MCQs: Chapter 3 – Prospectus and Allotment of Securities
1. Which section of the Companies Act, 2013 deals with the issue of prospectus?
a) Section 22
b) Section 23
c) Section 25
d) Section 29
Answer: b) Section 23
2. Which company is required to issue a prospectus?
a) Private company
b) Public company making a public offer
c) One person company
d) Government company
Answer: b) Public company making a public offer
3. A ‘shelf prospectus’ is defined under which section?
a) Section 31
b) Section 26
c) Section 30
d) Section 32
Answer: a) Section 31
4. A red herring prospectus is used in:
a) Private placement
b) IPOs with fixed price
c) Book building process
d) Rights issue
Answer: c) Book building process
5. Which document must be filed with the Registrar before the issue of a prospectus?
a) Memorandum of Association
b) Certificate of Incorporation
c) Copy of the prospectus
d) Shareholders' agreement
Answer: c) Copy of the prospectus
6. A company making a public offer must be listed on:
a) Any company registry
b) A recognized stock exchange
c) Registrar of Companies
d) SEBI
Answer: b) A recognized stock exchange
7. Deemed prospectus is covered under Section:
a) 26
b) 27
c) 28
d) 25
Answer: d) Section 25
8. Which of the following is NOT required in a prospectus?
a) Objectives of the issue
b) Name of the auditor
c) Company's bank account details
d) Financial information
Answer: c) Company's bank account details
9. Shelf prospectus is valid for a period of:
a) 6 months
b) 1 year
c) 3 years
d) 2 year's
Answer: c) 1 year (from the date of first offer)
