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Question 1Governance and Boardroom Practice

Which document most directly establishes the division of authority between a company's board of directors and its senior management?

  1. The board charter and delegated authority schedule Correct answer.
  2. The employee code of conduct
  3. The annual audited financial statements
  4. The shareholder dividend policy

Explanation

A board charter, often supported by a delegated authority schedule, defines what the board reserves to itself and what it delegates to management. Financial statements report results, while conduct and dividend policies address narrower matters. Together the charter and schedule are the primary internal instrument of governance authority.

Question 2Governance and Boardroom Practice

A board delegates a matter to a committee but retains final decision rights. Which governance principle does this best illustrate?

  1. Separation of audit and tax functions
  2. Delegation without accountability
  3. Retention of ultimate board responsibility Correct answer.
  4. Subsidiarity of shareholder voting

Explanation

Committees support the board but do not displace it; the board remains accountable for decisions even when work is delegated. Delegation transfers task execution, not ultimate responsibility. This principle is why committee recommendations normally return to the full board for approval.

Question 3Governance and Boardroom Practice

Which attribute best describes genuine director independence?

  1. Being nominated by a large institutional shareholder
  2. Having no material relationship with the company beyond the board seat Correct answer.
  3. Having served on the board for fewer than three years
  4. Holding a modest number of shares received as director fees

Explanation

Independence means the director's judgement is not compromised by relationships that could influence decisions, whether commercial, familial, or advisory. Shareholding, tenure, and nominating arrangements can each create a conflict or appearance of one. The defining test is the absence of material relationships beyond the directorship.

Question 4Governance and Boardroom Practice

What is the primary purpose of an annual board effectiveness evaluation?

  1. To benchmark director remuneration against peers
  2. To improve how the board and its committees perform Correct answer.
  3. To rank individual directors for removal
  4. To satisfy listing rules with a documentary record

Explanation

Board evaluations are intended as a developmental tool that identifies strengths and gaps in composition, process, and dynamics. The output should feed into board renewal, training, and agenda design. Treating the exercise purely as compliance or as a cull undermines its value.

Question 5Governance and Boardroom Practice

Which committee typically takes primary responsibility for overseeing the integrity of financial reporting and the external audit relationship?

  1. The nomination committee
  2. The remuneration committee
  3. The risk committee
  4. The audit committee Correct answer.

Explanation

The audit committee oversees financial reporting quality, internal control, and the relationship with external auditors. Nomination, risk, and remuneration committees have different mandates. Where a separate risk committee exists, it complements rather than replaces the audit committee's reporting oversight.

Question 6Governance and Boardroom Practice

A director learns of a takeover approach during a board meeting and trades in the company's shares before it is announced. Which duty has the director most clearly breached?

  1. The duty to promote the success of the company
  2. The duty to avoid conflicts and not misuse information Correct answer.
  3. The duty to exercise reasonable care
  4. The duty to act within the constitution

Explanation

Directors owe a duty not to exploit company information or their position for personal advantage, and to manage conflicts of interest. Trading on unpublished price-sensitive information is a direct breach of that duty. It may also breach securities law independently of the general law duties.

Question 7Governance and Boardroom Practice

Which practice best supports effective board decision-making on complex proposals?

  1. Sending full papers sufficiently in advance with a clear recommendation Correct answer.
  2. Voting immediately to save meeting time
  3. Circulating papers on the morning of the meeting
  4. Restricting discussion to the chief executive's summary

Explanation

Directors can only exercise informed judgement if they receive complete, balanced information early enough to study it. Papers should include a clear recommendation, rationale, and alternatives considered. Late or one-sided information undermines the quality of deliberation and the defensibility of decisions.

Question 8Governance and Boardroom Practice

What does board succession planning primarily aim to ensure?

  1. That board size remains fixed indefinitely
  2. That the longest-serving director becomes chair
  3. That retiring directors receive appropriate recognition
  4. That the board maintains the skills and diversity needed over time Correct answer.

Explanation

Succession planning aligns board composition with the company's strategy and future needs, covering skills, experience, and diversity. It should be a continuous process owned by the nomination committee. Recognition, seniority-based promotion, and fixed size are not its objectives.

