ACCA Corporate and Business Law (LW-GLO)
Part D: Formation and Constitution of Business Organisations (50 Practice Questions)
Examiner Style: Exam-standard multiple-choice questions (Section A & B style)
Syllabus Coverage: Chapters 7 to 11 (Agency Law, Partnerships, Corporations & Legal Personality, Company
Formation, and Company Constitution)
Instructions: Work through each question carefully. Answers are intentionally omitted to support active practice
and revision.
Chapter 7: Agency Law (Q1 - Q10)
Q1. Amy appoints Ben as her agent to buy a specific warehouse on her behalf. Amy tells Ben privately
not to spend more than USD 500,000. Ben enters into a contract to buy the warehouse for USD 550,000
with a third party, Seller, who has no knowledge of this private price limit. Is Amy bound by the contract
with Seller?
A. No, because Ben exceeded his actual authority.
B. Yes, because Ben acted within his apparent (ostensible) authority.
C. No, because private instructions always void third-party contracts.
D. Yes, because Ben had implied authority as a family member.
Q2. David runs a business and regularly lets his manager, Eric, buy office supplies on credit from
Supplier. David later fires Eric, but he forgets to notify Supplier. Eric, acting as though he is still
employed, orders more goods from Supplier on David’s account. What type of authority does Eric have to
bind David in this contract?
A. Express actual authority
B. Implied actual authority
C. Apparent (ostensible) authority
D. No authority, as agency terminates immediately upon firing.
Q3. Frank finds out that George, acting without any authority, signed a contract on Frank's behalf to buy
a vintage car from an owner. Frank loves the car and decides to adopt and approve the contract after it
was made. What legal term describes Frank’s action?
A. Novation
B. Ratification
C. Delegation
D. Indemnification
ACCA Corporate and Business Law (LW-GLO) - Part D Practice Exam
Page 1 of 10
Q4. Hannah is an agent for Ian. While performing her duties, Hannah acts with gross negligence and
causes financial damage to Ian’s business client. The client sues Ian for the damage. Can Ian recover the
money he paid to the client from Hannah?
A. No, because agents are never personally liable for business errors.
B. No, unless Hannah was paid a salary.
C. Yes, because an agent owes a duty of care and skill and must indemnify the principal for losses caused by
breach of duty.
D. Yes, but only through criminal proceedings.
Q5. Jack is appointed as an agent to sell a property for Kevin. Without telling Kevin, Jack buys the
property himself through a company he secretly owns. Which fiduciary duty has Jack breached?
A. The duty to keep proper accounts
B. The duty not to delegate authority
C. The duty to perform personally
D. The duty to avoid a conflict of interest
Q6. Laura acts as an agent for a principal, but deliberately conceals the fact that she is acting as an
agent, pretending to contract entirely on her own account. What is the legal term for this type of
principal?
A. A disclosed principal
B. An undisclosed principal
C. A fictitious principal
D. A nominal principal
Q7. Nick is appointed as an agent under a formal power of attorney to manage real estate transactions.
Can Nick delegate his professional legal responsibilities to another sub-agent without express
permission?
A. Yes, delegating is always an agent's automatic right.
B. No, under the Latin rule delegatus non potest delegare, an agent cannot delegate personal trust and
authority unless permitted.
C. Yes, provided the sub-agent is a close friend.
D. No, unless the sub-agent pays Nick a fee.
Q8. Olivia appoints Peter as her agent. Peter enters into a binding contract with a third party while
explicitly stating he is acting as an agent for Olivia, though he does not name Olivia. What type of
principal is Olivia?
A. Disclosed and named principal
B. Disclosed and unnamed principal
C. Undisclosed principal
D. Non-existent principal
ACCA Corporate and Business Law (LW-GLO) - Part D Practice Exam
Page 2 of 10
Q9. Which of the following events automatically terminates an agency relationship by operation of law?
