Practicing Success

Target Exam

CUET

Subject

Business Studies

Chapter

Formation of a Company

Question:

Who examine the feasibility of the idea, assemble resources, prepare necessary documents, give a name and perform various other activities to get a company registered and obtain the necessary certificate enabling the company to commence business?

Options:

Shareholders

Directors

Promoters

Manager

Correct Answer:

Promoters

Explanation:

The correct answer is option 3- Promoters.

A promoter is said to be the one who undertakes to form a company with reference to a given project and to set it going and who takes the necessary steps to accomplish that purpose. Thus, apart from conceiving a business opportunity the promoters analyse its prospects and bring together the men, materials, machinery, managerial abilities and financial resources and set the organisation going. As per section 69, a promoter means a person
(a) Who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or
(b) Who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or
(c) In accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act.However, it is provided that nothing in this sub-clause shall apply to a person who is acting merely in a professional capacity.

After thoroughly examining the feasibility of the idea, the promoters assemble resources, prepare necessary documents, give a name and perform various other activities to get a company registered and obtain the necessary certificate enabling the company to commence business. Thus, the promoters perform various functions to bring a company into existence.