Easy2Siksha Sample Paper
(GNDU) MOST REPEATED (IMPORTANT) QUESTIONS
BBA 5th SEMESTER
Company Law (2021–2024)
Repeated Quesons
1. Memorandum of Associaon – Denion, Purpose/Contents, Importance
o Frequency: 4 mes
o Years Appeared: 2021, 2023, 2024, 2024
2. Arcles of Associaon – Denion, Role/Contents
o Frequency: 4 mes
o Years Appeared: 2021, 2023, 2024, 2024
3. Prospectus – Denion, Types/Contents, Legal Requirements
o Frequency: 4 mes
o Years Appeared: 2021, 2022, 2023, 2024
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󹺔󹺒󹺓 2025 Smart Predicon Table
(Based on 4-Year Analysis: Frequency + Recentness + Core Syllabus Weight)
Queson Topic
Repeats
Years Appeared
Priority
Level
Memorandum of Associaon – Denion,
Purpose/Contents, Importance
4
2021, 2023,
2024, 2024
󽇐 Very
High
Arcles of Associaon – Denion,
Role/Contents
4
2021, 2023,
2024, 2024
󽇐 Very
High
Prospectus – Denion, Types/Contents, Legal
Requirements
4
2021, 2022,
2023, 2024
󽇐 Very
High
Easy2Siksha Sample Paper
(GNDU) MOST REPEATED (IMPORTANT) ANSWER
BBA 5th SEMESTER
Company Law (2021–2024)
SOLVED ANSWER PAPER
1. Memorandum of Associaon – Denion, Purpose/Contents, Importance
o Frequency: 4 mes
o Years Appeared: 2021, 2023, 2024, 2024
Ans: A Different Beginning – The Birth Certificate of a Company
Imagine a newborn baby. Before the baby can be recognised by the world, it needs a
birth certificate — a legal document that records its name, place of birth, and identity.
In the corporate world, when a company is “born” (incorporated), it too needs a birth
certificate. That document is called the Memorandum of Association (MOA).
Just as a birth certificate tells the world who the baby is and where it belongs, the MOA
tells the world:
• Who the company is (its name)
• Where it lives (registered office)
• What it can do (objectives)
• How much capital it has
• What kind of liability its members have
Without this document, the company cannot legally exist.
1. Definition of Memorandum of Association
Under Section 2(56) of the Companies Act, 2013, the Memorandum of Association is
defined as:
“The memorandum of association of a company means the memorandum of association
as originally framed or as altered from time to time in pursuance of any previous
company law or of this Act.”
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In simpler words:
• It is the charter of the company.
• It defines the scope of activities the company can undertake.
• It is a public document — anyone can inspect it to know the company’s basic
details and powers.
Key Idea: The MOA is like the constitution of the company in relation to the outside
world. It sets the boundaries — the company cannot act beyond what is written in it
(this is where the old doctrine of ultra vires comes from).
2. Purpose of the Memorandum of Association
Why is this document so important? Let’s break it down:
1. Foundation Document
o It is the starting point for the company’s legal existence.
o Without it, the Registrar of Companies will not register the company.
2. Defines Scope of Powers
o It tells shareholders, creditors, and the public what the company can and
cannot do.
o Protects investors by ensuring the company sticks to its stated objectives.
3. Public Notice
o Since it is a public document, anyone dealing with the company can check
its MOA to understand its nature and powers.
4. Legal Protection
o Prevents misuse of company funds for activities outside its objectives.
o Acts as a safeguard for shareholders.
5. Guidance for Management
o Directors must operate within the boundaries set by the MOA.
Analogy: If the company is a ship, the MOA is the map showing where it can sail. The
captain (board of directors) must follow this map — they can’t suddenly decide to sail to
a forbidden island.
3. Contents of the Memorandum of Association
The Companies Act, 2013 specifies six mandatory clauses that every MOA must have.
Let’s meet them one by one.
1. Name Clause
• States the legal name of the company.
• For a public company, the name must end with “Limited”.
• For a private company, the name must end with “Private Limited”.
• Section 8 companies (non-profits) may omit these words.
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Purpose: To give the company a unique identity and avoid confusion.
2. Registered Office Clause
• Specifies the state in which the company’s registered office is located.
• This determines the jurisdiction of the Registrar of Companies.
Purpose: To establish the company’s legal “home address”.
3. Object Clause
• The most important clause — it defines the main objectives for which the
company is formed.
• Divided into:
o Main Objects: Core business activities.
o Incidental/Ancillary Objects: Activities necessary to achieve the main
objects.
o Other Objects: Any additional activities (subject to compliance).