10. Private placement is defined under Section:
a) 24
b) 42
c) 40
d) 39
Answer: b) Section 42
1. Which section of the Companies Act, 2013 deals with the issue of prospectus?
a) Section 22
b) Section 23
c) Section 25
d) Section 29
Answer: b) Section 23
2. Which company is required to issue a prospectus?
a) Private company
b) Public company making a public offer
c) One person company
d) Government company
Answer: b) Public company making a public offer
3. A 'shelf prospectus' is defined under which section?
a) Section 31
b) Section 26
c) Section 30
d) Section 32
Answer: a) Section 31
4. A red herring prospectus is used in:
a) Private placement
b) IPOs with fixed price
c) Book building process
d) Rights issue
Answer: c) Book building process
5. Which document must be filed with the Registrar before the issue of a prospectus?
a) Memorandum of Association
b) Certificate of Incorporation
c) Copy of the prospectus
d) Shareholders' agreement
Answer: c) Copy of the prospectus
6. A company making a public offer must be listed on:
a) Any company registry
b) A recognized stock exchange
c) Registrar of Companies
d) SEBI
Answer: b) A recognized stock exchange
7. Deemed prospectus is covered under Section:
a) Section 26
b) Section 27
c) Section 28
d) Section 25
Answer: d) Section 25
8. Which of the following is NOT required in a prospectus?
a) Objectives of the issue
b) Name of the auditor
c) Company's bank account details
d) Financial information
Answer: c) Company's bank account details
9. Shelf prospectus is valid for a period of:
a) 6 months
b) 1 year
c) 3 years
d) 2 years
Answer: b) 1 year
10. Private placement is defined under Section:
a) Section 24
b) Section 42
c) Section 40
d) Section 39
Answer: b) Section 42
1. Which section of the Companies Act, 2013 deals with the issue of prospectus?
a) Section 22
b) Section 23
c) Section 25
d) Section 29
Answer: b) Section 23
2. Which company is required to issue a prospectus?
a) Private company
b) Public company making a public offer
c) One person company
d) Government company
Answer: b) Public company making a public offer
3. A 'shelf prospectus' is defined under which section?
a) Section 31
b) Section 26
c) Section 30
d) Section 32
Answer: a) Section 31
4. A red herring prospectus is used in:
a) Private placement
b) IPOs with fixed price
c) Book building process
d) Rights issue
Answer: c) Book building process
5. Which document must be filed with the Registrar before the issue of a prospectus?
a) Memorandum of Association
b) Certificate of Incorporation
c) Copy of the prospectus
d) Shareholders' agreement
Answer: c) Copy of the prospectus
6. A company making a public offer must be listed on:
a) Any company registry
b) A recognized stock exchange
c) Registrar of Companies
d) SEBI
Answer: b) A recognized stock exchange
7. Deemed prospectus is covered under Section:
a) Section 26
b) Section 27
c) Section 28
d) Section 25
Answer: d) Section 25
8. Which of the following is NOT required in a prospectus?
a) Objectives of the issue
b) Name of the auditor
c) Company's bank account details
d) Financial information
Answer: c) Company's bank account details
9. Shelf prospectus is valid for a period of:
a) 6 months
b) 1 year
c) 3 years
d) 2 years
Answer: b) 1 year
10. Private placement is defined under Section:
a) Section 24
b) Section 42
c) Section 40
d) Section 39
Answer: b) Section 42
11. A company may issue securities through a public offer under:
a) Section 23(1)(a)
b) Section 23(2)
c) Section 29(1)
d) Section 26
Answer: a) Section 23(1)(a)
12. Which document is used for offer of securities without inviting the public?
a) Shelf prospectus
b) Information memorandum
c) Private placement offer letter
d) Red herring prospectus
Answer: c) Private placement offer letter
13. Red herring prospectus is defined under which section?
a) Section 31
b) Section 32
c) Section 30
d) Section 28
Answer: b) Section 32
14. Filing of prospectus with the Registrar must be done before how many days of issue?
a) 10 days
b) 30 days
c) 60 days
d) 90 days
Answer: b) 30 days
15. Prospectus must be signed by:
a) All directors
b) CEO only
c) Company secretary only
d) At least two directors
Answer: a) All directors
16. Minimum subscription must be received within how many days of issue?
a) 30 days
b) 60 days
c) 90 days
d) 120 days
Answer: a) 30 days
17. Which section mandates listing of securities on a recognized stock exchange?
a) Section 40
b) Section 42
c) Section 39
d) Section 41
Answer: a) Section 40
18. Securities can be issued by a private company through:
a) IPO
b) FPO
c) Rights issue
d) Private placement
Answer: d) Private placement
19. Who regulates the issue of capital by companies?
a) RBI
b) SEBI
c) MCA
d) ROC
Answer: b) SEBI
20. The term "offer of sale" is defined under:
a) Section 25
b) Section 26
c) Section 28
d) Section 24
Answer: c) Section 28
Chapter 3 – Companies Act, 2013: MCQs
1. Which section of the Companies Act, 2013 deals with the issue of prospectus?
a) Section 22
b) Section 23
c) Section 25
d) Section 29
Answer: b) Section 23
2. Which company is required to issue a prospectus?
a) Private company
b) Public company making a public offer
c) One person company
d) Government company
Answer: b) Public company making a public offer
3. A 'shelf prospectus' is defined under which section?
a) Section 31
b) Section 26
c) Section 30
d) Section 32
Answer: a) Section 31
4. A red herring prospectus is used in:
a) Private placement
b) IPOs with fixed price
c) Book building process
d) Rights issue
Answer: c) Book building process
5. Which document must be filed with the Registrar before the issue of a prospectus?
a) Memorandum of Association
b) Certificate of Incorporation
c) Copy of the prospectus
d) Shareholders' agreement
Answer: c) Copy of the prospectus
6. A company making a public offer must be listed on:
a) Any company registry
b) A recognized stock exchange
c) Registrar of Companies
d) SEBI
Answer: b) A recognized stock exchange
7. Deemed prospectus is covered under Section:
a) Section 26
b) Section 27
c) Section 28
d) Section 25
Answer: d) Section 25
8. Which of the following is NOT required in a prospectus?
a) Objectives of the issue
b) Name of the auditor
c) Company's bank account details
d) Financial information
Answer: c) Company's bank account details
9. Shelf prospectus is valid for a period of:
a) 6 months
b) 1 year
c) 3 years
d) 2 years
Answer: b) 1 year
10. Private placement is defined under Section:
a) Section 24
b) Section 42
c) Section 40
d) Section 39
Answer: b) Section 42
11. A company may issue securities through a public offer under:
a) Section 23(1)(a)
b) Section 23(2)
c) Section 29(1)
d) Section 26
Answer: a) Section 23(1)(a)
