Chapter 19 Multiple Choice Questions

. The term 'body corporate' is applicable to which two types of business form?

Companies and sole proprietorships

Partnerships and limited liability partnerships

Companies and limited liability partnerships

Companies and partnerships

. A company can be created in one of three 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 registration.

A company can be created by an Act of Parliament.

A company can be created by royal charter.

. If a promoter enters into a contract on behalf of a purported company before that company has yet to be fully incorporated, the contract is void. True or False?

True

False

. There are a number of differences between a public company and a private company. Which one of the following is NOT a valid difference?

A public company must appoint a company secretary, whereas a private company is not required to appoint a company secretary.

A private company must be formed with one director, whereas a public company must have at least two directors.

Private companies can be created with a trivial amount of capital, whereas public companies must have an allotted minimum share capital of £50,000.

Public companies may offer their shares to the public, whereas private companies may not.

A public company must have at least two members, whereas a private company need only have one member.

. What is 'limited liability?'

Limited liability refers to how much the directors have to contribute in the event of the company becoming insolvent.

Limited liability refers to the ability of a member to limit his liability.

Limited liability refers to the directors' ability to limit their liability for acts of negligence, fraud etc.

Limited liability refers to the ability of a company to limit its liability.

. 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.

. Following the case of Petrodel Resources Ltd v Prest, which one of the following is a valid reason for ignoring a company's separate personality?

The company is interposed in order to evade or frustrate the enforcement of a legal obligation.

The company is an agent of another company.

The company is part of a 'single economic unit'.

The court considers it just and reasonable to ignore the company's corporate personality.

. Under the Companies Act 2006, in which document would you find the objects of a company?

The articles of association.

The memorandum of association.

. Regarding the statutory set of model articles, which one of the following statements is NOT true?

If a promoter does not register any articles, the model articles will act as the company's articles.

Only companies incorporated under the Companies Act 2006 may be governed by the new model articles.

The model articles do not cover unlimited companies and such companies must register their own articles.

Even if a promoter does register its own set of articles, the model articles will form part of the company's articles, unless the registered articles modify or exclude them.

. In relation to a company's contractual capacity, the ultra vires doctrine has been abolished. True or False?

True

False

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