LW D The formation and constitution of business organisations

An agent acts outside the authority given by the principal and the third party did not know. Who may the third party claim against?

• 1 The company's auditor
• 2 The principal in all cases
• 3 No one
• 4 The agent, for breach of warranty of authority

Apparent authority arises when:

• 1 The agent has a written contract
• 2 The agent has worked for ten years
• 3 The principal's conduct leads the third party to believe that the agent has authority
• 4 The agent is paid a commission

In an ordinary partnership, how are the partners liable for the firm's debts?

• 1 Jointly, without limit, with their personal assets
• 2 Only the senior partner is liable
• 3 Only for the amount they invested
• 4 Not at all

A limited partner's liability is limited as long as the partner:

• 1 Works full time in the firm
• 2 Does not take part in management
• 3 Is a director
• 4 Invests more than half of the capital

What does the veil of incorporation mean?

• 1 The company cannot be sued
• 2 The members own the company's assets directly
• 3 The company has no liability
• 4 A company has a legal personality separate from its members

In which circumstance will a court most likely lift the veil of incorporation?

• 1 The company is small
• 2 The company has one shareholder
• 3 The company makes a loss
• 4 A company is used as a sham to avoid an existing legal obligation

What is a promoter?

• 1 A person who takes the steps needed to form a company
• 2 A person who buys shares
• 3 A person who is the company secretary
• 4 A person who audits the company

A person signs a contract for a company that has not yet been formed. What is the usual rule?

• 1 The contract binds the shareholders
• 2 The company cannot ratify it, and the person may be personally liable
• 3 The company is automatically bound
• 4 The contract is automatically void for all parties

How can a company's articles of association generally be changed?

• 1 By an ordinary resolution of the directors
• 2 By a decision of the company secretary
• 3 By the auditor
• 4 By a special resolution