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ICAB PL Corporate Laws and Practices study materials
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ICAB PL Corporate Laws and Practices practice questions

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Question 1Corporate Laws

Under the Companies Act 1994 of Bangladesh, what is the minimum number of persons required to form a public company limited by shares?

  1. Seven Correct answer.
  2. Five
  3. Two
  4. Three

Explanation

A public company may be formed by any seven or more persons associated for a lawful purpose who subscribe their names to a memorandum of association. A private company needs only two persons, so the seven-person threshold is the distinguishing statutory minimum for public companies.

Question 2Corporate Laws

Which document of a company sets out the objects, the scope of its activities, and the relationship between the company and the outside world?

  1. The memorandum of association Correct answer.
  2. The prospectus
  3. The statutory register of members
  4. The articles of association

Explanation

The memorandum is the company's charter, stating its name, registered office, objects, liability, and capital, and it governs the company's external relationship with third parties. The articles are subordinate internal regulations that cannot exceed the memorandum.

Question 3Corporate Laws

A company wishes to alter its articles of association. Which procedure is legally required?

  1. A special resolution of the members, with a copy filed with the Registrar Correct answer.
  2. An ordinary resolution plus written consent of the company's auditors
  3. A unanimous resolution of all shareholders passed at a general meeting
  4. Approval by the Registrar of Joint Stock Companies before the alteration takes effect

Explanation

Section 20 of the Companies Act 1994 permits alteration of articles by special resolution, and a printed copy of the altered articles must be filed with the Registrar within the prescribed period. The alteration is a member-level constitutional change, so a simple majority ordinary resolution is insufficient.

Question 4Corporate Laws

Which of the following best describes the doctrine of ultra vires in company law?

  1. Contracts made before incorporation automatically bind the company
  2. Acts beyond the objects stated in the memorandum are void and cannot bind the company Correct answer.
  3. A company may ratify any act by ordinary resolution of the board
  4. Directors who exceed their delegated authority are personally immune from liability

Explanation

Under the ultra vires doctrine, a company has legal capacity only for purposes authorised by its memorandum, and acts outside those objects are void. This protects investors and creditors by confining the company's activities to the declared scope.

Question 5Corporate Laws

A promoter enters into a contract on behalf of a company that has not yet been incorporated. After incorporation, the company wishes to adopt the contract. What is the correct legal position?

  1. The company may adopt the contract by entering into a fresh contract or novation with the other party Correct answer.
  2. The company is automatically bound because incorporation relates back to the date of the contract
  3. The promoter is never personally liable once the company is formed
  4. The contract is void and no adoption is possible under any circumstances

Explanation

A company has no capacity before incorporation and cannot be bound by a pre-incorporation contract merely because it later comes into existence. It may adopt the benefit and burden only through a new contract or novation, and until then the promoter remains personally liable.

Question 6Corporate Laws

Which of the following is a characteristic of a private company under Bangladeshi company law?

  1. Its shares may be freely offered to the general public
  2. It must file a prospectus before commencing business
  3. It must have at least seven members at all times
  4. It restricts the right to transfer its shares and limits its members to fifty Correct answer.

Explanation

A private company by its articles restricts share transfer, limits membership to fifty (excluding present and former employees who are members), and prohibits any invitation to the public to subscribe for its securities. These restrictions are what distinguish it from a public company.

Question 7Corporate Laws

What is the legal effect of a certificate of incorporation issued by the Registrar?

  1. It may be challenged by any shareholder in court at any time
  2. It is conclusive evidence that the company has been duly registered and exists Correct answer.
  3. It is provisional and lapses unless business commences within twelve months
  4. It merely confirms that the name has been reserved

Explanation

The certificate of incorporation is conclusive evidence that all requirements of the Act relating to registration have been complied with and that the company is duly registered. This conclusiveness protects third parties who deal with the company in reliance on its existence.

Question 8Corporate Laws

A company's articles contain a clause giving the board power to refuse registration of any transfer of shares. A shareholder challenges the refusal. Which principle applies?

  1. The board's power must be exercised in good faith and for the proper purpose for which it was conferred Correct answer.
  2. The board's power is absolute and cannot be reviewed by any court
  3. The shareholder automatically succeeds if the transferee is a family member
  4. The power is void because transfer restrictions are unlawful in a public company

Explanation

Directors' powers, including a power to refuse registration of transfers, are fiduciary and must be exercised bona fide in the interests of the company and for the purpose for which they were given. A capricious or improper refusal can be challenged, although courts generally respect a genuine exercise of discretion.

