CIMA Exam CIMAPRO19-P03-1 Topic 5 Question 88 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam

Question #: 88
Topic #: 5

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: B, C, D

by Theresia at Mar 06, 2025, 05:09 PM

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Eloisa

17 days ago

I heard the Board meetings are 'reasonably well run' - is that corporate speak for 'chaotic and dysfunctional'? Better work on that before going public, or the stock might tank faster than a lead balloon.

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Natalie

25 days ago

An 'agenda setting' committee? Sounds like the founding family wants to keep a tight grip on things. Not very progressive for a public company, if you ask me.

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Latosha

8 days ago

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

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Rhea

15 days ago

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

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Ilene

1 months ago

10-year contracts for the executive directors? That's overkill. Talk about job security! I'd rather focus on setting up proper committees to oversee the transition.

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Kyoko

13 days ago

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

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Bernardine

16 days ago

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

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Jennie

26 days ago

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

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Fannie

1 months ago

Removing the venture capital director is a bit risky. They have a vested interest in the company's success, so it's better to work with them constructively.

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Margurite

1 months ago

Appointing enough independent non-executive directors is definitely the way to go. That will help bring in fresh perspectives and ensure better governance for the listing.

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