FLK1 Business Law: SQE practice questions

Hanna and Mohamed are in the process of forming a new business venture. They have decided to form a limited company and are deciding on the company’s name. Which of the following statements about the company’s name is true?

David is a director of a private limited company. He receives a personal discount offer from one of the company’s suppliers (a travel company) for a holiday package to the Maldives. He accepts the offer and books the holiday using the company credit card. Which of the following is true?

Myriam is a shareholder of a public limited company and holds 2% of the shares in the company. Myriam is an environmental activist and seeks to influence sustainability measures in all her public and personal engagements. She is deeply dissatisfied with the company’s environmental policies and wants to bring this to the attention of the board, as she thinks that the company could easily do a lot more to contribute to the fight against climate change. Which of the following options is available to the shareholder?

A limited liability company has two directors, Alex and Ben. Alex resigns from the company, but does not inform Companies House of his resignation. Ben continues to act as the sole director and signs a contract with a supplier for the purchase of goods. The goods are office equipment consumables, like ink cartridges and printing paper, and the seller is one of the company’s regular suppliers. Which of the following is true?

Anna has inherited some money from a distant relative and is keen to use it to invest in a new business venture. She has located a startup, set up as an Ltd that seems worth investing in. The business is offering shares in return for her investment. Which of the following statements best describes what it will mean for Anna to become a shareholder in a private limited company?

Sarah and Mike have decided to start a business together selling handmade jewellery. They have known each-other for a long time and they believe they will collaborate effectively. They have agreed to split profits and losses equally, but are hesitant to take any formal steps without obtaining some legal advice. They have not formed a company, but are in the process of drafting a partnership agreement. Which of the following best characterises the type of organisation their business will operate as, at this stage of their relationship?

Cancun Ltd is a travel services company. The company has operated for a number of years but had a very successful run in the last season and the directors are considering distributing a dividend to its newest shareholders, to reward them for investing in the business. Which of the following statements is correct regarding the process for distributing dividends?

Ambrac Ltd is a private limited company, which has just two shareholders and two directors. John owns 51% of the shares. Jane owns 49% of the shares. They are both directors. John wishes to make a significant loan to Ambrac Ltd. Which of the following statements is correct?

A company has a provision in its articles of association which allows the board to issue new shares, subject to the approval of the shareholders. The board decides to issue new shares to a group of investors without seeking the approval of the shareholders. Which of the following statements best describes the legal position of the company?

Salma is a director of Yeah Ltd, a private limited company. She receives a lucrative job offer from a competing company and decides to resign from Yeah Ltd. However, she fails to inform the board of directors and secretly starts working for the competitor while still acting as a director of Yeah Ltd. Which of the following statements is correct regarding Salma’s actions?

Acacia Ltd, a company engaged in manufacturing computer parts, has been found guilty of violating environmental regulations by discharging hazardous waste into the Thames close to Henley, in the vicinity of London. As a result, the company faces substantial fines from governmental authorities and potential legal action from affected parties in nearby towns. Which of the following statements is correct regarding the liability of the directors of Acacia Ltd?

Jonah and Myriam are partners in a consultancy firm, operating as a general partnership. Jonah, without Myriam’s knowledge or consent, signs a contract on behalf of the partnership to provide IT services to a client. The client, upon discovering that Jonah acted without Myriam’s authority, wants to hold the partnership liable. Which of the following statements is correct regarding the partnership’s liability?

Xylo Ltd, a company specializing in IT services, is facing financial difficulties and may be unable to pay its debts. The company’s directors decide to continue trading, hoping to turn the business around. However, they fail to inform the company’s creditors about the company’s financial situation. Which of the following statements is correct regarding the directors’ actions?

Tracy is a director of Xena Ltd, a company engaged in the construction business. She is negotiating a contract with a client, who is a close relative, one of her uncles. Tracy wants to be sure the negotiations are conducted in a way that won’t raise any issues for any of the parties involved. Which of the following statements is correct regarding Tracy’s situation?

A company wants to terminate its existing lease agreement for office space due to financial difficulties. The lease agreement contains a clause that allows termination upon payment of a specified penalty. The company notifies the landlord of its intention to terminate the lease and pays the penalty as stated in the agreement. Which of the following best describes the company’s position after the termination?

XYZ Ltd is a private limited company engaged in manufacturing and selling electronic devices. The company has recently faced financial difficulties and is considering restructuring its operations. As part of the restructuring process, the directors of XYZ Ltd propose to lay off a significant number of employees. Which of the following statements accurately reflects the legal requirements for conducting employee layoffs in a private limited company?

ABC Ltd is a private limited company engaged in manufacturing and distribution. The company has been facing financial difficulties and is considering options to restructure its operations. One possibility is to enter into a scheme of arrangement with its creditors to manage its debts. Which of the following statements best describes a scheme of arrangement?

XYZ Ltd is a public limited company operating in the fashion retail industry. The company has recently experienced a significant decrease in its share price, due to concerns about human rights abuses in its supply chain, leading to concerns among its shareholders. One of the shareholders is considering taking legal action against the company’s directors for alleged mismanagement. Which of the following legal principles is relevant to the shareholder’s ability to bring a claim against the directors?

