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Question 1Company Law and Corporate Governance

Under the Companies and Allied Matters Act 2020, which document sets out the internal rules governing the management of a company's affairs and the conduct of its members?

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

Explanation

The articles of association constitute the company's internal constitution, regulating the appointment of directors, conduct of meetings, and the rights of members among themselves. The memorandum, by contrast, governs the company's relationship with the outside world by stating its name, objects, and share capital. Where the Act is silent, the articles operate as a contract between the company and its members.

Question 2Company Law and Corporate Governance

A Nigerian public company wishes to alter the objects clause in its memorandum of association. Which approval threshold does the Act require for such an alteration?

  1. A simple majority of members present at a general meeting
  2. Approval of the Corporate Affairs Commission alone
  3. A special resolution of the members Correct answer.
  4. Unanimous consent of all members in writing

Explanation

Alteration of the objects clause requires a special resolution, meaning at least 75 per cent of votes cast at a general meeting of which proper notice has been given. The rationale is that the objects define the scope of the company's permitted activities, so a high threshold protects members and creditors. The Corporate Affairs Commission must be notified but does not itself authorise the change.

Question 3Company Law and Corporate Governance

Which of the following best describes the doctrine of ultra vires as it applies to Nigerian companies under CAMA 2020?

  1. An act outside the company's objects is automatically void and cannot bind the company
  2. Ultra vires applies only to companies limited by guarantee
  3. Any act performed without board approval is ultra vires the company
  4. An act outside the objects is void as between the company and its members but may bind the company in favour of third parties dealing in good faith Correct answer.

Explanation

CAMA 2020 substantially relaxed the strict ultra vires rule: acts outside the objects are no longer automatically void against outsiders. The company remains liable to a third party who deals in good faith, while the members may restrain the company from exceeding its objects and the directors may be liable internally. This protects commercial certainty for those dealing with the company.

Question 4Company Law and Corporate Governance

In the context of corporate governance, the principle of separation of ownership and control primarily refers to which arrangement?

  1. The division of a company's shares between two classes of shareholders
  2. The separation of the company's registered office from its place of business
  3. The division of regulatory oversight between the Commission and the Securities and Exchange Commission
  4. The distinction between shareholders as owners and directors as those who manage the company Correct answer.

Explanation

Separation of ownership and control describes the structure in which shareholders provide capital and elect directors, while the board exercises day-to-day management authority. This creates agency costs and explains why governance codes emphasise accountability, board independence, and disclosure. It is the foundation of modern corporate governance theory.

Question 5Company Law and Corporate Governance

A director of a Nigerian company sits on the board of a supplier that is about to enter a major contract with her company. What is the most appropriate governance step under the Act?

  1. She should refer the matter to the auditors for approval
  2. She should resign from the board of the supplier before the contract is discussed
  3. She should vote in favour provided the price is at arm's length
  4. She should disclose her interest and abstain from voting on the transaction Correct answer.

Explanation

A director who is interested in a transaction must declare the nature of that interest at a board meeting, and the Act restricts her from voting or being counted in the quorum on that matter. Disclosure and abstention protect the company from conflicts of interest and preserve the integrity of board decisions. Resignation is not the statutory requirement, though it may be prudent.

Question 6Company Law and Corporate Governance

Which duty requires a director to act in the way she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole?

  1. The duty to exercise independent judgment
  2. The duty to promote the success of the company Correct answer.
  3. The duty to declare interest in a proposed transaction
  4. The duty to avoid conflicts of interest

Explanation

This is the overarching fiduciary duty to promote the success of the company, sometimes called the duty of loyalty in its positive form. It requires the director to weigh long-term consequences, the interests of employees, suppliers, customers, and the community, alongside member interests. The other duties are specific applications of this general obligation.

Question 7Company Law and Corporate Governance

Under CAMA 2020, what is the minimum number of directors required for a private company?

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

Explanation

CAMA 2020 permits a private company to have a single director, reflecting the Act's accommodation of small and sole-member companies. A public company, by contrast, must have at least three directors. The reduction for private companies simplifies incorporation and ongoing compliance for small enterprises.

Question 8Company Law and Corporate Governance

A shareholder of a public company wants to propose a resolution at the annual general meeting. Which statement about the members' right to requisition a general meeting is correct?

