ACA Business Law 1 — Questions and Answers
Question 1: Under the Companies Act 2006, what is the minimum number of directors required for a private limited company?
- Two
- One (Correct answer)
- Three
- Four
Correct answer: One
The Companies Act 2006 requires a private limited company to have at least one director.
Question 2: Which of the following best describes the doctrine of separate legal personality established in Salomon v Salomon & Co Ltd [1897]?
- Directors are personally liable for company debts
- A company is a legal entity distinct from its shareholders (Correct answer)
- Shareholders must guarantee company obligations
- A company cannot sue or be sued in its own name
Correct answer: A company is a legal entity distinct from its shareholders
Salomon v Salomon established that a company is a separate legal entity from its members, meaning it can own property, incur debts, and be sued independently.
Question 3: In English contract law, which element is NOT required for a valid contract to exist?
- Offer and acceptance
- Consideration
- Written documentation (Correct answer)
- Intention to create legal relations
Correct answer: Written documentation
Most contracts in English law can be formed orally or by conduct; written documentation is generally not required unless statute demands it.
Question 4: Under the Insolvency Act 1986, what is the minimum unpaid debt required for a creditor to present a winding-up petition against a company?
- £500
- £750 (Correct answer)
- £1,000
- £2,000
Correct answer: £750
A creditor must be owed at least £750 (the statutory minimum) to present a winding-up petition under the Insolvency Act 1986.
Question 5: A director's duty to avoid conflicts of interest under the Companies Act 2006 is contained in which section?
- Section 171
- Section 172
- Section 175 (Correct answer)
- Section 177
Correct answer: Section 175
Section 175 of the Companies Act 2006 imposes a duty on directors to avoid situations where they have, or could have, a direct or indirect interest that conflicts with the company's interests.
Question 6: Which type of authority allows an agent to bind a principal when the agent acts outside their actual authority but the principal's conduct leads a third party to reasonably believe authority exists?
- Express authority
- Implied authority
- Apparent (ostensible) authority (Correct answer)
- Ratified authority
Correct answer: Apparent (ostensible) authority
Apparent or ostensible authority arises when a principal's words or conduct represent to a third party that the agent has authority to act, even if no such authority was actually granted.
Question 7: Under English law, which of the following is a requirement for a valid deed?
- It must be witnessed by a solicitor
- It must be signed, witnessed, and delivered (Correct answer)
- It must always be stamped by HMRC
- It must be registered at Companies House
Correct answer: It must be signed, witnessed, and delivered
For a deed to be valid it must be signed by the party, witnessed (attested), and delivered as a deed — required under the Law of Property (Miscellaneous Provisions) Act 1989.
ACA Business Law 1
Under the Companies Act 2006, what is the minimum number of directors required for a private limited company?