Free Company Law Basics MCQs with Answers
30 Company Law Basics MCQs from Introduction to Business, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Company law covers incorporation, separate legal personality, limited liability, shares, the memorandum and articles of association, and the powers and duties of directors. It also includes shareholder meetings, resolutions, company records, audit, winding up and the differences between a registered company, partnership and sole proprietorship.
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30 questions · page 2 of 2
- A. A person who manages the company after liquidation
- B. A person who audits the company accounts
- C. A person who lends money to the company
- D. A person who forms and organizes a company
Explanation: A promoter takes the preliminary steps to form and establish a company, such as preparing documents and arranging capital.
Correct answer: A person who forms and organizes a company- A. To record the personal assets of directors
- B. To receive official communications and notices
- C. To approve every contract made by managers
- D. To determine the market price of shares
Explanation: The registered office is the official address where statutory notices and communications may be served.
Correct answer: To receive official communications and notices- A. Transfer applies only to directors, while transmission applies to auditors
- B. Transfer occurs by law, while transmission is always voluntary
- C. Transfer is voluntary, while transmission occurs by law
- D. Transfer changes debt into equity, while transmission changes equity into debt
Explanation: A transfer is a voluntary act by which one person conveys shares to another.
Correct answer: Transfer is voluntary, while transmission occurs by law- A. The nominal value printed on each share
- B. The company’s authorised share capital
- C. The unpaid personal income of directors
- D. Distributable profits available for that purpose
Explanation: Dividends are generally paid out of profits lawfully available for distribution, subject to applicable company law requirements.
Correct answer: Distributable profits available for that purpose- A. The minimum attendance required for valid proceedings
- B. The total number of shares issued by the company
- C. The number of votes needed for a special resolution
- D. The written notice sent before a company meeting
Explanation: Quorum is the minimum number of members or persons required to be present for a meeting to conduct valid business.
Correct answer: The minimum attendance required for valid proceedings- A. To audit the company’s financial statements
- B. To attend and vote on behalf of a member
- C. To register a company with the regulator
- D. To replace the company secretary permanently
Explanation: A proxy is appointed by a member to attend and vote for that member at a meeting, subject to the applicable rules.
Correct answer: To attend and vote on behalf of a member- A. The director receives an official meeting notice
- B. The director reads the company’s published annual report
- C. The director attends a properly convened board meeting
- D. The director has a personal interest in a company contract
Explanation: A conflict may arise when a director’s personal interest could influence judgment about a company transaction.
Correct answer: The director has a personal interest in a company contract- A. To give public notice of security over company assets
- B. To convert all company shares into preference shares
- C. To cancel the company’s outstanding loans immediately
- D. To transfer management powers from directors to creditors
Explanation: Registration of a charge places information about security over company property on the public record and helps establish priority against…
Correct answer: To give public notice of security over company assets- A. A company that has no shareholders of its own
- B. A company that controls another company
- C. A company formed only to audit another company
- D. A company that must always be owned by its subsidiary
Explanation: A holding company controls another company, commonly through control of voting power or the composition of its board.
Correct answer: A company that controls another company- A. The director must guarantee every company debt personally
- B. The director may use company property for private benefit
- C. The director must act honestly in the company’s interests
- D. The director may ignore the company’s constitution when convenient
Explanation: A fiduciary duty requires a director to act in good faith for the benefit of the company and to avoid improper personal advantage.
Correct answer: The director must act honestly in the company’s interests