ACCA F4 flashcards – set 3

See also ACCA F4 Flashcards: Set 1 | Set 2 | Set 3 | Set 4


“The entry to balance the cash received on the event of a rights issue of shares is to a combination of the share capital account and the share premium account”
Is this statement true?

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Yes, the share capital account will be credited with the nominal value of the new issue and the share premium account with the excess proceeds over nominal value

Special notice is sometimes required for what type of resolution in a company’s general meeting?

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An ordinary resolution sometimes requires special notice

If a firm of auditors wishes to resign, or not seek re-election, they must deliver to the company’s registered office a “statement of circumstances”
Is this statement true?

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No. If a firm of auditors wishes to resign, or not seek re-election, they must deliver to the company’s registered office either a “statement of circumstances” or a “statement of no circumstances”

Within how many months after incorporation must a private company hold its first annual general meeting?

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It is not a statutory requirement that private companies should have an annual general meeting

Is it reasonable for a director to claim that she could not be expected to promote the interests of the company?

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No, it is a statutory duty of directors to promote the interests of the company

“Where a private company wishes to appoint a company secretary, that appointee should, by law, be appropriately qualified”
Is this statement true?

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No, where a private company wishes to appoint a company secretary, it is not statutorily necessary that that appointee should have any qualifications. It could be your grand-mother!

Is it true that the Court may, on application, direct that a public company be liquidated where the company has failed to obtain a trading certificate within 12 months of incorporation?

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Yes, it is true.  It’s one of the six grounds for which the Court may make that compulsory liquidation order

What sort of resolution is required to be passed by the members to put their company into liquidation?

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A special resolution requiring a 75% majority voting in favour

Which type of liquidation requires the directors to prepare a declaration of solvency?

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A members’ voluntary liquidation requires the directors to prepare a declaration of solvency

There are two main grounds under which the Court may grant a liquidation order. What are they?

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The Court may grant a liquidation order:
* on the grounds that it would be just and equitable
* on the grounds that the company is unable to pay its debts as they fall due

What was the case when the Court granted a liquidation order on the grounds that there was deadlock on the board?

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The case when the Court granted a liquidation order on the grounds that there was deadlock on the board was re Yenidji Tobacco

What is a Special Manager?

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Special Manager is a person appointed on application to the Court by the Official Receiver to take control of the company’s property during the liquidation process

A person who is to be appointed as liquidator must hold a specific qualification.
What is that qualification?

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A person who is to be appointed as liquidator must be a “qualified insolvency practitioner”

A person who is to be appointed as administrator must hold a specific qualification.
What is that qualification?

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A person who is to be appointed as administrator must be a “qualified insolvency practitioner”

“It is a requirement of the UK Corporate Governance Code that directors should be remunerated in part based on their performance”
Is this statement true?

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Yes,  it is a requirement of the UK Corporate Governance Code that part of the directors’  remuneration should be performance related

In an FTSE 350 company, for what period of time are directors appointed before they must seek re-election (if they wish to be re-elected!)?

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In an FTSE 350 company, all directors must retire each year and seek re-election (if they wish to be re-elected)

“A person who receives inside knowledge about a company from a director and who deals and makes a profit is guilty of the criminal offence of insider dealing”
Is this statement true?

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It is true if the person knew (or should have known) that the informer was an insider.  If they didn’t know (or suspect) , then the person is not guilty of the offence

In order that a company may reduce its share capital it requires permission within the Articles and permission from the Court.  It also needs a third authority.
What is it?

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 In order that a company may reduce its share capital, it requires not only permission within the Articles and permission of the Court. It also requires a special resolution to be passed

In order that a company may reduce its share capital, it requires three authorities.  What are they?

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 In order that a company may reduce its share capital, it requires permission within the Articles, a special resolution and permission of the Court

To be valid, a charge must be registered with the Registrar of Companies within how many days of its creation?

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 To be valid, a charge must be registered with the Registrar of Companies within 21 days of its creation

“In the event that there are two similar charges on the same asset, the charge which is registered first has priority over the one registered second”
Is this statement true?

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No, the statement is not true.  The one with priority is the charge which was created first, not necessarily the one which was registered first

“On a liquidation, all debenture holders are paid in priority to the members.”
Is this statement true?

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Yes, on a liquidation, all debenture holders are paid in priority to all the members

“On a liquidation, the floating charge debenture holders are paid in priority to all others. Their claim “floats” to the top of those people who are owed by the company”
Is this statement true?

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No, on a liquidation, the FIXED charge debenture holders are paid in priority to all others.

“At a general meeting of the company, the debenture holders’ votes are counted before those of the equity shareholders”
Is this statement true?

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No, this is not true. At a general meeting of the company, the debenture holders have no votes – they are creditors, not members

A debenture may be secured by way of a floating charge.
What characterises a floating charge as compared with a fixed charge?

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A floating charge does not attach to an individual asset but rather to a class of assets including current assets. The borrower is able freely to deal with the assets subject to the charge

A debenture may be secured by way of a fixed charge.
What characterises a fixed charge as compared with a floating charge?

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A fixed charge attaches to an individual asset whereby the borrower is not able freely to deal with that asset

For the purposes of the F4 examination, it is important to know the difference between “loan stock” and  “debentures”.
Is this statement true?