XYZ Plc is a public limited company that wants to raise additional capital by issuing new shares to the general public. Which of the following statements best describes the process of issuing new shares in a public limited company?

XYZ Ltd is a private limited company with multiple shareholders. The company’s articles of association state that any transfer of shares requires the approval of the existing shareholders. Jack, a shareholder of XYZ Ltd, wishes to transfer his shares to a third party without obtaining the approval of the existing shareholders. Which of the following statements best describes the situation?

ABC Ltd is a private limited company with multiple directors. The company’s articles of association grant the directors the power to make decisions collectively as a board. However, one of the directors, Alex, starts making major decisions for the company without consulting the other directors. Which of the following statements best describes the situation?

DEF Ltd is a private limited company with multiple shareholders. Amy, a shareholder of DEF Ltd, passes away. Which of the following statements best describes the impact of Amy’s death on her shares in DEF Ltd?

ABC Ltd is a private limited company engaged in retail sales. The directors decide to issue new shares to raise additional capital. They have decided to do this without obtaining approval from the existing shareholders. The articles of association require existing shareholders consent to any issue of new shares. Which of the following statements best describes the validity of the share issuance?

DEF Ltd is a mid-sized private limited company with multiple directors and shareholders. One of the directors, Lisa, has been absent from board meetings and has not actively participated in the company’s affairs for several months. The other directors are concerned about the impact of Lisa’s absence on the company’s operations. Which of the following actions can be taken to address the situation?

Alice and Bob are both directors of a company that manufactures electronic gadgets. Alice proposes a new marketing strategy aimed at targeting a younger demographic, while Bob advocates for maintaining the company’s current marketing approach. During a heated board meeting, the disagreement between Alice and Bob escalates, with each director vehemently defending their position in front of the other directors. Ultimately, the board votes in favour of Alice’s proposal, and the new marketing strategy is implemented. However, Bob is dissatisfied with the decision and believes that Alice manipulated the other directors to secure the outcome in her favour as she has hired a marketing company to implement the new plan, in which she is a major shareholder. Bob thinks that the company should be taking legal action against Alice for breaching her duties as a director. Which of the following principles relevant to the duties of directors would be most suitable as a ground of challenge in this scenario?

Jane is a director of Tech Solutions Ltd, a company that offers IT equipment and related services to other businesses. Jane recently discovered that one of Tech Solutions’ key clients, Global Corp, is looking for new software solutions. Jane also runs her own separate software company, Innovate Inc. Without informing the board of Tech Solutions, Jane approaches Global Corp on behalf of Innovate Inc. and secures a lucrative contract for her own company. She is confident that Tech Solutions Ltd would not have an interest in offering this sort of software solution to clients, so she didn’t think there was anything worth discussing internally. Which of the following statements best describes Jane’s position?

GlobalTech Ltd, a private company, has recently held its annual general meeting (AGM). During the meeting, the board of directors proposed a significant amendment to the company’s articles of association. The amendment would introduce stricter voting requirements for certain types of shareholder resolutions, effectively reducing the influence of minority shareholders. Jane, a minority shareholder holding 10% of the company’s shares, opposed the amendment but was outvoted by the majority shareholders. Jane seeks to challenge the amendment. Which legal mechanism allows Jane to challenge the amendment to the company’s articles of association?

InnovateTech Ltd. is a rapidly growing technology company with three directors: Alice, Bob, and Charlie. Recently, Alice discovered a promising new technology during a business trip that could significantly benefit InnovateTech Ltd. Instead of informing the board, Alice decided to invest in the technology through her own private company, TechVentures Ltd., without disclosing her interest to InnovateTech Ltd. Meanwhile, Bob, as the finance director, has been approving large expenditures without seeking board approval, claiming that the expenses were necessary for urgent projects. Charlie, the third director, is unaware of both Alice’s and Bob’s actions. Subsequently, InnovateTech Ltd. faces financial difficulties due to Bob’s unapproved expenditures and misses out on the new technology opportunity because Alice’s private company secured the investment. Charlie, upon discovering these issues, seeks to initiate legal action. Which of the following best describes legal tools to protest the behaviour of Alice and Bob?

GreenEarth Ltd. is a company focused on renewable energy projects. The company recently held a shareholders’ meeting where a special resolution was proposed to amend the articles of association, allowing the company to enter into new ventures outside the renewable energy sector. A group of minority shareholders strongly opposed the amendment, arguing that it contradicts the company’s original mission and could expose the company to financial risks. Despite their objections, the resolution passed with the required majority. The minority shareholders are now considering legal action to challenge the amendment. Which legal mechanism is available to the minority shareholders to challenge the amendment to the articles of association, and what must they prove to be successful?

AlphaTech Ltd. is a private company with a board of directors that has recently come under criticism from a group of shareholders who are dissatisfied with the company’s performance. The shareholders believe that the directors are not acting in the best interests of the company and should be removed. They decide to call for a general meeting (GM) to vote on a resolution to remove two of the directors. The company’s articles of association do not contain any special provisions regarding the removal of directors, so the shareholders plan to proceed under the standard rules of the Companies Act 2006. What percentage of the votes cast at the general meeting is required to pass the resolution to remove the directors under the Companies Act 2006?