Company Law Course Cover - Sridhar Insights Legal-Tech and Corporate Law Research

Company Law | Legal | Quiz

Shares, Share Capital, And Transfer Mechanisms | Company Law | MCQ Quiz with Answers | Test Your Legal Knowledge

BySridhar Insights October 9, 2026October 9, 2026

Company Law MCQ Quiz – Unit III

Company Law MCQ Quiz – Unit III (1–50)

(1). [AIBE 2021] Which eminent jurist/judge defined a share as “the interest of a shareholder in the company measured by a sum of money”?

[A]. Lord Macnaghten
[B]. Justice Farwell
[C]. Lord Denning
[D]. Justice Bhagwati

(2). What is the primary legal difference between Shares and Stock?

[A]. Shares cannot be transferred, stock can.
[B]. Stock is the consolidation of fully paid-up shares and can be transferred in fractions, whereas shares have discrete definitive numbers.
[C]. Stock applies only to private companies.
[D]. There is no legal difference.

(3). [CLAT-PG 2019] Under Section 43 of the Companies Act, 2013, preference share capital enjoys preferential rights regarding:

[A]. Voting rights and board appointments
[B]. Payment of dividend and repayment of capital upon winding up
[C]. Absolute control over management
[D]. Attending statutory meetings

(4). Can a company directly issue “Stock” to the public during an IPO?

[A]. Yes, absolutely.
[B]. No, a company must issue shares first; only fully paid-up shares can be converted into stock.
[C]. Only if the RBI approves.
[D]. Yes, for foreign investors.

(5). [AIBE 2023] The statutory restriction preventing a company from allotting shares unless a certain threshold of applications is received is known as:

[A]. Maximum allotment
[B]. Minimum subscription (Section 39)
[C]. Capital gearing
[D]. Equity capping

(6). As per SEBI guidelines and the Companies Act, the minimum application money payable on shares must not be less than:

[A]. 1% of the nominal amount
[B]. 5% of the nominal amount
[C]. 10% of the nominal amount
[D]. 25% of the nominal amount

(7). [CLAT-PG 2020] If a company fails to receive the minimum subscription within 30 days, the application money must be refunded within:

[A]. 5 days
[B]. 15 days
[C]. 30 days
[D]. 60 days

(8). Which intermediary provides a guarantee to the company to purchase shares that the public fails to subscribe to, ensuring the minimum subscription is met?

[A]. Statutory Auditor
[B]. Underwriter
[C]. Liquidator
[D]. Registrar of Companies

(9). [AIBE 2018] A demand made by the Board of Directors upon shareholders to pay the whole or part of the unpaid amount on their shares is called a:

[A]. Dividend
[B]. Call
[C]. Forfeiture
[D]. Lien

(10). If a shareholder fails to pay the validly demanded call money, the company’s ultimate penal remedy is:

[A]. Surrender of shares
[B]. Forfeiture of shares
[C]. Criminal imprisonment of the shareholder
[D]. Liquidation of the company

(11). [CLAT-PG 2022] What is the statutory notice period typically required under the Articles (Table F) before shares can be forfeited for non-payment of calls?

[A]. 7 days
[B]. 14 days
[C]. 21 days
[D]. 30 days

(12). What is the legal effect of a valid forfeiture of shares on the shareholder’s membership?

[A]. Membership is suspended temporarily.
[B]. The shareholder ceases to be a member, but may remain liable as a past member for unpaid calls if wound up within a year.
[C]. The shareholder receives a full refund.
[D]. The shareholder becomes a secured creditor.

(13). [AIBE 2019] Forfeited shares become the property of the company and can be:

[A]. Destroyed permanently
[B]. Re-issued at a discount, provided the discount does not exceed the forfeited amount
[C]. Gifted to the directors
[D]. Converted into debentures

(14). The voluntary transfer of shares between a buyer and a seller is carried out using which statutory form?

[A]. Form DIR-12
[B]. Form SH-4
[C]. Form INC-20A
[D]. Form AOC-4

(15). [CLAT-PG 2021] Which of the following is true regarding the “Transmission” of shares?

[A]. It requires an executed transfer deed.
[B]. It is subject to heavy stamp duty.
[C]. It occurs by operation of law (death/insolvency) without the need for a transfer deed or stamp duty.
[D]. It applies only to private companies.

(16). Under Section 58 of the 2013 Act, if a private company refuses to register a transfer of shares, it must send a notice of refusal within:

[A]. 15 days
[B]. 30 days
[C]. 45 days
[D]. 60 days

(17). [AIBE 2022] Can the Board of Directors of a Public Company arbitrarily refuse to register a share transfer?

