Exam Questions

Question 1

What is the main difference between US and EU Law

Answer 1

EU Law = Civil Law
* Legal System Inspired by Roman Law where
* Law is mainly codified

USA/UK Law = Common Law
* Case Law
* Law is developed through court cases

These are also known as the sources of Law

Question 2

Explain why most companies in the US are Registered in Delaware?

Answer 2

Well Developed corporate Law and court cases
* More predictable and more certainty for companies
* First began the adopt its laws in the 19th century, making changes that would attract businesses away from other states

Question 3

Explain Real Seat Theory

Answer 3

Applicable law is the law of the country where the company is managed

Question 4

Explain Incorporation Theory

Answer 4

The applicable law is the country where the company has been incorporated

Question 5

You have a Belgian company which was moved to France, which law is applicable to the company?

Answer 5

If its it managed in France, then french law is applicable (Real Seat Theory)

Question 6

Can Labour be contributed into capital?

Answer 6

No, For capital companies there is no such thing as a contribution of Labour. European legislators have stipulated that labour is not valuable economically

Question 7

What are the big differences between a company and a non profit company?

Answer 7

For non profits: Absolute prohibition to provide direct and indirect advantages to its members
**Direct: **Dividends
Indirect: Using profit to negotiate better prices for raw materials

Question 8

What is a Lions Clause?

Answer 8

Excluding a share holder from participating in the losses of a company but not for the profits

Question 9

How can you change the articles of associaton?

Answer 9

When you want to do a capita decrease, you need to pass through the notary public

Question 10

A company is being formed and the incorporators have a building (Cont in Kind) that has been formed for the activites of the company, What are the exceptions?

Answer 10

The general procedure is not followed if the assets being contributed are;
* Listed
* have already been subject to valuation (6 months prior)
* Fair value can be derived from audited internal accounts

Question 11

A company is being formed and the incorporators have a building (Cont in Kind) that has been formed for the activites of the company, how can capital/equity be formed and what is the procedure?

Answer 11

1.Incorporators have to make a draft report in which they;
* Indicate the importance of the asset
* describe each contribution
explain the valuation methods used that have
* lead them to the value of the contribution

2.Draft report is submitted to the auditor in which he;
* Indicates if the value of the contribution (calculated by the incorporators), correspond with the actual value of the asset
* Indicate the actual reimbursement in return for the contribution pro rate

3.The report of the incorporators is then finalised, if they deviate from the decision of the auditor the reasons should be stated.

Question 12

What is tag along right?

AKA Right to follow

Answer 12

If a shareholder is selling its shares to a third party the other shareholders will have the right to offer their shares against the same condisitions to that third party.

Question 13

What is a drag along right?

AKA Obligation to follow

Answer 13

A shareholder willing to sell its shares to a third party can force the other shareholders to sell their shares to that third party.

Question 14

If there is a change in the articles of association who needs to decide?

Answer 14

The decision is taken by an extraordinary general meeting.

Question 15

What happens in a capital decrease, interms of decision making?

Answer 15

There is a change in the articles of association, thus a decision has to be taken by the extraordinary general meeting.

Question 16

What is authorized capital?

Answer 16

It is the maximum amount of the capital for which shares can be issued by the company to shareholders. If, there is an increase of capital at authorized capital, an authorization is given by the general assembly to the board of directors.

Question 17

What are the conditions to acquire proper shares?

Answer 17

• Subject to prior approval from the general meeting of shareholders
• There is a maximum percentage of the subscribed capital
• Only fully paid in shares
• Shareholders to be treated equally
• The amount (acquistion price) must be available for distribution

Question 18

What are the exceptions to acquire proper shares?

Answer 18

• Acquisition in case of serious threatening circumstances
• shares acquired to be cancelled immediatly
• shares acquired as a result of a transfer by law
• transfers under judicial order

Question 19

A company provides an asset as a guarentee for the loan of the third party wanting to acquire the company’s shares. What is the transaction called?

Answer 19

Financial Assistance

Question 20

What is Financial Assistance?

Answer 20

A credit provided by a company in view of acquiring its shares
* Can be a loan, advances,etc.
* Security

Question 21

What are the conditions of financial assistance

Answer 21

• Responsibility of directors
• transaction must be at arms length
• authorization is needed from general meeting and speical report from the board of directors is drafted
• Acquisition must be made at fair price

Question 22

What is a collegial organ?

Answer 22

In monistic governance, the board of directors is the collegial organ. It takes decisions by majority voting.

Question 23

What are the competences of the board of directors?

Answer 23

• Has full authority and the shareholders can not intrstruct the directors
• Has all competencies not explicitly allocated to the general meeting

Question 24

What are the competencies of the General Meeting?

Answer 24

• Approval of annual accounts
• appoint directors
• Asses Liability of directors
• Other specific competencies

Question 25

What is full authority?

Answer 25

The Bord of Directors has full authortity, The board of directors has all competencies expect for those that are reserved for the general meeting. Ex.
* Deciding on merging or approving the annual accounts

Question 26

What are the consequences of a Merger?

Answer 26

1. All assets and liabilities of the merged company are transferred to the acquiring company
2. Shareholders of the merged company become the shareholders of the acquiring company
3. acquired company cease to exist

Question 27

A group of companies want to restructure and to limit the number of companies it has, what transactions/operations would you suggest?

Answer 27

Merger by acqusition or merger by incorporation

Question 28

What is retroactivity/retrospectivity?

Answer 28

A merger is done today, but for accounting purposes, it is implemented later on.

Question 29

Is retroactivity/Restrospectivity allowed?

Answer 29

Accounting wise: yes
Legally: No

Question 30

What is demerger by acquisition?

Answer 30

• The assets and liabilities of the operations of the demerged company that have been wound up are transferred to mare than 1 company
• in exchanfe for the issuance, sharegolders of the demerged company get new shares in the companies it ahs veen demerged into or a cash payment not exceeding 10% of the nominal value of shares

Question 31

What is demerger by incorporation?

Answer 31

The assets and liabilities of the operations of the demerged company that have been wound up are transferred to more than 1** new **company

In exchange for the issuance, shareholders of the demergd company get new shares in the new companies it has been demerged into or a cash payment not exceeding 10% of the nominal value of the shares.

Question 32

How long should a financial plan must cover?

Answer 32

A period of atleast 2 financial years

Question 33

What is quasi contribution

Answer 33

Instead of contirbuting something into the capital of a company, an incorporator/director/shareholder sells something to the company, they dont receive shares but the money from the sale.