This is Set VIII, the last set in our CSE332 Industry Ethics and Legal Issues MCQ series. It covers company law under the Companies Act, 2013 and Corporate Social Responsibility (CSR) under Section 135.
You will find questions on private, public and One Person Companies, the Memorandum and Articles of Association, directors and DIN, and the CSR thresholds and the 2% spending rule, including a short calculation of the kind that often turns up in exams.
How to use this set: pick an option for each question. You will see straight away whether it is right, with a short note on why. There are 15 questions.
What this set covers
- Features of a company: separate legal entity and perpetual succession
- Private company, public company and One Person Company
- Certificate of incorporation, MoA and AoA
- Directors, independent directors and DIN
- Section 8 companies
- CSR under Section 135: thresholds and the 2% rule
Industry Ethics and Legal Issues MCQs with answers and explanations
Q1. A company registered under the Companies Act, 2013 is a separate legal entity. This means:
a) The company can own property, enter contracts and sue or be sued in its own name
b) The company ends when a shareholder dies
c) The company and its members are legally the same person
d) Members are personally liable for all company debts
Q2. The feature that a company continues to exist even when its members change or die is called:
a) Perpetual succession
b) Indoor management
c) Limited liability
d) Ultra vires
Q3. What are the minimum and maximum number of members for a private company?
a) Minimum 2, maximum 50
b) Minimum 1, maximum 50
c) Minimum 2, maximum 200
d) Minimum 7, no maximum
Q4. Which of these is a key feature of a private company?
a) Its articles restrict the right to transfer shares and it cannot invite the public to subscribe to its securities
b) It cannot have limited liability
c) It must have at least 7 directors
d) Its shares are freely traded on the stock exchange
Q5. A public company must have at least:
a) 7 members
b) 50 members
c) 200 members
d) 2 members
Q6. What is the minimum number of directors for a public company?
a) 7
b) 3
c) 2
d) 1
Q7. A One Person Company (OPC) under the Companies Act, 2013 has:
a) Only government shareholders
b) At least seven members
c) Exactly two members
d) Only one member, who must be a natural person
Q8. The certificate of incorporation is issued by the:
a) Reserve Bank of India
b) Registrar of Companies
c) Securities and Exchange Board of India
d) District Court
Q9. The Memorandum of Association (MoA) mainly sets out:
a) The company's marketing plan
b) The company's name, registered office, objects, liability and capital, that is, its relationship with the outside world
c) The salary of each employee
d) The internal rules for meetings and the day-to-day management
Q10. If a company does something completely outside the objects stated in its Memorandum of Association, the act is:
a) Automatically legal after one year
b) Ultra vires and void
c) Valid only for public companies
d) Valid if the directors approve it
Q11. The doctrine of indoor management protects:
a) Auditors from liability
b) The Registrar of Companies
c) Directors from shareholders
d) Outsiders dealing with the company in good faith, who can assume internal procedures have been properly followed
Q12. A Director Identification Number (DIN) is:
a) The number of directors on a board
b) The registration number of a company
c) A tax number for companies
d) A unique number given to a person who wants to be appointed as a director
Q13. A company formed to promote charity, education, art, science or similar objects, which uses its profits only for those objects and pays no dividend to members, is registered under:
a) Section 2(68)
b) Section 8
c) Section 149
d) Section 135
Q14. Under Section 135, CSR rules apply to a company that in the preceding financial year has:
a) More than 500 employees
b) At least 7 directors
c) Any profit at all
d) Net worth of ₹500 crore or more, or turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more
Q15. A company covered by CSR rules had average net profits of ₹30 crore over the three immediately preceding financial years. Its minimum CSR spend for the year is:
a) ₹3 crore
b) ₹30 lakh
c) ₹60 lakh
d) ₹1.5 crore
Quick revision notes
- Companies Act 2013 replaced the 1956 Act. A company is a separate legal entity with perpetual succession and (usually) limited liability.
- Private: min 2, max 200 members, min 2 directors, restricted share transfer. Public: min 7 members, min 3 directors, freely transferable shares. OPC: 1 member (a natural person), min 1 director. Max directors: 15 (more with a special resolution).
- Certificate of incorporation is issued by the Registrar of Companies. MoA = external charter (name, registered office, objects, liability, capital). AoA = internal rules.
- Ultra vires acts are void. Indoor management protects outsiders acting in good faith. DIN is for individuals. Section 8 = non-profit companies.
- CSR (Section 135): net worth ≥ ₹500 crore or turnover ≥ ₹1,000 crore or net profit ≥ ₹5 crore. Spend at least 2% of average net profit of the 3 preceding years on Schedule VII activities.
Frequently asked questions
What is the difference between MoA and AoA?
The MoA defines what the company can do and its relationship with outsiders, including its objects. The AoA sets the internal rules for running the company, such as how meetings are called and what powers directors have. The AoA cannot go beyond the MoA.
Is CSR compulsory for every company in India?
No. Only companies that cross at least one of the three Section 135 thresholds in the preceding financial year must spend on CSR. Smaller companies can still do CSR voluntarily.
Can a private company become a public company?
Yes. It can convert by changing its articles to remove the restrictions of a private company, meeting the requirements for members and directors, and filing the required documents with the Registrar.
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Frequently asked questions
What does CSE332 Industry Ethics and Legal Issues cover?
It covers professional and business ethics, codes of conduct, intellectual property rights (patents, copyright, trademarks), cyber law in India including the IT Act 2000, and ethical issues such as privacy, data security and plagiarism in the IT industry.
How should I use these MCQ sets?
Attempt every question before checking the answer, note the ones you get wrong, and revise those topics from your course notes. Then move to the next set in the series.
Are these questions from the actual exam?
No. They are practice questions written to match the course syllabus. Use them alongside your class material and previous papers.
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