  1. Members holding at least 5 per cent of paid-up capital may requisition a meeting Correct answer.
  2. A single member may always requisition a meeting regardless of holding
  3. Requisition rights apply only to companies limited by guarantee
  4. Only the board may convene a general meeting

Explanation

CAMA 2020 empowers members holding not less than 5 per cent of the paid-up capital carrying voting rights to requisition a general meeting. If the directors fail to convene it within the statutory period, the requisitionists may convene it themselves. This right is a key accountability mechanism for minority shareholders.

Question 9Company Law and Corporate Governance

Which of the following is the principal role of the audit committee in Nigerian corporate governance?

  1. Setting the remuneration of executive directors
  2. Reviewing the company's financial statements and internal control systems Correct answer.
  3. Appointing the chief executive officer
  4. Approving the company's strategic business plan

Explanation

The audit committee oversees financial reporting, internal controls, and the independence of the external auditor, providing a check on management. Under CAMA 2020, public companies must establish an audit committee with member and shareholder representation. It does not manage the business or set executive pay.

Question 10Company Law and Corporate Governance

The Nigerian Code of Corporate Governance 2018 is best characterised as which type of instrument?

  1. A subsidiary legislation with binding criminal sanctions
  2. A statute enacted by the National Assembly
  3. A treaty obligation binding on listed companies
  4. A code of best practice applied on a comply-or-explain basis Correct answer.

Explanation

The Nigerian Code of Corporate Governance 2018 is a principles-based instrument issued by the regulator, applying on a comply-or-explain basis rather than as a statute. Companies are expected to disclose how they have applied its principles or explain any departure. This flexibility distinguishes soft-law codes from binding legislation.

Question 11Company Law and Corporate Governance

A director of a Nigerian company uses confidential information obtained at board meetings to buy shares in a target company before a takeover announcement. Which rule is most directly engaged?

  1. The duty to exercise reasonable care, skill, and diligence
  2. The duty not to accept benefits from third parties
  3. The duty to act within the company's constitution
  4. The duty to avoid conflicts of interest, including misuse of corporate information Correct answer.

Explanation

Misuse of confidential corporate information engages the no-conflict duty, which extends to exploiting information or opportunities that belong to the company for personal gain. Insider dealing may also attract securities regulation, but the direct fiduciary breach is the conflict of interest. The duty applies even where the company itself could not have pursued the opportunity.

Question 12Company Law and Corporate Governance

In relation to the duties of directors, the business judgment rule operates to do which of the following?

  1. Protect directors who act in good faith, on an informed basis, and in the honest belief that the decision serves the company Correct answer.
  2. Require directors to obtain court approval before making major decisions
  3. Shift liability for poor decisions onto shareholders
  4. Exempt directors from liability for any loss suffered by the company

Explanation

The business judgment rule is a judicial deference doctrine: courts will not second-guess a business decision made honestly and on an informed basis by directors acting in good faith. It does not immunise directors from liability for fraud, bad faith, or gross negligence. It recognises that entrepreneurial risk-taking should not be chilled by hindsight litigation.

Question 13Company Law and Corporate Governance

Which document must a Nigerian company prepare annually and lay before its members at the annual general meeting?

  1. The memorandum and articles of association
  2. The share certificate register
  3. The register of charges only
  4. The audited financial statements together with the directors' report and auditors' report Correct answer.

Explanation

The Act requires the directors to prepare financial statements and a directors' report, which together with the auditors' report are laid before members at the annual general meeting. This is the core disclosure mechanism through which shareholders hold the board accountable. Registers are maintained but are not the annual reporting package laid before members.

Question 14Company Law and Corporate Governance

A minority shareholder believes the directors have diverted company funds to a related company. In what circumstances may she bring a derivative action on behalf of the company?

  1. Where the wrongdoers control the company and the company has failed to pursue the claim Correct answer.
  2. Only if she holds at least 25 per cent of the shares
  3. Whenever she disagrees with a commercial decision of the board
  4. Only after the company has been wound up

Explanation

A derivative action allows a member to enforce a right of the company where the company itself has not done so, typically because those who control it are the wrongdoers. The member must show a prima facie case and give reasonable notice to the directors. Mere disagreement with commercial judgment is not a ground.

Question 15Company Law and Corporate Governance

Which of the following best explains the concept of the corporate veil in Nigerian company law?

