Chapter 23 Multiple Choice Questions

. What is the 'proper claimant' principle?

Where a company is acting within its powers, the courts will not interfere in matters of internal management unless the company itself commences proceedings.

If a procedural irregularity is committed, a member cannot commence proceedings if the irregularity can be ratified by a simple majority of the members.

Only the company can commence proceedings for wrongs committed against it.

Members can only enforce the rights of the company if they have acted in a proper, just and reasonable manner.

. Which ONE of the following is the only true exception to the rule in Foss v Harbottle?

Where the act complained of is illegal.

Where the act complained of is ultra vires.

Where the act infringes the personal rights of a member.

Where the act could only be done or sanctioned by the passing of a special resolution.

Where the act constitutes a fraud on the minority.

. Which one of the following is outside the scope of the statutory derivative claim?

Where a majority shareholder commits an act of negligence against the company.

Where a director breaches a general duty.

Where a director commits an act of default.

Where a member is involved in a breach of trust committed by a director.

. Regarding the requirement to obtain permission from the court to continue a derivative claim, which one of the following statements is not true?

The applicant must establish a prima facie case.

The court may refuse to grant permission to continue if the cause of action arises from an act or omission that is yet to occur, but which has been authorized by the company.

If a person acting in accordance with s 172 would not continue the claim, the permission to continue must be refused.

If the cause of action arises from an act or omission that was authorized by the company before it occurred, then permission to continue must be refused.

. Owain is a member of TechnoCorp plc. The directors of TechnoCorp breach their general duty to act for a proper purpose and, as a result, the profits of TechnoCorp are drastically reduced. As a result, the dividend paid to the members is significantly reduced. Can Owain commence a derivative claim?

Yes

No

. In order to obtain a remedy under s 994 of the Companies Act 2006, a member must show that the conduct complained of was unfair or prejudicial.

True

False

. Which one of the following is unlikely to constitute unfairly prejudicial conduct?

The payment of excessive remuneration

Mismanagement

The improper transfer of assets

Preventing the members from obtaining the best price for their shares

Non-payment of dividends

Exclusion from the management of a quasi-partnership company

. What is the most common remedy awarded in cases where unfair prejudice has occurred?

An order requiring the petitioner's shares to be purchased.

An order regulating the conduct of the company's affairs in the future.

An order requiring the company to refrain from doing an act complained of.

An order requiring the performance of an act that should have been performed.

An order requiring the company not to make any specified alterations to the articles without the court's consent.

. Which one of the following is unlikely to result in the company being wound up on just and equitable grounds?

Where the directors engage in negligence.

Where the company is fraudulently promoted.

Where the company is deadlocked.

Where the company cannot fulfil the purpose for which it was set up.

Where the directors display a lack of probity.

. The courts have identified a number of characteristics to help identify whether or not a company is a quasi-partnership. Which one of the following is not such a characteristic?

The company will be an association formed on the basis of mutual trust and confidence.

The shares of the company will not be freely marketable.

All the shares of the company will be owned by the company's directors.

There will be an agreement that some, or all, of the shareholders will be involved in management.

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