Formation of a Company (VSAQs)

Commerce-1 | 6. Formation of a Company – VSAQs:
Welcome to VSAQs in Chapter 6: Formation of a Company. This page includes the most important FAQs from previous exams. Each answer is provided in simple English and presented in the exam format. This approach helps you prepare effectively and aim for top marks in your final exams.

Overview:

VSAQ-1: Who is a Promoter?

A Promoter is like the driving force behind the creation of a new company. Imagine you and your friends have a great business idea, but someone needs to take the lead to make it happen. That person, who organizes everything, gathers resources, and manages the early steps to bring the company to life, is the promoter. They are the ones who get the ball rolling by handling all the legal and financial arrangements to set up the company. Once everything is set up and the company is ready to operate, the promoter usually hands over control to the company’s directors, who then take charge of running the business.

VSAQ-2: What is Capital Subscription?

Capital Subscription is like a startup gathering support to launch. When a public company is about to begin its business, it needs to secure enough financial backing, or capital, from the public. Think of it as the company inviting people to buy shares, much like a crowdfunding campaign. The company issues a document called a prospectus that outlines what the company plans to do and why investing in it might be a good idea. There’s usually a rule that at least 90% of the shares offered must be subscribed to by the public within a set time, often 120 days. If the company reaches this goal, it can then officially start its operations. This process ensures that the company has the necessary funds to get started and grow.