TUTORIAL QUESTIONS

SECTION A - MCQ QUESTIONS

1 Essentials of the Singapore legal system

1. In the context of the Singapore legal system, which of the following courts DOES NOT hear
cases on appeal?

A High Court
B Family Court
C District Court

2. Imran claims that Zak owes him $260,000 as a result of a breach of contract.
In which court will Imran start his action against Zak?

A Magistrates’ Court
B District Court
C High Court

3. In the context of case law, which of the following applies to an obiter dictum?

A It is binding on all future courts

B It is binding on all lower courts
C It is not binding on any courts
D It is not binding outside the court it was issued in

4. In the context of statutory interpretation, which of the following requires judges to

consider the wrong to which the legislation was intended to prevent?

A The mischief rule

B The literal rule
C The golden rule

5. In the context of the Singapore legal system, which of the following defines the ratio
decidendi of a judgement?

A The decision in a previous case

B The facts of the case
C The legal reason for deciding the case
D The future application of the case

6. Which TWO of the following statements in relation to the Application of English Law Act
Cap 7A are correct?
(1) It states which English statutes apply in Singapore
(2) It states which English subsidiary legislation applies in Singapore
(3) It explains how Singapore courts are to interpret English statutes
(4) It states the extent to which English common law applies in Singapore

A (1) and (3)

B (1) and (4)
C (2) and (4)
D (3) and (4)

7. Which of the following is the best description of the term “common law”?

A) A codified system where all the laws are written down

B) A system of law that is flexible and always looks for fairness and justice as its prime concern
C) Law developed by the courts on the basis of traditional principles rather than that created by
parliament.
D) A system of law developed by the European Common Market.

8. Identify the law that is NOT made by the courts?

A) Common Law
B) Case Law
C) Judge-made Law
D) Statute Law

9. The Literal Rule for Statutory Interpretation is used by the courts to:

A) Interpret the words used in an Act of Parliament literally as far as they can.
B) Depart from the literal reading of the Act to prevent an absurd result.
C) Interpret the statute according to the original purpose or policy underlying the enactment.
D) Consider the “mischief” that existed before the statute was passed.

10. The highest source of law in Singapore is the Singapore _______________.

A) Constitution
B) Parliament
C) Court of Appeal
2 Formation of contracts – Offer and acceptance

1. One of the following is a correct definition of a contract. Identify the correct statement.

A all agreements between parties

B an agreement between parties that are legally binding and enforceable
C only agreements that are put in writing
D only agreements that are witnessed by a lawyer

2. In the context of contract law, a bid at an auction is which of the following?

A An invitation to treat
B An offer
C A counter-offer
D An acceptance

3. Which of the following, in the context of entering into a contract, constitutes a binding
offer to sell a unique item of furniture?

A Placing an advertisement in a newspaper with a price attached

B Placing it on display inside a shop with a price attached
C Telling someone the price you may be willing to accept for it
D Telling someone you will reduce the marked price on it by 10%

4. Which of the following can be accepted so as to form a binding contract?

A A supply of information
B A statement of intent
C A quotation of price
D An agreement to enter into a future contract

5. The law of contract states that a display of goods for sale is

A an offer for sale to the buyer

B an invitation to treat made to the buyer
C an acceptance of an offer by the buyer
D a mere puff or gimmick

6. An acceptance of an offer cannot be communicated or done by one of the following.

Identify the one.

A oral communication of an acceptance

B communication by remaining silent
C communication by performance
D communication by conduct

7. A counter-offer is a new offer by the offeree that ________________.

A accepts the original offer by the offeror
B rejects the original offer by the offeror
C has no affect on the original offer
D cannot be accepted by the offeror

8. Which of the following situations is NOT an Invitation to treat?

A an advertisement for the sale of goods and services

B an advertisement offering a reward for finding a dog
C a display of goods with the price indicated
D a flyer or brochure with prices of goods

9. The postal rule of acceptance of an offer states that _______________.

A acceptance is deemed to take place once letter is received

B acceptance is deemed to take place once letter is posted
C acceptance is deemed to take place once letter is read
D acceptance is deemed to take place once letter is registered

10. A termination of an offer can be done by all the following except for one. Identify the one.

A revocation of the offer by the offeree

B rejection of the offer by the offeree
C by a lapse of time
D by a counter offer made by the offeree

3 Formation of contracts – Consideration and Intention to create legal

relations

1. Which of the following statements in relation to effective consideration is correct?

A It must be both adequate and sufficient

B It must be adequate but need not be sufficient
C It must be sufficient but need not be adequate

2. Mr Chan promises to bring his children for a holiday if they pass their mid-term exams. This
promise is not legally binding because it lacks ________________.

