Question 1

A company cannot be established with only one member.

Accepted Answer

A) True 
 B)False

Question 2

A company limited by shares may be either a public or proprietary company.

Accepted Answer

A) True 
 B)False

Question 3

The case of Morley v Statewide Tobacco Service Ltd (1992)ACLC 1233 is authority for the principle that:

Accepted Answer

A) a director will not be liable for a breach of s 588G if they were unable to attend company meetings. 
B) a director's liability under s 588G is determined by what they ought to have known about the company's debts. 
C) a director's liability under s 588G is determined by their actual knowledge of the company's debts. 
D) a director will not be liable for a breach of s 588G if they acted in good faith. 
A) a director will not be liable for a breach of s 588G if they were unable to attend company meetings. 
B) a director's liability under s 588G is determined by what they ought to have known about the company's debts. 
C) a director's liability under s 588G is determined by their actual knowledge of the company's debts. 
D) a director will not be liable for a breach of s 588G if they acted in good faith.

Question 4

Which of the following statements is true?

Accepted Answer

A) A company can own property and sue and be sued in its own name. 
B) A company is separate from its owners and employees. 
C) A company is an association of persons formed to finance a business. 
D) All of the above. 
A) A company can own property and sue and be sued in its own name. 
B) A company is separate from its owners and employees. 
C) A company is an association of persons formed to finance a business. 
D) All of the above.

Question 5

The decision in ASIC v Gallagher (1993)11 ACLC 286 was that non-executive directors of a company:

Accepted Answer

A) may rely on other directors providing them with important information. 
B) have a duty to inform themselves so that they can make independent judgments. 
C) must investigate all matters requiring their approval when they have been put upon enquiry. 
D) all of the above. 
A) may rely on other directors providing them with important information. 
B) have a duty to inform themselves so that they can make independent judgments. 
C) must investigate all matters requiring their approval when they have been put upon enquiry. 
D) all of the above.

Question 6

Explain what 'share capital' is.

Accepted Answer

A company gains its capital from two sou

Question 7

Committee members of an unincorporated association owe a fiduciary duty to the association.

Accepted Answer

A) True 
 B)False

Question 8

'Allotment' involves the business practice of:

Accepted Answer

A) transferring shares from one member to another. 
B) inviting members of the public to subscribe for shares in a company. 
C) allocating shares to members of the public who have applied for them. 
D) none of the above. 
A) transferring shares from one member to another. 
B) inviting members of the public to subscribe for shares in a company. 
C) allocating shares to members of the public who have applied for them. 
D) none of the above.

Question 9

In what circumstances will a court ignore the separate legal entity principle and lift the corporate veil?

Accepted Answer

A) If a company has been used to avoid a contractual obligation. 
B) If a company has been used by a director to breach a fiduciary duty. 
C) If a company has been used to commit a fraud. 
D) All of the above. 
A) If a company has been used to avoid a contractual obligation. 
B) If a company has been used by a director to breach a fiduciary duty. 
C) If a company has been used to commit a fraud. 
D) All of the above.

Question 10

In which of the following situations will a director be found to have breached their duty to act in good faith?

Accepted Answer

A) The director has put themselves in a situation where their duties to the company and their personal duties conflict. 
B) The director has agreed to vote in a certain way at future board meetings. 
C) The director has done something which no reasonable director could regard as being in the interests of the company. 
D) The director has exercised one of their powers primarily in order to gain some private advantage. 
A) The director has put themselves in a situation where their duties to the company and their personal duties conflict. 
B) The director has agreed to vote in a certain way at future board meetings. 
C) The director has done something which no reasonable director could regard as being in the interests of the company. 
D) The director has exercised one of their powers primarily in order to gain some private advantage.

Question 11

Which of the following statements accurately defines a 'debenture'?

Accepted Answer

A) The process by which a floating charge becomes a fixed charge. 
B) Security for a loan attached to all of the assets of the company. 
C) Security for a loan attached to specific assets such as land and buildings. 
D) A document whereby a company acknowledges a debt. 
A) The process by which a floating charge becomes a fixed charge. 
B) Security for a loan attached to all of the assets of the company. 
C) Security for a loan attached to specific assets such as land and buildings. 
D) A document whereby a company acknowledges a debt.

Question 12

What do the letters 'NL' after a company name mean?

Accepted Answer

A) Company members have no limit on their liability. 
B) Liability of members is not limited. 
C) Company members have no liability. 
D) The number of members is not limited. 
A) Company members have no limit on their liability. 
B) Liability of members is not limited. 
C) Company members have no liability. 
D) The number of members is not limited.

Question 13

In which of the following circumstances will a person be found NOT to be a director of a company?

Accepted Answer

A) If they have been validly appointed but do not act as director. 
B) If they act as a director but have not been validly appointed. 
C) If they have not been validly appointed but the other directors follow their instructions. 
D) None of the above. 
A) If they have been validly appointed but do not act as director. 
B) If they act as a director but have not been validly appointed. 
C) If they have not been validly appointed but the other directors follow their instructions. 
D) None of the above.

