Easy2Siksha Sample Papers
(GNDU) MOST REPETED (IMPORTANT) QUESTIONS
B.COM 3
rd
SEMESTER
Company Law
Repeated Quesons
1. Dene 'Company' and Explain its Characteriscs
(Frequency: 4, Years: 2021, 2022, 2023, 2024)
2. Disnguish between Private Company and Public Company
(Frequency: 3, Years: 2021, 2022, 2024)
2025 Smart Predicon Table
Based on 4-Year Queson Paper Analysis
Topic
No. of
Repeats
(2021–2024)
Years
Appeared
Priority Rang
Denion & Characteriscs of Company
4
2021, 2022,
2023, 2024
Very
High
Memorandum of Associaon
(Denion/Clauses)
4
2021, 2022,
2023, 2024
Very
High
Easy2Siksha Sample Papers
(GNDU) MOST REPETED (important) Answers
B.COM 3
rd
SEMESTER
Company Law
Solved Answer Paper
1. Dene 'Company' and Explain its Characteriscs
(Frequency: 4, Years: 2021, 2022, 2023, 2024)
Ans: A Story to Understand “Company”
Imagine a small town where a group of friends often gathered at a tea stall. Each one of
them had different talents—Ravi was good at managing money, Priya was an excellent
planner, Amit had strong leadership skills, Neha was amazing at marketing, and Mohan was
a tech wizard.
One evening, they thought:
“What if we all come together and start a business? Alone, we can’t achieve much, but
together, we can build something big.”
Now, if they just start selling things as a group, it’s not very safe. Why? Because if the
business faces a loss, each of them would personally have to pay from their own pockets—
even selling their personal bikes, laptops, or even homes! That sounds scary, right?
So, they found a magical system that exists in the business world. It’s called a “Company.”
What is a Company?
In simple words, a company is like a separate person created by law.
Yes, you read that right. A company is not a human being of flesh and blood, but once it is
registered under the law, it becomes a legal person in the eyes of the government.
This means:
• It can own property in its own name.
Easy2Siksha Sample Papers
• It can sue others or be sued.
• It can enter into contracts.
• It has its own identity, different from the people who started it.
So, Ravi, Priya, Amit, Neha, and Mohan don’t have to sell their personal things if the
business fails. Why? Because the company is responsible for its own debts.
Definition (Legal Perspective):
A company is an artificial person created by law, having a separate legal entity, with
perpetual succession and a common seal, formed to carry on business for profit.
Sounds heavy, right? Don’t worry—we’ll break this down step by step.
Characteristics of a Company (Explained Like a Story)
Now that we know what a company is, let’s look at its unique characteristics. These are like
the “superpowers” that make a company different from other forms of business.
1. Separate Legal Entity
Think of the company as a new person born the day it is registered.
• Ravi and his friends may have formed it, but now the company lives on its own.
• If the company borrows money and fails to repay, the bank cannot directly ask Ravi
or Neha to sell their personal cars. The bank can only demand payment from the
company’s assets.
This separation is like a protective wall between the company and its owners.
2. Limited Liability
This is the most loved feature by business people.
Imagine the company took a loan of ₹10 lakhs but failed in business. Now, how much will
each friend lose? Only the money they invested in the company’s shares.
• If Priya bought shares worth ₹50,000, her maximum loss is ₹50,000.
• She doesn’t need to sell her house or jewelry to repay company debts.
This “limited liability” gives entrepreneurs the courage to take risks.
Easy2Siksha Sample Papers
3. Perpetual Succession (Never-Ending Life)
What happens if Ravi moves to another country? Or Amit sadly passes away? Does the
company die too?
No! The company continues to exist.
A company has perpetual succession, which means it never dies—it continues until the law
shuts it down. Owners may change, but the company remains.
It’s like a river—people come and go, but the river keeps flowing.
4. Artificial Legal Person
A company is not a human being, but the law treats it like a “person.”
• It cannot eat, sleep, or walk.
• But it can buy property, sign contracts, and pay taxes.
• Since it cannot speak or sign on its own, it acts through directors or authorized
officers.
Think of it like a robot created by law—it doesn’t breathe but still functions like a person in
business.
5. Separate Ownership and Management
In small businesses, the owner and manager are usually the same person. But in a company,
things are different.
• Owners = Shareholders (they invest money).
• Managers = Directors (they run the company).
For example, our friends may all own shares, but they appoint Amit as the Managing
Director. So, Amit takes day-to-day decisions, while others just attend meetings and receive
profits.
This separation ensures professional management.
Easy2Siksha Sample Papers
6. Transferability of Shares
One day, Mohan decides he no longer wants to be part of the company. Can he leave?