Question 9Corporate Laws

Which of the following statements about the doctrine of separate legal personality is correct?

  1. Directors are personally liable for all debts of the company in every case
  2. Shareholders own the company's assets jointly with the company
  3. The company's liability is limited to the extent of its directors' personal guarantees
  4. The company is a legal person distinct from its members and can own property and sue in its own name Correct answer.

Explanation

On incorporation the company becomes a body corporate with perpetual succession, capable of owning property, contracting, and suing and being sued in its own name. Members' liability is generally limited to any amount unpaid on their shares, and the company's debts are its own.

Question 10Corporate Laws

In which of the following situations is a court most likely to lift the corporate veil?

  1. Where the company earns high profits but pays low dividends
  2. Where the company has only two shareholders
  3. Where a shareholder also serves as a director of the company
  4. Where the company is used as a mere sham or façade to evade a legal obligation or perpetrate fraud Correct answer.

Explanation

Courts may disregard separate personality where the corporate form is used as a device or façade to conceal fraud, evade existing obligations, or defeat the law. Ordinary commercial structures such as small shareholder numbers or dual shareholder-director roles are not grounds for lifting the veil.

Question 11Corporate Laws

What is the principal fiduciary duty of a director of a Bangladeshi company?

  1. To act honestly and in good faith in the best interests of the company Correct answer.
  2. To give preference to the interests of majority shareholders over the company
  3. To maximise the director's own remuneration
  4. To follow the instructions of the managing director without independent judgment

Explanation

Directors stand in a fiduciary relationship to the company and must act honestly and in good faith in what they believe to be the best interests of the company as a whole. They must exercise their powers for proper purposes and not for personal advantage.

Question 12Corporate Laws

A director of a company fails to disclose to the board a material personal interest in a contract that the company is considering. What is the legal consequence?

  1. The contract is automatically void and the director commits a criminal offence in all cases
  2. The contract is valid because directors may contract freely with their company without disclosure
  3. The director must disclose the interest, and failure may render the director liable to account and the contract voidable at the company's option Correct answer.
  4. Only the auditors can challenge the contract, not the company

Explanation

Directors must disclose any interest in a transaction with the company, typically at a board meeting, and a failure to disclose exposes the director to account for profits and makes the contract voidable at the company's election. The duty protects the company from conflicts of interest.

Question 13Corporate Laws

How are the first directors of a company incorporated under the Companies Act 1994 determined?

  1. They are the persons named as directors in the articles or in the statement filed at incorporation Correct answer.
  2. They are elected by the shareholders at the first annual general meeting
  3. They are appointed by the Registrar from a panel
  4. They are chosen by the company's auditors

Explanation

The subscribers to the memorandum or the persons named as first directors in the articles or the prescribed statement become the company's initial directors until successors are appointed. Subsequent directors are then appointed in accordance with the articles and the Act.

Question 14Corporate Laws

A public company must appoint auditors. Which statement correctly describes the requirement?

  1. Auditors are appointed by the members at the annual general meeting, and the auditor holds office until the next AGM Correct answer.
  2. Auditors are optional for public companies that have no borrowings
  3. Auditors are appointed by the board and never require shareholder approval
  4. Auditors are appointed by the Registrar for a fixed ten-year term

Explanation

The members appoint the auditor at each annual general meeting, and the auditor generally holds office until the conclusion of the next AGM. This ensures accountability to shareholders rather than to management alone.

Question 15Corporate Laws

Which of the following is a statutory book or register that a company must maintain?

  1. A register of all employees' home addresses
  2. A list of the company's competitors
  3. A register of members containing the names and shareholdings of shareholders Correct answer.
  4. A diary of directors' daily meetings with clients

Explanation

The Act requires companies to keep a register of members showing names, addresses, and the shares held, and to allow inspection under prescribed conditions. Other statutory registers include those of directors, charges, and debenture holders.

Question 16Corporate Laws

What is the maximum interval permitted between two annual general meetings of a company under Bangladeshi law?