Question 9Governance and Boardroom Practice

A board is reviewing whether to separate the roles of chair and chief executive. Which argument most strongly supports separation?

  1. It reduces the cost of board meetings
  2. It guarantees higher shareholder returns
  3. It removes the need for independent directors
  4. It creates a clearer check on executive power and improves board independence Correct answer.

Explanation

Separating the chair and chief executive roles prevents one individual from both running the business and leading its oversight. This division supports independent challenge and clearer accountability. It does not by itself guarantee performance outcomes, nor does it remove the need for independent directors.

Question 10Governance and Boardroom Practice

During a board debate, a non-executive director consistently defers to the chief executive's views and never challenges proposals. Which board dynamic is most at risk?

  1. Overly frequent board turnover
  2. Groupthink and insufficient independent challenge Correct answer.
  3. Excessive risk appetite
  4. Premature disclosure of inside information

Explanation

When directors habitually defer to management or to a dominant voice, the board loses the constructive challenge that independent oversight requires. This can produce groupthink and poorly tested decisions. Boards mitigate this through diverse composition, strong chairing, and deliberate invitation of dissent.

Question 11Governance and Boardroom Practice

A company operates in a jurisdiction where the board may delegate powers to a committee. Which condition is essential for the delegation to be sound?

  1. The delegation must be approved by the external auditor
  2. The delegation must be authorised by the constitution and recorded with clear terms of reference Correct answer.
  3. The committee must include only executive directors
  4. The committee must meet at least weekly

Explanation

Valid delegation depends on authority in the constitution or law and on clear, documented terms of reference setting scope and reporting lines. Composition and meeting frequency should suit the task rather than follow fixed rules. Auditors observe governance but do not authorise delegations.

Question 12Governance and Boardroom Practice

A director sits on the board of two companies that are bidding for the same contract. What is the most appropriate governance response?

  1. Keep the situation confidential to avoid disruption
  2. Disclose the conflict and manage it, for example by recusal or resignation from one role Correct answer.
  3. Continue on both boards but abstain from voting at one company only
  4. Resign from both boards immediately

Explanation

Conflicting loyalties must be disclosed promptly and managed transparently, typically through recusal from relevant discussions and, where the conflict is entrenched, resignation from one position. Concealment is never acceptable. Abstaining at only one company leaves the other conflict unaddressed.

Question 13Governance and Boardroom Practice

Which factor most undermines the credibility of a board's evaluation of its own performance?

  1. Comparing results against prior years
  2. Using a structured questionnaire
  3. Allowing the chair to select only favourable respondents Correct answer.
  4. Facilitating the review externally

Explanation

Credibility depends on the evaluation gathering candid input from the whole board and being conducted with appropriate independence. Selective sampling produces a flattering but unreliable picture. Structured tools, external facilitation, and year-on-year comparison all strengthen rather than weaken credibility.

Question 14Governance and Boardroom Practice

A nomination committee is refreshing the board. Which approach best aligns with good governance?

  1. Filling vacancies as quickly as possible with the first available candidate
  2. Prioritising candidates who have served longest on other boards
  3. Recruiting exclusively from the chief executive's personal network
  4. Defining the skills, experience, and diversity profile needed before searching Correct answer.

Explanation

Effective board renewal starts with a role specification derived from strategy and a skills matrix, then a broad search against that specification. Relying on personal networks or speed risks narrowing diversity and missing capability gaps. Long tenure elsewhere is not itself a qualification.

Question 15Governance and Boardroom Practice

What is the main governance rationale for publishing a board skills matrix?

  1. To demonstrate to stakeholders how board composition matches strategy and oversight needs Correct answer.
  2. To guarantee that all directors are independent
  3. To disclose individual director remuneration
  4. To replace the need for a nomination committee

Explanation

A published skills matrix gives stakeholders visibility of the capabilities represented on the board and how gaps are being addressed. It supports accountability for board renewal. It does not disclose pay, substitute for a committee, or certify independence.

Question 16Governance and Boardroom Practice

A board receives a whistleblower report alleging senior management misconduct. Which response best reflects sound governance?