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No, it is NOT necessary to be able to differentiate between loan stock and debentures in the F4 examination

If pre-tax profit is $40,000, post-tax profit is $36,000, and there are 10,000 50 cent 6% preference shares in issue, how much is the preference share dividend for the year?

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$300 ie 6% * 10,000 * .50

A preference share has that name because of its preferential entitlements over equity shares.
One preference is that it shall receive its dividend before any equity dividend is paid.
What is the other?

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In the event of a liquidation, preference shareholders shall be repaid their capital, in full, before the equity shareholders receive a single cent in repayment of their capital

“Called-up capital and paid-up capital are two ways of saying the same thing”
Is this statement true?

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No, called-up capital and paid-up capital are not the same thing

“If a private company wishes to have a company secretary, the person appointed must be appropriately qualified”
Is this statement true?

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No, it is not true, no qualifications are necessary for a person to be appointed as a private company secretary

“A public company must have an appropriately qualified company secretary”
Is this statement true?

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Yes, a public company must have an appropriately qualified company secretary

What is the minimum number of directors required in a private company?

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1 is the minimum number of directors required in a private company

“A proxy appointed by a member of a company to represent the member’s wishes must be also a member of the company”
It this statement true?

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No, it is not necessary that a proxy be a member of the company

What does the word “proxy” mean in the expression “present in person or by proxy”?

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A proxy is appointed by a member to represent the member at a general meeting where the member is unable to attend

Where is the detail of quorum size specified?

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 The detail of quorum size is specified in a company’s Articles

What is a quorum?

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A quorum is the minimum number of members necessary to be present at a general meeting of a company if resolutions are to be validly passed

“If a person’s name appears in a Register of Members, this indicates that they are a shareholder of the company”
Is this statement true?

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No, if a person’s name appears in a Register of Members, this indicates that they are a member of the company, but not necessarily a shareholder

“A person becomes a member of a company when they have successfully bought shares in the company”
Is that statement true?

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No, a person becomes a member of a company when their name appears in the Register of Members

“A person becomes a member of a company when their name appears in the Register of Members”
Is this statement true?

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Yes, a person becomes a member of a company when their name appears in the Register of Members

Within how many days must a copy of a special resolution be filed with the Registrar of Companies after being passed at a general meeting of a company?

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Within 15 days

What is meant by the expression “passing off” in the context of company law?

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“passing off” is where a company is established with a name similar to an existing company name and in a similar business such that confusion is likely to result.

What sort of resolution is required if a company wishes to change the company name?

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A special resolution is required if a company wishes to change the company name

“At the time someone becomes a member of a company, it is as though they have entered a contract with **** and with ****”. Complete the sentence

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“At the time someone becomes a member of a company, it is as though they have entered a contract with the company and with all the other members individually”

“An alteration to the Articles allowing a majority to acquire compulsorily the shares of a minority has been shown not to be for the benefit of the company as a whole”. Is this statement true?

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Yes, as illustrated by the case Dafen Tinplate v Llanelli Steel

There is a limitation on the alterability of a company’s articles. They may only be altered if the alteration can be shown to be for the ***** of the company as a *****. Complete the sentence

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They may only be altered if the alteration can be shown to be for the benefit of the company as a whole

In a company with 1,000 members, what is the MINIMUM number of members who must vote in favour in order to pass a special resolution and all members vote?

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No! Just one! I didn’t say that everyone had the same number of votes!

What majority voting in favour is required to pass a special resolution?

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A majority of not less than 75% of votes in favour is required to pass a special resolution

What sort of resolution  is required to alter the Articles?

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A special resolution is required to effect an alteration to the Articles of a company

What is meant by the term “Articles of Association” of a company?

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The Articles of Association consist of the internal rules that relate to the management and administration of the company

The constitution of a company is the combination of three elements.
What are those elements?

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The articles of association,  resolutions which affect the articles and any agreements which affect the articles

A Register of Directors shall contain what information relating to the directors?

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Present and former names, address (ideally home address), nationality, business occupation, date of birth

“A company’s Register of Members must be kept at the company’s registered office”
Is this statement always true?

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No, not true.  A company may keep its register of members at the offices of the company’s registrars

“The date on the certificate of incorporation is ***** proof that that was the date the company was created”.
Complete the sentence

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The date on the certificate of incorporation is conclusive proof that that was the date the company was created

What matters must be disclosed in an “Application for registration” of a new company?

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Proposed name, country of domicile of registered office, liability of members, company status (plc or ltd) , postal address of registered office

If a promoter enters into a contract on behalf of company which has not yet received its certificate of incorporation, is the company liable or, in fact, is anyone liable?

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The promoter is liable personally – the company doesn’t exist and therefore has no liability

The duty to act with reasonable skill and care is an example of what type of duty?

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The duty to act with reasonable skill and care is an example of a fiduciary duty

“The duties owed by a promoter are collectively known as ***** duties”
Complete the sentence

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The duties owed by a promoter are collectively known as fiduciary duties

Define “promoter”

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A promoter is one who undertakes to form a company with reference to a given project and to set it going and who takes the necessary steps to accomplish that purpose

Is it possible for a member to have their liability increased even in a limited liability company?

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Yes, in a number of situations including if they give their written consent.

In a case where the plaintiff is referred to as “R”, who is “R”? (eg R v Clark)

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“R” is the Monarch of the United Kingdom