Formation Of A Business | Important Questions | Business Studies | 1st Year / Class 11 – Commerce | AHSEC (Assam)

Formation Of A Business | Important Questions | Business Studies | 1st Year / Class 11 – Commerce | AHSEC (Assam)

Q. What is Memorandum of Association? State the contents of Memorandum of Association.   (2+6=8) (2016/2019)

-> Memorandum of association is the most important document of a company. It contains the fundamentals on which a company is incorporated. The company is bound to act according to the objects and powers contained in its Memorandum of association. It also regulates the relationship of the company with the rest of the world.

There are six clauses of Memorandum of Association:-

A) Name Clause- This clause contains the name of the company which has already been approved by the Registrar of Companies. Under this clause the corporate name of the company is stated with the name “limited” or “Private Limited” as the last word in this name. This name should not be identical with the name of any registered company. 

B) Registered office clause- This clause contains the name of the state in which the registered office of the company is proposed to be situated.

C) Objects Clause- This clause must contain the main object of the company and the other objects related to it for the completion of the main object. The company is not entitled to carry any of the business which is not mentioned in the object clause.

D) Liability Clause- This clause limits the liability of the members to the amount unpaid on the shares owned by them.

E) Capital Clause- This Clause shows the amount of share capital which the company is going to be registered and its division. The authorised share capital of the proposed company along with its division into the number of shares having a fixed face value is specified in this clause.

F) Association Clause- In this clause the signatories to the Memorandum of Association state their intention to be associated with the company and also give their consent to purchase qualification shares.

Q. Mention three points of distinction between Memorandum of Association and Articles of Association. (3marks) (2015/2019)

-> The difference between Memorandum of Association and Articles of Association is given here:-

Memorandum of AssociationArticles of Association
It is a document that contains all the fundamental data which are required for the company incorporation.It is a document containing all the rules and regulations that govern the company.
MOA must be registered at the time of incorporation.AOA may or may not be registered.
A MOA contains six clauses.The AOA can be drafted according to the decision of the company.
The MOA contains the objectives and powers of the company.The AOA provides the regulations by which those objectives and powers are to be conveyed into impact.
The MOA is the dominant instrument and controls articles.Any provision, as opposed to a memorandum of association, is invalid.

Q. Name the documents necessary for the incorporation of a company. (5marks) (2018)

-> The documents which are required for the incorporation of a company:-

1) Memorandum of Association.

2) Articles of Association.

3) Consent of proposed directors.

4) Agreement if any, with the proposed managing or whole time director.

5) Statutory declaration.

Q. State three functions of a promoter. (3marks) (2016)

-> Three functions of a promoter are:-

1) Identification of business opportunity- The first and foremost activity of a promoter is to identify a business opportunity. The opportunity may be in respect of producing a new product or service or making some product available through a different channel or any other opportunity having an investment potential.

2) Feasibility studies- It may not be feasible or profitable to convert all identified business opportunities into real projects. The promoters, therefore, undertake detailed feasibility studies to investigate all aspects of the business they intend to start.

3) Name approval- Having decided to launch a company, the promoters have to select a name for it and submit an appreciation in the registrar of companies of the state in which the registered office of the company is to be situated, for its approval.

Q. What are Articles of Association? (2marks) (2017/2019)

-> It is a document containing all the rules and regulations that govern the company. AOA may or may not be registered. The AOA provides the regulations by which those objectives and powers are to be conveyed into impact. Any provision, as opposed to a memorandum of association, is invalid.

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