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Free Questions › ACCA › Corporate and Business Law
Free ACCA Corporate and Business Law Practice Questions & Answers
400 exam-style Corporate and Business Law questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 391
Which of the following best describes a 'security interest' in company finance?
Select an option first.
Correct answer: B — A right granted over assets to a lender so that, if the borrower defaults, the lender can realise those assets to recover the debt
Explanation: A security interest (e.g., a fixed or floating charge) gives the lender rights over specific assets on default. A is unsecured; C is a personal guarantee; D is a covenant.
Question 392
'Thin capitalisation' in corporate finance refers to:
Select an option first.
Correct answer: B — A company predominantly funded by debt rather than equity, raising tax and insolvency risk concerns
Explanation: Thin capitalisation: a company funded mainly by debt rather than equity. This creates tax issues and risk for creditors if insolvency occurs, as debt holders rank ahead of equity.
Question 393
A 'scheme of arrangement' under Part 26 CA 2006 requires which court involvement?
Select an option first.
Correct answer: B — The court must sanction (approve) the scheme after the requisite creditor/shareholder majorities have approved it
Explanation: Part 26 CA 2006: after approval by 75% in value (and majority in number) of each class, the court must sanction the scheme before it binds all members of each class.
Question 394
In corporate insolvency, 'preferential debts' rank:
Select an option first.
Correct answer: B — After fixed charges and insolvency costs, but before the claims of floating charge holders and unsecured creditors
Explanation: Preferential debts (IA 1986, Sch 6 as amended by IA(N)A 2020) rank after fixed charges and insolvency costs, but before floating charge holders and unsecured creditors.
Question 395
The 'wrongful trading' civil liability (s.214 IA 1986) can be avoided by a director if:
Select an option first.
Correct answer: B — The director took every step with a view to minimising the potential loss to creditors from the point they knew or ought to have known insolvency was unavoidable
Explanation: s.214(3) IA 1986: the director escapes liability if they took every step to minimise creditor losses once they knew insolvency was unavoidable. A, C and D are not defences.
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Question 396
The 'anti-avoidance' provision for transactions at undervalue (s.238 IA 1986) can challenge transactions made within:
Select an option first.
Correct answer: B — 2 years of the onset of insolvency, regardless of whether the other party is connected
Explanation: s.238 IA 1986: transactions at undervalue can be challenged within 2 years before the onset of insolvency, regardless of whether the counterparty is connected.
Question 397
The Insolvency Act 1986 (Prescribed Part) (Amendment) Order 2020 raised the cap on the prescribed part to:
Select an option first.
Correct answer: B — £800,000
Explanation: The 2020 Amendment Order raised the prescribed part cap from £600,000 to £800,000, improving the ring-fenced amount available to unsecured creditors from floating charge realisations.
Question 398
The FCA's power to impose a 'market abuse' sanction includes:
Select an option first.
Correct answer: B — Civil powers to impose unlimited financial penalties, censures, and prohibitions on individuals and firms for market abuse under FSMA 2000
Explanation: The FCA (as competent authority) has civil enforcement powers under FSMA 2000: unlimited financial penalties, public censure, and prohibition of individuals.
Question 399
A 'proof of debt' submitted by a creditor in a liquidation must:
Select an option first.
Correct answer: B — Be in the prescribed form (or contain the required information), state the amount owed and the basis of the claim, and be submitted to the liquidator for adjudication
Explanation: Creditors submit proofs of debt directly to the liquidator in a prescribed form. The liquidator adjudicates and admits or rejects proofs. A, C and D are incorrect.
Question 400
A 'fixed charge' over book debts (trade receivables) was confirmed to require strict control conditions in which leading case?
Select an option first.
Correct answer: B — Re Spectrum Plus Ltd [2005]
Explanation: Re Spectrum Plus [2005] (Supreme Court): a fixed charge over book debts is only valid if the chargor is restricted from dealing with the proceeds of collected debts – paying them into a blocked account controlled by the chargeholder. Without this, the charge is floating.
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