Get premium membership and access revision papers, questions with answers as well as video lessons.

Got a question or eager to learn? Discover limitless learning on WhatsApp now - Start Now!

Law Ii Question Paper

Law Ii

Course:Cpa Part Ii

Institution: Star College Of Management Studies question papers

Exam Year:2006

LAW II

2006.

Answer any five questions.

QUESTION ONE

a. What are the legal consequences of registration of a company as stipulated under the Companies Act, Cap. 486? (4mks)

b. Explain the similarities and differences between a company registered under the Companies Act, and a corporation created by a specific Act of Parliament (10mks)

c. Under what circumstances may a company be deemed to be a subsidiary of another company? (6mks)

QUESTION TWO

With respect to the articles of association, explain the following:

a. The operation of Table A model articles of association (6mks)

b. The effect of the articles of association on both members and non-members (8mks)

c. The procedure for altering the articles of association (6mks)

QUESTION THREE

a. Define the term "pre-incorporation contract". (3mks)

b. What is the legal effect of a pre-incorporation contract on the following:

i. The company being incorporated (4mks)

ii. The individual who contracts as agent or trustee for the company? (3mks)

c. A, B and C are promoters of Y Ltd. In the course of promoting the company, they bought a machine from X Ltd., a company under liquidation at a price of Sh. 500,000 and sold it to Y Ltd. at Sh. 750,000. The machine was however not operational. A, B and C were also paid a commission of Sh. 100,000 and did not disclose that the machine was faulty. The three promoters became the directors of Y Ltd. after incorporation. Y Ltd. has come to learn about the secret profit made and commission paid to A, B and C.

Advise Y Ltd. (10mks)

QUESTION FOUR

a. Mark Oriwo has been appointed to chair a general meeting of a company. He is quite new in the company and inexperienced. Mark Oriwo seeks your advice on the duties of a chairman of a general meeting.

Advise him. (8mks)

b. Outline the circumstances under which a company may be compelled to call and extraordinary meeting. (4mks)

c. Explain the meaning of the following terms:

i. A poll vote (4mks)

ii. A proxy vote (4mks)

QUESTION FIVE

"A description of the legal and equitable rules relating to directors' duties appear to show that their duties of loyalty are exceptionally strict and their duties of diligence and skill exceptionally lax"

With reference to decided cases, discuss the above statement (20mks)

QUESTION SIX

The general rule is that a company may not reduce its capital. The Companies Act, (Cap. 486) however makes a provision for a company limited by shares or limited by guarantee and having a share capital to reduce its capital.

a. With reference to the Companies Act, explain the conditions that must be met by a company that wishes to reduce its capital (6mks)

b. Outline the ways in which a company may effect a reduction of its share capital (6mks)

c. Explain how the rights attached to a class of shares may be varied and the action a dissatisfied shareholder may take. (8mks)

QUESTION SEVEN

Mr. John Wagocho is the finance manager of Paradise Ltd. He lives in the same house with his wife Mrs. Joan Wagocho. One morning, Mr. Wagocho informed his wife that the board of directors of Paradise Ltd. was due to meet to consider a very important matter that would determine the future of Paradise Ltd. Later in the evening, the managing director of Paradise Ltd. sent a message to Mr. Wagocho on his mobile phone to the effect that the board had proved the take-over of Paradise Ltd. by Maendeleo Ltd. Mrs. Joan Wagocho happened to read the message on her husband's mobile phone but did not reveal this fact to him.

With reference to insider dealing, analyze the legal implications of the following events which took place thereafter.

a. Mrs Wagocho bought shares in Paradise Ltd. (6mks)

b. Mrs Wagocho told a friend Mrs. Clarita Mwangi about the likelihood of the take-over of Paradise Ltd by Maendeleo Ltd. Mrs. Clarita Mwangi bought shares in Paradise Ltd. (4mks)

c. Mrs. Clarita Mwangi disclosed the take-over bid to her friend Mr. James Mwema who also bought shares in Paradise Ltd. (4mks)

d. Mrs. Wagocho advised her sister in law, Mrs. Angelina Omollo to buy shares in Paradise Ltd. without disclosing the take-over bid. Mrs. Angelina Omollo bought shares in paradise Ltd. (6mks)

QUESTION EIGHT

The late Jared Mzee died testate and left some of his property to his twenty five year old son Reuben Kijana. Apparently, Reuben Kijana has no knowledge of the law relating to shares and debentures and seeks your advice.

Explain to Reuben Kijana the meaning and the rights of the following forms of inheritance:

a. Ordinary shares, 75% paid up worth Sh. 100,000 in Chuma Limited. (4mks)

b. Ordinary shares, fully paid, worth Sh. 105,000 in Chema Limited (4mks)

c. Preference shares worth Sh. 50,000 in Bidii Limited (4mks)

d. Debenture stock worth Sh. 50,000 secured by a fixed charge against the assets of Dunia Limited (4mks)

e. Debenture stock worth Sh. 50,000 secured by a floating charge against the assets of Mawingu Ltd. (4mks)

Law Ii Question Paper

More Question Papers

Popular Exams