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Bmgt 323: Company Law Y3s2 2010/2011 Question Paper
Bmgt 323: Company Law Y3s2 2010/2011
Course:Bachelor Of Commerce
Institution: Kabarak University question papers
Exam Year:2010
COURSE CODE: BMGT 323
COURSE TITLE: COMPANY LAW
STREAM: Y3S2
DAY: TUESDAY
TIME: 9.00 – 11.00 A.M.
DATE: 08/12/2010
INSTRUCTIONS
ANSWER QUESTION 1 AND ANY OTHER THREE.
QUESTION 1
(a) Calvin Klein has been in business for over twenty years, selling his design clothes. He
has been a sole proprietor. He has been advised/misadvised that transforming his business
into a company might be the best way to go. He does not wish to take this step without
further advice. He comes to you for it. Discuss with him the salient features of a
registered company. (10 marks)
(b) Calvin Klein has taken all the relevant factors into account and has proceeded to form a
company which he wants “to move to higher levels by having it to start trading in both
the Nairobi Stock Exchange and the London Stock Exchange” (sic). Advise him on how
to register such a company in Kenya, assuming that after doing so in Kenya the company
will have no obstacle to being accepted in the British market since he has able solicitors
who will do it there. (10 marks)
(c) A director may be appointed to be as such in many ways. Discuss any five (5 marks)
QUESTION 2
(a) Leaving aside form, discuss four distinctions between a company and a partnership.
(4 marks)
(b) A promoter has fiduciary duties. Discuss any three of them. (3 marks)
(c) Friedman Palumbo and Company Limited was duly incorporated in June 2010 with the
sole objective of establishing washrooms and bathrooms in Kenya. On 15th October 2010
the directors were approached by the State House comptroller to venture into the business
of doing laundry for VIPs in preparation for Mashujaa Day. They quickly set up laundry
rooms and bought three laundry machines. They have received huge bales of clothes from
“wakubwa” and they are busy laundering them when the shareholders discover this, on
the 18th October 2010. One of the shareholders has approached you to discuss with him
the possible effects of such a transaction. Proceed. (8 marks)
QUESTION 3
(a) A company may be wound up by a court for various reasons. Explain them. (14 marks)
(b) Who is an underwriter and what is an underwriting agreement? (1 mark)
QUESTION 4
(a) Mr. Cleverman incorporated a transport company and appointed himself the driver at a
salary of Ug Shs 200,000/=. Whilst transporting goods on behalf of the company’s there
was fire tragedy at Sachangwani wherein the vehicle caught fire and he was burnt beyond
recognition. His wife wants to sue. Advise her. ( 5 Marks)
(b) Matopeni Company called for a meeting to discuss the possibility of changing some of
the contents of the objects of its memorandum of association. You have recently been
appointed as the company secretary. Advise it on the cautionary measures they need to
take or what they ought to bear in mind as they take that leap. ( 6 marks)
(c) What are the common requirements which the law lays on a promoter of a company and a
director of a company? (4 Marks)
QUESTION 5
(a) Having been a promoter of Mgongo-Wasi Fish Company Limited, you issued a
prospectus some days before you had an IPO. It turned out the document was extremely
faulty and, in the least, untruthful. You have been sued. Put forth credible defences you
think of to enable you to escape liability. (10 marks)
(b) Joseph Isaac Matakamengi learnt that Flamingo Tea Development Authority was about to
carry out elections for directors. He tendered his application to the amazement of every
contestant and many other shareholders for they “know who he is.” What are the grounds
(whether genuine or technical) of disqualifying him from being director? (5 Marks)
QUESTION 6
(a) Courts are very ready and quick to respect the principle in Salomon vs. Salomon and
Company Limited (1897). However, they will not hesitate to go against it if it becomes
necessary. Justify the above statement, giving five instances when the latter is possible
(12 marks)
(b) Briefly discuss any three types of preference shares you may find in a company.
(3 marks)
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