12th Standard Commerce — Companies Act, 2013 Online Test
Chapter 26 of 12th Commerce traces Indian company law from the East India Company to the Companies Act 2013, defines a company and body corporate, and explains the four stages of formation. It then covers share capital, equity and preference shares, issue at par, premium and discount, bonus and right shares, share certificates, warrants, stock and debentures.
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About Companies Act, 2013
Medium ~45 min study
Companies Act, 2013 is the first chapter of Unit 10, Company Law and Secretarial Practice, in the Tamil Nadu State Board Class 12 Commerce book. It begins with the history of company law, from the Merchant Guilds and the East India Company to the Companies Act 1956 and its replacement, the Companies Act 2013.
The lesson then defines a company under Section 2(20), explains body corporate under Section 2(11) and the minimum members needed under Section 3(1), and walks through the four stages of formation. The second half deals with shares and share capital, the eight kinds of preference shares, ways of issuing shares, share certificate and share warrant, and the kinds of debentures.
This page gives the five book-back one mark questions with answers checked against the printed key in both books, plus additional questions on every section, each with a short explanation.
What you'll learn
- Trace the main stages in the development of company law in India.
- State key facts about the Companies Act 2013 and the changes it made.
- Define a company and body corporate under the Act.
- List the minimum members and the four stages of formation of a company.
- Distinguish the kinds of shares and the ways of issuing them.
- Explain share certificate, share warrant, stock, and the kinds of debentures.
Before you start
- Features of a joint stock company such as limited liability and perpetual succession from Class 11 Commerce.
- Basic idea of capital, shareholders and creditors.
- The meaning of the capital market and stock exchange from earlier Class 12 lessons.
Topics covered in this chapter
Companies Act, 2013 explained
What this lesson covers
History of company law
A Royal Charter set up the East India Company in 1600. England passed its first Joint Stock Companies Act in 1844, India provided for registration of joint stock companies in 1850, and the Indian Companies Act 1913 introduced private companies. The Companies Act 1956 came into force on 1 April 1956.
Companies Act 2013
Passed by the Lok Sabha on 18 December 2012 and the Rajya Sabha on 8 August 2013, it received the President's assent on 29 August 2013. It has 29 chapters, 470 sections and 7 schedules. It allows a private company up to 200 members, introduces the One Person Company and defines Key Managerial Persons under Section 2(51).
Company and its formation
- Section 2(20): a company incorporated under this Act or any previous company law.
- Section 3(1): seven persons for a public company, two for a private company, one for a One Person Company.
- Stages: promotion, registration, capital subscription, commencement of business.
Shares and debentures
- Equity and preference share capital; eight kinds of preference shares.
- Issue at par, at premium (Securities Premium Account, Section 78) and at discount (prohibited by Section 53, except sweat equity under Section 54).
- Bonus shares, right shares, share certificate, share warrant, share and stock.
- Debentures under Section 2(30), their features, kinds and differences from shares.
Common mistakes to avoid
- Thinking any share may be issued at a discount. Section 53 prohibits it, except sweat equity shares under Section 54.
- Mixing up bonus and right shares. Bonus shares are free; right shares are offered to existing shareholders for subscription.
- Using the Securities Premium Account to pay dividend. It is capital in nature and cannot be distributed as dividend.
- Treating debenture holders as members. They are creditors with no voting right.
- Forgetting that a private company starts business right after registration, while a public company has two more stages.
Test yourself on these with the practice test, then check the worked reasoning in the solved MCQs.
Frequently asked questions
When did the Companies Act 2013 receive the President's assent?
It was passed in the Lok Sabha on 18 December 2012 and the Rajya Sabha on 8 August 2013, and received the President's assent on 29 August 2013.
How many persons are needed to form a company?
Under Section 3(1), seven or more persons can form a public company, two or more a private company, and one person a One Person Company.
What are the four stages of formation of a company?
Promotion, registration, capital subscription and commencement of business. The first two apply to all companies; a public company must also pass the last two.
What is the difference between bonus shares and right shares?
Bonus shares are issued free to existing shareholders out of reserves and surpluses. Right shares are offered first to existing equity shareholders, pro rata, to raise further capital.
Can shares be issued at a discount?
The Companies Act 2013 prohibits issue of shares at a discount under Section 53. Only sweat equity shares, given to employees or directors, can be issued at a discount under Section 54.
What is a debenture?
Under Section 2(30), a debenture includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether or not it creates a charge on the company's assets.
Last updated 16 October 2026