ACCA Business and Corporate Law 2

Question 1

Under US corporate law, which doctrine holds that courts will not substitute their judgment for that of directors who made informed, good-faith business decisions?

Accepted Answer

Business judgment rule

Answer

The business judgment rule protects directors from liability for decisions made in good faith, on an informed basis, and in the honest belief they are in the company's best interest.

Question 2

In contract law, which remedy requires the breaching party to perform their contractual obligations rather than pay damages?

Accepted Answer

Specific performance

Answer

Specific performance is an equitable remedy that compels the breaching party to fulfill contractual duties, typically granted when monetary damages are inadequate.

Question 3

A corporation's articles of incorporation serve what primary legal function?

Accepted Answer

Establish the corporation's existence with the state

Answer

Articles of incorporation are filed with the state to legally create the corporation and contain basic information such as name, purpose, and share structure.

Question 4

Which type of business organization provides limited liability to all owners while allowing pass-through taxation?

Accepted Answer

Limited liability company (LLC)

Answer

An LLC combines limited liability protection for all members with pass-through taxation, avoiding the double taxation associated with C-corporations.

Question 5

Under agency law, when does an agent have 'apparent authority' to bind a principal?

Accepted Answer

When the principal's conduct leads a third party to reasonably believe the agent has authority

Answer

Apparent authority arises when the principal's representations or conduct cause a third party to reasonably believe the agent has authority to act.

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA Business and Corporate Law 2