Class 9 Commercial Studies — Chapter 7: Joint Stock Company (Chapter-wise Questions Answers and MCQs)

Class 9 Commercial Studies — Chapter 7: Joint Stock Company (Chapter-wise Questions Answers and MCQs)

Joint Stock Company 

Exam-Based MCQs

1. A Joint Stock Company is:

A. A partnership firm 

B. An incorporated association of persons C. A sole proprietorship 

D. A cooperative society

Answer: B

2. A Joint Stock Company is created by:

A. Agreement 

B. Law 

C. Partnership deed 

D. Custom

Answer: B

3. Which feature makes a company different from its shareholders?

A. Common Seal 

B. Separate Legal Entity 

C. Corporate Finance 

D. Transferability

Answer: B

4. A company is known as an:

A. Natural Person 

B. Artificial Legal Person 

C. Minor 

D. Partnership

Answer: B

5. The capital of a Joint Stock Company is divided into:

A. Units 

B. Shares 

C. Debentures 

D. Bonds

Answer: B

6. The feature that ensures the company continues despite death of members is:

A. Limited Liability 

B. Perpetual Succession 

C. Common Seal 

D. Corporate Finance

Answer: B

7. Members of a company have:

A. Unlimited liability 

B. Limited liability 

C. Joint liability 

D. No liability

Answer: B

8. Shares of a public company are generally:

A. Non-transferable 

B. Freely transferable 

C. Transferable only with court permission

D. Never transferable

Answer: B

9. The official signature of a company is:

A. Prospectus 

B. Common Seal 

C. Memorandum 

D. Articles

Answer: B

10. Members elect ______ to manage the company.

A. Employees 

B. Directors 

C. Creditors 

D. Auditors

Answer: B

11. Which feature allows a company to own property?

A. Separate Legal Entity 

B. Limited Liability 

C. Corporate Finance 

D. Common Seal

Answer: A

12. Which feature allows a company to raise huge capital?

A. Corporate Finance 

B. Artificial Person 

C. Common Seal 

D. Voluntary Association

Answer: A

13. Government regulates companies through:

A. Partnership Act 

B. Companies Act 

C. Sale of Goods Act 

D. Contract Act

Answer: B

14. Aman sold his company shares without asking other shareholders. Which feature is shown?

A. Common Seal 

B. Transferability of Shares 

C. Corporate Finance 

D. Artificial Person

Answer: B

15. A company's creditor cannot recover money from shareholders' personal property.

This shows:

A. Corporate Finance 

B. Limited Liability 

C. Common Seal 

D. Public Goodwill

Answer: B

16. Even after all shareholders changed, the company continued.

Which feature is shown?

A. Common Seal 

B. Perpetual Succession 

C. Artificial Person 

D. Democratic Management

Answer: B

17. A company entered into an agreement in its own name.

Which feature allowed this?

A. Separate Legal Entity 

B. Limited Liability 

C. Transferability 

D. Common Seal

Answer: A

18. Members elect directors but do not manage daily affairs.

This shows:

A. Democratic Management 

B. Partnership 

C. Sole Proprietorship 

D. Unlimited Liability

Answer: A

19. Thousands of investors purchased shares of a company.

Which merit is shown?

A. Efficient Management 

B. Large Capital Resources 

C. Public Goodwill 

D. Common Seal

Answer: B

20. Directors delayed an important decision because approvals were required.

Which demerit is shown?

