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Corporate personality, Incorporation, and comparative structures | Company Law | MCQ Quiz with Answers | Test Your Legal Knowledge

BySridhar Insights October 9, 2026October 9, 2026

Company Law MCQ Quiz – Unit I

Company Law MCQ Quiz – Unit I (1–50)

(1). [AIBE 2021] Which of the following is the foundational case establishing that a registered company is a separate legal entity distinct from its shareholders?

[A]. Donoghue v. Stevenson
[B]. Salomon v. Salomon & Co.
[C]. Rylands v. Fletcher
[D]. Kesavananda Bharati

(2). What is the maximum number of members permitted in a Private Company under the Companies Act, 2013?

[A]. 50
[B]. 100
[C]. 200
[D]. Unlimited

(3). [CLAT-PG 2019] The minimum number of subscribers required to incorporate a Public Company is:

[A]. 2
[B]. 7
[C]. 50
[D]. 100

(4). Which of the following features is unique to a Company compared to a Partnership Firm?

[A]. Unlimited liability
[B]. Separate legal entity and perpetual succession
[C]. Sharing of profits
[D]. Mutual agency among members

(5). [AIBE 2023] Under Section 7(2) of the Companies Act, 2013, the Certificate of Incorporation issued by the Registrar of Companies serves as:

[A]. Rebuttable evidence only
[B]. Conclusive evidence that all requirements of registration have been complied with
[C]. Advisory confirmation
[D]. Temporary license

(6). A company that has its securities listed on any recognized stock exchange is classified as a:

[A]. Private company
[B]. Listed company
[C]. Section 8 company
[D]. Unlimited company

(7). [CLAT-PG 2020] In which of the following landmark cases did the court lift the corporate veil to prevent the evasion of contractual non-compete obligations through a sham company?

[A]. Gilford Motor Co. v. Horne
[B]. Salomon v. Salomon
[C]. Macaura v. Northern Assurance Co.
[D]. Lee v. Lee’s Air Farming

(8). A “One Person Company” (OPC) introduced under the 2013 Act can be formed by:

[A]. Any foreign corporation
[B]. A natural person who is an Indian citizen and resident in India
[C]. A partnership firm
[D]. A municipal corporation

(9). [AIBE 2018] The fundamental charter document of a company that defines its scope of powers and objectives is the:

[A]. Articles of Association (AoA)
[B]. Memorandum of Association (MoA)
[C]. Prospectus
[D]. Annual report

(10). Which of the following bodies replaced the erstwhile Company Law Board (CLB) for the judicial adjudication of corporate disputes under the 2013 Act?

[A]. Supreme Court
[B]. National Company Law Tribunal (NCLT)
[C]. Reserve Bank of India
[D]. Law Commission

(11). [CLAT-PG 2022] The principle that shareholder property does not include company property, meaning a shareholder has no insurable interest in company assets, was established in:

[A]. Macaura v. Northern Assurance Co.
[B]. Daimler Co. v. Continental Tyre Co.
[C]. State of UP v. Renusagar Power Co.
[D]. LIC v. Escorts Ltd.

(12). Section 135 of the Companies Act, 2013 introduced a mandatory statutory requirement for qualifying companies regarding:

[A]. Compulsory retirement of directors
[B]. Corporate Social Responsibility (CSR) spending
[C]. Foreign exchange transactions
[D]. Stock split procedures

(13). [AIBE 2019] Can a private company issue an invitation to the general public to subscribe for its shares or debentures?

[A]. Yes, anytime.
[B]. No, private companies are strictly prohibited from inviting the public to subscribe for their securities.
[C]. Only with RBI approval.
[D]. Only during an IPO.

(14). The legal status of shares or other interest of any member in a company is statutorily defined under Section 44 as:

[A]. Immovable property
[B]. Movable property transferable in the manner provided by the articles
[C]. Cash currency
[D]. Government bonds

(15). [CLAT-PG 2021] During wartime, if a registered company’s management and control are held by enemy aliens, courts may lift the corporate veil to determine its enemy character, as established in:

[A]. Daimler Co. v. Continental Tyre Co.
[B]. Gilford Motor Co. v. Horne
[C]. Salomon v. Salomon
[D]. Lee v. Lee’s Air Farming

(16). Which of the following is a key difference between a Company and a Limited Liability Partnership (LLP)?

[A]. An LLP has no separate legal entity.
[B]. A company is governed by the Companies Act, 2013, whereas an LLP is governed by the LLP Act, 2008.
[C]. Company members have unlimited liability.
[D]. LLPs cannot have contracts.

