ExpertEasy2 marksMultiple Choice
The formation and constitution of business organisationsThe formation and constitution of business organisationsTypes of company
ACCA · Question 52 · The formation and constitution of business organisations
Section B - Scenario 3
GreenCanopy is a newly formed Non-Governmental Organisation (NGO) dedicated to reforestation. The founders want to incorporate the organisation to protect themselves from personal liability, but they do not intend to distribute any profits to members; all funds will be reinvested into planting trees.
Which of the following is the most appropriate business vehicle for GreenCanopy?
Section B - Scenario 3
GreenCanopy is a newly formed Non-Governmental Organisation (NGO) dedicated to reforestation. The founders want to incorporate the organisation to protect themselves from personal liability, but they do not intend to distribute any profits to members; all funds will be reinvested into planting trees.
Which of the following is the most appropriate business vehicle for GreenCanopy?
Answer options:
A.
A private company limited by shares.
B.
A public limited company (PLC).
C.
A private company limited by guarantee.
D.
A general partnership.
How to approach this question
Identify the corporate structure specifically designed for non-profit organisations that require limited liability.
Full Answer
C.A private company limited by guarantee.✓ Correct
A private company limited by guarantee is the most appropriate structure for non-profit organisations like NGOs, charities, and sports clubs. It provides separate legal personality and limited liability, but instead of shareholders, it has members who guarantee to contribute a nominal amount (usually £1) towards the company's debts if it is wound up.
Common mistakes
Choosing a company limited by shares, which is designed for commercial, profit-distributing enterprises.
Practice the full ACCA LW — Corporate and Business Law Practice Exam 6
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