These are ACCA F4 Global (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 Global 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 Global (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 Global – CL/LW
Chapter:	Capital maintenance and dividend law
Chapter Number:	17 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 Global (CL/LW) Corporate and Business Law Module.

Time

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Result

Students will get their F4 Global 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 (GLO) - Chapter 17 - Part E - MCQs

Course: ACCA - Association of Chartered Certified Accountants
Subject: F4 (LW/CL) (GLOBAL) - Corporate And Business Law
Syllabus Area: E - Capital and the financing of companies
Chapter in Kit: 17 - Capital maintenance and dividend law
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

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1 / 16

What is the principle of capital maintenance?

Companies should maintain the ratio of their debt and equity capital

Companies should seek to maintain or increase their capital at all times

Companies should not make payments out of capital to the detriment of creditors

2 / 16

Which of the following statements regarding reduction of capital is correct?

A limited company requires a court order to cancel unissued shares

A limited company is permitted without restriction to cancel its unissued shares

A limited company requires a special resolution of its members to cancel unissued shares

3 / 16

Which of the following is required to permit a private company to reduce its share capital without application to a court?

Authority in the articles and an ordinary resolution

A special resolution and a solvency statement from the directors

A special resolution only

4 / 16

Which of the following is required to permit a public company to reduce its share capital?

Authority in the articles and a special resolution

A special resolution and court approval

A special resolution and a solvency statement from the directors

5 / 16

Which type of dividend is paid by the issue of additional shares?

Equity dividends

Capital dividends

Scrip dividends

6 / 16

At which point before its payment does a dividend become a debt of the company?

When it is declared by the company in general meeting

When the company's bank receives the instruction to make the payment

When it is recorded in the financial statements

7 / 16

Which of the following is an undistributable reserve for the payment of a dividend?

Capital redemption reserve

Accumulated realised profits

Retained earnings

8 / 16

The rules of capital maintenance exist to primarily protect which of the following parties?

A company's members

A company's creditors

A company's customers

The government

9 / 16

Which of the following is NOT a valid method that a company may use to reduce its share capital according to the Companies Act 2006?

Pay off part of paid-up share capital out of surplus profits

Cancel paid-up share capital that is no longer represented by assets

Buy back fully paid up share capital from shareholders using cash not surplus profit

Extinguish liability on partly paid shares

10 / 16

Which TWO of the following are true concerning the issuing of a solvency statement by private companies in connection with a reduction of the company's share capital?

A solvency statement must be made 15 days in advance of the meeting where the special resolution concerning the reduction will be voted on.
Only the Chairman and Finance Director of the company must be named on the statement.
The statement must declare that there are no grounds to suspect the company will be unable to pay its debts for the next six months.
It is an offence to make a solvency statement without reasonable grounds for the opinion expressed in it.

3 and 4

1 and 4

2 and 3

1 and 2

11 / 16

Which of the following statements concerning public companies reducing their share capital is correct?

A public company can reduce its share capital to below £50,000 and remain a public company without restriction

A public company that wishes to reduce its share capital to below £50,000 must obtain permission from the stock market

A public company that wishes to reduce its share capital to below £50,000 must re-register as a private company

A public company that wishes to reduce its share capital to below £50,000 must pass a written resolution of the members

12 / 16

What is the name given to dividends that are paid part of the way through a company's financial year?

Preference dividends

Interim dividends

Dividends paid in specie

Semi-dividends

13 / 16

In relation to the payment of dividends, which of the following will be included in the profit available for distribution in a company's current financial year?

A premium received on the nominal value of shares issued in the current financial year

Profit on the sale of an asset sold after the end of the current financial year

A depreciation charge made in the current financial year

An increase in the asset value of a head office building that occurred during the current financial year

14 / 16

Which of the following statements is true concerning the payment of dividends by a public company?

A public company may make a distribution as long as its net assets are not less than its share capital less its undistributable reserves

A public company may make a distribution as long as its net assets are not less than its share capital

A public company may make a distribution as long as its net assets are not less than its share capital plus its undistributable reserves

A public company may make a distribution as long as its net assets are not less than its undistributable reserves

15 / 16

Which TWO of the following statements concerning liability for the payment of unlawful dividends is correct?

Directors are liable if they declare a dividend that they know to be paid out of capital
Members who did not know the payment was unlawful are not liable
Directors face criminal liability if they declare unlawful dividends
Directors who honestly rely on proper accounts when deciding whether to pay a dividend are still liable if it turns out to be unlawful

2 and 3

1 and 2

3 and 4

1 and 4

16 / 16

Which TWO of the following statements concerning liability for the payment of unlawful dividends is correct?

Directors are liable if they declare a dividend that they know to be paid out of capital
Members who did not know the payment was unlawful are not liable
Directors face criminal liability if they declare unlawful dividends
Directors who honestly rely on proper accounts when deciding whether to pay a dividend are still liable if it turns out to be unlawful

1 and 4

1 and 2

2 and 3

3 and 4