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SSM Licensed Secretary practice questions

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Question 1Company Law and the Companies Act 2016

Under the Companies Act 2016, what is the maximum number of shareholders counted towards a private company's statutory limit?

  1. 100
  2. 20
  3. 50 Correct answer.
  4. Unlimited

Explanation

Section 42 of the Companies Act 2016 limits a private company to 50 counted shareholders. Joint holders are counted as one, and qualifying employee and former-employee shareholders are excluded from the count. These counting rules qualify the limit; they do not abolish it.

Question 2Company Law and the Companies Act 2016

A company wishes to convert from private to public status. Which step is required under the Companies Act 2016?

  1. Obtain the Minister's prior written approval
  2. Increase paid-up capital to at least RM50 million
  3. Pass a special resolution and lodge the prescribed form with the Registrar Correct answer.
  4. Publish a notice in two national newspapers

Explanation

Conversion from private to public status requires a special resolution of the members and lodgment of the prescribed conversion form with the Registrar. The Registrar then issues a notice of conversion. Ministerial approval and newspaper publication are not statutory prerequisites.

Question 3Company Law and the Companies Act 2016

Which body is responsible for the internal management of a company under the Companies Act 2016?

  1. The audit committee
  2. The company secretary
  3. The general meeting of members
  4. The board of directors Correct answer.

Explanation

Section 211 of the Companies Act 2016 vests the business and affairs of a company in the board of directors. The board may exercise all powers not required to be exercised by members in general meeting. The company secretary and audit committee perform oversight or administrative functions, not general management.

Question 4Company Law and the Companies Act 2016

A director of a Malaysian private company wants to appoint a proxy to attend and vote at a general meeting. Which statement reflects the position under the Companies Act 2016?

  1. A proxy may be appointed and the instrument must be deposited at the registered office before the meeting Correct answer.
  2. A proxy must be a member of the company
  3. A proxy may be appointed only by a member holding at least 5% of shares
  4. Proxies are permitted only if the constitution expressly allows them

Explanation

Section 334 of the Companies Act 2016 entitles a member to appoint a proxy, and the instrument of proxy must be deposited at the registered office or another place specified in the notice before the meeting. The right is statutory and does not depend on the constitution. A proxy need not be a member.

Question 5Company Law and the Companies Act 2016

What is the minimum number of directors required for a private company under the Companies Act 2016?

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

Explanation

Section 196 of the Companies Act 2016 permits a private company to have a minimum of one director. A public company must have at least two directors. The other numbers exceed the statutory minimum for a private company.

Question 6Company Law and the Companies Act 2016

A public company director resigns. When does the resignation take effect under the Companies Act 2016?

  1. Only after the company appoints a replacement director
  2. Upon the Registrar issuing a notice of cessation
  3. Upon the company receiving the director's written notice of resignation Correct answer.
  4. Immediately upon the board accepting the resignation

Explanation

Section 208 of the Companies Act 2016 provides that a director may resign by giving written notice to the company, and the resignation takes effect on the date the company receives the notice or a later date specified in it. Board acceptance is not required. The company must then notify the Registrar within the prescribed period.

Question 7Company Law and the Companies Act 2016

Which of the following is a statutory duty of a company secretary under the Companies Act 2016?

  1. To represent the company in court proceedings
  2. To audit the company's annual financial statements
  3. To maintain the register of members and other statutory registers Correct answer.
  4. To approve the company's business plan

Explanation

Section 236 of the Companies Act 2016 requires a company secretary to maintain the statutory registers, including the register of members, and to perform other functions prescribed by the Act. Auditing, approving business plans, and litigation representation are not statutory duties of the secretary.

Question 8Company Law and the Companies Act 2016

How many days before a general meeting must a private company give notice to members under the Companies Act 2016?

  1. 14 days Correct answer.
  2. 28 days
  3. 7 days
  4. 21 days

Explanation

Section 316 of the Companies Act 2016 requires at least 14 days' notice for a general meeting of a private company. For a public company, the minimum is 21 days. The shorter and longer periods stated in the other options do not reflect the statutory default for private companies.

Question 9Company Law and the Companies Act 2016

A company's constitution contains a provision that conflicts with a mandatory requirement of the Companies Act 2016. What is the effect?