A. Lack of Motivation 

B. Delay in Decisions 

C. Social Evils 

D. Corrupt Management

Answer: B

21. Which is NOT a merit?

A. Large Capital Resources 

B. Efficient Management 

C. Public Goodwill 

D. Economic Oligarchy

Answer: D

22. Which merit attracts investors most?

A. Common Seal 

B. Limited Liability 

C. Delay in Decisions 

D. Government Control

Answer: B

23. Large-scale production becomes possible due to:

A. Economies of Scale 

B. Common Seal 

C. Artificial Person 

D. Transferability

Answer: A

24. Professional managers improve:

A. Efficient Management 

B. Social Evils 

C. Legal Formalities 

D. Delay in Decisions

Answer: A

25. Public confidence increases because of:

A. Public Goodwill 

B. Economic Oligarchy 

C. Social Evils 

D. Corrupt Management

Answer: A

26. Formation of a company is expensive because of:

A. Legal Formalities 

B. Public Goodwill 

C. Democratic Management 

D. Economies of Scale

Answer: A

27. Ownership and management are separated, resulting in:

A. Efficient Management 

B. Lack of Motivation 

C. Corporate Finance 

D. Public Goodwill

Answer: B

28. Fraud by directors is known as:

A. Economic Oligarchy 

B. Corrupt Management 

C. Social Advantage 

D. Democratic Management

Answer: B

29. Excessive rules and regulations lead to:

A. Efficient Management 

B. Excessive Government Control 

C. Corporate Finance 

D. Public Goodwill

Answer: B

30. Share price manipulation results in:

A. Healthy Investment 

B. Unhealthy Speculation 

C. Democratic Management 

D. Efficient Management

Answer: B

31. Minimum members in a Public Company are:

A. 2 

B. 5 

C. 7 

D. 10

Answer: C

32. Minimum members in a Private Company are:

A. 1 

B. 2 

C. 5 

D. 7

Answer: B

33. Maximum members in a Private Company are:

A. 50 

B. 100 

C. 200 

D. Unlimited

Answer: C

34. Which company can invite the public to subscribe for shares?

A. Private Company 

B. Public Company 

C. OPC 

D. Partnership

Answer: B

35. Which company must issue a prospectus?

A. Private Company 

B. Public Company 

C. Partnership 

D. OPC

Answer: B

36. Which company can start business immediately after incorporation?

A. Public Company 

B. Private Company 

C. Government Company 

D. Listed Company

Answer: B

37. Implied agency exists in:

A. Joint Stock Company 

B. Partnership 

C. OPC 

D. Public Company

Answer: B

38. Unlimited liability exists in:

A. Public Company 

B. Private Company 

C. Partnership 

D. OPC

Answer: C

39. OPC means:

A. One Person Company 

B. One Public Company 

C. One Private Company 

D. One Partnership Company

Answer: A

40. OPC has:

A. Two members 

B. One member 

C. Seven members 

D. Fifty members

Answer: B

41. OPC is governed by:

A. Partnership Act 

B. Companies Act, 2013 

C. Contract Act 

D. Sale of Goods Act

Answer: B

42. Liability of an OPC owner is:

A. Unlimited 

B. Limited 

C. Joint 

D. Personal

Answer: B

43. A company owns land in its own name. Shareholders cannot claim it personally. Which feature applies?

A. Limited Liability 

B. Separate Legal Entity 

C. Common Seal 

D. Democratic Management

Answer: B

44. A shareholder dies, but the company continues. This is because of:

A. Corporate Finance 

B. Perpetual Succession 

C. Public Goodwill 

D. Limited Liability

Answer: B

45. Investors feel safe because they can lose only the amount invested.

This reflects:

A. Corporate Finance 

B. Limited Liability 

C. Democratic Management 

D. Common Seal

Answer: B

46.

Assertion: A company is a separate legal entity.

Reason: It can own property in its own name.

A. Both true and Reason explains Assertion 

B. Both true but Reason doesn't explain 

C. Assertion true, Reason false 

D. Assertion false, Reason true

Answer: A

47.

Assertion: Shareholders are personally liable for company debts.

Reason: Liability of shareholders is limited.

A. Both true 

B. Assertion true, Reason false 

C. Assertion false, Reason true 

D. Both false

Answer: C

48.

Assertion: A company enjoys perpetual succession.

Reason: Death of members does not dissolve the company.

A. Both true and Reason explains Assertion 

B. Both true but unrelated 

C. Assertion true, Reason false 

D. Both false

Answer: A

49. Which form of business is most suitable for raising huge capital while giving investors limited liability?

A. Sole Proprietorship 

B. Partnership 

C. Joint Stock Company 

D. HUF

Answer: C

50. Which famous case established the principle of Separate Legal Entity?

A. Donoghue v. Stevenson 

B. Salomon v. Salomon & Co. Ltd. 

C. Carlill v. Carbolic Smoke Ball 

D. Ashbury Railway Case

Answer: B

Joint Stock Company 

Exam-Based Short Questions with Answers 

1. A company continues its business even after the death of its founder. Which feature is shown?

Answer: Perpetual Succession.