A. A minor disagreement over commission rates
B. The bankruptcy, mental incapacity, or death of either the principal or the agent
C. A change in the office furniture
D. The principal taking a short vacation
Q10. Rachel is appointed as a purchasing agent. She accepts a secret cash commission from a supplier
in exchange for favoring their products over competitors, without telling her principal. What are the legal
consequences for Rachel?
A. She is entitled to keep the bonus as a performance tip.
B. The principal can dismiss her without notice, recover the secret commission, and rescind the contract.
C. She is promoted to senior manager.
D. The contract with the supplier becomes twice as strong.
Chapter 8: Partnerships (Q11 - Q20)
Q11. Laura, Mona, and Nina form an ordinary partnership to run a bakery. The partnership agreement
says nothing about profit sharing. Laura contributed 60% of the capital, Mona contributed 30%, and Nina
contributed 10%. How should the partnership profits be shared under partnership law?
A. 60:30:10 according to capital contribution
B. Equally, regardless of capital contribution
C. 50% to Laura and 25% each to Mona and Nina
D. According to the number of hours each partner works
Q12. Oliver, Paul, and Quentin are partners in a firm. Paul, acting on his own and without telling Oliver or
Quentin, enters into a contract to buy delivery vans for the partnership business. The type of vans
bought is normally used in this kind of business. Are Oliver and Quentin bound by Paul's contract?
A. No, because all partners must sign contracts.
B. Yes, because every partner is an agent of the partnership for the purpose of the partnership business
(implied authority).
C. No, unless Paul obtained a majority vote first.
D. Yes, but only if Paul paid using his own money.
Q13. Rachel, Sarah, and Tina are partners. Rachel decides to retire from the partnership. She forgets to
give public notice or inform regular customers of her retirement. Sarah later orders goods from a regular
supplier who still believes Rachel is a partner. Is Rachel liable to the supplier for this new order?
A. No, because partners are not liable after retirement.
B. Yes, under the principle of holding out / apparent partner liability, because notice of retirement was not
given.
C. No, because the partnership automatically dissolved.
D. Yes, but only if Sarah used Rachel's personal credit card.
ACCA Corporate and Business Law (LW-GLO) - Part D Practice Exam
Page 3 of 10
Q14. Uma, Vera, and Wendy are partners. Vera commits a serious fraud against a client while carrying out
everyday partnership business tasks. Who is legally liable for Vera’s wrongful act (tort)?
A. Only Vera, because she committed the act alone.
B. Only the partnership firm's insurance company.
C. Vera and the partnership jointly and severally.
D. Only Uma and Wendy, because Vera was acting outside her duties.
Q15. Which of the following is a key difference between a traditional Partnership and a Limited Liability
Partnership (LLP)?
A. An LLP does not have a separate legal personality.
B. Partners in an LLP have unlimited personal liability for all debts.
C. An LLP provides limited liability protection to all its members while allowing them to participate in
management.
D. An LLP cannot have more than two partners.
Q16. Two people run a business together with the shared view of making a profit, but they never formally
sign any partnership agreement or register anything. Does a legal partnership exist between them?
A. No, a written contract notarized by a lawyer is legally mandatory to form a partnership.
B. Yes, a partnership is formed whenever persons carry on business in common with a view of profit,
regardless of paperwork.
C. No, they are legally classified as a public limited company.
D. Yes, but only for tax evasion purposes.
Q17. Under partnership law, can a new partner be introduced into an existing partnership firm without the
consent of all existing partners?
A. Yes, any partner can introduce anyone at any time.
B. No, unanimous consent of all existing partners is required to introduce a new partner, unless the
partnership agreement states otherwise.
C. Yes, if a majority of 51% votes in favor.
D. No, new partners are strictly prohibited by law.
Q18. What happens to an ordinary partnership upon the death or bankruptcy of one of the partners?