Purpose: To limit the company’s activities to its stated objectives.
4. Liability Clause
• States the liability of members:
o Limited by shares: Liability is limited to unpaid amount on shares.
o Limited by guarantee: Liability is limited to the amount members agree to
contribute if the company is wound up.
o Unlimited: Members have unlimited liability.
Purpose: To inform stakeholders about the financial risk members bear.
5. Capital Clause
• States the company’s authorised share capital and its division into shares of fixed
value.
Purpose: To set the maximum amount of capital the company can raise by issuing
shares.
6. Association (Subscription) Clause
• Contains the declaration by the subscribers (founders) that they wish to form the
company.
• Includes their names, addresses, occupations, and number of shares they agree
to take.
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Purpose: To show the initial commitment of the promoters.
4. Diagram – Structure of MOA
5. Importance of the Memorandum of Association
The MOA is not just a formality — it has real legal and practical importance:
1. Legal Requirement for Incorporation
o Without it, the Registrar will reject the application for registration.
2. Defines Relationship with Outsiders
o Outsiders can rely on the MOA to know the company’s powers.
3. Limits the Company’s Powers
o Prevents the company from engaging in unauthorised activities.
4. Investor Confidence
o Investors know exactly what the company is set up to do.
5. Basis for Articles of Association
o The Articles (internal rules) are framed in line with the MOA.
6. Evidence in Court
o Can be used as evidence in legal disputes about the company’s powers.
Case Law Example: In Ashbury Railway Carriage and Iron Co. Ltd. v. Riche (1875), the
company entered into a contract outside its object clause. The court held the contract
ultra vires (beyond powers) and void.
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6. Alteration of Memorandum of Association
While the MOA is fundamental, it can be altered — but only by following strict legal
procedures under the Companies Act, 2013.
Examples of Alterations:
• Change of Name: Requires special resolution and approval of the Central
Government (except for private to public or vice versa).
• Change of Registered Office:
o Within the same city: Board resolution.
o From one city to another within the same state: Special resolution.
o From one state to another: Special resolution + approval from Regional
Director.
• Change in Object Clause: Requires special resolution and filing with Registrar.
• Change in Capital Clause: As per provisions in Articles and Companies Act.
• Change in Liability Clause: Requires consent of members and compliance with
law.
7. Story Recap – Why the MOA Matters
Think back to our “birth certificate” analogy:
• Without it, the company doesn’t legally exist.
• It tells the world the company’s name, home, purpose, and limits.
• It protects shareholders and guides directors.
• It’s public — anyone can check it.
• It can be changed, but only with proper legal steps.
Conclusion
The Memorandum of Association is the soul of a company — it defines its identity,
purpose, and boundaries. It is both a legal necessity and a practical safeguard. Just as a
ship cannot sail without a map, a company cannot operate without its MOA.
Understanding it is not just about passing an exam — it’s about understanding the DNA
of corporate existence.
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2. Arcles of Associaon – Denion, Role/Contents
o Frequency: 4 mes
o Years Appeared: 2021, 2023, 2024, 2024
Ans: A Different Beginning – The Company Rulebook Story
Imagine you’ve just been hired as the captain of a massive cruise ship. The ship already has
a map showing where it can sail — that’s the Memorandum of Association (MOA). But
now, you’re handed a thick manual that tells you:
• How to start the engines
• How to assign cabins
• How to organise crew shifts
• How to handle emergencies
• How to serve passengers
This manual is not about where the ship can go — it’s about how to run it.
In the corporate world, that manual is called the Articles of Association. It’s the internal
rulebook of the company — the “how-to” guide for running its day-to-day affairs.
1. Definition of Articles of Association
Under Section 2(5) of the Companies Act, 2013:
“Articles of Association” means the articles of association of a company as originally framed
or as altered from time to time in pursuance of any previous company law or of this Act.
In simple words:
• The AOA is a written document containing the rules and regulations for the internal
management of the company.
• It defines the rights, duties, and powers of the company’s members and directors.
• It works alongside the MOA — but while the MOA deals with the company’s
relationship with the outside world, the AOA governs the inside world.
Analogy: If the MOA is the constitution of the country, the AOA is the parliamentary
rulebook — it tells everyone how to operate within the framework set by the constitution.
2. Role and Purpose of the Articles of Association
The AOA plays a central role in the life of a company. Let’s break down its functions:
1. Internal Governance
o It lays down the rules for how the company will be managed on a daily basis.
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o Covers meetings, voting rights, dividend distribution, appointment of
directors, etc.
2. Defines Powers of Directors and Officers
o Specifies what directors can and cannot do.
o Prevents misuse of authority.
