Chapter 2 Multiple choice questions

. Which two types of business structure are created via a process of incorporation?

Companies and sole proprietorships.

Ordinary partnerships and limited liability partnerships.

Companies and limited liability partnerships.

Companies and ordinary partnerships.

. A company can be created in several ways. Which ONE of the following is NOT a valid method of creating a company?

A company can be created by the Chancery Division of the High Court.

A company can be created by registering certain documents.

A company can be created by an Act of Parliament.

A company can be created by Royal Charter.

. An application to incorporate a company by registration must contain certain information. Which ONE of the following pieces of information is not required?

Whether the member's liability will be limited or unlimited.

The names of the company's proposed officers.

The intended address of the company's registered office.

The proposed objects of the company.

Whether the company will be public or private.

. Which ONE of the following statements regarding the consequences of incorporation is not true?

A company is a person.

A company can incorporate another company.

A company has certain human rights.

A company cannot enter into contract with persons inside the company (e.g. shareholders, directors).

A company can own assets.

. Concerning a company's liability, which ONE of the following statements is true?

A company cannot be convicted of a crime that requires proof of mens rea.

A company will not be found liable for the acts of its directors – the directors will be personally liable instead.

A company will only be vicariously liable for the acts of its employees if the employee was sufficiently senior within the company.

Where liability requires a level of knowledge, the liability of employees and directors can be attributed to the company.

. What is 'corporate personality?'

Corporate personality means that the members in general meeting are regarded by the law as a person.

Corporate personality means that the board of directors is regarded by the law as a person.

Corporate personality means that the company as an entity is regarded by the law as a person.

Corporate personality means that all of the companies within a corporate group are regarded by the law as one person.

. The case of Salomon v A Salomon & Co Ltd established a number of principles. Which ONE of the following was not a principle established in Salomon?

That a person who owns the vast majority of a company's shares is to be regarded as the principal of the company or that the company is a trustee for his benefit.

That a company's promoters, directors and members could legitimately use corporate personality to shield themselves from certain liabilities.

That the minimum member requirement does not require the members to be active.

. Which ONE of the following cases is regarded as the leading case on the piercing of the corporate veil?

Adams v Cape Industries plc [1990]

Antonio Gramsci Shipping Corp v Stepanovs [2011]

Petrodel Resources Ltd v Prest [2013]

VTB Capital plc v Nutritek International Corp [2013]

. In Petrodel Resources Ltd v Prest [2013], Lord Sumption stated that there is only one instance in which the courts can pierce the veil. What is this one instance?

Where a subsidiary is acting as an agent for the parent.

Where a group of companies are to be regarded as a 'single economic unit.'

Where a person is under an existing legal obligation which he deliberately evades or whose enforcement he frustrates by interposing a company under his control.

Where a parent owes the employees of its subsidiary a duty of care.

. In Chandler v Cape plc [2012], did the Court of Appeal pierce the corporate veil?

Yes.

No.

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