CS Executive Company Law common mistakes
CS Executive Company Law · Understand the traps and how to avoid them.
Applying the Companies Act's numerical thresholds (number of members for a private company, minimum directors, quorum, notice periods) without checking the proviso or the notification threshold, then answering from the default figure alone.
Candidates memorise the headline number and stop reading at the first comma; the Act routinely attaches provisos and separate thresholds for small companies, private companies, and one-person companies, and the exam tests the exception rather than the rule.
What to do instead
For every threshold you learn, build a two-column note: default figure and the exceptions/provisos with the section number. When a question states the company type, re-derive the answer from the exception column before selecting an option.
Treating the memorandum and the articles as interchangeable, and answering alteration questions with the wrong special-resolution or central-government-approval requirement.
Both documents are altered by members and both are filed, so the procedural steps blur; candidates also forget that the memorandum's alteration rules differ clause by clause (name, object, registered office, capital, liability).
What to do instead
Make a clause-by-clause table of the memorandum (name, registered office, object, liability, capital) showing the mode of alteration and any approval needed, and keep it strictly separate from the articles table (special resolution, entrenchment, retrospective effect).
Concluding that an act beyond the objects is void and therefore that the company cannot be wound up, that directors escape liability, or that the transaction cannot be ratified by unanimous shareholders.
The ultra vires label is learned as a single verdict, so candidates import the wrong legal consequences and miss the settled positions on injunctions, personal liability of directors, and the limits of shareholder ratification.
What to do instead
Learn ultra vires as a bundle: effect on the transaction, remedies available to members, liability of directors and officers, and what ratification can and cannot cure. Practise writing the four consequences together so the answer is never a one-line verdict.
Answering share capital questions by mixing up authorised, issued, subscribed, paid-up and called-up capital, and computing calls, forfeiture or rights-issue entitlements from the wrong base figure.
The terms appear together in balance-sheet style questions, and candidates latch onto the largest number (authorised) as the operative figure for calculations and for the limits on further issue.
What to do instead
Before any calculation, write the five capital figures in a header line and mark which one the question actually governs. For rights issues and calls, use issued and paid-up capital respectively, and check the article's lien and forfeiture provisions before computing.
Treating every director as a trustee of company property and money, and applying trustee-level liability to negligence or to the company's own funds.
The fiduciary language in textbooks invites the trust analogy, but the Act and case law distinguish directors as agents and fiduciary officers from strict trustees, and the standard of care is separate from the duty of loyalty.
What to do instead
Keep a short note distinguishing director from trustee and from agent, listing the duties (good faith, care and diligence, independent judgment, no conflict) and the specific statutory liabilities. Test each fact pattern against the duty actually engaged.
Confusing the resolutions required for different meeting outcomes: ordinary versus special versus special-with-approval, and the notice periods for AGM, EGM, and short notice.
The percentages (simple majority, three-fourths, and the various special-majority thresholds) and the notice periods (21 clear days for AGM, 15 days for general meetings, shorter with consent) are learned as isolated numbers and then cross-applied under exam pressure.
What to do instead
Build a resolution matrix: resolution type, majority required, notice period, consent needed for short notice, and whether postal ballot or e-voting applies. Recite the matrix before attempting any meeting question, and verify the company type and listing status first.
Answering dividend questions using the declared rate rather than the free reserves and profits test, and ignoring the transfer-to-reserves rule and the consequence of declaring a dividend from capital.
Candidates treat dividend as a board discretion question and forget that the Act imposes source-of-payment rules, reserve-transfer conditions, and a separate regime for interim dividends and unpaid dividend accounts.
What to do instead
Learn dividend as a three-step test: source of profits and free reserves, mandatory transfer where applicable, and the timelines for payment, unpaid dividend account and transfer to the investor fund. Apply the test step by step before choosing a rate or a consequence.
Assuming every charge must be registered and that registration cures the defect, without distinguishing the categories of charge, the 30-day filing window, and the effect of non-registration on the creditor versus the company.
The registration requirement is taught as a blanket rule, so candidates miss that certain charges are exempt, that the registrar's power to condone delay is time-bound, and that non-registration affects enforceability against the liquidator and creditors rather than voiding the charge outright.
What to do instead
Make a charge table: instrument creating the charge, whether registration is compulsory, filing period with the additional period for condonation, and the legal effect of default on the company, the charge-holder and the liquidator. Answer from the table, not from memory.
Conflating compromise, arrangement, amalgamation and winding up, and applying the winding-up grounds or the tribunal's powers to a scheme question (or vice versa).
The chapters sit adjacent in the syllabus and share procedural words such as 'meeting', 'tribunal' and 'order', so candidates transfer the wrong procedure and the wrong majority requirement across topics.
What to do instead
Write a one-page comparison of the four routes: initiating authority, requisite member/creditor approval, role of the tribunal, effect on the company's existence, and the remedy for dissenters. Use it to classify the fact pattern before answering.
Ignoring the distinction between a promoter's pre-incorporation contract and a post-incorporation contract, and asserting that the company is automatically bound once incorporated.
Corporate personality is learned as a single moment of birth, so candidates assume the company inherits the promoter's obligations and forget the adoption/novation requirement and the promoter's personal liability.
What to do instead
For each pre-incorporation fact pattern, state three things explicitly: the company is not bound unless it adopts the contract, the promoter remains personally liable unless released, and the adoption must be by a competent act of the company. Then apply the same test to the promoter's fiduciary duties.