CIMA Exam CIMAPRA19-P03-1 Topic 1 Question 45 Discussion

Actual exam question for CIMA's CIMAPRA19-P03-1 exam

Question #: 45
Topic #: 1

C Ltd is a private, family-owned company which is hoping to become listed on a recognised Stock Exchange within the next two years. At the moment, the Board of Directors comprises five directors; four of whom are from the founding family and all of whom are involved in the day-to-day running of the business. The remaining director obtained a seat on the Board threeyearsagoas a condition of an investment by a venture capital fund.

The Board meets in half-day sessionsonce a fortnight and the Board meetings are reasonably well run. All decisions are taken by the Board as a whole. There are no sub-committees.

Which of the following steps would it be appropriate for C Ltd to take in the light of the proposed listing?

AAppoint enough independent non-executive directors (NEDs)that they make up at least 50% of the Board.

BAppoint one of the NEDs as Chair of the Board.

CInsist that the venture capital company director be removed as he is not necessarily motivated to act in the best interests of C Ltd.

DSet up at least three sub-committees namely remuneration, nomination, and audit committees.

EEnsure that the current executive directors are given 10 year contracts starting on the day the company is floated, to ensure consistency and continuity in the management of the company.

FSet up an 'agenda setting' sub-committee consisting of the current executive directors to decide the agenda for each Board meeting.

Show Suggested Answer

Suggested Answer: A, B, C

by Bernardo at May 13, 2024, 04:30 AM

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Arthur

1 months ago

Option C is a bit harsh. The venture capital director might have valuable insights to offer. Why not keep them on and let the independent NEDs provide the necessary balance?

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Milly

1 months ago

Hmm, option B - appointing an independent NED as Chair - that's a bold move. Gotta love a company that's not afraid to shake things up!

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2 months ago

C Ltd should definitely avoid option E. Locking in the executive directors for 10 years is a recipe for stagnation and lack of flexibility.

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King

14 days ago

D) Set up at least three sub-committees namely remuneration, nomination, and audit committees.

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Lucia

1 months ago

C) Insist that the venture capital company director be removed as he is not necessarily motivated to act in the best interests of C Ltd.

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Nicolette

1 months ago

B) Appoint one of the NEDs as Chair of the Board.

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Alonzo

2 months ago

A) Appoint enough independent non-executive directors (NEDs) that they make up at least 50% of the Board.

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2 months ago

I think it would be a good idea to appoint independent non-executive directors to make up at least 50% of the Board.

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