Types of Companies and Incorporation: Features, Memorandum and Articles of Association (MOA/AOA), Doctrine of Ultra Vires Questions

Question 1

What is incorporation of a company?

Accepted Answer

Incorporation is the legal process of registering a company under law to obtain a **separate legal identity**.

Question 2

State one classification of companies based on liability.

Accepted Answer

Companies based on liability include **company limited by shares** (also limited by guarantee / unlimited).

Question 3

What is MOA?

Accepted Answer

MOA (Memorandum of Association) is the company’s charter defining its **objects and powers** and relationship with outsiders.

Question 4

What is AOA?

Accepted Answer

AOA (Articles of Association) contains the **internal rules** for management and administration of the company.

Question 5

An ultra vires act can be ratified by shareholders. (True/False)

Accepted Answer

False. An act beyond the company’s **MOA powers** (ultra vires) is void and cannot be ratified.

Question 6

Who is a promoter (one line)?

Accepted Answer

A **promoter** is a person who takes steps to form a company, arrange initial requirements and complete incorporation.

Question 7

Differentiate private and public company (any three points) using a table.

Accepted Answer

Private vs public company:

| Basis | Private company | Public company |
|---|---|---|
| Share transfer | **restricted** | generally transferable |
| Public invitation | cannot invite public | can invite public (as per law) |
| Compliance | relatively less | relatively more |

Thus, private companies have closer control; public companies have wider ownership and compliance.

Question 8

Explain types of companies based on liability using a table (brief).

Accepted Answer

Companies based on liability:

| Type | Liability |
|---|---|
| **Limited by shares** | unpaid amount on shares |
| **Limited by guarantee** | guaranteed amount |
| Unlimited | no limit (rare) |

Hence, liability classification shows the extent of members’ risk.

Question 9

Write the steps in incorporation (brief) as a flowchart.

Accepted Answer

Incorporation steps (flow):

Name selection → Prepare **MOA/AOA** → File forms with ROC + declarations → Scrutiny/fees → **Certificate of Incorporation**

This creates the company as a legal person.

Question 10

Differentiate MOA and AOA using a table (any three points).

Accepted Answer

MOA vs AOA:

| Basis | **MOA** | **AOA** |
|---|---|---|
| Nature | charter; defines powers | internal rules |
| Governs | external relationship | internal management |
| Importance | supreme (subject to Act) | subordinate to MOA/Act |

Thus, MOA defines scope; AOA governs internal administration.

Question 11

Explain Certificate of Incorporation and its legal significance (brief) with a small table.

Accepted Answer

The **Certificate of Incorporation** is issued by the ROC after registration of the company.

| Point | Significance |
|---|---|
| Evidence | conclusive proof that the company is incorporated |
| Effect | company becomes a **separate legal entity** |
| Result | company can commence legal existence (and acts as per law) |

Hence, it is the official proof of the company’s birth.

Question 12

Explain clauses of MOA (exam-style) with a table and conclusion.

Accepted Answer

### Clauses of MOA

| Clause | Meaning |
|---|---|
| **Name clause** | company’s legal name |
| **Registered office clause** | state/location of registered office |
| **Object clause** | main and incidental objects/powers |
| **Liability clause** | extent of members’ liability |
| Capital clause | authorised capital (if share capital) |
| Subscription clause | initial subscribers and shares taken |

### Conclusion
MOA is the charter document defining the company’s identity and limits of powers; it is crucial for outsiders and governance.

Question 13

Explain doctrine of ultra vires: meaning, effects and exceptions (exam-style) with a table and conclusion.

Accepted Answer

### Meaning
An act is **ultra vires** when it is beyond the company’s powers/objects stated in the **MOA**.

### Effects
- ultra vires act is **void** and cannot be ratified
- company is not bound by it
- directors may be liable to restore loss if they exceed authority

| Situation | Result |
|---|---|
| Beyond MOA objects (**ultra vires**) | void |
| Within MOA but violates AOA/procedure | irregular; may be ratified |

### Conclusion
Ultra vires doctrine protects shareholders and creditors by keeping the company within its authorised objects and powers.

Question 14

Write an exam-style note on incorporation: meaning, steps and legal effects (include a flow/table and conclusion).

Accepted Answer

### Meaning
Incorporation is registration of a company under law, giving it **separate legal identity**.

### Steps (flow)
Name → MOA/AOA → ROC filing → Scrutiny/fees → **Certificate of Incorporation**

### Legal effects
| Effect | Meaning |
|---|---|
| **Legal person** | company can sue/be sued |
| Perpetual succession | continues despite member changes |
| Separate property | owns assets in its name |
| Limited liability | members’ risk is limited (as applicable) |

### Conclusion
Incorporation is essential because it creates the company as a legally recognised entity with continuity and defined rights/powers.

Question 15

Explain promoters: role and duties (fiduciary position) (exam-style) with a table and conclusion.

Accepted Answer

Promoters take steps to form the company (idea, documents, filings, arrangements).

Duties (fiduciary):

| Duty | Meaning |
|---|---|
| **Disclosure** | disclose material interest/facts |
| No secret profit | avoid undisclosed gains |
| Good faith | act honestly for the company |

Thus, promoters must act in **good faith** and be transparent.

Basis	Private company	Public company
Share transfer	restricted	generally transferable
Public invitation	cannot invite public	can invite public (as per law)
Compliance	relatively less	relatively more

Types of Companies and Incorporation: Features, Memorandum and Articles of Association (MOA/AOA), Doctrine of Ultra Vires

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