A consideration
B an intention to create legal relationship
C a written agreement

3. Mrs Donoghue, in the case of Donoghue V Stevenson, could not sue the restaurant owner,
in her own capacity, for breach of contract because ________________.
A she did not provide any consideration
B she did not benefit from the agreement
C her friend did not provide any consideration

4. If a person promises to pay for a service that he already obtained earlier and for which no
monetary benefit was promised by him, this promise would not be binding
since____________________.

A Consideration is executory
B Consideration is executed
C Consideration is past

5. A formal contract is a contract in which the promises are _______________.

A contained in a written agreement

B contained in a verbal agreement
C contained in a deed

6. If you promise to pay your mechanic extra for work to be done on time, since you are
worried that it may not be completed, this promise may not be binding on you, once the work is
completed, because ___________________.

A past consideration is no consideration

B Consideration must be sufficient
C a promise to pay more for an existing obligation is no consideration
D consideration must move from the promise

7. A promise by a creditor that he will accept less than the agreed sum, from a debtor, is not
binding because ______________________.

A the agreement may not be in writing

B it is unfair to the creditor
C a part payment of a debt is no consideration for the full sum

8 Although there is a presumption in law that a commercial transaction is legally binding,

there is no legal intention in all the following except for one. Identify the one.

A A letter of intent
B oral agreement
C memorandum of understanding
D letters of comfort

9. Promissory estoppel is a _____________ doctrine, which makes a promise binding even

where consideration may be lacking.
A legal
B equitable
C statutory

10. Where one of the parties has performed his or her obligation, that person’s consideration
is known as _______________.

A Past consideration
B executory consideration
C Executed consideration

4 Contents of contracts – Terms & Exemption clauses

1. Which of the following may imply terms into contracts?

A Statute
B Third parties
C The parties to the contract

2. Breach of which of the following terms does NOT allow the possibility of the aggrieved
party terminating the contract?

A A condition
B A warranty
C An innominate term

3. Which of the following statements in relation to an innominate term is correct?

A An innominate term consists of only serious obligations

B Breach of an innominate term always allows the innocent party to terminate the contract
C An innominate term is similar to a condition
D Breach of an innominate term may lead to serious and less serious consequences

4. Which of the following explains why a term is distinguished from a representation?

A The consequences of breach are different

B The amount of damages claimable is different
C The method of proof is different
D The party which has to prove the statement is different

5. An exclusion clause may be incorporated into a contract by all the following methods
except for one. Identify the one.
A incorporated by signature
B incorporated by previous course of dealing
C incorporated impliedly by the court
D incorporated by reasonable notice

6. The Sale of Goods Act, implies all of the following as implied conditions except for one.

A that goods would be of satisfactory quality

B that goods would correspond with the description
C that goods would be sold at a reasonable price
D that goods would correspond with the sample

7. The Unfair contract terms Act (UCTA) ensures the following.

A that sellers do not use unfair terms in their contract

B that sellers do not make a sale of goods at an unreasonable price
C that sellers do not protect themselves using reasonable clauses
D that sellers do not avoid liability for causing death or injury to persons

8 Terms may be implied into a contract for all the following reasons except for one. Which
one is it?

A based on business efficacy

B based on the officious bystander test
C based on custom and usage
D based on reasonableness

9. A hotel placed an exclusion clause on the door of the hotel room but failed to put such a
clause at the reception. Why would this exemption clause be invalid?

A because the clause is unreasonable

B because notice was brought after the formation of a contract
C because notice of the clause must be brought both before and after the contract

10. An exemption clause in a signed document is effective unless one of the following occurs.

A customer does not understand what he signs

B customer does not read what he signs
C customer is fraudulently misrepresented to sign the document

5 Contents of contract – Vitiating factors

1. A vitiating factor is a factor that makes a contract unenforceable by making it ___________.

A valid
B void
C void or voidable

2. What is a misrepresentation?

A A promise made that induces a person to enter into a contract

B A statement of fact that is false and that induces a person into a contract
C remaining silent when one knows the truth of a matter

3. What contracts are considered as contracts of utmost good faith or uberrimae fidei?

A Sale of goods contract between seller and consumer

B Sale of goods contract between seller and commercial buyer
C insurance contracts
D contracts involving minors

4. What is fraudulent misrepresentation?

A An untrue statement of fact made knowingly or recklessly

B An untrue statement of fact made negligently
C An untrue statement of fact made innocently

5. When does an opinion made by someone to another become a statement of a fact that
could be considered as a misrepresentation if it was untrue?