  1. Twelve months
  2. Twenty-four months
  3. Fifteen months Correct answer.
  4. Eighteen months

Explanation

The first AGM must be held within eighteen months of incorporation, and thereafter an AGM must be held at least once in every calendar year, with not more than fifteen months elapsing between one AGM and the next. The Registrar may extend the interval by up to three months for special reasons.

Question 17Corporate Laws

A special resolution of members requires what level of approval?

  1. Unanimous consent of every member
  2. A simple majority of votes cast
  3. Two-thirds of the board of directors
  4. Three-quarters of the votes cast by members entitled to vote, with proper notice Correct answer.

Explanation

A special resolution requires at least three-quarters of the votes cast in favour, and the notice must specify the intention to propose it as a special resolution. An ordinary resolution needs only a simple majority.

Question 18Corporate Laws

A shareholder holding ten percent of the paid-up voting capital of a public company wishes to requisition an extraordinary general meeting. Which statement is correct?

  1. Members holding at least one-tenth of the paid-up voting capital may requisition an EGM, and the directors must call it Correct answer.
  2. Only the board may call an EGM, so the request has no legal effect
  3. A single shareholder may always call an EGM regardless of shareholding
  4. Requisition requires the consent of the auditors

Explanation

The Act allows members holding not less than one-tenth of the paid-up capital carrying voting rights to requisition an extraordinary general meeting. If the directors fail to call it within the prescribed period, the requisitionists may convene it themselves.

Question 19Corporate Laws

What is the legal nature of a share in a company?

  1. A movable property interest comprising a bundle of rights and liabilities in the company Correct answer.
  2. A loan made by the shareholder to the company
  3. A guarantee of the company's debts by the shareholder
  4. A fixed deposit repayable on demand

Explanation

A share is a movable property right representing the shareholder's interest in the company, measured by a sum of money and carrying rights to vote, receive dividends, and participate in surplus assets. It is not a loan and is generally not repayable on demand.

Question 20Corporate Laws

A company issues shares at a premium. How must the premium be treated?

  1. It must be returned to the subscribers within one year
  2. It may be distributed as dividend immediately
  3. It must be transferred to a share premium account, which is subject to restricted use Correct answer.
  4. It is recorded as a reduction of share capital

Explanation

Where shares are issued at a premium, the excess over nominal value must be credited to a share premium account. That account is treated like paid-up capital and may be applied only for limited purposes such as issuing fully paid bonus shares.

Question 21Corporate Laws

Which statement correctly describes the rule in Trevor v Whitworth as applied in Bangladesh?

  1. Shareholders may demand repayment of capital on request
  2. A company must always maintain a reserve equal to its share capital in cash
  3. A company cannot reduce its capital or buy back its shares except in accordance with the statutory procedure Correct answer.
  4. A company may freely purchase its own shares at any time

Explanation

The rule preserves the maintenance of capital: a company may not return capital to shareholders or acquire its own shares except through procedures authorised by statute, such as a court-confirmed reduction of capital. This protects creditors who rely on the company's capital.

Question 22Corporate Laws

A director wishes to transfer company property to a person connected with the director at a price below market value. Which concern is most relevant?

  1. The transaction requires only the consent of the transferee
  2. The transaction may breach the director's duty to avoid conflicts and to act in the company's best interests Correct answer.
  3. The transaction is automatically valid because directors control company property
  4. The transaction is prohibited only if the director holds more than half the shares

Explanation

A transaction between the company and a person connected with a director engages the duty to avoid conflicts of interest and to act in the company's best interests. Such a transaction may require disclosure and approval, and if it unfairly benefits the director it may be set aside or the director made to account.

Question 23Corporate Laws

What is the purpose of a statutory declaration of compliance filed at incorporation?

  1. To guarantee the company's future profitability
  2. To declare that all requirements of the Act relating to registration have been complied with Correct answer.
  3. To confirm that the company has already commenced trading
  4. To transfer liability for the company's debts to the Registrar

Explanation

A declaration of compliance states that the requirements of the Act in respect of registration and matters precedent or incidental to it have been complied with. It supports the conclusiveness of the certificate of incorporation.

Question 24Corporate Laws

A company fails to hold its statutory annual general meeting. Which consequence may follow?

