Chapter 7 – Formation of a Company Questions and Answers: NCERT Solutions for Class 11 Business Studies

QUESTION 1
State the three stages in the formation of a company.

Answer:The three stages in the formation of a company are.
Promotion
Incorporation
Subscription of a company

QUESTION 2
Define the formation of the company.

Answer:Formation of a company is complicated and include multiple stages of legal formalities and procedures. The formation process comprises of three stages promotion, incorporation, and subscription of a company. Unlike public limited companies, private business is restricted to raise funds from the public, and also they don’t require to issue a prospectus to complete the formalities.

QUESTION 3
In a company, who is known to be the first directors of the company?

Answer:In a company, the promoter decides who will sign the memorandum of association of the proposed company. Whoever signs the memorandum, they will also be the first directors of the company.

QUESTION 4
When a company is legally born?

Answer:The date when the certificate of incorporation is printed, a company is legally born.

QUESTION 5
How many members should sign a memorandum of association in a public company?

Answer:A minimum of seven members should sign a memorandum of association in a public company.

QUESTION 6
How many members should sign a memorandum of association in a private company?

Answer:Only two members are required to sign a memorandum of association in a private company.

QUESTION 7
What do you mean by Technical feasibility?

Answer:Technical feasibility means analyzing an idea which may be great but technically impossible to execute. It could be because of the desired raw material or technology is not easily available.

QUESTION 8
What do you mean by Financial feasibility?

Answer:Fund is an essential element while planning to start a company. The promoters have to estimate and arrange the funds properly for the desired company. If the promoters fail to arrange the funds, then the plan has to be dropped.

QUESTION 9
What do you mean by Economic feasibility?

Answer:A plan or a project can be technically and financially feasible, but the outcome of it being profitable is very limited.

QUESTION 10
What are the documents required for the registration of incorporation document?

Answer:The documents required for the registration of incorporation document are.
Stamped, signed, and witnessed memorandum of association. For a public company, a minimum of seven members are required to sign the memorandum, and for private two members is required.
The article of association should be stamped and witnessed.
Written approval of the proposed directors to act as the first directors and to undertake the purchase of qualification shares.
A signed agreement if there is any Managing director, manager or full-time director.
Registrar’s letter with the approved name of the company
A statutory declaration mentioning that all the necessary legal requirements for registration are completed with signature.
An address proves documents should be submitted with the required documents.
Registration fee receipt or any documentary evidence.

QUESTION 11
What do you mean by promoter?

Answer:Apromoter is a person who has control over the operation of a company directly, indirectly or as a shareholder. According to his advice, the director or the board members of the company takes the decision.
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