A when the person expressing the opinion believes it is true

B when the person hearing the opinion believes it is true
C when the person expressing the opinion has more skill and knowledge
D When the person hearing the opinion has more skill and knowledge

6. In the case of an innocent misrepresentation, the affected party is allowed the following
remedies.

A rescission and damages

B rescission only
C damages only
D no claim whatsoever

7. S2 (1) of the Misrepresentation Act provides all the following advantages to the affected
party except for one.
A the burden of proving that the misrepresentation was innocent is on the maker
B that affected party obtains the same remedies as that of fraudulent misrepresentation
C the affected party has to prove that the statement was fraudulent

8 A restraint of trade clause is generally considered illegal and hence it would be

___________.

A voidable
B void
C valid

9. In the event of a misrepresentation, the right of rescission may be lost for all the following
reasons except for one.

A the contract is affirmed expressly or impliedly after knowledge of misrepresentation

B a reasonable amount of time had lapsed since the discovery of the misrepresentation
C the parties cannot be restored to their original position
D the affected party does not have enough evidence of the misrepresentation

10. A restraint of trade clause would only be valid and effective in the following situation.

A Where the employer wishes to prevent competition by the ex-employee

B Where the employer has a legitimate interest to protect, reasonable in scope and not
contrary to public interest
C Where the employer had provided personal training and skills to the ex-employee
D Where the employee held a very senior position

6 Contents of a contract – Discharge and remedies

1. Which of the following is NOT a method by which a contract is discharged?

A Performance
B Termination
C Frustration
D Negotiation

2. All the following, except for one, are exceptions to the general rule that discharge by
performance must be complete.

A de minimis principle
B where partial performance is accepted
C where performance is partial
D doctrine of substantial performance

3. When is a contract discharged by frustration?

A when the buyer is angry and frustrated over the failure to perform by the seller
B when the seller cannot perform because it has become expensive for him to do so
C when then contract becomes impossible to be performed

4. What is the purpose of a force majeure clause in a contract?

A to ensure that parties are treated fairly in the event of a frustration of a contract
B to dictate the obligations of parties in the event of a frustration of a contract
C to ensure that parties carry out their original obligation in the contract in the event of a
frustration of a contract

5. If a person has booked a specifically expensive hotel room for the purpose of watching a
fireworks display for example, the cancellation of the fireworks would
_________________________.

A not affect the enforceability of the contract since the room may be used
B not affect the enforceability of the contract if the payment has been made
C could frustrate the contract since the original commercial purpose could not be achieved
D could frustrate the contract since the contract is impossible to be performed

6. The purpose of damages under contract law is to ___________________.

A put the affected party in a better financial position than he had been in before the contract
B put the affected party in the original financial position he was in before the contract
C put the affected party in the position that he would be in if the contract was performed
D put the affected party in a fair and reasonable position

7. Liquidated damages are damages that are _____________________.

A determined by the courts after the breach

B determined and agreed by the parties during the formation of a contract
C determined and agreed by the parties after the breach

8 All the following are remedies in contract law, under equity except for one.

A specific performance
B injunction
C damages
D rescission

9. All the following remedies are claimable for a breach of contract except for one. Identify
the one.
A damages to satisfy expectation losses
B order of specific performance
C injunctions
D monetary claim for distress and disappointment

10. Financial loss caused as a result of breach of contracts are considered remote and thus not
claimable if they are ______________________.

A for too large a monetary claim

B claims which are for anxiety and depression
C claims which are for losses not arising naturally ‘according to the usual course of things’
D for losses which are not reasonably foreseeable

7 Law of Torts and professional negligence

1. What is the effect of a finding of negligence in the law of tort?

A It requires the defendant to pay damages

B It requires the defendant to stop the wrongful act
C It allows the plaintiff to rescind the contract

2. The following are all aims of the law of tort of negligence, except for one.

A aims to compensate the victim of negligence

B aims to prevent criminal acts
C aims to prevent wrongful acts/omissions that may cause loss
D aims to enforce contractual obligations between parties

3. Bob took great care but still injured his back when he did a bungee jump.
Which of the following defences can the organiser of the bungee jump use?