A. The partnership automatically dissolves, unless there is a prior agreement stating otherwise.
B. Nothing changes; the dead partner's ghost retains a vote.
C. The government takes over ownership of the firm.
D. The partnership automatically converts into a corporation.
Q19. Which of the following persons is NOT automatically presumed to be a partner merely because they
receive a share of business profits?
A. Someone receiving a payment of a debt by installments out of profits
B. An active co-owner running the storefront daily
C. A person sharing gross returns from a joint business venture
D. A co-adventurer sharing net operating profits
ACCA Corporate and Business Law (LW-GLO) - Part D Practice Exam
Page 4 of 10
Q20. In a Limited Partnership (as distinct from an LLP), what is the key characteristic of a "limited
partner"?
A. They manage the daily operations and have unlimited liability.
B. They contribute capital, do not take part in management, and have liability limited to the amount of capital
contributed.
C. They are exempt from paying any income tax.
D. They must be a corporate entity.
Chapter 9: Corporations and Legal Personality (Q21 - Q30)
Q21. The landmark case of *Salomon v Salomon & Co Ltd* established which fundamental principle of
company law?
A. Directors are personally liable for all business debts.
B. A company is a legal person distinct and separate from its members and shareholders.
C. Small family businesses cannot be registered as companies.
D. Shareholders must guarantee company loans with their personal houses.
Q22. Xander is the sole shareholder and managing director of a small registered company. He uses the
company’s bank account to pay for his personal luxury grocery shopping and family holidays. If the
company becomes insolvent, what is the legal consequence regarding Xander's personal liability?
A. Limited liability protects Xander completely under all circumstances.
B. The court may "lift (or pierce) the corporate veil" to hold Xander personally liable because he abused the
corporate form.
C. Xander will automatically face criminal execution.
D. The company’s debts will be cancelled by the government.
Q23. Which of the following is a primary consequence of a company having a "separate legal
personality"?
A. The company can own property, enter into contracts, and sue or be sued in its own name.
B. The shareholders automatically own the physical assets of the company directly.
C. The directors are immune from any criminal liability.
D. The company pays no taxes whatsoever.
Q24. Under what circumstances will a court most likely "pierce the corporate veil" based on statute or
common law?
A. When the company makes a net profit for three consecutive years.
B. When a company is used as a sham or facade to avoid an existing legal obligation or liability.
C. When the shareholders disagree on who should be the chairperson.
D. When the company changes its registered office address without notice.
ACCA Corporate and Business Law (LW-GLO) - Part D Practice Exam
Page 5 of 10
Q25. What is the main structural difference between a Public Limited Company (PLC) and a Private
Limited Company (Ltd)?
A. A PLC cannot have more than 50 employees.
B. A PLC is permitted to offer its shares and debentures to the general public, whereas a private company is
restricted from doing so.
C. A private company has separate legal personality, but a PLC does not.
D. Directors of a PLC have unlimited personal liability.
Q26. Can a shareholder of a company steal or appropriate company property for personal use without
legal consequence just because they own 95% of the shares?
A. Yes, majority shareholders own everything.
B. No, because company property belongs to the company as a separate legal entity, not the shareholders.
C. Yes, provided they report it on their birthday.
D. No, but only if there are minority shareholders present.
Q27. In the context of corporate groups (holding and subsidiary companies), what is the general legal
rule regarding liability between parent and subsidiary companies?
A. A parent company is automatically liable for every single debt of its subsidiary.
B. Each company in the group is a separate legal entity; hence, the parent is not liable for the subsidiary's
debts unless specific veil-piercing grounds apply or a guarantee was given.
C. Subsidiary companies cannot own bank accounts.
D. Parent companies legally own the employees of the subsidiary.
Q28. What does "limited liability" mean for an ordinary shareholder of a limited company?
A. Their liability to contribute to company debts is limited to the nominal value (and any unpaid amount) of the
shares they hold.
