SQE Business Law and Practice 1 — Questions and Answers
Question 1: Under the Companies Act 2006, what is the minimum number of directors required for a private limited company?
- 1 (Correct answer)
- 2
- 3
- 4
Correct answer: 1
Section 154(1) CA 2006 requires a private company to have at least one director, who must be a natural person.
Question 2: Which document governs the internal management of a company under the Companies Act 2006?
- Articles of Association (Correct answer)
- Memorandum of Association
- Shareholders' Agreement
- Certificate of Incorporation
Correct answer: Articles of Association
The Articles of Association constitute the company's constitution and govern its internal management and the rights of its members.
Question 3: What is the legal effect of a company becoming insolvent on a floating charge?
- The floating charge crystallises and attaches to the assets (Correct answer)
- The floating charge is automatically released
- The floating charge converts to a fixed charge prospectively
- The floating charge remains unaffected
Correct answer: The floating charge crystallises and attaches to the assets
Upon a crystallisation event such as insolvency, a floating charge converts to a fixed charge and attaches to the assets covered at that moment.
Question 4: Under the Partnership Act 1890, what is the default rule regarding sharing of profits and losses among partners?
- Equally regardless of capital contribution (Correct answer)
- In proportion to capital contributed
- In proportion to time spent
- As agreed in the partnership deed only
Correct answer: Equally regardless of capital contribution
Section 24 PA 1890 provides that in the absence of agreement, partners share profits and losses equally, irrespective of their capital contributions.
Question 5: What type of resolution is required to change a company's articles of association?
- Special resolution (75%) (Correct answer)
- Ordinary resolution (50%)
- Written resolution only
- Unanimous consent
Correct answer: Special resolution (75%)
Under s.21 CA 2006, a company's articles can only be amended by a special resolution passed by at least 75% of those voting.
Question 6: What is the purpose of a shareholders' agreement compared to a company's articles of association?
- It is a private contract providing additional rights not in the articles (Correct answer)
- It replaces the articles entirely
- It is filed at Companies House
- It binds third parties automatically
Correct answer: It is a private contract providing additional rights not in the articles
A shareholders' agreement is a private contract between shareholders offering flexibility and confidentiality beyond what the public articles provide.
SQE Business Law and Practice 1
Under the Companies Act 2006, what is the minimum number of directors required for a private limited company?