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Law Ii Question Paper

Law Ii

Course:Cpa Part Ii

Institution: Star College Of Management Studies question papers

Exam Year:2007

LAW II

2007.

Answer any five questions

QUESTION ONE

a. Outline the conditions that a company must satisfy before it can be granted authority to trade its shares on the stock exchange (8mks)

b. Distinguish between a bonus issue and a rights issue (4mks)

c. The rules governing the closure of the share register, bonus and rights issues have changed with the implementation of the central depository system (CDS).

Detail the procedure to be followed in a bonus issue under the CDS. (8mks)

QUESTION TWO

a. Explain the rule in Royal British V. Turquand and the exceptions to the rule (12mks)

b. The articles of association of Jimjo Company Ltd., a public limited company, bestowed on the directors of the company the power to determine who should sign documents including contracts on behalf of the company. One of the directors, Otieno Agengo, purporting to be the chairman and without being so authorized, executed a guarantee to Pembe Mbili in the name of the company.

The directors of Jimjo Company Ltd. later on discovered the guarantee and refused to honor it as demanded by Pembe Mbili.

Advise the directors of Jimjo Company Ltd. whether the company could be held liable on the guarantee (8mks)

QUESTION THREE

a. Discuss the rules relating to the appointment and disqualification of directors of a company (10mks)

b. Explain the provisions of the Companies Act that relate to advancing loans to directors and the requirements for disclosure of lawful loans (10mks)

QUESTION FOUR

a. Explain the circumstances under which a company might be wound up by the court on just and equitable grounds (12mks)

b. Define a contributory and explain the liability of contributaries as past members of a company (8mks)

QUESTION FIVE

a. Mr. Blastus McOtiego bought shares in Matarajio Limited, a public limited company, three years ago. He has been informed by one of the directors of the company that the company would soon issue a debenture in order to raise additional capital to finance the envisaged expansion of its operations.

Advise Mr. McOtiego on the following matters:

a. The difference between shares and debentures (12mks)

b. The types of debentures that might be issued by a company (4mks)

c. The advantages of a debenture trust deed (4mks)

QUESTION SIX

a. Distinguish between a registered company and a partnership (10mks)

b. Enumerate the registers and documents kept at the registered office of a public limited company (5mks)

c. Briefly explain the clauses contained in the memorandum of association of a registered company (5mks)

QUESTION SEVEN

a. Explain the circumstances under which a member's name might be removed from the company's register of members (6mks)

b. "Priority of claims in an insolvency of a company is a matter of some claims being more equal than others"

Discuss (6mks)

c. Blackcurrent Ltd. deals in heavy engineering equipment. The company maintains a current account with South Bank Ltd. At the request of the directors, the bank appointed receivers to the company on 30 June 2007. The bank used the powers contained in the standard debenture given by the company on 1 January 2006 to appoint the receiver.

The receiver has identified a likely shortfall in the recovery of monies owed to the bank, from the sale of the company's assets. In addition, the receiver has learnt that in March 2007 the company sold to its directors at a bargain, two heavy engineering machines. The company later hired the two machines from the directors.

Discuss the ways in which the receiver might enhance the recovery of monies owed to the bank by the company (8mks)

QUESTION EIGHT

a. ABC Limited is a public company regulated by Table A. The company has an authorized share capital of Sh. 75 million of which Sh. 25 million is paid-up capital. The directors of the company wish to raise additional capital.

Advise the directors on the following matters:

i. The meaning of the term "prospectus" and the circumstances under which a form of application for shares need not be issued with a prospectus (6mks)

ii. The provisions of the Companies Act that govern the preparation of the prospectus (6mks)

b. Explain what is meant by rescission in respect of prospectuses and state the circumstances in which the right to rescind may be lost (8mks)

Law Ii Question Paper

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