Commercial Applications
A company provides its members with limited liability but requires them to contribute a specified amount in case of winding up. What type of company is this?
- Company Limited by Guarantee
- Unlimited Company
- Private Company
- One Person Company
Joint Stock Company
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Answer
Company Limited by Guarantee
Reason — In a company limited by guarantee, the liability of every member is limited to the amount which he had undertaken to contribute, if necessary, to the assets of the company at the time of winding up. This amount, called the guarantee, is specified in the Memorandum of Association. The guaranteed amount is in the nature of reserve capital which can be called upon only at the time of winding up. This type of company is generally formed to promote art, literature, sports, education and other non-business activities.
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Related Questions
Directors in a joint stock company are personally liable for all debts incurred by the company.
- True
- False
Why are joint stock companies better suited for large-scale production than partnerships?
- Joint ownership of property.
- Larger capital resources and professional management.
- Direct involvement of shareholders in management.
- Fewer legal requirements for incorporation.
Statement I : The capital share of a company is generally divided into a large number of shares of small value.
Statement II : These shares can only be bought by noble people of the society.
- Only I is correct
- Only II is correct
- Both I and II are correct
- Both I and II are wrong
A joint stock company faces criticism for holding back crucial financial information from its minority shareholders while making key decisions. What principle of corporate governance is being violated?
- Transparency and accountability
- Perpetual succession
- Limited liability
- Profit-sharing among shareholders