Chartered Institute of Management Accountants (CGMA) · Fundamentals of Ethics, Corporate Governance and Business Law
CIMA BA4 Company administration: practice questions with answers
4 free exam-style questions on Company administration for CIMA BA4 Fundamentals of Ethics, Corporate Governance and Business Law. Try each one, then open the answer to read the explanation. Fincora has 32 original questions on this syllabus area.
Question 1
In which of the following situations are the courts most likely to 'lift the veil of incorporation' and look behind the company to the people controlling it?
- A Whenever a company becomes insolvent and cannot pay all of its trade and other creditors in full
- B Where it is a sham or façade used to evade an existing legal obligation of its controller
- C Whenever a company has only one shareholder, who is also its sole director and controls all of its decisions
- D Whenever a creditor would otherwise not be paid in full by the company
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Answer: B. The veil of incorporation is lifted only in limited circumstances. At common law, the courts will disregard separate personality where a company is a sham or façade used to evade an existing legal obligation or frustrate its enforcement, for example forming a company to get round a restraint of trade covenant or to avoid a contract to sell land. Statute also lifts the veil in specific cases, such as fraudulent and wrongful trading under insolvency law. Insolvency, a single member or unpaid creditors are not grounds in themselves.
Question 2
Under the UK Companies Act 2006, how may the members of a company normally alter its articles of association, assuming the articles contain no entrenched provisions?
- A By ordinary resolution
- B By a resolution of the board of directors
- C Only by application to the court
- D By special resolution
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Answer: D. Under section 21 of the Companies Act 2006 a company may amend its articles by special resolution, which requires a majority of not less than 75%. Articles may contain entrenched provisions, which can be amended only if conditions more restrictive than a special resolution are met. Any alteration must be made bona fide in the interests of the company as a whole, and a copy of the amended articles must be filed with the registrar.
Question 3
Which statement about company secretaries under the Companies Act 2006 is correct?
- A Every company, whether public or private, must appoint a company secretary who holds a professional qualification
- B A private company must have a company secretary, but a public company need not have one
- C A public company must have a company secretary, but a private company need not have one unless its articles require it
- D The company secretary must also be one of the company's directors
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Answer: C. Under the Companies Act 2006:
- a private company is not required to have a company secretary, unless its articles require one; if it has none, the directors carry out the secretary's administrative functions;
- a public company must have a secretary, and the directors must take reasonable steps to ensure that the secretary has the necessary knowledge and experience and holds a suitable qualification (for example as a chartered accountant or chartered secretary, or a barrister or solicitor) or relevant experience.
The secretary's duties include maintaining statutory registers, filing returns and documents with the Registrar, and organising meetings and minutes.
Question 4
Which statement about annual general meetings (AGMs) under the Companies Act 2006 is correct?
- A A private company must hold an AGM in each calendar year, but a public company need not hold one
- B A public company must hold an AGM within six months of its year end; a private company need not, unless its articles require one
- C Every company, public or private, must hold an AGM within nine months after the end of each financial year
- D AGMs are optional for all companies, whether public or private, unless the shareholders formally demand one
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Answer: B. Under section 336 of the Companies Act 2006, every public company must hold an AGM within six months beginning with the day after its accounting reference date (financial year end). Notice of at least 21 days is required, unless all members entitled to attend and vote agree to shorter notice.
A private company is not required to hold an AGM unless its articles require one; it can deal with matters by written resolution. Members can still requisition a general meeting if needed.
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