ACCA LW Management, administration and regulation of companies: practice questions with answers

Answer: C. The company secretary is the company's chief administrative officer. The secretary therefore has apparent authority to make contracts connected with the administrative operation of the company, such as hiring staff, ordering office supplies or hiring cars. A company bound by such a contract cannot deny the secretary's authority, even where the secretary misuses it. Commercial decisions such as major borrowing, disposing of key assets or entering trading contracts are for the directors.

Answer: A. An ordinary resolution is passed by a simple majority of the votes cast by members who are entitled to vote, in person or by proxy. A special resolution needs a majority of at least 75%. Special resolutions are required for important matters such as altering the articles or changing the company's name. Ordinary resolutions cover matters such as removing a director or an auditor.

Answer: D. A court may disqualify a person from being a director (or taking part in the management of a company) on grounds including: conviction of an indictable offence connected with the promotion, formation or management of a company; persistent default in filing returns; fraud in a winding up; unfit conduct as a director of an insolvent company; and participation in wrongful or fraudulent trading. Business failure or losses alone are not grounds; disqualification is aimed at misconduct and unfitness.

Answer: A. Non-executive directors attend board meetings and contribute independent judgment but do not take part in day-to-day management. As directors, they are subject to the same general duties as executive directors, owed to the company: to act within powers, promote the success of the company, exercise independent judgment, exercise reasonable care, skill and diligence, avoid conflicts of interest, not accept benefits from third parties and declare interests in proposed transactions. The standard of care takes account of the functions the particular director carries out, but non-executives cannot escape liability simply because they are not involved in management. Like any director, they may be removed by ordinary resolution.

Answer: C. The company secretary is the company's chief administrative officer, responsible for matters such as maintaining statutory registers, filing returns and arranging meetings. A public company must have a secretary, and its directors must take all reasonable steps to ensure the secretary has the requisite knowledge and experience (for example, as a qualified accountant, lawyer or chartered secretary, or through relevant experience). A private company is not required to have a secretary unless its articles require one; if it has none, the directors carry out these tasks. The secretary is an officer of the company but is not a director by virtue of that office.

Answer: B. Every member entitled to attend and vote at a general meeting may appoint a proxy to exercise all or any of its rights to attend, speak and vote at the meeting. The proxy need not be a member of the company. A proxy can vote on a poll, casting the votes attached to the appointing member's shares, and can demand or join in demanding a poll. The notice of the meeting must tell members of their right to appoint a proxy.