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Company Law Question Paper
Company Law
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
UNIVERSITY EXAMINATIONS: 2010/2011
SECOND YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CFU 200 COMPANY LAW (Saturday)
DATE: DECEMBER2011 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One and Any Other Two Questions
Question One
a) Describe the categories of persons not qualified to be appointed as auditors of a company.
(5 Marks)
b) With help of case law, explain the duties and liabilities of a promoter during the
incorporation of a company (10 Marks)
c) Outline the similarities and differences between shares and debentures (5 Marks)
d) ‘The prospectus of a company must contain true statements and calls for liability for any misrepresentation made therein’ Discuss the statement, explaining the remedies and
defenses available if any, for misrepresentation the company’s prospectus (8 Marks)
e) Explain two remedies available to a debenture-holder who wishes to reclaim his investment when the company is in default? ( 2 Marks)
Question Two
a) A person dealing with a company is entitled to assume, in the absence of the facts putting him on doubt, that there has been due compliance with the all matters of internal
management and procedures required by the articles. With reference to the rule in Royal
British Bank vs. Turquand (1856) discuss the above statement. (10 Marks)
2
b)
Explain the rule in Sharp Vs. Dawes and it’s exceptions (5Marks)
c) Explain five disadvantages of incorporation (5 Marks)
Question Three
a) Mr. X is acting as a promoter of a private limited company which wishes to register the
name ‘Kenya Cocaine Processing Company International.’ Advice him on the proposed
name and the general restrictions on choice of a company’s name. (10 Marks)
b) With reference to Directors, explain the provisions of the company’s Act on
i) Their appointment (3 Marks)
ii) Remuneration (2 Marks)
iii) Disqualification (5 Marks)
Question Four
The main object of Treina co. is to provide training courses for office administrators and
secretaries. The directors have recently decided that it would be best to diversify the company’s activities and start supplying computers, office equipment and stationery, using the contacts they have made in the course of their contacts. It appears that approximately 75% of the company’s shareholders support the change, although a minority will undoubtedly strongly oppose the diversification. Advise the directors;
a) On the statutory provisions on when and how the company’s memorandum may be altered
to enable the diversification to occur (8 Marks)
b) b) Explain the rights of the minority shareholders who oppose the diversification (8 Marks)
c) Explain the common law provisions on when the corporate veil may be lifted (4 Marks)
Question Five
Write short notes on;
a) The effects of a winding up order (5 Marks)
b) Ways of altering share capital and procedure for alteration (8 Marks)
c) “The doctrine of ultra vires as it was explained in Ashbury’s case should be applicable. But
this doctrine ought to be reasonably and not unreasonably understood and applied and
whatever may fairly be regarded as incidental to or consequential upon those things that the legislature has authorised ought not to be held by judicial construction to be ultra vires.”
In light of the above statement, discuss the meaning and significance of the doctrine and
explain its effect on transactions entered into with the company to the company itself and to third parties. (7 Marks)
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