  1. It separates the company's legal personality from its members, though courts may lift it in cases of fraud or abuse Correct answer.
  2. It shields directors from criminal prosecution
  3. It applies only to companies limited by guarantee
  4. It prevents shareholders from ever being liable for company debts

Explanation

Incorporation confers a separate legal personality on the company, distinct from its members, so shareholders are generally not liable for company debts beyond their unpaid subscription. Courts may, however, lift the veil where the corporate form is used as a cloak for fraud, evasion of legal obligations, or where a statute so provides. The veil is therefore a general rule with recognised exceptions.

Question 16Company Law and Corporate Governance

What is the effect of a certificate of incorporation issued by the Corporate Affairs Commission?

  1. It is merely a receipt for fees paid
  2. It can be challenged by any member at any time
  3. It is valid only for twelve months
  4. It is conclusive evidence that the company has been duly incorporated Correct answer.

Explanation

The certificate of incorporation is conclusive evidence that the requirements of the Act relating to registration have been complied with and that the company is duly incorporated. This protects third parties who rely on the register. Challenges to incorporation are therefore generally foreclosed once the certificate is issued.

Question 17Company Law and Corporate Governance

A company wishes to issue shares to a new investor at a price below the current market value. Which governance concern is most directly raised?

  1. Whether the company has an audit committee
  2. Dilution of existing shareholders and the need for proper board and member authorisation Correct answer.
  3. Whether the shares are in certificated form
  4. Whether the investor is resident in Nigeria

Explanation

Issuing shares at a discount to market can dilute existing members and transfer value to the incoming investor, so the board must act for proper purposes and within its authorisation. The Act requires shares to be issued at a fair consideration and may require member approval depending on the circumstances. Residence, audit committee status, and certificate form are not the central governance issue.

Question 18Company Law and Corporate Governance

Which body is responsible for the registration of companies and the maintenance of the public register of companies in Nigeria?

  1. The Central Bank of Nigeria
  2. The Securities and Exchange Commission
  3. The Corporate Affairs Commission Correct answer.
  4. The Nigerian Exchange Limited

Explanation

The Corporate Affairs Commission is established under CAMA to incorporate companies, register business names, and maintain the public register. The Securities and Exchange Commission regulates the capital market, the Central Bank regulates banking, and the Exchange operates the trading platform. Each has a distinct statutory mandate.

Question 19Company Law and Corporate Governance

Under the Act, a company secretary of a public company is expected to possess which minimum qualification?

  1. Membership of a recognised professional body or such other qualification as the Commission may approve Correct answer.
  2. Ownership of at least 5 per cent of the company's shares
  3. Any university degree
  4. A minimum of ten years' banking experience

Explanation

CAMA 2020 requires the company secretary of a public company to be a member of a recognised professional body such as the Institute of Chartered Secretaries and Administrators of Nigeria, or to hold such other qualification as the Commission may approve. The role is substantive, involving compliance and board support, not merely clerical. Shareholding and banking experience are irrelevant to the statutory qualification.

Question 20Company Law and Corporate Governance

A director is offered a personal payment by a supplier in return for favourable contract terms. Which fiduciary rule does acceptance most clearly breach?

  1. The duty to promote the success of the company only
  2. The duty not to accept benefits from third parties Correct answer.
  3. The duty to keep accounting records
  4. The duty to act within powers

Explanation

Accepting a personal payment from a supplier creates a conflict and constitutes acceptance of a benefit from a third party, which the Act prohibits unless the benefit cannot reasonably be regarded as likely to give rise to a conflict. The rule protects the integrity of board decisions and reinforces loyalty. Keeping accounting records is a separate statutory obligation.

Question 21Company Law and Corporate Governance

Which statement accurately describes the liability of members of a company limited by shares?

  1. Members are liable jointly and severally for all contractual claims against the company
  2. Members are liable without limit for all company debts
  3. Members are liable for the company's tax obligations personally
  4. Members are liable only to the extent of any amount unpaid on their shares Correct answer.

Explanation

In a company limited by shares, member liability is limited to the amount, if any, unpaid on the shares they hold. Once shares are fully paid, the member generally has no further liability to creditors. This limited liability is a defining feature of the corporate form and underpins capital market investment.

Question 22Company Law and Corporate Governance

A board wishes to appoint a new director to fill a casual vacancy between annual general meetings. Which statement reflects the usual governance position?

  1. Only the members in general meeting may ever appoint a director
  2. The company secretary may appoint directors at his discretion
  3. Casual vacancies cannot be filled until the next annual general meeting
  4. The board may appoint a director to fill a casual vacancy, subject to confirmation by members at the next general meeting Correct answer.

