MCQS Flashcards
When will a company pay the main rate of corporation tax (25%) but with marginal relief applied?
Companies with total profits between 50,000 and 250,000.
What does it mean if a payment is classed as a preference?
Where a debtor acts to put a creditor in a better position than they would have been in but for that action.
What approval is needed for a company to obtain a loan from a bank?
Board resolution only
What agreement is needed for a general meeting to be called on short notice?
For those that have a right to attend and vote at a meeting, majority in number must hold at least 90%.
Example: R holds 85%, S holds 11% and T holds 4%.
R and S both need to agree to hold this meeting because their shares add up to 96%
If a majority shareholder rejects to the way a company runs, how can they retain control of the company?
Can pass an ordinary resolution removing the current directors and appoint replacement directors.
What is the 3 stage test for deductible expenditure?
(A) expense must be income in nature. - a necessity for the business/ regular occurrence.
(B) wholly and exclusively incurred for purposes of the trade.
(C) not prohibited by statute.
If a company does not have a seal or a company secretary, what are the formalities requirements for a loan agreement to be binding on the company?
Loan agreement must be signed by the company by a person acting under its authority express or implied.
How will income profits, capital and losses be shared in a partnership?
It will be shared equally.
However it can be inferred from a course of conduct that the partners own the capital profits in unequal shares.
Calculation of trading profits or losses
Chargeable receipts - deductible expenditure - capital allowances = trading profit/loss.
How is writing down allowance calculated?
18% of the plant and machinery’s total value will be deducted from chargeable receipts when calculating trading profits.
What is the Annual investment allowance?
100% allowance capped at 1 million for both companies and unincorporated businesses.
Condition of asset can be new, second hand or refurbished.
How will you calculate how much a client will receive, if they are owed money by a company in liquidation?
Divide the company’s total assets by total liabilities then multiply that result by how much money they are owed
E.g.
Company’s assets £150,000
Company’s liabilities £300,000
Client is owed 30,000
Calculation: 150,000 divided by 300,000 = 0.50 x 30,000 = 15,000
What defence can you use to not be held liable for wrongful trading?
That you took every step with a view to minimising the potential loss to your creditors if it went into insolvent liquidation
If a company has only one class of shares and they want to issue further shares of that class to a new investor in exchange for cash, what resolutions will the members need to pass?
A special resolution dis applying the pre-emption rights.
Because the company has only class of shares, they already have the authority to issue further shares of that class.
If a person is in a partnership with no partnership agreement, and then they also start working for another person who is a competitor, what will be the consequences of their actions?
If a partner without the consent of the other partners, carries on any business of the same nature as and competing with that of the firm, they must account to and pay over to the firm all profits made by him in that business.
This is the default position as there is no partnership agreement.
If a director entered into a transaction in good faith for the company but failed to obtain members permission, will they be held liable?
No because they acted in good faith, so the company will be bound by the contract that the director entered into.
Ring-fencing
Legal structure used to separate assets from others with the purpose of protecting them.
Can shareholders compel the directors to recommend a dividend?
No because only the directors have the power to recommend payment of a dividend.