  1. The Registrar must appoint a new board of directors
  2. The company is automatically dissolved on the same day
  3. Any member may apply to the court, which may order the meeting to be called, and the company and defaulting officers may be liable to penalties Correct answer.
  4. The directors are personally liable for all company debts

Explanation

Where a company defaults in holding an AGM, any member may apply to the court for an order calling or directing the calling of the meeting, and the company and every officer in default may be liable to a fine. The court may also give consequential directions.

Question 25Corporate Laws

Which of the following best describes the role of the Registrar of Joint Stock Companies and Firms?

  1. To act as legal adviser to the boards of public companies
  2. To administer registration, filing, and compliance functions under the companies legislation Correct answer.
  3. To manage the internal affairs of every registered company
  4. To audit the financial statements of every company

Explanation

The Registrar is the statutory regulator responsible for incorporating companies, receiving statutory filings, maintaining the register, and enforcing compliance. The Registrar does not manage companies or audit their accounts, which are functions of the board and the appointed auditor respectively.

Question 26Corporate Laws

What is the minimum number of members required to form a public company under the Companies Act 1994?

  1. Two
  2. Ten
  3. Three
  4. Seven Correct answer.

Explanation

Under section 5 of the Companies Act 1994, a public company must have at least seven members at the time of incorporation. A private company requires only two members. This minimum ensures broader ownership and public accountability for companies offering shares to the public.

Question 27Corporate Laws

Which document of a company contains the rules governing the internal management of its affairs?

  1. The articles of association Correct answer.
  2. The prospectus
  3. The certificate of incorporation
  4. The memorandum of association

Explanation

The articles of association set out the internal regulations for managing the company, including board powers and shareholder meetings. The memorandum governs the company's external relations and objects. The certificate of incorporation is conclusive evidence of existence, and a prospectus invites public investment.

Question 28Corporate Laws

A company wishes to alter its articles of association. Which procedure must it follow?

  1. Pass a special resolution of members and file the altered articles with the Registrar Correct answer.
  2. Seek consent from the company's auditors
  3. Pass an ordinary resolution at a board meeting
  4. Obtain approval from the board of directors alone

Explanation

Section 87 of the Companies Act 1994 permits a company to alter its articles by special resolution. The altered articles must be filed with the Registrar within the prescribed time. Board approval or auditor consent alone is insufficient because the articles form a contract between the company and its members.

Question 29Corporate Laws

What is the effect of the memorandum and articles of association once registered?

  1. They bind only the directors and officers
  2. They are merely internal guidelines with no legal force
  3. They can be ignored if all members agree informally
  4. They bind the company and its members as a contract Correct answer.

Explanation

Under section 18 of the Companies Act 1994, the memorandum and articles, when registered, bind the company and its members as if they had been signed by each member. They constitute a statutory contract. This binding effect applies to the company and its members in their capacity as members.

Question 30Corporate Laws

Which of the following names would be prohibited for a company under the Companies Act 1994?

  1. A name identical to an existing company Correct answer.
  2. A name that includes the word 'Limited'
  3. A name that includes the word 'Corporation'
  4. A name that includes the word 'Bangladesh'

Explanation

Section 20 prohibits the registration of a name that is identical to an existing company or is likely to deceive. Use of words like 'Bangladesh', 'Corporation', or 'Limited' is permitted subject to conditions. The Registrar must ensure names are not misleading or identical.

Question 31Corporate Laws

What is the statutory duty of a company regarding the keeping of its registered office?

  1. It must have a registered office in Bangladesh to which communications may be addressed Correct answer.
  2. It may use a post office box as its registered office
  3. It is not required to have a registered office if it has no physical premises
  4. It may change its registered office without any notice

Explanation

Section 77 requires every company to have a registered office in Bangladesh from the date of incorporation. The registered office is the official address for service of documents. A post office box alone is insufficient, and changes must be notified to the Registrar.

Question 32Corporate Laws

A company wishes to issue shares at a discount. Under the Companies Act 1994, is this permitted?

  1. No, shares cannot be issued at a discount except in a statutory reduction of capital Correct answer.
  2. Yes, if the board considers it commercially necessary
  3. Yes, if the discount does not exceed ten percent
  4. Yes, if the members pass an ordinary resolution

Explanation

Section 153 prohibits a company from issuing shares at a discount except in a reduction of capital duly approved by the court. Issuing shares at a discount would undermine the maintenance of capital. There is no general exception for board or member approval.

