Assess your understanding of fundamental company law terms and concepts, such as company structure, management, legal documents, and regulatory authorities. Ideal for beginners or anyone seeking to review basic principles in corporate law.
In legal terms, what is a company?
Explanation: A company is legally defined as an organization registered under law, giving it certain rights and responsibilities. Family businesses and temporary partnerships typically lack formal legal registration as companies. Unincorporated associations are not the same as registered companies.
Who is primarily responsible for managing the daily operations of a company?
Explanation: The Board of Directors manages a company's daily operations and makes key business decisions. Shareholders invest capital but do not oversee daily management. Creditors lend money, and the Registrar of Companies handles registration and oversight, not daily management.
Which document defines the purpose and objectives of a company?
Explanation: The Memorandum of Association outlines a company's objectives and powers. Articles of Association govern internal management. Share certificates prove ownership, and audit reports review financial records but do not state the company's purpose.
What is the mandatory yearly meeting of a company's shareholders called?
Explanation: An Annual General Meeting (AGM) must be held yearly for shareholders to review accounts and vote on important matters. Extraordinary General Meetings are for special occasions, board meetings involve directors, and committee meetings are smaller and issue-specific.
What term describes the distribution of a company's profits to its shareholders?
Explanation: Dividends are payments of profits made to shareholders. Royalties are paid for use of intellectual property, interest is paid on debts, and commissions are typically payments for services rendered.
Who is appointed to examine and verify a company's financial records?
Explanation: An auditor is responsible for checking a company's financial records for accuracy and compliance. Directors oversee operations, promoters help set up the company, and secretaries handle administrative duties.
What principle allows a company to exist as a separate legal person from its members?
Explanation: Corporate personality means a company has its own legal identity, separate from shareholders or directors. Limited partnerships, joint ventures, and sole proprietorships do not automatically confer a separate legal personality.
Which duty ensures company directors act honestly and in the company's best interests?
Explanation: Fiduciary duty requires directors to act with loyalty and good faith towards the company. Statutory duties are obligations in law, occupational and promotional duties are not specific to this context.
What is the legal process called when a company is formally closed and its assets are distributed?
Explanation: Winding up is the formal process of dissolving a company and distributing its assets. Amalgamation is merging companies, incorporation is forming a new company, and reconstruction involves reorganizing.
Which authority in India is responsible for registering and monitoring companies?
Explanation: The Registrar of Companies registers and oversees compliance of companies in India. The Ministry of Finance deals with financial policy, the Securities Exchange Board regulates securities markets, and the Income Tax Department handles taxation.