A Volenti non fit injuria

B Res ipsa loquitur
C Contributory negligence

4. The following are all elements of the tort of negligence except for one. Identify the one.

A duty of care
B breach of the duty of care
C causation and foreseeability of damages
D defence of volenti non fit injuria

5. A footballer kicks a football which leaves the Singapore stadium and which causes injury to
a motor cyclists. This has never happened before. One of the factors of standard of care and
reasonable behaviour, which the courts would look at, under the circumstances, to decide if he is
negligent would be ____________________.

A whether he was a professional footballer

B whether the act was probable or likely to cause harm
C whether the injury caused by the act would be serious
D the cost involved in preventing the injury

6. The ‘but for test’ is a test in the tort of negligence that deals with ______________.

A the duty of care

B the remoteness of damage
C the factual causation of damage
D the policy decision

7. John is an Auditor. His friend Jack consults him on a social occasion on whether he should
buy a large number of shares in a particular company. John would not be held liable to Jack, under
the tort of negligence, if he gives negligent advice under the circumstance because
________________________.

A John is giving free advice

B John and Jack have no ‘special relationship’
C Jack is not a share holder

8 The principle of remoteness of damages under the tort of negligence deals with
_________________.

A the seriousness of damage or injury

B the cause of damage or injury
C the type of damage or injury
D the reason for damage or injury

9. Which of the following are not remedies under the law of tort?

A damages
B specific performance
C injunctions
D rescission

10. Which of the following is protected by the tort of passing off?

A A person’s right to personal safety

B A person’s right to enjoyment of their land
C A person’s right to their intellectual efforts

8 Formation and constitution of business organisations

1. Which of the following is required to have the abbreviation ‘Ltd’ stated after its business
name?

A A limited partnership
B A private limited company
C A limited liability partnership

2. Which of the following statements is incorrect with regards to a partnership?

A the partnership firm is not a separate legal entity

B partners are only liable for their own acts (contractual and tort)
C partners have unlimited liability to the debts of the business
D partners are agents of the other partners

3. Which of the following statements relating to limited liability partnerships is correct?

A They are limited to a maximum of 20 partners

B They must have a minimum of two partners
C They must have at least one limited partner

4. Which of the following statements relating to a partnership is correct?

A Partners have limited liability

B A partnership is a company
C A partnership can exist perpetually without partners
D A partnership is a firm

5. Which of the following in NOT an implied term of the partnership Act?

A partners share profits equally

B partners share management powers equally
C partners have authority to act on behalf of the partnership and the other partners
D partners are entitled to sell their ‘share’ to anyone

6. Which one of the following is not a characteristics of a LLP?

A It is a separate legal entity

B It can sue and be sued in its own name
C It would have a memorandum and articles like a company
D the partners of an LLP have limited liability

7. Which of the following statements relating to a private company is correct?

A They are limited to a maximum of 20 members

B They are limited to a maximum of 50 members
C They must have at least two members

8 Which of the following statements relating to a Limited partnership is incorrect?

A the Limited partnership is a separate legal entity

B the liabilities of a limited partner is limited to his contribution
C the general partners have unlimited liability

9. Which of the following statements relating to a public limited company is NOT correct?

A right to the transfer of shares cannot be limited

B A company secretary must be appointed
C issue of shares must involve disclosure and public offer
D must have at least one director

10. Which of the following statements relating to a company is NOT correct?

A A company is in law a person

B A company must state its objects in the memorandum of association
C A company can sue and be sued
D A company has perpetual succession

9 Corporations and legal personality

1. Which of the following is NOT considered as a characteristic of a company’s separate legal

entity?

A A company’s life is perpetual

B A company can sue and be sued in its own name
C Shareholders own the assets in the company

2. What does the corporate veil ensure?

A ensures that the company cannot be sued

B ensures that the members are not held liable for the company’s losses
C ensures that the Directors’ are not held liable for their breach of duties

3. What does Limited liability mean with regards to companies and their members?

A the members’ liability is limited to the amount of their investments

B the members’ liability is limited to the amount unpaid on their partly paid shares
C the members have no liability for the losses of the company
4. Which of the following will NOT be a reason for the corporate veil to be lifted?

