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Law Ii Question Paper

Law Ii

Course:Cpa Part Ii

Institution: Star College Of Management Studies question papers

Exam Year:2007

Law II

2007.
Answer any FIVE questions.

QUESTION ONE

a. Distinguish between a fixed charge and a floating charge (4mks)

b. Explain the advantages and disadvantages of a floating charge (6mks)

c. Discuss the priority of charges (10mks)

QUESTION TWO

a. Explain the rule in Trevor V. Whitworth (1887) and the exceptions to the rule (12mks)

b. Ukweli Ltd. has issued shares at a premium. The company is required by Section 58 of the Companies Act. Cap. 486 to transfer a sum equal to the aggregate amount or value of the premiums on those shares to the share premium account.

Explain to the directors of Ukweli Ltd. the purpose for which the funds in the share premium account may be applied by a company (8mks)

QUESTION THREE

Citing relevant cases, critically examine the propriety of the situations in which the courts have lifted the veil of incorporation. (20mks)

QUESTION FOUR

a. Wataalamu Ltd. a registered company limited by shares commenced business three years ago. The company realized losses during the first two years of operations. The company's fortunes however improved significantly during the third year of trading and the company has realized profits.

The company is due to hold its annual general meeting on 28 June 2007. The directors have expressed their wish to recommend payment of dividends to members.

Advise the directors on the rules relating to payment of dividends under the provisions of:

i. Table A. (8mks)

ii. Common law (6mks)

b. Explain the contents of a debenture trust deed (6mks)

QUESTION FIVE

Advise the directors of a registered company limited by shares on the following matters:

a. Rules relating to convening an annual general meeting in accordance with Section 131 of the Companies Act. Cap. 486. (10mks)

b. Contents of the statutory report as prescribed by Section 130 of the Companies Act, Cap. 486 (10mks)

QUESTION SIX

a. With reference to the forfeiture of shares, explain the following:

i. The limits imposed on the right of a company to forfeit shares. (5mks)

ii. The legal effects of forfeiture of shares (3mks)

b. Explain the rationale of the law making insider trading an offense and the justification of making it a criminal offense (12mks)

QUESTION SEVEN

Jamaa Mohamed is a minority shareholder in a private company, Cheka Ltd. Jamaa Mohamed is concerned about the way in which the company is being run by the current board of directors. His major concern is the fact that all of the day to day business decisions are taken by Gamaliel Ibrahim, the chairman of the board of directors without any reference to the other directors.

Jamaa Mohamed also suspects that Gamaliel Ibrahim has been taking bribes from other companies in order to get Cheka Ltd. to enter into particular contracts. As a result, Jamaa Mohamed would like to have Gamaliel Ibrahim removed from the board of directors.

Advise Jamaa Mohamed with respect to the following matters:

a. The authority of individual directors to enter into binding contracts on behalf of their company and whether or not Cheka Ltd. is bound by Gamaliel Ibrahim's contracts. (8mks)

b. The fiduciary duties that directors owe to their company and whether or not Gamaliel Ibrahim has breached any of those duties (12mks)

QUESTION EIGHT

a. Explain the grounds upon which a company may be wound up (10mks)

b. With respect to corporate insolvency, explain what is administration and highlight the circumstances in which administration may occur (10mks)

Law Ii Question Paper

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