ACCA - Association of Chartered Certified Accountants Business and Corporate Law Questions and Answers

Question 1

An agent, appointed by a company to purchase raw materials, frequently buys from a specific supplier and always pays on time.
The company later instructs the agent not to exceed a certain credit limit with this supplier, but this instruction is not communicated to the supplier.
The agent then places an order that exceeds this new internal limit.
The supplier, unaware of the new restriction, provides the goods.
Which type of authority did the agent have that would bind the company to the contract with the supplier?

Accepted Answer

Apparent (or ostensible) authority

Answer

Express authority

Answer

Implied authority

Answer

Authority by ratification

Question 2

Which of the following scenarios would most likely persuade a UK court to 'lift the corporate veil'?

Accepted Answer

A director, subject to a restrictive covenant from a previous employment contract, forms a new company to carry on the same business and breaches the covenant.

Answer

A sole director and shareholder of a company causes it to become insolvent through poor business decisions.

Answer

A parent company forms a subsidiary in another country to take advantage of lower tax rates.

Answer

A group of companies is structured as a single economic unit for operational efficiency.

Question 3

An employee with three years of continuous service is dismissed with full notice pay as stipulated in their contract. However, the dismissal was for a reason that was not one of the five potentially fair reasons for dismissal under the Employment Rights Act 1996, and no formal disciplinary procedure was followed. Which type of claim is the employee most likely to succeed with?

Accepted Answer

Unfair dismissal

Answer

Wrongful dismissal

Answer

Breach of statutory duty

Answer

Constructive dismissal

Question 4

According to the Companies Act 2006, which of the following is a general duty owed by a director to the company?

Accepted Answer

A duty to exercise independent judgment.

Answer

A duty to guarantee the profitability of the company.

Answer

A duty to prioritise the interests of the company's employees above all other stakeholders.

Answer

A duty to personally disclose the company's financial accounts to the public.

Question 5

For a simple contract to be legally binding under English law, which of the following elements is NOT required?

Accepted Answer

The contract must be in writing.

Answer

There must be consideration.

Answer

There must be an intention to create legal relations.

Answer

There must be offer and acceptance.

Question 6

In a compulsory liquidation of an insolvent company in the UK, which of the following creditors will be paid LAST from the proceeds of the company's assets?

Accepted Answer

Shareholders.

Answer

Preferential creditors (e.g., certain employee wage arrears).

Answer

Secured creditors with a floating charge.

Answer

Unsecured creditors (e.g., trade suppliers).