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Company Law Question Paper

Company Law

Course:Certified Public Accountant

Exam Year:2011

KASNEB

COMPANY LAW

DECEMBER 2011

QUESTION ONE
a) Explain three types of cooperative organizations recognized by the relevant law governing cooperatives in your country. (6 marks)
b) Outline the requirements that one must satisfy to qualify for membership of a cooperative society. (6 marks)
c) In order for a scheme of arrangement to be effective, the court must make provision of certain matters.
With reference to the above statement, highlight four that the court must make provision for in a scheme of arrangement. (8 marks)

QUESTION TWO
a) Uzuri Company Limited was registered two years ago. The company has uncalled up capital of sh. 1 million. The company also has two directors, Steven Meta and Paul Mailu.

Recently, Steven Meta in the absence of Paul Mailu and other shareholders, held a meeting and passed a resolution to make a call. The meeting scheduled for 28 October 2011 was only attended by one member and the company secretary who is not a member.

The member acted as chairman and the "meeting" resolved that calls be made. Paul Mailu was sued for failure to make a good call. However, upon hearing the case the court held that the purported proceedings were invalid.
1. Outline the rule which the court relied on to make its decision. (2 marks)
2. Citing relevant legal provisions, discuss any five exceptions to the rule in (1) above. (10 marks)

b) Explain the powers of the liquidator of a company that are exercisable with sanction of the court. (8 marks)

QUESTION THREE
a) According to the decision of Romer L.J, in Re: Yorkshire Woolcombers Association Limited, one of the characteristics of a floating charge is "it hovers over all the assets of a company until some event occurs which causes the charge to crystallize".
In reference to the above statement, explain the events that cause the crystallization of a floating charge. (8 marks)

b) Explain the ways in which the drafting style of the objects clause in the memorandum of association has expanded the contracting capacity of registered companies. (4 marks)

c) ABC and sons limited was incorporated in 2009 with a capital of sh.3 million divided into 30000 shares of sh.100 each. Its main object was to acquire and carry on the business of a hardware and any other business and transactions which the company might consider to be in any way conducive or auxiliary thereto. The company has gone into liquidation. James Fine, a former shareholder has made a claim against the company for the balance of the price of shares which he had sold to the company but which had not been fully paid for.

With reference to the above facts and in light of the ruling in Trevor V. Whitworth, explain:
1. The rule in Trevor V. Whitworth. (2 marks)
2. The exception to the rule in (c) (1) above. (6 marks)

QUESTION FOUR
a) XYZ company limited has been sued severally in the past by individuals who suffered losses after relying on the audited accounts of the company.
The board of directors have resolved to remove the auditor and have approached you for advice.
Advise the board on regulations governing the removal of an auditor from office. (10 marks)

b) Explain the persons who could present a winding up petition to the court. (10 marks)

QUESTION FIVE
a) Explain the legal provisions relating to the display of the name of a foreign company.
(8 marks)

b) Describe the duties of a promoter. (12 marks)

QUESTION SIX
a) Share may be disposed of as security for a loan. Such a transaction is referred to as mortgage of shares and may be legal or equitable.
With reference to the above statement distinguish between a legal and equitable mortgage.
(4 marks)

b) Briefly outline the rights conferred on a shareholder by the Companies Act. (4 marks)

c) Boaz Tito was appointed as a director of Bantex Limited in the last annual general meeting of the company. Boaz intended to invest in a piece of land and therefore applied for a loan for the purpose. His loan application was not approved.

Boaz Tito feels aggrieved after learning that a junior employee who applied for a loan at about the same time was granted the loan.
Advise Boaz Tito on the circumstances under which a company could grant a loan to a director of the company. (10 marks)

QUESTION SEVEN
a) As a fiduciary, a company secretary is liable in damages for breach of his fiduciary obligations.
Explain the liability of a company secretary. (4 marks)

b) Highlight the circumstances under which group accounts need not deal with a subsidiary of the company. (4 marks)

c) Describe six ways through which a person could acquire company membership. (12 marks)

Company Law Question Paper

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