12. Which document is used for offer of securities without inviting the public?
a) Shelf prospectus
b) Information memorandum
c) Private placement offer letter
d) Red herring prospectus
Answer: c) Private placement offer letter
13. Red herring prospectus is defined under which section?
a) Section 31
b) Section 32
c) Section 30
d) Section 28
Answer: b) Section 32
14. Filing of prospectus with the Registrar must be done before how many days of issue?
a) 10 days
b) 30 days
c) 60 days
d) 90 days
Answer: b) 30 days
15. Prospectus must be signed by:
a) All directors
b) CEO only
c) Company secretary only
d) At least two directors
Answer: a) All directors
16. Minimum subscription must be received within how many days of issue?
a) 30 days
b) 60 days
c) 90 days
d) 120 days
Answer: a) 30 days
17. Which section mandates listing of securities on a recognized stock exchange?
a) Section 40
b) Section 42
c) Section 39
d) Section 41
Answer: a) Section 40
18. Securities can be issued by a private company through:
a) IPO
b) FPO
c) Rights issue
d) Private placement
Answer: d) Private placement
19. Who regulates the issue of capital by companies?
a) RBI
b) SEBI
c) MCA
d) ROC
Answer: b) SEBI
20. The term "offer of sale" is defined under:
a) Section 25
b) Section 26
c) Section 28
d) Section 24
Answer: c) Section 28
21. The term "information memorandum" is used in context with:
a) Prospectus
b) Shelf prospectus
c) Red herring prospectus
d) Offer for sale
Answer: b) Shelf prospectus
22. The registrar must be informed of allotment within how many days?
a) 15 days
b) 30 days
c) 60 days
d) 45 days
Answer: b) 30 days
23. Which form is used to file return of allotment?
a) INC-22
b) MGT-7
c) PAS-3
d) DIR-12
Answer: c) PAS-3
24. Which of the following is not a type of prospectus?
a) Shelf prospectus
b) Red herring prospectus
c) Deemed prospectus
d) Open prospectus
Answer: d) Open prospectus
25. The minimum amount to be subscribed before allotment is called:
a) Capital reserve
b) Minimum subscription
c) Share premium
d) Application money
Answer: b) Minimum subscription
26. Under private placement, securities can be offered to how many people in a year?
a) 50
b) 100
c) 200
d) Unlimited
Answer: c) 200
27. The contents of a prospectus are detailed in which section?
a) Section 26
b) Section 27
c) Section 28
d) Section 29
Answer: a) Section 26
28. A company issuing a red herring prospectus must file it with:
a) SEBI
b) ROC
c) Stock exchange
d) MCA
Answer: b) ROC
29. In case of default in refunding application money, interest is payable at:
a) 12% p.a.
b) 6% p.a.
c) 10% p.a.
d) 15% p.a.
Answer: a) 12% p.a.
30. Which section empowers SEBI to regulate the issue of securities?
a) Section 23
b) Section 24
c) Section 25
d) Section 26
Answer: b) Section 24
Chapter 3 – Companies Act, 2013: MCQs
31. A company can issue securities through rights issue under:
a) Section 23(1)(b)
b) Section 26
c) Section 29
d) Section 42
Answer: a) Section 23(1)(b)
32. A deemed prospectus arises when:
a) Company advertises its securities
b) Securities are offered for sale by another person
c) Company offers securities privately
d) Company issues bonus shares
Answer: b) Securities are offered for sale by another person
33. Penalty for misstatement in prospectus may include:
a) Fine only
b) Imprisonment only
c) Fine and imprisonment
d) Warning letter
Answer: c) Fine and imprisonment
34. Who is liable for misstatement in a prospectus?
a) Auditors only
b) Directors only
c) Experts only
d) All of the above
Answer: d) All of the above
35. What is the maximum number of persons to whom a private placement can be made per
financial year?
