Practice Qs Flashcards
1
Q
Geary & Smith, a firm of accountants, acted on the audit of Musica Ltd and, owing to the negligence of the audit team manager, misrepresented the company’s financial position. Geary & Smith had known that Moments Musicaux plc had been promised a set of the audited accounts as soon as they were available in order to assist it in proposing a takeover bid price that would be acceptable to the shareholders in Musica Ltd.
Can Moments Musicaux plc sue Geary & Smith in the tort of negligence?
a) No, because its loss is purely financial and it should have carried out its own professional investigation into the accuracy of the accounts.
b) No, because no duty of care is owed to potential investors, only to the existing body of shareholders as a whole.
c) Yes, because when a takeover is anticipated, a special relationship arises between accountants and all recipients of the accounts.
d) Yes, because Moments Musicaux plc was a bidder known to Geary & Smith to be highly likely to rely on the accounts.
A
d
The facts are similar to Galoo Ltd v Bright Grahame Murray 1995. In such circumstances, the court is likely to consider that the accounts were prepared for the purpose of assisting the takeover and
not just for audit purposes.
2
Q
Derry plans to incorporate his business, a sports shop on Bromley High Street, as Sports International Ltd, but his business partner, Thelma, is worried about the choice of name. She seeks your advice on two points
a) Is the word ‘International’ in the proposed name prohibited?
b) Could Thelma, who will own 60% of the shares in the new company, ensure a voluntary change of name at a later date?
A
a) No
But the approval of the Secretary of State is required and is unlikely to be given in this case
b) No.
A special resolution (75%) is required for a change of name.
3
Q
Are the following statements true or false?
a) Public companies must publish the results of polls at general meetings on a website.
b) Proxies cannot be included in determining whether a quorum is present.
A
a) False.
This is true for quoted companies only.
b) False.
4
Q
Edwina has been appointed as administrator for Eggsell Ltd.
Within how many weeks is she obliged to hold a creditors’ meeting (assuming that no
exceptions apply and that she is required to hold one)?
6 weeks.
10 weeks.
12 weeks.
3 months.
A
10 weeks
No creditors’ meeting is necessary where the administrator considers there to be insufficient property to make a distribution to unsecured creditors over and above the ‘ring-fenced asset distribution’ set out in the Insolvency Act 1986 and at least 10% creditors do not require one.
5
Q
Within what time period must a private company give notice of its refusal to register a requested transfer of its shares?
A
2 months. It must also give reasons for its refusal
6
Q
In some cases, a worker may intend to disclose wrongdoing by his employer to someone outside the workplace, for example the police or the NCA. In such cases, the disclosure will be protected by the Public Interest Disclosure Act 1998 if it is reasonable in all the circumstances and is not made for personal gain. In addition, the worker will need to satisfy one of several other criteria in order to
receive the protection of the Act (assuming that the matter disclosed is a qualifying disclosure within the Act).
Which one of the following is not one of those criteria and will not, therefore, afford the statutory protection?
a) Reasonably believing that he would be victimised if he raised the matter internally.
b) The fact that he had already raised the matter internally.
c) The fact that the matter was of a serious criminal nature.
d) Reasonably believing that a cover-up was likely and there was no prescribed person to whom disclosure could be made.
A
c
Is not a minimum criteria
7
Q
As a general rule, accountants have a duty to report any suspicion or knowledge of money laundering that they have, or face criminal liability under the Proceeds of Crime Act 2002.
However, does this duty to report apply in the following situations?
a) Where the accountant is acting as an insolvency practitioner?
b) Where the accountant is involved in giving tax advice and the alleged offence is committed by a third party and not their client?
A
a) Yes
b) Yes
8
Q
Can an independent contractor claim wrongful dismissal?
A
No, only employees can
9
Q
What are the three critical aspects of a contract of employment
A
- Personal service
- Control over employee
- Mutuality of obligations
10
Q
Hilary is employed by Howard in his restaurant. Howard deducts tax and national insurance from her monthly salary. She is entitled to paid sick leave of up to 10 weeks per year. She is given at least 48 hours’ notice of when she is required to work and Howard is required to ask Hilary to work before offering the work to the other non-permanent staff. Hilary wears a uniform provided by Howard, bearing the name of the restaurant.
Is Hilary an employee or an independent contractor?
a) She is an employee because she is paid after deductions for tax and national insurance.
b) She is an independent contractor because she works for Howard on an as-and-when-required basis.
c) She is an employee because she wears a uniform supplied by Howard and is entitled to sick leave.
d) She is an independent contractor because she is free to work for other employers when she is not working for Howard.
A
b
The obligation to work as-and-when required means that mutuality of obligations is not present and
she cannot, therefore, be an employee.
11
Q
Edward has been working for Claire for six and a half years. His contract provides for his employment to be terminated on the giving of one month’s notice. Claire hands him written notice terminating his employment ‘one month from now’.
Has sufficient notice been given?
a) Yes. Notice has been given in accordance with Edward’s contract.
b) Yes. Edward’s length of continuous employment entitles him to not less than one month’s notice.
c) No. Edward is entitled to not less than six weeks’ notice.
d) No. Under the Employment Rights Act 1996, the minimum period of notice to which Edward is
entitled is six and a half weeks.
A
c
Half weeks do not apply
12
Q
Is an employer obliged to provide a written statement of the reasons for a dismissal?
A
No - not unless the employee requests one within 14 days of their dismissal
13
Q
Under the Employment Rights Act 1996 lack of capability on the part of the employee is a potentially fair reason for dismissal which can be put forward by an employer, subject to the requirement that the employer must have acted reasonably in the circumstances.
Which of the following is NOT protected by the statutory provisions regulating unfair
dismissal on the grounds of lack of capability?
a) A part-time employee who has worked for Primefoods Ltd for 3 years.
b) A full-time employee who has worked for Fastfoods Ltd for 6 months and then Primefoods Ltd for 18 months after Fastfoods’ business was transferred to Primefoods Ltd.
c) A full-time employee whose contract of employment requires them to work for Primefoods Ltd’s sister company in France.
d) An employee who has worked for Primefoods Ltd for 3 years but during that time spent 6 months
in the armed services.