2. A shareholder sells his shares to another person without affecting the company's existence. Which feature is illustrated?

Answer: Transferability of Shares.

3. A company owns land in its own name and not in the name of its members. Which feature is shown?

Answer: Separate Legal Entity.

4. A company's creditors cannot recover debts from the personal property of shareholders. Which principle applies?

Answer: Limited Liability.

5. Why can a company sue another company in its own name?

Answer: Because it has a Separate Legal Entity.

6. Why is a joint stock company suitable for large-scale industries?

Answer: It can raise large capital from many investors.

7. A company needs ₹500 crore for expansion. Which form of business is most suitable?

Answer: Joint Stock Company.

8. A shareholder dies. Does the company automatically close?

Answer: No, because of Perpetual Succession.

9. Why is investment in a joint stock company less risky for shareholders?

Answer: Because their liability is limited.

10. Which feature allows investors to recover money by selling shares?

Answer: Transferability of Shares.

11. Why can a company continue despite changes in ownership?

Answer: Because it has perpetual succession.

12. Why are shareholders called owners but not managers?

Answer: Because management is handled by the Board of Directors.

13. Why do shareholders elect directors?

Answer: To manage the company on their behalf.

14. Which feature separates ownership from management?

Answer: Separation of Ownership and Control.

15. Why does a company have a common seal?

Answer: It acts as the official signature of the company.

16. A company enters into a contract in its own name. Which feature allows this?

Answer: Separate Legal Entity.

17. Why can a company own property independently?

Answer: Because it is an artificial legal person.

18. A member invested ₹50,000 but the company incurred huge losses. How much can he lose?

Answer: Only up to his investment (limited liability).

19. Why do investors prefer joint stock companies over partnerships?

Answer: Because of limited liability and easy transfer of shares.

20. Which feature encourages more people to invest?

Answer: Limited Liability.

21. Why can companies undertake large projects like highways or airports?

Answer: Because they can mobilise huge capital.

22. A company grows rapidly due to professional managers. Which merit is shown?

Answer: Efficient Management.

23. Why do companies enjoy economies of scale?

Answer: Because they operate on a large scale.

24. Why do companies generally enjoy public confidence?

Answer: Because they are regulated and audited.

25. How does transferability of shares benefit investors?

Answer: It provides liquidity by allowing easy sale of shares.

26. Why does a company enjoy continuity?

Answer: Ownership changes do not affect its existence.

27. Why is democratic management considered a merit?

Answer: Directors are elected by shareholders.

28. Why is capital formation easier in a company?

Answer: Because many people contribute funds.

29. Why is a company considered socially beneficial?

Answer: It creates employment and mobilises public savings.

30. Why do large companies produce goods at lower costs?

Answer: Because of economies of scale.

Application-Based Questions on Demerits

31. Why is company formation time-consuming?

Answer: Due to many legal formalities.

32. Why may company directors lack motivation?

Answer: They are salaried managers and not full owners.

33. Why are company decisions sometimes delayed?

Answer: Due to bureaucracy and multiple approvals.

34. Why can management become an oligarchy?

Answer: Because a few directors may dominate decision-making.

35. Why is there a possibility of fraud in a company?

Answer: Because dishonest management may misuse funds.

36. Why is government control considered a disadvantage?

Answer: It increases compliance and reduces flexibility.

37. Why can speculation harm shareholders?

Answer: It causes unstable share prices.

38. Why may conflicts arise in a company?

Answer: Different stakeholders have different interests.

39. Why may monopoly be considered a social evil?

Answer: It concentrates economic power in a few hands.

40. Why may investors hesitate to invest in companies with poor governance?

Answer: Due to fear of fraud and mismanagement.

41. A company invites the public to buy shares. Is it public or private?

Answer: Public Company.

42. A company has only two members and cannot invite the public. Identify it.

Answer: Private Company.

43. Which company requires at least seven members?

Answer: Public Company.

44. Which company can start business immediately after incorporation?

Answer: Private Company.

