LAW-Ch-9&10

In relation to company law, which of the following statements is correct?

• 1. A company limited by shares is fully liable for all its debts

• 1. Shareholders are fully liable for the debts of the company

• 1. Directors are fully liable for the debts of the company

• None

Quentin was employed by Bee Co as its senior design consultant. Quentin contracted with Bee Co that when his employment with the company ceased, he would not act in competition with it or solicit its customers. After Quentin left Bee Co, he registered a company called Cee Co, which immediately began working in competition with Bee Co and soliciting its customers.

Which of the following is correct?

• 1. Quentin is not in breach of the agreement with Bee Co because Cee Co is a separate legal entity

• 1. Since Cee Co was formed to avoid the non-compete agreement the courts will “lift the corporate veil” and enforce the agreement

• 1. Cee Co will be bound by the agreement because a company is always liable for the actions of its shareholders.

• 1. The non-compete agreement has no legal effect as it attempts to regulate Quentin’s activities after he has left Bee Co’s employment

Which of the following statements about a company limited by shares are correct?

(1) A company is owned by its shareholders and managed by its directors

(2) A company is entitled to own property in its own name

(3) The shareholders can never incur personal liability over and above the amount due on their shares even if the veil of incorporation is lifted

• 1. 1 and 2 only

• 1. 1 and 3 only

• 1. 2 and 3 only

• 1. 1, 2 and 3

Which of the following are consequences of corporate personality?

(1) The company is fully liable for its own debts

(2) A shareholder always has limited liability

(3) If a wrong is done to the company, in general, only the company is entitled to sue

• 1. 1 and 2 only

• 1. 1 and 3 only

• 1. 2 and 3 only

• 1. 1, 2 and 3

Which of the following statements is NOT correct in relation to companies limited by shares?

• 1. A private company must have at least one director

• 1. A public company must have at least two directors

• 1. A private company must have authorised share capital of at least £30,000

• 1. A public company must have issued share capital of at least £50,000

What is the basis for the rule in Foss v Harbottle?

• 1. The separate legal personality of a company

• 1. The limited liability of members of a company

• 1. The common law right of a minority not to be prejudiced

• None

Which of the following statements about a company is NOT true?

• 1. A company is a legal person

• 1. The shares of a public limited company must be quoted on the stock exchange

• 1. It is possible for a company to be convicted of a criminal offence

• None

Dilip incorporates his own manufacturing business, Patel Tartan, under the name Patel Tartan Co. He lent Patel Tartan Co £20,000 and owns 95% of its shares. He continued to insure the company’s assets, including the factory, in his own name, as he had always done prior to incorporation. On New Year’s Eve, the factory was destroyed by fire.

Can Dilip claim on the insurance and for what reason?

• 1. Yes, because Patel Tartan Co is essentially no different from the original business

• 1. Yes, because he has an insurable interest as a creditor of Patel Tartan Co

• 1. Yes, because he has an insurable interest as a member of Patel Tartan Co

• 1. No, because the insurance is not in the name of Patel Tartan Co and the company has the insurable interest

Which of the following in relation to companies limited by guarantee is NOT correct?

• 1. They may not issue shares

• 1. They may dispense with the suffix “Ltd” in their names

• 1. They may distribute profits

• None

Which of the following statements about corporate personality is NOT correct?

• 1. A company has perpetual succession

• 1. A company can be charged with a crime

• 1. The directors cannot be held liable for the debts of the company

• 1. Shareholders liability is limited to the amount unpaid on their shares