THE UNIVERSITY OF NEW SOUTH WALES

School of Business Law & Taxation LEGT 2741 Business Entities

Mon 27 April 2009 at CLB7 at 6.00 (for approx 6.20pm start)

SAMPLE MID-SESSION EXAM

Session 1 2009

Time Allowed: Marks:

INSTRUCTIONS:

40 minutes 15

1. Answer all 30 questions (worth half a mark each) on the attached answer sheet. 2. Write your name and student number on the same attached answer sheet. 3. Only one (1) response per question will be accepted candidates are strongly advised to use a 2Hb pencil. 4. This is a

closed book examination no study materials are allowed.

5. Candidates MUST NOT REMOVE this examination paper.

Sample Multiple Choice Questions

Question 1 The Corporations Act requires public and proprietary companies to have at least: (a) (b) (c) (d) two members and one member respectively one member each five members and one member respectively three members and one member respectively

Question 2 Shareholders in a company limited by shares whose shares are fully paid: (a) (b) (c) (d) are not liable for the debts of the company at all are liable for its debts if, on a winding-up, there are insufficient assets are liable to its secured creditors if their security realises less than the amount of the loan and interest are not liable for the debts of the company except that they must indemnify the directors against any claims against them personally

Question 3 Select the incorrect answer A holder of ordinary shares will generally have: (a) voting rights at the companys general meeting. (b) more voting rights than other classes of shareholders. (c) a right to participate in any surplus assets on a winding up. (d) a right to always share equally in dividends. Question 4 The following business vehicles are taxed as a separate entity: (a) (b) (c) (d) Companies. Companies and partnerships. Companies and trusts. Companies, trusts and partnerships.

Question 5 A syndicate of business people headed by Charles expects to obtain a license from the Timor government to drill for oil and gas in the Timor gap. They decided to form a company, Bright Prospects NL to exploit the mining license. Before finalisation of negotiations and registration of the company, Charles, on behalf of the proposed company, ordered drilling equipment from Hi-tech Ld. Shortly thereafter the Timor government awarded the mining license to another bidder. As a result, the syndicate decides not to proceed with the registration of the company. It also refuses to pay for the equipment as it has no use for it now. Select the correct statement from the following:

(a) (b) (c) (d)

As Bright Prospects NL was never registered, no one is liable to pay for the equipment. As Bright Prospects NL was never registered, Hi-tech Ltds sole remedy is to recover its equipment from the syndicate. As Bright Prospects NL was never registered, Charles is liable to pay for the equipment. Hi-tech Ltd may sue Bright Prospects NL as there was intention to register the company.

Question 6 Which of the following statement on partnership law is incorrect? a) Where there are only two partners, the death of one of the partners will bring the partnership to an end. b) Partners have joint and several liabilities for breach of partnership contracts. c) A limited liability partner cannot be involved in the management of the business affairs of the partnership. d) Every partner acts as both principal and agent for the business of the partnership. Question 7 Select the most accurate answer from the answers below. The Partnership Act states that a partnership must consist of two or more people who, a) b) c) d) carry on business together to make a profit carry on any activity in common to make a profit. carry on a business together in common. carry on a business in common with a view to making a profit.

Question 8 The maintenance of share capital rule (the rule in Trevor v Whitworth) seeks to protect the companys: (a) (b) (c) (d) directors. creditors. shareholders only. creditors and directors.

Question 9 Sam, an entertainer, is the sole director and shareholder of Sparks Pty Ltd which is properly incorporated and in the entertainment business. John contracts with Sparks Pty Ltd for Sam to appear at a concert. Sam fails to appear and John loses a large sum of money. John has a legal remedy against: (a) (b) Sparks Pty Ltd. Sam, as a director of Sparks Pty Ltd.

(c) (d)

Sam, as owner of Sparks Pty Ltd. Sam, on the basis that Sparks Pty Ltd is a sham.

Question 10 Select the incorrect answer Under the Corporations Act, the constitution (if any) of a company and its replaceable rules has effect as a contract: (a) (b) (c) (d) between the company and each member. between the company and each director and secretary. between the company and each officer. between a member and each other member.

Answers:
Question 1 Question 2 Question 3 Question 4 Question 5 Question 6 Question 7 Question 8 Question 9 Question 10 b a d a c b d b a c

NOTE: WEEK 7 (Mid-Session Exam Details, Conditions and Procedure) MidSession Closed Book Exam on Monday 27 April 2009 at CLB 7 at 6.00pm (for start at approx 6.20pm and finish 40 min later. Please do not enter and sit inside the venue. Wait until you are instructed to enter. Only take following to your seat in the exam room: Student ID Card Pencil + Eraser Note:

(i) Books/Bags must be placed at the front of the lecture theatre. It cannot be taken to your seat. You are requested to proceed to the front to drop off study materials and return to your seat as quickly as possible to expedite the start of the exam a slow

response will lead to a delayed start and completion time.

(ii) Mobile phones must be switched off and placed either on the floor (your responsibility to retrieve at end of exam) or /in bag at front of the lecture theatre the latter option is strongly recommended.

(iii) Universitys examination rules (including exclusion) are applicable. Week 2 up to and including Week 6 materials examinable. Read course-outline for special consideration Rules and Procedure If you have a clash with any other course, please advise your lecturer that you will miss the first hour of class due to mid-session exam Good Luck with your preparations - ( Original Notice posted on Friday 3 April 2009 Week 4; Revised notice with extra questions (now representing one-third of

the exam questions) posted on Tuesday 7 April 2009 in response to student feedback)