Explanation

The articles commonly empower the board to fill casual vacancies, but such appointments are typically subject to confirmation by members at the next general meeting. This balances board flexibility with shareholder oversight of board composition. The Act and articles, rather than the company secretary, govern the process.

Question 23Company Law and Corporate Governance

Which of the following is a key feature of an independent non-executive director in corporate governance?

  1. The director is also the chief executive officer
  2. The director has no material relationship with the company that could impair independent judgment Correct answer.
  3. The director holds the largest shareholding in the company
  4. The director is employed by a major supplier to the company

Explanation

Independence means the director has no material relationship, whether financial, familial, or commercial, that could compromise objective judgment. Independent directors strengthen board oversight of management and reduce agency problems. Being CEO, a major shareholder, or a supplier's employee would all undermine independence.

Question 24Company Law and Corporate Governance

A shareholder of a Nigerian company alleges that a resolution passed at a general meeting was procured by fraud on the minority. Which remedy is most appropriate?

  1. An application to the Corporate Affairs Commission to cancel the resolution
  2. A demand that the auditors reverse the resolution
  3. A criminal complaint to the police
  4. A petition to the court for relief against unfair prejudice or oppression Correct answer.

Explanation

Where the affairs of a company are being conducted in a manner oppressive to some members, or in disregard of their interests, a member may petition the court for relief, which may include regulating the company's affairs or ordering a purchase of shares. This statutory remedy protects minorities where the majority abuses its power. The Commission and auditors have no power to cancel member resolutions.

Question 25Company Law and Corporate Governance

Which of the following best explains why the Act requires disclosure of directors' remuneration in the annual report?

  1. To enable shareholders to assess whether pay is aligned with performance and to hold the board accountable Correct answer.
  2. To determine the company's tax rate
  3. To satisfy the personal curiosity of members
  4. To allow competitors to benchmark their own pay scales

Explanation

Disclosure of directors' remuneration supports accountability by allowing members to assess whether pay is justified by performance and aligned with long-term interests. It is a transparency mechanism central to governance codes and reduces agency costs. Competitor benchmarking and member curiosity are not the statutory rationale, and tax rates are set by tax law.

Question 26Company Law and Corporate Governance

Under CAMA 2020, which class of private company enjoys exemptions from the statutory requirement to appoint a company secretary and to hold an annual general meeting?

  1. A company limited by guarantee
  2. A small company Correct answer.
  3. A public company
  4. An unlimited company

Explanation

CAMA 2020 introduced the small company category and relieves such companies of several formal burdens, including the mandatory appointment of a company secretary and the holding of an annual general meeting. The classification depends on thresholds of turnover and net assets set by the Act. Other company types remain subject to the full set of governance obligations.

Question 27Company Law and Corporate Governance

A Nigerian company has only one member who is also its sole director. Which statement best reflects the position under CAMA 2020 on decision-making in such a company?

  1. The sole member must obtain the consent of the Corporate Affairs Commission for each decision
  2. The company is void ab initio because a company cannot have a single member
  3. The sole member may exercise the powers of the company in general meeting by recording the decision in writing Correct answer.
  4. The company must appoint a second director before any valid decision can be taken

Explanation

CAMA 2020 permits a single-member company, and where the company has only one member, that member may take decisions that would otherwise require a general meeting. The decision must be recorded in writing and kept with the company's records so that an audit trail exists. There is no requirement for a second director or regulatory consent for each decision.

Question 28Company Law and Corporate Governance

Which principle established in Salomon v Salomon remains foundational to Nigerian company law?

  1. A company's shareholders own the company's assets directly and jointly
  2. A company ceases to exist whenever its majority shareholder dies
  3. A company is a separate legal person distinct from its members and controllers Correct answer.
  4. A company's directors are personally liable for all corporate debts

Explanation

The Salomon principle treats a duly incorporated company as a legal person separate from its shareholders, with its own rights, assets and liabilities. Nigerian courts apply this doctrine, so members are generally not liable for company debts beyond any unpaid amount on their shares. Exceptions arise only through statutory or judicial lifting of the corporate veil.

Question 29Company Law and Corporate Governance

A board of directors wishes to delegate authority to a management committee for a major procurement exercise. Which statement best reflects the governance position under CAMA 2020?