A
c
The Employment Rights Act 1996 originally provided that employees who ordinarily work outside Great Britain were excluded. Although this provision was repealed in 1999, generally speaking, it can be said that those who work outside Great Britain are excluded from the Act’s protection. (The
judiciary now has the task of deciding, on a case by case basis, whether an employee is excluded, generally based on the strength of the link with Great Britain.)
14
Q
Can a registered company be
a) A data controller?
b) A data subject?
A
a) Yes
b) No - only individuals can be data subjects
15
Q
Pamela and Rhiannon work for Hammer House Ltd and have just been told by their boss that they are no longer required and should clear their desks immediately. Their contracts provide for one month’s notice and no wrongdoing has been alleged. There is no question of redundancy. Pamela has been working at Hammer House for two years and Rhiannon for nine months.
a) Can Pamela claim for both unfair dismissal and wrongful dismissal?
b) Can Rhiannon claim wrongful dismissal in an employment tribunal?
A
a) Yes
b) Yes
Assuming her claim is for less than a prescribed amount, employment tribunals have a concurrent jurisdiction with the courts. (She cannot claim unfair dismissal, because she has insufficient continuous employment in accordance with the Employment Rights Act 1996).
16
Q
True or false;
Under criminal law, the victim of the crime is not entitled to damages from the guilty party
A
True
Damages is not an available remedy under criminal law
17
Q
All of the following contracts except one must be in the form of a deed. Which one is the exception?
a) Contract for the transfer of land
b) Contract for consumer credit
c) Contract for a lease over 3 years
d) Contract for the regular payment of a donation to charity
A
b) A contract for consumer credit must be in writing but not as a deed
18
Q
Prunella agrees to pay Paul £500 if Paul will landscape Phillip’s garden. There is no agency relationship and the rights of third parties act does not apply.
Who may enforce the terms of the contract?
a) Prunella, Paul and Phillip
b) Prunella and Phillip only
c) Pail and Phillip only
d) Prunella and Paul only
A
d) Prunella and Paul only
Phillip has given no consideration and is not a party in the contract, thus, he has no rights to enforce
19
Q
Is the payment of £1 per year as rent for a house valid consideration?
A
Yes - consideration need not be adequate but it must be sufficient
20
Q
True or false;
Acceptance must always be communicated to the offeror in order to be effective
A
False
This can be waived & acceptance inferred from conduct
21
Q
True or false;
a) Anticipatory breaches may be implied from conduct and need not be explicit
b) If an innocent party elects to treat the contract as discharged, they waive the right to claim damages from the party at fault
A
a) True
b) False
They may treat the contract as discharged AND sue for damages
22
Q
True or false;
a) Damages for breach of contract are primarily intended to restore the injured party to the same position they were in at the time the contract was made
b) The claimant is required to take every opportunity to mitigate their loss arising as a consequence of a breach of contract
A
a) False
Damages are intended to put the party in the position they would have been had the contract been performed
b) False
The claimant is required to taker only reasonable steeps not ones that carry undue risk or that are discreditable
23
Q
All of the following statements are examples of lawful excuses for not performing under a contract except one, which?
a) Performance by one party is rejected by another
b) Non-performance occurs but is agreed by both parties
c) One party makes it impossible to perform
d) Performance is impossible when the contract is made
A
d) If performance is impossible when the contract is MADE then there is usually no contract at all
24
Q
Which of the following is not necessary to be shown by a claimant in order to succeed in an action for negligence
a) That the defendant owed them a duty of care
b) That the defendant was in breach of a duty of care
c) That the claimant suffered injury, damage or loss as a result of the breach of that duty of care
d) That the damage was not too remote
A
d) Whether the damage was too remote is a matter for the court to decide in assessing damages once negligence has been shown
25
Can a company agree to indemnify auditors against negligence?
Yes
26
True or false;
Under the partnership act, a partner can be expelled for any reason
False, must be in good faith for a good reason
27
True or false,
Under the Partnership Act,
a) A partner has unfettered access to the firm's books
b) The partners share the capital, profit and losses in proportion to their initial capital contribution
a) True
b) False - p/l shared equally
28
When a private company limited by shares registers, must it submit a trading certificate?
No - this is a requirement for public companies
29
Is a company required to keep a register of its director's personal addresses?
Is a company required to keep a list of debenture holders?
Yes - but must not be made public
No- but if it does must be available for inspection
30
True or false;
a) When a company applies for registration, a copy of its proposed articles must be supplied to the registrar
b) A certificate of incorporation is conclusive evidence that a company ahs been registered in accordance with the companies act
a) False - model articles will apply if not
b) True
31
True or false;
a) The duties owed by a defacto director are the same as those of a properly appointed director
b) Directors are agents of the members of a company
c) The statutory duty of a director to disclose any interest that they have in a proposed transaction or arrangement with the company does not apply to shadow directors
d) Is petitioning the court for winding up on the just and equitable ground available to any member regardless of the size of his shareholding?
e) A director is required to exercise their powers subject to any directions given by ordinary resolution
f) Directors can be found guilty of fraudulent trading even if their company has not been wound up
g) Directors can only be fount to have committed wrongful trading if their company has been wound up
a) True
b) False
c) False - all directors duties apply to shadow directors also
d) Yes
e) False - a director is not an agent of the shareholders and is not liable to act as instructed by them
f) True
g) True
32
Indicate whether the following actions require an ordinary or special resolution;
a) The change of a companies name
b) The removal of a director
c) The removal of an auditor
d) A change in articles
e) A reduction of the companies share capital
a) Special resolution
b) Ordinary resolution
c) Ordinary resolution
d) Special resolution
e) Special resolution
33
Which type of share carries the right to demand a dividend
a) Ordinary share
b) Preference share
c) Both
d) Neither
d) Neither - both have the right to receive but not demand
34
What percentage holders of a class of shares can apply to the court to have a variation cancelled
15%
35
How is the authority to allot shares required to be given to directors of a plc
a) By ordinary resolution
b) By special resolution
c) By articles of association
1. a & c
2. b & c
3. c
4. b
1
36
What is a debenture?
