CAF-4 · Chapter 18
Directors MCQs with Answers
9 multiple-choice questions on Directors for CAF-4 Business Law Dynamics. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
What is the statutory requirement regarding the frequency of board meetings for the directors of a public company?
- A) They must meet at least once every month.
- B) They must meet at least once in each quarter of a year.
- C) They must meet bi-annually.
- D) They must meet only prior to the Annual General Meeting.
Show answer & explanation
Answer: B) They must meet at least once in each quarter of a year.
The directors of a public company are required to meet at least once in each quarter of a year.
Question 2
A director may vacate their office if they absent themselves from board meetings without obtaining a leave of absence. How many consecutive meetings must they miss for this to happen?
- A) Two consecutive meetings
- B) Three consecutive meetings
- C) Four consecutive meetings
- D) Five consecutive meetings
Show answer & explanation
Answer: B) Three consecutive meetings
A director's office can be vacated if they are absent for three consecutive board meetings without obtaining a leave of absence.
Question 3
The board of directors of Sapphire Limited, a listed company, is preparing for its upcoming elections. What is the statutory deadline for the existing board to fix the number of directors to be elected?
- A) At least 14 days before the convening of the general meeting.
- B) At least 21 days before the convening of the general meeting.
- C) Not later than 35 days before the convening of the general meeting.
- D) On the exact day of the general meeting.
Show answer & explanation
Answer: C) Not later than 35 days before the convening of the general meeting.
The directors must fix the number of directors to be elected for the next term not later than 35 days before the convening of the general meeting at which the elections are to be held.
Question 4
Atab is an elected director in a listed company. He recently suffered a severe medical condition and was declared by a competent court to be of unsound mind. What is the immediate effect on his directorship?
- A) He is given a 30-day grace period to recover.
- B) He ipso facto (automatically) ceases to hold the office of director.
- C) He is suspended with half pay until the next AGM.
- D) The shareholders must vote to remove him.
Show answer & explanation
Answer: B) He ipso facto (automatically) ceases to hold the office of director.
A director ipso facto ceases to hold office if they become ineligible under the law, which includes being declared of unsound mind by a competent court.
Question 5
A casual vacancy occurs on the board of a listed company due to the sudden resignation of a director. What is the legal requirement for filling this vacancy?
- A) It must be filled by the remaining directors within 90 days, and the new director holds office for the remainder of the term.
- B) It must be left vacant until the next annual general meeting.
- C) The shareholders must hold an extraordinary general meeting within 30 days.
- D) The SECP will automatically appoint a replacement.
Show answer & explanation
Answer: A) It must be filled by the remaining directors within 90 days, and the new director holds office for the remainder of the term.
Any casual vacancy on the board of a listed company must be filled by the directors within 90 days. The person appointed holds office for the remainder of the term of the director in whose place they were appointed.
Question 6
In a public unlisted company, a resolution is moved in a general meeting to remove an elected director, Farhan. The company has 10 million shares and 5 directors. In the last election, the candidate who secured the lowest number of votes to successfully become a director received 1.5 million votes. How many votes does Farhan need to survive the removal resolution?
- A) More than 50% of the total shares.
- B) Exactly 2 million votes.
- C) A number of votes equal to or exceeding 1.5 million.
- D) He cannot be removed before his term expires.
Show answer & explanation
Answer: C) A number of votes equal to or exceeding 1.5 million.
An elected director cannot be removed if the votes cast against the removal resolution equal or exceed the minimum number of votes that were sufficient to elect a director in the immediately preceding election (which is 1.5 million here).
Question 7
What is the requirement for a person to be appointed as the Chief Executive Officer of a company regarding their membership?
- A) They must own at least 10% of the company's shares.
- B) They must be an existing shareholder (member) of the company.
- C) A person who is not a member of the company can be appointed as the Chief Executive.
- D) They must be a founding subscriber of the memorandum.
Show answer & explanation
Answer: C) A person who is not a member of the company can be appointed as the Chief Executive.
The Chief Executive does not need to be an existing member/shareholder. If a non-member is appointed as CEO, they are deemed to be a director of the company for all intents and purposes.
Question 8
Under the Companies Act, 2017, how is the remuneration for a director for attending board meetings or performing extra services determined?
- A) By the SECP on an annual basis.
- B) It is strictly prohibited; directors cannot receive remuneration.
- C) By the directors themselves or the company in a general meeting, in accordance with the articles.
- D) It is fixed at 1% of net profits.
Show answer & explanation
Answer: C) By the directors themselves or the company in a general meeting, in accordance with the articles.
The remuneration of a director for attending meetings or performing extra services is determined by the directors or the company in a general meeting, strictly in accordance with the provisions of the articles.
Question 9
The board of directors of Emerald Limited, a listed company, consists of 8 directors. What is the minimum quorum required to hold a valid board meeting?
- A) 2 directors
- B) 3 directors
- C) 4 directors
- D) 5 directors
Show answer & explanation
Answer: C) 4 directors
For a listed company, the quorum for a board meeting is not less than one-third of their number or 4, whichever is greater. One-third of 8 is ~2.6, so the minimum requirement defaults to 4.