  1. The board cannot delegate any function to a committee under the Act
  2. The board may delegate only if the shareholders approve the delegation by special resolution
  3. Delegation transfers full legal responsibility to the committee, releasing the board
  4. The board may delegate subject to the articles, but remains responsible for the delegated functions Correct answer.

Explanation

A company's business is managed by the directors, who may delegate to committees or officers where the articles allow, but the board retains ultimate oversight and accountability. Delegation does not extinguish the directors' duty to supervise the exercise of the delegated power. Shareholder approval by special resolution is not the general precondition for such delegation.

Question 30Company Law and Corporate Governance

A director of a Nigerian company is also the controlling shareholder of a supplier that the company intends to contract with. What does the Act require of that director in relation to the transaction?

  1. Transfer the supplier's shares to a family member to remove the conflict
  2. Disclose the nature of the interest to the board and refrain from voting on the matter where the conflict is material Correct answer.
  3. Obtain the prior written approval of the Corporate Affairs Commission
  4. Resign from the board before the contract is discussed

Explanation

Directors owe a duty to avoid conflicts of interest and to disclose any interest in a transaction, whether direct or indirect, to the board. Disclosure allows the disinterested directors to assess the transaction and, where appropriate, to exclude the conflicted director from voting. Resignation, share transfers or regulatory approval are not the statutory remedy for a conflict.

Question 31Company Law and Corporate Governance

A company proposes to enter into a transaction with a person connected to one of its directors. Which governance safeguard is most directly engaged under CAMA 2020?

  1. Mandatory appointment of an independent auditor to negotiate the contract
  2. Disclosure of the director's interest and, where required, approval by the board or members Correct answer.
  3. Automatic invalidity of any transaction involving a connected person
  4. Automatic suspension of the director from office pending completion

Explanation

Related-party transactions are controlled through disclosure of the director's interest and, in specified cases, approval by the board or by members in general meeting. The aim is transparency so that the company is not disadvantaged by the conflict. The Act does not render such transactions automatically void or suspend the director.

Question 32Company Law and Corporate Governance

Which statement best describes the nature of the duty of care and skill owed by a director of a Nigerian company?

  1. The director's duty is owed exclusively to the majority shareholders
  2. The director must exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances Correct answer.
  3. The director is liable for every business loss suffered by the company regardless of fault
  4. The director must guarantee the company's solvency at all times

Explanation

The duty of care and skill is measured objectively against what a reasonably diligent person would do in comparable circumstances, with account taken of the director's actual knowledge and experience. It is a duty of conduct, not a guarantee against loss. Directors owe their duties to the company itself rather than to a particular shareholder group.

Question 33Company Law and Corporate Governance

A director of a Nigerian company learns at a board meeting that the company intends to acquire a parcel of land. She personally buys the land first and later sells it to the company at a profit. Which rule is most directly breached?

  1. The duty to keep proper accounting records
  2. The duty to convene an annual general meeting
  3. The duty to file annual returns with the Corporate Affairs Commission
  4. The duty not to divert a corporate opportunity for personal benefit Correct answer.

Explanation

Directors may not take for themselves a business opportunity that properly belongs to the company, nor use their position to make a secret profit. Acquiring the land in her own name and reselling it to the company is a classic misappropriation of a corporate opportunity. The other duties listed concern administration and compliance rather than fiduciary loyalty.

Question 34Company Law and Corporate Governance

Which statement correctly describes the legal effect of a company's memorandum and articles of association on the company and its members?

  1. They are merely internal guidelines with no contractual force
  2. They take effect only after registration by the Corporate Affairs Commission of a special resolution approving them
  3. They bind only the directors and not the shareholders
  4. They constitute a contract between the company and its members and among the members themselves Correct answer.

Explanation

The memorandum and articles, once registered, operate as a statutory contract binding the company and its members in respect of their membership rights. This contractual effect allows members to enforce provisions that concern them in their capacity as members. They are binding from registration and do not require a further special resolution.

Question 35Company Law and Corporate Governance

A shareholder wishes to challenge an alteration to the company's articles that would expropriate the class rights attached to his shares without his consent. Which ground is most relevant?

  1. The alteration was not advertised in a national newspaper
  2. The alteration was passed by a simple majority instead of unanimity
  3. The alteration was proposed by a director rather than a shareholder
  4. The alteration amounts to a fraud on the minority or is not bona fide for the benefit of the company as a whole Correct answer.

