ACCA Business and Corporate Law 3

Question 1

Which element distinguishes a public corporation from a close (closely held) corporation?

Accepted Answer

A public corporation has shares traded on a public securities exchange

Answer

A public corporation has shares available for trading on a public stock exchange, while a close corporation's shares are held by a small group and not publicly traded.

Question 2

Under the Uniform Commercial Code (UCC), which article governs the sale of goods in the United States?

Accepted Answer

Article 2

Answer

UCC Article 2 governs contracts for the sale of goods, establishing rules for formation, performance, breach, and remedies.

Question 3

What is the primary duty of a corporate director under the duty of loyalty?

Accepted Answer

To avoid placing personal interests above the corporation's interests

Answer

The duty of loyalty requires directors to prioritize the corporation's interests over their own and to disclose and abstain from conflicts of interest.

Question 4

In US bankruptcy law, what is the key difference between Chapter 7 and Chapter 11 proceedings?

Accepted Answer

Chapter 7 involves liquidation; Chapter 11 allows reorganization while continuing operations

Answer

Chapter 7 involves liquidating assets to pay creditors, while Chapter 11 allows the debtor to reorganize and continue operating under a court-approved plan.

Question 5

Which legal theory allows plaintiffs to hold a parent corporation liable for the debts of its subsidiary?

Accepted Answer

Piercing the corporate veil

Answer

Courts may pierce the corporate veil and impose liability on a parent or shareholders when the subsidiary is used as a mere alter ego or to perpetrate fraud.

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA Business and Corporate Law 3