a) 100
b) 200
c) 500
d) Unlimited
Answer: b) 200
36. Which section governs variation in terms of contract in prospectus?
a) Section 26
b) Section 27
c) Section 42
d) Section 40
Answer: b) Section 27
37. Which authority must approve variation in prospectus terms?
a) Board of Directors
b) SEBI
c) Shareholders via special resolution
d) ROC
Answer: c) Shareholders via special resolution
38. Which section deals with punishment for fraudulently inducing persons to invest money?
a) Section 36
b) Section 30
c) Section 40
d) Section 34
Answer: a) Section 36
39. A company cannot allot securities unless:
a) It has an auditor
b) It has a valid prospectus
c) It receives a minimum subscription
d) It is listed
Answer: c) It receives a minimum subscription
40. Prospectus should not include:
a) Company objectives
b) Management details
c) Personal data of shareholders
d) Financial information
Answer: c) Personal data of shareholders
41. A red herring prospectus lacks:
a) Price details
b) Company name
c) Registrar details
d) Auditor report
Answer: a) Price details
42. The offer document in private placement is:
a) PAS-4
b) PAS-3
c) MGT-7
d) AOC-4
Answer: a) PAS-4
43. Who signs PAS-4?
a) CFO
b) Company Secretary
c) Two directors
d) Any director
Answer: c) Two directors
44. Misstatement in prospectus is punishable under which section?
a) Section 35
b) Section 34
c) Section 28
d) Section 36
Answer: b) Section 34
45. Filing of PAS-3 must be done within how many days of allotment?
a) 7 days
b) 15 days
c) 30 days
d) 60 days
Answer: c) 30 days
46. Which of the following is not a component of a valid prospectus?
a) Auditor’s certificate
b) Consent of directors
c) Application form
d) Articles of Association
Answer: d) Articles of Association
47. What is the liability for fraudulently inducing investment?
a) Fine up to ₹10 lakh
b) Imprisonment up to 5 years
c) Both fine and imprisonment
d) No penalty
Answer: c) Both fine and imprisonment
48. PAS-4 is maintained for how many years?
a) 5 years
b) 8 years
c) 10 years
d) 7 years
Answer: d) 7 years
49. Minimum application money to be received before allotment is:
a) 5% of nominal value
b) 10% of nominal value
c) 15% of nominal value
d) 20% of nominal value
Answer: b) 10% of nominal value
50. If minimum subscription is not received, money should be refunded within:
a) 15 days
b) 30 days
c) 45 days
d) 60 days
Answer: a) 15 days
51. Which form is used to file private placement return?
a) MGT-7
b) PAS-5
c) PAS-3
d) AOC-4
Answer: b) PAS-5
52. Which of the following is not an exemption from issuing a prospectus?
a) Private placement
b) Rights issue
c) Bonus issue
d) Public offer
Answer: d) Public offer
53. Offer of securities to selected group is called:
a) Public issue
b) Rights issue
c) Private placement
d) Bonus issue
Answer: c) Private placement
54. Minimum subscription must be disclosed in the:
a) Auditor report
b) Articles of Association
c) Prospectus
d) Board report
Answer: c) Prospectus
55. Red herring prospectus is filed before the issue of:
a) Rights shares
b) Debentures
c) Equity shares via book building
d) Preference shares
Answer: c) Equity shares via book building
56. PAS-4 is required to be filed under:
a) Section 23
b) Section 27
c) Section 42
d) Section 31
Answer: c) Section 42
57. Prospectus can be used as a basis for:
a) Investment decisions
b) Filing income tax
c) GST return
d) Salary calculation
Answer: a) Investment decisions
58. Which section deals with civil liability for misstatement?
a) Section 36
b) Section 35
c) Section 34
d) Section 33
Answer: b) Section 35
59. Who can issue a red herring prospectus?
a) Private company
b) Public company
c) One person company
d) Government department
Answer: b) Public company
60. Prospectus must be dated and signed by:
a) All shareholders
b) Company secretary
c) All directors
d) Statutory auditor
Answer: c) All directors
61. The SEBI Act governs companies:
a) Listed on stock exchanges
b) Incorporated under Companies Act only
c) Unlisted public companies
d) Private companies
Answer: a) Listed on stock exchanges
62. Offer of sale is generally made by:
a) Promoters
b) Directors
c) Government
d) Debenture holders
Answer: a) Promoters
63. Misstatement in a prospectus refers to:
a) Typographical error
b) False or misleading statements
c) Extra details
d) Auditor's report
Answer: b) False or misleading statements
64. Securities offered through a shelf prospectus are usually:
a) Equity shares
b) Bonds
c) Preference shares
d) Debentures
Answer: d) Debentures
65. Shelf prospectus allows companies to:
a) File multiple prospectuses
b) Offer securities in tranches
c) Raise equity only
d) Avoid disclosure norms
Answer: b) Offer securities in tranches
66. Which of the following is required for filing red herring prospectus?
a) Special resolution
b) SEBI approval
c) Registrar filing
d) Board resolution
Answer: c) Registrar filing
67. Maximum penalty for non-compliance with Section 42 is:
a) ₹1 crore
b) ₹2 crore
c) ₹5 crore
d) ₹10 crore
Answer: c) ₹5 crore
68. Which section allows a company to raise funds through public offer?
a) Section 23
b) Section 26
c) Section 28
d) Section 40
Answer: a) Section 23
69. A prospectus must be issued within how many days from filing with ROC?
a) 90 days
b) 60 days
c) 30 days
d) 15 days
Answer: a) 90 days
70. A company can withdraw a red herring prospectus:
a) Before issue opens
b) After issue closes
c) After allotment
d) Never
Answer: a) Before issue opens
Chapter 3 – Companies Act, 2013: MCQs
...[Previous 70 questions]...