(17). [AIBE 2022] If a company’s membership falls below the statutory minimum (2 for private, 7 for public) and it carries on business for more than 6 months with reduced members, the remaining members become:

[A]. Personally liable for all debts contracted during that period (Section 3A)
[B]. Immune from all debts
[C]. Owners of the building
[D]. Bankrupt automatically

(18). The internal rules and regulations governing the day-to-day management of a company are contained in the:

[A]. Memorandum of Association
[B]. Articles of Association
[C]. Prospectus
[D]. Government Gazette

(19). [CLAT-PG 2018] The doctrine of Ultra Vires in company law applies when a company acts:

[A]. Beyond the scope of objects specified in its Memorandum of Association
[B]. Ethically
[C]. Under NCLT directions
[D]. With board approval

(20). Which of the following represents a statutory ground under the 2013 Act for lifting the corporate veil?

[A]. Misstatements in a prospectus (Sections 34 and 35)
[B]. Weather conditions
[C]. Shareholder birthdays
[D]. Change of office color

(21). [AIBE 2023] The online integrated web form introduced by the MCA for streamlined company incorporation combining name approval, DIN, PAN, TAN, and incorporation is called:

[A]. SPICe+
[B]. Form INC-22
[C]. DIN-3
[D]. RUN form

(22). In a company limited by shares, the liability of a shareholder is:

[A]. Unlimited
[B]. Limited to the nominal face value of shares held by them (and any unpaid amount on them)
[C]. Equal to the total debts of the company
[D]. Zero

(23). [CLAT-PG 2019] The Supreme Court of India in LIC v. Escorts Ltd. held that the corporate veil can be lifted:

[A]. Whenever a judge feels like it.
[B]. Where authorized by statute, or where the company is a facade or sham, but not loosely outside these parameters.
[C]. Only in criminal murder trials.
[D]. Never.

(24). A subsidiary company whose holding company is a public company is legally treated under Section 2(71) as:

[A]. A private company
[B]. A public company
[C]. An unregistered association
[D]. A foreign firm

(25). [AIBE 2020] The official registration number assigned to every registered company in India by the ROC is called the:

[A]. DIN
[B]. CIN (Corporate Identification Number)
[C]. PAN
[D]. GSTIN

(26). Which category of company is prohibited from paying dividends to its members and must apply all profits toward promoting its charitable objects?

[A]. Public company
[B]. Section 8 company
[C]. One Person Company
[D]. Holding company

(27). [CLAT-PG 2022] Pre-incorporation contracts entered into by promoters on behalf of a proposed company:

[A]. Are automatically binding on the company from birth.
[B]. Are not binding on the company unless novated or adopted post-incorporation.
[C]. Are illegal.
[D]. Bind the Registrar of Companies.

(28). The concept of “Perpetual Succession” means that:

[A]. A company never pays taxes.
[B]. The death, insolvency, or retirement of members has no effect on the continuous corporate existence of the company.
[C]. Directors can never be removed.
[D]. Shares cannot be sold.

(29). [AIBE 2018] Which of the following business forms features mutual agency among its members, meaning each member can bind the others by their acts?

[A]. Company
[B]. Partnership Firm
[C]. One Person Company
[D]. Corporation Sole

(30). Class Action suits by shareholders against management or the company were formally introduced in India under Section 245 of which Act?

[A]. Companies Act, 1956
[B]. Companies Act, 2013
[C]. Partnership Act, 1932
[D]. Contract Act, 1872

(31). [CLAT-PG 2021] Can a single human being incorporate a company with limited liability under the Companies Act, 2013?

[A]. No, minimum 2 always required.
[B]. Yes, through a One Person Company (OPC).
[C]. Only if they are a lawyer.
[D]. Only in foreign countries.

(32). The legal effect of a company entering into an ultra vires transaction (an act beyond its Memorandum of Association) under the traditional common law rule was that the act was:

[A]. Void ab initio
[B]. Fully enforceable
[C]. Voidable at director’s option
[D]. A criminal offense

(33). [AIBE 2019] Promoters stand in what type of legal relationship toward the company they are forming?