  1. Filing it without review because it is anonymous
  2. Discussing it informally with the chief executive only
  3. Referring the matter to the accused manager for internal resolution
  4. Routing it through the audit committee or an independent channel with documented escalation Correct answer.

Explanation

Serious allegations touching senior management require an independent, documented escalation route, often through the audit committee or an external reporting line. The accused should not control the investigation. Anonymous reports still warrant proportionate assessment.

Question 17Governance and Boardroom Practice

Which statement best captures the board's role in risk oversight?

  1. The board should delegate all risk oversight to the external auditor
  2. The board should personally approve every operational risk decision
  3. The board should set the risk appetite and oversee the framework while management manages risks day to day Correct answer.
  4. The board should focus exclusively on financial risk

Explanation

The board sets the risk appetite and satisfies itself that a sound framework is in operation, while management owns day-to-day risk taking and mitigation. Board involvement in every operational decision blurs accountability. Risk oversight spans strategic, operational, compliance, and financial risk.

Question 18Governance and Boardroom Practice

A director is appointed for the first time. Which induction activity most directly supports effective contribution?

  1. Reviewing the director fee schedule
  2. Attending a general industry conference
  3. A structured programme covering strategy, finances, risk, and governance with access to management Correct answer.
  4. Receiving a copy of the last annual report only

Explanation

Induction should give new directors the context and relationships needed to challenge and contribute, covering strategy, financial position, risk profile, and governance arrangements. A structured programme with management access is more effective than isolated documents or events. Fee schedules are irrelevant to capability.

Question 19Governance and Boardroom Practice

Under a typical unitary board structure, which statement correctly describes the relationship between the board and shareholders?

  1. The board may ignore shareholder resolutions on governance matters
  2. The board is accountable only to the chief executive
  3. The board is accountable to shareholders and reports to them at general meetings Correct answer.
  4. The board must obtain shareholder approval for routine operational decisions

Explanation

In a unitary structure the board is accountable to shareholders, who exercise rights through general meetings and voting. Directors cannot disregard valid shareholder resolutions within their remit. Routine operational decisions sit with management and the board, not shareholders.

Question 20Governance and Boardroom Practice

Which feature most clearly distinguishes a well-designed delegated authority schedule?

  1. It duplicates the full board charter verbatim
  2. It lists every employee by name
  3. It sets financial and decision thresholds with the accountable role for each Correct answer.
  4. It is reviewed only when a director resigns

Explanation

A delegated authority schedule translates the board charter into practical thresholds, specifying who may approve what up to defined limits. This enables timely decisions while preserving escalation for material matters. Naming individuals, rare review, or mere duplication of the charter would defeat its purpose.

Question 21Governance and Boardroom Practice

A board is considering a major acquisition that would transform the company's risk profile. Which governance process is most appropriate?

  1. Deferring entirely to the chief executive's judgement
  2. Approving the deal subject to ratification at the next annual general meeting
  3. Commissioning independent due diligence and structured challenge before a decision Correct answer.
  4. Approving the deal at a single meeting based on a management presentation

Explanation

Transformational transactions warrant independent diligence, clear articulation of strategic rationale, and structured board challenge before approval. Relying on a single management presentation or on one executive's judgement concentrates risk. Shareholder ratification is not a substitute for proper board deliberation.

Question 22Governance and Boardroom Practice

A long-serving director argues that familiarity with the business justifies indefinite tenure. Which governance concern is most directly relevant?

  1. Increased audit fees
  2. Excessive shareholder turnout
  3. Reduced need for board evaluation
  4. Declining independence and reduced fresh perspective Correct answer.

Explanation

Very long tenure can erode the independence of mind and fresh perspective that effective oversight requires, even where the director remains personally objective. Many codes therefore treat extended tenure as a factor to disclose and consider. Audit fees, turnout, and evaluation are unrelated to the tenure concern.

Question 23Governance and Boardroom Practice

A board committee exceeds its terms of reference by committing the company to a transaction reserved for the full board. What is the most accurate governance characterisation?