a) A charge over a company's goodwill
b) The registration document used to register a fixed or floating charge
c) A document that records the terms of any loan
d) A document that records the terms of any secured loan
c - the written acknowledgement of a secured or unsecured loan is called a debenture
37
True or false;
a) Once approved, a company voluntary arrangement becomes binding on all creditors
b) How long does a CVA usually last?
a) False - preferred and secured creditors are not bound by the CVA
b) 3-5 Years
38
Which of the following parties nominates the liquidators in a creditors' voluntary liquidation?
a) Members
b) Creditors
c) Neither
d) Both
c) Directors nominate, creditors must approve
39
On compulsory winding up, who will the court usually appoint?
a) The secured creditor owed the most money
b) The auditor
c) The official receiver
d) The insolvency practitioner
c) - may be replaced by IP later
40
Who can apply for a debtors bankrupcy online?
a) The debtor themselves
b) Any creditor owed £750 +
c) A supervisor of an IVA
1. a
2. b & c
3. c
d. a & c
1.
Third parties must petition the court
41
Who can apply for a debtors bankruptcy online?
a) The debtor themselves
b) Any creditor owed £750 +
c) A supervisor of an IVA
1. a
2. b & c
3. c
d. a & c
1.
Third parties must petition the court
42
In order to receive protection under the whistleblowing provisions of PIDA, does a person have to be an employee?
No, they have to be a worker, which is wider than an employee but does not cover self employed
43
Which of the following best defines insider dealing;
a) Dealing in securities while in possession of inside information as an insider, the securities being price-affected by the information
b) Acquiring securities with the benefit of price-sensitive information obtained as an insider
c) Being an insider and in possession of confidential information about the likely effect of dealings on the price of securities
a
44
Which of the following can be included as a separate document, rather than as part of the written statement of prescribed particulars as given to an employee
a) The names of the employee and employer
b) A brief job description
c) The notice period for termination of the employment
d) Whether any service with a previous employer forms part of the employee's period of continuous employment
c
45
All except one of the following are parts of the common law duty of an employer to protect their employees against reasonably foreseeable risks to their health, safety and welfare at work
Which is the exception
a) The duty to provide a safe system of work
b) The duty to provide reasonably competent employees
c) The duty to protect an employees personal property while they are engaged in performing their contractual duties
d) The duty to provide safe plant and appliances
c
46
Which of the following national insurance contributions are employers obliged to pay on behalf of their employees
a) Class 1 Primary
b) Class 1 Secondary
c) Class 2
d) Class 4
b
Employees pay Class 1 primary. Self employed pay class 2 & 4
47
True or false;
a) The data protection act applies to computer based and electronically stored information only
b) Data is regulated by the data protection act if merely opinions about the data subject is held rather than facts about them
c) if a company breaches the data protection act, they may be fined up to 20 m or 4% of turnover, receive a criminal conviction and a court order to erase all databases
a) False
b) True
c) False; destruction of databases is not a potential penalty under the act
48
All except one of the following constitute personal data under the data protection act, which is the exception?
a) The fact a person is persistently late for work
b) The fact a person's corporate employer is on the verge of insolvency
c) An opinion that someone is good at their job
d) The intention to promote an employee within 6 months
b - the act only applies to data about individuals
49
Which of the following statements concerning the Information Commissioner is correct;
a) They have the right to seize hardware containing inaccurate data
b) They must be informed about every data breach within 72 hours
c) They only regulate data protection in the UK
d) They have the power to issue unlimited fines to organise data breaches
c
they only have to be notified of data breaches that affect the rights and freedoms of individuals
50
1) Which of the following ICC Incoterms places the maximum obligations on the seller?
2) Which of the following ICC Incoterms places the minimum obligations on the seller?
a) DAP
b) DDP
c) CPT
d) CFR
e) EXW
1) a
2) e
51
Shareholders representing what minimum percentage of the nominal value of shares with voting rights must agree to notice shorter than 14 days for a general meeting?
90%
52
Directors must avoid conflicts of interest unless they are authorised by the company's other directors.
a) Can directors authorise such a conflict in a private company (in the absence of any provisions in the articles)?
b) Can directors authorise such a conflict in a public company (in the absence of any provisions in the articles)?
a) Yes
b) No, Articles must expressly allow
53
True or false,
The sole director of a company can also be the company secretary
True
54
a) After being appointed as administrator, how many days does that administrator have to make their requirements for statements known to the company's officers and employees?
b) How many days do the officers and employees have to comply with the request?
a) 7 days
b) 11 days
55
With regard to members' voluntary winding up of a company,
The declaration of solvency must be made by
a) The majority of directors
b) The directors acting unanimously
In appointing a liquidator, the company must pass
c) An ordinary resolution
d) A special resolution
a
d
56
Can a person petition the court for their own bankruptcy?
No - they can apply online
57
a) Can the criminal offence of fraudulent trading be committed by the director of a company even if the company is not in liquidation?
b) Can the civil offence of fraudulent trading be committed by the director of a company even if the company is not in liquidation?
c) Can the criminal offence of fraudulent trading be committed where the business is carried on for any fraudulent purpose?
a) Yes
b) No
c) Yes
58
Must a contract of employment be in writing?
No
59
Is an independent contractor entitled to protection under health and safety legislation?
Yes
60
a) If an employer fairs to provide a written statement of employment particulars, are they liable to criminal charges; fine / imprisonment?
b) Does an employer face civil liability for this - even if the written contract of employment covers the matters that should have been contained?
a) No
b) No
61
Are the following implied duties of the employer in a contract of employment;
a) To assess the employee's performance on an annual basis
b) To pay reasonable remuneration
a) No
b) Yes
62
When calculating the basic award for unfair dismissal, which of the following will be considered?
a) Age of employee
b) Length of service
c) Employee's conduct
d) Redundancy payments made to employee
all factors
63
What is the usual remedy for unfair dismissal?
a) Damages
b) Compensatory award
What is the usual remedy for wrongful dismissal?
c) Damages
d) Compensatory award
B
c
64
Within what time period following the date of dismissal must a person claim for redundancy?
