These are ACCA F4 English (CL/LW) Corporate and Business Law MCQs for Part-E of the Syllabus “Capital and the financing of companies”.

These multiple-choice questions (MCQs) are designed to help ACCA F4 English students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams. By doing so, students can reduce exam stress and prepare more effectively.

Please note:

Students should not attempt these MCQs until they have studied the entire chapter.
All questions are compulsory, so please do not skip any.

We hope that these MCQs will be a valuable resource for students preparing for the ACCA F4 English (CL/LW) exam.

INFORMATION ABOUT THESE CBE MCQs Test/Quiz

Course:	ACCA – Association of Chartered Certified Accountants
Fundamental Level:	Applied Skills
Subject:	Corporate and Business Law
Paper:	F4 English – CL/LW
Chapter:	“Capital and the financing of companies – MCQs”
Chapter Number:	21 of the Practice and Exam Kit
Syllabus Area:	E – “Capital and the financing of companies”
Questions Type:	CBE MCQs
Exam Section:	Section A

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part E of the Syllabus; “Capital and the financing of companies” of ACCA F4 English (CL/LW) Corporate and Business Law Module.

Time

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Result

Students will get their F4 English CBE MCQs Test results after they finish the entire test. They will also be able to see the correct and incorrect answers, as well as explanations for the incorrect questions.

Types of Questions

MCQs: Choose one from the given options.
Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “( select all those which are correct/ or incorrect)“.
Drop-down: Select from the list provided.
Type numbers: Type your answer in numbers as per the requirement of the question.

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F4 (ENG) - Chapter 21 - Part E - MCQs

Course: ACCA - Association of Chartered Certified Accountants
Subject: F4 (LW/CL) (ENGLISH) - Corporate And Business Law
Syllabus Area: E - Capital and the financing of companies
Chapter in Kit: 21 - MTQ Bank 4
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

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1 / 15

Riz is considering incorporating a public limited company. He is keen to ensure that the company is funded correctly, but not excessively, and is aware that the Companies Act includes a number of rules concerning share capital.

He has been advised to consider the following terms in connection with share capital and is seeking your advice.

Issued share capital
Paid-up share capital
Called-up share capital
Authorized share capital

REQUIREMENT

Which of the following concerns the number of shares held by shareholders?

Authorised share capital

Paid-up share capital

Issued share capital

Called-up share capital

2 / 15

He has been advised to consider the following terms in connection with share capital and is seeking your advice.

Issued share capital
Paid-up share capital
Called-up share capital
Authorized share capital

REQUIREMENT

Which concerns the amount of money a company has received for the shares held by shareholders?

Issued share capital

Authorised share capital

Paid-up share capital

Called-up share capital

3 / 15

He has been advised to consider the following terms in connection with share capital and is seeking your advice.

Issued share capital
Paid-up share capital
Called-up share capital
Authorized share capital

REQUIREMENT

Which of the following correctly describes the minimum amount of paid-up share capital that Riz's company must have?

£50,000

£12,500 plus the full amount of any share premium

£12,500

£12,500 plus a quarter of any share premium

4 / 15

Flop Ltd was in financial difficulties. In January, in order to raise capital, it issued 10,000 £1 shares to Gus, but only asked him to pay 75 pence per share at the time of issue.

In June, the company realised that it needed even more money, and in order to persuade Gus to provide it, Flop Ltd told him that if he bought a further 10,000 shares he would only have to pay a total of 40 pence for each £1 share.

Gus agreed to this, but the injection of cash did not save Flop Ltd and in December it went into insolvent liquidation, owing a considerable amount of money.

REQUIREMENT

What is the general rule concerning the issuing of shares?

Shares may be issued at a premium or discount to their nominal value

Shares may be issued at a premium to their nominal value but not at a discount to it

Shares may be issued at a discount but not at a premium to their nominal value

Shares must be issued at a discount to their nominal value

5 / 15

Flop Ltd was in financial difficulties. In January, in order to raise capital, it issued 10,000 £1 shares to Gus, but only asked him to pay 75 pence per share at the time of issue.

Gus agreed to this, but the injection of cash did not save Flop Ltd and in December it went into insolvent liquidation, owing a considerable amount of money.

REQUIREMENT

What is the extent of Gus's liability on the 10,000 £1 shares that he paid 75p each for?

£7,500 (the amount of share capital paid by Gus)

£2,500 (the amount of Gus's unpaid share capital)

Nothing

£10,000 (the amount of share capital issued to Gus)

6 / 15

Flop Ltd was in financial difficulties. In January, in order to raise capital, it issued 10,000 £1 shares to Gus, but only asked him to pay 75 pence per share at the time of issue.

Gus agreed to this, but the injection of cash did not save Flop Ltd and in December it went into insolvent liquidation, owing a considerable amount of money.

REQUIREMENT

What is the extent of Gus's liability on the further 10,000 £1 shares that he paid 40p each for?

Nothing

£6,000 (the amount unpaid on Gus's shares) only

£4,000 (the amount Gus paid for the shares) plus interest

£6,000 (the amount unpaid on Gus's shares) plus interest

7 / 15

In 20X5 two newspaper companies, Kudos Ltd and Lux Ltd, entered into an agreement in an attempt to safeguard their independent positions. Under the agreement, Kudos Ltd purchased 20% of Lux Ltd's preference shares which carry a preferred dividend of 10%.

The board of directors of Lux Ltd have recently become disenchanted with their link with Kudos Ltd and want encourage Kudos Ltd to sell its preference share in the company. To do this, the board of Lux Ltd proposes a resolution to reduce the dividend on all preference shares to 5%.

REQUIREMENT

Which TWO of the following are examples of class rights?