  1. A matter solely for the external auditor to resolve
  2. A decision automatically ratified by the passage of time
  3. An unauthorised decision that should be reported and remedied by the full board Correct answer.
  4. A valid decision because the committee acted in good faith

Explanation

Committees derive authority only from their terms of reference and any valid delegation; acting beyond them is unauthorised. The matter should be escalated to the full board, which can ratify, reverse, or remedy it as appropriate. Good faith alone does not cure the absence of authority.

Question 24Governance and Boardroom Practice

Which situation most clearly indicates that a board's risk appetite statement is failing in practice?

  1. Business units regularly take risks that exceed the stated tolerances without escalation Correct answer.
  2. Management routinely seeks board approval for decisions near the stated thresholds
  3. The board reviews the statement annually
  4. The statement is expressed in both qualitative and quantitative terms

Explanation

A risk appetite statement only has value if it actually constrains and guides behaviour. Frequent unescalated breaches show the statement is disconnected from operations and that monitoring or culture is weak. Threshold-based escalation, annual review, and mixed metrics are all signs of a functioning framework.

Question 25Governance and Boardroom Practice

A board discovers that a director failed to disclose a personal interest in a supplier before a procurement decision. Which combination best reflects the appropriate governance response?

  1. Remove the director from the board without any process
  2. Ignore the omission because the decision was commercially sound
  3. Refer the matter solely to the supplier for resolution
  4. Investigate, review the decision's validity, and reinforce disclosure controls and culture Correct answer.

Explanation

Undisclosed interests compromise the integrity of the decision regardless of commercial outcome, so the board should investigate, assess whether the decision must be revisited, and strengthen disclosure processes. Summary removal without process risks unfairness and legal challenge. Suppliers have no role in resolving director duties.

Question 26Governance and Boardroom Practice

Which document typically sets out the division of responsibilities between a board chairman and a chief executive in a listed company?

  1. The external audit engagement letter
  2. The board charter or role-separation statement Correct answer.
  3. The shareholder rights plan
  4. The schedule of matters reserved for the board

Explanation

Governance codes generally require the division of responsibilities between the chair and the chief executive to be clearly established, set out in writing, and agreed by the board. This is usually captured in a board charter or a dedicated role-separation statement. The matters reserved schedule allocates decisions between board and management, not between two officeholders.

Question 27Governance and Boardroom Practice

A board wants to ensure independent directors can raise concerns that are not being addressed by executive management. Which mechanism most directly achieves this?

  1. Publishing the board meeting attendance record
  2. Rotating the external audit firm every five years
  3. Increasing director fees to attract stronger candidates
  4. Holding regular sessions of independent directors without executives present Correct answer.

Explanation

Private sessions of independent or non-executive directors, without management present, give them a safe forum to test concerns and align before raising them formally. Governance codes commonly recommend such meetings as a check on executive dominance of board discussion. The other options affect incentives, transparency, or audit independence rather than providing a private channel.

Question 28Governance and Boardroom Practice

A board is establishing an audit committee. Which composition requirement is most consistent with widely accepted governance standards?

  1. The chief executive as a member to ensure alignment with strategy
  2. A majority of executive directors plus the finance director as chair
  3. Entirely composed of independent non-executive directors with a chair independent of the company Correct answer.
  4. Any three directors provided at least one has accounting experience

Explanation

Good practice requires the audit committee to be composed of independent non-executive directors, with at least one member having recent and relevant financial experience. Including executives, especially the chief executive or finance director, compromises the committee's ability to scrutinise management. Independence of the committee chair from the company is also expected so that oversight is not self-reviewed.

Question 29Governance and Boardroom Practice

A board is designing its annual agenda. Which practice best ensures adequate time is devoted to strategy rather than being crowded out by compliance items?

  1. Allowing the agenda to be set reactively by whatever issues arise each month
  2. Scheduling dedicated strategy sessions and reserving agenda slots for forward-looking items at the start of the year Correct answer.
  3. Limiting board papers to one page per item to save reading time
  4. Delegating all strategy discussion to the executive committee

Explanation

Boards commonly lose strategic time to routine compliance and reporting items unless strategy is deliberately protected in the annual agenda. Pre-scheduling dedicated sessions and reserving forward-looking slots ensures the board discharges its direction-setting role. Reactive agendas and full delegation of strategy to management leave the board in a purely retrospective posture.