6 months
65
Which of the following can be included as a separate document, rather than as part of the written statement of prescribed particulars given to an employee?
a) The names of employer and employee
b) A brief job description
c) Whether any services from a previous employer must be continued
d) The notice period
d
66
Is a redundancy payment calculated in the same way as the basic award for unfair dismissal?
yes - based on age and length of service
67
When making a qualifying disclosure, does the person need some documentary evidence of the matter complained of?
No - reasonable belief will suffice
68
With regard to the offence of fraud, is it necessary to show that the defendant intended to make a gain for themselves or another person?
No - they can also intent to cause loss for another person
69
Can you be guilty of insider dealing even if the person you disclose information to does not deal?
Yes - it is irrelevant whether any dealing takes place if a person encourages another to deal
70
Which of the following is the correct definition for money laundering;
a) It is the process by which the proceeds of illegal activity are disposed of into apparently legitimate business activities
b) It is the process by which monies are transferred from business to business or place to place in order to conceal their origin
c) It is the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin
c
71
Is disclosing information in the course of employment an offence of insider dealing?
No
It can be an offense of disclosing inside information - assuming you do not also encourage that person to buy
72
How does pharming differ from phishing?
Phishing is based on legitimate looking emails - pharming is based on legitimate looking websites
73
a) What is spear phishing?
b) What is online relationship fraud?
a) Targeting particular groups of individuals in an attempt to increase the success rate
b) Building a relationship with the victim and persuading them to give personal details or money
74
True or false; Only the court can extend an administrators appointment beyond 1 year
False, a majority of prescribed creditors may extend - only once
75
Can a creditor peruse the recovery of a debt when a company is in administration?
Yes - if administrator approves
76
In a members' voluntary winding up of a company,
The declaration of solvency is to be made by
a) The directors' acting unanimously
b) A majority of the directors
In appointing a liquidator, the company must pass
c) An ordinary resolution
d) A special resolution
b
c
77
True or false; creditors play no part in a members' voluntary liquidation
True - only proceeds where the creditors debts can be paid in full and a declaration of solvency is made. If this is not the case, then a creditors meeting is held
78
Where a liquidator can avoid a transaction at an undervalue, can they order the return of the property in order to restore the position to what it would haver been if the transaction had not taken place?
No - liquidator does not have this power, but an application to the court can be made
79
a) Once a bankruptcy order has been made, can a secured creditor enforce their security against the bankrupt debtor?
b) Does the debtors property vest in the trustee
c) In liquidation, do the company's assets automatically vest in the liquidator
a) Yes - this is an exception to the normal rule that the bankrupt can no longer have action taken against them by creditors
b) Yes - this is automatic
c) No - they remain the property of the company but under liquidators control (Unless court says otherwise)
80
Does a company need to issue all of its share capital?
No - this would be unissued share capital
81
How is authority to allot shares required to be given to the directors of a public company?
By ordinary resolution or by the articels
82
Must the shares taken buy the original subscribers for both private and public companies be paid for in cash?
No - only public
83
Must the articles of a private company permit the issue of redeemable shares?
No but they can restrict
84
Can redeemable shares only be issued when there are other non-redeemable shares issued?
Yes
85
A charge may be avoided by a liquidator as a preference where it is created within a specified time before a company becoming insolvent.
a) What is the specified time for a fixed charge?
b) What is the specified time for a floating charge?
a) 6 months
b) 12 months
86
Can floating charges apply to future assets in that class?
Yes
87
True or false, if a directors' appointment is subsequently found to have been defective, their actions are invalidated as a result
False - the directors' actions remain valid regardless of a defective or void appointment
88
Is a company always liable for its own debts?
Yes
89
Which of the following is needed to change the articles of a company?
a) Ordinary resolution
b) Special resolution
c) Unanimous agreement or court order
Which of the following is needed to alter a provision for entrenchment
e) Ordinary resolution
f) Special resolution
g) Unanimous agreement or court order
b
g
90
a) Do micro entities have to file a P/L, BS or both with the registrar?
b) Do micro entities have to file notes?
a) Balance sheet
b) Yes
91
What does res ipsa loquitur mean?
The facts speak for themselves
92
Which of the following statements are incorrect?
a) If the defendant succeeds in arguing res ipsa loquitur, the burden of proof is then on the claimant to show negligence
b) In arguing res ipsa loquitur, it must be shown that the thing that caused damage was under the control of the defendant
c) Res ipsa loquitur is relevant where the reason for the damage is unknown
d) Whether a breach of the duty of care has occurred is a matter of fact
a - when the facts speak for themselves, the burden of proof is on the defendant
93
An accountant gives incorrect tax advice to a client, the error constituted negligence. They face potential liability in;
a) Contract only
b) Tort only
c) Contract and tort
d) Neither - this is a misrepresentation
c
Contractual liability may arise where he gives the advice in performance of a contract
94
True or false;
a) A liability limitation agreement between a company and its auditor limiting potential liability for negligence in the course of auditing accounts is automatically void
b) A provision (other than a liability limitation agreement that excludes auditors from negligence is enforceable
c) A company can agree to indemnify an auditor against liability for negligence
a) False
b) False
c) True
95
Within what time period must a person claim for
a) Tortious acts
b) Personal injury due to tortious acts
a) 6 years
b) 3 years
96
In damages, do the following matters have to be considered as reasonably foreseeable?