Question 33Corporate Laws

What is the consequence of a company failing to file its annual return with the Registrar?

  1. The company and every officer in default may be liable to a fine Correct answer.
  2. The company's shares are suspended from trading
  3. The company is automatically dissolved
  4. The directors are personally liable for all company debts

Explanation

Section 36 requires companies to file an annual return. Failure to file is an offence, and the company and every officer in default are punishable by fine. Automatic dissolution or personal liability for debts does not follow solely from late filing.

Question 34Corporate Laws

Which of the following statements about the capacity of a company to enter into contracts is correct?

  1. A company has no capacity to contract unless expressly authorised by the Registrar
  2. A company's contractual capacity is limited to its paid-up capital
  3. A company may only contract through its managing director
  4. A company may enter into any contract authorised by its memorandum Correct answer.

Explanation

A company's capacity is determined by its objects clause in the memorandum. Under section 17, a company may do all things necessary or conducive to its objects. Contracts outside the objects may be ultra vires and unenforceable against the company.

Question 35Corporate Laws

What is the liability of a member of a company limited by guarantee?

  1. The member is liable to contribute a fixed amount to the company's assets on winding up Correct answer.
  2. The member has no liability whatsoever
  3. The member is liable only for the amount unpaid on shares
  4. The member is liable for the company's debts without limit

Explanation

In a company limited by guarantee, each member undertakes to contribute a specified amount to the company's assets if it is wound up. This amount is stated in the memorandum. Members are not liable for the company's debts beyond that guaranteed sum.

Question 36Corporate Laws

Under the Companies Act 1994, what is the maximum period for which a person may be appointed as auditor of a company?

  1. Three years
  2. One year
  3. Ten years
  4. Five years Correct answer.

Explanation

Section 212 provides that an auditor may be appointed for a maximum term of five years, subject to reappointment. This ensures periodic review of the audit relationship. The Act does not permit an initial term exceeding five years.

Question 37Corporate Laws

Which of the following is a valid ground for disqualifying a person from acting as a director of a company?

  1. The person is a relative of another director
  2. The person resides outside Bangladesh
  3. The person holds shares in the company
  4. The person is an undischarged bankrupt Correct answer.

Explanation

Section 92 disqualifies an undischarged bankrupt from acting as a director. Holding shares, being related to another director, or residing abroad are not statutory disqualifications. The disqualification protects creditors and the public.

Question 38Corporate Laws

A director of a company is also a partner in a firm that supplies goods to the company. What must the director do under the Companies Act 1994?

  1. Disclose the interest at a board meeting and refrain from voting on the contract Correct answer.
  2. Resign from the board immediately
  3. Obtain prior approval from the Registrar
  4. Transfer the shares held in the company to a trust

Explanation

Section 105 requires a director interested in a contract to disclose the nature of the interest at a board meeting. The director must not vote on the contract unless permitted by the articles. This ensures transparency and prevents conflicts of interest.

Question 39Corporate Laws

What is the rule regarding the payment of dividends by a company?

  1. Dividends may be paid out of capital if approved by the board
  2. Dividends may be paid only out of profits available for distribution Correct answer.
  3. Dividends must be paid annually at a fixed rate
  4. Dividends may be paid from unrealised revaluation reserves

Explanation

Dividends can only be paid from distributable profits, not from capital. This rule protects creditors and maintains the company's capital base. Payment from capital or unrealised reserves would be unlawful.

Question 40Corporate Laws

A company has not held its annual general meeting for two consecutive years. Which action can a member take?

  1. Directly call the meeting without any notice
  2. File a petition for the company's automatic dissolution
  3. Apply to the court for an order directing the company to hold the meeting Correct answer.
  4. Elect a new board of directors by written resolution

Explanation

Under section 84, if a company fails to hold an AGM, any member may apply to the court for an order to convene the meeting. The court may give directions for the meeting. Members cannot unilaterally call a meeting without following statutory procedures.

Question 41Corporate Laws

What is the minimum number of directors required for a public company under the Companies Act 1994?

  1. Three Correct answer.
  2. Two
  3. Five
  4. One

Explanation

Section 90 requires a public company to have at least three directors. A private company may have a minimum of two. The higher number for public companies reflects greater accountability.

Question 42Corporate Laws

Which of the following statements about the transfer of shares in a private company is correct?

