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Company Law Question Paper

Company Law

Course:Certified Public Accountant

Exam Year:2009

KASNEB

COMPANY LAW

AUGUST 2009 PILOT PAPER

answer any FIVE questions

QUESTION ONE
a) Distinguish between a company and a cooperative society. (8 marks)

b) Citing relevant decided cases, explain the circumstances under which a court would lift the veil of incorporation. (12 marks)

QUESTION TWO
Kimoli and Anjere wish to venture into business. However, they are not sure whether to trade as a partnership or a private limited company and seek your advise.

a) Advise them on the disadvantages of trading as a private limited company. (12 marks)

b) Highlight the legal consequences of incorporation of a company. (8 marks)

QUESTION THREE
A company's shares can be issued at a discount, premium or par value.

Discuss the statement. (12 marks)

Explain the provisions which govern the issue of shares of a company for the purposes other than raising capital. (8 marks)

QUESTION FOUR
With reference to company law, discuss the provisions which govern the removal of a director from office before expiry of his tenure. (20 marks)

QUESTION FIVE
a) Explain the reasons why a company would resort to take over, merger or a reconstruction.
(10 marks)

b) Highlight the advantages of instituting a scheme of arrangement. (10 marks)

QUESTION SIX
a) In relation to the law relating to meetings under company law, discuss the rules which govern the following:

1. Voting by proxy (4 marks)
2. Revocation of authority of proxy. (6 marks)

b) Explain the rights of auditor of a company. (10 marks)

QUESTION SEVEN
A public company in the mining business made an issue of its shares to the public at sh.10 per share.
In the prospectus, the company stated that " the company has discovered a booming market in the European Union member countries for its minerals"
The company had never marketed its minerals in the European Union member countries. Timothy, without reading the prospectus applied for shares and was allotted 1000 shares at sh.10 each.
Mary read the prospectus, applied for the shares but was not allotted any shares. Later on, Mary bought 2000 shares at the stock exchange at sh.25 each.
Peter, an old shareholder in the company owned 500 shares even before the company made the issue. He is disappointed with the price at which the new offer for sale was made claiming that this had destabilized the price of the company's shares.

Required:
a) Explain the legal principles applicable in the above case and advise Timothy, Peter and Mary. (12 marks)

b)Timothy prepared a transfer form to transfer 100 shares only to his wife Rose presented the form to the company. The company erroneously transferred the entire 1000 shares to Timothy's wife.
Timothy is aggrieved and seeks your legal advise.
Discuss the legal principles in the case and advise Timothy. (8 marks)

Company Law Question Paper

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