Which of the following is true in relation to a company and the issue of shares ?
A. A company is an artificial person with separate legal entity, perpetual succession and a common seal.
B. Share calls are to be made as per the provisions of the articles of association.
C. Minimum subscription of 75% is must for issue of shares.
D. The procedure for accounting for the issue of both equity and preference shares is the same. To differentiate between the two, the words 'Equity' and 'Preference' is prefixed to each and every instalment.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → A, B and D only
A. A company is an artificial person with separate legal entity, perpetual succession and a common seal — Correct. These are the defining features of a company: it is created by law, it survives the death or departure of its members, and it signs through its seal.
B. Share calls are to be made as per the provisions of the articles of association — Correct. The articles govern the calls; where a company has none of its own, Table A supplies the terms — one month between calls, no call above 25% of face value, 14 days’ notice, and calls made uniformly on all shares of a class.
C. Minimum subscription of 75% is must for issue of shares — Incorrect. The figure is 90% of the issued amount, not 75%. If that much is not subscribed, the company must refund the whole of what it has received, and it must have the minimum subscription within 120 days of issuing the prospectus.
D. The procedure for accounting for the issue of both equity and preference shares is the same, the words ‘Equity’ and ‘Preference’ being prefixed to each instalment — Correct. The entries are identical; only the account names carry the label, so ‘Equity Share First Call A/c’ and ‘Preference Share First Call A/c’ stay apart in the ledger.
NCERT Extract