Question 30Governance and Boardroom Practice

Which statement best describes the fiduciary duty of loyalty owed by a director?

  1. A duty to prioritise the interests of employees over all other stakeholders
  2. A duty to maximise the share price in every reporting period
  3. A duty to act in the best interests of the company as a whole rather than in the director's own or a faction's interest Correct answer.
  4. A duty to follow the instructions of the largest shareholder in all votes

Explanation

The duty of loyalty requires a director to act in good faith in the best interests of the company, treating the company's interest as distinct from personal, factional, or single-constituency interests. It does not mean maximising short-term share price or obeying a dominant shareholder. Where a conflict arises, the director must manage or disclose it rather than subordinate the company's interest.

Question 31Governance and Boardroom Practice

A board is reviewing a proposal from management to enter a new market. The independent directors have limited expertise in that market. Which action best supports sound decision-making?

  1. Requesting independent market analysis and a staged entry plan with defined review points before committing Correct answer.
  2. Approving the proposal quickly to avoid losing first-mover advantage
  3. Approving on condition that the chief executive accepts personal liability for losses
  4. Deferring entirely to the chief executive's judgement given their operational knowledge

Explanation

Where the board lacks expertise, good governance calls for obtaining independent evidence and structuring commitment in stages so the board can reassess at defined gates. This preserves independent judgement and limits downside exposure. Rushing, full deference, or shifting liability to an executive does not substitute for informed board decision-making.

Question 32Governance and Boardroom Practice

Which of the following best describes the purpose of a board's conflict-of-interest register?

  1. To document the board's performance against its annual budget
  2. To identify and manage situations where a director's personal interests could conflict with the company's interests Correct answer.
  3. To record directors' trading in company shares for market disclosure
  4. To list the external advisers engaged by the board

Explanation

A conflict-of-interest register records declared interests and the management steps taken, so that conflicts can be identified early and handled transparently. It supports the duty to avoid or manage conflicts rather than merely disclosing them after the event. Share trading records, budget performance, and adviser lists serve different governance purposes.

Question 33Governance and Boardroom Practice

A board is deciding how much authority to delegate to a newly formed risk committee. Which principle should guide the design of its terms of reference?

  1. The committee should advise and monitor within defined limits, with decisions reserved to the full board specified explicitly Correct answer.
  2. The committee should be chaired by the chief risk officer to ensure technical expertise
  3. The committee should have unlimited authority to bind the company in any transaction
  4. The committee should replace the board's role in setting risk appetite

Explanation

Delegation to a committee must be bounded by clear terms of reference that state what the committee may decide and what remains reserved to the full board. Committees support the board; they do not displace its ultimate responsibility for risk appetite. Chairing by an executive would also compromise the committee's independent oversight.

Question 34Governance and Boardroom Practice

Which statement best explains why boards are encouraged to hold an annual general meeting open to shareholders?

  1. It allows the board to bypass the need for written resolutions
  2. It provides a forum for shareholder accountability and direct questioning of the board Correct answer.
  3. It is required to approve the company's internal audit plan
  4. It transfers decision-making authority from the board to shareholders

Explanation

The annual general meeting is a key accountability mechanism, giving shareholders the opportunity to receive reports, vote on resolutions, and question the board directly. It does not transfer general decision-making authority, which remains with the board subject to reserved shareholder matters. Internal audit plans and written resolutions are unrelated to the meeting's purpose.

Question 35Governance and Boardroom Practice

A board is assessing whether its chair is effective. Which indicator most reliably signals a well-functioning chair?

  1. The chair votes last on every resolution to signal direction
  2. All directors contribute in discussions and decisions are reached after genuine debate Correct answer.
  3. The chair personally drafts all board papers
  4. Board meetings finish ahead of schedule every time

Explanation

An effective chair ensures all directors, including quieter or independent voices, are heard and that decisions follow genuine debate rather than being rushed or steered. This supports independent judgement and collective decision-making. Meeting efficiency, signalling a vote, or drafting papers are not reliable measures of chair effectiveness.

