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Law 6011Corporate Law And Governance Town Campus Question Paper
Law 6011Corporate Law And Governance Town Campus
Course:Master Of Business Administration In Corporate Management
Institution: Kca University question papers
Exam Year:2014
UNIVERSITY EXAMINATIONS: 2013/2014
EXAMINATION FOR THE MASTERS OF BUSINESS ADMINISTRATION
(MBA) IN CORPORATE MANAGEMENT
LAW 6011CORPORATE LAW AND GOVERNANCE TOWN CAMPUS
DATE: AUGUST, 2014
TIME: 3 HOURS
INSTRUCTIONS: Answer Question One and Any Other Three Questions
QUESTION ONE (31 MARKS)
Alliance World Limited has three directors: Johny Mrefu, George Tumbo and Alice Diaba.
The following events are taking place in the corporate affairs of the company and you are required to
discuss the legal implication of each one of them:-
a)
Johny Mrefu''s son has recently come of age and Johny Mrefu wishes to appoint him as a
director of the company. There are three other shareholders in the company.
b)
(8 Marks)
The Company is considering the purchase of a substantial quantity of goods from Merika
Limited in which Alice Diaba, has a large shareholding, though she is not a director. Johny
Mrefu and George Tumbo are unaware of Alice Diaba''s interest in Merika Ltd.
c)
(5 Marks)
George Tumbo''s private life has acquired adverse publicity as most of the female employees of
the Company have spread word that he is gay. Johny Mrefu and Alice Diaba wish to remove
him as a director since he refuses to resign.
d)
In view of the adverse publicity, Johny Mrefu and Alice Diaba have decided to exclude George
Tumbo from participation in the Company''s affairs.
e)
(5 Marks)
(5 Marks)
The directors are advised by Mhasibu & Company, the Company''s auditors, that there is no
possibility of the Company trading at a profit in the foreseable future and there is no reasonable
prospect of the company paying its debts.
(8 Marks)
1
QUESTION TWO (23 MARKS)
Wanende Company Limited is in the business of importing seeds. It is about to make a new issue of
800,000 shares of Sh. 20 each.
The prospectus has stated that the seeds produced by this company yield 20 bags per acre “even on arid
land and that the company was the only one with such kind of seeds”. There was also a publication in
the local newspaper about the shares.
Maureen Mwikali did not read the prospectus but had applied for the shares and was allocated
4,000 shares at Sh. 40 per share.
Olive Omute read the prospectus and was not allocated the shares. She bought 6,000 shares at
the securities exchange at Sh. 50 per share.
Mary Mpito read the publication in the local newspaper about the shares and bought 10,000
shares at the securities exchange at sh. 55 per share.
An actual analysis of the seed was done and it was discovered that the seeds were not as productive
and only produced 5 bags per acre and could only thrive in wet land.
The shares of Wanende Company Limited dropped in value to Sh. 9 per share. Mercy Matu had held
20,000 shares of the company from the time of inception and in her opinion, it was the publication that
had caused drop in the value of the shares.
Required:
(i)
Explain three types of misrepresentation and explain the elements of misrepresentation and the
remedies available to an aggrieved person.
(ii)
(10 Marks)
Advise Maureen Mwikali, Olive Omute, Mary Mpito and Mercy Matu. (13 Marks)
QUESTION THREE (23 MARKS)
New School Ltd. is a company which is entirely directed by a board of trustees who are the directors of
the company. The objects of the company include:
To educate girls and women
To donate money to enable girls to proceed for higher education.
To perform all things the trustees consider desirable.
James Juu, Tim Tuti and Roney Rwabe are members of the board of trustees and consequently
directors of the company.
The trustees have authorised a gift to Maureen Kwetu who has been accepted for a course in KCA
2
University.
Tim Tuti and Roney Rwabe are in agreement with the majority of the directors that boys should be
admitted to the school. Five boys have been provisionally accepted as pupils at the school.
Required:
a) Advise James Tut who objects the proposed gift to Maureen Kwetu.
(10 Marks)
b) What is the position of the New School Limited after it has resolved to admit boys. (13 Marks)
QUESTION FOUR (23 MARKS)
a)
State the circumstances under which a company can pay underwriting commission and
distinguish it from brokerage.
b)
Discuss the procedure to be followed by directors of a Public Company to ensure that it is
granted a Trading Certificate by the Registrar to enable it commence trading.
c)
(6 Marks)
(8 Marks)
A promoter is not entitled to remuneration for incorporating a company. This is because there is
no contractual relationship between him / her and the company. However, promoters may be
rewarded in other ways.
Describe the ways in which promoters may be rewarded.
(9 Marks)
QUESTION FIVE (23 MARKS)
An auditor has been described as “watchdog but not a bloodhound “Re Kingston Cotton Mills
Company (1986).
a)
With reference to the above statement, elaborate the duties of an auditor towards the company.
(13 Marks)
b)
What are the auditors powers to enable him to perform such duties effectively
(10 Marks)
QUESTION SIX (23 MARKS)
Abel and Boaz have been carrying on business in partnership. They have both been employed on full
time basis in the business and they have shared profits and losses equally. Abel wishes to bring his son
David into the business and Boaz accepts the proposal.
They wish to convert the partnership into a Private Limited Company Abebo Company Limited in
which Abel and Boaz will each hold 40% of the shares and David will hold 20% of the shares. All
three shareholders will be directors of the new private company.
3
Required:
a.
Advise the three shareholders of Abebo Company Limited on the documents which they are
requested to submit to the Registrar of Companies for Approval in connection with the
formation of the company.
b.
(8 Marks)
After Abebo Company Limited has been formed, there arose disagreement between Boaz and
David regarding the day to day management of the business. Abel and David decided to
remove Boaz from the Board of Directors of the Company.
Explain the procedure that Abel and David should follow to effect the removal of Boaz as
director of the Company.
c.
(8 Marks)
Discuss whether Boaz has grounds for petitioning for the compulsory winding up of the
company
(7 Marks)
4
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