a) The manner in which the loss was suffered
b) The extent of the loss
c) The type of damage suffered
a) No
b) No
c) Yes
Provided the type of damage suffered was reasonably foreseeable, it does not matter what it came about in an unexpected way or that it was more or less extensive than was reasonably foreseeable
97
True or false;
a) An employer will not be vicariously liable for negligent acts of their employee if they can show that they took reasonable steps to avert the possibility of the tort being committed
b) If an employee does something they are prohibited from doing in their contract, and that act causes harm to others, the employer is not vicariously liable because the employee is acting outside the course of their employment
a) False - endeavours of the employer do not impact their vicarious liability
b) False - the fact that the employee does a prohibited act does not take the act outside the scope of employment so the employer is still liable
98
True or false;
a) Where it can be shown that A owes B a contractual duty of care, it follows that a duty of care is also owed in tort
b) In a claim for negligent misstatement, it will be harder for a sophisticated investor to satisfy the court that an auditor owes them a duty of care
c) When determining liability for negligence, the court will consider whether the damage was in the contemplation of the parties at the time of the act
a) False
b) True - sophisticated investors are likely to be considered responsible for their own actions
c) False - it will consider whether the damages were reasonably foreseeable
99
Does ratification impact future actions of the agent
No - a principal can only ratify past actions
100
True or false;
a) In connection with agency by estoppel, it is not necessary to show that the claimant's loss was caused by their reliance on the representation
b) For an agency by estoppel to arise, there must be a pre-existing agency relationship between the principal and the agent
c) If a third party was not aware that an agent was acting as such at the time a contract was made, but becomes aware a week later, the agent is not liable
d) If a third party was not aware that an agent was acting as such at the time a contract was made, but becomes aware a week later, the agent cannot sue the third party
a) False - their must be a causal link between the third party's loss and their reliance on the representation
b) False
c) False - the third party may choose to sue either the agent or the principal
d) False - either the third party or agent can sue - but the agent's rights are subordinated to the principal's
101
If a person claims to be acting as an agent without any authority, are they liable for the tort of deceit?
Yes
102
Can an agency relationship be created by ratification?
Yes
103
Can an agent keep a principal's goods in lien as well as property?
Yes
104
Is specific performance a common law or equitable remedy for breach of contract?
An equitable remedy
105
Match the key terms with their definitions;
1. Reliance interest
2. Expectation interest
a) A claimant seeking to reclaim money they have wasted in performing a contract that the defendant has breached
b) The amount of money needed to put the claimant in the position they would have been in if the contract had been performed
1. a
2. b
106
Is specific likely to be awarded as a remedy in cases involving a contract to build a house
No - requires supervision
107
Which of the following describes the reasonableness test under UCTA?
a) Whether it is fair and reasonable, with regard to all the circumstances which were or which ought to have been known to the parties when the contract was made
b) Whether it is fair and reasonable, with regard to all the circumstances which were known to or which were in the reasonable contemplation of the parties when the contract was made
a
108
James is contracted to buy a car from Jeremy for £23,000 but refused to take delivery. Jeremy, who had bought the car for £20,000 was able to sell the car to Richard for £24,000, but sued James for breach of contract.
Which of the following applies;
a) James is no longer in breach of contract because Jeremy mitigated his loss
b) Jeremy is entitled to nominal damages only since he has been able to sell the car for a greater profit
b
109
True or false;
Where the offeror prescribes a mode of communication of acceptance, the offeree can normally use an alternative mode, provided it is at least as expeditious as the mode prescribed.
True - the offeror would need to be very specific for this not to be the case
110
Match the key term to its definition;
1. Executed consideration
2. Executory consideration
3. Past consideration
a) Payment occurs at the time the contract is made
b) A promise for a promise
c) Consideration is made before the contract is formed
1.a
2.b
3.c
111
Which of the following types of contract need not be a deed
a) Contract for consumer credit
b) A lease over 3 years
c) A contract for the regular payment of a donation to charity
a - this must be in writing but need not be a deed
112
True or false;
a) Only written contractual terms are capable of being enforced
b) Terms of a a valid contract do not have to be complete, some may be left for clarification at a later date
c) Statements made by one party before a contract is formed that induce the other party to enter the contract will become a term of the contract
d) In the event of a contractual dispute, oral evidence cannot be submitted that contradicts the written terms
a) False
b) True
c) False - these would be representations not terms
d) False - oral evidence can be submitted if the contract shows that the written terms do not intend to include all terms
113
The supply of goods and services act implies that work and materials must be of
a) Satisfactory quality
b) Contracted quality
c) Merchantable quality
a
114
True or false;
a) Under UCTA, a clause that seeks to limit liability for breach of contract where one party is acting as a consumer is void
b) Exclusion clauses in business to consumer contracts are void
c) Exclusion clauses may legitimately restrict liability for loss or damage to property caused by negligence
a) False - valid if reasonable
b) False - valid if reasonable
c) True
115
UCTA does not apply to which of the following contracts;
a) Hire purchase contracts
b) A contract between two private persons
c) A contract where one party is a business and one is a consumer
d) A contract between two business organisations
b
116
Under UCTA, which factor is not taken into account by a court when applying the reasonableness test?
a) Whether the party relying on the clause is protected by insurance
b) Whether one party is a consumer
b
117
Once a director has been appointed, the register should be updated and registrar notified within how many days?
14
118
If a public company does business or borrows before obtaining a trading certificate from the registrar, the transaction is;
a) invalid and the third party cannot recover any loss
b) invalid and the third party can recover any loss from the directors
c) valid and the directors are punishable by a fine
d) valid but the third party can sue the directors for liquidated damages
c
119
True or false;
The share premium account can be used for discounts on the issue of debentures
True
120
When a company receives an instrument of transfer, it must register or refuse within how long?
2 months
121
What resolution is required to authorise the redemption of shares?
Ordinary
122
a) What restrictions apply to a private company providing financial assistance for the purchase of its shares?
b) Can a private company purchase its own shares when they are partly paid up, provided it has sufficient distributable profits?
a) None
b) No - they must be fully paid up
123
Within how many days do most charges need to be registered?
21 days
124
What must an administrator do within 8 weeks?
Submit proposal for their aim and seek creditor's approval
125
List the maximum sentences for the offences below
a) Failure to implement ML prevention measures
b) Regulated industries failing to report ML
c) Tipping off for ML
d) Laundering
a) 2Y
b) 5Y
c) 2Y
d) 14Y
126
Are partners employees
Generally speaking, no, although a salaried partner maybe
127
Under certain circumstances a member can bring aderivative claim on behalf of the company against the directors for breach ofreasonable skill, care or diligence.