B. They are limited in how many times they can vote.
C. They have limited access to company financial statements.
D. They cannot sue the company under any contract.
Q29. Which statutory provision or situation commonly leads courts to pierce the corporate veil in modern
trading environments?
A. Wrongful or fraudulent trading where directors knowingly run up debts with intent to defraud creditors.
B. Failing to paint the company office building.
C. Appointing a relative as company secretary.
D. Holding board meetings online via video call.
Q30. How does a corporation exercise its legal capacity since it is an artificial legal person and cannot
act physically on its own?
A. Through random selection of citizens
B. Through its human agents, directors, and authorized officers acting within their authority
C. By hiring a government official as a legal guardian
D. By automatic computer algorithms only
ACCA Corporate and Business Law (LW-GLO) - Part D Practice Exam
Page 6 of 10
Chapter 10: Company Formation (Q31 - Q40)
Q31. Two promoters sign a contract on behalf of a company that has not yet been registered, intending
for the company to take over the contract later. The company is later registered. What is the legal status
of this pre-incorporation contract under standard common law rules?
A. The company is automatically bound from the date of signing.
B. The promoters are personally liable on the contract, and the company cannot ratify it after incorporation
without a novation.
C. The contract is completely void and illegal.
D. The government takes over the contract obligations.
Q32. Which document is typically submitted to the Registrar of Companies to officially apply for the
registration and incorporation of a new company?
A. The annual general meeting minute
B. The application for registration (incorporation documents / memorandum of association and application
form)
C. The board of directors' CVs
D. The dividend distribution policy
Q33. What official document does the Registrar of Companies issue once a company has successfully
completed all registration requirements?
A. A tax clearance certificate
B. A business license
C. A Certificate of Incorporation
D. A share certificate booklet
Q34. Can a private limited company commence business operations immediately upon receiving its
Certificate of Incorporation?
A. No, it must wait for a trading certificate from the court.
B. Yes, a private company can commence business right away upon incorporation.
C. No, it must wait until it has at least 100 shareholders.
D. Yes, but only if it sells non-food products.
Q35. What is the legal effect of the registration of a company on the status of its members?
A. It creates a corporation with legal personality separate from its members, limiting their liability.
B. It turns all members into company employees.
C. It merges the personal bank accounts of members with the company account.
D. It makes the members partners in a general partnership.
ACCA Corporate and Business Law (LW-GLO) - Part D Practice Exam
Page 7 of 10
Q36. What is the role of a "promoter" in company law?
A. A person who audits company tax returns after five years of trading.
B. A person who undertakes the preparations and steps necessary to form and float a company.
C. A government inspector checking factory safety.
D. A bank teller who handles corporate deposits.
Q37. What fiduciary duty does a promoter owe to the company they are forming?
A. No duty whatsoever, because the company does not exist yet.
B. A fiduciary duty of good faith, full disclosure of any profits made, and not to make a secret profit at the
company's expense.
C. An obligation to work for free for ten years.
D. A duty to pay all corporate taxes personally.
Q38. Under company law statutes, what is a public limited company (PLC) generally required to obtain
before it can legally commence business or exercise borrowing powers (trading certificate
requirements)?
A. A special trading certificate issued by the Registrar confirming a minimum allotted share capital.
B. Written approval from every citizen in the country.
C. An endorsement from the international trade organization.
D. A lottery license.
Q39. What is the evidentiary value of a Certificate of Incorporation once it has been issued by the
Registrar of Companies?
A. It is conclusive evidence that all statutory requirements for registration have been complied with and that
the company is duly incorporated.
B. It is merely a suggestion that can be challenged easily in minor court claims.
C. It expires after 30 days unless renewed.
D. It only proves the company's address, not its existence.
Q40. If a promoter enters into a pre-incorporation contract and the company refuses to adopt it after
incorporation, how can the contract be made binding on the company cleanly?