  1. The provision is valid if all members agree to it
  2. The constitution prevails because it is a contract between the company and its members
  3. The provision remains valid until the Registrar orders an amendment
  4. The provision is void to the extent of the inconsistency Correct answer.

Explanation

Section 32 of the Companies Act 2016 provides that a constitution is void to the extent that it is inconsistent with the Act. Mandatory statutory provisions cannot be overridden by member agreement. The Registrar does not need to issue an order for the inconsistency to be ineffective.

Question 10Company Law and the Companies Act 2016

A director of a public company has not attended any board meeting for six months without leave. What is the consequence under the Companies Act 2016?

  1. The director must pay a fine to the Registrar
  2. The director is automatically disqualified for five years
  3. The director is suspended until the next annual general meeting
  4. The director's office becomes vacant Correct answer.

Explanation

Section 208 of the Companies Act 2016 provides that the office of a director becomes vacant if the director is absent from board meetings for six months without leave. The vacation of office is automatic. It does not create a five-year disqualification or a fine.

Question 11Company Law and the Companies Act 2016

Which statement best describes the liability of members of a company limited by shares under the Companies Act 2016?

  1. Members are liable only if they are also directors
  2. Members are personally liable for all company debts
  3. Members have no liability whatsoever in any circumstances
  4. Members are liable for the company's debts to the extent of their unpaid shares Correct answer.

Explanation

In a company limited by shares, a member's liability is limited to any amount unpaid on the shares held. Once shares are fully paid, the member has no further liability for company debts. Unlimited personal liability applies to unlimited companies, not companies limited by shares.

Question 12Company Law and the Companies Act 2016

A company proposes to reduce its share capital. Which procedure is available under the Companies Act 2016?

  1. A unanimous written resolution of members only
  2. A simple board resolution followed by lodgment with the Registrar
  3. Court approval in every case without member approval
  4. A special resolution plus solvency statement and lodgment with the Registrar Correct answer.

Explanation

Section 117 of the Companies Act 2016 permits a share capital reduction by special resolution supported by a solvency statement, followed by lodgment with the Registrar and notice to creditors. Court confirmation is no longer the default route. A board resolution alone is insufficient.

Question 13Company Law and the Companies Act 2016

Under the Companies Act 2016, within how many days must a company lodge a notice of change of its registered office address with the Registrar?

  1. 14 days Correct answer.
  2. 7 days
  3. 30 days
  4. 60 days

Explanation

Section 46 of the Companies Act 2016 requires a company to lodge notice of a change of registered office within 14 days of the change. The change takes effect on the date stated in the notice. The other periods do not reflect the statutory deadline.

Question 14Company Law and the Companies Act 2016

A company wishes to remove an auditor before the expiry of the auditor's term. What is required under the Companies Act 2016?

  1. An application to the Minister
  2. A board resolution and written notice to the auditor
  3. The auditor's written consent to the removal
  4. A special resolution of members and notice to the auditor Correct answer.

Explanation

Section 276 of the Companies Act 2016 allows an auditor to be removed before the end of the term only by special resolution of the members. The auditor must be given notice and an opportunity to make representations. Board resolution or ministerial approval is not sufficient.

Question 15Company Law and the Companies Act 2016

Which of the following statements about a company's common seal under the Companies Act 2016 is correct?

  1. A common seal must be kept at the Registrar's office
  2. Every company must have a common seal
  3. A company may execute documents without a common seal if authorised by its constitution or the Act Correct answer.
  4. A common seal is required only for public companies

Explanation

The Companies Act 2016 makes the common seal optional. A company may execute documents by other means, such as signature of authorised officers, if permitted by its constitution or the Act. The seal is not mandatory for any company type and is not kept at the Registrar's office.

Question 16Company Law and the Companies Act 2016

A director is also a substantial shareholder of the company. What disclosure obligation applies under the Companies Act 2016?

  1. The director must disclose the nature and extent of the interest at a board meeting Correct answer.
  2. The director must transfer the shares to a nominee
  3. The director must resign from the board
  4. The director must obtain the Registrar's approval before voting

Explanation

Section 221 of the Companies Act 2016 requires a director with a direct or indirect interest in a transaction to disclose the nature and extent of that interest at a board meeting. The interested director must not vote on the matter. Resignation, share transfer, or Registrar approval is not required.