Question 36Governance and Boardroom Practice

Which arrangement best supports the independence of a board's internal audit function?

  1. The internal audit function is outsourced to the external auditor
  2. The internal audit plan is set by operational management without committee review
  3. The head of internal audit reports solely to the chief executive
  4. The head of internal audit reports administratively to the finance director and functionally to the audit committee Correct answer.

Explanation

Good practice gives the head of internal audit a dual reporting line: administrative reporting to an executive for day-to-day matters and functional reporting to the audit committee for independence and escalation. This allows concerns to reach independent directors without management filtering. Reporting solely to executives or outsourcing to the external auditor compromises objectivity.

Question 37Governance and Boardroom Practice

A director who is also a partner in a firm providing consultancy services to the company is asked to join the audit committee. What is the most appropriate governance response?

  1. Appoint the director, since consultancy fees are immaterial
  2. Appoint the director but ask them to leave the room during fee discussions
  3. Decline the appointment because the relationship compromises independence Correct answer.
  4. Appoint the director and disclose the relationship only in the annual report

Explanation

A material professional relationship with the company undermines the independence required of audit committee members, because the director's firm benefits from fees the committee oversees. Good governance therefore prevents such an appointment rather than relying on recusal or later disclosure. Disclosure alone does not cure the underlying conflict.

Question 38Governance and Boardroom Practice

Which practice best aligns a board's remuneration approach with long-term shareholder interests?

  1. Structuring incentives with multi-year performance periods and shareholding requirements Correct answer.
  2. Setting bonuses solely on annual profit targets
  3. Benchmarking pay to the highest-paying peer regardless of performance
  4. Allowing executives to set their own performance targets

Explanation

Remuneration design should link reward to sustained performance over multi-year periods and align executives with shareholders through shareholding requirements or deferred equity. Annual-only profit targets and peer-leader benchmarking can encourage short-termism or pay inflation unrelated to performance. Executives setting their own targets undermines the independence of the remuneration process.

Question 39Governance and Boardroom Practice

A board is considering whether to appoint a director with no prior board experience but deep industry expertise. Which argument best reflects good governance thinking on board composition?

  1. Industry expertise alone is sufficient because sector knowledge determines board quality
  2. The appointment should be assessed against the board skills matrix and diversity needs, with induction and support provided Correct answer.
  3. First-time directors should never be appointed to listed company boards
  4. Appointment should be made to reward long service to the company

Explanation

Board composition should be driven by an assessment of the skills, experience, and diversity the board needs, as captured in a skills matrix, rather than by a single attribute. First-time directors can add value if given proper induction, mentoring, and support. Neither excluding them outright nor appointing on tenure grounds reflects good practice.

Question 40Governance and Boardroom Practice

Which of the following best describes the board's responsibility for the company's system of internal control?

  1. The board must personally test every control in operation
  2. The board reviews internal control only when a fraud has occurred
  3. The board delegates all responsibility for internal control to the external auditor
  4. The board sets the framework and appetite, and monitors through assurance from management and internal audit Correct answer.

Explanation

The board is responsible for establishing and maintaining the system of internal control and for setting the risk appetite within which it operates, while relying on management and assurance providers to operate and test controls. It does not personally test controls or delegate responsibility to the external auditor. Review should be continuous, not triggered only by incidents.

Question 41Company Law and Regulatory Compliance

Under the Companies Act 2013, which document sets out the internal rules and regulations governing the management of a company?

  1. The Articles of Association Correct answer.
  2. The annual return
  3. The prospectus
  4. The Memorandum of Association

Explanation

The Articles of Association contain the internal regulations that govern how the company is managed, including rules on meetings, directors, and share transfers. The Memorandum governs the company's relationship with the outside world and defines its scope of activity.

Question 42Company Law and Regulatory Compliance

A public company wishes to issue shares to a select group of investors without a public offer. Which provision of the Companies Act 2013 primarily governs such preferential allotment?

  1. Section 62 dealing with rights issue
  2. Section 23 dealing with public offer
  3. Section 68 dealing with buy-back
  4. Section 42 dealing with private placement Correct answer.

