Company Law (MCQs)

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1. What is the primary purpose of Company Law?
(A) To regulate trade
(B) To govern the formation and operation of companies
(C) To protect consumer rights
(D) To enforce contracts

2. What is a “limited liability” company?
(A) A partnership with unlimited liability
(B) A non-profit organization
(C) A company where the owners’ liability is limited to their investment
(D) A government-owned corporation

3. Which document is essential for the incorporation of a company?
(A) Memorandum of Association
(B) Both Memorandum and Articles of Association
(C) Articles of Association
(D) Shareholder agreement

4. What is the maximum number of members allowed in a private company?
(A) 50
(B) Unlimited
(C) 100
(D) 200

5. Which of the following is NOT a type of company?
(A) Sole Proprietorship
(B) Public Limited Company
(C) Private Limited Company
(D) Limited Liability Partnership

6. What is the primary responsibility of a company’s board of directors?
(A) To conduct audits
(B) To hire employees
(C) To manage the company’s affairs and make strategic decisions
(D) To represent the company in court

7. Which of the following is a characteristic of a public limited company?
(A) Shares can be bought and sold on a stock exchange
(B) Shares are not freely transferable
(C) Limited to family ownership
(D) Cannot issue debentures

8. What does the term “incorporation” refer to in company law?
(A) The process of liquidating a company
(B) The merger of two companies
(C) The legal process of forming a corporation
(D) The dissolution of a company

9. Which document outlines the rules for the internal governance of a company?
(A) Memorandum of Association
(B) Articles of Association
(C) Company Act
(D) Shareholders’ agreement

10. What is the role of a company secretary?
(A) To ensure compliance with legal requirements and corporate governance
(B) To manage the company’s finances
(C) To represent the company in litigation
(D) To prepare financial statements

11. What does “share capital” represent in a company?
(A) The total assets of the company
(B) The liabilities of the company
(C) The profits earned by the company
(D) The funds raised by issuing shares to shareholders

12. Which of the following is true regarding company resolutions?
(A) Only shareholders can pass resolutions
(B) Resolutions are not necessary for decision-making
(C) All resolutions require a unanimous vote
(D) Resolutions can be ordinary or special, depending on the nature of the decision

13. What is a “debenture”?
(A) A type of share
(B) A document for company registration
(C) An agreement between shareholders
(D) A long-term security yielding a fixed interest rate

14. In which type of company is the liability of members limited by shares?
(A) Sole Proprietorship
(B) Non-Governmental Organization
(C) Limited Company
(D) Partnership

15. What is the minimum number of directors required for a public company?
(A) 1
(B) 5
(C) 3
(D) 7

16. What is the purpose of the “Memorandum of Association”?
(A) To define the company’s objectives and scope of activities
(B) To outline the company’s internal regulations
(C) To set the rules for board meetings
(D) To list shareholders’ rights

17. What does “dissolution” of a company mean?
(A) The merging of two companies
(B) The legal termination of a company’s existence
(C) The liquidation of company assets
(D) The transfer of ownership

18. Which of the following is an advantage of a company structure?
(A) Unlimited liability
(B) Difficult to raise capital
(C) Limited liability
(D) Increased personal responsibility

19. What is a “private placement”?
(A) Selling shares to a select group of investors
(B) Selling shares to the general public
(C) Offering shares at a public auction
(D) Issuing bonds instead of shares

20. Who is responsible for a company’s debts in a limited liability company?
(A) The shareholders personally
(B) The board of directors
(C) The company itself
(D) The company secretary

21. What does “good corporate governance” ensure?
(A) High profits
(B) Strict regulations
(C) Accountability, fairness, and transparency
(D) Limited shareholder involvement

22. Which statement is correct regarding company meetings?
(A) Private companies do not need meetings
(B) Annual General Meetings (AGMs) are mandatory for public companies
(C) Resolutions cannot be passed at meetings
(D) Board meetings are optional

23. What are the “Articles of Incorporation”?
(A) A summary of company profits
(B) A document that establishes a company as a legal entity
(C) A financial statement
(D) A tax filing

24. What is the primary purpose of an Annual General Meeting (AGM)?
(A) To discuss employee welfare
(B) To present financial statements and elect directors
(C) To decide on product launches
(D) To review company policies

25. What is “insider trading”?
(A) Buying shares at a low price
(B) Selling shares to the public
(C) Trading shares based on non-public information
(D) Trading stocks on a stock exchange

26. What is the purpose of an “auditor”?
(A) To manage company operations
(B) To set company policies
(C) To independently review and verify financial statements
(D) To represent the company legally

27. What is a “shareholder”?
(A) A company employee
(B) A government official
(C) A board member
(D) An individual or entity that owns shares in a company

28. Which law governs companies in most jurisdictions?
(A) Contract Law
(B) Property Law
(C) Tax Law
(D) Companies Act

29. What does the term “dividend” refer to?
(A) Portion of earnings distributed to shareholders
(B) Total revenue of a company
(C) Company liabilities
(D) Investment value

30. What is “liquidation”?
(A) Sale of company shares
(B) Merger of companies
(C) Winding up company affairs and distributing assets
(D) Issuance of new shares

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