The right to attend company meetings granted to ordinary shareholders but not preference shareholders

The right to appoint directors granted to preference and ordinary shareholders

The right to approve the appointment of auditors granted to all shareholders

The priority right to a dividend granted to preference shareholders

8 / 15

REQUIREMENT

Which of the following correctly describes the percentage of members that are needed to apply to the court for a variation of class rights to be cancelled?

15% of members of the affected class

10% of all company members

10% of members of the affected class

15% of all company members

9 / 15

REQUIREMENT

Can Kudos Ltd prevent the reduction of the preference dividend and why?

Yes – because it can demonstrate the variation is not for the benefit of the company as a whole

Yes – because it has enough votes to block the resolution

No – because it does not have enough votes to block the resolution or apply to the court for the variation to be cancelled

No – because it does not have enough votes to block the resolution and the court is unlikely to uphold a request from it to have the variation cancelled

10 / 15

Milly Ltd has recently entered into the following arrangements with its creditors.

A single debenture of £15,000 from B Bank that is secured by a charge over Milly Ltd's trade receivables. Milly Ltd may deal with the trade receivables as it wishes. The charge documentation describes the charge as a fixed charge. It was created on 15 May 20X1 and registered on 31 May 20X1.
A single debenture of £10,00 from C Bank that is secured by a fixed charge over Milly Ltd's office building. The charge was created on 20 May 20X1 and registered on 31 May 20X1.
A single debenture of £20,000 from Peppa Ltd secured on Milly Ltd's inventory. A floating charge was created on 3 March 20X1 and registered on 31 March 20X1.
A single debenture of £5,000 from Otto Ltd that is also secured on Milly Ltd's inventory. A floating charge was created on 10 April 20X1 and registered on 30 April 20X1.

REQUIREMENT

Which of the following statements concerning a register of debenture holders is correct?

Companies have no legal obligation to keep a register of debentureholders

Companies are legally required to keep a register of debentureholders for any debentures that it has issued

Companies are legally required to keep a register of debentureholders for debentures issued as a series

Companies are legally required to keep a register of debentureholders for debentures issued as a series or as debenture stock

11 / 15

Milly Ltd has recently entered into the following arrangements with its creditors.

A single debenture of £15,000 from B Bank that is secured by a charge over Milly Ltd's trade receivables. Milly Ltd may deal with the trade receivables as it wishes. The charge documentation describes the charge as a fixed charge. It was created on 15 May 20X1 and registered on 31 May 20X1.
A single debenture of £10,00 from C Bank that is secured by a fixed charge over Milly Ltd's office building. The charge was created on 20 May 20X1 and registered on 31 May 20X1.
A single debenture of £20,000 from Peppa Ltd secured on Milly Ltd's inventory. A floating charge was created on 3 March 20X1 and registered on 31 March 20X1.
A single debenture of £5,000 from Otto Ltd that is also secured on Milly Ltd's inventory. A floating charge was created on 10 April 20X1 and registered on 30 April 20X1.

REQUIREMENT

In regards to the fixed charges, which of the following parties' charges has priority?

12 / 15

Milly Ltd has recently entered into the following arrangements with its creditors.

A single debenture of £15,000 from B Bank that is secured by a charge over Milly Ltd's trade receivables. Milly Ltd may deal with the trade receivables as it wishes. The charge documentation describes the charge as a fixed charge. It was created on 15 May 20X1 and registered on 31 May 20X1.
A single debenture of £10,00 from C Bank that is secured by a fixed charge over Milly Ltd's office building. The charge was created on 20 May 20X1 and registered on 31 May 20X1.
A single debenture of £20,000 from Peppa Ltd secured on Milly Ltd's inventory. A floating charge was created on 3 March 20X1 and registered on 31 March 20X1.
A single debenture of £5,000 from Otto Ltd that is also secured on Milly Ltd's inventory. A floating charge was created on 10 April 20X1 and registered on 30 April 20X1.

REQUIREMENT

In regards to the floating charges, which of the following parties' charges has priority?

Otto Ltd

Peppa Ltd

13 / 15

Dee and Eff are major shareholders in, and the directors of, Fan Ltd. For the year ended 30 April 20X8 Fan Ltd's financial statements showed a loss of £2,000 for the year and no profits were carried forward.

For the year ended 30 April 20X9 Fan Ltd made a profit of £3,000. Also, due to a revaluation, the value of its land and buildings increased by £5,000 and a premium of £4,000 was received from a share issue.

As a consequence, Dee and Eff recommended, and the shareholders approved, the payment of £4,000 in dividends.

REQUIREMENT

What is the distributable profit of Fan Ltd for 20X9?

£12,000 (the company's profit for the year plus increase in value of land and buildings and share premium from share issue)

£8,000 (the company's profit for the year plus increase in value of land and buildings)

£Nil

£3,000 (the company's profit for the year)

14 / 15

As a consequence, Dee and Eff recommended, and the shareholders approved, the payment of £4,000 in dividends.

REQUIREMENT

Which of the following statements correctly describes the liability of Dee and Eff if the dividend paid to them is made from undistributable reserves?

Liable only as shareholders for knowingly receiving an unlawful dividend

Liable as directors for declaring unlawful dividends and as shareholders for knowingly receiving unlawful dividends

Liable only as directors for declaring unlawful dividends

No liability because as directors and shareholders, Dee and Eff are protected by the veil of incorporation

15 / 15

As a consequence, Dee and Eff recommended, and the shareholders approved, the payment of £4,000 in dividends.

REQUIREMENT

Which of the following is NOT exempt from the dividend payment rules?

Paying out a cumulative dividend to preference shareholders

A reduction of share capital

Distributing assets upon a winding up

The issue of bonus shares