Explanation

Section 42 regulates private placement, requiring the company to make offers only to identified persons, maintain records, and comply with valuation and filing requirements. A preferential allotment to select investors is governed by this private placement framework.

Question 43Company Law and Regulatory Compliance

Which of the following is a statutory duty of an auditor appointed under the Companies Act 2013?

  1. To approve the board's dividend recommendation
  2. To prepare the company's financial statements
  3. To report on the accounts examined and make prescribed disclosures Correct answer.
  4. To manage the company's internal controls

Explanation

The auditor's statutory function is to examine the books of account and report to members on whether the financial statements give a true and fair view, with prescribed disclosures. Preparation of financial statements and maintenance of internal controls remain management responsibilities.

Question 44Company Law and Regulatory Compliance

Under the Companies Act 2013, what is the minimum number of members required to form a public company?

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

Explanation

A public company must be formed by at least seven persons who subscribe their names to the memorandum. A private company requires two members, and a one person company requires one.

Question 45Company Law and Regulatory Compliance

Which body is responsible for administering the Insolvency and Bankruptcy Code in relation to corporate insolvency resolution?

  1. The Insolvency and Bankruptcy Board of India Correct answer.
  2. The Competition Commission of India
  3. The Reserve Bank of India
  4. The Securities and Exchange Board of India

Explanation

The Insolvency and Bankruptcy Board of India is the regulator established under the Code to oversee insolvency professionals, agencies, and information utilities. It frames regulations and supervises the corporate resolution ecosystem.

Question 46Company Law and Regulatory Compliance

A company's board must meet at a minimum frequency. Under the Companies Act 2013, how often must the board meet?

  1. At least once in every six months
  2. At least once every two months
  3. At least once every financial year
  4. At least once in every calendar quarter Correct answer.

Explanation

The board of directors must meet at least once in every calendar quarter, with a maximum gap of one hundred and twenty days between two consecutive meetings. This balances oversight continuity with practical scheduling.

Question 47Company Law and Regulatory Compliance

Which of the following persons is disqualified from being appointed as a director of a company?

  1. A person holding a professional degree
  2. A person resident outside India
  3. An undischarged insolvent Correct answer.
  4. A person who is a director in more than twenty companies

Explanation

An undischarged insolvent is expressly disqualified from being appointed as a director under the Companies Act 2013. Other categories such as non-resident persons or professionally qualified individuals are not automatically disqualified.

Question 48Company Law and Regulatory Compliance

What is the primary purpose of a company's memorandum of association?

  1. To define the company's constitution and its relationship with the outside world Correct answer.
  2. To list the company's employees and their designations
  3. To specify the internal borrowing limits of the company
  4. To record the minutes of board meetings

Explanation

The memorandum is the charter that establishes the company, defines its name, objects, liability, and capital, and governs its external relations. It sets the outer boundary of what the company may lawfully do.

Question 49Company Law and Regulatory Compliance

A private company wants to accept deposits from its members. Which framework under the Companies Act 2013 and related rules primarily applies?

  1. The Insolvency and Bankruptcy Code
  2. The SEBI takeover regulations
  3. The Foreign Exchange Management Act
  4. The deposit rules framed under Chapter V, read with the Companies (Acceptance of Deposits) Rules Correct answer.

Explanation

Acceptance of deposits is regulated by Chapter V of the Companies Act 2013 and the Companies (Acceptance of Deposits) Rules, which prescribe limits, forms, and repayment conditions. These rules apply to eligible companies including private companies accepting member deposits.

Question 50Company Law and Regulatory Compliance

A company proposes to give a loan to a person in whom one of its directors is interested. Which requirement is most directly triggered under the Companies Act 2013?

  1. Mandatory approval of the Reserve Bank of India
  2. Automatic exemption because the loan is to a related person
  3. Approval by the Registrar of Companies before disbursement
  4. Prior approval of the board by a resolution passed at a board meeting, with disclosure of interest Correct answer.

Explanation

Loans to persons in whom a director is interested require board approval by resolution at a meeting, with the interested director disclosing the nature of interest and abstaining. Certain loans also require prior approval of members by special resolution.