3. Regulates Shareholder Rights
o Explains how shares can be issued, transferred, or forfeited.
o Protects minority shareholders by embedding certain safeguards.
4. Binding Contract
o Under Section 10 of the Companies Act, 2013, the AOA is a binding contract
between:
▪ The company and its members
▪ The members among themselves
5. Flexibility
o Unlike the MOA, the AOA can be altered more easily to adapt to changing
needs (subject to legal procedure).
6. Legal Compliance
o Ensures the company operates within the law and its own agreed rules.
Story View: Think of the AOA as the house rules in a shared apartment. The MOA is the
rental agreement with the landlord (external relationship), but the AOA is the agreement
between the roommates — who cleans, who cooks, how bills are split.
3. Contents of the Articles of Association
The Companies Act doesn’t prescribe a fixed format — but Table F of Schedule I provides a
model AOA for companies limited by shares. Here are the common contents:
1. Share Capital and Variation of Rights
• Details of authorised share capital.
• Classes of shares (equity, preference) and their rights.
• Procedure for altering share capital.
2. Lien on Shares
• Company’s right to retain shares until debts are paid.
3. Calls on Shares
• Rules for demanding unpaid amounts on shares from shareholders.
4. Transfer and Transmission of Shares
• How shares can be transferred between people.
• What happens if a shareholder dies (transmission).
5. Forfeiture of Shares
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• Conditions under which a shareholder’s shares can be taken back for non-payment.
6. Alteration of Capital
• Procedure for increasing, consolidating, or subdividing share capital.
7. General Meetings
• Rules for Annual General Meetings (AGMs) and Extraordinary General Meetings
(EGMs).
• Notice periods, quorum, voting methods.
8. Proceedings at General Meetings
• How meetings are conducted.
• Role of the chairman.
• How resolutions are passed.
9. Board of Directors
• Number of directors.
• Appointment, removal, and powers.
• Proceedings of board meetings.
10. Dividends and Reserves
• How profits are distributed.
• Creation of reserves.
11. Accounts and Audit
• Maintenance of books of accounts.
• Appointment of auditors.
12. Winding Up
• Rules for winding up the company.
13. Indemnity
• Protection for directors and officers against certain liabilities.
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4. Diagram – MOA vs AOA
5. Importance of the Articles of Association
1. Operational Blueprint
o Without it, the company would have no agreed method of running its affairs.
2. Legal Binding Force
o Members and the company are bound to follow it.
3. Investor Confidence
o Investors can check the AOA to understand governance rules.
4. Conflict Resolution
o Acts as a reference point in disputes between members.
5. Flexibility with Control
o Can be altered to meet new needs, but only with member approval.
6. Alteration of Articles of Association
The AOA can be altered by passing a special resolution (75% majority) and filing it with the
Registrar of Companies. However:
• Alteration must be within the limits of the MOA.
• Must comply with the Companies Act and other laws.
• Cannot increase liability of members without their consent.
• Cannot be against public policy.
Example: If the AOA says the company will have 5 directors, it can be altered to have 7 —
but it cannot authorise an activity that the MOA prohibits.
7. Real-Life Example
Suppose a company’s AOA says:
• Board meetings must be held once every 3 months.
• Dividends can only be declared after setting aside 10% of profits as reserve.
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If the directors skip meetings for 6 months or declare dividends without creating the
reserve, they are violating the AOA — and members can take legal action.
Conclusion
The Articles of Association is the rulebook that keeps the company’s internal machinery
running smoothly. If the MOA is the company’s soul and identity, the AOA is its nervous
system — coordinating every movement, decision, and interaction. It ensures that the
company’s journey is not just legally valid but also well-organised, fair, and transparent.
3. Prospectus – Denion, Types/Contents, Legal Requirements
o Frequency: 4 mes
o Years Appeared: 2021, 2022, 2023, 2024
Ans: A Different Beginning – The Public Invitation Story
Imagine a brand-new amusement park is about to open. The owners have built the
rides, hired the staff, and decorated the place — but they need money to make it even
bigger and better. They decide to invite the public to invest in the park.
But here’s the catch:
• People won’t just hand over their money without knowing what they’re getting
into.
• They want to know: Who owns the park? How will it make money? What are the
risks?
So, the owners print a beautiful, detailed invitation booklet — it tells the story of the
park, its attractions, its ticket prices, its management team, and how investors can
benefit.
In the corporate world, that booklet is called a Prospectus.
1. Definition of Prospectus
Under Section 2(70) of the Companies Act, 2013:
“A prospectus means any document described or issued as a prospectus and includes a
red herring prospectus referred to in section 32 or shelf prospectus referred to in
section 31 or any notice, circular, advertisement or other document inviting offers from
the public for the subscription or purchase of any securities of a body corporate.”