Yes! He can sell his shares to someone else. That new person becomes a part-owner of the
company.
This freedom makes companies attractive to investors—they can enter and exit easily.
7. Common Seal (Now Mostly Optional)
Earlier, companies had an official seal (like a stamp) that worked as its signature.
Whenever the company signed an agreement, this seal was placed on the document. Today,
with digital and director-based authorizations, this is optional in many countries, including
India.
8. Capacity to Sue and be Sued
Just like a person, a company can go to court if someone cheats it. Similarly, if the company
does something wrong, others can sue it.
For example, if the company supplies faulty products, customers can file a case against the
company—not against Ravi or Neha personally.
9. Separate Property
The property belongs to the company, not to its members.
If the company buys an office building, shareholders cannot say:
“This is our personal property, let’s use it for a birthday party.”
No—the property belongs strictly to the company as a separate person.
10. Regulation and Compliance
Unlike a small shop, a company must follow strict legal rules.
• It has to register under the Companies Act.
• It must file annual reports, pay taxes, and hold meetings.
Easy2Siksha Sample Papers
• This ensures transparency and protects shareholders and the public.
Why These Characteristics Matter
All these characteristics make the company a powerful tool for business.
• Investors feel safe because their risk is limited.
• Businesses can grow because the company has a long life.
• Owners can easily transfer their ownership.
• The law keeps checks to ensure fair play.
That’s why most large businesses we see today—like Reliance, Tata, Infosys, or Apple—are
companies, not partnerships or sole proprietorships.
Putting It All Together
So, when Ravi and his friends registered their company, something magical happened:
• A new legal person was born.
• They got protection from unlimited losses.
• Their company would live forever, even if they leave.
• They could invite new investors by selling shares.
• They had to follow government rules to stay legitimate.
That’s exactly what a company is—a creation of law that helps people do business on a
larger, safer, and more organized scale.
Conclusion (Examiner-Friendly)
To sum it up:
A company is an artificial person created by law, having a separate legal entity, perpetual
succession, limited liability for its members, and the ability to own property, enter into
contracts, and sue or be sued in its own name.
Its key characteristics—like limited liability, separate ownership and management,
transferability of shares, perpetual succession, and legal personality—make it one of the
most effective forms of business organization in the modern world.
In short, a company gives wings to the dreams of entrepreneurs while ensuring safety and
continuity.
Easy2Siksha Sample Papers
2. Disnguish between Private Company and Public Company
(Frequency: 3, Years: 2021, 2022, 2024)
Ans: A Tale of Two Companies: Private vs. Public
Imagine two brothers, Aarav and Vihaan. Both dream of starting their own businesses. They
are equally ambitious, but they choose very different paths.
• Aarav wants to keep things close-knit. He says, “I’ll start small with family and
friends. I don’t want outsiders interfering in my business.” He decides to form a
Private Company.
• Vihaan, on the other hand, dreams big. He says, “I want the whole world to invest in
my company. I’ll raise money from the public, list on the stock exchange, and expand
fast.” He chooses to form a Public Company.
And that’s how our story begins – with the two brothers taking different routes. Now, let’s
walk through their journeys and understand the key differences between Private Company
and Public Company, one by one.
Diagram of Private Company and Public Company
1. Meaning and Nature
• Aarav’s Private Company is like a close family dinner. Only selected people are
invited, and everything remains within a small circle. A private company is one where
ownership is restricted to a small group, usually family, friends, or known investors.
• Vihaan’s Public Company is like a wedding feast in a big town hall. Anyone can join,
provided they buy a ticket (in this case, shares). A public company offers its shares to
the general public and is usually listed on the stock exchange.
In simple words:
Easy2Siksha Sample Papers
• Private Company = Business with close and known members.
• Public Company = Business open to the public at large.
2. Minimum and Maximum Members
• Aarav wants to keep his company private. The law supports him. So, his Private
Company needs only 2 members at minimum and can go up to 200 members
maximum (excluding employees and past employees).
• Vihaan, aiming for the public, needs a bigger setup. A Public Company requires at
least 7 members to start, but there is no maximum limit. Even lakhs of shareholders
can be part of it.
Think of it like this:
• Private Company = Small gathering, max 200 people.
• Public Company = Open concert, unlimited crowd.
3. Transfer of Shares
One evening, Aarav’s cousin says, “I want to sell my shares to my friend.” Aarav immediately
replies, “No, no! Outsiders are not allowed just like that. We must first offer the shares to
existing members. Only if no one is interested, then maybe.”
