Skip to content

IAI Actuarial Core Principles · Business Management · Separate legal personality, directors' duties, shareholders and partnerships

Meera and Arjun wish to incorporate a private company in India. Which statement correctly describes a requirement for a private company under the Companies Act, 2013?

A private company must restrict transfer of its shares in its articles and must not invite the public to subscribe to its securities. The seven-member minimum applies to public companies, and there is no compulsory listing, public offer or large minimum capital for private companies.

  1. AIts articles must restrict the right to transfer shares and it may not invite the public to subscribe to its securitiesCorrect
  2. BIt must have at least seven members and seven directors
  3. CIt must list its shares on a recognised stock exchange within one year
  4. DIt must offer shares to the public through a prospectus before commencing business
  5. It must have a minimum paid-up capital of Rs 5 crore

Explanation

The Act defines a private company by restrictions on share transfer and a bar on inviting the public to subscribe. Seven members is the minimum for a public company, not a private one. Listing, mandatory public offers and a Rs 5 crore capital are not requirements.

Did you get it right without looking?

One question tells you little. A timed set on Separate legal personality, directors' duties, shareholders and partnerships shows your real accuracy, how long you take and where you lose marks.

Practise Separate legal personality, directors' duties, shareholders and partnershipsFree diagnostic mock

More Separate legal personality, directors' duties, shareholders and partnerships questions