In simple words:
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• A Prospectus is a legal document issued by a public company to invite the public
to buy its shares or debentures.
• It contains full and truthful information about the company, its financial
position, its management, and the securities being offered.
Key Points:
• Only public companies can issue a prospectus (private companies cannot invite
the public to subscribe).
• It is a public invitation — once issued, anyone can apply for the securities.
• It must be registered with the Registrar of Companies before being issued.
Analogy: If the company is hosting a grand investment party, the prospectus is the
official invitation card — with all the details, terms, and conditions.
2. Purpose of a Prospectus
Why is it so important? Because it:
1. Informs Investors – Gives them the facts they need to make an informed
decision.
2. Protects the Public – Prevents fraud by requiring full disclosure.
3. Acts as Evidence – If there’s a dispute, the prospectus can be used in court.
4. Builds Trust – Transparency attracts more investors.
3. Types of Prospectus
The Companies Act, 2013 recognises several types:
1. Shelf Prospectus (Section 31)
• Used when a company plans to issue securities in multiple tranches over a period
(up to 1 year).
• Only one prospectus is filed for all issues — saves time and cost.
• Common with financial institutions and banks.
Analogy: Like printing a single season pass for multiple concerts instead of separate
tickets for each.
2. Red Herring Prospectus (Section 32)
• Issued before the price of the securities is finalised.
• Contains all details except the price and number of shares.
• Used in book-building issues (common in IPOs).
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Analogy: Like a movie trailer — gives you all the details except the final release date and
ticket price.
3. Abridged Prospectus (Section 2(1))
• A shorter version of the full prospectus.
• Contains only the salient features.
• Must be attached to every application form for securities.
Analogy: Like a summary brochure — quick to read but still informative.
4. Deemed Prospectus (Section 25)
• If a company allots securities to an intermediary (like an issuing house) who then
offers them to the public, the offer document is treated as a prospectus.
Analogy: Like a travel agency selling tickets on behalf of an airline — their brochure still
counts as the airline’s invitation.
4. Contents of a Prospectus
Section 26 of the Companies Act, 2013 specifies the mandatory contents. Here’s what
must be included:
A. General Information
• Name and address of the company’s registered office.
• Names of company secretaries, auditors, legal advisers, bankers, trustees.
B. Capital Structure
• Authorised, issued, subscribed, and paid-up capital.
• Details of the securities being offered.
C. Terms of the Issue
• Price of securities.
• Minimum subscription amount.
• Opening and closing dates of the issue.
D. Company’s Objectives
• Main objects of the company.
• Purpose for which funds are being raised.
E. Financial Information
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• Reports by auditors.
• Profit and loss statements.
• Balance sheets for the last 3–5 years.
F. Management Details
• Names, addresses, and backgrounds of directors.
• Their interest in the company.
G. Risk Factors
• Any risks involved in the business or investment.
H. Declaration
• A statement that the prospectus complies with the Companies Act.
• Signed by all directors.
Golden Rule: The prospectus must contain full, true, and accurate information — no
misleading statements or omissions.
5. Legal Requirements for Issuing a Prospectus
The law is strict because public money is at stake.
1. Approval
• The draft prospectus must be approved by the Board of Directors.
2. Registration
• A copy must be filed with the Registrar of Companies before issue.
• Must be signed by every director.
3. Time Limit
• Must be issued within 90 days of registration — otherwise, it becomes invalid.
4. Compliance with SEBI Guidelines
• For listed companies, SEBI’s disclosure and investor protection guidelines must
be followed.
5. Liability for Misstatements
• Civil Liability: Investors can claim compensation for losses.
• Criminal Liability: Fines and imprisonment for fraudulent statements.
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Case Example: In Rex v. Kylsant (1932), a company’s prospectus stated it had paid
dividends for years — but didn’t reveal they were paid from reserves, not profits. The
directors were held liable for misleading statements.
6. Diagram – Prospectus Overview
7. Why the Prospectus Matters
• For Investors: It’s the primary source of information before investing.
• For the Company: It’s a legal shield — if truthful, it protects against false claims.
• For the Market: It ensures transparency and builds trust.
Conclusion
The Prospectus is more than just a legal formality — it’s the bridge of trust between a
company and the investing public. It tells the company’s story, its ambitions, and its
promises — and it does so under the watchful eye of the law. Just as you wouldn’t
attend a grand event without reading the invitation, no investor should put money into
a company without reading its prospectus.
“This is only a part of the preparation journey.
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