[A]. Yes, they have absolute discretion.
[B]. No, shares of a public company are freely transferable; refusal must be strictly for “sufficient cause.”
[C]. Yes, if the transferee is poor.
[D]. Only if the company is in losses.

(18). In V.B. Rangaraj v. V.B. Gopalakrishnan, the Supreme Court ruled that restrictions on the transfer of shares are legally binding only if:

[A]. They are agreed upon verbally by all promoters.
[B]. They are explicitly incorporated into the Articles of Association.
[C]. They are written in a secret shareholders’ agreement.
[D]. They are approved by the police.

(19). [CLAT-PG 2018] If a shareholder’s name is wrongly removed from the Register of Members, the statutory remedy is to file an appeal for “Rectification of Register” before the:

[A]. Supreme Court
[B]. National Company Law Tribunal (NCLT) under Section 59
[C]. SEBI Appellate Tribunal
[D]. Local Magistrate

(20). Under Section 56(4), a company must issue share certificates to the subscribers of the memorandum within:

[A]. 1 month of incorporation
[B]. 2 months of incorporation
[C]. 6 months of incorporation
[D]. 1 year of incorporation

(21). [AIBE 2023] The statutory time limit for a company to issue a share certificate after receiving a valid instrument of transfer is:

[A]. 15 days
[B]. 1 month
[C]. 2 months
[D]. 3 months

(22). A Share Certificate issued under the common seal of the company (or signed by authorized directors) acts as:

[A]. Conclusive evidence of ownership
[B]. Prima facie evidence of title to the shares (Section 46)
[C]. A negotiable instrument
[D]. A promissory note

(23). [CLAT-PG 2019] The equitable doctrine that prevents a company from denying the truth of statements made in a share certificate against a bona fide purchaser is:

[A]. Estoppel
[B]. Res Judicata
[C]. Constructive Notice
[D]. Lis Pendens

(24). If a company erroneously issues a share certificate stating the shares are “fully paid up”, and a bona fide purchaser buys them relying on this statement, what happens if the company later demands unpaid call money?

[A]. The purchaser must pay.
[B]. The company is estopped from demanding the money from the bona fide purchaser.
[C]. The shares are automatically forfeited.
[D]. The original seller is sent to jail.

(25). [AIBE 2020] In Re Bahia & San Francisco Railway Co., the company issued a new share certificate based on a forged transfer deed. When the true owner proved the forgery, the company was compelled to:

[A]. Restore the true owner to the register AND compensate the bona fide purchaser who relied on the faulty certificate.
[B]. Ignore the true owner.
[C]. Arrest the purchaser.
[D]. Dissolve the company.

(26). The “Certification of Transfer” occurs when:

[A]. The ROC approves a merger.
[B]. A shareholder sells only a part of their holding, lodges the original certificate with the company, and the company endorses the transfer deed.
[C]. An auditor signs the balance sheet.
[D]. Shares are converted to stock.

(27). [CLAT-PG 2022] A major difference between the 1956 Act and the 2013 Act is that the 2013 Act completely abolished:

[A]. Equity shares
[B]. Share Warrants (bearer instruments)
[C]. Preference shares
[D]. Stock conversions

(28). Why were Share Warrants abolished under the new corporate regime?

[A]. They were too expensive to print.
[B]. Being bearer instruments transferable by mere delivery, they facilitated anonymous ownership, tax evasion, and money laundering.
[C]. They caused stock market crashes.
[D]. The British government requested it.

(29). [AIBE 2018] What is the penalty under the 2013 Act for a person who fraudulently issues or transfers forged share certificates?

[A]. A warning letter
[B]. Action under Section 447 (Corporate Fraud), involving severe imprisonment and heavy fines
[C]. A fine of ₹100
[D]. Mandatory resignation

(30). In the context of Share Capital, what is a “Call”?

[A]. A dividend announcement
[B]. A demand for the payment of the unpaid portion of the share’s nominal value
[C]. A shareholder meeting
[D]. A court summons

(31). [CLAT-PG 2021] To constitute a valid Call on shares, the power must be exercised by the Board of Directors:

[A]. Capriciously
[B]. Bona fide and entirely for the benefit of the company (Fiduciary duty)
[C]. To favor majority shareholders
[D]. To bankrupt minority shareholders

(32). Can a company accept payment for shares in advance of calls?

[A]. No, it is illegal.
[B]. Yes, if authorized by the Articles, and it may pay interest on such “Calls in Advance” (Section 50).
[C]. Only from foreign investors.
[D]. Only in cash.