To whom would any damages accrue?
a) The member.
b) The company.
c) The other members.
d) The creditors.
b) The company.
Benefits of derivative actions accrue to the company only.
128
True or false;
a) If the board of directors exceeds its powers, the company cannot be held liable on a contract with a third party.
b) Any person has the right to inspect any part of the Register maintained by the Registrar of Companies
a) False. Where directors exceed their powers the company may be liable on contracts with third parties.
b) False. Certain exceptions apply, including the register of directors' residential addresses and the contents of any charges.
129
Under company law, there are several ways in which the members can exercise control over the directors.
Which of the following is NOT one of those ways?
a) Members can remove directors from office by ordinary resolution.
b) Members are required to give approval of directors' service contracts guaranteed for over two years.
c) Members are required to give approval of any borrowing by directors.
d) Members may re-allocate powers by altering the articles.
b) Members are required to give approval of any borrowing by directors.
This is not usually the case, although the articles may set a maximum borrowing limit, above which directors must seek members' approval.
130
To what extent is a member of a company limited by guarantee personally liable to contribute towards the company's debts?
a) They are liable to contribute towards all the company's debts at any time.
b) They are liable for all the company's debts on a winding up only.
c) Their liability to contribute is limited to the amount they agreed to upon a winding up.
d) Their liability to contribute is limited to the amount they agreed to at any time.
c) Their liability to contribute is limited to the amount they agreed to upon a winding up.
Liability is limited to the guaranteed amount and is due only in the event of liquidation.
131
The articles of association of a company limited by shares form a contract between:
a) The shareholders and the company in all respects.
b) The shareholders and the directors in all respects.
c) The company and the directors in respect of directors' rights only.
d) The company and the shareholders in respect of shareholder rights only.
d) The company and the shareholders in respect of shareholder rights only.
Eley v Positive Government Security Assurance Co Ltd illustrates that the statutory rules only apply to rights as a shareholder, and not rights of shareholders who are suing in another capacity.
132
Will the provisions of the Law Reform (Frustrated Contracts) Act 1943 override any express contractual terms which cover the event that has occurred?
No
133
Carol had entered into a contract to design and build a pergola for Janet's garden for the sum of £800. Although she was quick to produce plans and drawings, she still had not purchased the necessary materials after 3 months. Janet's mother, fearing that the summer was likely to be over before the pergola was in place, offered Carol an additional £100 to build the pergola. Carol completed the pergola.
Is she entitled to claim the £100 from Janet's mother?
a) No, because she was already bound to build the pergola anyway.
b) Yes, because her existing obligation to build the pergola was owed to Janet, not Janet's mother.
c) No, because Janet's mother did not intend to create legal relations. She simply wanted to put pressure on Carol.
d) Yes, but she cannot also demand payment from Janet because she has effectively agreed to a new price for the same work and waived the original claim.
b) Yes, because her existing obligation to build the pergola was owed to Janet, not Janet's mother.
Performance of an existing contractual duty to another party can be valid consideration.
134
Who would normally appoint a managing director?
a) The board of directors.
b) The company secretary.
c) The company auditor.
d) The shareholders.
a
135
A company has 5 members who are also directors. Each holds 10 shares. Normally the shares carry 1 vote each, but the articles state that on a resolution for a director's removal, the director to be removed should have 5 votes per share. On a resolution for the removal of Pamela, a director, Pamela casts 50 votes against the resolution and the other members cast 40 votes for the resolution.
Has Pamela validly defeated the resolution?
a) No. The articles are invalid insofar as they purport to confer extra votes.
b) Yes. The proceedings and articles are valid.
c) Yes. Whilst the articles are invalid, a special resolution is required and the necessary majority has not been obtained.
d) No. A director is not entitled to vote on a resolution for her own removal.
b) Yes. The proceedings and articles are valid.
Weighted voting rights such as these were held to be valid per Bushell v Faith.
136
Which of the following statements about the duties of directors is CORRECT?
a) The directors have a duty to ensure that no individual shareholder suffers a financial loss as a result of purchasing the company's shares.
b) Directors owe their duties to the members.
c) Current and past directors owe duties.
d) Directors have a duty to distribute a dividend to ordinary shareholders each year.
c) Current and past directors owe duties.
Directors do not have a responsibility to individual shareholders but to the company. Directors do not have a duty to distribute dividend to ordinary shareholder each year as a dividend is only paid if there are funds available and the directors decide to do so. Past directors owe duties regarding conflicts of interest and accepting benefits from third parties.
137
Powell is applying to register a new company First Step Ltd.
In preparing the statement of capital and initial shareholding, which of the following does NOT need to included?
a) The aggregate nominal value of shares.
b) The amount to be unpaid on each share.
c) Whether rights of pre-emption apply.
d) Details of individual classes of shares.
c) Whether rights of pre-emption apply.
This information is not needed.
138
Might a director's duty to promote the success of the company, set out in the Companies Act 2006, require a director to have regard to relevant interests of
i. creditors?
ii. members?
iii. employees?
a) All of them.
b) None of them.
c) (i) and (ii) only.
d) (ii) and (iii) only.
a) All of them.
The statutory provision dealing with this duty requires a director to have regard to the interests of the company's employees and also, to act for the benefit of (and fairly as between) its members. It also requires a director to continue to observe any applicable common law duty to have regard to creditors.
139
Which of the following can petition the court alleging that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally?
i. A shareholder
ii. A director who is not a shareholder
iii. A creditor
a) None of the above.
b) All of the above.
c) (i) only.
d) (i) and (ii) only.
c) (i) only.
Any member may apply to the court under s994 CA'06 on this basis.
140
In the absence of any express provisions, are preference shareholders entitled
a) To receive any unpaid preference dividends when a company is wound up?
b) To participate in any additional dividend over and above the rate specified in relation to their shares?
a) No.
The entitlement only arises where express provision is made in the company's articles of association or terms of issue.
b) No.
There is no such entitlement unless express provision is made to that effect.
141
Arthur has been appointed as administrator for Wheelies Ltd. He has formulated his proposals for achieving the aim of administration as set out in the Insolvency Act 1986.