71. Shelf prospectus is valid for a period of:
a) 1 year
b) 2 years
c) 3 years
d) 5 years
Answer: c) 3 years
72. In case of shelf prospectus, which document must be filed before each offer?
a) Information memorandum
b) Red herring prospectus
c) PAS-4
d) Offer letter
Answer: a) Information memorandum
73. Filing of information memorandum is governed under which section?
a) Section 23
b) Section 31
c) Section 26
d) Section 40
Answer: b) Section 31
74. Which of the following is a type of prospectus?
a) Statutory prospectus
b) Legal prospectus
c) Abridged prospectus
d) Secret prospectus
Answer: c) Abridged prospectus
75. An abridged prospectus is issued along with:
a) Annual return
b) Application form
c) Offer letter
d) Share certificate
Answer: b) Application form
76. A company issuing securities to more than 200 persons is deemed to be:
a) Making a private placement
b) Making a public offer
c) Violating the Act
d) Issuing bonus shares
Answer: b) Making a public offer
77. The application money must be received through:
a) Cash only
b) Cheque only
c) Banking channels
d) In-kind assets
Answer: c) Banking channels
78. Under Section 42, the value of private placement must be:
a) Less than ₹10 lakh per person
b) Less than ₹25 crore
c) Recorded in board minutes
d) Offered through PAS-4
Answer: d) Offered through PAS-4
79. A person induced to invest due to misstatement may:
a) File IT return
b) Claim refund and damages
c) Issue bonus shares
d) File ROC annual return
Answer: b) Claim refund and damages
80. Section 40 deals with:
a) Prospectus contents
b) Allotment of securities
c) Securities to be dealt in stock exchange
d) Penalties
Answer: c) Securities to be dealt in stock exchange
81. Prospectus is mandatory for:
a) Private placement
b) Rights issue
c) Public offer
d) ESOP allotment
Answer: c) Public offer
82. The Registrar of Companies is required to be filed with prospectus under:
a) Section 25
b) Section 26
c) Section 30
d) Section 33
Answer: b) Section 26
83. Prospectus filed with SEBI is required for:
a) All companies
b) Government companies
c) Listed companies
d) Foreign companies
Answer: c) Listed companies
84. Filing PAS-3 with incorrect details may result in:
a) Rejection of allotment
b) Imprisonment only
c) No consequences
d) Deregistration
Answer: a) Rejection of allotment
85. Validity of PAS-4 offer is:
a) 30 days
b) 60 days
c) 90 days
d) 180 days
Answer: c) 90 days
86. A bridge loan is usually repaid out of:
a) Profit
b) Bonus shares
c) Public issue proceeds
d) Preference shares
Answer: c) Public issue proceeds
87. Minimum subscription refers to:
a) Least number of shareholders
b) Minimum amount before allotment
c) Listing approval amount
d) Auditor-certified capital
Answer: b) Minimum amount before allotment
88. Deemed prospectus is covered under:
a) Section 25
b) Section 23
c) Section 28
d) Section 36
Answer: a) Section 25
89. Private placement is considered invalid if:
a) Form PAS-3 not filed
b) Offer made to more than 200 persons
c) Money received in cash
d) All of the above
Answer: d) All of the above
90. Shelf prospectus can be issued by:
a) All companies
b) One person company
c) Certain classes of financial institutions
d) Private companies
Answer: c) Certain classes of financial institutions
91. Rights issue must be offered to:
a) Public
b) Employees
c) Existing shareholders
d) SEBI
Answer: c) Existing shareholders
92. Bonus shares are issued from:
a) Revaluation reserves
b) Free reserves
c) Loan capital
d) Application money
Answer: b) Free reserves
93. Which of the following is not a legal requirement for prospectus?
a) Board resolution
b) ROC filing
c) Inclusion of all disclosures
d) Income tax certificate
Answer: d) Income tax certificate
94. Prospectus is issued to:
a) Collect data
b) Raise capital
c) Avoid taxes
d) Pay creditors
Answer: b) Raise capital
95. Offer of sale is governed under:
a) Section 25
b) Section 28
c) Section 35
d) Section 42
Answer: b) Section 28
96. Application form without abridged prospectus is:
a) Valid
b) Invalid
c) Irregular
d) Incomplete
Answer: b) Invalid
97. Abridged prospectus is prepared in:
a) Form PAS-4
b) Form PAS-5
c) Form MGT-9
d) Form PAS-2
Answer: a) Form PAS-4
98. When is a company not liable for misstatement?
a) If not aware of statement
b) If relied on expert opinion
c) If due diligence was done
d) All of the above
Answer: d) All of the above
99. Penalty for issuing securities without complying with private placement provisions
includes:
a) ₹1 crore fine
b) Repayment of money
c) Both a and b
d) Deregistration
Answer: c) Both a and b
100. Which section provides exemptions to certain companies from prospectus provisions?
a) Section 32
b) Section 35
c) Section 23
d) Section 24
Answer: a) Section 32
