescribed form along with necessary prescribed fees for incorporation.
In simple words: The incorporation process involves several steps starting from obtaining digital signatures and DIN, reserving a company name, finalizing and signing constitutional documents like MOA and AOA, preparing other essential declarations, and finally filing all these documents with the Registrar of Companies.

🎯 Exam Tip: When explaining the steps, ensure to cover the key legal requirements and documents like DSC, DIN, MOA, AOA, and the final filing with ROC.

 

Question 2. Promoters play an important role in the formation of a company. Explain.

Answer:
Promoters:
A person who take lead to form the company is called a "Promoter”.
As per Companies Act, 2013; Section 2(69) Promoter is defined as.
• A person who has been named in the prospectus or identified by the company in Annual Return or
• Who has control on company's affairs directly or indirectly whether as a shareholder, director or otherwise or
• In accordance with whose advice, directions, or instructions, the Board of Directors is accustomed to act.
Role of Promoters:
• To conceive (discover) the idea of forming a business.
• To decide aims and objects of business, amount of capital, scale/size of business, etc.
• Drafting the 'Memorandum of Association' and 'Articles of Association'.
• Drafting Prospectus to invite investors.
• To appoint first directors and first subscribers to Memorandum of Association and Articles of Association.
• To enter into 'Preliminary Contract' like hiring office premises, preparing and drafting Memorandum of Association and Articles of Association.
In simple words: Promoters are the individuals or groups who initiate and drive the entire process of company formation, from generating the business idea and defining its scope to drafting legal documents and appointing initial directors. Their role is fundamental to establishing the company.

🎯 Exam Tip: Emphasize both the definition of a promoter (as per Companies Act) and their comprehensive role in the pre-incorporation phase, including conceptualization, planning, and documentation.

 

Activity (Text Book Page No. 42)

From The Following CIN, Identify The Type Of Companies:

 

Question 1. U74999TN20140PC098340

Answer:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह CIN (Corporate Identity Number) U74999TN2014OPC098340 को उसके घटकों में विभाजित करता है। 'U' का अर्थ अनलिस्टेड कंपनी है। '74999' इंडस्ट्री कोड को दर्शाता है। 'TN' राज्य कोड (तमिलनाडु) को इंगित करता है। '2014' निगमन का वर्ष है। 'OPC' वन पर्सन कंपनी के प्रकार को दर्शाता है। अंत में, '098340' कंपनी का पंजीकरण संख्या है।
In simple words: The CIN U74999TN20140PC098340 indicates an Unlisted One Person Company registered in Tamil Nadu in the year 2014, with a specific industry code and registration number.

🎯 Exam Tip: To identify company types from CIN, remember to decode each segment, especially the listing status, state code, year of incorporation, and company type abbreviation (e.g., OPC, PLC, PTC).

 

Question 2. L28920MH1945PLC004520

Answer:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह CIN (Corporate Identity Number) L28920MH1945PLC004520 को उसके घटकों में विभाजित करता है। 'L' का अर्थ लिस्टेड कंपनी है। '28920' इंडस्ट्री कोड को दर्शाता है। 'MH' राज्य कोड (महाराष्ट्र) को इंगित करता है। '1945' निगमन का वर्ष है। 'PLC' पब्लिक लिमिटेड कंपनी के प्रकार को दर्शाता है। अंत में, '004520' कंपनी का पंजीकरण संख्या है।
In simple words: The CIN L28920MH1945PLC004520 signifies a Listed Public Limited Company, incorporated in Maharashtra in 1945, with a specific industry code and registration number.

🎯 Exam Tip: Pay close attention to the first letter (L for Listed, U for Unlisted) and the company type abbreviation (PLC for Public Limited Company) within the CIN for accurate identification.

 

Question 3. U72900KA2003PTC033028

Answer:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह CIN (Corporate Identity Number) U72900KA2003PTC033028 को उसके घटकों में विभाजित करता है। 'U' का अर्थ अनलिस्टेड कंपनी है। '72900' इंडस्ट्री कोड को दर्शाता है। 'KA' राज्य कोड (कर्नाटक) को इंगित करता है। '2003' निगमन का वर्ष है। 'PTC' प्राइवेट लिमिटेड कंपनी के प्रकार को दर्शाता है। अंत में, '033028' कंपनी का पंजीकरण संख्या है।
In simple words: The CIN U72900KA2003PTC033028 represents an Unlisted Private Limited Company, incorporated in Karnataka in 2003, with a particular industry code and registration number.

🎯 Exam Tip: Remember to deconstruct the CIN into its constituent parts – listing status, industry, state, year, company type, and registration number – to correctly identify the company's characteristics.

Maharashtra State Board 11th Std Secretarial Practice Textbook Solutions Digest