Commencement of Business (VSAQs)
Commerce-1 | 7. Commencement of Business – VSAQs:
Welcome to VSAQs in Chapter 7: Commencement of Business. 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.
VSAQ-1: What is Minimum Subscription?
Minimum Subscription is like setting a goal for how much support a new company needs before it can start working. Imagine you’re organizing a big event, and you decide that you need at least 100 people to buy tickets for it to be worth holding. If fewer than 100 people buy tickets, you would cancel the event and return the money. Similarly, when a public company offers shares to the public, it must raise a certain amount of money, usually at least 90% of the total shares offered, before it can officially allot those shares and begin operations. If the company doesn’t meet this minimum subscription level, it has to refund all the money to the investors and can’t move forward with its plans until it reaches that goal.
VSAQ-2: What is a Certificate of Commencement of Business?
A Certificate of Commencement of Business is like the green light a public limited company gets to start its operations. Imagine you’ve passed all your exams and now have the official letter saying you can start working in your new job. This certificate, issued by the registrar of companies, confirms that the company has met all legal requirements, including raising enough initial capital (like meeting the minimum subscription). Once the company has this certificate, it can start signing contracts, raising funds, and officially begin its business activities.
VSAQ-3: What is a Memorandum of Association (MOA)?
The Memorandum of Association (MOA) is like the rulebook for a company, outlining its basic goals and the rules it must follow. Think of it as a roadmap that tells everyone what the company is all about, what it can and cannot do, and the relationship it has with its shareholders. When a company is being formed, this document is one of the first things that must be submitted to the registrar of companies. For a public limited company, at least seven members need to sign the MOA, while for a private limited company, two members are required. This document is essential because it defines the company’s identity and scope, ensuring that everyone involved knows the purpose and limits of the company’s operations.