A company used as an instrument for fraud

B company functioning as a sham
C member avoiding his personal contractual obligation through a company
D creditors suing a holding company for the losses of its subsidiary

5. What is wrongful or insolvent trading under S339 (3) of the Companies Act?

A where the directors’ fraud causes the company’s losses

B where the directors knowingly or recklessly incur debts when there is no reasonable
expectation company will be able to pay the debt
C where the directors knowingly or recklessly incur debts in a situation where the company is
solvent
D Where the directors knowingly or recklessly incur debts in situation where the company is
making losses

10 Company formations

1. Which one of the following describes a promoter of a company?

A A lawyer or accountant who provides professional advice on setting up a company

B A person who is appointed to be one of the first few directors of the company
C A person who incorporates a company and gets it started

2. Which of the following is a duty of a promoter?

A ensures that he does not make profits from the sale of assets to the company
B ensures that he does not make secret profits from the sale of assets to the company
C ensures that he informs at least one of the directors of the profit that he makes

3. Which of the following statements is true?

A a promoter is a trustee of the future company

B a promoter is an agent of the future company
C a promoter is a fiduciary to the future company

4. Which of the following is NOT a remedy available to the company that has been affected by
the promoter’s breach of fiduciary duty?

A company can rescind the contract with the promoter

B company can sue the promoter for damages
C company can bring criminal charges against the promoter
D company can recover the secret profits that had been made by the promoter

5. Which of the following is the best description of a pre-incorporation contract?

A a contract between a future company and a third party
B a contract between a promoter and a third party on behalf of a future company
C a contract between an existing company and a third party
D a contract between a promoter and a third party on his own behalf

6. Which of the following is the best description of an Agency relationship?

A An agent represents the principal in a contract with a third party

B A principal represents himself in a contract with a third party
C An agent represents himself in a contract with a third party

7. Which of the following statements is true?

A a promoter is an agent of the company

B a shareholder is an agent of the company
C the board of directors are agents of the company
D a creditor is an agent of the company

8. Which of the following statements is true?

A a contract between a promoter and a third party can be enforced against the company
B a contract between a promoter and a third party can be enforced against the company if
entered on behalf of the company
C a contract between a promoter and a third party can be enforced against the company if
entered on behalf of the company and ratified by the company

9. Which one of the following is not required to be in a memorandum of association?

A the name of the company

B the liability of the members
C par value of a share

10. Which of the following describes the term ‘ultra vires’?

A an act by the directors that is beyond the powers of the board of directors
B an act done by the directors which is beyond the powers of the company
C an act done by the directors that has not been approved by the shareholders in a meeting
D an act that is illegal

11 Capital and financing of companies – Loan capital

1. Which one of the following statements in Incorrect?

A creditors are paid interest at an agreed rate
B on a winding up of a company a preference shareholder has priority over unsecured creditors
C creditors are not members and hence have no membership rights
D creditors have no rights to share in any surplus capital on winding up

2. Which of the following best describes a debenture?

A securities or shares that are issued to a share holder

B salary or bonuses owed to an employee
C a document that creates a debt

3. Which of the following is NOT an example of a debenture?

A Loan stock
B Note
C Cheque
D Convertible bond

4. Which of the following statements is incorrect with regards to charges.

A the creditor obtains a proprietary interest over the property charged

B the creditor has a right to have the security made available by a court order
C the creditor obtains legal title of the property charged
D the creditor obtains priority to charged assets over other unsecured creditors

5. Which one of the following statements does NOT apply to a floating charge?

A the charge floats over an asset until it attaches at a certain point

B the charge crystallizes upon liquidation
C the charge has priority over a fixed charge if it was created earlier
D the charge is usually created over assets that keep changing

6. Which of the following statements does not describe a fixed charge?

A it attaches immediately to assets charged

B the company may dispose the assets even though it has a fixed charge
C the charge is usually created over fixed assets such as plant and real property

7. What is the effect of not registering a charge?

A the creditor will lose his priority with shareholders

B the creditor will become unsecured
C the creditor will lose his priority against later charges
D the creditor will not have evidence of his loan

8. All the following are weaknesses of a floating charge, with regards to the secured creditor
except for one. Identify the one.