A. Through a novation agreement involving the third party, the promoter, and the newly incorporated company.
B. By sending an email to the registrar.
C. By paying a fine to the court.
D. It is legally impossible under any circumstance.
ACCA Corporate and Business Law (LW-GLO) - Part D Practice Exam
Page 8 of 10
Chapter 11: Constitution of a Company (Q41 - Q50)
Q41. The articles of association of a company state that the company has power to borrow up to USD
1,000,000. The directors borrow USD 1,500,000 from a bank without authorization. What is the legal effect
of this transaction under modern company law provisions?
A. The transaction is completely void because of the ultra vires doctrine.
B. The transaction remains valid and binding on the company, though the directors may be in breach of their
duties to the company.
C. The bank loses all its money permanently without any legal recourse.
D. The government seizes the borrowed funds.
Q42. How can a company alter or amend its articles of association?
A. By a unanimous vote of all employees.
B. By a special resolution passed by the shareholders (usually requiring a 75% majority vote).
C. By a simple email from the managing director.
D. By getting permission from the local police department.
Q43. Can a company include a clause in its articles of association that cannot be altered or changed
under any circumstances?
A. Yes, perpetual clauses are mandatory for public companies.
B. No, articles can generally be altered by special resolution, though certain entrenched provisions may
require higher voting thresholds or specific conditions.
C. Yes, if approved by the company secretary alone.
D. No, articles can never be changed once registered.
Q44. In company law, the constitutional documents (such as the articles of association) create a statutory
contract between:
A. The company and its customers only.
B. The company and its members, and between the members inter se (among themselves).
C. The government and the company directors.
D. The company auditors and the bank.
Q45. A shareholder named Brenda wants to enforce a right given to her personally in the articles of
association (e.g., her right to be appointed as company solicitor). Can Brenda sue the company based on
this clause in the articles?
A. Yes, because any clause in the articles can be enforced by anyone.
B. No, if the right relates to her in a non-member capacity (an outsider right), unless it constitutes part of her
membership rights.
C. Yes, because articles are treated as an employment contract.
D. No, shareholders have no legal standing to sue companies under any circumstances.
ACCA Corporate and Business Law (LW-GLO) - Part D Practice Exam
Page 9 of 10
Q46. What is the scope of the traditional "ultra vires" doctrine in modern company law regarding a
company's capacity?
A. Companies have unlimited capacity by default unless restricted by their articles, significantly reducing the
practical impact of ultra vires on third parties.
B. Companies are strictly restricted to manufacturing paper products.
C. Third parties must check company articles before buying stationery.
D. Directors are jailed if they buy an office desk.
Q47. Can an alteration of a company's articles of association be challenged if it is passed by the required
75% majority vote?
A. No, majority rule is absolute under all circumstances.
B. Yes, if the alteration is not made in good faith for the benefit of the company as a whole, or if it constitutes a
fraud on minority shareholders.
C. Yes, if one employee objects.
D. No, courts never review company resolutions.
Q48. What is the legal status of an outsider (such as a director who is also a shareholder) who relies on a
clause in the articles regarding their employment contract?
A. The articles themselves do not constitute an employment contract between the company and the director
as an employee; a separate contract is required.
B. The articles automatically become a lifetime employment guarantee.
C. The government guarantees their salary.
D. Directors cannot be employees under any corporate structure.
Q49. How are the internal governance rules and administrative procedures of a company primarily
regulated?
A. By the articles of association
B. By national criminal law textbooks
C. By international tax treaties
D. By the local police handbook
Q50. If a provision in a company's articles of association conflicts directly with the requirements of the
governing Companies Act legislation, which rule prevails?
A. The articles of association always prevail.
B. The Companies Act legislation always prevails over conflicting articles.
C. Whichever document was printed first prevails.
D. The board of directors decides which rule to follow on a case-by-case basis.
ACCA Corporate and Business Law (LW-GLO) - Part D Practice Exam
Page 10 of 10