45. Which company must issue a prospectus?

Answer: Public Company.

46. Which company has freely transferable shares?

Answer: Public Company.

47. Which company has restrictions on share transfer?

Answer: Private Company.

48. Which company requires a statutory meeting?

Answer: Public Company.

49. Which business organisation has unlimited liability?

Answer: Partnership.

50. Which form has a separate legal entity—partnership or company?

Answer: Company.

51. Which business form is suitable for a single entrepreneur wanting limited liability?

Answer: One Person Company (OPC).

52. Why is OPC better than sole proprietorship for legal protection?

Answer: Because it has limited liability.

53. Why is OPC suitable for professionals?

Answer: It provides company benefits with single ownership.

54. Why is decision-making fast in an OPC?

Answer: Because there is only one owner.

55. Why can't OPC raise funds from the public?

Answer: Because it has only one member.

56. Why is business secrecy better in an OPC?

Answer: There are no partners to share confidential information.

57. Which feature protects the owner's personal assets in an OPC?

Answer: Limited Liability.

58. Why is OPC considered flexible?

Answer: It has fewer compliance requirements than larger companies.

59. Which disadvantage of OPC may affect business continuity?

Answer: Dependence on a single individual.

60. Why is democracy absent in an OPC?

Answer: Because there is only one member.

61. Why is a company called an artificial person but not a natural person?

Answer: Because it is created by law and has no physical existence.

62. Can a company be imprisoned for a crime?

Answer: No. It has no physical body but can be fined.

63. Why can shareholders change without affecting the company's identity?

Answer: Because the company has a separate legal existence.

64. Why are directors called agents of the company?

Answer: They manage the business on behalf of the company.

65. Why does the law recognise a company as different from its members?

Answer: To give it an independent legal identity.

66. Why is limited liability beneficial to economic growth?

Answer: It encourages more people to invest.

67. Why is separation of ownership and management both an advantage and a disadvantage?

Answer: It allows professional management but may reduce managers' personal motivation.

68. Why do governments regulate companies strictly?

Answer: To protect investors and the public.

69. Why are joint stock companies more suitable than partnerships for multinational businesses?

Answer: They can raise huge capital, have perpetual succession, and are professionally managed.

70. Which feature of a joint stock company is considered the foundation of modern corporate business? Why?

Answer: Separate Legal Entity, because it enables the company to own property, enter contracts, sue, and be sued independently of its members.

Joint Stock Company 

Exam-Based Long Questions with Answers 

1. Define a Joint Stock Company. Explain its features.

Answer:

Definition: A Joint Stock Company is an incorporated association of persons formed under the Companies Act to carry on business. It has a separate legal identity, perpetual succession and limited liability.

Features

a. Incorporated Association It is formed under the Companies Act after registration.

b. Separate Legal Entity A company has a legal identity separate from its members.

c. Artificial Legal Person A company exists only in the eyes of law and acts through its directors.

d. Perpetual Succession The company continues to exist despite the death or insolvency of its members.

e. Limited Liability The liability of shareholders is limited to the unpaid value of their shares.

f. Transferability of Shares Shares of a public company can be transferred freely.

g. Common Seal The common seal acts as the official signature of the company.

h. Separation of Ownership and Management Shareholders own the company, while directors manage it.

2. Explain the merits (advantages) of a Joint Stock Company.

Answer:

A Joint Stock Company enjoys the following advantages:

a. Large Capital Resources Large amounts of capital can be raised by issuing shares.

b. Limited Liability Shareholders' personal assets remain protected.

c. Perpetual Succession The company continues despite changes in membership.

d. Transferability of Shares Investors can easily buy and sell shares.

e. Efficient Management Professional managers and directors manage the company.

f. Economies of Scale Large-scale production reduces the cost per unit.

g. Public Confidence Audited accounts and government regulation increase public trust.

h. Democratic Management Directors are elected by shareholders.

i. Scope for Expansion Easy availability of capital helps expansion.