A a floating charge ranks lower than employees claim of wages during a liquidation
B a floating charge requires registration
C a floating charge allows the company to sell the assets
D an earlier floating charge has less priority than a later fixed charge

9. Which one of the following statements is incorrect?

A charges are ranked according to their order of creation

B a later fixed charge is superior to an earlier floating charge
C a fixed and floating charge cannot be created over the same asset

10. What is the purpose of a ‘negative pledge’ with regards to charges?

A to allow an earlier fixed charge to have priority over a later fixed charge
B to allow an earlier fixed charge to have priority over a later floating charge
C to allow a floating charge to have priority over an unsecured creditor
D to allow an earlier floating charge to have priority over a later fixed charge

12 Capital and financing of companies – Share capital

1. There are a number of ways in which investors can take an interest in a company and such
different interests have different rights attached to them.
Which of the following NORMALLY participate in surplus capital?

A Preference shares
B Ordinary shares
C Debentures secured by a fixed charge
D Debentures secured by a floating charge

2. It is not unusual for some company investments to carry cumulative dividend rights.
Which of the following statements about the declaration of dividends is correct?

A They are not paid until profits reach a certain percentage

B They are paid out of capital
C They are paid when profits are available for that purpose

3. Which of the following statements is incorrect with regards to the capital maintenance
doctrine?

A it is to protect shareholders rights

B it is to protect creditors generally
C it is to protect directors
D it is to protect employees generally

4. Which of the following statements is true with regards to dividends?

A shareholders can demand that directors declare dividends

B shareholders can demand that directors declare dividends when there are profits
C shareholders can demand that directors declare dividends when assets exceed liabilities
D shareholders cannot demand that directors declare dividends

5. Which of the following is NOT prohibited under the capital maintenance doctrine?

A a company purchasing or acquiring its own shares

B a company providing financial assistance for the purchase of its own shares
C a company purchasing or acquiring shares from another company
D a company returning assets of a company to its shareholders

6. What are treasury shares?

A shares that a holding company owns of its subsidiary

B shares that members purchase from other members
C shares that a company acquires during a buy back and that are not cancelled

7. Which of the following statements is correct?

A redeemable preference shares may be bought back

B ordinary shares may be bought back by the company
C no shares can be bought by a company

8. All the following are features of a treasury share except for one. Identify the one.

A they are not cancelled on purchase by the company

B they may be issued again to shareholders
C they will be kept by the company
D the company is allowed to vote under the rights of these shares

9. Which one of the following is a legal method by which a shareholder obtains capital of the
company?
A return of his invested capital through a share buy back
B allowing a discount on the price of a share when a shareholder buys shares
C distribution of dividends when the company has distributable profits

10. Which of the following is not a valid purpose for share buy-backs by a company?

A to restructure or downsize the company

B to reduce excessive capital when capital exceeds assets
C to acquire shares of a minority in order for an easy take-over and merger

13 Company directors and other officers

1. Which of the following statements best describes a Director of a company?

A he is the original promoter of the company

B he is the majority shareholder of the company
C he is anyone who occupies the position
D he is the legal advisor of the company

2. Which of the following statements in relation to the appointment of the company auditor
is correct?

A They are appointed by the Board of directors

B They are appointed by the members in a general meeting
C They are appointed by the Chief executive officer
D They are appointed by the company secretary

3. Which of the following statements is incorrect with regards to the appointment of

Directors in a private limited company?

A it must have at least one director who is ordinarily resident in Singapore

B must be of at least 18 years of age
C cannot be a bankrupt of a person disqualified due to fraud
D must be appointed by members through a special resolution

4. Under S150 (1) of the Companies Act a director of a public company may be removed by
the following method.

A may be removed by the Board of Directors

B may be removed by the company through a special resolution
C may be removed by the company through an ordinary resolution
D may be removed by the company through an ordinary resolution provided the memorandum
and articles permits this

5. Which of the following methods best describes the removal of directors in a private limited
company?

A he may be removed by a minority shareholder

B he may be removed by a majority shareholder
C he may be removed by a resolution of members according to the articles
D he may be removed by a resolution of members through an ordinary resolution

6. The directors’ duty of exercising reasonable due diligence is best described as follows.

A he must discharge his duty in the best way he thinks possible

B he must discharge his duty based on the subjective test only
C he must discharge his duty based on the objective test

7. Which test would the court apply in determining whether a director acted honestly at all
times, in the discharge of his duties?

