Which statement best describes a designated activity company (DAC)?

Which statement best describes a designated activity company (DAC)?

• A. It is a form of company with restricted liability.
• B. It allows unlimited liability.
• C. It is formed for non-designated activities.
• D. It is a company formed for designated activities.

Answer: (D)

A Designated Activity Company is set up with a constitution that restricts its activities to designated purposes. Because the company’s scope is limited to those specified activities, any change to what it can do requires altering its constitutional documents. That defining feature makes it a company formed for designated activities. The other statements don’t fit as well: one implies a different liability structure, which isn’t the defining point of a DAC; another suggests unlimited liability, which isn’t characteristic; and another claims it’s for non-designated activities, which contradicts the whole idea of a DAC.

A Designated Activity Company is set up with a constitution that restricts its activities to designated purposes. Because the company’s scope is limited to those specified activities, any change to what it can do requires altering its constitutional documents. That defining feature makes it a company formed for designated activities.

The other statements don’t fit as well: one implies a different liability structure, which isn’t the defining point of a DAC; another suggests unlimited liability, which isn’t characteristic; and another claims it’s for non-designated activities, which contradicts the whole idea of a DAC.