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Writer's pictureArtha Institute of Management

Company Law prospectus - MCQS Part 1

1. Section 23 of the Companies Act, 2013 deals with the ways a Public company can issue its securities namely………..

a. To public through Prospectus(IPO and FPO)

b. Private Placement

c. By right or bonus issue

d. All of the above

2. M/s PQR Ltd., is a Public Limited company desires to issue its securities. States the ways a company can issue its securities?

a. To public through Prospectus(IPO and FPO)

b. Private Placement

c. By right or bonus issue

d. All of the above

3. Section 23 of the Companies Act, 2013 deals with the ways a Private company can issue its securities namely………..

a. By right issue

b. By bonus issue

c. Private Placement

d. All of the above

4. M/s MNQ Pvt. Ltd., is a Private Limited company desires to issue its securities. States the ways a Private company can issue its securities?

a. By right issue

b. By bonus issue

c. Private Placement

d. All of the above

5. ……….. Company is prohibited from access to the public in raising its capital.

a. Public company

b. Private company

c. All of the above

d. None of the above

6. States the non-applicability of Section 26 of the companies Act, 2013

a. Not applicable to existing shareholders or debentures

b. is not applicable to issue of shares or debentures of similar nature which are already issue by the company

c. Both a and b

d. None of the above

7.States the procedure of alteration of contents of prospectus?

a. General meeting – Special resolution shall be passed

b. The prescribed details of the notice shall be published in two newspaper, one in English and other vernacular language, circulating in the city in which the registered office of the company is situated

c. Both a and b

d. None of the above

8. Restriction on use of money through prospectus shall not be used For buying, trading or otherwise dealing in equity shares of any other listed company. True or False.

a. True

b. False

c. Partly True

d. Partly False

9. State the Section of companies Act, 2013 for alteration of content of prospectus.

a. Section 27

b. Section 25

c. Section 26

d. Section 28

10. State the circumstances, under which issue of prospectus is not necessary under the provision of the Companies Act, 2013

a. Private Placement through issue a Private Placement letter

b. Securities are offered to existing holders under a right issue

c. Securities are offered to existing holders under a bonus issue

d. All of the above

11. If a company or any other person has received application for allotment of securities along with advance payment then the company or any other person shall intimate the changes if any, to such applicant, and an option to withdraw their application shall be given to such applicants. True or False.

a. True

b. False

12. If a company or any other person has received application for allotment of securities along with advance payment then the company or any other person shall intimate the changes to such applicant, and an option to withdraw their application shall be given to such applicants and if such applicants desire to withdraw their application, all monies received them shall be refunded within ……….. Days.

a. 20 days

b. 10 days

c. 30 days

d. 15 days

13. A Prospectus issued by the financial institutions or bank for one or more issue of the securities or class of securities specified in the prospectus is called …….

a. Deemed Prospectus

b. Red herring Prospectus

c. Shelf Prospectus

d. Abridged Prospectus

14. Mr. Vishnu applies for share on the basis of a prospectus which contain misstatement. The shares are allotted to him, who afterwards transfer them to Mr. Murali. Can Mr. Murali bring an action for a rescission on the ground of misstatement?

a. Yes

b. No

c. Partly Yes

d. Partly No

15. No allotment of any securities of a company offered to the public for subscription shall be made unless….

a. The amount stated in the prospectus as the minimum amount has been subscribed

b. the sum payable on application for the amount so stated have been paid to and received by the company by cheque or other instrument

c. Both a and b

d. a or b

16. Red herring Prospectus shall be filed by the company with the ROC at least …….. days prior to the opening of the subscription and the offer

a. 10 days

b. 20 days

c. 30 days

d. 60 days

17. The company shall file actual prospectus with ROC & SEBI containing details of……….

a. Total capital raised

b. Closing and final price of shares

c. Any other details not included in Red Herring Prospectus

d. All of the above

18. Public will place bidding on the basis of ……….. Prospectus in given price band and bidding will be converted into offer.