Explanation

Although a special resolution can alter the articles, the majority's power is constrained by the equitable principle that it must be exercised bona fide for the benefit of the company as a whole. An alteration that discriminates against a minority and expropriates their rights may be set aside as a fraud on the minority. Unanimity and newspaper advertisement are not the applicable tests.

Question 36Company Law and Corporate Governance

Which body within a Nigerian public company is primarily responsible for recommending the appointment of external auditors to the shareholders?

  1. The external auditors themselves
  2. The company secretary
  3. The audit committee Correct answer.
  4. The risk management department

Explanation

The audit committee oversees the integrity of financial reporting and recommends the appointment, removal and remuneration of the external auditor to the members. This separation supports auditor independence. The company secretary, risk function and the auditors themselves do not perform this recommending role.

Question 37Company Law and Corporate Governance

A director of a Nigerian company is convicted of fraud and sentenced to imprisonment. What is the most likely consequence for his directorship under CAMA 2020?

  1. He becomes disqualified from acting as a director for the period specified by the Act following conviction Correct answer.
  2. He remains in office because directorship is a private contractual matter
  3. He is automatically appointed to the audit committee on release
  4. He is disqualified only if the company's members vote to remove him

Explanation

CAMA 2020 disqualifies persons convicted of fraud or dishonesty from acting as directors for a statutory period, reflecting the fiduciary nature of the office. The disqualification operates by force of the Act rather than by a members' vote. It protects the public and the company from the management of persons convicted of dishonest conduct.

Question 38Company Law and Corporate Governance

Which statement best explains the rationale for the statutory requirement that directors disclose their remuneration in the company's annual report?

  1. It allows the Corporate Affairs Commission to fix the level of directors' pay
  2. It replaces the need for shareholders to approve remuneration at the general meeting
  3. It transfers liability for excessive pay to the auditors
  4. Transparency enables members to assess whether remuneration is consistent with performance and the company's interests Correct answer.

Explanation

Disclosure of directors' remuneration supports accountability by giving members the information needed to evaluate whether pay is justified by performance. It reinforces the link between governance and stewardship of company resources. The Corporate Affairs Commission does not fix pay levels, and disclosure does not displace shareholder approval processes.

Question 39Company Law and Corporate Governance

A company's articles provide that disputes between members shall be referred to arbitration. A member nevertheless sues the company alleging oppression. Which statement best reflects the position?

  1. The member loses all rights because the articles bind him contractually
  2. The arbitration clause automatically extinguishes the statutory remedy
  3. The statutory remedy for oppression may still be available because it protects substantive member rights that cannot be ousted by an arbitration clause Correct answer.
  4. The member must first obtain the consent of the Corporate Affairs Commission before suing

Explanation

Statutory remedies for oppression and unfair prejudice protect substantive rights conferred on members by the Act, and contractual mechanisms in the articles cannot wholly exclude them. The court retains jurisdiction to grant relief where the affairs of the company are conducted in a manner oppressive to members. An arbitration clause does not automatically extinguish that statutory protection.

Question 40Company Law and Corporate Governance

Which statement correctly describes the liability of a director of a Nigerian company that has been wound up for fraudulent trading?

  1. The director is immune from liability once the company is dissolved
  2. The court may declare the director personally liable for the company's debts where fraud is established Correct answer.
  3. The director is liable only to the extent of any unpaid dividends
  4. The director's liability is always limited to the nominal value of his shares

Explanation

Where the business of a company has been carried on with intent to defraud creditors, the court may declare those knowingly party to the conduct personally liable for the company's debts. This is a statutory exception to limited liability aimed at deterring abuse of the corporate form. It does not depend on shareholding or dividend status.

Question 41Corporate Secretarial Practice

Under the Companies and Allied Matters Act 2020, what is the minimum number of directors a private company limited by shares must have?

  1. Two directors
  2. Three directors
  3. Four directors
  4. One director Correct answer.

Explanation

Section 271 of CAMA 2020 requires every private company to have at least one director, a change from the earlier requirement of two. Small companies and companies with a sole member may therefore operate with a single director. Public companies remain subject to a higher minimum.

Question 42Corporate Secretarial Practice

Which document must a company deliver to the Corporate Affairs Commission within 15 days of an allotment of shares?