A he would be judged on the basis of an objective test

B he would be judged on the basis of a reasonable man’s test
C he would be judged on the basis of the subjective test

8. If a director decides to issue a large proportion of shares to a certain shareholder only in

order to increase his voting powers and to facilitate a merger, which common law duty could he be
possibly breaching?

A duty to act honestly

B duty to use reasonable diligence
C duty not to make improper use of information or position
D duty to act for a proper purpose

9. If a director decides to purchase an asset for himself on the basis of his position and at the
expense of the company, although the board approves it, which fiduciary duty could he be
breaching?

A duty not to act for an improper purpose

B duty not to conflict with the interest of the company
C duty to act honestly
D duty to act with due diligence

10. Which of the following is the best description of the term ‘shadow director’?

A A director who is not appointed

B A Non-executive director
C A director whose orders are usually followed by the other directors

14 Company’s meetings and resolutions

1. Which of the following statements is correct with regards to general meetings.

A it is a meeting of members
B it is a meeting of creditors
C it is a meeting of directors
D it is a meeting of employees

2. What is a statutory meeting?

A The first general meeting of a private limited company

B The annual meeting of members of a public company
C The first general meeting of a public limited company

3. Which one of the following is NOT a function of a general meeting of a company?

A to pass a resolution to determine the issuance of dividends

B to pass a resolution to remove or appoint directors
C to pass a resolution in order to vary or delete an article provision
D to pass a resolution to wind up the company

4. A written ordinary resolution requires the approval of which of the following?

A More than 50% of those actually voting

B More than 50% of those entitled to vote
C Unanimous approval of those entitled to vote

5. In the context of company meetings, which of the following must be passed by a 75%
majority to be effective?

A An ordinary resolution with special notice

B A special resolution
C A written resolution

6. Which one of the following statements with regards to Board meetings is incorrect?

A All directors have to be given notice of board meetings

B The board meeting’s chairman would usually have an extra vote
C The resolutions in the board meeting are usually determined by unanimous votes

7. Ordinary resolutions of the general meeting are usually required for all the following
except for one. Identify the one.
A appointment and removal of directors
B appointment and removal of auditors
C variation of class rights

8. What is a class meeting?

A It is a meeting of all ordinary share holders

B It is a board meeting
C It is a meeting of members of a certain class of shares
D It is an Extraordinary General meeting

9. What is the possible legal effect of a failure of the company to inform a

shareholder/member of a general meeting?

A the meeting will still be valid

B the shareholder can sue the director
C the shareholder can sue the company
D the meeting and the resolution may be held invalid

10. Which one of the following is not a members’ right with regards to general meetings?

A right to vote
B right to attend and speak
C right to veto the resolution
D right to appoint a proxy to attend and vote

15 Majority control and minority protection

1. Which one of the following statements best describes the ‘proper plaintiff rule’?

A a member can sue personally to enforce his rights

B a member can sue on behalf of the company to enforce its rights
C only the company can sue to enforce its rights against another
D only a director can sue to enforce the company’s rights

2. Which of the following statements is incorrect with regards the application of S39 of the
Companies Act which concerns the legal effect of the memorandum and the articles?

A a member can enforce his personal membership rights against the company
B the company can enforce its rights against the members
C a member can enforce any right mentioned in the articles against the company

3. Which one of the following is NOT the reason why members cannot bring an action against
a wrong doer on behalf of the company?
A Directors have the power of management
B the company is a separate legal entity that has powers of its own
C members do not have majority control
D the company in general meeting can ratify any wrong act

4. What is a derivative action?

A action taken by a member against the company enforcing the company’s rights
B action taken by a member against the director enforcing his personal rights
C action taken by the member on behalf of the company against a wrong doer

5. All the following are requirements for bringing a S216A statutory derivative action, except
for one. Identify the one.

A the claimant must apply for leave

B the claimant must be personally affected by the wrong doing
C the claimant must give 14 days’ notice of intention to the company
D the claimant must act in good faith and prima facie in the interest of the company

6. In which of the following situations is a member allowed to bring a personal action against
the company?

A where a member is prevented from exercising his voting rights

B where a members share value is diluted as a result of issue of more shares by the company
C where a member suffers indirect losses as a result of a director’s mismanagement

7. All the following are requirements for a S216 oppression remedy, except for one. Which
one is it?

A a member or holder of a denture may apply

B if the affairs of the company are conducted in an oppressive manner
C it has been unfairly prejudicial to the members
D a personal members rights are affected