[A]. Fiduciary relationship
[B]. Hostile relationship
[C]. Employer-employee relationship
[D]. Debtor-creditor relationship

(34). Under the 2013 Act, the requirement of having a physical “Common Seal” was made:

[A]. Mandatory for all letters
[B]. Optional, providing alternative execution methods via directors or company secretaries
[C]. Illegal
[D]. Exclusive to banks

(35). [CLAT-PG 2023] In summary, Unit I’s comprehensive analysis of Company Law demonstrates that corporate existence is founded upon:

[A]. The fiction of separate legal personality, statutory registration, limited liability, and strict regulatory oversight.
[B]. Informal handshake agreements.
[C]. Absolute executive decrees.
[D]. Unwritten tribal customs.

(36). Which landmark Indian case operationalized the NCLT framework alongside the Insolvency and Bankruptcy Code (IBC, 2016)?

[A]. Innovative Industries v. ICICI Bank
[B]. LIC v. Escorts
[C]. Salomon v. Salomon
[D]. Bachan Singh

(37). [AIBE 2021] A company incorporated in London operating a branch office in Mumbai is classified under Indian law as a:

[A]. Domestic company
[B]. Foreign company (Section 2(42))
[C]. Statutory corporation
[D]. Partnership branch

(38). The maximum number of directors permitted in a public company without passing a special resolution under the 2013 Act is:

[A]. 5
[B]. 12
[C]. 15
[D]. 50

(39). [CLAT-PG 2020] The primary distinction between a Company Limited by Shares and a Company Limited by Guarantee is that in a Guarantee company:

[A]. Members promise to contribute a specified amount to the assets of the company in the event of winding up.
[B]. Shares are traded publicly.
[C]. Liability is unlimited.
[D]. No registration is required.

(40). The rule that a company cannot issue shares at a discount (with narrow statutory exceptions like sweat equity) protects:

[A]. Creditors and the integrity of the company’s stated capital
[B]. The government’s tax revenue
[C]. Foreign investors only
[D]. Shareholder voting rights

(41). [AIBE 2017] When promoters make secret profits at the expense of the company they are floating, they violate their:

[A]. Fiduciary duty
[B]. Tax obligation
[C]. Civil procedure code
[D]. Copyright license

(42). The legal consequence of a company’s name being struck off the Register of Companies by the ROC due to non-commencement of business is that:

[A]. The company ceases to operate as a legal entity, subject to NCLT restoration.
[B]. All debts are automatically cancelled.
[C]. Directors become monarchs.
[D]. Assets are distributed to the public.

(43). [CLAT-PG 2019] Which of the following documents regulates the external relations of a company with third-party outsiders?

[A]. Articles of Association
[B]. Memorandum of Association
[C]. Board resolution
[D]. Internal audit report

(44). The doctrine of Indoor Management (Turquand’s Rule) protects:

[A]. Outsiders dealing with a company in good faith, assuming internal procedural regularity.
[B]. Directors from personal liability.
[C]. The government from audit.
[D]. Shareholders from voting.

(45). [AIBE 2022] In summary, the study of Company Law in Unit I establishes the structural parameters of corporate entities, balancing economic enterprise with strict adherence to:

[A]. Statutory incorporation, separate personality, veil-lifting safeguards, and corporate governance standards.
[B]. Absolute executive discretion.
[C]. Informal family trusts.
[D]. Unwritten common law customs.

(46). Which landmark English rule protects outsiders dealing with a company regarding internal management irregularities?

[A]. Turquand’s Rule (Royal British Bank v. Turquand)
[B]. Rule in Rylands v. Fletcher
[C]. The Neighbour Principle
[D]. The Grundnorm theory

(47). [CLAT-PG 2021] Can a company change its registered office from one State to another?

[A]. No, never.
[B]. Yes, by passing a special resolution and obtaining approval from the Central Government (NCLT/MCA).
[C]. Yes, by a simple board vote.
[D]. Only with Presidential assent.

(48). The legal document inviting deposits or offering shares/debentures to the public for subscription is termed a:

[A]. Prospectus (Section 2(70))
[B]. Memorandum
[C]. Balance sheet
[D]. Tax invoice

(49). [AIBE 2023] The overarching jurisprudential purpose of Company Law is to:

[A]. Facilitate capital formation and economic growth through limited liability while preventing corporate fraud via robust governance.
[B]. Abolish private enterprise.
[C]. Give absolute immunity to corporate boards.
[D]. Increase litigation.

(50). The synergy across Unit I confirms that corporate personality, registration frameworks, classification types, and veil-lifting doctrines work together to ensure that modern commerce operates with:

[A]. Legal certainty, structured accountability, and protected investor liability.
[B]. Complete anarchy.
[C]. Feudal privilege.
[D]. Purely oral contracts.

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