3. Explain the demerits (disadvantages) of a Joint Stock Company.

Answer:

The important demerits are:

a. Difficult Formation Formation involves many legal formalities.

b. Costly Formation Registration and compliance are expensive.

c. Delay in Decision-Making Many approvals are required before taking important decisions.

d. Separation of Ownership and Management Managers may not always work in the best interest of shareholders.

e. Lack of Motivation Directors are salaried employees and may lack personal interest.

f. Corrupt Management Dishonest directors may misuse company funds.

g. Excessive Government Control Companies must comply with many legal regulations.

h. Speculation Frequent trading of shares may encourage unhealthy speculation.

i. Economic Oligarchy A small group of directors may dominate company decisions.

4. Explain the features of a Public Company.

Answer:

A Public Company has the following features:

a. Minimum seven members.

b. No maximum limit on members.

c. Minimum three directors.

d. Can invite the public to subscribe to shares.

e. Shares are freely transferable.

f. Must issue a prospectus before inviting public investment.

g. Must comply with more legal formalities than a private company.

5. Explain the features of a Private Company.

Answer:

A Private Company has the following features:

a. Minimum two members.

b. Maximum 200 members.

c. Minimum two directors.

d. Cannot invite the public to subscribe to shares.

e. Restricts transfer of shares.

f. Can commence business immediately after incorporation.

g. Enjoys fewer legal formalities than a public company.

6. Distinguish between a Public Company and a Private Company.

Basis                                 Public Company             Private Company

Minimum Members                     7                                     2

Maximum Members                   No limit                             200

Directors                                     Minimum 3                     Minimum 2

Invitation to Public                         Allowed                           Not allowed

Transfer of Shares                         Freely transferable       Restricted

Prospectus                                     Compulsory              Not required

Commencemen After fulfilling legal requirements Immediately after incorporation

7. Explain the merits and demerits of a Public Company.

Answer:

Merits

a. Large capital resources.

b. Limited liability.

c. Perpetual succession.

d. Professional management.

e. Easy transfer of shares.

f. Public confidence.

g. Economies of scale.

Demerits

i. Costly formation.

ii. Lengthy legal formalities.

iii. Delay in decisions.

iv. Government control.

v. Possibility of fraud.

vi. Lack of motivation.

vii. Unhealthy speculation.

8. Explain the characteristics of One Person Company (OPC).

Answer:

i. Single Member Only one person owns the company.

ii. Separate Legal Entity The company has its own legal identity.

iii. Limited Liability The owner's liability is limited.

iv. Perpetual Succession Business continues through the nominee if required.

v. Separate Management The owner may appoint directors if necessary.

vi. Registration under the Companies Act, 2013 is compulsory.

9. Explain the advantages of One Person Company (OPC).

Answer:

i. Limited liability.

ii. Separate legal identity.

iii. Easy decision-making.

iv. Better credibility.

v. Continuous existence.

vi. Better access to loans.

vii. Full control by one owner.

10. Explain the disadvantages of One Person Company (OPC).

Answer:

i. Limited capital.

ii. Cannot invite the public to invest.

iii. Depends on one person.

iv. Restricted business growth.

v. Legal compliances are compulsory.

11. Explain why a Joint Stock Company is suitable for large-scale business.

Answer:

A Joint Stock Company is suitable because:

1i. It can raise huge capital from the public.

ii. Shareholders enjoy limited liability.

iii. Professional managers run the business.

iv. The company has perpetual succession.

v. Shares are easily transferable.

vi. Large-scale production reduces costs.

vii. It enjoys public confidence.

12. Explain the importance of Separate Legal Entity.

Answer:

A separate legal entity means the company is different from its members.

Its importance is:

i. The company can own property.

ii. It can enter into contracts.

iii. It can sue and be sued.

iv. Members are not owners of company assets.

v. The company continues despite changes in shareholders.

13. Explain the importance of Limited Liability.

Answer:

Limited liability protects shareholders because:

i. Personal assets remain safe.

ii. Risk is limited to investment.

iii. More investors are attracted.

iv. Large capital can be raised.

v. It encourages entrepreneurship.

14. Why is a Joint Stock Company called an Artificial Legal Person?

Answer:

A company is called an artificial legal person because:

i. It is created by law.

ii. It has a separate legal identity.

iii. It owns property in its own name.

iv. It can sue and be sued.

v. It acts through its directors.

vi. It has no physical body but enjoys legal rights.