Question 17Company Law and the Companies Act 2016

Which statement accurately describes the role of the Registrar of Companies under the Companies Act 2016?

  1. The Registrar investigates all companies annually
  2. The Registrar administers the Act and maintains the register of companies Correct answer.
  3. The Registrar adjudicates disputes between shareholders
  4. The Registrar approves every contract entered into by a company

Explanation

The Registrar administers the Companies Act 2016, maintains the register of companies, and performs functions conferred by the Act. The Registrar does not investigate every company annually, adjudicate shareholder disputes, or approve commercial contracts. Those functions belong to other bodies or the courts.

Question 18Company Law and the Companies Act 2016

A private company has only one director who is also the sole shareholder. What is the position regarding the requirement for a company secretary?

  1. A company secretary must be appointed, and the sole director may also be appointed if qualified Correct answer.
  2. No company secretary is required because there is only one director
  3. The company must appoint two company secretaries
  4. The director may act as company secretary without any qualification

Explanation

Section 235 of the Companies Act 2016 requires every company to appoint a company secretary. A sole director may also hold the office of secretary if the director meets the qualification requirements. The Act does not dispense with the secretary for single-member companies.

Question 19Company Law and the Companies Act 2016

Which of the following is a ground on which the court may order the winding up of a company under the Companies Act 2016?

  1. The company has only one director
  2. The company has changed its registered office without approval
  3. The company is unable to pay its debts Correct answer.
  4. The company has failed to hold an annual general meeting for two years

Explanation

Section 465 of the Companies Act 2016 lists inability to pay debts as a ground for winding up by the court. Failure to hold an AGM, a change of registered office, or having only one director does not by itself constitute a winding-up ground. Those matters may attract other consequences.

Question 20Company Law and the Companies Act 2016

A company's articles provide that a director may be removed only by a unanimous vote of all members. How does this interact with the Companies Act 2016?

  1. The provision is void because the statutory removal right cannot be excluded Correct answer.
  2. The provision is valid only if approved by the Registrar
  3. The provision is valid for private companies but not public companies
  4. The provision is valid because the constitution governs director removal

Explanation

Section 206 of the Companies Act 2016 gives members the right to remove a director by ordinary resolution. That right is mandatory and cannot be excluded or restricted by the constitution. A provision requiring unanimity is therefore void to that extent.

Question 21Company Law and the Companies Act 2016

A director of a company is also a director of a competing business. Which duty is most directly engaged under the Companies Act 2016?

  1. The duty to appoint an auditor
  2. The duty to act in the best interests of the company and avoid conflicts of interest Correct answer.
  3. The duty to file annual returns on time
  4. The duty to maintain the register of members

Explanation

Section 213 of the Companies Act 2016 requires a director to act in the best interests of the company and to avoid conflicts of interest. Holding a competing directorship engages that duty. Filing returns, maintaining registers, and appointing auditors are functions of the secretary or members, not the director's fiduciary duty in this context.

Question 22Company Law and the Companies Act 2016

Which statement about the register of members under the Companies Act 2016 is correct?

  1. It may be destroyed after three years
  2. It must be open for inspection by members free of charge Correct answer.
  3. It must be audited annually
  4. It must be kept at the Registrar's office

Explanation

Section 51 of the Companies Act 2016 requires the register of members to be kept at the registered office or another place approved by the Registrar. Members are entitled to inspect it free of charge. It is not kept at the Registrar's office, destroyed after three years, or audited annually.

Question 23Company Law and the Companies Act 2016

A public company fails to appoint an auditor at its annual general meeting. What is the consequence under the Companies Act 2016?

  1. The company is automatically wound up
  2. The Registrar appoints an auditor without any application
  3. The existing auditor automatically continues until a new auditor is appointed Correct answer.
  4. The directors are personally liable for all company debts

Explanation

Section 271 of the Companies Act 2016 provides that if an auditor is not appointed at the annual general meeting, the existing auditor continues in office until a successor is appointed. The company does not face automatic winding up, personal director liability for debts, or a Registrar appointment without application.