  1. A statutory declaration of compliance
  2. A notice of allotment in the prescribed form Correct answer.
  3. An auditor's certificate of paid-up capital
  4. A certified copy of the board resolution

Explanation

CAMA 2020 requires a company to notify the Commission of any allotment of shares within 15 days, using the prescribed return of allotment form. The filing ensures the register of members at the Commission reflects current shareholding. Failure to file attracts a penalty on the company and every officer in default.

Question 43Corporate Secretarial Practice

A company wishes to shorten the notice period for a general meeting. Which body is competent to approve a shorter notice, and on what condition?

  1. The chairman, if he considers it impracticable to give full notice
  2. The board, if all directors consent in writing
  3. The members holding at least 95% of the voting rights, at the meeting itself Correct answer.
  4. The Corporate Affairs Commission, on written application

Explanation

CAMA 2020 permits a general meeting to be called on shorter notice where members holding at least 95% of the total voting rights agree. The agreement may be given at or before the meeting. This mirrors the common law and statutory approach of protecting the majority while allowing flexibility.

Question 44Corporate Secretarial Practice

Which of the following best describes the duty of a company secretary in relation to minutes of board meetings?

  1. Destroying minutes after the financial year ends
  2. Approving the minutes on behalf of the board
  3. Recording and maintaining minutes as a statutory record of proceedings Correct answer.
  4. Drafting minutes only when requested by the chairman

Explanation

The secretary is the officer charged with recording and keeping minutes of board and general meetings as statutory records. Minutes serve as evidence of proceedings and must be retained in the company's minute book. Approval of minutes is a function of the board, not the secretary.

Question 45Corporate Secretarial Practice

A company with 300 members proposes to hold its annual general meeting. What is the minimum notice period required?

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

Explanation

CAMA 2020 requires at least 21 days' notice for an annual general meeting. Shorter notice may only be given with the consent of members holding at least 95% of the voting rights. The 21-day period allows members to prepare and to propose resolutions.

Question 46Corporate Secretarial Practice

Which register must a company keep at its registered office showing the names and particulars of its members?

  1. Register of charges
  2. Register of debenture holders
  3. Register of directors' interests
  4. Register of members Correct answer.

Explanation

CAMA 2020 requires every company to maintain a register of members at its registered office, recording names, addresses, shareholdings and dates of entry. The register is prima facie evidence of membership. Other registers serve different statutory purposes.

Question 47Corporate Secretarial Practice

A director of a Nigerian company is also a director of a competing business. What is the primary obligation on that director under CAMA 2020?

  1. To seek the Commission's approval of the dual role
  2. To disclose the conflict of interest to the board Correct answer.
  3. To resign from the competing business immediately
  4. To transfer all shares in the competing business to the company

Explanation

Directors owe a duty of loyalty and must disclose any conflict of interest to the board. Disclosure allows the board to manage the conflict, for example by excluding the director from relevant deliberations. The Act does not automatically require resignation or share transfer.

Question 48Corporate Secretarial Practice

Which of the following is the correct description of a proxy in relation to a general meeting?

  1. An officer appointed to count votes at the meeting
  2. A person appointed by a member to attend and vote in the member's place Correct answer.
  3. A director appointed to chair the meeting
  4. A shareholder who holds shares on behalf of another

Explanation

A proxy is a person appointed by a member to attend and vote at a meeting on that member's behalf. CAMA 2020 requires the notice of meeting to state the member's right to appoint a proxy. The proxy exercises the member's voting rights as directed.

Question 49Corporate Secretarial Practice

A company's articles of association conflict with a provision of CAMA 2020. What is the effect?

  1. The articles prevail until amended by the members
  2. The conflict is resolved by the Commission on application
  3. The articles prevail because they are the company's constitution
  4. The Act prevails and the conflicting article is void to that extent Correct answer.

Explanation

CAMA 2020 prevails over the articles of association, and any provision in the articles inconsistent with the Act is void to the extent of the inconsistency. The articles operate as a contract between the company and its members but cannot override statute. Members must amend conflicting provisions.

Question 50Corporate Secretarial Practice

What is the statutory position where a company fails to hold its annual general meeting in a given year?

  1. The company and every officer in default commit an offence Correct answer.
  2. The company is automatically dissolved
  3. The members may hold the meeting without notice
  4. The directors' appointments lapse automatically

Explanation

CAMA 2020 makes failure to hold the annual general meeting an offence for which the company and every officer in default may be liable. The Commission may also take steps to compel compliance. Automatic dissolution or lapse of directorships is not the statutory consequence.