(33). [AIBE 2019] If an allotment is made without receiving the minimum subscription, the allotment is:

[A]. Valid but irregular
[B]. Voidable at the option of the applicant
[C]. Absolutely void ab initio
[D]. Ratifiable by the ROC

(34). Shares held in an electronic depository system (NSDL/CDSL) are known as:

[A]. Bearer shares
[B]. Dematerialized (Demat) shares
[C]. Scrip shares
[D]. Warrants

(35). [CLAT-PG 2023] When shares are held in Demat form, who is considered the “Registered Owner” in the books of the company?

[A]. The individual investor
[B]. The Depository
[C]. The SEBI Chairman
[D]. The Stock Broker

(36). The individual investor holding Demat shares is legally referred to under Section 2(55) as the:

[A]. Fiduciary owner
[B]. Beneficial Owner (and is treated as a full member)
[C]. Ostensible owner
[D]. Pledgee

(37). [AIBE 2021] Which of the following conditions is required for the conversion of shares into stock?

[A]. The shares must be newly issued.
[B]. The shares must be partly paid.
[C]. The shares must be fully paid-up.
[D]. The company must be in liquidation.

(38). The document transferring ownership of physical shares (Form SH-4) must be executed by:

[A]. Only the transferor
[B]. Only the transferee
[C]. Both the transferor and transferee
[D]. The Company Secretary

(39). [CLAT-PG 2020] Under Section 56, the instrument of transfer must be delivered to the company within what period from its execution?

[A]. 15 days
[B]. 30 days
[C]. 60 days
[D]. 120 days

(40). The statutory mandate forcing unlisted public companies to issue securities only in dematerialized form marks a shift towards:

[A]. Increasing paper-based forgery
[B]. Enhancing transparency, preventing physical certificate fraud, and improving regulatory tracking
[C]. Abolishing the stock market
[D]. Bypassing SEBI

(41). [AIBE 2017] A company issues a share certificate to X. X sells the shares to Y, giving Y the certificate and a blank transfer deed. Before Y registers the transfer, X fraudulently sells the same shares to Z and gets a duplicate certificate issued. Who has superior equity?

[A]. X
[B]. The company
[C]. Y, as the bona fide purchaser holding the original certificate and transfer deed
[D]. Z

(42). Forfeiture of shares is essentially in the nature of a:

[A]. Reward mechanism
[B]. Penal proceeding resulting in confiscation of property
[C]. Dividend distribution
[D]. Tax collection

(43). [CLAT-PG 2019] If the Articles of Association do not explicitly grant the Board of Directors the power to forfeit shares, can they still forfeit shares for non-payment of calls?

[A]. Yes, it is an inherent corporate power.
[B]. No, the power to forfeit must be expressly authorized by the Articles.
[C]. Yes, with ROC permission.
[D]. Only if the debt exceeds ₹1 lakh.

(44). A forged transfer deed lodged with a company is legally:

[A]. Voidable
[B]. A complete nullity (Void ab initio) and confers no title whatsoever
[C]. Valid if stamped
[D]. Ratifiable by the directors

(45). [AIBE 2022] If a company registers a forged transfer and removes the true owner’s name, the true owner can:

[A]. Do nothing
[B]. File a petition to compel the company to restore their name to the Register of Members
[C]. Only sue the forger, not the company
[D]. Ask for a refund

(46). Differential Voting Rights (DVRs) can be issued by a company in respect of which class of shares?

[A]. Preference shares only
[B]. Equity shares (subject to strict statutory conditions and limits)
[C]. Debentures
[D]. Stock

(47). [CLAT-PG 2021] The term “Transmission” of shares specifically excludes:

[A]. Death of a sole shareholder
[B]. Insolvency of a shareholder
[C]. Voluntary sale of shares for money
[D]. Lunacy of a shareholder

(48). Upon the death of a shareholder, the shares vest in their legal representative. Does the legal representative have to register themselves as a member to sell the shares?

[A]. Yes, it is mandatory.
[B]. No, Section 56(5) allows the legal representative to execute a valid transfer of the shares even without being registered as a member themselves.
[C]. Only if they pay a fine.
[D]. No, shares return to the company.

(49). [AIBE 2023] In summary, Unit III’s focus on shares, allotment, and transfer regulations ensures that:

[A]. The company’s capital base is secure and investor titles are protected against fraud through stringent documentation and transparency.
[B]. Promoters can manipulate share prices.
[C]. Shares cannot be bought or sold.
[D]. Foreigners control all Indian companies.

(50). The transition from the 1956 Act to the 2013 Act regarding share capital mechanisms primarily targeted:

[A]. Reducing the rights of minority shareholders.
[B]. The elimination of bearer instruments (warrants), shortening transfer timelines, and aggressively migrating to electronic (Demat) formats to eliminate paper fraud.
[C]. Abolishing the NCLT.
[D]. Allowing companies to issue shares for free.

Leave a Reply Cancel reply

error: Content is protected !!