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Hi,
Yesterday I have done and passed F4 CBE, however there were a few questions that remained in my mind and I am just really curious to verify my answers with you.
The fist one was something like “What does it mean if a contract can be set aside by either party?”
a. It is unenforceable
b. It is voidable
c. It is voidI am not a native English speaker and got confused about the meaning of “set aside” in this sentence. I thought about it in a litteral way and went for exclusion. I answered b.
The second one was probably easy, but I got completely confused as I never saw a similar question in the whole Kaplan exam kit. This was the scenario:
“The BOD of the company XX Ltd decided to share dividends for £5m. The Finance Director though pointed out that the company made losses for that year and that it was not possible to share dividends. The BOD went one with their decision. The shareholders found out about the BOD decision at the general meeting, where they also found out about the company loss when the Finance Director announced he was resigning.”
Question: who would be liable for the decision of sharing the divindends in this case?
a. all the shareholders
b. all the directors
c. all the directors and all the shareholders
d. all directors and only the shareholders present at the general meetingAs I got completely confused, I answered d, knowing that it is probably the wrong one.
I would appreciate if you could tell me the correct answer and an explanation of why it is the correct one. I feel like being a future accountant I should know exactly the answer to this one as it may be useful in future!
Anyway, I understood that the shareholders are the ones deciding how to share the dividends and not the directors. That’s why I was lost already from the first line of the scenario.Last question was about the non-executive directors, asking what would be one their responsibility in the company (or something like that, now I don’t remember the exact words).
a. governance of the company
b. management of the company
c. decision making for the running of the companyThe answers were so close and vague that I got lost again. I don’t even remember what I answered, I think I just picked one, probably c. I know that they are usually external to the company and they bring their expertise to the BOD, plus they sort of check on the other directors, however I did not remember any more than that.
I hope this can help other students too.
Thank you!a) From what you have written (and the PRECISE wording of these questions is important) I suggest that “voidable” is correct
b) Again, the precise wording is very important! If there was a credit balance on the Retained Earnings figure brought forward, the loss this year could be irrelevant – so long as it’s less than the brought forward credit balance.
If the dividend will result in a deficit on Retained Earnings then the directors and any shareholder that accepts that dividend will be liable (so, basically, all the shareholders!)
c) The non-executive directors have no part in decision making nor in management (as such) so the answer must be governance. But, again, the precise wording is important. The responsibility for governance lies initially with the executive board. The NEDs are there to make sure that the executive board are doing an acceptable job of governance
Whatever … it’s over!!!! Yeah :-)))
Congratulations!
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