Company law Prospectus MCQs - Part 2

1. In case of Listed Company or a company who propose to get its securities listed, issue shall be governed by the Companies Act, 2013 as well as provision of SEBI Act, 1992. True or False.

a. True

b. False

c. Partly True

d. Partly False

2. Can issue of Prospectus compulsory for a company?

a. Yes

b. No

c. Partly Yes

d. Partly No

3. M/s XYZ Pvt. Ltd., is a Private Limited company desires to issue prospectus for public offer. Whether Company can do so?

a. Yes

b. No

c. Partly Yes

d. Partly No

4. Any document by which the offer for sale to the public is made, where a company allots or agrees to allot any securities of the company with a view to all or any of those securities being offered for sale to the public, shall be ……………. Prospectus issued by the company

a. Deemed Prospectus

b. Red herring Prospectus

c. Shelf Prospectus

d. Abridged Prospectus

5. Deemed Prospectus shall be signed by………..

a. By 2 directors in case of Company and by not less than one-half of the partners in case of Firm

b. By 3 directors in case of Company and by not less than one of the partners in case of Firm

c. By 1 directors in case of Company and by not less than 2 of the partners in case of Firm

d. By 2 directors in case of Company and by not less than one of the partners in case of Firm

6. ……………..is a public offer made by a company to subscribe for its securities by the public through prospectus.

a. Initial Public offer/ Further Public Offer

b. Offer for sale

c. Private Placement

d. Right issue

7. ………… prospectus means a prospectus in which a permanent or constant information of earlier year is given for numerous number of issue over such period.

a. Deemed Prospectus

b. Red herring Prospectus

c. Shelf Prospectus

d. Abridged Prospectus

8. Shelf Prospectus is valid for …………. Years.

a. 1 Year

b. 2 Year

c. 3 Year

d. 5 Year

9. Section 29 of the Companies act, 2013, dematerialization is mandatory for every company making public offer. True or False.

a. True

b. False

c. Partly True

d. Partly False

10. M/s PQR ltd., is a Public Limited company desires to go for an Initial public offer. Whether Dematerialization is mandatory for such company?

a. Yes

b. No

c. Partly Yes

d. Partly No

11. Amount payable on application on every security shall be…….

a. Not less than 5 % of nominal amount

b. such other amount or % as specified by SEBI

c. a or b

d. None of the above

12. If Company fails to issue regular prospectus, if any person is not satisfied with Abridged Prospectus and he can demand regular prospectus from the Company. State the penalty for non-compliance.

a. Rs. 50,000/-

b. Rs. 1,00,000/-

c. Rs. 5,00,000

d. None of the above

13. …………. Means a prospectus contained summary of original Prospectus so as to save cost and time.

a. Deemed Prospectus

b. Red herring Prospectus

c. Shelf Prospectus

d. Abridged Prospectus

14. It is compulsory for every company to issue Abridged Prospectus with ………

a. Regular Prospectus

b. Application Form

c. Red herring Prospectus

d. Shelf Prospectus

15. ………… Prospectus is estimated worth of the company in open market

a. Deemed Prospectus

b. Red herring Prospectus

c. Shelf Prospectus

d. Abridged Prospectus

16. The Article of Association of MNQ Ltd. contained a provision that up to 4% of issue price of the shares may be paid as underwriting commission to the underwriters. The Board of directors of MNQ Ltd. decided to pay 5% underwriting commission. State the validity.

a. Valid

b. Invalid

c. Neutral

d. Can’t say

17. After allotment, a Return of allotment in Form PAS 3 containing details shall be filed with ROC…….

a. List of security holder

b. Full name and address of security holder

c. Number of securities allotted and other relevant information prescribed

d. All of the above

18. The underwriting commission on shares must not exceed…….

a. 2.0 % of the issued price of shares

b. 2.5 % of the issued price of shares

c. 5.0 % of the issued price of shares

d. 5.5 % of the issued price of shares

19. If a company does not receive the minimum subscription, it should refund money received from applicants within 120 days of issue of prospectus. True or False.

a. True

b. False

c. Partly True

d. Partly False

20. If amount of a minimum subscription has not received within 30 days from prospectus date or any other period prescribed by SEBI, then amount received shall be returned within ……….. Days from the closure of issue.

a. 30 days

b. 15 days

c. 60 days

d. 120

21. A Private placement offer or invitation shall not be made, in one financial year, to more than ……. Persons and not more than …………persons in aggregate in a financial year.

a. 50, 200

b. 100, 200

c. 50, 100

d. 100, 500

22. Can a Public Company make Private placement?

a. Yes

b. No

c. Partly Yes

d. Partly No

23. The Company shall not accept any cash towards subscription of securities?

a. Yes

b. No

c. Partly Yes

d. Partly No

Section 42 of the Companies Act, 2013, cash not to be accepted towards subscription.