To whom is he obliged to submit them?
i. The Registrar of Companies
ii. The company's creditors
iii. The members of Wheelies Ltd
a) (i) only.
b) (ii) only.
c) (ii) and (iii) only.
d) (i), (ii) and (iii).
d) All of them
142
Which of the following statements is untrue in respect of unlimited partnerships?
a) There must be at least one partner who retains unlimited liability.
b) The partnership must be incorporated.
c) A partner with limited liability may not withdraw capital.
d) All partners are entitled to a 5% return on initial capital invested.
d) All partners are entitled to a 5% return on initial capital invested.
Limited partnerships are regulated by the Limited Partnership Act 1907. This states, amongst other things, that there must be at least one general partner with unlimited liability, that the partnership has separate legal personality and must hence be incorporated and a limited partner cannot interfere with the running of the business nor withdraw capital. Last statement refers to a condition within the Partnership Act 1890 which regulated ordinary partnerships.
143
Robert, Sally and Tim have carried on business together in a partnership since May 2010. In October 2010, they decided to enter into a formal partnership agreement. The partners agreed the terms of the agreement in December 2010 and signed it in January 2011.
When did the partnership commence?
a) January 2011.
b) May 2010.
c) December 2010.
d) October 2010.
b
144
In relation to ordinary partnerships, answer the following:
a) Can the partnership raise finance by creating a floating charge over its assets or undertaking?
b) Can a partner assign their interest in the partnership to another person?
a) No
b) Yes
145
Which of the following is NOT a feature of an ordinary partnership?
a) Partnership accounts must be filed with the Registrar of Companies.
b) Partners jointly own the business’ assets.
c) Partners have unlimited liability for the business’ debts.
d) Partners have the right to participate in the management of the business.
a
146
True or false;
a) An ordinary partnership must file its accounts and documents with the Registrar of Companies.
b) Partners in an ordinary partnership are protected from liability on partnership debts due to the veil of incorporation.
a) False
b) False
147
Which of the following is NOT required by the incorporation document when a Limited Liability Partnership (LLP) is being formed?
a) The name of the LLP.
b) The location of the registered office.
c) The names and addresses of all the members of the LLP.
d) The amounts of capital introduced by each member.
d) The amounts of capital introduced by each member.
The amounts of capital introduced by each member is not required on the incorporation document.
148
What is the maximum number of members permitted in a limited liability partnership (LLP)?
a) 20.
b) 50.
c) 70.
d) There is no maximum.
d) There is no maximum.
There is no maximum number of members of an LLP.
149
True or False;
a) Fraudulent trading is a criminal offence under the Companies Act 2006 and may be committed by directors of solvent and insolvent companies.
b) Fraudulent trading is a civil offence under the Insolvency Act 1968 and may only be committed by directors of insolvent companies.
c) A limited liability partnership (LLP) is not required to have a formal partnership
agreement, but if it does, it must file it with the Registrar of Companies.
d) The Registrar of Companies must be notified with 28 days of any changes to the
membership of a limited liability partnership (LLP).
a) True
Fraudulent trading is a criminal offence under the Companies Act 2006 that may be committed by directors of solvent and insolvent companies.
b) True
Fraudulent trading is also a civil offence under the Insolvency Act 1986 that may only be committed by directors of insolvent companies.
c) False - first part true - but not required to be filed
d) False - 14 days
150
a) Must an exclusion cause be signed in order to be incorporated into a contract?
b) Can an exclusion clause remove all liability for a party in regard to their breach of contract?
a) No - can be shown
b) Yes
151
Can a principal ratify only party o a contract?
No
152
Which of the following is not necessary to include on the incorporation document?
a) The PSR between its members
b) The address of its registered office
c) The addresses of all its members
d) The location or domicile of its registered office
a
153
A company's application for registration must include all of the following options except one. Which is the exception?
a) A statements that its subscribers wish to form a company
b( A statement as to whether or not it members'' liability is limited
c) The intended address of the company's registered office
d) A statement as to whether the company is public or private
a
154
Can the registrar order a company to change its name?
No - secretary of state can
155
Substantial property transactions from directors to company's require approval. What is the threshold for measuring a SPT?
> £5,000 and 10% of company's asset value
156
a) Do ordinary shares carry pre-emption rights automatically?
b) Do preference shares carry pre-emption rights automatically?
a) Yes
b) No
157
What kind of resolution is required to appoint an administrator?
Ordinary
158
a) Can a QFCH apply to the court to appoint an administrator once a company is in liquidation?
b) Can a QFCH appoint an administrator out of court once a company is in liquidation?
a) Yes
b) No
159
Will a contract be void if it offends public policy?
Yes
160
Can an offeror waive the need for acceptance to be communicated to them?
Yes - can be made by conduct
161
Is the burden of proof on the claimant to show that they took reasonable steps to mitigate their loss?
No - the burden of proof is on the defendant to show that the claimant failed to do so
162
True or false;
The Unfair Contract Terms Act 1977 applies to all contracts, provided at least one party is a commercial concern or business
False - does not apply to Land or Insurance contracts
163
Can a company agree to limit an auditor's liability for negligence?
yes
164
Can all companies exclude pre-emption rights if there is a provision to do so in the articles?
No - private companies only can
165
In the absence of a partnership agreement, can a secretary be appointed without agreement of all partners?
Yes - majority only needed
166
True or false;
The penalty for failing to prevent bribery is punishable by imprisonment and/or a fine
False.
This is an offence which may be committed by a commercial organisation, including companies and
partnerships. The penalty is a fine.
167
Roger, Saheed and Tristan are directors of Benches Ltd. They have recently received loans from the
company for the purposes of purchasing fully paid shares in the company. The loans are in breach
of the rules on financial assistance.
Which of the following sanctions might be imposed on the directors?
i. A fine
ii. Imprisonment
iii. Civil liability
All of the above.
Both criminal and civil sanctions may apply.