Question 24Company Law and the Companies Act 2016

Which of the following best describes the effect of the Companies Act 2016 on the doctrine of ultra vires in relation to a company's capacity?

  1. A company has unlimited capacity and the ultra vires doctrine is abolished Correct answer.
  2. A company may act only with the prior approval of the Registrar
  3. A company's capacity is limited to the business stated in its name
  4. A company's capacity is limited to the objects stated in its constitution

Explanation

Section 21 of the Companies Act 2016 provides that a company has the legal capacity and powers of an individual, and the ultra vires doctrine is abolished. A company is not limited by objects in its constitution. Registrar approval and name-based limits do not restrict capacity.

Question 25Company Law and the Companies Act 2016

A member of a private company wants to inspect the minutes of general meetings. What is the position under the Companies Act 2016?

  1. Members have no right to inspect minutes
  2. Members may inspect minutes only after paying a prescribed fee to the Registrar
  3. Members may inspect minutes only with board approval
  4. Members may inspect minutes free of charge at the registered office Correct answer.

Explanation

Section 342 of the Companies Act 2016 requires minutes of general meetings to be kept and allows members to inspect them free of charge at the registered office. Board approval or a Registrar fee is not required. The right is statutory.

Question 26Company Law and the Companies Act 2016

Under the Companies Act 2016, a company is a body corporate whose members' liability is limited. What does this mean for a member holding fully paid shares when the company is wound up with unpaid debts?

  1. The member is liable only for any amount unpaid on the shares held, and nothing more Correct answer.
  2. The member must contribute towards the debts in proportion to the shares held
  3. The member's liability is limited to the amount of dividends received in the past year
  4. The member is personally liable for all debts incurred while holding the shares

Explanation

Section 192 provides that a member of a company limited by shares is liable to contribute only the amount unpaid on the shares held. Once shares are fully paid, no further contribution is required. Personal liability for company debts does not attach merely by reason of membership.

Question 27Company Law and the Companies Act 2016

A newly incorporated private company has adopted a constitution. Which statement about the effect of the constitution is correct under the Companies Act 2016?

  1. It binds the company and its members as if it were a contract between them Correct answer.
  2. It binds only the directors who signed it at incorporation
  3. It has effect only after being lodged with the Registrar for approval
  4. It is enforceable by third parties who deal with the company

Explanation

Section 33 provides that, once adopted, the constitution binds the company and its members to the same extent as if it had been signed and sealed by each of them and contained covenants on their part to observe it. It operates as a statutory contract among the company and its members.

Question 28Company Law and the Companies Act 2016

A company wishes to change its name. Which step is required under the Companies Act 2016 before the new name can be used?

  1. The company must pass a special resolution and obtain the Registrar's approval of the new name Correct answer.
  2. The company must obtain the approval of the Minister before any resolution is passed
  3. The company must pass an ordinary resolution and notify the Registrar after the change
  4. The board of directors may change the name by board resolution alone

Explanation

Section 28 requires a company to pass a special resolution to change its name and then lodge the resolution with the Registrar, who must approve the proposed name. The change takes effect on the date the Registrar issues the notice of approval.

Question 29Company Law and the Companies Act 2016

A private company wants to keep its financial statements and reports. For how long must it retain its accounting records under the Companies Act 2016?

  1. Five years after the records are audited
  2. Two years after the end of the financial year in which the records were made
  3. Seven years after the end of the financial year in which the records were made Correct answer.
  4. Ten years after the company is dissolved

Explanation

Section 245 requires a company to keep accounting and other records for seven years after the end of the financial year in which the records were made. The records must be kept in a manner enabling them to be conveniently and properly audited.

Question 30Company Law and the Companies Act 2016

A company has only one member who is also its sole director. Which statement about the conduct of its affairs is correct under the Companies Act 2016?

  1. The company must appoint a second director within twelve months of incorporation
  2. The sole member cannot exercise any power reserved to members in general meeting
  3. The company must still hold an annual general meeting with the single member attending in person
  4. The director may record in writing any decision that a general meeting could have taken, and the record is sufficient evidence Correct answer.

Explanation

Where a company has only one member, section 342 allows that member to record any decision that could have been taken at a general meeting in a written memorandum. A private company is also exempt from holding annual general meetings.