a. Deemed Prospectus

b. Red herring Prospectus

c. Shelf Prospectus

d. Abridged Prospectus

19. Any changes between Red Herring Prospectus and a Prospectus shall be highlighted as ‘variations’ in actual Prospectus. True or False.

a. Yes

b. No

c. Partly Yes

d. Partly No

20. Mr. Ram is not satisfied with Abridged Prospectus of M/s ABC Ltd. He demand the regular prospectus from M/s ABC Ltd. Whether he can do so?

a. Yes

b. No

c. Partly Yes

d. Partly No

21. The underwriting commission on Debenture must not exceed…….

a. 2.0 % of the issued price of shares

b. 2.5 % of the issued price of shares

c. 5.0 % of the issued price of shares

d. 5.5 % of the issued price of shares

22. ABC Ltd. offered to the public for subscription but the minimum subscription has not been received within 30 days from prospectus date, in how many days company can returned the amount received?

a. 30 days

b. 15 days

c. 60 days

d. 120

23. ………….. Is an instrument through which Indian company can issue its shares across the globe?

a. Global Depository Receipt

b. American Depository Receipt

c. Indian Depository Receipt

d. None of the above

24. ………….. Is an instrument through which Indian company can issue its shares in America?

a. Global Depository Receipt

b. American Depository Receipt

c. Indian Depository Receipt

d. None of the above

25. Any foreign company who wish to issue the shares in India can apply to any foreign custodian by issuing their shares, is called as ………………..

a. Global Depository Receipt

b. American Depository Receipt

c. Indian Depository Receipt

d. None of the above

1. d

2. d,

3. d,

4. d,

5. b, As per Section 2(68) of the Companies Act, 2013, Private company prohibits any invitation to the public to subscribe for any securities for any securities of the Company.)

6. c. (As per Section 26 of the Companies Act, 2013, Contents of prospectus.)

7. c. ( As per Section 27 of the Companies Act, 2013, Alteration of contents of prospectus.)

8. a. (2nd Proviso to subsection 1 of the Section 27 of the Companies Act, 2013, restriction on use of money raised.)

9. a.

10. d. (Section 23 and 25 of the Companies Act, 2013.)

11. a, (As per section 31 of the Companies act, 2013, any person who have advanced the money for issue before realize of Information Memorandum can demand the refund of the same.)

12. d, (Section 31 of the Companies act, 2013)

13. c, (Section 31 of the Companies act, 2013, Shelf prospectus means a prospectus in respect of which the securities or class of securities are issued for subscription in one or more issue over a certain period without the issue of a further prospectus.)

14. b, (Hint: As per Section 37 of the Companies act, 2013, Mr. Murali cannot bring an action for rescission of the contract to buy shares from Mr. Shyam on the ground of misstatement. A suit may be filed or any other action may be taken under Section 34 or Section 35 or Section 36 only by any person, group of persons or any association of persons affected by any misleading statement or the inclusion or omission of any matter in the prospectus.)

15. c (Section 39 of the Companies Act, 2013, no allotment without subscription)

16. a (Section 33 of the Companies Act, 2013, time limit for filing with ROC.)

17. d (Section 33 of the Companies Act, 2013, issue of actual prospectus.)

18. b (Section 33 of the Companies Act, 2013.)

19. a (Section 33 of the Companies Act, 2013, Red Herring Prospectus shall carry the same obligations as applicable to the actual Prospectus. If found any changes between them, same shall highlighted.)

20. a (As per section 33 of the companies act, if any person is not satisfied with Abridged Prospectus and he can demand regular prospectus from the Company. It is the duty of the company to provide the same.)

21. b ( As per Rule 13 of Companies (Prospectus and allotment of securities) Rules, 2014)

22. b ( Section 39(1) of the Companies act, 2013.

23. a ( Section 41 of the Companies act, 2013.)

24. b ( Section 41 of the Companies act, 2013.)

25. c

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