168
True or false;
Failure to obtain a trading certificate within 6 months of incorporation may result in the compulsory winding up of a public company?
false - the period is 12 months
169
True or false;
Compensation awarded in a whistleblowing case may include an amount for injury to feelings
True
170
Peter and Kieran are in partnership together. Peter takes a 60% share of the profits and Kieran takes 40%. They have never drawn up a formal partnership agreement.
Since there is no express provision in respect of losses, do they share losses equally?
No - it mirrors the PSR
171
True or false;
Where it can be shown that a member knew that their LLP would become insolvent, a withdrawal made by that member within the 20 months prior to the making of a winding up order can be claimed back.
True.
Withdrawals made at any time within 2 years prior to a winding up can be claimed back.
172
A tribunal may reduce the amount of a basic award for unfair dismissal on certain grounds.
Which of the following is NOT a ground for making such a reduction?
a) Where the employee has unreasonably refused an offer of reinstatement.
b) Where the employee has received a redundancy payment.
c) Where it is just and equitable having regard to the employee's conduct.
d) Where the loss suffered by the employee was less than the nominal amount of the award.
d) Where the loss suffered by the employee was less than the nominal amount of the award.
Basic awards are governed by the Employment Rights Act 1996 and are made regardless of the amount of loss suffered by an employee.
173
Which of the following types of contract must be in writing?
a) A Conveyance (transfer) of a legal estate in land.
b) A Partnership Agreement.
c) An agreement for the sale of land.
d) A consumer credit agreement.
c) An agreement for the sale of land.
Simple contracts can be in any form but to be enforceable any contract to buy or sell land must be made in writing.
There is no need to have a Partnership Agreement in writing it may be made orally or even by the conduct of the parties.
A consumer credit agreement must have written evidence of the terms within it but need not actually be written.
A Conveyance must be made by Deed.
174
Consideration is an essential element of a binding contract.
Which of the following types of consideration would be in the correct form to create a binding contract?
a) A guarantee by a debtor to make the payment due on the date agreed.
b) A promise to reimburse a builder who has built an extension to your house.
c) A promise made to a witness by a defendant to pay them if they give evidence on the defendant’s behalf where that witness has been subpoenaed to appear.
d) A promise made by a father to his daughter to give her £50,000 in exchange for her continued love and affection.
b) A promise to reimburse a builder who has built an extension to your house.
The rules of consideration are that it must be for money or money’s worth and that it need not be adequate but must be sufficient so that it cannot be the promise to do something that one is already contractually or legally bound to do.
Consideration cannot be in the past but there is an exception if that work has been requested or where it is implied that the work will be paid for.
175
A company’s articles form part of its constitution along with all special resolutions and other relevant resolutions and agreements.
Which of the following statements about articles is correct?
a) A company’s articles of association can be altered by the passing of an ordinary resolution unless there is an entrenched provision which would then require the passing of a special resolution.
b) A company may provide that a provision for entrenchment can never be replaced or amended.
c) A company can change their articles to compel a member to subscribe for additional shares where the net assets fall to half or less of it’s called up share capital.
d) A copy of any amended article must be sent to the Registrar within 15 days.
d) A copy of any amended article must be sent to the Registrar within 15 days.
Whilst articles can be amended this requires a special resolution as it involves a major change in the company, a company cannot provide that a provision for entrenchment can never be replaced or amended and must give notice to the Registrar whenever one is included or removed.
Members will not be bound by any alteration made after they became a member insofar as the alteration requires them to take more shares or increase their liability in any way to pay money to or contribute to the company.
176
Barbara was formerly a director of two listed companies. She is now a director of Dark Side Ltd and actively manages her business in a way that prejudices the company's main creditor, Sunshine Bank plc, but favours a small number of smaller lenders with whom she has connections. The financial status of Dark Side Ltd is rapidly approaching a situation where it may be unable to pay its debts but it is not yet insolvent.
Can Barbara be liable to contribute to the assets of the company by reason of her fraudulent trading?
No.
Civil liability only arises when a company is being wound up. Criminal liability exists regardless of whether the company is solvent or not.
177
Are the following statements true or false?
a) Where it is shown that the claimant consented to the risk of injury, the defence of volenti applies and the defendant cannot be liable.
b) An exclusion clause may be effective to exclude or restrict liability in tort as well as in contract.
a) False
Something more than the knowledge of, or consent to, risk is needed. The claimant must be shown, effectively, to have waived the right to redress for a breach of the duty of care owed to them.
b) True
178
The companies (miscellanious reporting) regulations 2018 require companies to make disclosures in reltion to all of the following areas except one. Which is the exception;
a) Corporate governance
b) Directors remuneration
c) Compliance with ML regs
d) Stakeholder engagement
c
179
What type of national insurance contributions do employers pay on behalf of employees?
Class 1 secondary
180
Indicate whether the following require an ordinary or special resolution;
a) Appointing a liquidator
b) A change in the company name
c) The alteration of the articles
d) The removal of a director
e) A variation of class rights
Must the declaration of solvency be made by;
1. A majority of the directors
2. The directors acting unanimously
a) Ordinary
b) Special
c) Special
d) Ordinary
e) Special
1
181
True or false;
a) Micro-entities do not have to file a profit and loss account with the registrar
b) Micro entities do not have to file notes with the registrar
a) True
b) False
182
True or false;
employers have a general duty to provide work
false
There is no general liability for the employer to provide work provided they continue to pay wages. There are however, requirements to provide work if by not doing so the employee cannot earn (such as piece workers or where earnings are on commission) or where the employee would suffer a loss of skills by not being afforded the opportunity to use those skills.
183
Which of the following statements concerning the differences between share capital and loan capital is incorrect?
a) There are statutory restrictions on the redemption of shares but none on redeeming debentures.
b) Debentures can be issued at a discount to their nominal value but shares cannot.
c) Unlike loan capital, share capital does not have to be repaid.
d) Share capital is transferable, loan capital is not.
d) Share capital is transferable, loan capital is not.
A share is a transferable form of personal property, similarly debenture holders own transferable company securities which are usually long-term investments in the company and the procedure for issue and transfer of shares and debentures is very similar.
The other statements set out 3 of the differences between the types of capital.
