0 Comments122 Chapter 1: Company Formation
Syllabus
1.1.1 Company Formation
> Concept of corporation,
> Meaning of the company,
> Private and public company: concept and features,
> Differences between private and public company,
> Main documents of a company: Memorandum of Association, Articles of Association and Prospectus.
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Very Short Answer Question |
1.1 Company or Corporation
2079, GIE Set B, Q1 | 2081, Set D, Q1
Q: Define company.
Answer: Definition of a company
According to the Oxford Dictionary, "Company is a business organization that makes money by producing or selling goods or services."
Q: Define a corporation.
Answer: Definition of a corporation
According to the Oxford Dictionary, "Corporation is a large business company."
Q: Write the meaning of a company.
Answer: Meaning of a company
Company is a legal entity established under the company law.
It operates specific business activities to earn profits.
Keep in Mind
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1.2 Types of Companies
Q: Write four types of companies.
Answer: Types of companies
> Public Company Limited
> Private Company Limited
> Statutory Company
> Government Company
Q: Write the types of companies based on number of members.
Answer: Number of members based companies
> Public Company Limited
> Private Company Limited
Q: Write the types of companies based on incorporation.
Answer: Incorporation companies
> Statutory Company
> Registered Company
> Chartered Company
Q: Write the types of companies based on liabilities.
Answer: Liabilities based companies
> Unlimited Company
> Company Limited by Shares
> Company Limited by Guarantee
Q: Write the types of companies based on ownership.
Answer: Ownership based companies
> Government Company
> Private Company
Q: Write the types of companies based on domicile.
Answer: Domicile based companies
> Domestic Company
> Foreign Company
> Multinational Company
Q: Write the types of companies based on control.
Answer: Control based companies
> Holding Company
> Subsidiary Company
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2080, GIE, Set B, Q1
Q: Define Public Limited Company.
Answer: Definition of a public limited company
According to the Oxford Dictionary, "Public limited company is a company that sells shares in itself to the public."
Q: Write the meaning of a Public Limited Company.
Answer: Meaning of a Public Limited Company
Public Limited Company is a legal entity established under the company law.
This company must write suffix ‘Limited’ or 'Inc.' with its name.
Examples:
Nepal: Nepal Telecom Limited
India: Reliance Industries Limited
US: Apple Inc., Meta Platforms Inc.
2080, Set R, Q1 | 2082, Q1 |
Q: Mention any two features of Public Limited Company.
Answer: Features of Public Limited Company
Legal entity: A company has a distinct legal identity under the law.
Artificial person: A company is an artificial person created by law.
Q: Mention any two characteristics of public limited company.
Answer: Characteristics of Public Limited Company
Profit seeking: A company operates to generate profit for shareholders.
Legal operation: A company must operate within the national legal framework.
2079, GIE Set A, Q1:
Q: Mention any two advantages of public limited company.
Answer: Advantages of Public Limited Company
Limited liability: Shareholders are liable only for their invested capital.
Share trading: Shares can be bought or sold on stock exchanges.
Q: Mention any two disadvantages of public limited company.
Answer: Disadvantages of Public Limited Company
Regulatory scrutiny: PLCs must follow strict rules from regulatory authorities.
High investment: PLCs require significant capital to start business.
Q: Write two rights and privileges of public limited company.
Answer: Rights and privileges of Public Limited Company
Legal status: A Public Limited Company is a distinct legal entity.
Limited shield: Shareholders’ liability is limited to the amount they invest.
Q: Write two rights and privileges of common stockholders.
Answer: Rights and privileges of common stockholders
Voting rights: Stockholders can vote on company decisions and policies.
Dividend entitlement: Stockholders are entitled to receive dividends from profits.
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Q: Define Private Limited Company.
Answer: Definition of a private limited company
According to the Cambridge Dictionary, "Private limited company is a type of company whose shares are not traded on a stock market."
Q: Write the meaning of a Private Limited Company.
Answer: Meaning of a Private Limited Company
Private Limited Company is a legal entity established under the company law.
This company must write suffix 'Private Limited' with its name.
Examples:
Nepal: Agni Air Pvt. Ltd.
India: Flipkart Pvt Ltd
USA: Chobani LLC
Keep in mind
Private Limited = (P) Ltd, Pvt. Ltd., or Pte Ltd, Pty Ltd Private Limited in the USA = LLC, Private C-corp |
Q: Mention two features of Private Limited Company.
Answer: Features of Private Limited Company
Shareholder limits: Private limited companies can have a limited number of shareholders.
Legal entity: Private Limited Company has separate legal entity from its shareholders.
Q: Write two differences between Private and Public Limited Companies
Answer: Two differences between Private and Public Limited Companies
Basis | Private Limited Company | Public Limited Company |
Shareholders | Minimum 1 to maximum 100 members. | Minimum 7 members, no maximum limit. |
Share Transfer | Shares cannot be freely transferred to the public. | Shares can be freely traded on a stock exchange. |
Financial Disclosure | Not required to disclose financial reports publicly. | Must disclose financial reports to the public.
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