Question 31Company Law and the Companies Act 2016

Which statement about the register of directors, managers and secretaries that a company must keep is correct under the Companies Act 2016?

  1. It must be lodged with the Registrar monthly in its entirety
  2. It may be kept anywhere the board decides and need not be disclosed to members
  3. It may be destroyed once the directors' particulars are filed with the Registrar
  4. It must be kept at the registered office and be open to inspection by members free of charge Correct answer.

Explanation

Section 47 requires the company to keep a register of directors, managers and secretaries at its registered office, and section 49 allows members to inspect it without charge. The register is a continuing record and cannot be discarded after filing.

Question 32Company Law and the Companies Act 2016

A private company's board wants to allot new shares to a new investor. Which requirement applies under the Companies Act 2016?

  1. Only the existing shareholders may subscribe, and no new investor may be admitted
  2. The allotment requires a special resolution and court confirmation
  3. The directors must first obtain the prior approval of the members by ordinary resolution unless the constitution provides otherwise Correct answer.
  4. The directors may allot shares at their discretion without any member involvement in any case

Explanation

Section 75 requires directors to obtain the prior approval of members by ordinary resolution before allotting shares, unless the constitution permits otherwise. This protects members against dilution of their holdings.

Question 33Company Law and the Companies Act 2016

A member of a private company has been declared bankrupt. What is the position regarding that member's shares under the Companies Act 2016?

  1. The shares are automatically cancelled and the capital reduced accordingly
  2. The shares pass to the company, which must resell them within thirty days
  3. The member retains full voting rights despite the bankruptcy
  4. The shares vest in the Official Receiver or trustee, who may be registered as the holder upon producing proof of title Correct answer.

Explanation

On bankruptcy, a member's shares vest in the Official Receiver or trustee in bankruptcy, who may apply to be registered as holder on producing evidence of title. The company must register the transmission once satisfied of the title.

Question 34Company Law and the Companies Act 2016

A director of a private company wants to enter into a contract in which he has a direct pecuniary interest. What must he do under the Companies Act 2016?

  1. Obtain the prior written consent of the Registrar
  2. Resign from the board before the contract is considered
  3. Declare the nature and extent of the interest at a board meeting as soon as practicable after becoming aware Correct answer.
  4. Disclose the interest only in the company's annual return

Explanation

Section 221 requires a director with a direct or indirect interest in a transaction to declare the nature and extent of that interest at a meeting of the board as soon as practicable after the relevant facts come to his knowledge. The declaration is then recorded in the minutes.

Question 35Company Law and the Companies Act 2016

A company's board proposes to pass a resolution by written means without holding a meeting. Which condition must be satisfied under the Companies Act 2016?

  1. The company secretary must certify the resolution before it is circulated
  2. The resolution must be signed or assented to by all directors entitled to receive notice of a directors' meeting Correct answer.
  3. The resolution must be approved by members before it can take effect
  4. A simple majority of directors must sign the resolution within seven days

Explanation

Section 317 permits a directors' resolution to be passed by circular resolution only if it is signed or assented to by all directors entitled to receive notice of a meeting. This ensures no director is bypassed by a written resolution.

Question 36Company Law and the Companies Act 2016

A company proposes to pay a dividend to its members. Which requirement must be satisfied under the Companies Act 2016?

  1. The dividend may be paid out of share capital provided members approve by ordinary resolution
  2. The dividend may be paid from any source provided the company has positive cash flow at the payment date
  3. The dividend may be paid only out of profits available for distribution, and the directors must be satisfied the company will remain solvent Correct answer.
  4. The dividend must be approved by the Registrar before payment

Explanation

Section 131 restricts distributions to profits available, and the directors must satisfy themselves on reasonable grounds that the company will be able to pay its debts as they fall due within twelve months after the distribution. Distributions made contrary to this are unlawful.

Question 37Company Law and the Companies Act 2016

A company wishes to buy back its own shares on the open market. Which statement about the buy-back is correct under the Companies Act 2016?

  1. The buy-back must be approved by the court in every case
  2. A company may never purchase its own shares under any circumstances
  3. The buy-back must be authorised by the constitution or a special resolution and must comply with the solvency requirements Correct answer.
  4. The company may buy back its shares at any time without member approval

Explanation

Section 127 permits a company to purchase its own shares where authorised by its constitution or by special resolution of members, subject to the solvency test in section 112. The shares purchased are treated as cancelled.