Question 14

Which type of company is the most appropriate for a husband and wife running a small business?

Accepted Answer

A) A company is not appropriate for a small family business. 
B) Small proprietary company limited by shares. 
C) Small public company limited by shares. 
D) Public no liability company. 
A) A company is not appropriate for a small family business. 
B) Small proprietary company limited by shares. 
C) Small public company limited by shares. 
D) Public no liability company.

Question 15

An incorporated association will cease to exist if members do not renew their membership.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is NOT true?

Accepted Answer

A) ASIC initiates civil and criminal action for breaches of the Corporations Act 2001 (Cth). 
B) ASIC Monitors and promotes market integrity. 
C) ASIC monitors compliance with accounting standards. 
D) ASIC investigates breaches of Australian law that relates to a company. 
A) ASIC initiates civil and criminal action for breaches of the Corporations Act 2001 (Cth). 
B) ASIC Monitors and promotes market integrity. 
C) ASIC monitors compliance with accounting standards. 
D) ASIC investigates breaches of Australian law that relates to a company.

Question 17

Which of the following is an advantage of using a company as a business structure?

Accepted Answer

A) Shareholders have limited liability for the debts of the company. 
B) Reporting requirements are minimal. 
C) Directors have limited liability for the actions of the company. 
D) Low establishment cost and ongoing fees. 
A) Shareholders have limited liability for the debts of the company. 
B) Reporting requirements are minimal. 
C) Directors have limited liability for the actions of the company. 
D) Low establishment cost and ongoing fees.

Question 18

As a separate legal entity a company can be a director of a subsidiary company.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is NOT a requirement which must be satisfied before a company can buy back shares from its members?

Accepted Answer

A) The share capital reduction must not materially prejudice the company's ability to pay its creditors. 
B) The share capital reduction must be approved by shareholders. 
C) The share capital reduction must be approved by the court. 
D) The share capital reduction must be fair and reasonable to the company's shareholders as a whole. 
A) The share capital reduction must not materially prejudice the company's ability to pay its creditors. 
B) The share capital reduction must be approved by shareholders. 
C) The share capital reduction must be approved by the court. 
D) The share capital reduction must be fair and reasonable to the company's shareholders as a whole.

Question 20

The case of Salomon v Salomon & Co Ltd [1897] AC 22 is authority for the principal that:

Accepted Answer

A) the debts of a company are the debts of its shareholders. 
B) a company is a legal entity separate from its shareholders. 
C) debenture holders take precedence over unsecured creditors. 
D) companies must have more than one director. 
A) the debts of a company are the debts of its shareholders. 
B) a company is a legal entity separate from its shareholders. 
C) debenture holders take precedence over unsecured creditors. 
D) companies must have more than one director.

Exam 19: Introduction to Companies and Incorporated Associations

A company cannot be established with only one member.

A company limited by shares may be either a public or proprietary company.

The case of Morley v Statewide Tobacco Service Ltd (1992)ACLC 1233 is authority for the principle that:

Which of the following statements is true?

The decision in ASIC v Gallagher (1993)11 ACLC 286 was that non-executive directors of a company:

Explain what 'share capital' is.

Committee members of an unincorporated association owe a fiduciary duty to the association.

'Allotment' involves the business practice of:

In what circumstances will a court ignore the separate legal entity principle and lift the corporate veil?

In which of the following situations will a director be found to have breached their duty to act in good faith?

Which of the following statements accurately defines a 'debenture'?

What do the letters 'NL' after a company name mean?

In which of the following circumstances will a person be found NOT to be a director of a company?

Which type of company is the most appropriate for a husband and wife running a small business?

An incorporated association will cease to exist if members do not renew their membership.

Which of the following statements is NOT true?

Which of the following is an advantage of using a company as a business structure?

As a separate legal entity a company can be a director of a subsidiary company.

Which of the following is NOT a requirement which must be satisfied before a company can buy back shares from its members?

The case of Salomon v Salomon & Co Ltd [1897] AC 22 is authority for the principal that:

Legal Foundations

Legal Systems

How Law Is Made: Precedentstatute Law

Civil Liability: the Law of Torts and Negligence

Applications of Negligence to Business

Introduction to Contracts

Agreement Between the Parties

Intention to Create Legal Relations

Consideration

Capacity of the Parties

Genuine Consent

Is the Contract Legal

Terms of the Contract

Rights and Liabilities of the Parties,discharge and Remedies

Remedies in Contract

Statutory Consumer Guarantees and the Australian Consumer Law

General and Specific Consumer Protections Under the Acl

Agency

Partnerships

Choosing a Business Entity

Other Business-Related Torts

Insurance

Sale of Goodsbusiness to Business

Property and Mortgages

Intellectual Property

Ethics and Business Practice

Criminal Law in a Business Context

Competition Law

Insolvency and Debt Recovery

The Work Environment and the Employment Relationship

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