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Law Ii Question Paper

Law Ii

Course:Cpa Part Ii

Institution: Star College Of Management Studies question papers

Exam Year:2005

LAW II

2005.

Answer any FIVE questions.

QUESTION ONE

a. What are the legal restrictions imposed on the choice of a name of a proposed company? (8mks)

b. " The doctrine of ultra vires was a nuisance to the company and a trap to unwary third parties"

Explain the principles in the doctrine of ultra vires and the exceptions thereof. (12mks)

QUESTION TWO

a. Outline the distinctions between the memorandum and articles of association. (12mks)

b. Explain the statutory provisions under which a company may alter its articles of association. (8mks)

QUESTION THREE

a. State and briefly explain the conditions which must be fulfilled before a company limited by shares can issue redeemable preference shares. (10mks)

b. Outline the rules governing payment of dividends (6mks)

c. It is a basic principle of company law that dividends must not be paid out of funds raised by issue of shares or debentures.

Highlight the exceptions to this principle. (4mks)

QUESTION FOUR

A CPA Part II candidate taking the Law II paper has requested you for advice on the issues listed below. Advise him.

a. A company has established an employee share scheme and a number of employees including two directors wish to borrow money from the company to enable them purchase shares in the company. (6mks)

b. The same group of employees and the two directors have requested additional loans from the company to enable them buy additional shares in the company. (6mks)

c. The company is proposing to offer shareholders the option of receiving shares in the company in lieu of dividend. (4mks)

d. The company is proposing to co-opt John Omwami to the Board of Directors and the board is proposing to lend him Sh. 100,000 to purchase qualification shares. (4mks)

QUESTION FIVE

a. Explain the ways in which a person would:

i. Become a member of a registered company. (5mks)

ii. Cease to be a member of a registered company. (5mks)

b. Henry, a sole trader carrying on a business in the printing industry has asked Tumaini Bank Ltd. to advance him Sh. 500,000 as an additional working capital. The bank is prepared to advance the money on condition that Henry offers a security. Henry has a share certificate for 5,000 shares issued by Bright Star Company Limited. Henry wants to know whether he can use the shares whose value is Sh. 650,000 as a security for the loan. He further seeks to know whether he would still receive dividends even after he has charged the shares to the bank.

Advise Henry. (10mks)

QUESTION SIX

a. Compare the position of directors with that of auditors in respect to the standard duty of skill and care expected of them. (10mks)

b. Explain the rules that govern the appointment and removal of an auditor of a company. (10mks)

QUESTION SEVEN

a. Highlight the contents of a statutory report. (10mks)

b. Outline the purposes for which a special resolution is required. (10mks)

QUESTION EIGHT

a. A court of law has a right to compulsorily wind up a company.

Explain the grounds for a compulsory winding up of a company by the court. (6mks)

b. Summarize the procedure to be followed in winding up a company by the High Court (14mks)

Law Ii Question Paper

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