That’s the rule of a Private Company – shares cannot be freely transferred.
On the other hand, in Vihaan’s Public Company, anyone can sell shares freely in the stock
market. If you own Reliance shares, you don’t need Mukesh Ambani’s permission to sell
them. That’s the beauty of a Public Company – shares are freely transferable.
Difference is simple:
• Private Company = Restricted transfers.
• Public Company = Free trade of shares.
4. Raising Capital
• Aarav, with his private setup, cannot go to the public to raise money. He can only ask
relatives, friends, or venture capitalists.
• Vihaan, however, is free to issue prospectus and invite the public to buy shares. He
can also list his company on the stock exchange to raise massive capital.
Easy2Siksha Sample Papers
That’s why big giants like Tata, Infosys, Reliance are Public Companies – they need huge
funds to run their operations.
5. Number of Directors
• In Aarav’s Private Company, he needs only 2 directors to run the show.
• In Vihaan’s Public Company, he must have at least 3 directors.
Though both can have more, the law prescribes these minimums.
6. Use of the Word “Limited”
• Aarav’s company will end with “Private Limited” (e.g., Aarav Foods Pvt. Ltd.).
• Vihaan’s company will end with “Limited” (e.g., Vihaan Industries Ltd.).
This one word makes a huge difference. The moment you see “Pvt. Ltd.” you know it’s
private; if it’s just “Ltd.”, it’s public.
7. Secrecy vs. Transparency
• Aarav enjoys more privacy. He doesn’t have to reveal as much to the public. His
company’s internal matters remain within the group.
• Vihaan, on the other hand, must disclose everything – financial reports, director
salaries, expansion plans, etc. Public companies are under heavy regulatory
compliance because they use people’s money.
So:
• Private Company = More secrecy.
• Public Company = More transparency.
8. Compliance Burden
Running a private company is like driving a scooter – fewer rules, less paperwork. Aarav
needs to file fewer returns and follow less strict laws.
But running a public company is like flying a plane – lots of checks, licenses, and compliance.
Vihaan must follow strict rules of SEBI, Companies Act, and Stock Exchange guidelines.
Easy2Siksha Sample Papers
9. Examples
• Private Company Examples: Flipkart (before being acquired by Walmart), Ola, Byju’s
(before IPO).
• Public Company Examples: Reliance Industries Ltd., Tata Motors Ltd., Infosys Ltd.,
HDFC Bank Ltd.
10. Advantages and Disadvantages
Private Company (Aarav)
Advantages:
• More control and decision-making freedom.
• Less compliance burden.
• Greater privacy.
Disadvantages:
• Limited funds.
• Shares not easily transferable.
• Cannot raise money from the public.
Public Company (Vihaan)
Advantages:
• Easy to raise large amounts of capital.
• Shares can be freely traded.
• Increased credibility and trust.
Disadvantages:
• Heavy compliance burden.
• Reduced secrecy (everything must be disclosed).
• Risk of hostile takeovers.
11. A Quick Tabular Comparison
Easy2Siksha Sample Papers
Basis
Private Company
Public Company
Minimum Members
2
7
Maximum Members
200
Unlimited
Transfer of Shares
Restricted
Freely transferable
Capital Raising
Cannot invite public
Can invite public
Directors
Minimum 2
Minimum 3
Name Ending
Pvt. Ltd.
Ltd.
Secrecy
High
Low
Compliance
Less
Heavy
12. The Brothers’ Journey – Final Outcome
Years later, Aarav and Vihaan meet again.
• Aarav says, “I am happy. My company is small but manageable. I know all my
shareholders personally. We take decisions quickly without interference.”
• Vihaan replies, “My journey was tough. I had to follow strict laws, disclose
everything, and handle thousands of shareholders. But look at my empire – my
company is known all over the world!”
Both brothers smile because both paths have their own beauty. Neither Private nor Public
Company is “better” in all cases – it depends on the dream, the scale, and the vision of the
entrepreneur.
13. The Final Word
In essence, a Private Company is like a small, close-knit family where secrecy, flexibility, and
control are valued more than size. A Public Company, on the other hand, is like a massive
joint family where transparency, credibility, and access to resources matter more.
So, the difference between the two is not just about legal points – it’s about mindset. Do
you want a business that feels like a private dinner with known faces, or a grand concert
where the whole world can participate?
Both are important for the economy. Small startups often begin as Private Companies, and
once they grow, many of them turn into Public Companies to raise more money and expand
globally.
Easy2Siksha Sample Papers
“This is only a part of the preparation journey.
For full access to repeated questions and detailed answers, purchase our
Premium Papers and boost your chances of scoring higher!”