  1. Shares are freely transferable without any restriction
  2. Transfer is permitted only to existing members
  3. The articles may restrict the transfer of shares Correct answer.
  4. Transfer requires prior approval of the Registrar

Explanation

Section 38 allows a private company to restrict share transfers in its articles. This preserves the closely held nature of the company. Public companies generally have freely transferable shares, but private companies may impose restrictions.

Question 43Corporate Laws

What is the effect of a company's failure to comply with the requirement to file a notice of change of directors?

  1. The company and officers in default commit an offence and may be fined Correct answer.
  2. The change of directors is automatically void
  3. The company is struck off the register
  4. The new directors are personally liable for company debts

Explanation

Section 95 requires notice of changes in directors to be filed with the Registrar within 14 days. Non-compliance is an offence punishable by fine. The change itself is not void, and striking off is not an automatic consequence.

Question 44Corporate Laws

Which of the following is a statutory requirement for a company's financial statements?

  1. They must be published in a national newspaper
  2. They must be approved by the Registrar before issue
  3. They must be prepared monthly
  4. They must be audited by a qualified auditor Correct answer.

Explanation

Section 210 requires the financial statements of a company to be audited by a qualified auditor. Publication in a newspaper is not a statutory requirement for all companies. Registrar approval before issue is not required, and monthly preparation is not mandated.

Question 45Corporate Laws

A member of a company alleges that the company's affairs are being conducted in a manner oppressive to members. What remedy is available under the Companies Act 1994?

  1. Automatic winding up of the company
  2. Compulsory acquisition of the member's shares by the Registrar
  3. Criminal prosecution of the directors
  4. Application to the court for an order to regulate the company's affairs Correct answer.

Explanation

Section 233 allows a member to apply to the court for relief where the company's affairs are conducted oppressively. The court may make orders regulating the company's affairs or requiring the purchase of shares. Winding up or criminal prosecution is not automatic.

Question 46Corporate Laws

What is the purpose of the statutory meeting of a public company?

  1. To approve the annual financial statements
  2. To elect the board of directors annually
  3. To enable members to discuss the company's affairs and the statutory report Correct answer.
  4. To declare dividends

Explanation

Section 83 requires a public company to hold a statutory meeting within six months of incorporation. The meeting considers the statutory report and allows members to discuss the company's formation and prospects. It is not the annual general meeting.

Question 47Corporate Laws

Which of the following statements about the liability of directors for untrue statements in a prospectus is correct?

  1. Directors are liable only if the company becomes insolvent
  2. Directors are liable only if they personally profited from the statement
  3. Directors may be liable to compensate persons who subscribe on the faith of the prospectus Correct answer.
  4. Directors are immune from liability if the prospectus was approved by the Registrar

Explanation

Section 145 imposes liability on directors for untrue statements in a prospectus. Persons who subscribe for shares on the faith of the prospectus may claim compensation. Registrar approval does not absolve directors of liability for misstatements.

Question 48Corporate Laws

What is the effect of a company's failure to keep proper books of account?

  1. The directors are automatically disqualified
  2. The company's contracts become void
  3. The company must immediately wind up
  4. The company and every officer in default commit an offence Correct answer.

Explanation

Section 181 requires companies to keep proper books of account. Failure to do so is an offence for which the company and officers in default may be fined. It does not automatically void contracts or disqualify directors.

Question 49Corporate Laws

A company wishes to reduce its share capital. Which procedure is required under the Companies Act 1994?

  1. Board resolution alone
  2. Approval by the Registrar without member consent
  3. Court approval following a special resolution Correct answer.
  4. Ordinary resolution of members

Explanation

Section 154 permits a company to reduce its share capital with court approval after passing a special resolution. The court procedure protects creditors. Board or ordinary resolutions alone are insufficient.

Question 50Corporate Laws

Which of the following is a consequence of a company being wound up by the court?

  1. A liquidator is appointed to realise assets and distribute proceeds Correct answer.
  2. The company's contracts are automatically terminated
  3. The company's directors automatically become personally liable for all debts
  4. The company's shares are converted into debentures

Explanation

On a winding up by the court, a liquidator is appointed to take control of the company's assets, realise them, and distribute the proceeds to creditors and members. Directors do not automatically become personally liable, and contracts are not automatically terminated.