8. What is the purpose of S254 (1) (i) Just and equitable winding up provision of the
companies Act?

A to award a remedy suitable to the affected member

B to allow the member to be compensated through damages
C to allow for the winding up of the company if no other remedy is suitable

16 Winding up and corporate rescue

1. What is the purpose of a compromise arrangement?

A to prevent a creditor from enforcing his legal rights

B to prevent the company from being compulsorily wound up
C to rearrange the rights of creditors and members

2. What type of resolution would be required in order for the compromise arrangement to be
legally effective?

A a simple majority of more than 50% of creditors and members present and voting
B a special resolution of 75% of creditors and members present and voting
C a majority of ¾ in value of creditors and members present and voting

3. What is the purpose of judicial management?

A to prevent the company from being wound up

B to ensure that the company is given a chance of survival
C to alter or change the rights of members and creditors

4. Which of the following is NOT a pre-requisite for a judicial management application to

succeed?

A a company is or will be unable to pay its debts

B the court order would be likely to achieve the survival of the company
C shareholders’ interests would be safeguarded
D judicial management would be more advantageous than a winding up

5. Which one of the following is NOT an advantage of a judicial management order?

A Allows a company that is insolvent to reorganize its affairs

B prevents a voluntary winding up of the company during administration
C prevents a voluntary winding up of the company perpetually
D prevents civil proceedings and possession of assets by secured creditors

6. Which of the following are NOT characteristics of a judicial management?

A an interim judicial manager may be appointed by the court

B no voluntary or involuntary winding up can take place during judicial management
C members are required to pass a special resolution before the JM application
D the judicial manager takes over the fiduciary duties of the company

7. Which of the following is NOT a criteria for a court winding up order?

A a company has by ordinary resolution decided to wind up the company

B a public company fails to hold a statutory meeting
C the company is unable to pay its debts
D the court is of the opinion that it is just and equitable to wind up

8. Which one of the following ‘persons’ are NOT considered as belonging to the list of persons
entitled to make a petition for a court winding up of a company?

A the company itself

B any creditor
C board of directors
D liquidator or judicial manager

17 Corporate fraud and criminal behaviour

1. A bank customer gave $5,000 to a bank officer to thank them for approving their loan
application. The bank customer actually did not qualify for the loan application. The bank officer
accepted the money.
In the context of anti-corruption law, who has committed corruption offences?

A The bank
B The bank customer only
C The bank officer only
D Both the bank customer and the bank officer

2. Alex was convicted of insider trading in relation to the shares of Eminent Ltd. He was said
to have made use of price-sensitive information about Eminent Ltd when it was not publicly
available.
Which TWO of the following acts could he have done?

1) Procured another person to subscribe for shares of Eminent Ltd

2) Recorded the information in his computer hard drive
3) Communicated the information to his primary school son
4) Sold off Eminent Ltd’s shares which he owned

A (1) and (3)

B (2) and (3)
C (2) and (4)
D (1) and (4)

3. Which of the following about the role of the securities market is correct?

A It is to allow companies to raise capital

B It is to allow companies to compete with each other for customers
C It is to allow companies to be part of a corporate group

4. John a director of a public company, informed his wife that his company would be taken-
over by a large conglomerate. He tells her that it is really good news for his company but says
nothing more. John’s wife immediately buys a large quantity of the company’s shares. What
criminal act could he or she have done?

A Only John’s wife commits the offence of trading

B John commits the offence of communication
C John commits the offence of procuring
D John commits the offence of communication and the wife the offence of trading

5. What is the consequence of a person incorporating a company for the purposes of fraud?

A Only the directors would be held liable for the losses to the company
B Only the shareholders would be held liable for the losses to the company
C Any person involved in the fraud would be held liable

- End of MCQs -
SECTION B - MCQ ANSWERS
Topics 1 2 3 4 5 6 7 8 9 10
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B C C A C B C D A A
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B B D C B B B B B A
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C B A C C C C B B C
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A B D A C C D D B C
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C B C A C B A B D B
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D C C B C C B C D C
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B D A D B C B C D C
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B B B D D C B A D B
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C B B D B X X X X X
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C B C C B A C C C B
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B C C C C B B B C D
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B C B D C C A D C C
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C B D C C C C C B C
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A C A B B C C C D C
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C C C C B A D C X X
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C C B C C C A C X X
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D D A D C X X X X X