Question 38Company Law and the Companies Act 2016

A member of a public company wants to inspect the minutes of general meetings. What is the position under the Companies Act 2016?

  1. Minutes are confidential and may be inspected only with the directors' permission
  2. Only the company secretary and auditors may inspect the minutes
  3. Members may inspect the minutes only after the next annual general meeting
  4. The minutes must be kept at the registered office and members are entitled to inspect them without charge Correct answer.

Explanation

Section 342 requires minutes of general meetings to be kept at the registered office, and members are entitled to inspect them free of charge. The minutes are also open to inspection by the Registrar and auditors.

Question 39Company Law and the Companies Act 2016

A company's financial statements for a financial year must be circulated to members. Within what period must a private company circulate them under the Companies Act 2016?

  1. Within six months of the end of the financial year, unless an extension is granted Correct answer.
  2. Within eighteen months of incorporation only
  3. Within three months of the end of the financial year in all cases
  4. Within thirty days of the auditors signing the report

Explanation

Section 258 requires a private company to circulate its financial statements and reports within six months of the end of the financial year, unless the Registrar grants an extension. Public companies face a shorter period.

Question 40Company Law and the Companies Act 2016

A person is disqualified from acting as a director following a court order. What consequence follows if the person continues to act as a director?

  1. The company is automatically wound up by the court
  2. The person commits an offence and is liable to a fine or imprisonment, and may be personally liable for the company's debts incurred during that period Correct answer.
  3. The person's shares are forfeited to the company
  4. The acts of the person are automatically valid and no liability arises

Explanation

Section 198 makes it an offence for a disqualified person to act as director or take part in the management of a company, punishable by fine or imprisonment. Such a person may also be personally liable for debts incurred while acting while disqualified.

Question 41Company Law and the Companies Act 2016

A company secretary of a public company resigns. What must the company do under the Companies Act 2016?

  1. Apply to the court for permission to leave the office vacant
  2. Take no action until the next annual general meeting
  3. Appoint the outgoing secretary as a consultant to continue the statutory functions
  4. Notify the Registrar within thirty days and appoint a replacement within the period allowed so that the office is not vacant Correct answer.

Explanation

Section 235 requires a public company to have a secretary, and any vacancy must be filled within thirty days. The company must also lodge notice of the change with the Registrar within thirty days of the change occurring.

Question 42Company Law and the Companies Act 2016

A shareholder of a private company wants to transfer shares to an outsider. Which statement reflects the default position under the Companies Act 2016 where the constitution is silent?

  1. The directors must register every transfer within seven days
  2. The transfer requires the consent of all other shareholders
  3. The transfer is void unless approved by the Registrar
  4. The company must register the transfer within 30 days of receiving the instrument, unless a legally permitted refusal or delay is supported by a resolution stating reasons and the required notice Correct answer.

Explanation

Section 106 requires registration within 30 days of receiving the transfer instrument unless the Act or constitution expressly permits refusal or delay. Any refusal or delay must satisfy the statutory requirements, including a directors' resolution stating the reasons and the required notice. Silence in the constitution does not confer unrestricted discretion.

Question 43Company Law and the Companies Act 2016

A company fails to lodge its annual return within the prescribed period. Which consequence applies under the Companies Act 2016?

  1. The company and every officer in default commit an offence and are liable to a fine, with a further default penalty for continuing failure Correct answer.
  2. The company's shares are suspended from trading
  3. The company is automatically struck off the register on the day the period expires
  4. The directors are personally liable to pay all company debts

Explanation

Section 68 requires annual returns to be lodged within thirty days of the anniversary of incorporation, and failure is an offence by the company and every officer in default. A further default penalty applies for each day the failure continues.

Question 44Company Law and the Companies Act 2016

A director of a company uses a corporate opportunity that came to him in his capacity as director for his own benefit. Which duty has he most directly breached under the Companies Act 2016?

  1. The duty to exercise his powers in good faith and in the best interests of the company Correct answer.
  2. The duty to ensure the company complies with tax legislation
  3. The duty to keep proper accounting records
  4. The duty to attend board meetings regularly

Explanation

Section 213 requires a director to act in good faith in the best interests of the company, which includes not appropriating corporate opportunities for personal gain. The fiduciary character of the office underlies this duty.

