Tag: documents used in company formation

Questions Related to documents used in company formation

State the following statement is True or False:
The document which determine the scope of the business operations of a company is the Memorandum of Association.

business organisation and correspondence joint stock company 2 - memorandum and articles of association documents used in company formation memorandum and articles of association documents required for company formation

  1. True

  2. False

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Correct Option: A
Explanation:
Memorandum of Association is a legal document which is prepared in the formation and registration process of a limited liability company. It is called the charter of the company.
Memorandum of Association defines the company’s relationship with its shareholders. It is the most important document of a company as it states the objects of the company for which it is formed. It also contains the powers of the company within which it can act.

State the following statement is True or False:
A document prepared not for publicity but for filing with the Registrar is statement-in-lieu prospectus.

business organisation and correspondence joint stock company 2 - memorandum and articles of association documents used in company formation memorandum and articles of association documents required for company formation

  1. True

  2. False

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Correct Option: A
Explanation:

Where a public company does not invites public to subscribe for it shares but arrange money from private sources, it needs not issue the prospectus to the public. But the company has to get its prospectus registered three days before the allotment of shares. Thus, the company not inviting public to subscribe, prepare a draft prospectus which contains the information given in schedule III of the act, such a draft prospectus is knows as a statement in lieu of prospectus.

Select the option from the option choices given in below and re-write the completed sentences:
The _________ is almost an unalterable document.

business organisation and correspondence joint stock company 2 - memorandum and articles of association documents used in company formation memorandum and articles of association documents required for company formation

  1. memorandum

  2. articles

  3. prospectus

  4. none of the above

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Correct Option: A

State the following statement is True or False:
Statement in-lieu-of prospectus is prepared for filing purpose only.

business organisation and correspondence joint stock company 2 - memorandum and articles of association documents used in company formation memorandum and articles of association documents required for company formation

  1. True

  2. False

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Correct Option: A
Explanation:
The Statement in Lieu of Prospectus is a document filed with the Registrar of the Companies (ROC) when the company has not issued prospectus to the public for inviting them to subscribe for shares. The statement must contain the signatures of all the directors or their agents authorised in writing. It is similar to a prospectus but contains brief information.

State the following statement is True or False:
Object clause of Memorandum of Association states aims and objects of a company.

business organisation and correspondence joint stock company 2 - memorandum and articles of association documents used in company formation memorandum and articles of association documents required for company formation

  1. True

  2. False

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Correct Option: A
Explanation:

True

The objective clause requires the company  to summarize the main objectives for establishing the company with reference to the requirements for shareholding and use of financial resources. It also needs to state ancillary objectives, those objectives that are required to facilitate the achievement of the main objectives. The objectives should be free of any provisions or declarations that contravene laws or public good.

State the following statement is True or False:
A subordinate document to the Memorandum of Association is the Articles of Association.

business organisation and correspondence joint stock company 2 - memorandum and articles of association documents used in company formation memorandum and articles of association documents required for company formation

  1. True

  2. False

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Correct Option: A
Explanation:

True

Memorandum of Association (MOA) is the main, compulsory document required for the incorporation of the company. It must be registered with the ROC (Registrar of Companies) at the time of incorporation. It lays down the objects, scope, powers and area of operation of the company, all of which the company can’t transgress. Thus, it lays down it’s the limits of the company.
Articles of Association (AOA) is a secondary document that is constituted only after the MOA. It lays down the rules and regulations for the administration and management of the company. The Articles lay down the right, responsibilities, powers, duties, etc of the members along with information regarding the accounts and audit of the company.
It follows the MOA and can’t contradict it. It is easier to amend than MOA which can be done without any restrictions. It can be amended retrospectively in the Annual General Meeting as per the choice of the company.

State the following statement is True or False:
The document which is a charter or constitution of a company is the Memorandum of Association.

business organisation and correspondence joint stock company 2 - memorandum and articles of association documents used in company formation memorandum and articles of association documents required for company formation

  1. True

  2. False

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Correct Option: A
Explanation:

True

An important step in the formation of a company is to prepare a document called Memorandum of Association. It is the charter of the company and is very important document as it contains the basic conditions on which the company is incorporated.
The Memorandum contains the name, registered office, main and other objects of the company, liability of the members and the authorized capital of the company. The main purpose of the memorandum is to limit the scope of activities and powers of the company. Thus, any act outside the Memorandum is ultra-vires the company. Such an act is not enforceable and directors involve personal liability for it.

State the following statement is True or False:
Prospectus is the document, through which a company invites public to invest in the shares or debentures.

business organisation and correspondence joint stock company 2 - memorandum and articles of association documents used in company formation memorandum and articles of association documents required for company formation

  1. True

  2. False

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Correct Option: A
Explanation:
A Prospectus is a formal legal document that is required by and filed with the Securities and Exchange Commission (SEC) that provides details about an investment offering for sale to the public. The preliminary prospectus is the first offering document provided by a security issuer and includes most of the details of the business and transaction in question; the final prospectus, containing finalized background information including such details as the exact number of shares/certificates issued and the precise offering price, is printed after the deal has been made effective. In the case of mutual funds, a fund prospectus contains details on its objectives, investment strategies, risks, performance, distribution policy, fees and expenses, and fund management.

State the following statement is True or False:
A statement filed with the Registrar of Companies, instead of prospectus is the statement-in-lieu of prospectus.

business organisation and correspondence joint stock company 2 - memorandum and articles of association documents used in company formation memorandum and articles of association documents required for company formation

  1. True

  2. False

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Correct Option: A
Explanation:
The Statement in Lieu of Prospectus is a document filed with the Registrar of the Companies (ROC) when the company has not issued prospectus to the public for inviting them to subscribe for shares. The statement must contain the signatures of all the directors or their agents authorised in writing. It is similar to a prospectus but contains brief information.

State the following statement is True or False:
The clause of Memorandum that fixes the area of activities of the company is object clause.

business organisation and correspondence joint stock company 2 - memorandum and articles of association documents used in company formation memorandum and articles of association documents required for company formation

  1. True

  2. False

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Correct Option: A
Explanation:

True

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. The objectives should be free of any provisions or declarations that contravene laws or public good.