Chapter 12 - Corporation & Legal Personality

Question 1

A promoter is a type of:

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Answer 1

Agent

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Question 2

A person who merely acts ___________ can not be a promoter for the company.

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Answer 2

acts in a professional capacity such as an accountant or a solicitor.

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Question 3

Some of the duties of a promoter are:

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Answer 3

• reasonable skill and care
• avoiding conflict of interest
• account for any benefits obtained
• providing full information of transactions

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Question 4

What is a legitimate profit in the context of a promoter?

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Answer 4

a disclosed profit from a business arrangement started BEFORE start of promoting a company

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Question 5

What is wrongful profit in the context of a promoter?

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Answer 5

profit from a business dealing started after the promotion of a company has started.

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Question 6

What are the different types of business organizations?

Answer 6

1)soletrader
2)partnership
3)company

Question 7

Is there perpetual succession in soletrader and partnership?

Answer 7

No,because death of an owner or partner or change in ownership or partnership will brought the business to an end

Question 8

In soletrader who is responsible for breach of law by the business?

Answer 8

The soletrader(owner)

Question 9

Who are responsible for debts of a partnership?

Answer 9

Individual partners are personally liable,jointly with the other partners

Question 10

What is a company limited by guarantee?

Answer 10

A company which has no shares but members guarantee certain amount to pay in case of liquidation

Question 11

In limited liability company,Company has an unlimited liability.

Answer 11

True(shareholders have limited liability,not company)

Question 12

What is an unlimited liability company?

Answer 12

Where shareholders or members liability is not limited.

Question 13

Can an unlimited liability company be a public company?

Answer 13

No,it is a form of private company

Question 14

What are the conditions to trade as a public company?

Answer 14

1)trading certificate
2)minimum capital of £50000

Question 15

What is the period of time after which general meeting of public companies must be held?

Answer 15

Must hold within 6 months of financial year

Question 16

What is a parent company?

Answer 16

Which holds a majority of voting rights in the subsidiary and has right to exercise dominant influence over the subsidiary

Question 17

Is a parent company treated as parent of the subsidiaries of its subsidiaries?

Answer 17

Yes

Question 18

What is another name for a listed company?

Answer 18

Quoted company

Question 19

What is an unquoted company?

Answer 19

Which can not trade its shares on the stock exchange

Question 20

How many directors and members should be in a public company?

Answer 20

One member, two directors

Question 21

What are the reasons for lifting the veil of incorporation?

Answer 21

1)by statute to enforce the law
2)to prevent evasion of obligation
3)in group situations(parent subsidiary)

Question 22

How many members and directors should be in a private company?

Answer 22

One member,one director

Question 23

What is a fraudulent trading?

Answer 23

Where the directors have carried out business with an intent to defraud the creditors

Question 24

Is fraudulent trading a criminal offence or civil wrong?

Answer 24

Criminal offence under Companies Act and civil litigation under Insolvency Act

Question 25

What is wrongful trading?

Answer 25

Directors continuing a business,when it might be insolvent(because they believe that may be after taking certain reasonable steps business can continue)

Question 26

Is wrongful trading intentional?

Answer 26

No

Question 27

Wrongful trading is a criminal offence.

Answer 27

False,it is a civil offence