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Law Ii Question Paper

Law Ii

Course:

Exam Year:

KENYA ACCOUNTANTS AND SECRETARIES NATIONAL EXAMINATIONS BOARD

CPA PART II

LAW II

Time: 3 hrs

Answer any FIVE questions.

ALL questions carry equal marks.

1.Janet and Jackson Onyango are forming a Limited Liability Company.They are seeking your legal advice on the issues listed below.Respond to the enquiries by Janet and Jackson Onyango on:

(a) What are the Memorandum and Articles of Association and is there a difference between the two?(5 marks)

(b) What details would you expect them to contain and what other information might you be able to give about these details?(15 marks)

2.(a) Outline the rules that govern pre-incorporation contracts.

Cite relevant case-law to support your answer.(8 marks)

(b) Kioko, an Under Secretary in the Ministry of Viwandani was entrusted with the responsibility of selling the Ministry's boarded motor vehicles.He invited bids from members of the public to buy two lorries.He also bid ,through a nominee, Mwangangi, his own brother.

Subsequently,he sold the lorries to Mwangangi at Sh.80,000 each.Kioko then formed Kima Company Ltd and instructed Mwangangi to sell the lorries to the company at Sh.350,000 each.A prospectus was issued to the public to subscriber for shares in in Kima Company Ltd.The prospectus gave Mwangangi as the vendor of the lorries and did not disclose the profit Kioko was making.Musembi,a shareholder of the company has learnt of the sale of the lorries to the company and the profit Kioko made and seeks your advice on the company's rights in respect of the same.

Advise Musembi.(12 marks)

3.(a) Explain three ways in which a company may raise capital.(6 marks)

(b) Explain five circumstances when shares may be issued at a discount.(10 marks)

(c) Explain two terms implied in a contract of sale of shares between a seller and purchaser.(4 marks)

4.(a) Outline the contents of a register of members of a company.(6 marks)

(b) Njoroge,a member of Tusonge Company Ltd. Inspected the register of members of the company and noted that his name had been omitted therein.

Advise Njoroge on how he should proceed to have his name entered in the register.(4 marks)

(c) It is fundamental principle of company law that the share capital of a company must be maintained.

Discuss the legal consequences of this principle.(10 marks)

5.(a) In relation to the provisions of the Companies Act (Cap 486) of the Laws of Kenya,outline general provisions relating to meetings and votes.(10 marks)

(b) State the duties of an Auditor of a company.( 6 marks)

(c) Describe the categories of persons who do not qualify to be appointed auditors of a company.(4 marks)

6.(a) Explain the reason why a third party dealing with the company may concern himself with the doctrine of ultra vires.(6 marks)

(b) The Companies Act (Cap 486) of the Laws of Kenya, imposes certain statutory limitations and obligations on directors.

List four of such limitations.(4 marks)

(c) Explain the circumstances under which a company may issue bonus shares.(10 marks)

7.(a) List six types of company charges that require registration as outlined in the Companies Act (Cap.486) of the laws of Kenya.(8 marks)

(b) Green Bank gave a loan of Sh.3,000,000 to Maendeleo Company Ltd.The bank took a floating charge over all the company's movable and immovable property.The company has defaulted on repayment of the loan.However,the administrative receiver appointed by the bank has noticed that the chattels of the company were not registered and Ujenzi Company which is Maendeleo Company's creditors are claiming the chattels.

Advise the Official Administrative Receiver of his rights over the chattels.(8 marks)

(c) Explain the remedies available to an aggrieved debenture holder.(4 marks)

8.(a) What are the different types of Liquidation and may commence proceedings?(6 marks)

(b) How does a creditor demonstrate that the company is unable to pay its debts?(10 marks)

(c) What courses are open to a secured creditor in liquidation?( 4 marks)

Law Ii Question Paper

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