24. ABC Pvt. Ltd. is a Private Limited Company desires to issue shares through private placement to 35 group of persons. At the same time Company also offered securities to 10 employee under ESOP u/s 62(1)(b). While calculating number of persons for private placement under section 42 of the companies Act, 2013, can company also considered numbers of employees to whom the securities has been offered under ESOP u/s 62(1)(b)?

a. Yes

b. No

c. Partly Yes

d. Partly No

25. EFG Pvt. Ltd. is a Private Limited Company desires to issue shares through private placement to 50 group of persons. At the same time Company also offered securities to 2 Qualified Institutional buyer. While calculating number of persons for private placement under section 42 of the companies Act, 2013, can company also considered numbers of Qualified Institutional buyer to whom the securities has been offered?

a. Yes

b. No

c. Partly Yes

d. Partly No

1. a. ( Section 24 of the Companies Act, 2013, Powers of SEBI to regulate Issue & Transfer of Securities.)

2. b, ( As per Section 23(1) of the Companies Act, 2013, it is issued by a public company which is seeking to raise the required funds from the public by means of issue of shares and debentures. It is not necessary for every company to file a prospectus. ... Private companies are not required to file a prospectus. )

3. b, ( As per Section 23(2) of the Companies Act, 2013, a Private Company is prohibited from inviting the public for subscription of its shares, i.e. a Private Company cannot issue Prospectus, whereas a Public Company is free to invite public for subscription i.e., a Public Company can issue a Prospectus.)

4. a. ( As per Section 25 of the Companies Act, 2013)

5. a, ( As per Section 25 of the Companies Act, 2013)

6. a

7. c. ( Section 31 of the Companies Act, 2013)

8. a. ( Section 31 of the Companies Act, 2013, validity of Shelf Prospectus is one year.)

9. a, ( As per section 29(1) of the Companies act, 2013, every company making Initial public offer must go for Dematerialization. )

10. a, ( As per section 29(1) of the Companies act, 2013, makes it mandatory every company making Initial public offer.)

11. c ( Section 39 of the Companies Act, 2013, Minimum application money to be paid)

12. a ( Section 33 of the Companies Act, 2013.)

13. d ( Section 33 of the Companies Act, 2013.)

14. b ( Section 33 of the Companies Act, 2013.)

15. b ( Section 32 of the Companies Act, 2013.)

16. b ( As per Rule 13 of Companies(Prospectus and allotment of securities) Rules, 2014 the rate of commission paid or agreed to be paid shall not exceed 5% of the price at which the shares are issued or a rate authorized by the article, whichever is less.)

17. d ( Section 42 of the Companies Act, 2013.)

18. c ( As per Rule 13 of Companies (Prospectus and allotment of securities) Rules, 2014)

19. b ( As per Section 39(3) of the Companies act, 2013 if the amount of subscription has not received within 30 days from prospectus date then the amount received under sub section (1) shall be returned within 15 days from the closure of the issue)

20. b ( Section 39(1) of the Companies act, 2013)

21. a ( Section 42 of the Companies act, 2013, condition for Private Placement.)

22. a ( Private placement is a common method of raising business capital through offering equity shares. Private placements can be done by either private companies wishing to acquire a few select investors or by publicly traded companies as a secondary stock offering)

23. a ( Section 42 of the Companies Act, 2013, cash not to be accepted towards subscription.)

24. b ( Section 42 of the Companies Act, 2013, Qualified Institutional buyer and employees to whom the securities has been offered under ESOP u/s 62(1)(b) are excluded while computing the number of persons.)

25. b ( Section 42 of the Companies Act, 2013, Qualified Institutional buyer and employees to whom the securities has been offered under ESOP u/s 62(1) (b) are excluded while computing the number of persons.)