Question 45Company Law and the Companies Act 2016

A member holding ten per cent of the paid-up capital of a public company wants to requisition an extraordinary general meeting. Which statement is correct under the Companies Act 2016?

  1. The directors may ignore the requisition if they consider the meeting unnecessary
  2. The requisition must be supported by at least fifty per cent of the members before it can be considered
  3. The directors must convene the meeting within fourteen days of the requisition, failing which the requisitionists may convene it themselves Correct answer.
  4. The requisition can only be made at the annual general meeting

Explanation

Sections 314 and 315 allow members holding at least ten per cent of the paid-up capital to requisition a general meeting; the directors must convene it within fourteen days. If they fail, the requisitionists may convene the meeting themselves.

Question 46Company Law and the Companies Act 2016

A company's constitution contains a provision allowing the board to remove an auditor without following the statutory procedure. How does this provision operate under the Companies Act 2016?

  1. It is valid only for private companies
  2. It is valid because the constitution is a contract between the company and its members
  3. It is void to the extent that it conflicts with the statutory procedure for removal of auditors Correct answer.
  4. It is valid only if approved by the Registrar

Explanation

Section 289 permits removal of an auditor before the expiry of the term only by resolution at a general meeting after special notice, and any provision in the constitution that conflicts with the Act is void to that extent under section 33. The statutory safeguards for auditors cannot be displaced.

Question 47Company Law and the Companies Act 2016

A minority shareholder believes the affairs of the company are being conducted in a manner oppressive to him. Which remedy is available under the Companies Act 2016?

  1. He may require the auditors to restate the financial statements
  2. He may apply to the Registrar to wind up the company administratively
  3. He may apply to the court for an order, which may include regulating the affairs of the company or requiring the purchase of his shares Correct answer.
  4. He may unilaterally remove the directors by written notice

Explanation

Section 346 allows a member to apply to the court where the affairs of the company are conducted in a manner oppressive to, or in disregard of, his interests. The court has broad powers, including regulating affairs or ordering the purchase of the member's shares.

Question 48Company Law and the Companies Act 2016

A director causes the company to enter into a transaction that benefits a company in which his wife holds a controlling interest, without disclosing the interest. Which statement best describes the legal position?

  1. The transaction is automatically valid because the director did not personally benefit
  2. The transaction is void from the outset and cannot be ratified in any circumstances
  3. The transaction is valid provided the price was at market value
  4. The transaction is voidable at the company's instance, and the director may be liable to account for any gain and to indemnify the company for loss Correct answer.

Explanation

Breach of the duty to disclose an interest under section 221 renders the transaction voidable at the company's election, and the director is liable to account for any profit and to indemnify the company for loss. The company may also affirm the transaction through proper disclosure and approval.

Question 49Company Law and the Companies Act 2016

A company's constitution provides that disputes between members shall be referred to arbitration and that members waive any right to apply to court under the oppression provision. How should this clause be treated under the Companies Act 2016?

  1. The waiver is fully effective because the constitution binds all members as a contract
  2. The waiver is ineffective because the statutory right to apply to court cannot be excluded by the constitution Correct answer.
  3. The waiver is effective against minority members but not against directors
  4. The waiver is effective only if approved by a special resolution after incorporation

Explanation

The oppression remedy under section 346 is a statutory right conferred on members, and a constitution cannot contract out of mandatory statutory protections. A provision purporting to waive that right is void to that extent under section 33.

Question 50Company Law and the Companies Act 2016

A company has passed a resolution to reduce its share capital. Which statement best describes the position under the Companies Act 2016?

  1. The reduction requires a special resolution and, where creditor protection applies, compliance with the solvency statement or court confirmation route Correct answer.
  2. The reduction is prohibited unless the company is in liquidation
  3. The reduction may be effected by ordinary resolution without any creditor safeguards
  4. The reduction requires the unanimous consent of all creditors in every case

Explanation

Section 115 permits a company to reduce its share capital by special resolution supported by a solvency statement, or alternatively by court confirmation. Creditor protection is built into the solvency statement route.